Levi Strauss (Phils.), Inc. vs. Vogue Traders Clothing Company

A pending administrative cancellation case before the BPTTT does not bar an ordinary court from hearing an infringement or unfair competition action, including an application for preliminary injunction and damages; the earlier cancellation petition is not a prejudicial question. A corporation’s certification against forum shopping must be executed by a duly authorized director or officer, not by its counsel, and a preliminary injunction based on initial evidence does not prejudge the merits.

Levi Strauss & Co., a Delaware corporation, is the principal that granted petitioner Levi Strauss (Phils.), Inc. a license to use the LEVI’S trademark, design, and name; petitioner is its Philippine licensee. Respondent Vogue Traders Clothing Company, owned by Tony Lim, claimed to be the lawful assignee and authorized user of the LIVE’S marks and related copyright registrations. The parties’ competing trademark claims implicated both the BPTTT’s administrative cancellation jurisdiction and the ordinary courts’ jurisdiction over infringement, unfair competition, injunction, and damages.

In 1972, per “Trademark, Technical Data, and Technical Assistance Agreement,” Levi Strauss & Co., the principal based in Delaware, United States of America, granted petitioner Levi Strauss (Phils.) a non-exclusive license to use the LEVI’S trademark, design, and name in the manufacturing, marketing, distribution, and sale of its clothing and other goods. The licensing agreement was renewed several times, the recent one being under Certificate of Registration No. 1379-A. Levi Strauss & Co. obtained certificates of registration from the BPTTT for the following trademarks: “LEVI’S”; “501”; “Two Horse Design”; “Two Horse Label”; “Two Horse Patch”; “Two Horse Label with Patterned Arcuate Design”; “Arcuate Design”; and the composite trademarks, namely, “Arcuate,” “Tab,” and “Two Horse Patch.” Petitioner discovered the existence of some trademark registrations belonging to respondent which, in its view, were confusingly similar to its trademarks. Thus, it instituted two cases before the BPTTT for the cancellation of respondent’s trademark registrations, namely Inter Partes Case No. 4216, a petition for cancellation of Certificate of Registration No. 53918 (for “LIVE’S”), and Inter Partes Case No. 4217, a petition for cancellation of Certificate of Registration No. 8868 (for “LIVE’S” Label Mark).

Petitioner then applied for the issuance of a search warrant on the premises of respondent Vogue Traders Clothing Company, owned by one Tony Lim, with the Regional Trial Court of Manila, Branch 3. On December 12, 1995, said trial court issued Search Warrant No. 95-757 and Search Warrant No. 95-758 based on its finding of probable cause that the respondent had violated Article 189 of the Revised Penal Code in manufacturing, selling, and incorporating designs or marks in its jeans which were confusingly similar to petitioner’s “LEVI’s jeans.” These search warrants commanded the seizure of certain goods bearing copies or imitations of the trademarks which belonged to petitioner. On December 13, 1995, the search warrants were enforced and several goods belonging to respondent were seized. Meanwhile, it appears that criminal charges were filed against Tony Lim of respondent company in the Department of Justice, but the same were eventually dismissed and the search warrants were quashed.

Consequently, on February 1, 1996, respondent filed a complaint for damages in the Regional Trial Court of Manila, Branch 50, against petitioner. The complaint alleged that since January 1, 1988, respondent, through Antonio Sevilla, with business address at 1082 Carmen Planas Street, Tondo, Manila, had been a lawful assignee and authorized user of: (a) the trademark “LIVE’S” under Certificate of Registration No. 53918 issued by the BPTTT, (b) the trademark “LIVE’S LABEL MARK” under Certificate of Registration No. SR 8868 issued by the BPTTT, and (c) the copyright registrations of “LIVE’S ORIGINAL JEANS,” its pocket design, and hand tag; that the goods, articles, and effects seized from respondent’s establishment were manufactured and used in its legitimate business of manufacturing and selling of the duly registered trademark “LIVE’S” and “LIVE’S ORIGINAL JEANS;” and that the trademarks of respondent did not have any deceptive resemblance with the trademarks of petitioner. Respondent sought to recover the seized assorted sewing materials, equipment, and finished products or the value thereof, in case the same had been destroyed or impaired as a result of the seizure. Respondent also prayed that, after due trial, judgment be rendered ordering the petitioner to pay compensatory damages of ₱320,000 with an additional amount of damages of ₱11,000 per day until the seized properties are restored; ₱2,000,000 as exemplary damages; ₱100,000 for attorney’s fees with an additional amount of ₱100,000 in the event of an appeal plus ₱1,500 per court appearance and the costs of the suit.

In its amended answer with counterclaim, petitioner countered that respondent’s LIVE’S brand infringed upon its licensed brand name LEVI’S. It sought to cancel respondent’s Copyright Registration No. I-3838 and enjoin the respondent from further manufacturing, selling, offering for sale, and advertising the denim jeans or slacks by using a design substantially, if not exactly similar to, or a colorable imitation of the trademarks of petitioner. Upon manifestation/motion by petitioner, the RTC of Manila, Branch 50 issued an order dated May 9, 1996, forwarding the case to the Executive Judge (RTC of Manila, Branch 23) for re-raffle among the courts designated as Special Courts to try and decide cases involving violations of Intellectual Property Rights pursuant to Administrative Order No. 113-95, dated October 2, 1995. On May 17, 1996, Branch 23 issued an order directing that the case be forwarded to Branch 1 (a designated Special Court per said administrative order) for further proceedings.

The records show that respondent, through its former counsel, Atty. Alfonso R. Yatco, was present during the hearing on November 6, 1996; the Branch Clerk of Court of RTC of Manila, Branch 1, Atty. Joselito C. Frial, noted in the minutes that respondent shall be given a period of 10 days to interpose its opposition to petitioner’s prayer for injunctive relief, and the November 6, 1996 order set the hearing on December 4 and 11, 1996 and notified the counsels in open court. On the scheduled hearing on December 4, 1996 in the RTC of Manila, Branch 1, respondent failed to appear. Upon motion of petitioner, the trial court declared respondent to have waived its right to present evidence to controvert petitioner’s application for a writ of preliminary injunction. In an order dated December 10, 1996, the trial court found that the respondent intended to appropriate, copy, and slavishly imitate the genuine appearance of authentic LEVI’s jeans and pass off its LIVE’s jeans as genuine LEVI’s jeans. The RTC’s order also stated that respondent’s backpocket design was not copyrightable, as it was neither an original work nor a novel design, but a copy or slavish imitation of petitioner’s Arcuate trademark, and that no rights attendant to a copyright could attach to it. The trial court then issued a writ of preliminary injunction upon the filing of a bond in the sum of ₱500,000, restraining respondent, its officers, employees, agents, representatives, dealers, retailers, or assigns from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using denims or jeans with a design substantially, if not exactly similar to, petitioner’s trademarks.

Respondent moved for reconsideration, praying that petitioner’s counterclaim be dismissed and that the December 10, 1996 order be set aside. In an order dated April 11, 1997, the trial court denied the motion, stating that the injunction was properly directed against the real party in interest, the acts enjoined were within the reliefs demanded, the counterclaim did not amount to forum shopping, the injunctive order was merely provisional and did not dispose of the case on the merits, and the evidence on record justified the injunctive relief. Respondent explained to the trial court that its former counsel, Atty. Yatco, had honestly thought that the December 4, 1996 hearing had been rescheduled to December 11, 1996 per agreement with petitioner’s counsel; the trial court found this insufficient.

• Primary Jurisdiction: Petitioner argued that the CA erred in holding that the doctrine of primary jurisdiction operated to suspend all proceedings in Civil Case No. 96-76944, including the RTC’s power to issue preliminary injunctive relief, and that the trial judge abused his discretion in granting such relief. Petitioner maintained that its Certificate of Registration No. 1379-A gave rise to a presumption of validity and the right to exclusive use under Section 17 of R.A. No. 166; that Section 27 vested jurisdiction over damage suits in the proper RTC; and that an infringement or unfair competition action, including injunction and damages, may proceed independently or simultaneously with an administrative cancellation case before the BPTTT.
• Forum-Shopping Certification: Petitioner argued that the CA erred in failing to hold that respondent’s certification against forum shopping, attached to its petition for certiorari and prohibition, was fatally defective because it was executed by Atty. Danilo A. Soriano, counsel, not by a duly authorized officer of respondent corporation.
• Waiver of Evidence: Petitioner argued that the CA erred in holding that the RTC committed grave abuse of discretion in declaring respondent to have waived its right to present evidence to controvert petitioner’s evidence in support of the preliminary injunction.
• Prejudgment: Petitioner argued that the CA erred in holding that the preliminary injunctive order in Civil Case No. 96-76944 prejudged the case.

• Prejudgment: Respondent countered that the RTC’s order dated December 10, 1996 amounted to a prejudgment of the case because it declared that respondent’s LIVE’S backpocket design was not copyrightable, was neither an original work nor a novel design, was a copy or slavish imitation of petitioner’s LEVI’S Arcuate trademark, and that no copyright rights could attach to it.
• Waiver/Due Process: Respondent explained that its non-appearance on December 4, 1996 was due to its former counsel’s honest mistake that the hearing had been rescheduled to December 11, 1996 per agreement with petitioner’s counsel.

• Primary Jurisdiction and Injunctive Relief: Whether the CA erred in holding that the doctrine of primary jurisdiction suspends all proceedings in Civil Case No. 96-76944, particularly the RTC’s ability to issue preliminary injunctive relief, and that the trial judge abused his discretion in granting such relief.
• Certification Against Forum Shopping: Whether the CA erred in failing to hold that respondent’s certification against forum shopping attached to its petition for certiorari and prohibition was fatally defective because it was executed by counsel, not by a duly authorized officer of respondent corporation.
• Waiver of Right to Present Evidence: Whether the CA erred in holding that the RTC committed grave abuse of discretion in declaring respondent to have waived its right to adduce evidence to counter petitioner’s evidence for preliminary injunction.
• Prejudgment: Whether the CA erred in holding that the preliminary injunctive order issued in Civil Case No. 96-76944 prejudged the case.

• Primary Jurisdiction and Injunctive Relief: Yes. The CA erred in applying the doctrine of primary jurisdiction to suspend the entire civil case. A pending BPTTT cancellation case does not bar an ordinary court from hearing an infringement or unfair competition action, including an application for preliminary injunction and damages, and the earlier cancellation petition is not a prejudicial question.
• Certification Against Forum Shopping: Yes. The CA should have dismissed respondent’s petition because the certification against forum shopping was executed by Atty. Soriano, counsel, not by a duly authorized director or officer of respondent corporation; Section 5, Rule 7 requires the plaintiff or principal party, or a corporation’s authorized officer, to execute it.
• Waiver of Right to Present Evidence: Yes. The RTC correctly deemed respondent to have waived its right to present evidence when it failed to appear on December 4, 1996 without valid reason; its former counsel’s honest mistake was negligence and lack of vigilance, not a sufficient ground.
• Prejudgment: Yes. The preliminary injunction did not prejudge the case. It was based on initial and incomplete evidence, was interlocutory, and preserved the status quo; a preliminary injunction becomes prejudgment only when it grants the main prayer and leaves nothing for the trial court to try except incidental matters.

• Primary Jurisdiction and Injunctive Relief: The SC held that the CA’s reliance on primary jurisdiction was misplaced. Under R.A. No. 166, while administrative cancellation of a registered trademark on grounds under Section 17 is within the BPTTT’s ambit, an action for infringement or unfair competition, including injunction and damages, is within the jurisdiction of ordinary courts; Section 27 vests damage suits in the proper RTC. Conrad and Company, Inc. vs. Court of Appeals and Shangri-La International Hotel Management Ltd. vs. Court of Appeals clarified that a BPTTT cancellation application cannot per se restrain courts from exercising jurisdiction; primary jurisdiction merely requires courts, in specialized disputes, to defer to administrative findings on technical matters. R.A. No. 8293, Sections 151.2, 156, and 161, provide that the court or agency vested with jurisdiction to enforce a registered mark may determine cancellation; filing a suit to enforce the mark excludes any other court or agency from assuming jurisdiction over a subsequently filed cancellation petition, but the earlier filing of a cancellation petition does not constitute a prejudicial question. Rule 8, Section 7 of the Regulations on Inter Partes Proceedings has the same effect. Thus petitioner’s prior BPTTT cancellation cases did not preclude its counterclaim for infringement and injunction in Civil Case No. 96-76944, and the RTC could act on the injunction application.
• Certification Against Forum Shopping: The SC held that the CA should have outrightly dismissed respondent’s petition. Section 5, Rule 7, incorporating Administrative Circular Nos. 28-91 and 04-94, requires the plaintiff or principal party to certify under oath against forum shopping; for a corporation, the certification must be executed by its duly authorized director or officer, not by counsel. Digital Microwave Corp. vs. Court of Appeals explained that only the petitioner or authorized corporate officer has actual knowledge of whether similar actions are pending; counsel may know only the case for which he has been retained. Atty. Soriano’s certification was defective; no board resolution or Secretary’s Certificate showed he was authorized. Non-compliance cannot be excused by liberal construction. Therefore the CA erred in giving due course to respondent’s petition.
• Waiver of Right to Present Evidence: The SC held that the RTC did not commit grave abuse of discretion. Respondent, through former counsel Atty. Yatco, was present at the November 6, 1996 hearing; the minutes noted respondent would be given 10 days to oppose the injunction prayer; the November 6 order set the hearing on December 4 and 11, 1996 and notified counsels in open court. On December 4, 1996, only petitioner’s counsel appeared despite notice, so upon petitioner’s motion the RTC deemed respondent to have waived its right to present evidence and submitted the injunction application for resolution. Respondent’s explanation that Atty. Yatco thought the December 4 hearing had been rescheduled to December 11 per agreement with petitioner’s counsel was not sufficient; the SC characterized it as negligence and lack of vigilance. The RTC correctly resolved the incident on petitioner’s evidence.
• Prejudgment: The SC held that the preliminary injunction did not prejudge the merits. A writ of preliminary injunction is generally based on initial and incomplete evidence; the evidence at the hearing is not conclusive because only a “sampling” is needed to justify issuance pending decision on the merits. The findings of fact and opinion when issuing the writ are interlocutory. The sole object is to preserve the status quo until the merits can be heard. Section 4, Rule 58 gives trial courts discretion to evaluate conflicting claims in an application for a provisional writ, and appellate courts generally do not interfere absent manifest abuse, as noted in Landbank of the Philippines vs. Continental Watchman Agency, Inc. A writ becomes prejudgment only when it grants the main prayer in the complaint or responsive pleading, leaving nothing to try except incidental matters, as in Ticzon vs. Video Post Manila, Inc. The RTC’s writ restrained respondent’s manufacture, distribution, sale, or offer for sale of jeans allegedly incorporating exact or colorable imitations; it did not dispose of the merits. The April 11, 1997 order expressly stated it was not a prejudgment, and petitioner still had to establish entitlement to permanent injunction at trial. Thus no prejudgment.

• Doctrine of primary jurisdiction — In controversies involving specialized disputes, regular courts may defer to the findings or resolutions of administrative tribunals on technical matters. The doctrine does not, however, allow a pending BPTTT cancellation case to suspend an ordinary court’s jurisdiction over infringement or unfair competition, including injunction and damages. Applied: the BPTTT cancellation cases did not bar the RTC from hearing Civil Case No. 96-76944 or issuing preliminary injunctive relief.
• Certification against forum shopping — The plaintiff or principal party must certify under oath in the initiatory pleading or a sworn certification annexed thereto: (a) that he has not commenced any action or filed any claim involving the same issues in any court, tribunal, or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending; (b) if there is such other pending action or claim, a complete statement of its present status; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five days to the court where the initiatory pleading was filed. For a corporation, the certification must be executed by a duly authorized director or officer, not by counsel. Failure is cause for dismissal without prejudice; false certification or non-compliance is indirect contempt; willful and deliberate forum shopping is ground for summary dismissal with prejudice and direct contempt. Applied: Atty. Soriano’s certification was defective because he was not shown to be authorized by respondent corporation.
• Preliminary injunction as interlocutory; no prejudgment — A writ of preliminary injunction is generally based on initial and incomplete evidence, and its factual findings and opinion are interlocutory. Its sole object is to preserve the status quo until the merits can be heard. It becomes a prejudgment only when it grants the main prayer in the complaint or responsive pleading, leaving nothing for the trial court to try except incidental matters. Applied: the RTC’s writ restrained respondent’s use of substantially similar designs but did not dispose of the merits.
• Waiver of right to present evidence through counsel’s negligence — A party’s failure to appear at a scheduled hearing without valid reason may be deemed a waiver of the right to present evidence. Counsel’s “honest mistake” about a rescheduled hearing is negligence and lack of vigilance, not a sufficient excuse. Applied: respondent was deemed to have waived its right to controvert petitioner’s injunction evidence after Atty. Yatco failed to appear on December 4, 1996.
• Presumption of validity and exclusive use of a registered trademark — A certificate of registration gives rise to a presumption of validity and the right to the exclusive use of the mark. Applied: petitioner’s Certificate of Registration No. 1379-A supported its claim to protect its LEVI’S marks.
• Independent and simultaneous remedies — An action for infringement or unfair competition, including injunction and damages, in the regular courts may proceed independently or simultaneously with an administrative cancellation action before the BPTTT. The earlier filing of a cancellation petition does not constitute a prejudicial question. Applied: petitioner’s BPTTT cases did not preclude its counterclaim for infringement and injunction in the RTC.

• “It bears stressing that an action for infringement or unfair competition, including the available remedies of injunction and damages, in the regular courts can proceed independently or simultaneously with an action for the administrative cancellation of a registered trademark in the BPTTT.” — The SC used this to reject the CA’s suspension of the RTC case pending the BPTTT cancellation proceedings.
• “The requirement of certification against forum shopping under the Rules is to be executed by the petitioner, or in the case of a corporation, its duly authorized director or officer, but not petitioner’s counsel whose professional services have been engaged to handle the subject case.” — The SC held that Atty. Soriano’s certification was defective and that the CA should have dismissed respondent’s petition.
• “A writ of preliminary injunction would become a prejudgment of a case only when it grants the main prayer in the complaint or responsive pleading, so much so that there is nothing left for the trial court to try except merely incidental matters.” — The SC used this rule to hold that the RTC’s preliminary injunction did not prejudge the merits.
• “It was correct for the trial court, upon motion of petitioner, to consider the matter submitted for resolution on the basis of petitioner’s evidence. Respondent cannot find solace in its lame excuse of honest mistake which was, in fact, negligence and lack of vigilance.” — The SC upheld the RTC’s declaration that respondent waived its right to present evidence after its counsel failed to appear on December 4, 1996.

• Conrad and Company, Inc. vs. Court of Appeals, G.R. No. 115115, July 18, 1995, 246 SCRA 691 — Controlling precedent; clarified that while administrative cancellation is within the BPTTT’s jurisdiction, an action for infringement or unfair competition, including injunction and damages, is within the jurisdiction of ordinary courts.
• Shangri-La International Hotel Management Ltd. vs. Court of Appeals, G.R. No. 111580, June 21, 2001, 359 SCRA 273 — Reiterated Conrad; applied to show that a BPTTT cancellation case does not restrain courts from exercising their jurisdiction.
• Digital Microwave Corp. vs. Court of Appeals, G.R. No. 128550, March 16, 2000, 328 SCRA 286 — Controlling on the certification against forum shopping; held that the certification must be executed by the petitioner or a duly authorized corporate officer, not by counsel, and that strict compliance is required.
• Landbank of the Philippines vs. Continental Watchman Agency, Inc., et al., G.R. No. 136114, January 22, 2004, 420 SCRA 624 — Cited for the rule that appellate courts generally will not interfere with the trial court’s discretion in a preliminary injunction absent manifest abuse.
• Ticzon vs. Video Post Manila, Inc., G.R. No. 136342, June 15, 2000, 333 SCRA 472 — Cited for the rule that a preliminary injunction becomes a prejudgment only when it grants the main prayer and leaves nothing for the trial court to try except incidental matters.

• Section 17, Republic Act No. 166 (Trademark Law) — The decision quotes this provision on grounds for cancellation in discussing the registered mark holder’s right to protect its mark. Applied: petitioner’s Certificate of Registration No. 1379-A gave it a basis to assert rights against respondent’s LIVE’S marks.
• Section 27, Republic Act No. 166 — States that the proper RTC shall have jurisdiction over damage suits. Applied: the RTC of Manila had jurisdiction over Civil Case No. 96-76944.
• Sections 151.2, 156, and 161, Republic Act No. 8293 (Intellectual Property Code) — The court or agency vested with jurisdiction to enforce a registered mark may determine cancellation; filing a suit to enforce the mark excludes any other court or agency from assuming jurisdiction over a subsequently filed cancellation petition; the earlier filing of a cancellation petition does not constitute a prejudicial question; damages and injunction are available for infringement; the court may determine the right to registration and order cancellation. Applied: the BPTTT cancellation cases did not suspend the RTC action, and the RTC could hear the injunction application.
• Sections 155(2), 156, and 163, Republic Act No. 8293 — Provide remedies for infringement or damages against reproduction, counterfeit, copy, or colorable imitation of a registered mark likely to cause confusion. Applied: petitioner’s counterclaim for infringement and injunction was a proper remedy.
• Section 5, Rule 7, Rules of Civil Procedure, incorporating Administrative Circular Nos. 28-91 and 04-94 — Requires the plaintiff or principal party to certify under oath against forum shopping; for a corporation, the certification must be executed by a duly authorized director or officer; failure is cause for dismissal without prejudice; false certification or non-compliance is indirect contempt; willful and deliberate forum shopping is ground for summary dismissal with prejudice and direct contempt. Applied: Atty. Soriano’s certification was defective, so the CA should have dismissed respondent’s petition.
• Section 4, Rule 58, Rules of Civil Procedure — Gives trial courts discretion to evaluate conflicting claims in an application for a provisional writ; appellate courts generally do not interfere absent manifest abuse. Applied: the RTC’s issuance of the preliminary injunction was within its discretion and did not prejudge the case.
• Section 3(a), (b), and (c), Rule 58, Rules of Civil Procedure — Grounds for preliminary injunction; cited in the RTC order. Applied: the RTC issued the writ upon a ₱500,000 bond to restrain respondent’s use of substantially similar designs.
• Rule 8, Section 7, Regulations on Inter Partes Proceedings — Filing a suit to enforce a registered mark with the proper court or Bureau excludes any other court or agency from assuming jurisdiction over a subsequently filed cancellation petition; an earlier cancellation petition is not a prejudicial question. Applied: the BPTTT cases did not bar the RTC from proceeding.