Philip Morris, Inc. vs. Court of Appeals

A foreign corporation, though entitled to bring an infringement suit in the Philippines without a local license, must show actual commercial use of its trademark within the country to establish a clear legal right sufficient for the issuance of a preliminary injunction.

Petitioners, foreign corporations not doing business in the Philippines, owned Philippine registrations for the cigarette trademarks "MARK VII," "MARK TEN," and "LARK." Private respondent Fortune Tobacco Corporation manufactured and sold cigarettes under the trademark "MARK" pursuant to a temporary authority from the Bureau of Internal Revenue, and had a pending application for its registration with the Philippine Patent Office. Petitioners filed a complaint for infringement and sought a preliminary injunction to stop Fortune's activities.

• Nature of the Action: Petitioners, foreign corporations, sued Fortune Tobacco for trademark infringement, alleging that Fortune's "MARK" cigarettes infringed on their registered trademarks "MARK VII," "MARK TEN," and "LARK."
• Petitioners' Status: Petitioners admitted they were not doing business in the Philippines but claimed protection under the Trademark Law (R.A. No. 166) and the Paris Convention.
• Fortune's Status: Fortune was authorized by the Bureau of Internal Revenue to manufacture "MARK" cigarettes and had a pending application for trademark registration. The Philippine Patent Office had preliminarily found "MARK" to be confusingly similar to petitioners' marks.
• Lower Court Findings: The RTC denied the injunction, finding no clear right to protection because petitioners were not using their marks in local commerce and because Fortune's application was still pending.
• Appellate Court Action: The Court of Appeals first granted the injunction, finding a prima facie case of infringement. It later dissolved the injunction upon Fortune's offer of a counterbond, reasoning that petitioners would not suffer irreparable damage since they were not manufacturing locally and any damages could be compensated by the bond.

• Capacity to Sue: Petitioners argued that Section 21-A of the Trademark Law and the Paris Convention granted them the right to sue for infringement regardless of whether they were licensed to do business in the Philippines.
• Clear Right to Injunction: Petitioners maintained that their certificates of registration constituted prima facie evidence of ownership and exclusive use, establishing a clear right for injunctive relief.
• Irreparable Injury: Petitioners contended that the infringement diluted their goodwill and property rights, causing damage not susceptible to exact pecuniary measurement.
• Grave Abuse of Discretion: Petitioners asserted that the Court of Appeals acted with grave abuse of discretion in dissolving the injunction based on improper considerations (e.g., lack of local business operations, economic impact on Fortune).

• No Irreparable Damage: Respondent countered that petitioners suffered no irreparable injury because they were not engaged in business in the Philippines and their claimed damages were speculative.
• Economic Impact: Respondent argued that maintaining the injunction would cause great damage to itself (layoffs) and the government (loss of substantial tax revenues), which outweighed any potential harm to petitioners.
• Sound Discretion of the Court: Respondent maintained that the dissolution of an injunction upon the filing of a counterbond is within the court's sound discretion under Section 6, Rule 58 of the Rules of Court.
• Pending Application: Respondent noted that its trademark application was still pending, making the issuance of an injunction premature.

• Capacity and Right to Protection: Whether foreign corporations not doing business in the Philippines have a clear legal right to a preliminary injunction to protect their registered trademarks.
• Propriety of Dissolution: Whether the Court of Appeals gravely abused its discretion in dissolving the writ of preliminary injunction.

• Capacity and Right to Protection: While foreign corporations have the capacity to sue for infringement under Section 21-A of the Trademark Law and the Paris Convention, the right to a preliminary injunction depends on proof of actual use of the trademark in Philippine commerce. Petitioners' admission that they were not doing business in the Philippines negated the existence of a clear, positive right to injunctive relief.
• Propriety of Dissolution: The Court of Appeals did not commit grave abuse of discretion. The dissolution was proper under Section 6, Rule 58 of the Rules of Court, as the injunction would cause great damage to the defendant (Fortune) while the plaintiff (petitioners) could be fully compensated for any damages via a counterbond. The Court also considered the public interest in preserving jobs and tax revenues.

• Trademark Protection for Foreign Corporations — A foreign corporation not doing business in the Philippines may maintain an action for trademark infringement under Section 21-A of R.A. No. 166 and the Paris Convention. However, the substantive right to protection, including injunctive relief, requires actual use of the trademark in local commerce as mandated by Sections 2 and 2-A of the same law. Registration alone does not perfect a trademark right; it is acquired through actual use.
• Requisites for Preliminary Injunction — To be entitled to a preliminary injunction, the applicant must demonstrate: (1) a clear and unmistakable right to be protected, and (2) that the acts against which the injunction is directed violate that right. The existence of the right must be established prima facie. The writ is an exception, not the rule, and courts must exercise great caution in its issuance.
• Dissolution of Injunction upon Counterbond — Under Section 6, Rule 58 of the Rules of Court, a preliminary injunction may be dissolved if, after hearing, it appears that although the plaintiff is entitled to the injunction, its continuance would cause great damage to the defendant while the plaintiff can be fully compensated for any damages suffered, and the defendant files a sufficient bond.

• "A foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market." — This passage underscores the distinction between the capacity to sue and the substantive right to injunctive protection.
• "The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademarks in question and the filing of the counterbond will amply answer for such damages." — This excerpt from the Court of Appeals resolution, affirmed by the Supreme Court, encapsulates the rationale for dissolving the injunction.

• Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583 (1991) — Cited for the principle that actual use in commerce in the Philippines is a prerequisite to acquiring ownership over a trademark.
• La Chemise Lacoste S.A. vs. Fernandez, 129 SCRA 373 (1984) — Affirmed the right of foreign corporations to sue in the Philippines under the Trademark Law and the Paris Convention.
• Buayan Cattle Co. vs. Quintillan, 125 SCRA 276 — Cited for the requisites for granting a preliminary injunction.
• Pagasa Industrial Corporation v. Court of Appeals, 118 SCRA 526 (1982) — Emphasized that the Trademark Law requires actual commercial use of the mark prior to registration.

• Section 21-A, Republic Act No. 166 (Trademark Law) — Allows a foreign corporation to bring an action for infringement in the Philippines whether or not it is licensed to do business, provided a reciprocity requirement is met.
• Sections 2 and 2-A, Republic Act No. 166 — Require that trademarks be "actually in use in commerce" in the Philippines for at least two months before registration and that ownership is acquired by actual use in manufacture or trade.
• Section 6, Rule 58 of the Revised Rules of Court — Provides grounds for the dissolution of a preliminary injunction, including when its continuance would cause great damage to the defendant while the plaintiff can be fully compensated via a counterbond.
• Article 2, Paris Convention for the Protection of Industrial Property — Establishes the principle of "national treatment," entitling nationals of member countries to the same protections as domestic nationals, and prohibits domicile requirements.

• Justice Jose C. Melo (Ponente)
• Justice Florenz D. Regalado
• Justice Abraham F. Sarmiento
• Justice Carolina C. Griño-Aquino
• Justice Jose A. R. Melo
• Justice (Name not listed in text, but noted as concurring in the result)

• Justice Abdulwahid A. Bidin — Concurred with the main opinion.
• Justice Vicente V. Mendoza — Concurred in the result.
• Justice Flerida Ruth P. Romero — Took no part.
• Justice Isagani A. Cruz — Dissented. He argued that the Court of Appeals' dissolution of the injunction was a grave abuse of discretion. He maintained that petitioners had a clear right based on their registrations and the Patent Office's finding of confusing similarity, and that the economic arguments of Fortune were exaggerated and irrelevant to the legal right. He voted to grant the petition and reinstate the injunction.