Torres vs. Perez

There is no probable cause to indict former partners for unfair competition under Section 168 of the Intellectual Property Code when they continue using the partnership's trademark after lawfully buying out the complaining partner's share and dissolving the partnership, as they become the exclusive owners of the partnership entitled to use its assets, and the essential elements of unfair competition—deception, passing off, and fraud upon the public—are absent.

Shirley Torres met spouses Imelda and Rodrigo Perez in 2002 when she sold them business-class plane tickets. The Perezes owned RGP Footwear Manufacturing (RGP), which supplied ladies' shoes to Shoe Mart (SM). They suggested Torres form a partnership with their daughter Sunshine to supply garments to SM. On October 17, 2002, Torres and Sunshine established Sasay's Closet Co. (SCC), registered with the Securities and Exchange Commission, to supply, trade, and retail garments. SCC used the trademark "Naturals with Design," which it filed with the Intellectual Property Office on August 24, 2005, and registered on February 26, 2007. SCC used RGP's facilities and business address in Biñan, Laguna, and was assigned vendor code "190501" by SM. In August 2003, Sunshine withdrew from the partnership to work abroad, and Imelda took over her responsibilities. In December 2005, following a dispute over reimbursement of travel expenses and unpaid work, Imelda dissolved the partnership and paid Torres her share of partnership assets from January to April 2006. In March 2006, Torres established her own sole proprietorship (Tezares Enterprise) and discovered that "Naturals" products were being sold in SM under RGP's vendor code "180195," prompting her to file a criminal complaint for unfair competition against the Perezes.

• Shirley Torres met spouses Imelda and Rodrigo Perez in 2002 when she sold them business-class plane tickets; the Perezes owned RGP Footwear Manufacturing, which supplied shoes to Shoe Mart (SM).
• The Perezes suggested Torres form a partnership with their daughter Sunshine to supply garments to SM.
• On October 17, 2002, Torres and Sunshine formed Sasay's Closet Co. (SCC), a partnership registered with the Securities and Exchange Commission, engaged in supplying garments such as underwear, children's wear, and other clothing items.
• SCC used the trademark "Naturals with Design," filed with the Intellectual Property Office on August 24, 2005, and registered on February 26, 2007.
• SCC was assigned vendor code "190501" by SM and used RGP's facilities and business address at No. 72 Victoria Subdivision, Barangay Dela Paz, Biñan, Laguna.
• In August 2003, Sunshine withdrew from the partnership to work in an international school, and respondent Imelda took over Sunshine's responsibilities in SCC.
• On December 14, 2005, Torres sent an email to Imelda requesting reimbursement for expenses incurred in a trip to China; Imelda refused, stating the trip was personal, and expressed frustration over doing unpaid work for SCC, subsequently manifesting her decision to dissolve the partnership.
• From January to April 2006, respondents paid Torres various amounts representing her share in the partnership assets, effectively buying her out of the partnership.
• On March 27, 2006, Torres established Tezares Enterprise, a sole proprietorship engaged in supplying clothing and accessories.
• In March 2006, Torres discovered that underwear products bearing the "Naturals" brand were being sold in SM with vendor code "180195," which was registered to RGP, confirmed by test buys conducted on May 13 and 14, 2006.
• On June 5, 2006, the RTC of Manila, Branch 24, issued a search warrant for unfair competition against respondents, which was implemented on the same day but quashed on October 20, 2006, upon the trial court's finding that respondents used the brand in the honest belief they owned SCC.
• On June 9, 2006, Torres filed a criminal complaint for unfair competition against respondents and Sunshine before the City Prosecution Office of Makati City.
• The City Prosecutor found probable cause on October 5, 2006, ruling that respondents passed off the "Naturals" brand as RGP's despite SCC remaining the owner, but found no probable cause against Sunshine as she had withdrawn in August 2003.
• The Department of Justice reversed the finding of probable cause on December 13, 2006, ruling that SCC had effectively wound up its affairs on April 24, 2006, when the last payment was made to Torres, and that respondents had become the exclusive owners of SCC entitled to use the trademark.

• The trial judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying the Motion to Dismiss and/or Withdraw Information despite the DOJ Resolution finding no probable cause, arguing that the judge's own finding of probable cause for the warrant of arrest should prevail.
• The trial judge committed grave abuse of discretion in granting the motion to dismiss based on the Court of Appeals decision in CA-G.R. SP No. 103846 which had not yet attained finality pending review by the Supreme Court.
• Respondents committed unfair competition by using RGP's vendor code "180195" to sell "Naturals" products, thereby passing off SCC's goods as those of RGP and prejudicing SCC's rights as the trademark owner.
• As a legitimate partner of SCC, Torres had the personality to prosecute respondents for unfair competition on behalf of the partnership.

• The finding of probable cause for filing an information is an executive function lodged with the prosecutor, not the judge; the judge's finding of probable cause for issuing a warrant of arrest is distinct from the determination of probable cause for holding a person for trial.
• The trial judge based his finding solely on the evidence submitted by petitioner without evaluating respondents' evidence, violating the requirement for an independent assessment.
• SCC had been effectively dissolved and its affairs wound up by April 2006 when payments to Torres were completed; thus, no competition existed between the parties when the complaint was filed on June 9, 2006.
• Having bought out Torres' share in the partnership, respondents became the exclusive owners of SCC and, as such, had the right to use the "Naturals" trademark.
• The use of RGP's vendor code was merely a practical measure to ensure that SM's payments for the products would go to respondents as the actual suppliers, not to deceive the public.
• The essential elements of unfair competition—deception, passing off, and fraud upon the public—were absent because respondents honestly believed they owned SCC and the trademark.

• Procedural Issues:
  • Whether the trial judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying the prosecutor's Motion to Dismiss and/or Withdraw Information despite the DOJ Resolution finding no probable cause (G.R. No. 188225).
  • Whether the trial judge committed grave abuse of discretion in granting the motion to dismiss the criminal case based on a Court of Appeals decision that was not yet final and executory, being the subject of a pending petition before the Supreme Court (G.R. No. 198728).
• Substantive Issues:
  • Whether probable cause exists to indict respondents for unfair competition under Section 168 in relation to Section 170 of Republic Act No. 8293.

• Procedural:
  • The trial judge did not commit grave abuse of discretion in initially denying the Motion to Dismiss, as judges have the independent duty under Crespo v. Mogul to personally evaluate records submitted in support of criminal complaints and determine probable cause; the prosecutor's resolution is persuasive but not binding on the court.
  • While the trial judge erred in yielding to the Court of Appeals decision that had not yet attained finality when he issued the Order dated July 29, 2009, this error did not constitute grave abuse of discretion amounting to lack or excess of jurisdiction, as he was merely performing a task he was called upon to do.
• Substantive:
  • No probable cause exists to indict respondents for unfair competition because the crime was not committed; respondents became the exclusive owners of SCC after completing payments to buy out petitioner's share from January to April 2006, giving them the right to use the "Naturals" trademark.
  • The use of RGP's vendor code "180195" instead of SCC's code "190501" was a practical arrangement to ensure payments would go to respondents as the actual suppliers, not an act of deception or passing off to mislead the public.
  • The essential elements of unfair competition—deception, passing off, and fraud upon the public—were absent; vendor codes are used by SM only for internal identification of suppliers and do not deceive the purchasing public.

• Probable Cause Definition — Defined as "such facts as are sufficient to engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial"; the determination of probable cause necessitates the prior determination of whether a crime or offense was committed in the first place.
• Elements of Unfair Competition — The key elements are "deception, passing off and fraud upon the public," which must be present to constitute unfair competition under Section 168 of the Intellectual Property Code.
• Judicial Independence in Preliminary Investigation — Under Crespo v. Mogul, once a complaint or information is filed in court, any disposition of the case as to its dismissal, or the conviction or acquittal of the accused, rests on the sound discretion of the court, as it is the best and sole judge of what to do with the case before it; while the resolution of the prosecutorial arm is persuasive, it is not binding on the court, which must make a personal evaluation of the records.

• "Crespo v. Mogul instructs in a very clear manner that once a complaint or information is filed in court, any disposition of the case as to its dismissal, or the conviction or acquittal of the accused, rests on the sound discretion of the said court, as it is the best and sole judge of what to do with the case before it. While the resolution of the prosecutorial arm is persuasive, it is not binding on the court."
• "Probable cause, for purposes of filing a criminal information, is described as 'such facts as are sufficient to engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial.'"
• "We have enunciated in CCBPI v. Gomez that the key elements of unfair competition are 'deception, passing off and fraud upon the public.'"
• "No deception can be imagined to have been foisted on the public through different vendor codes, which are used by SM only for the identification of suppliers' products."

• Crespo v. Mogul — Controlling precedent establishing that courts have independent discretion to grant or deny motions to dismiss after an information is filed, and that prosecutorial resolutions are merely persuasive, not binding, on the trial court.
• Yambot v. Armovit — Cited for the mandate that judges must make a personal evaluation of records submitted in support of criminal complaints filed before their respective salas.
• Alejandro v. Bernas — Cited for the definition of probable cause as facts sufficient to engender a well-founded belief that a crime has been committed and the respondent is probably guilty.
• CCBPI v. Gomez — Cited for the definition of the key elements of unfair competition as deception, passing off, and fraud upon the public.

• Section 168 of Republic Act No. 8293 (Intellectual Property Code of the Philippines) — Defines unfair competition as employing deception or any means contrary to good faith by which a person passes off his goods, business, or services for those of another who has established goodwill, and specifies acts deemed guilty of unfair competition.
• Section 170 of Republic Act No. 8293 — Provides the criminal penalties of imprisonment and fine for unfair competition.
• Rule 45 of the Rules of Court — Governs the petitions for review on certiorari filed before the Supreme Court assailing the Court of Appeals decisions.