Tuna Processors, Inc. vs. Frescomar Corporation & Hawaii International Seafoods, Inc.

Patent infringement is determined by the claims: the accused process must perform all elements of the patented claim, and an unclaimed machine disclosed only in the patent description forms part of prior art and cannot support infringement. A third person who maliciously induces a contracting party to violate its contract is liable for tortious interference under Article 1314 of the Civil Code.

Tuna Processors, Inc. (TPI), a California corporation, held the right to license or sub-license the Yamaoka Patent, a process for curing tuna meat using filtered smoke cooled to between 0°C and 5°C, and to enforce the patent and collect royalties from infringers. Frescomar Corporation processed seafood and manufactured tasteless filtered smoke in canisters for export, while Hawaii International Seafoods, Inc. (HISI) sold seafood products and Frescomar's tasteless smoke in canisters to seafood processing facilities outside the Philippines under the Kowalski Patent. TPI and Frescomar entered a license agreement granting Frescomar a non-exclusive license under the Yamaoka Patent, with royalty and shipment-report obligations. The dispute concerns whether Frescomar's production of filtered smoke and HISI's conduct infringed the Yamaoka Patent and gave rise to tortious interference.

Kanemitsu Yamaoka owned the rights over the Yamaoka Patent, a process of curing tuna meat using filtered smoke cooled to between 0°C and 5°C. Yamaoka Nippon Corporation (YNC), and later Pescarich Manufacturing Corporation (Pescarich), used the Yamaoka Patent in producing tuna products. In January 2003, Tuna Processors, Inc. (TPI), a foreign corporation organized and existing under the laws of California, United States, was granted the right to license or sub-license the Yamaoka Patent and its counterparts in other jurisdictions, such as U.S. Patent No. 5,484,619 and Indonesian Patent No. ID0003911, as well as the exclusive right to enforce the patents and collect royalties for past and present infringement and damages from third persons. Hawaii International Seafoods, Inc. (HISI) sells seafood products in the U.S. and Frescomar's tasteless smoke in canisters to seafood processing facilities outside the Philippines; HISI's products used tasteless smoke technology protected under U.S. Patent No. 5,972,401 with a corresponding application under Philippine Patent Application No. 1-1998-02560, the Kowalski Patent.

On March 31, 2004, TPI entered into a License Agreement with Frescomar, a company that processes and manufactures seafood products and tasteless filtered smoke in canisters for export abroad. Under the License Agreement, TPI granted Frescomar the non-exclusive license to make, use, import, purchase, sell, or offer to sell products protected by the Yamaoka Patent. Frescomar had to submit shipment reports as the bases for computing royalty fees for the use of the patent, and if it believed that any of its products did not use the Yamaoka Patent, it should request exemption from paying royalty fees. Frescomar made an initial payment of USD 3,000.00 to TPI but failed to make subsequent payments.

In a letter dated October 30, 2004, TPI demanded from Frescomar the shipment report and payment of royalty fees. The request remained unheeded. In another letter dated September 1, 2005, TPI reiterated its demands and added that it had learned Frescomar was producing and selling filtered smoke contained in a canister for William Kowalski of HISI. TPI demanded that Frescomar submit all information for all transactions it believed to be outside the scope of the Yamaoka Patent and stop using the patent to produce smoke for Kowalski. Frescomar initially claimed that the selling of smoke was not covered by the License Agreement. Not long after, Frescomar agreed to pay USD 22,534.80 royalties computed based on Frescomar's shipment reports submitted to TPI. Frescomar failed to make any payments. TPI sent a final demand letter dated January 13, 2006 asking Frescomar to pay USD 22,534.80 royalties for the past two years. Still, Frescomar failed to comply. Consequently, TPI terminated the License Agreement on January 17, 2006.

On February 13, 2006, Frescomar and HISI filed a Complaint for Unfair Competition and Injunction with Prayer for a Preliminary Injunction against TPI. In turn, TPI filed a Counterclaim demanding the payment of royalties from March 25, 2004 until the termination of the agreement. TPI's Counterclaim raised the issues of whether Frescomar and HISI were liable for breaching the License Agreement and infringing the Yamaoka Patent. Frescomar and HISI filed a Supplemental Reply and mainly argued that the Yamaoka Patent only covers tuna products and not tasteless smoke technology and that TPI had no right to stop Frescomar from producing the smoke and HISI from buying it. On August 23, 2007, TPI and Frescomar entered into a Settlement Agreement. In a Joint Motion to Dismiss filed on September 25, 2007, Frescomar moved for the dismissal of its action against TPI, while TPI moved for the dismissal of its counterclaims against Frescomar, both with prejudice. On October 4, 2007, the Regional Trial Court, Branch 23, General Santos City (RTC) granted the Joint Motion to Dismiss; Civil Case No. 7565 was dismissed with prejudice, and Civil Case No. 7566 was dismissed with prejudice with respect to Frescomar and continued with respect to HISI. Thereafter, HISI moved to suspend the proceedings to file a Petition for Certiorari; the RTC granted the motion, then lifted the suspension on April 11, 2008 since no Petition was filed. The case was referred to the Philippine Mediation Center. Before the scheduled mediation, TPI filed a Motion to Dismiss and to Set for Hearing the Counterclaim in the unfair competition case on the ground of failure to prosecute for an unreasonable length of time, and HISI filed a Motion to Dismiss the unfair competition case because Frescomar entered into a Settlement Agreement with TPI. On September 4, 2008, the RTC dismissed the unfair competition case and directed TPI to present its evidence ex-parte for its counterclaims against HISI.

TPI submitted testimonies. Francisco Santos, Frescomar's Vice President, testified that Frescomar entered into a License Agreement with TPI; Kowalski was aware of the License Agreement; Frescomar used the Yamaoka Patent from 2004 to 2007; Frescomar delivered about 2,389 canisters of filtered smoke to HISI; Frescomar did not pay royalties after consulting Kowalski, who advised Frescomar to say that it was actually using his patent and not Yamaoka's; and Frescomar filed the unfair competition case to pre-empt the arbitration proceedings in the U.S. required under the License Agreement. Eliseo Garay, YNC's former plant manager who later became HISI's Senior Technical Consultant, testified that Frescomar had been using the smoke machine in the Yamaoka Patent to produce the smoke it sells to HISI, which in turn sells them to other manufacturers; the temperature used in Frescomar's process was within the temperature covered by the Yamaoka Patent; and, following Kowalski's instructions, he ordered the falsification of the daily record of temperature to make it appear that the temperatures used fell within the Kowalski Patent and outside the Yamaoka Patent. Shem Makiputin, Pescarich's former smoke machine operator, supported Eliseo's testimony that they antedated the 2004 to 2006 records to make it appear that the temperature range fell outside the Yamaoka Patent, and confirmed that Frescomar hired him to operate two machines patterned after Pescarich's smoke machines. Jake T. Lu testified on TPI's right over the Yamaoka Patent and the License Agreement with Frescomar, including Frescomar's failure to comply, and that TPI filed a patent infringement case against HISI in the U.S. in December 2004. Tan and Ng testified that they wanted to enter into a license agreement with TPI but no longer pursued it after hearing about the cases filed against TPI.

The RTC and the CA found that Frescomar used smoke machines patterned from Pescarich's to produce the filtered smoke it sold to HISI, and that HISI sold the smoke to seafood processing businesses outside the Philippines. They also found that Frescomar admitted the use of the Yamaoka Patent, so no comparison of the claims was made.

• TPI (G.R. No. 226445) — Waiver and Damages: TPI assailed the CA's ruling and insisted that (1) it did not waive all its claims against Frescomar, (2) HISI cannot benefit from the Settlement Agreement, (3) the attorney's fees should not be reduced, and (4) the moral and exemplary damages should not have been deleted.
• HISI (G.R. No. 226631) — Patent Infringement and Procedural Errors: HISI reiterated its arguments before the CA that the Yamaoka Patent was not infringed and the RTC should not have dismissed the unfair competition case for failure to prosecute; even assuming the Counterclaim survived, the hearing should not have been made ex-parte; and the award of damages has no basis.

• Procedural — Counterclaim Survival: Whether TPI's counterclaim may still be resolved after the unfair competition case was dismissed at HISI's instance.
• Patent Infringement — Direct and Indirect: Whether Frescomar infringed the Yamaoka Patent and HISI is liable for contributory infringement.
• Release/Waiver: Whether TPI released Frescomar from liabilities for infringement.
• Tortious Interference and Damages: Whether HISI is liable for tortious interference and TPI is entitled to damages and attorney's fees.

• Procedural — Counterclaim Survival: Yes. Under Rule 17, Section 2 of the Rules of Court, where a counterclaim was pleaded before the plaintiff moved to dismiss, the dismissal is limited to the complaint; TPI's counterclaim could still be resolved in the same action.
• Patent Infringement — Direct and Indirect: No. Frescomar did not infringe because it did not perform all elements of Claim 1; the smoke machine is not claimed and forms part of prior art; the filtered smoke is not a direct or indirect product; and HISI cannot be liable for indirect infringement absent a direct infringer.
• Release/Waiver: Yes. TPI released Frescomar from past infringement liabilities through the Settlement Agreement and Joint Motion to Dismiss with prejudice, which TPI did not question.
• Tortious Interference and Damages: Yes. HISI is liable for tortious interference under Article 1314 of the Civil Code because all elements are present and its interference was malicious; TPI is entitled to temperate damages, exemplary damages, and attorney's fees, but not moral damages.

• Procedural — Counterclaim Survival: Rule 17, Section 2 of the Rules of Court, as amended by A.M. No. 19-10-20-SC, provides that a complaint may be dismissed at the plaintiff's instance, but if the defendant filed a counterclaim before the plaintiff moved for dismissal, the dismissal shall be limited to the complaint. HISI moved for the dismissal of the unfair competition case after TPI filed its Counterclaim. Thus, TPI's Counterclaim could still be resolved in the same action. HISI also did not question the RTC's order dismissing the unfair competition case and setting the case for hearing TPI's Counterclaim despite receipt of the order.

• Patent Infringement — Direct and Indirect: Sections 76.1 and 76.6 of the Intellectual Property Code define direct and indirect patent infringement. Direct infringement covers the making, using, offering for sale, selling, or importing of a patented product or a product obtained directly or indirectly from a patented process, or the unauthorized use of a patented process. Indirect infringement consists of infringement by inducement or contributory infringement and presupposes a direct infringer. Section 75 provides that the extent of protection conferred by a patent is determined by the claims, interpreted in light of the description and drawings, and that the description can neither limit nor expand the claims. Claim 1 of the Yamaoka Patent is the only independent claim and covers a method for curing raw tuna meat by extra-low temperature smoking, with four steps: (1) burning smoking material at 250° to 400°C; (2) filtering the produced smoke to remove mainly tar; (3) cooling the filtered smoke in a cooling unit to between 0° and 5°C while retaining preservative and sterilizing effects; and (4) smoking the tuna meat by exposure to the smoke cooled to between 0° and 5°C. The smoke machine is not included in the claims; it is disclosed only in the description and therefore forms part of prior art. Frescomar built a smoke machine patterned from Pescarich's but modified it. Its process ended with the production of smoke and, at most, performed only the first two elements of Claim 1. There were no findings that HISI performed the last two elements of cooling the filtered smoke to between 0° and 5°C before applying it to tuna meat. The method protected by the Yamaoka Patent was therefore not completed, and no direct infringement occurred. The filtered smoke is not a product directly or indirectly obtained from the patented process; it is only a material or component element in producing tuna products under the Yamaoka Patent, and not a by-product. Because there was no direct infringement, HISI could not be liable for indirect infringement. For contributory infringement, it was not proven that HISI knew the smoke was used for infringing the Yamaoka Patent or that the smoke had no other use but to infringe; conventional smoking can be done in three temperature zones not covered by the extra-low temperature of 0° to 5°C. Thus, Frescomar and HISI are not liable for patent infringement.

• Release/Waiver: Even if the smoke were considered an indirect product, Frescomar could not be held liable. The Settlement Agreement provided that TPI agreed not to pursue Frescomar and Francisco for liability or royalties related to past infringement of U.S. Patent No. 5,484,619 or its international counterparts. TPI and Frescomar then jointly moved for the dismissal of TPI's counterclaims against Frescomar with prejudice, which the RTC granted on October 4, 2007. The WHEREAS clauses of the Settlement Agreement showed the parties' intention to compromise and settle all their disputes. A plain reading of the Joint Motion to Dismiss revealed that TPI voluntarily waived any claim it may have against Frescomar arising from the case. TPI never questioned the RTC's dismissal. TPI's argument that "not to pursue" is not the same as "release from liability" was rejected because not pursuing Frescomar for past infringement necessarily released it from liability. Since HISI's liability for indirect infringement would have been solidary with Frescomar, HISI was also released from patent infringement liability. However, HISI remained liable for tortious interference.

• Tortious Interference and Damages: Article 1314 of the Civil Code provides that any third person who induces another to violate a contract shall be liable for damages to the other contracting party. The elements of tortious interference, as laid down in So Ping Bun vs. Court of Appeals, are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of the contract; and (3) interference by the third person without legal justification or excuse. Lagon vs. Court of Appeals further requires that the third person may be held liable only when there is no legal justification or excuse, or when the conduct was stirred by a wrongful motive; the interference must not be solely driven by economic or proper business interest, and the third person must have acted with malice. All elements were present. The license agreement between TPI and Frescomar existed. The testimonies of Francisco and Eliseo proved HISI's knowledge of the license agreement and showed that HISI insisted Frescomar should not pay royalties. HISI's officers ordered Frescomar not to pay because paying TPI would help TPI in its patent infringement case against HISI in the U.S., and they advised Frescomar to file a case in the Philippines to pre-empt the U.S. arbitration. Eliseo also ordered Frescomar's employees to tamper with temperature records to make it appear that Frescomar was using the Kowalski Patent. HISI acted with malice. Its belief that Frescomar did not use the Yamaoka Patent was not a legal justification because Frescomar's obligations were contractual: it had to pay royalties and request exemption for products produced outside the Yamaoka Patent. Thus, HISI is liable for tortious interference. On damages, Article 2199 requires actual or compensatory damages to be proved with reasonable certainty, while Article 2224 allows temperate damages when a pecuniary loss is suffered but its amount cannot be proved with certainty. In tortious interference, the defendant cannot be held liable for more than the amount for which the party induced to break the contract can be held liable. TPI suffered a pecuniary loss when Frescomar failed to pay royalties during the effectivity of the license agreement, but the exact amount was unidentified because no evidence proved the exact number of tuna products produced. The CA found no basis for actual damages. The PHP 5,000,000.00 award was unreasonable. Francisco testified that unpaid royalties in 2005 were around USD 17,000.00, and TPI's final demand letter dated January 13, 2006 sought USD 22,534.80 based on Frescomar's shipment records for two years. Using the average Philippine Peso per U.S. Dollar rate in January 2006 of PHP 52.6171, the Court found PHP 1,000,000.00 as temperate damages proper. Moral damages were not proper. A juridical person is generally not entitled to moral damages because it cannot experience physical suffering or wounded feelings; while it may claim moral damages for libel or defamation, the grant is not automatic and requires factual basis. The evidence showed that the proximate cause of TPI's injury was the filing of the unfair competition case, not HISI's interference; the filing was an efficient intervening cause. Thus, the requisites for moral damages were absent. Exemplary damages were proper to deter future similar offenses; HISI acted in bad faith and with malice, so PHP 500,000.00 was imposed. Attorney's fees of PHP 1,000,000.00 were upheld under Article 2208(1) and (4) of the Civil Code because HISI acted with malice in interfering with the license agreement and in filing the unfair competition case.

• Claims Define the Scope of Patent Protection — Under Section 75 of the Intellectual Property Code, the extent of protection conferred by a patent is determined by the claims, interpreted in the light of the description and drawings; the description can neither limit nor expand the claims. Any unclaimed invention or information disclosed in the description forms part of prior art. In this case, the smoke machine was not claimed in the Yamaoka Patent and was disclosed only in the description, so its use by Frescomar did not infringe the patent.
• Direct Patent Infringement — Section 76.1 of the Intellectual Property Code defines direct infringement as the making, using, offering for sale, selling, or importing of a patented product or a product obtained directly or indirectly from a patented process, or the unauthorized use of a patented process. A process infringes only if the accused process performs all the elements of the patent claim. Frescomar performed at most the first two elements of Claim 1 and did not complete the curing process, so there was no direct infringement.
• Indirect Patent Infringement — Section 76.6 of the Intellectual Property Code recognizes infringement by inducement and contributory infringement. Indirect infringement presupposes a direct infringer. Contributory infringement requires knowledge that the component is especially adopted for infringing the patented invention and is not suitable for substantial non-infringing use; the contributory infringer is solidarily liable with the direct infringer. Because there was no direct infringement and the required knowledge and lack of non-infringing use were not proven, HISI was not liable for indirect infringement.
• Two-Step Analysis in Patent Infringement — The court first interprets the claims to determine the patent's scope and meaning, then measures the accused product or process against the properly interpreted claims. The courts below failed to make this comparison because they found Frescomar admitted use of the Yamaoka Patent; the Supreme Court applied the analysis and found no infringement.
• Tortious Interference — Article 1314 of the Civil Code makes a third person who induces another to violate a contract liable for damages. The elements are: (1) existence of a valid contract; (2) knowledge by the third person of the contract's existence; and (3) interference without legal justification or excuse. Liability attaches only when there is no legal justification or excuse, or when the interference is stirred by a wrongful motive or malice, not solely by economic or proper business interest. HISI's malicious inducement of Frescomar to stop paying royalties satisfied all elements.
• Damages in Tortious Interference — A defendant in tortious interference cannot be held liable for more than the amount for which the party induced to break the contract can be held liable. Actual or compensatory damages must be proved with reasonable certainty; if a pecuniary loss is suffered but its amount cannot be proved with certainty, temperate damages may be awarded under Article 2224. Moral damages are generally not recoverable by juridical persons and are not automatic; exemplary damages may be awarded to deter similar conduct. The Court awarded PHP 1,000,000.00 temperate damages, PHP 500,000.00 exemplary damages, and PHP 1,000,000.00 attorney's fees, but denied moral damages.
• Dismissal upon Motion of Plaintiff and Counterclaim Survival — Under Rule 17, Section 2 of the Rules of Court, as amended, if a counterclaim has been pleaded before the plaintiff moves for dismissal, the dismissal is limited to the complaint. TPI's counterclaim against HISI survived the dismissal of the unfair competition case.
• Prior Art — Section 24 of the Intellectual Property Code defines prior art as everything made available to the public anywhere in the world before the filing or priority date, and the whole contents of an earlier published application. Unclaimed information disclosed in a patent description forms part of prior art. The smoke machine disclosed in the Yamaoka Patent description was prior art and could not support infringement.

• "In this case, the Court stresses the importance of examining the patent claims in determining patent infringement. Like the technical description of a real property, patent claims define the extent of protection conferred by the patent and describe the boundary of the invention through words. Any information or invention outside of that boundary forms part of prior art, and the use of that information or invention without the patentee's consent does not constitute patent infringement." — This opening passage states the ratio decidendi on the primacy of patent claims and the prior-art boundary.
• "As stated in Section 75 of the IP Code, the extent of protection conferred by the patent shall only be determined by the claims. Thus, it follows that any unclaimed invention or information disclosed in the description, like the other contents of a patent application and everything that has been made available to the public anywhere in the world, forms part of prior art." — This passage explains why the unclaimed smoke machine disclosed in the Yamaoka Patent description could not support a finding of infringement.
• "In fine, Frescomar did not use the curing process under the Yamaoka Patent. Thus, the Yamaoka Patent was not infringed." — This is the Court's conclusion on direct infringement.
• "A plain reading of the Motion reveals that TPI voluntarily waived any claim that it may have against Frescomar arising from this case. The Court sees no other reasonable explanation why TPI would agree to move for the dismissal of its counterclaims if it still wants to hold Frescomar liable for patent infringement." — This passage supports the holding that TPI released Frescomar from infringement liability.

• Phillips Seafood Philippines Corporation vs. Tuna Processors, Inc., G.R. No. 214148, February 6, 2023 — Controlling precedent involving the same Yamaoka Patent; it established the two-step analysis, held that Claim 1 is the only independent claim, reiterated that the language of the claims limits the scope of protection, and noted that conventional smoking can be done in three temperature zones not covered by the extra-low temperature of 0° to 5°C.
• Godines vs. Court of Appeals, 297 Phil. 375 (1993) — Cited for direct patent infringement under Section 76.1; if the accused product or process falls within the literal meaning of the claim or appropriates the innovative concept and performs substantially the same functions, in the same way, to produce the same result, there is direct infringement.
• So Ping Bun vs. Court of Appeals, 373 Phil. 532 (1999) — Laid down the elements of tortious interference: existence of a valid contract, knowledge by the third person of the contract, and interference without legal justification or excuse.
• Lagon vs. Court of Appeals, 493 Phil. 739 (2005) — Held that a third person may be liable for tortious interference only when there is no legal justification or excuse, or when the conduct was stirred by a wrongful motive; the interference must not be solely driven by economic or proper business interest, and malice must be shown.
• Go vs. Cordero, 634 Phil. 69 (2010) — Cited on damages in tortious interference; the defendant cannot be held liable for more than the amount for which the party induced to break the contract can be held liable; it also discussed exemplary damages and moral damages for corporations.
• Pearl & Dean (Phil.), Incorporated vs. Shoemart, Incorporated, 456 Phil. 474 (2003) — Cited in support of the principle that performance of some elements of a claim is not sufficient to conclude patent infringement, especially when the accused only used prior art and did not appropriate the inventive step, and that a contrary ruling would discourage innovation.
• Filipinas Broadcasting Network, Inc. vs. Ago Medical & Educational Center-Bicol Christian College of Medicine, 489 Phil. 380 (2005) — Cited for the rule that a juridical person is generally not entitled to moral damages because it cannot experience physical suffering or wounded feelings, although it may claim moral damages for defamation.
• Seven Brothers Shipping Corporation vs. DMC-Construction Resources, Inc., 748 Phil. 692 (2014) — Cited for temperate damages; the amount must be reasonable, more than nominal but less than compensatory.
• Dee Hua Liong Electrical Equipment Corporation vs. Reyes, 230 Phil. 101 (1986) — Cited for the requirement that actual or compensatory damages must be proved with a reasonable degree of certainty.
• Quezon City Government vs. Dacara, 499 Phil. 228 (2005) — Cited for the definition of proximate cause as any cause that produces injury in a natural and continuous sequence, unbroken by any efficient intervening cause, such that the result would not have occurred otherwise.

• Section 75, Intellectual Property Code (Republic Act No. 8293) — The extent of protection conferred by a patent is determined by the claims, interpreted in the light of the description and drawings; equivalents are considered. Applied to hold that the smoke machine, not being claimed, could not expand the patent's protection and formed part of prior art.
• Section 76.1, Intellectual Property Code — Defines direct patent infringement as the making, using, offering for sale, selling, or importing of a patented product or a product obtained directly or indirectly from a patented process, or the unauthorized use of a patented process. Applied to find no direct infringement because Frescomar did not perform all elements of Claim 1.
• Section 76.6, Intellectual Property Code — Defines indirect patent infringement through active inducement or contributory infringement, requiring knowledge that the component is especially adopted for infringing the patented invention and is not suitable for substantial non-infringing use; the contributory infringer is solidarily liable. Applied to hold HISI not liable because there was no direct infringement and the required elements were not proven.
• Section 24, Intellectual Property Code — Defines prior art as everything made available to the public anywhere in the world before the filing or priority date, and the whole contents of an earlier published application. Applied to treat the unclaimed smoke machine disclosed in the Yamaoka Patent description as prior art.
• Rule 17, Section 2, Rules of Court, as amended by A.M. No. 19-10-20-SC — Provides that if a counterclaim has been pleaded before the plaintiff moves for dismissal, the dismissal is limited to the complaint. Applied to allow TPI's counterclaim against HISI to survive the dismissal of the unfair competition case.
• Article 1314, Civil Code — Any third person who induces another to violate a contract shall be liable for damages to the other contracting party. Applied to hold HISI liable for tortious interference.
• Article 2199, Civil Code — A person is entitled to adequate compensation for a pecuniary loss duly proved; actual or compensatory damages must be proved with reasonable certainty. Applied to deny the PHP 5,000,000.00 actual damages award because the exact loss was not proved.
• Article 2224, Civil Code — Temperate damages may be granted if a party suffered some pecuniary loss but its amount cannot, from the nature of the case, be proved with certainty. Applied to award PHP 1,000,000.00 as temperate damages.
• Articles 2219 and 2220, Civil Code — Moral damages may be recovered in the cases and under the requisites provided by law. Applied to deny moral damages because the proximate cause of TPI's injury was the filing of the unfair competition case, not HISI's interference.
• Article 2208(1) and (4), Civil Code — Attorney's fees may be recovered when exemplary damages are awarded and in cases of a clearly unfounded civil action or proceeding. Applied to uphold PHP 1,000,000.00 attorney's fees because HISI acted with malice.
• Rule 416, Revised Implementing Rules and Regulations for Patents, Utility Models, and Industrial Designs — Provides for the two-part form claim, containing a statement of the subject matter and prior-art features and a characterizing portion stating the protected technical features. Applied to hold that performance of some elements of a claim is not sufficient to conclude patent infringement.
• Section 35, Intellectual Property Code — The patent description must disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art. Applied to note that the smoke machine was disclosed in the description but could not limit or expand the claims.

Gesmundo, C.J.; Leonen, SAJ.; Caguioa; Hernando; Lazaro-Javier; Zalameda; Gaerlan; Rosario; J. Lopez; Dimaampao; Marquez; Kho, Jr.; and Singh, JJ., concur. Inting, J., took no part.