Zuneca Pharmaceutical vs. Natrapharm, Inc.

A petition for review challenging a permanent injunction issued by the Court of Appeals in a certiorari proceeding against the denial of a preliminary injunction becomes moot and academic once the trial court renders a decision on the merits of the main case that includes a permanent injunction; the proper remedy is an appeal from that decision on the merits. A preliminary injunction is ancillary and cannot survive the main case, while a permanent injunction forms part of the judgment on the merits.

Natrapharm, Inc. is an all-Filipino pharmaceutical company that manufactures and sells a medicine bearing the generic name “CITICOLINE” under the registered trademark “ZYNAPSE.” Zuneca Pharmaceutical, Akram Arain and/or Venus Arain, M.D., doing business as Zuneca Pharmaceutical, sold an imported anti-convulsant bearing the generic name “CARBAMAZEPINE” under the brand name “ZYNAPS.” The dispute is governed by Republic Act No. 8293, the Intellectual Property Code of the Philippines, which provides for the acquisition of trademark rights through registration, the rights conferred on registered mark owners, and limitations against prior users, and by Rule 58 of the Rules of Court, which distinguishes preliminary from permanent injunctions.

Natrapharm, Inc., an all-Filipino pharmaceutical company, manufactures and sells a medicine bearing the generic name “CITICOLINE,” indicated for heart and stroke patients. It markets the medicine under the trademark “ZYNAPSE,” which it registered with the Intellectual Property Office on September 24, 2007 under Certificate of Trademark Registration No. 4-2007-005596, giving it protection for ten years from that date. Natrapharm also obtained from the Bureau of Food and Drugs all necessary permits and licenses to register, list, and sell “ZYNAPSE” in its various forms and dosages.

Zuneca Pharmaceutical, Akram Arain and/or Venus Arain, M.D., doing business as Zuneca Pharmaceutical, sold a medicine imported from Lahore, Pakistan bearing the generic name “CARBAMAZEPINE,” an anti-convulsant indicated for epilepsy, under the brand name “ZYNAPS.” The “ZYNAPS” mark was not registered with the IPO, but “ZYNAPS” is pronounced exactly like “ZYNAPSE.” Petitioners claimed prior use in good faith, having submitted an application for a Certificate of Product Registration with the BFAD on October 2, 2001 with the name “ZYNAPS” expressly indicated; the CPR was issued on April 15, 2003. Respondent alleged that, unknown to it, petitioners had been selling “ZYNAPS” since 2003 or even as early as 2001.

Natrapharm further alleged that petitioners sold “ZYNAPS” CARBAMAZEPINE in numerous drugstores in the country where its own “ZYNAPSE” CITICOLINE was also sold. It claimed that CARBAMAZEPINE has a documented serious and disfiguring side effect called Stevens-Johnson Syndrome, and that the sale of “ZYNAPSE” and “ZYNAPS” in the same drugstores would give rise to medicine switching, placing patients on “ZYNAPSE” medication in a more injurious situation.

On October 30, 2007, Natrapharm sent petitioners a cease-and-desist demand letter. It asserted that “ZYNAPSE” was its registered trademark and that, as owner, it had the exclusive right to use the mark and to prevent others from using identical or confusingly similar marks; it demanded that petitioners stop using “ZYNAPS” because it was nearly identical to “ZYNAPSE.” It also warned that the confusing similarity created a danger of medicine switching, with patients on “ZYNAPSE” medication placed at greater risk because of the Stevens-Johnson Syndrome side effect of “ZYNAPS” CARBAMAZEPINE. Petitioners refused to heed the demand, claiming prior use of “ZYNAPS” since 2003 and relying on the BFAD CPR issued on April 15, 2003.

On November 29, 2007, Natrapharm filed a complaint against petitioners for trademark infringement for violation of Republic Act No. 8293, the Intellectual Property Code of the Philippines, with a prayer for a temporary restraining order and/or writ of preliminary injunction. Natrapharm cited Section 122 of R.A. No. 8293, under which registration gives the exclusive right to use the name and to exclude others from using the same, and Sections 138 and 147.1, under which certificates of registration are prima facie evidence of the registrant’s ownership and exclusive right to use the mark. It also invoked Conrad and Company, Inc. vs. Court of Appeals, where it was ruled that an invasion of a registered mark entitles the holder of a certificate of registration to injunctive relief. In their answer, petitioners argued that they enjoyed prior use in good faith of “ZYNAPS” and that Section 159 of the IPC protected their right to use the mark.

The RTC found that petitioners had prior actual use of “ZYNAPS” in 2003, which defeated Natrapharm’s 2007 registration for purposes of the injunctive relief sought.

• Prior Use in Good Faith: Petitioners argued that they enjoyed prior use in good faith of the brand name “ZYNAPS,” having submitted their application for a Certificate of Product Registration with the BFAD on October 2, 2001, with the name “ZYNAPS” expressly indicated thereon; the CPR was issued on April 15, 2003.
• Section 159 IPC Limitation: Petitioners averred that under Section 159 of the Intellectual Property Code, their right to use the “ZYNAPS” mark is protected, as a registered mark has no effect against a person who, in good faith, was using the mark before the filing or priority date.
• No Mootness Due to Non-Finality: Petitioners opposed respondent’s motion to dismiss, arguing that the December 2, 2011 RTC Decision had not yet attained finality, and thus the present petition had not been rendered moot.

• Exclusive Trademark Rights: Respondent argued that under Section 122 of R.A. No. 8293, registration of “ZYNAPSE” gave it the exclusive right to use the name and to exclude others from using the same.
• Prima Facie Evidence of Registration: Respondent argued that under Sections 138 and 147.1 of the IPC, certificates of registration are prima facie evidence of the registrant’s ownership of the mark and of the registrant’s exclusive right to use the same.
• Entitlement to Injunctive Relief: Respondent invoked Conrad and Company, Inc. vs. Court of Appeals, where it was ruled that an invasion of a registered mark entitles the holder of a certificate of registration to injunctive relief.
• Mootness of Ancillary Petition: Respondent moved to dismiss the present petition in view of the December 2, 2011 RTC Decision, contending that the petition is moot and academic because the RTC Decision was a full adjudication on the merits of the main issue of trademark infringement and the present petition involved only an ancillary writ.

• Mootness: Whether the decision on the merits rendered the issues in this case moot and academic.
• Permanent Injunction in Certiorari: Whether the CA may order a permanent injunction in deciding a petition for certiorari against the denial of an application for a preliminary injunction issued by the RTC.

• Mootness: Yes. The issues raised in the instant petition have been rendered moot and academic given the RTC’s December 2, 2011 Decision on the merits of the case. The petition was denied for being moot and academic.
• Permanent Injunction in Certiorari: Mooted. The Court did not resolve the propriety of the CA’s permanent injunction because the RTC’s December 2, 2011 Decision on the merits, which included a permanent injunction, rendered the issue moot and academic; the proper remedy is an appeal from the decision in the main case.

• Mootness: Rule 58 of the Rules of Court provides for both preliminary and permanent injunction. A preliminary injunction is an order granted at any stage of an action or proceeding prior to judgment or final order, requiring a party, court, agency, or person to refrain from particular acts or to perform acts. It is generally based solely on initial and incomplete evidence; the evidence submitted during the hearing is not conclusive or complete, for only a sampling is needed to give the trial court an idea of the justification for the preliminary injunction pending the decision on the merits. The findings of fact and opinion of a court when issuing a preliminary injunction are interlocutory in nature and made before trial on the merits is commenced or terminated. By contrast, a permanent injunction under Section 9, Rule 58 forms part of the judgment on the merits and can only be properly ordered on final judgment; it may be granted after a trial or hearing on the merits, and a decree granting or refusing an injunction should not be entered until after a hearing on the merits where a verified answer containing denials is filed or where no answer is required, or a rule to show cause is equivalent to an answer. A preliminary injunction, like any preliminary writ and interlocutory order, cannot survive the main case of which it is an incident; an ancillary writ of preliminary injunction loses its force and effect after the decision in the main petition. In Casilan vs. Ybañez, the Court stated that preliminary writs are vacated, superseded, and replaced by the permanent injunction ordered in the decision on the merits, and that no action can be taken on the permanent injunction without reviewing the judgment on the merits, since the injunction is but a consequence of the pronouncement on the merits; the remedy is a timely appeal from the judgment on the merits, not certiorari. Here, the case brought to the CA on a petition for certiorari merely involved the RTC’s denial of respondent’s application for a writ of preliminary injunction, a mere ancillary writ. With the RTC’s December 2, 2011 Decision on the case for “Injunction, Trademark Infringement, Damages and Destruction,” which included a permanent injunction in its disposition, the issues raised in the instant petition were rendered moot and academic. The proper remedy is an appeal from the decision in the main case.
• Permanent Injunction in Certiorari: The Court framed the issue as whether the CA erred by issuing a permanent injunction in a case which questioned the propriety of the denial of an ancillary writ. Because the RTC had already rendered a decision on the merits that included a permanent injunction, the issue was moot and academic. The Court noted that the appeal on the main case was pending before the Supreme Court, docketed as G.R. No. 211850. Thus, the propriety of the permanent injunction should be raised in that appeal, not in the present petition for review of the ancillary writ.

• Moot and Academic Principle — A case becomes moot and academic when a subsequent event renders it no longer capable of presenting a justiciable controversy. In this case, the RTC’s December 2, 2011 Decision on the merits of the trademark infringement case, which included a permanent injunction, mooted the petition challenging the CA’s permanent injunction issued in a certiorari proceeding against the denial of a preliminary injunction. The proper remedy is an appeal from the decision on the merits.
• Preliminary Injunction — A preliminary injunction is an order granted at any stage of an action or proceeding prior to judgment or final order, requiring a party, court, agency, or person to refrain from a particular act or acts, or to perform a particular act or acts. It is generally based solely on initial and incomplete evidence; the findings of fact and opinion of the court issuing it are interlocutory. It cannot survive the main case and loses force and effect after the decision in the main petition.
• Permanent Injunction — A permanent injunction is granted after trial if it appears that the applicant is entitled to have the act or acts complained of permanently enjoined. It forms part of the judgment on the merits and can only be properly ordered on final judgment. It may confirm a preliminary mandatory injunction. A permanent injunction is but a consequence of the judgment on the merits and cannot be reviewed without reviewing that judgment.
• Ancillary Writ and Proper Remedy — A preliminary injunction, like any preliminary writ and interlocutory order, is ancillary to the main case and cannot survive it. Once a decision on the merits is rendered, the proper remedy from that decision is an appeal, not a petition for certiorari or review directed at the ancillary writ.

• "A writ of preliminary injunction is generally based solely on initial and incomplete evidence." — The Court used this to distinguish the evidentiary basis of a preliminary injunction from that of a permanent injunction, which is based on a full trial on the merits.
• "By contrast a permanent injunction, based on Section 9, Rule 58 of the Rules of Court, forms part of the judgment on the merits and it can only be properly ordered only on final judgment." — This passage states the defining procedural character of a permanent injunction and supports the conclusion that the RTC’s decision on the merits superseded the ancillary controversy.
• "As such a preliminary injunction, like any preliminary writ and any interlocutory order, cannot survive the main case of which it is an incident; because an ancillary writ of preliminary injunction loses its force and effect after the decision in the main petition." — This is the ratio for mootness: the preliminary injunction issue could not outlive the main case once the RTC rendered its decision on the merits.
• "Since a decision on the merits has already been rendered and which includes in its disposition a permanent injunction, the proper remedy is an appeal from the decision in the main case." — This excerpt identifies the proper remedy and explains why the present petition was denied as moot and academic.

• Casilan vs. Ybañez, 116 Phil. 906, 908 (1962) — Cited by the Court to support the rule that preliminary writs are vacated and superseded by the permanent injunction in the decision on the merits, and that a permanent injunction cannot be reviewed without reviewing the judgment on the merits; the remedy is a timely appeal from the judgment on the merits.
• La Vista Association, Inc. vs. Court of Appeals, 344 Phil. 30, 44 (1997) — Cited for the proposition that a writ of preliminary injunction is generally based solely on initial and incomplete evidence.
• Urbanes, Jr. vs. Court of Appeals, 407 Phil. 856, 867 (2001) — Cited for the rule that the evidence submitted during the hearing on an application for a writ of preliminary injunction is not conclusive or complete, and that the findings of fact and opinion of the court when issuing the writ are interlocutory in nature.
• Conrad and Company, Inc. vs. Court of Appeals, 316 Phil. 850 (1995) — Invoked by respondent to argue that an invasion of a registered mark entitles the holder of a certificate of registration to injunctive relief; the Court did not rely on it for its mootness holding.

• Section 1, Rule 58, Rules of Court — Defines a preliminary injunction as an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party, court, agency, or person to refrain from a particular act or acts, or to perform a particular act or acts. The Court used this definition to distinguish preliminary from permanent injunctions.
• Section 9, Rule 58, Rules of Court — Provides that if after trial it appears that the applicant is entitled to have the act or acts complained of permanently enjoined, the court shall grant a final injunction perpetually restraining the party or person enjoined from the commission or continuance of the act or acts or confirming the preliminary mandatory injunction. The Court cited this to show that a permanent injunction forms part of the judgment on the merits.
• Section 122, R.A. No. 8293 (Intellectual Property Code of the Philippines) — Provides that rights in a mark shall be acquired through registration made validly in accordance with law. Respondent cited this to assert its exclusive right to use “ZYNAPSE” and to exclude others from using the same.
• Section 138, R.A. No. 8293 — Provides that a certificate of registration of a mark shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark, and the registrant’s exclusive right to use the same in connection with the goods or services specified in the certificate. Respondent cited this to support its claim to injunctive relief.
• Section 147.1, R.A. No. 8293 — Provides that the owner of a registered mark has the exclusive right to prevent third parties not having consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those for which the trademark is registered where such use would result in a likelihood of confusion. Respondent cited this in support of its infringement claim.
• Section 159, R.A. No. 8293 — Provides limitations to actions for infringement, including that a registered mark shall have no effect against any person who, in good faith, before the filing date or priority date, was using the mark for the purposes of his business or enterprise. Petitioners invoked this provision to assert prior use in good faith; the RTC relied on it in denying injunctive relief, but the Supreme Court did not rule on the merits of the infringement case.

Velasco, Jr. (Chairperson), Bersamin, Leonen, and Jardeleza, JJ., concurred.