Philip Morris v. Fortune Tobacco

Posted Jul 16, 1993

By Anonymous

7 min read

Case Title and Citation

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC REUNIES, S.A., petitioners
vs. FORTUNE TOBACCO CORPORATION, respondents.
G.R. No. 91332, July 16, 1993
Supreme Court - Third Division
Ponente: Justice Melo

Facts

Petitioners Philip Morris, Inc. (U.S. corporation), Benson & Hedges (Canada), Inc., and Fabriques de Tabac Reunies, S.A. (Switzerland) are registered owners of cigarette trademarks in the Philippines:
- MARK VII, Certificate of Registration No. 18723, registered April 26, 1973.
- MARK TEN, Certificate of Registration No. 11147, registered May 28, 1964; first use in commerce in the Philippines on April 15, 1963.
- LARK, Certificate of Registration No. 10953, registered March 25, 1964; first use in commerce in the Philippines on February 6, 1963.
Fortune Tobacco Corporation began manufacturing and selling cigarettes under the brand “MARK” in the Philippines sometime before October 17, 1981, and filed on February 13, 1981 an application for registration of “MARK” as a trademark for cigarettes with the Philippine Patent Office.
Fortune was temporarily authorized by the Bureau of Internal Revenue (BIR) to manufacture two new brands including “MARK” on January 30, 1979, with a caveat that the temporary authorization does not grant protection against infringement or unfair competition.
On March 28, 1983, the trial court denied petitioners’ prayer for a preliminary injunction, noting Fortune’s pending patent-office registration and Fortune’s status as not doing business in the Philippines.
Petitioners argued that their marks are protected by treaty obligations under the Paris Convention and by Philippine law; Fortune countered that the marks are generic or not exclusively protectable and that petitioners were not using their marks in the Philippines.
The Court of Appeals (CA-G.R. SP No. 13132) granted a preliminary injunction on May 5, 1989, after noting that petitioners were registered owners of their marks and that Fortune’s registration for “MARK” was allegedly confusingly similar to petitioners’ marks, including communications from the Patent Office stating similarity and the alleged abandonment and forfeiture of Fortune’s mark application.
Fortune moved for reconsideration; the CA granted dissolution of the injunction upon a counterbond and later reaffirmed dissolution on September 14, 1989, citing potential damages to Fortune and the Government.
Petitioners filed a petition for certiorari with the Supreme Court. The issues centered on whether petitioners had a clear right to injunctive relief, whether Fortune’s acts caused irreparable injury, and whether the CA properly dissolved the injunction.

Issues

Did petitioners have a clear legal right to a preliminary injunction to restrain Fortune from manufacturing, selling, and distributing cigarettes under the trademark “MARK”?
Were Fortune’s acts in manufacturing and selling “MARK” cigarettes causing irreparable injury to petitioners’ rights?
Was the Court of Appeals’ dissolution (or modification) of the injunction under Section 6, Rule 58 of the Rules of Court proper?

Ruling

No — petitioners did not establish a clear right to the preliminary injunction. The Court found petitioners’ rights to the marks were not undisputedly established, given Fortune’s pending registration, the absence of actual use of the marks in the Philippines for all petitioners, and the fact that petitioners themselves admitted they were not doing business in the Philippines.
No — petitioners did not prove irreparable injury. Although they argued that Fortune’s use of a confusingly similar mark could dilute goodwill, the Court emphasized that irreparable injury requires demonstrated, non-compensable harm; the record showed damages could be compensated in monetary terms and did not meet the standard for irreparable harm.
Yes — the Court of Appeals did not gravely abuse its discretion in lifting the injunction under Section 6, Rule 58; the CA balanced equities, considered the petitioners’ lack of local business activity, the ongoing proceedings regarding Fortune’s registration, and the counterbond offered by Fortune.

Reasoning / Ratio Decidendi

The right to injunctive relief hinges on a clear right to be protected. Philippine trademark law requires actual use in commerce in the Philippines for ownership and exclusive rights, particularly for marks not well-known internationally or registered under certain provisions. See Sec. 2 and Sec. 2-A of RA 166, as amended; Sec. 37 (for foreign-origin registrations) and the precedents that emphasize actual use as a basis for ownership (Pagasa Industrial Corp. v. Court of Appeals; La Chemise Lacoste v. Fernandez; Converse Rubber Corp. v. Universal Rubber).
The Paris Convention (Article 2) guarantees national treatment for industrial property rights, allowing foreign nationals to seek protection in the Philippines, but Philippine trademark law still requires actual use in commerce to establish ownership and exclusive rights, especially for marks not recognized as well-known.
The Court reaffirmed that the mere pendency of an application for registration does not automatically bar injunctive relief where substantial rights are at issue, but the petitioners must show a clear right and actual use in commerce. The majority noted that petitioners’ statements indicating they were not doing business in the Philippines undermined their claim to irreparable injury and right to injunctive relief.
Irreparable injury requires damage that cannot be measured or compensated in monetary terms; the Court cited authorities like Social Security Commission v. Bayona and related remedial-law jurisprudence to emphasize that when damages are calculable, injunction is inappropriate. The CA’s consideration of economic impact on workers and government revenue did not override the need to show a clear, non-compensable injury.

Cited authorities referenced in the decision include: Pag asa Industrial Corporation v. Court of Appeals; La Chemise Lacoste, S.A. v. Fernandez; Converse Rubber Corp. v. Universal Rubber Products, Inc.; La Chemise Lacoste; Del Monte Corp. v. Court of Appeals; Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate Appellate Court; Western Equipment and Supplies Co. v. Reyes; Asari Yoko Co. v. Kee Boc; General Garments Corp. v. Director of Patents; Sta. Ana v. Maliwat; Buayan Cattle Co. v. Quintillan; Ortigas & Co. v. Ruiz; Rosauro v. Cuneta; Calo v. Roldan; and statutory provisions RA 166, sections 2, 2-A, 20, 21-A, as well as Article 2 of the Paris Convention.

Doctrine / Legal Principle

Actual use in commerce in the Philippines is a fundamental precondition for ownership of a trademark and for the exclusive right to use a mark, except where international registration and well-known status may alter that requirement (Pagasa; La Chemise Lacoste; Converse; Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft).
Foreign nationals may maintain actions for infringement or unfair competition in Philippine courts under Section 21-A of RA 166, as amended, and under the Paris Convention, without necessarily doing business in the Philippines, provided reciprocity exists; however, the right to injunctive relief still depends on establishing a clear right and the facts, including actual use.
The Paris Convention ensures national treatment but does not permit a local domicile requirement to block protection; nevertheless, local use remains a crucial element for ownership and enforcement in Philippine law.
The remedy of preliminary injunction is disfavored unless the moving party demonstrates a clear right and irreparable injury; it remains an interlocutory measure subject to the court’s discretion and can be dissolved or modified upon proper grounds (Section 6, Rule 58).
The protection and enforcement of well-known or internationally recognized marks may be more expansive (La Chemise Lacoste; Del Monte) but in this case the record did not establish a sufficiently clear right or irreparable harm for the petitioners.

Disposition

The petition is DISMISSED. The Court of Appeals’ September 14, 1989 and November 29, 1989 resolutions are AFFIRMED. The writ of preliminary injunction against Fortune to restrain the manufacture and sale of “MARK” cigarettes was not reinstated.

Concurring / Dissenting Opinions

FELICIANO, J., dissenting: Would grant the petition and reinstate the Court of Appeals’ original grant of the preliminary injunction, arguing that petitioners had established a prima facie right to the injunction and that Fortune’s continued use of the mark infringed petitioners’ rights; asserts that the majority undervalued the irreparable injury and the impact on petitioners’ trademarks.
Bidin, J., concurred (in the result).
Davide, Jr., J., concurred in the result.

Significance / Notes

This decision reinforces that, in Philippine trademark law, actual use in commerce in the Philippines is a critical factor in establishing ownership and the right to enforce trademarks, even for foreign registrants. It clarifies that while Section 21-A of RA 166 and the Paris Convention protect foreign trademark holders’ rights to file infringement actions, the grant of a preliminary injunction requires a clear right and proof of irreparable injury, which may be lacking where there is no local business activity or verifiable use in the Philippines.
The case underscores the discretion afforded appellate courts in handling injunctions under Rule 58, Section 6, including dissolution or modification when equity requires it, especially in cases involving competing trademark rights and pending applications before the Patent Office.

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