FIRST DIVISION
MANUEL P. SAMSON, G.R. No. 139983
Petitioner,
Present:
PUNO, C.J.,
Chairperson,
CARPIO,
- versus -
AZCUNA,
and
LEONARDO-DE
CASTRO, JJ.
COURT OF APPEALS
and Promulgated:
WILFRO
LUMINLUN,
Respondents. March 26, 2008
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D E C I S
I O N
CARPIO, J.:
The Case
This is a petition for review of the
Decision[1]
dated
The Antecedent Facts
On
On
AUTHORITY
TO USE TRADEMARK
KNOW ALL MEN BY THESE PRESENTS:
I, MANUEL P. SAMSON, Filipino, of legal age and a resident of Doña Betang Subdivision, Santolan, Metro Manila, am the registered owner of the trademark OTTO for bags, shoes, sandals and slippers under Registration Certificate No. 29840 issued on September 29, 1981, and the applicant in Application hearing Serial No. 47626 for the same trademark OTTO filed on February 26, 1982 for belts, bags, t-shirts, blouses, briefs, pants, jackets, jeans and bras, which application was duly approved for publication in the Official Gazette last November 18, 1982;
That for valuable consideration, I hereby grant unto WILFRO P. LUMINLUN, Filipino, of legal age and with business address at No. 959 Soler Street, Binondo, Manila, a non-transferable, non-assignable, non-exclusive right and license to use said trademark OTTO for jeans only. This authority shall remain valid and existing for as long as I remain the owner of the trademark OTTO unless said WILFRO P. LUMINLUN should do or cause to be done any act which in any way prejudice or discredit the trademark OTTO not only in connection with its use for jeans but as well as for other products enumerated in my registration certificates/application documents.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 29th day of December, 1983.
SGD. MANUEL P. SAMSON
On
In a letter[4]
dated
Dear Mr. Luminlun:
On behalf of my client, Mr. Manuel
P. Samson, this is to demand that you CEASE and DESIST from further
manufacturing and distributing OTTO jeans effective as of receipt of this notice
considering that my aforesaid client had already revoked the authority granted
to you for the use of the trademark ‘OTTO’ in jeans. A copy of the Revocation of Authority To Use
Trademark filed in the Patent Office on
Further, you
have to account for the sale of OTTO jeans beginning January 1984 up to March
1989 as we will get a percentage thereof for the royalty due to my client of
not less than P5,000,000.00 for your use of said trademark for more than
five (5) years.
Kindly give us the name and address of your sales outlet in order that they maybe properly appraised (sic) of this development.
Should you fail to heed this advice, we will be constrained to file an action for damages and we will pray for issuance of injunction against you and for the confiscation and removal of jeans with the use of an unauthorized trademark ‘OTTO’.
I trust for your compliance within five (5) days from receipt hereof to obviate being embroiled in a costly and cumbersome litigation.
Very truly yours,
SGD. NELSON Y. NG
Samson also filed with the Philippine
Patent Office a Revocation of Authority to Use Trademark.[5]
As a result, Luminlun
filed a complaint before the Regional Trial Court,
On
After presentation of evidence and
submission of memoranda by both parties, on
On
The Ruling of the Trial Court
In its Decision dated
WHEREFORE, foregoing considered, the complaint is ordered DISMISSED. With costs against plaintiff.
The writ of preliminary injunction earlier issued by the Court is set aside and recalled.
On
the counterclaim, plaintiff is ordered to pay defendant attorney’s fees of P25,000.00.
SO ORDERED.[6]
The trial court ruled that Samson was
justified in revoking the authority of Luminlun to
use the trademark. The trial court found that Luminlun’s
acts of manufacturing and selling products bearing the trademark “OTTO LTD.”
like skirts, shorts, pants, jeans, as as well as products with the trademark “OTTO” like
belts, buttons, and bags, clearly violated the authority granted by Samson to
use the “OTTO” trademark for jeans only. The trial court, however, ruled that Samson failed to prove that he was
entitled to royalties.
Upon motion for reconsideration of both
parties, the trial court in an Order dated P20,000 in favor of Samson.
The Ruling of the Court of Appeals
On appeal, the Court of Appeals
reversed the ruling of the trial court.
The appellate court found that Samson revoked the authority on the sole
ground that Luminlun failed to pay royalties. According to the appellate court, Samson
could not validly revoke the authority based on this ground since he failed to
prove that royalties were due him. The
appellate court further ruled that Luminlun suffered
losses as a result of the revocation and thus awarded damages. The dispositive
portion of the Court of Appeals’ decision reads:
WHEREFORE,
judgment is hereby rendered setting aside the decision appealed from and a new
one issue making the injunction permanent and ordering appellee
to pay appellant the following sums of money:
a) actual and compensatory damages in the amount
of P2,257,872.20.
b)
attorney’s fees in the amount of P50,000.00.
Costs
against appellee.
SO
ORDERED.[8]
The Issues
Thus, in this petition, Samson raises the following assignment of errors:[9]
(a) The Court of Appeals erred in
concluding that the revocation of the Authority to Use Trademark made by Samson
was unjustified;
(b) The Court of Appeals erred in awarding actual or compensatory damages
of P2,257,872.20 in spite of the total absence of evidence to show that Luminlun sustained such damages as a consequence of the
revocation of the Authority to Use Trademark;
(c) The Court of Appeals erred in
awarding attorney’s fees of P50,000 in spite of the absence of any legal
ground for such award; and
d) The Court of Appeals erred in not sustaining
the trial court’s award of moral damages and attorney’s fees in favor of
Samson.
The Court’s Ruling
The
resolution of this case hinges on whether Samson was justified in revoking Luminlun’s authority to use the “OTTO” trademark.
We
rule in the affirmative.
In finding for respondent Luminlun, the
appellate court rationalized:
x x x In appellee’s Opposition to Motion for Issuance of Preliminary Injunction and/or Motion to Lift Restraining Order dated April 18, 1989 (p. 37, Records), it is clearly stated that he revoked the Authority to Use Trademark on the sole ground that appellant failed to pay royalty tax, thus:
“x x x. When plaintiff unjustly and illegally failed,
refused and neglected and still fails, refuse, and neglects to pay royalty tax,
defendant revoked the grant of authority and the same was filed with the Patent
Office on
x x x x x x x x x
“It
is defendant who is entitled to the issuance of injunction to restrain plantiff from further manufacturing and distributing OTTO
jeans after plaintiff’s authority had
been revoked for failure to comply with his obligation to pay royalty tax due
to defendant.”
As correctly pointed out by appellant, the issue that appellee had been allegedly affected and his products allegedly discredited by appellant’s use of the trademark OTTO and OTTO Ltd. was but a belated attempt on the part of the appellee to justify his illegal act of revoking the Authority to Use Trademark issued to the appellant. It was only after realizing the weakness of his sole ground for revoking the authority that he raised said issue.
It is
evident that when appellee executed the Revocation of
Authority to Use Trademark on March 28, 1989 he was not concerned with
appellant’s use of the trademark OTTO Ltd. on appellant’s product and the
trademark OTTO on belts and buttons because there was no prejudice on his
part. Otherwise, he could have
mentioned the same in the Revocation and in the demand letter dated
We disagree with the appellate court’s ruling.
The
authority granted to Luminlun to use the
“OTTO” trademark was limited for use on jeans only. Under the agreement, Samson could revoke the authority if Luminlun “should
do or cause to be done any act which would in any way prejudice or discredit
the trademark OTTO not only in connection with its use for jeans but as well
as for other products” enumerated in Samson’s registration certificates.
As
correctly found by the trial court, Luminlun
manufactured “OTTO” belts, buttons, and bags
as well as “OTTO LTD.” clothing in violation of the terms and conditions
of the authority which affected Samson and discredited his products, thus:
On the second issue, the Court finds that defendant has been affected and his products discredited by plaintiff’s use of trademark “OTTO” and OTTO LTD.” on other products, aside from jeans. Plaintiff admitted manufacturing and selling products bearing the trademark “OTTO LTD.” like skirts, shorts, pants, jeans; also plaintiff manufactures and sells products with the trademark “OTTO”, like belts, buttons and bags. (Exh. “3”; also pp. 67, 68, 69, 91, rec.) The authority given to plaintiff was a non-transferable, non-assignable, non-exclusive right and license to use said trademark “OTTO” for jeans only x x x”. (Underlining supplied) Clearly, plaintiff failed to comply with the terms and conditions enumerated in the agreement. Plaintiff had the option to use the trademark “OTTO” but he had done acts constituting bad faith, necessarily discrediting the interest of defendant on his products which were duly registered with the Philippine Patent Office, such as: Exh. “6,” photograph of over all with trademark “OTTO”; Exh. “7”, issue of Panorama Magazine; Exh. “7-A”, trousers with “OTTO LTD.”, Exh. “8”, t-shirt with brand “OTTO [LTD.]”; Exh. “14”, pants bearing “OTTO [LTD.]”, Exh. “14-A” & Exh. “14-B”; belt and pant with “OTTO LTD.” & “OTTO”; Exh. “15” Cash invoice, pants “OTTO”; Exh. “17”- .”, jeans classic with trademark “OTTO”.
Defendant therefore was justified when he served notice of revocation of the authority of plaintiff to use the trademark.[11] (Emphasis supplied)
Under the
circumstances and in accordance with the terms and conditions of the Authority
to Use Trademark, we find that Samson was justified in revoking Luminlun’s authority
to use the “OTTO” trademark.
However,
the appellate court chose to ignore Luminlun’s
glaring violation of the terms and conditions of the Authority. The appellate court instead resorted to
hair-splitting and ruled that Samson could not justify the revocation since he
did not raise this ground in his “Opposition to Motion for Issuance of
Preliminary Injunction and/or Motion to Lift Restraining Order.”
We find such
reasoning flawed.
The
records reveal that Samson, in his Answer, raised, among others, the
affirmative defense that he had the right to
revoke the Authority to Use Trademark because Luminlun
manufactured other “OTTO” products aside from jeans:
Defendant had every right and prerogative to revoke
the authority granted to plaintiff on the use of the trademark for “OTTO” for
jeans only when plaintiff failed to pay a single centavo of royalty and had
likewise violated the grant of authority by illegally manufacturing and
distributing aside from jeans, other products like jackets, skirts, shirts,
blouses and shorts which are not covered by the grant of authority granted to him.[12]
(Emphasis supplied)
We
find that Samson seasonably raised this defense and we do not see any basis for
the apellate court’s ruling that Samson could not
invoke this ground.
The
appellate court further makes issue of the fact that Samson did not mention in
both the Revocation of Authority to Use Trademark and his demand letter dated
We
note that the Revocation of Authority simply mentioned that “it was Luminlun’s failure to comply with his undertaking when the
authority was executed as the reason for the revocation.” The
fact that Samson did not indicate the specific reason for the revocation
is of no moment and should not be taken against him. Thus, we find no basis for the appellate
court’s conclusion that when Samson executed the Revocation of Authority
he was not concerned with Luminlun’s use of the
“OTTO” trademark on other products because there was no prejudice on his
part. Samson was affected and his
products discredited by Luminlun’s unauthorized
manufacture of other “OTTO” products.
Thus, in its Order resolving the Motions for Reconsideration filed by
the parties, the trial court stated:
x x x it is not denied defendant was given the authority by the
Patent Office and has been the registered owner of the trademark “OTTO” under
principal register no. 33064 and 29840 and supplemental register 7390 and
4166. The license was issued to the
defendant for the protection of his rights as a registered owner of the
trademark in order to identify the lawful user.
It was intended to protect the public to be deceived of the use of the
products.
On
the issue of the violation of the conditions involving the claim of royalty,
the Court said that defendant has been affected and his products discredited by
the plaintiff’s use of trademark “OTTO” and “OTTO LTD,” on other products. Plaintiff had admitted manufacturing and selling
products with the same trademark on skirts, shorts, pants and jeans. Bad faith was evident from the acts of
plaintiff. The authority of plaintiff to
use the trademark “OTTO” for jeans was revoked for violation of the terms of
the agreement.[13]
(Emphasis supplied)
Considering
that Samson was justified in revoking the authority of Luminlun
to use the “OTTO” trademark, it necessarily follows that the damages awarded by
the appellate court in favor of Luminlun have no
basis.
WHEREFORE, we GRANT the Petition. We SET ASIDE the assailed Decision and
Resolution of the Court of Appeals and
REINSTATE the
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Associate Justice
TERESITA J. LEONARDO-DE
CASTRO
Associate Justice
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Penned by Associate Justice Demetrio G. Demetria, concurred
in by Associate Justices Ramon A.
[3] Records, p. 60.
[4]
[5]
[6] Rollo, p. 62.
[7] Amending its Order dated
[8] Rollo, p. 47.
[9]
[10]
[11]
[12] Records, pp. 93-94.
[13] Rollo, pp. 63-64.