WESTERN EQUIPMENT AND SUPPLY COMPANY, et al vs. FIDEL REYES, et al

G.R. No. L-27897

December 2, 1927

FACTS

Western Equipment and Supply Company (WESTERN EQUIPMENT) is a foreign corporation organized under laws of US.

It applied before the Director of Bureau of Commerce and Industry for issuance of a license to engage in business in Philippines. Provisional license was granted on May 20, 1926 which was made permanent on August 23, 1926.

Since the issuance of its provisional license, WESTERN EQUIPMENT has been and still is engaged in importing and selling in Philippines the electrical and telephone apparatus and supplies manufactured by Western Electric Company (WESTERN ELECTRIC) also a foreign corporation organized in the US which was not licensed to engage business in the Philippines.

Electric and telephone apparatus manufactured by WESTERN ELECTRIC have been sold in foreign and interstate commerce and HAS BECOME WELL KNOWN AND THOROUGHLY KNOWN TO TRADE IN ALL COUNTRIES FOR THE PAST 50 YRS; greater part of the equipment used in Manila and elsewhere in the Philippines were manufactured by WESTERN ELECTRIC and sold by it in commerce between the US and the Philippines; ABOUT OF SUCH EQUIPMENT THROUGHOUT THE WORLD ARE MANUFACTURED BY Western Electric Company, Inc. AND BEARS ITS CORPORATE NAME

Defendants Henry Herman, Peter OBrien, Manuel Diaz, Felipe Mapoy and Artemio Zamora filed articles of incorporation with Bureau of Commerce and Industry with intention to ORGANIZE A DOMESTIC CORPORATION to be known as Western Electric Company, Inc. for the purpose: manufacturing, buying, selling and dealing generally in electrical and telephone apparatus (apparently, same ra sila ug nature sa business ni WESTERN ELECTRIC)

Defendants signed the said articles of incorporation with full knowledge of the existence of WESTERN ELECTRIC of its corporate name, of its trade-mark, Western Electric and of the fact that the manufactures of WESTERN ELECTRIC beating its trademark or corporate name are in general use in the Philippines and US.

Plaintiffs lodged a protest with the Bureau of Commerce and Industry to oppose the attempted incorporation of the defendant corporation alleging that corporate name of the defendants (Western Electric Company, Inc.), being identical with that of WESTERN EQUIPMENT, will deceive and mislead the public purchasing electrical and telephone apparatus and supplies.

Director of Bureau of Commerce and Industry announced his intention to overrule the protest of plaintiffs and to issue to the defendants a certificate incorporation, unless restrained by the Court.

Lower court rendered judgement in favor of plaintiffs ruling that WESTERN ELECTRIC, a foreign corporation, had a right to bring the present suit in Philippine courts, wherein it is unregistered and unlicensed and declared that the purpose of the incorporation of the defendants under the name Western Electric Company, Inc. was fraudulent and with wrongful intent.

RULING

Does WESTERN ELECTRIC (foreign corporation which in unregistered and unlicensed to do business in the Philippines, but is widely and favorably known in the Philippines through the use of its products bearing its corporate and tradename) have a right to maintain action in the Philippines to restrain residents thereof from organizing a corporation bearing the same name as the foreign corporation and where the purpose of the proposed domestic corporation deal exactly with the same goods as that of the foreign corporation?

YES. WESTERN ELECTRIC can legally maintain an action in the Philippines even if it is unregistered and unlicensed to engage business in the Philippines.

The Court held that a foreign corporation which has never done any business in the Philippine and which is unlicensed to do business here, BUT IS WIDELY AND FAVORABLY KNOWN IN THE PHILIPPINES through the use of its products bearing its corporate and tradename, has a legal right to maintain an action to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.

In this case, the foreign company is not seeking to enforce any legal or contract rights arising from the business which it has transacted in the Philippines.

What is the purpose then of the said action?

Purpose is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves.

What is the nature of the right of the company to the use of its corporate and tradename?

Its right to the use of its corporate and tradename is a PROPERTY RIGHT, A RIGHT IN REM, which it may assert and protect against all the world, in any of the courts of the world even in jurisdictions where it does not transact business, just the same as it may protect its tangible property, real or personal, against trespass or conversion.

Since it is the trade and not the mark that is to be protect, a trademark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and identified by the use of the mark.

What is the difference between INFRINGMENT OF TRADEMARKS and UNFAIR COMPETITION IN TRADE?

INFRINGEMENT OF TRADEMARKS title to the trademark is indispensable to a good cause of action

UNFAIR COMPETITION IN TRADE no proprietary interest in the words, names or means by which the fraud is perpetrated is requisite to maintain a suit to enjoin it. It is sufficient that complainant is entitled to the custom goodwill of a business, and that this goodwill is injured, or is about to be injured, by the palming off of the goods of another as his.

Should the Bureau of Commerce and Industry approve the incorporation of proposed Domestic Corporation of the defendants?

NO. It is very apparent that the purpose and intent of Herman and his associates in seeking to incorporate under the name of Western Electric Company, Inc., was to unfairly and unjustly compete in the Philippine Islands with the Western Electric Company, Inc., in articles which are manufactured by, and bear the name of, that company, all of which is prohibited by Act No. 666.

The plaintiff, Western Electric Company, Inc., has been in existence as a corporation for over fifty years, during which time it has established a reputation all over the world including the Philippines, for the kind and quality of its manufactured articles.

It is very apparent that the whole purpose and intent of Herman and his associates in seeking to incorporate another corporation under the identical name of Western Electric Company, Inc., and for the same identical purpose as that of the plaintiff, is to trespass upon and profit by its good name and business reputation. The very fact that Herman and his associates have sought the use of that particular name for that identical purpose is conclusive evidence of the fraudulent intent with which it is done.