573 Phil. 1
CARPIO, J.:
KNOW ALL MEN BY THESE PRESENTS:On 19 March 1984, the Philippine Patent Office issued to Samson a Certificate of Registration for the mark "OTTO" in the principal register for use on belts, bags, t-shirts, blouses, briefs, pants, jackets, jeans, and bra.
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
Dear Mr. Luminlun:Samson also filed with the Philippine Patent Office a Revocation of Authority to Use Trademark.[5]
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 March 21, 1989 is attached.
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
WHEREFORE, foregoing considered, the complaint is ordered DISMISSED. With costs against plaintiff.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.
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]
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]
(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.
x x x In appellee's Opposition to Motion for Issuance of Preliminary InjunctionWe disagree with the appellate court's ruling.
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 March 21, 1989, a copy of which was served on plaintiff and received by him contained in a letter dated March 29, 1989. (at page 3 of Opposition)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.
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."
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 March 29, 1989 of his counsel, Atty Nelson Y. Ng [10] (Emphasis supplied)
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)
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.
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.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.
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)