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COCA-COLA Bottlers vs. Gomez
COCA-COLA Bottlers vs. Gomez
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 154491
Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City,
after taking the joint deposition of the witnesses, issued Search Warrant No.
2001-013 to seize 2,500 Litro and 3,000 eight and 12 ounces empty Coke
bottles at Pepsi's Naga yard for violation of Section 168.3 (c) of the IP
Code.4 The local police seized and brought to the MTC's custody 2,464 Litro
and 4,036 eight and 12 ounces empty Coke bottles, 205 Pepsi shells for Litro,
and 168 Pepsi shells for smaller (eight and 12 ounces) empty Coke bottles, and
later filed with the Office of the City Prosecutor of Naga a complaint against two
Pepsi officers for violation of Section 168.3 (c) in relation to Section 170 of the
IP Code.5The named respondents, also the respondents in this petition, were
Pepsi regional sales managerDanilo E. Galicia (Galicia) and its Naga general
manager Quintin J. Gomez, Jr. (Gomez).
In their counter-affidavits, Galicia and Gomez claimed that the bottles came
from various Pepsi retailers and wholesalers who included them in their return
to make up for shortages of empty Pepsi bottles; they had no way of
ascertaining beforehand the return of empty Coke bottles as they simply
received what had been delivered; the presence of the bottles in their yard was
not intentional nor deliberate; Ponce and Regaspi's statements are hearsay as
they had no personal knowledge of the alleged crime; there is no mention in the
IP Code of the crime of possession of empty bottles; and that the ambiguity of
the law, which has a penal nature, must be construed strictly against the State
and liberally in their favor. Pepsi security guards Eduardo E. Miral and Rene
Acebuche executed a joint affidavit stating that per their logbook, Lirio did not
visit or enter the plant premises in the afternoon of July 2, 2001.
The respondents also filed motions for the return of their shells and to quash
the search warrant. They contended that no probable cause existed to justify
the issuance of the search warrant; the facts charged do not constitute an
offense; and their Naga plant was in urgent need of the shells.
Coca-Cola opposed the motions as the shells were part of the evidence of the
crime, arguing that Pepsi used the shells in hoarding the bottles. It insisted that
the issuance of warrant was based on probable cause for unfair competition
under the IP Code, and that the respondents violated R.A. 623, the law
regulating the use of stamped or marked bottles, boxes, and other similar
containers.
THE MTC RULINGS
On September 19, 2001, the MTC issued the first assailed order 6 denying the
twin motions. It explained there was an exhaustive examination of the applicant
and its witnesses through searching questions and that the Pepsi shells are
prima facie evidence that the bottles were placed there by the respondents.
In their motion for reconsideration, the respondents argued for the quashal of
the warrant as the MTC did not conduct a probing and exhaustive examination;
the applicant and its witnesses had no personal knowledge of facts surrounding
the hoarding; the court failed to order the return of the "borrowed" shells; there
was no crime involved; the warrant was issued based on hearsay evidence;
and the seizure of the shells was illegal because they were not included in the
warrant.
On November 14, 2001, the MTC denied the motion for reconsideration in the
second assailed order,7 explaining that the issue of whether there was unfair
competition can only be resolved during trial.
The respondents responded by filing a petition for certiorari under Rule 65 of
the Revised Rules of Court before the Regional Trial Court (RTC) of Naga City
on the ground that the subject search warrant was issued without probable
cause and that the empty shells were neither mentioned in the warrant nor the
objects of the perceived crime.
THE RTC RULINGS
On May 8, 2002, the RTC voided the warrant for lack of probable cause and the
non-commission of the crime of unfair competition, even as it implied that other
laws may have been violated by the respondents. The RTC, though, found no
grave abuse of discretion on the part of the issuing MTC judge. 8 Thus,
Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the
Honorable Judge Julian C. Ocampo III on July 2, 2001 is ANNULLED
and SET ASIDE. The Orders issued by the Pairing Judge of Br. 1,
MTCC of Naga City dated September 19, 2001 and November 14,
2001 are also declared VOID and SET ASIDE. The City Prosecutor of
Naga City and SPO1 Ernesto Paredes are directed to return to the
Petitioner the properties seized by virtue of Search Warrant No. 200102. No costs.
SO ORDERED.9
In a motion for reconsideration, which the RTC denied on July 12, 2002, the
petitioner stressed that the decision of the RTC was contradictory because it
absolved Judge Ocampo of grave abuse of discretion in issuing the search
warrant, but at the same time nullified the issued warrant. The MTC should
have dismissed the petition when it found out that Judge Ocampo did not
commit any grave abuse of discretion.
Bypassing the Court of Appeals, the petitioner asks us through this petition for
review on certiorariunder Rule 45 of the Rules of Court to reverse the decision
of the RTC. Essentially, the petition raises questions against the RTC's
nullification of the warrant when it found no grave abuse of discretion
committed by the issuing judge.
THE PETITION and
THE PARTIES' POSITIONS
In its petition, the petitioner insists the RTC should have dismissed the
respondents' petition for certiorari because it found no grave abuse of discretion
by the MTC in issuing the search warrant. The petitioner further argues that the
IP Code was enacted into law to remedy various forms of unfair competition
accompanying globalization as well as to replace the inutile provision of unfair
competition under Article 189 of the Revised Penal Code. Section 168.3(c) of
the IP Code does not limit the scope of protection on the particular acts
enumerated as it expands the meaning of unfair competition to include "other
acts contrary to good faith of a nature calculated to discredit the goods,
business or services of another." The inherent element of unfair competition is
fraud or deceit, and that hoarding of large quantities of a competitor's empty
bottles is necessarily characterized by bad faith. It claims that its Bicol bottling
operation was prejudiced by the respondents' hoarding and destruction of its
empty bottles.
The petitioner also argues that the quashal of the search warrant was improper
because it complied with all the essential requisites of a valid warrant. The
empty bottles were concealed in Pepsi shells to prevent discovery while they
were systematically being destroyed to hamper the petitioner's bottling
operation and to undermine the capability of its bottling operations in Bicol.
The respondents counter-argue that although Judge Ocampo conducted his
own examination, he gravely erred and abused his discretion when he ignored
the rule on the need of sufficient evidence to establish probable cause;
satisfactory and convincing evidence is essential to hold them guilty of unfair
competition; the hoarding of empty Coke bottles did not cause actual or
probable deception and confusion on the part of the general public; the alleged
criminal acts do not show conduct aimed at deceiving the public; there was no
attempt to use the empty bottles or pass them off as the respondents' goods.
The respondents also argue that the IP Code does not criminalize bottle
hoarding, as the acts penalized must always involve fraud and deceit. The
hoarding does not make them liable for unfair competition as there was no
deception or fraud on the end-users.
THE ISSUE
Based on the parties' positions, the basic issue submitted to us for resolution is
whether the Naga MTC was correct in issuing Search Warrant No. 2001-01 for
the seizure of the empty Coke bottles from Pepsi's yard for probable violation of
Section 168.3 (c) of the IP Code. This basic issue involves two sub-issues,
namely, the substantive issue of whether the application for search warrant
effectively charged an offense, i.e., a violation of Section 168.3 (c) of the IP
Code; and the procedural issue of whether the MTC observed the procedures
required by the Rules of Court in the issuance of search warrants.
OUR RULING
We resolve to deny the petition for lack of merit.
We clarify at the outset that while we agree with the RTC decision, our
agreement is more in the result than in the reasons that supported it. The
decision is correct in nullifying the search warrant because it was issued on an
invalid substantive basis - the acts imputed on the respondents do not violate
Section 168.3 (c) of the IP Code. For this reason, we deny the present petition.
The issuance of a search warrant 10 against a personal property11 is governed by
Rule 126 of the Revised Rules of Court whose relevant sections state:
Section 4. Requisites for issuing search warrant. - A search warrant
shall not issue except uponprobable cause in connection with one
specific offense to be determined personally by the judge after
examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be
searched and the things to be seized which may be anywhere in the
Philippines.
Section 5. Examination of complainant; record. - The judge must,
before issuing the warrant,personally examine in the form of
searching questions and answers, in writing and under oath, the
complainant and the witnesses he may produce on facts personally
known to them and attach to the record their sworn statements together
with the affidavits submitted.
Section 6. Issuance and form of search warrant. - If the judge is
satisfied of the existence of facts upon which the application is based or
that there is probable cause to believe that they exist, he shall issue the
warrant, which must be substantially in the form prescribed by these
Rules. [Emphasis supplied]
168.2. Any person who shall employ deception or any other means
contrary to good faith by which he shall pass off the goods
manufactured by him or in which he deals, or his business, or services
for those of the one having established such goodwill, or who shall
commit any acts calculated to produce said result, shall be guilty of
unfair competition, and shall be subject to an action therefor.
Articles 168.1 and 168.2, as quoted above, provide the concept and general
rule on the definition of unfair competition. The law does not thereby
cover every unfair act committed in the course of business; it covers only acts
characterized by "deception or any other means contrary to good faith" in
the passing off of goods and services as those of another who has established
goodwill in relation with these goods or services, or any other act calculated to
produce the same result.
What unfair competition is, is further particularized under Section 168.3 when it
provides specifics of what unfair competition is "without in any way limiting the
scope of protection against unfair competition." Part of these particulars is
provided under Section 168.3(c) which provides the general "catch-all" phrase
that the petitioner cites. Under this phrase, a person shall be guilty of unfair
competition "who shall commit any other act contrary to good faith of a nature
calculated to discredit the goods, business or services of another."
From jurisprudence, unfair competition has been defined as the passing off (or
palming off) or attempting to pass off upon the public the goods or business of
one person as the goods or business of another with the end and probable
effect of deceiving the public. It formulated the "true test" of unfair competition:
whether the acts of defendant are such as are calculated to deceive the
ordinary buyer making his purchases under the ordinary conditions which
prevail in the particular trade to which the controversy relates. 13 One of the
essential requisites in an action to restrain unfair competition is proof of fraud;
the intent to deceive must be shown before the right to recover can exist. 14 The
advent of the IP Code has not significantly changed these rulings as they are
fully in accord with what Section 168 of the Code in its entirety
provides. Deception, passing off and fraud upon the public are still the key
elements that must be present for unfair competition to exist.
The act alleged to violate the petitioner's rights under Section 168.3 (c) is
hoarding which we gather to be the collection of the petitioner's empty bottles
so that they can be withdrawn from circulation and thus impede the circulation
of the petitioner's bottled products. This, according to the petitioner, is an act
contrary to good faith - a conclusion that, if true, is indeed an unfair act on the
part of the respondents. The critical question, however, is not the intrinsic
unfairness of the act of hoarding; what is critical for purposes of Section 168.3
(c) is to determine if the hoarding, as charged, "is of a nature calculated to
discredit the goods, business or services" of the petitioner.
We hold that it is not. Hoarding as defined by the petitioner is not even an act
within the contemplation of the IP Code.
The petitioner's cited basis is a provision of the IP Code, a set of rules that refer
to a very specific subject - intellectual property. Aside from the IP Code's actual
substantive contents (which relate specifically to patents, licensing, trademarks,
trade names, service marks, copyrights, and the protection and infringement of
the intellectual properties that these protective measures embody), the
coverage and intent of the Code is expressly reflected in its "Declaration of
State Policy" which states:
As basis for this interpretative analysis, we note that Section 168.1 speaks of a
person who has earned goodwill with respect to his goods and services and
who is entitled to protection under the Code, with or without a registered
mark. Section 168.2, as previously discussed, refers to the general definition of
unfair competition. Section 168.3, on the other hand, refers to the specific
instances of unfair competition, with Section 168.1 referring to the sale of
goods given the appearance of the goods of another; Section 168.2, to the
inducement of belief that his or her goods or services are that of another who
has earned goodwill; while the disputed Section 168.3 being a "catch all"
clause whose coverage the parties now dispute.
The use of intellectual property bears a social function. To this end, the
State shall promote the diffusion of knowledge and information for the
promotion of national development and progress and the common
good.
It is also the policy of the State to streamline administrative procedures
of registering patents, trademarks and copyright, to liberalize the
registration on the transfer of technology, and to enhance the
enforcement of intellectual property rights in the Philippines. (n)
"Intellectual property rights" have furthermore been defined under Section 4 of
the Code to consist of: a) Copyright and Related Rights; b) Trademarks and
Service Marks; c) Geographic Indications; d) IndustrialDesigns; e) Patents; f)
Layout-Designs (Topographies) of Integrated Circuits; and g)Protection of
Undisclosed Information.
Given the IP Code's specific focus, a first test that should be made when a
question arises on whether a matter is covered by the Code is to ask if it refers
to an intellectual property as defined in the Code. If it does not, then coverage
by the Code may be negated.
Under all the above approaches, we conclude that the "hoarding" - as defined
and charged by the petitioner - does not fall within the coverage of the IP Code
and of Section 168 in particular. It does not relate to any patent, trademark,
trade name or service mark that the respondents have invaded, intruded into or
used without proper authority from the petitioner. Nor are the respondents
alleged to be fraudulently "passing off" their products or services as those of the
petitioner. The respondents are not also alleged to be undertaking any
representation or misrepresentation that would confuse or tend to confuse the
goods of the petitioner with those of the respondents, or vice versa. What in
fact the petitioner alleges is an act foreign to the Code, to the concepts it
embodies and to the acts it regulates; as alleged, hoarding inflicts unfairness by
seeking to limit the opposition's sales by depriving it of the bottles it can use for
these sales.
In this light, hoarding for purposes of destruction is closer to what another law R.A. No. 623 - covers, to wit:
SECTION 1. Persons engaged or licensed to engage in the
manufacture, bottling or selling of soda water, mineral or aerated
Where, as in this case, the imputed acts do not violate the cited offense, the
ruling of this Court penned by Mr. Justice Bellosillo is particularly instructive:
In the issuance of search warrants, the Rules of Court requires a
finding of probable cause in connection with one specific offense to be
determined personally by the judge after examination of the
complainant and the witnesses he may produce, and particularly
describing the place to be searched and the things to be seized.
Hence, since there is no crime to speak of, the search warrant
does not even begin to fulfill these stringent requirements and is
therefore defective on its face. The nullity of the warrant renders
moot and academic the other issues raised in petitioners' Motion to
Quash and Motion for Reconsideration. Since the assailed search
warrant is null and void, all property seized by virtue thereof should be
returned to petitioners in accordance with established jurisprudence. 16
Based on the foregoing, we conclude that the RTC correctly ruled that the
petitioner's search warrant should properly be quashed for the petitioner's
failure to show that the acts imputed to the respondents do not violate the cited
offense. There could not have been any probable cause to support the
issuance of a search warrant because no crime in the first place was effectively
charged. This conclusion renders unnecessary any further discussion on
whether the search warrant application properly alleged that the imputed act of
holding Coke empties was in fact a "hoarding" in bad faith aimed to prejudice
the petitioner's operations, or whether the MTC duly complied with the
procedural requirements for the issuance of a search warrant under Rule 126 of
the Rules of Court.
WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we
confirm that Search Warrant No. 2001-01, issued by the Municipal Trial Court,
Branch 1, Naga City, is NULL and VOID. Costs against the petitioner.
SO ORDERED.
15
Agpalo, Statutory Construction, 3rd (1995) Ed., at p. 159, citing Co Kim Chan
v. Valdez Tan Keh, 75 Phil 371, and Soriano v. Sandiganbayan, G.R. No.
65952, July 1, 1984, among others.