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700 SUPREME COURT REPORTS ANNOTATED

Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

*
No. L-27361. May 29, 1981.

PARKE, DAVIS & COMPANY, plaintiff-appellant, vs.

DOCTORS’ PHARMACEUTICALS, INC. and V-LAB
DRUGHOUSE CORPORATION, defendants-appellees.

Remedial Law; Civil Procedure; Pleadings; A motion to

dismiss based on failure of a complaint to state a cause of action
hypothetically assume the truth of the factual allegations of the
complaint.—It is axiomatic that in resolving a motion to dismiss a
complaint on the ground of failure to state a cause of action, the
court should hypothetically assume the truth of the factual
allegations of the complaint (except allegations of facts the falsity
of which the court may take judicial notice of) and determine
whether on the basis thereof, the complainant is entitled to the
relief demanded.
Mercantile Law; Infringement of patents; Evidence; Fact of
existence of two different substances of medicine of which a court
could

________________

* SECOND DIVISION

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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

not take judicial notice of nor competent to so find in the absence of

evidence, and the existence of two patents require presentation of
evidence to show whether the substances are the same or not.—
Thus, instead of hypothetically assuming the truth of the
plaintiff’s allegation that “Chloramphenicol” and
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“Chloramphenicol Palmitate” are two different substances, the

lower court had ruled against its veracity. This is clearly an error
considering that the said assumed fact cannot qualify as
something which the court could take judicial notice of nor was it
competent to so find in the absence of evidence formally presented
to that effect. The existence of two patents separately covering
said substances simply militates against said factual assumption
and requires the presentation of evidence sufficient to convince
the court that said substances are indeed the same.

APPEAL from the order of the Court of First Instance of

Rizal.

The facts are stated in the opinion of the Court.

ABAD SANTOS, J.:

This is an appeal from the order of the Court of First

Instance of Rizal dated August 22, 1966, in Civil Case No.
C-712, dismissing, on the ground of lack of cause of action,
the complaint for damages for infringement of patent and
unfair competition, with preliminary injunction, filed by
the herein appellant against the herein appellees.
On May 5, 1966, Parke, Davis & Company filed with the
Court of First Instance of Rizal, Caloocan City Branch, the
said Complaint with Preliminary Injunction against
Doctors’ Pharmaceuticals, Inc., otherwise referred to as
defendant No. 1 and V-Lab Drughouse Corporation,
otherwise referred to as defendant No. 2, alleging, among
others, that plaintiff is a foreign corporation organized and
existing under the laws of the State of Michigan, U.S.A.,
with principal office situated in Detroit, Michigan, U.S.A.;
that the laws of the United States of America allow
corporate or juristic citizens of the Philippines to file in
said country, actions for infringement of patents and for
unfair competition; that defendants 1 and 2 are
corporations organized and existing under the laws of the
Philippines

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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

with offices respectively located at 354-B San Diego Street,

Grace Park, Caloocan City and 126 Gen. Evangelista
Street, Caloocan City; that on March 21, 1957, Letters
Patent No. 279 was legally issued to plaintiff by the Patent
Office of the Republic of the Philippines for an invention
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entitled “Therapeutically Valuable Esters and Method for

Obtaining the same”; that since that date, plaintiff has
been and still is, the owner of said Letters Patent No. 279
which is still in force in the Philippines; that defendant No.
1 has knowingly infringed and is still knowingly infringing
Claim 4 of said Letters Patent No. 279 of plaintiff by
selling, causing to be sold, using or causing to be used,
“Chloramphenicol Palmitate”, the substance covered by
said Claim 4 of said plaintiff’s Letters Patent No. 279,
under the name “Venimicetin Suspension”, willfully and
without the consent or authorization of plaintiff; that
defendant No. 2 has likewise, knowingly infringed and is
still knowingly infringing Claim 4 of said Letters Patent
No. 279 by acting as distributor of defendant No. 1 of the
latter’s medicine called “Venimicetin Suspension” which
contains “Chloramphenicol Palmitate”; that plaintiff,
through its wholly-owned local subsidiary, Parke, Davis &
Company, Inc., a domestic corporation with main office at
Mandaluyong, Rizal, has at great expense, established a
market and a continuing demand for “Chloramphenicol
Palmitate” in the Philippines and has for many years sold
and is still selling this product in the Philippines; that
defendants have derived unlawful gains and profits from
the aforesaid infringement to the great and irreparable
injury, damage and prejudice of plaintiff, and have
deprived plaintiff of legitimate returns which plaintiff
would have otherwise received had it not been for
defendants’ infringing acts; that defendants, in advertising
and selling the medicine of defendant No. 1 called
“Venimicetin Suspension” have falsely and deceptively
concealed that the same contains “Chloramphenicol
Palmitate” and falsely and deceptively represented the
same to contain “Chloramphenicol”; that
“Chloramphenicol” and “Chloramphenicol Palmitate” are
entirely different substances; that defendants, in
advertising and selling “Venimicetin Suspension”, have
falsely and deceptively used plaintiffs name and
represented that defendant
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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

No. 1 holds a license from plaintiff for said medicine with,

inter alia, the following words:

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“First Compulsory License in the Philippines by Parke-Davis

Company Detroit, Michigan, U.S.A.”;

that plaintiff has never granted defendant No. 1 any kind

of license for any product; that defendant No. 1 has not
even applied for a compulsory license under plaintiff’s
Letters Patent No. 279, the only patent which covers
“Chloramphenicol Palmitate”; that the compulsory
licensing case between plaintiff and defendant No. 1 in the
Philippine Patent Office (Inter Partes Case No. 181) dealt
with plaintiff’s Letters Patent No. 50 (which covers
“Chloramphenicol”) and not with plaintiff’s Letters Patent
No. 279 (which covers “Chloramphenicol Palmitate”), that
the resolution of the Director of Patents fixing the terms
and conditions of the compulsory license for
“Chloramphenicol” has not yet become final as the same is
still subject to a pending motion for reconsideration; that
even if said resolution does become final, the compulsory
license will not cover defendants’ “Venimicetin Suspension”
which actually contains “Chloramphenicol Palmitate” and,
therefore, defendants’ statement will still be false and
misleading; and that defendants’ use of the aforesaid false
statement is designed to induce persons to purchase and
physicians to prescribe the use of “Venimicetin Suspension”
in the mistaken belief that it is identical with the
“Chloramphenicol Palmitate” product manufactured and
sold in the Philippines by plaintiff’s subsidiary or that the
active ingredient in said product has been obtained from
plaintiff and/or that said product has been made under the
supervision or control of plaintiff—thereby causing damage
or loss to plaintiff. On the basis of the foregoing allegations,
the plaintiff prayed, among others, that defendants be
enjoined from performing the acts complained of as
infringement of patent and unfair competition and to pay
the plaintiff all damages due thereto by reason of said acts.
On May 6, 1966, the Court of First Instance issued an
order which, among others, temporarily restrained the
defendants “from directly or indirectly selling, using,
causing to be sold or

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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

causing to be used any ‘Chloramphenicol Palmitate’ not

manufactured by plaintiff or plaintiff’s wholly-owned
subsidiary, Parke, Davis & Company, Inc.” Alleging that
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the defendants have not complied with such order, the

plaintiff filed on May 24, 1966, a motion to punish
defendants for contempt.
Before the court could act on the plaintiff’s motion for
contempt, the defendants filed a Motion to Dismiss, dated
May 25, 1966, alleging, among others, that the complaint
states no cause of action against them since defendant No.
1 “was granted a compulsory license to manufacture, use
and sell its own brands of medicinal preparation containing
‘chloramphenicol’.”
On June 17, 1966, the plaintiff filed its Opposition to
Motion to Dismiss controverting, among others, defendants’
contention that the complaint states no cause of action.
Plaintiff pointed out that the defendants have confused the
substance which is the subject matter of the complaint,
namely, “Chloramphenicol Palmitate”, with the substance
covered by the compulsory licensing case, namely,
“Chloramphenicol”, and the Letters Patent subject of the
complaint, namely, Letters Patent No. 279, with the
Letters Patent subject of the compulsory licensing case,
namely, Letters Patent No. 50.
On June 27, 1966, the defendants filed their Reply to
Opposition alleging, among others, that in advertising and
selling their product “Venimicetin Suspension,” never do
they state that the same contains “Chloramphenicol
Palmitate” They pointed out that even in the annexes of
plaintiffs complaint (consisting of the packages and labels
allegedly used by the defendants in said product), only the
substance “Chloramphenicol” is stated—showing that the
substance involved is “Chloramphenicol and not
“Chloramphenicol Palmitate”.
On July 5, 1966, the plaintiff filed its Rejoinder to Reply
to Opposition stating, among others, that while the
packages and labels of defendants’ “Venimicetin
Suspension” indicate that the same contains
“Chloramphenicol”, the truth of the matter is that said
product does not contain said substance but the substance
covered by Letters Patent No. 279, namely,
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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

“Chloramphenicol Palmitate”. This, plaintiff pointed out, is

expressly alleged in the complaint; thus, applying the rule
that a motion to dismiss hypothetically admits the truth of
the allegations of the complaint, defendants are guilty of
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(1) infringement of patent, by selling, causing to be sold,

using or causing to be used “Chloramphenicol Palmitate” in
their medicine called “Venimicetin Suspension”, and (2)
unfair competition, by concealing that said medicine
contains “Chloramphenicol”, and, by deceiving and
misleading the purchasers who are made to believe that
“Venimicetin Suspension” is covered by a compulsory
license from the plaintiff.
On the basis of the foregoing pleadings, the Court of
First Instance of Rizal issued the order dated August 22,
1966, which dismissed the complaint on the ground of lack
of cause of action, to wit:

“x x x                     x x x.
“After a careful consideration of the arguments for and against
the motion to dismiss, and in view of the fact that the substance
covered by Letters Patent No. 50 and Letters Patent No. 279 is
the same and that is, the substance known as ‘Chloramphenicol’,
because while under Letters Patent No. 50, the substance is
referred to as ‘Chloramphenicol’, in Letters Patent No. 279; THE
SUBSTANCE HAS BEEN DENOMINATED AS ‘Chloramphenicol
Palmitate’ yet it is the opinion of the Court that ‘Chloramphenicol’
and ‘Chloramphenicol Palmitate’ are the same, the difference
being merely in the taste, and this Court to state that there was
infringement of Patent with respect to Letters Patent No. 279
would be tantamount to preventing the defendant, Doctors’
Pharmaceuticals, Inc., from exercising the right granted it by
Letters Patent No. 50. It would further render nugatory the
decision of the Director of Patents, affirmed by the Supreme
Court, granting the defendant, Doctor’s Pharmaceuticals, Inc., the
right to use and import ‘Chloramphenicol’.
“The defendant, V-Lab Drughouse Corporation being merely a
sales representative of the defendant, Doctors’ Pharmaceuticals,
Inc., and the Court being of the opinion that there is no cause of
action with respect to the principal defendant, is likewise of the
opinion that there is no cause of action with respect to the
defendant, V-Lab Drughouse Corporation.

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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

“It is likewise the opinion of this Court that there is no cause of

action for unfair competition because a perusal of the records of
this case will show that under paragraph 7 of the Resolution of
the Director of Patents, Annex “C” of the Motion to Dismiss, the
petitioner (Doctors’ Pharmaceuticals, Inc.) shall adopt and use its
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own trademarks or labels on all its products containing

Chloramphenicol under license from Parke, Davis, & Co., Inc., of
Michigan, U.S.A.
“The claim of the plaintiff that the representation:

‘First Compulsory License in the Philippines by Parke Davis Company,

Detroit, Michigan, U.S.A.’

is false and has a definite tendency to deceive possible

purchasers and distort the facts is not well-taken in view of the
above-mentioned (Par. 7) of the Resolution of the Director of
Patents.
“WHEREFORE, finding the ground of lack of cause of action to
be well-taken, this case is ordered DISMISSED, without
pronouncement as to costs. The restraining order heretofore
issued is hereby lifted and set aside. Having reached the above
conclusion, the Court will no longer pass upon the issue of
contempt.
“SO ORDERED.”

Hence, the present appeal.

We are thus tasked with the resolution of the issue of
whether or not the lower court correctly dismissed the
complaint for damages for infringement of patent and
unfair competition on the ground of failure to state a cause
of action.
It is axiomatic that in resolving a motion to dismiss a
complaint on the ground of failure to state a cause of
action, the court should hypothetically assume the truth of
the factual allegations of the complaint (except allegations
of facts the falsity of which the court may take judicial
notice of) and determine whether on the basis thereof, the
complainant is entitled to the relief demanded. Had the
lower court applied the foregoing formula, it would not
have dismissed, on the ground of failure to state a cause of
action, the complaint for damages for infringement of
patent and unfair competition. For, instead of
hypothetically assuming the truth of the factual allegations
of the complaint, the lower court had ruled against their
veraci-
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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

ty and consequently concluded that the complaint states no

cause of action.

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As can be gleaned from the appealed order, the

pertinent portions of which We have heretofore quoted, the
lower court premised its ruling that there is no cause of
action for infringement of patent on the assumption that
“Chloramphenicol” (the substance covered by Letters
Patent No. 50) and “Chloramphenicol Palmitate” (the
substance covered by Letters Patent No. 279) are the same.
Thus, instead of hypothetically assuming the truth of the
plaintiff’s allegation that “Chloramphenicol” and
“Chloramphenicol Palmitate” are two different substances,
the lower court had ruled against its veracity. This is
clearly an error considering that the said assumed fact
cannot qualify as something which the court could take
judicial notice of nor was it competent to so find in the
absence of evidence formally presented to that effect. The
existence of two patents separately covering said
substances simply militates against said factual
assumption and requires the presentation of evidence
sufficient to convince the court that said substances are
indeed the same.
Had the lower court hypotheticaliy assumed as true, for
the purpose of the motion to dismiss, the allegations in the
complaint that “Chloramphenicol” and “Chloramphenicol
Palmitate” are entirely different substances and that
“Venimicetin Suspension” actually contains
‘Chloramphenicol Palmitate” and not “Chloramphenicol” as
indicated in its package and label, it necessarily would
have to conclude that the complaint states causes of action
for infringement of patent and for unfair competition. For
defendants would then be guilty of infringement of patent
by selling, causing to be sold, using and causing to be used
“Chloramphenicol Palmitate”, without the consent or
authority of the plaintiff as the holder of Letters Patent No.
279, Claim 4 of which allegedly covers said substance.
Sections 37 and 42 of R.A. No. 165 provide:

“SEC. 37. RIGHTS OF PATENTEES.—A patentee shall have the

exclusive right to make, use and sell the patented machine, article
or product, and to use the patented process for the purpose of

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Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

industry or commerce, throughout the territory of the Philippines

for the term of the patent; and such making, using, or selling by

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any person without the authorization of the patentee, constitutes

infringement of the patent.” (Italics supplied.)
“SEC. 42. CIVIL ACTION FOR INFRINGEMENT.—Any
patentee, or anyone possessing any right, title or interest in and
to the patented invention, whose rights have been infringed, may
bring a civil action before the proper Court of First Instance, to
recover from the infringer damages sustained by reason of the
infringement and to secure an injunction for the protection of his
rights.”

Likewise, the defendants would be guilty of unfair

competition by falsely stating that defendant No. 1’s
medicine called “Venimicetin Suspension” contains
“Chloramphenicol” when in fact it actually contains
“Chloramphenicol Palmitate”, and that it is covered by a
compulsory license from the plaintiff. Section 29 of R.A. No.
166 provides, inter alia:

“In particular, and without in any way limiting the scope of unfair
competition, the following shall be deemed guilty of unfair
competition:
x x x                     x x x
“(c) Any person who shall make any false statement in the
course of trade x x x.”

Clearly, the lower court erred in dismissing, on the ground

of failure to state a cause of action, the complaint for
damages for infringement of patent and unfair competition.
WHEREFORE, the appealed order of dismissal is hereby
set aside and the complaint for damages for infringement of
patent and unfair competition is hereby reinstated.
Without pronouncement as to costs.
*
          Barredo (Chairman), Aquino, Guerrero and De
Castro, JJ., concur.

_______________

* Justice Juvenal K. Guerrero has been designated to sit in the Second

Division in lieu of Justice Hermogenes Concepcion, Jr. who is on official
leave.

709

VOL. 104, MAY 29, 1981 709

Parke, Davis & Co. vs. Doctors’ Pharmaceuticals, Inc.

Order of respondent Court is set aside.

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Notes.—A trial court commits an abuse of discretion

where it orders the complaint dismissed for failure of
plaintiff and counsel to appear at the pre-trial. (Gutierrez
vs. Esrenzo, 43 SCRA 173)
Ancillary matters cannot be leaned upon to make out a
cause of action. (Gabila vs. Barriga, 41 SCRA 131)
Splitting of the cause of action, when dictated by
practical consideration is a realistic and practical approach
to procedural problems. (Tarnate vs. Garcia, 48 SCRA 464)
Action for forcible entry and action for quieting of title
though involving the same parties and subject matter are
founded on different causes. (Quimpo vs. De la Victoria, 46
SCRA 139)
Where the offended party reserves the right to file a
separate action for damages arising from physical injuries,
the cause of action prescribes in four years, not ten years.
(Escueta vs. Fandialan, 61 SCRA 278)
Nature of proceedings Patent Office is procedural, not
jurisdictional in nature. (Boehringer Ingelheim GMBH vs.
Court of Appeals, 84 SCRA 449)
Purchasers of veterinary medicine are ordinarily more
wary of the products they are buying. (American Cyanamid
Company vs. Director of Patents, 76 SCRA 568).
Director of Patents has no jurisdiction over the issue of
unfair competition. (Victorias Milling Company, Inc. vs.
Ong Siu, 79 SCRA 207)
When competitors adopt a distinctive or dominant mark
or feature of another’s trademark and with it make use of
the same color ensemble, employs similar words written in
a style, type and size of lettering almost identical with
those found in the other trademark, the intent to pass to
the public his product as that of the other, is quite obvious.
(Philippine Nut Industry, Inc. vs. Standard Brands, Inc.,
65 SCRA 575)
Findings of fact by the Director of Patents are conclusive
and binding on the Supreme Court provided they are sup-
710

710 SUPREME COURT REPORTS ANNOTATED

Insular Lumber Co. vs. Court of Tax Appeals

ported by substantial evidence. (Philippine Nut Industry,

Inc. vs. Standard Brands, Inc., 65 SCRA 575)

——o0o——

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