MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC.

, petitioner,
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.
G.R. No. 154342 July 14, 2004
CORONA, J.:

DOCTRINE:

It is a fundamental principle that the validity and obligatory force of a law proceed from the fact
that it has first been promulgated. A law that is not yet effective cannot be considered as
conclusively known by the populace. To make a law binding even before it takes effect may lead
to the arbitrary exercise of the legislative power.40 Nova constitutio futuris formam imponere
debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt
must generally be resolved against the retroactive operation of laws, whether these are original
enactments, amendments or repeals.41 There are only a few instances when laws may be
given retroactive effect,42 none of which is present in this case.

FACTS:

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but
organized and existing under the laws of the State of California, United States of America
(U.S.), where all its wineries are located. Gallo Winery produces different kinds of wines and
brandy products and sells them in many countries under different registered trademarks,
including the GALLO and ERNEST & JULIO GALLO wine trademarks.

Respondent domestic corporation, Andresons, has been Gallo Winery’s exclusive wine importer
and distributor in the Philippines since 1991, selling these products in its own name and for its
own account.5

Gallo Winery’s GALLO wine trademark was registered in the principal register of the Philippine
Patent Office (now Intellectual Property Office) on November 16, 1971 under Certificate of
Registration No. 17021 which was renewed on November 16, 1991 for another 20 years.6 Gallo
Winery also applied for registration of its ERNEST & JULIO GALLO wine trademark on October
11, 1990 under Application Serial No. 901011-00073599-PN but the records do not disclose if it
was ever approved by the Director of Patents.7

On the other hand, petitioners Mighty Corporation and La Campana and their sister company,
Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the cultivation,
manufacture, distribution and sale of tobacco products for which they have been using the
GALLO cigarette trademark since 1973. 8

The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO 100’s
cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both
for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries filed its
manufacturer’s sworn statement as basis for BIR’s collection of specific tax on GALLO
cigarettes.9

On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the
registration of the GALLO cigarette trademark in the principal register of the then Philippine
Patent Office.10
In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana
which, on July 16, 1985, applied for trademark registration in the Philippine Patent Office.11 On
July 17, 1985, the National Library issued Certificate of Copyright Registration No. 5834 for La
Campana’s lifetime copyright claim over GALLO cigarette labels.12

Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes

Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially by
Tobacco Industries, then by La Campana and finally by Mighty Corporation.15

On the other hand, although the GALLO wine trademark was registered in the Philippines in
1971, respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO
GALLO wines in the Philippines circa 1974 within the then U.S. military facilities only. By 1979,
they had expanded their Philippine market through authorized distributors and independent
outlets.16

Respondents claim that they first learned about the existence of GALLO cigarettes in the latter
part of 1992 when an Andresons employee saw such cigarettes on display with GALLO wines in
a Davao supermarket wine cellar section.17 Forthwith, respondents sent a demand letter to
petitioners asking them to stop using the GALLO trademark, to no avail.

ISSUE:
Whether the Intellectual Property Code is applicable (NO)
Whether GALLO cigarettes and GALLO wines were identical, similar or related good. (NO)

RULING:

ISSUE 1:

THE TRADEMARK LAW AND THE PARIS

We note that respondents sued petitioners on March 12, 1993 for trademark infringement and
unfair competition committed during the effectivity of the Paris Convention and the Trademark
Law.

Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only
under the aforesaid governing laws but also under the IP Code which took effect only on
January 1, 1998,37 or about five years after the filing of the complaint:

Defendants’ unauthorized use of the GALLO trademark constitutes trademark infringement

The CA apparently did not notice the error and affirmed the Makati RTC decision:
In the light of its finding that appellants’ use of the GALLO trademark on its cigarettes is likely to
create confusion with the GALLO trademark on wines previously registered and used in the
Philippines by appellee E & J Gallo Winery, the trial court thus did not err in holding that
appellants’ acts not only violated the provisions of the our trademark laws (R.A. No. 166 and
R.A. Nos. (sic) 8293) but also Article 6bis of the Paris Convention.39 (Emphasis and
underscoring supplied)

We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case.

It is a fundamental principle that the validity and obligatory force of a law proceed from the fact
that it has first been promulgated. A law that is not yet effective cannot be considered as
conclusively known by the populace. To make a law binding even before it takes effect may lead
to the arbitrary exercise of the legislative power.40 Nova constitutio futuris formam imponere
debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt
must generally be resolved against the retroactive operation of laws, whether these are original
enactments, amendments or repeals.41 There are only a few instances when laws may be
given retroactive effect,42 none of which is present in this case.

The IP Code, repealing the Trademark Law,43 was approved on June 6, 1997. Section 241
thereof expressly decreed that it was to take effect only on January 1, 1998, without any
provision for retroactive application. Thus, the Makati RTC and the CA should have limited the
consideration of the present case within the parameters of the Trademark Law and the Paris
Convention, the laws in force at the time of the filing of the complaint.

ISSUE 2:
NO

Confusion of goods is evident where the litigants are actually in competition; but confusion of
business may arise between non-competing interests as well.90

Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6bis of the
Paris Convention which proscribe trademark infringement not only of goods specified in the
certificate of registration but also of identical or similar goods, we have also uniformly
recognized and applied the modern concept of "related goods."91 Simply stated, when goods
are so related that the public may be, or is actually, deceived and misled that they come from
the same maker or manufacturer, trademark infringement occurs.92

Non-competing goods may be those which, though they are not in actual competition, are so
related to each other that it can reasonably be assumed that they originate from one
manufacturer, in which case, confusion of business can arise out of the use of similar marks.93
They may also be those which, being entirely unrelated, cannot be assumed to have a common
source; hence, there is no confusion of business, even though similar marks are used.94 Thus,
there is no trademark infringement if the public does not expect the plaintiff to make or sell the
same class of goods as those made or sold by the defendant.95

In resolving whether goods are related,96 several factors come into play:

(a) the business (and its location) to which the goods belong

(b) the class of product to which the goods belong

(d) the nature and cost of the articles98

(e) the descriptive properties, physical attributes or essential characteristics with reference to
their form, composition, texture or quality

(f) the purpose of the goods99

(g) whether the article is bought for immediate consumption,100 that is, day-to-day household
items101

(h) the fields of manufacture102

(i) the conditions under which the article is usually purchased103 and

(j) the channels of trade through which the goods flow,104 how they are distributed, marketed,
displayed and sold.105

The wisdom of this approach is its recognition that each trademark infringement case presents
its own unique set of facts. No single factor is preeminent, nor can the presence or absence of
one determine, without analysis of the others, the outcome of an infringement suit. Rather, the
court is required to sift the evidence relevant to each of the criteria. This requires that the entire
panoply of elements constituting the relevant factual landscape be comprehensively
examined.106 It is a weighing and balancing process. With reference to this ultimate question,
and from a balancing of the determinations reached on all of the factors, a conclusion is
reached whether the parties have a right to the relief sought.107

A very important circumstance though is whether there exists a likelihood that an appreciable
number of ordinarily prudent purchasers will be misled, or simply confused, as to the source of
the goods in question.108 The "purchaser" is not the "completely unwary consumer" but is the
"ordinarily intelligent buyer" considering the type of product involved.109 He is "accustomed to
buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent
simulation is to be found in the likelihood of the deception of some persons in some measure
acquainted with an established design and desirous of purchasing the commodity with which
that design has been associated. The test is not found in the deception, or the possibility of
deception, of the person who knows nothing about the design which has been counterfeited,
and who must be indifferent between that and the other. The simulation, in order to be
objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has
a need to supply and is familiar with the article that he seeks to purchase."110

Hence, in the adjudication of trademark infringement, we give due regard to the goods’ usual
purchaser’s character, attitude, habits, age, training and education. 111

Applying these legal precepts to the present case, petitioner’s use of the GALLO cigarette
trademark is not likely to cause confusion or mistake, or to deceive the "ordinarily intelligent
buyer" of either wines or cigarettes or both as to the identity of the goods, their source and
origin, or identity of the business of petitioners and respondents.
Obviously, wines and cigarettes are not identical or competing products. Neither do they belong
to the same class of goods. Respondents’ GALLO wines belong to Class 33 under Rule 84[a]
Chapter III, Part II of the Rules of Practice in Trademark Cases while petitioners’ GALLO
cigarettes fall under Class 34.

We are mindful that product classification alone cannot serve as the decisive factor in the
resolution of whether or not wines and cigarettes are related goods. Emphasis should be on the
similarity of the products involved and not on the arbitrary classification or general description of
their properties or characteristics. But the mere fact that one person has adopted and used a
particular trademark for his goods does not prevent the adoption and use of the same trademark
by others on articles of a different description.