Assignment for October 7

8/10/2019 Assignment for October 7

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ASSIGNMENT FOR OCTOBER 7, 2014

Rights of a Patentee

Sec. 71

Limitations

Sec. 72

Roma Drug vs. RTC of Guagua, Pampanga, G.R. No. 149907, April 16, 2009

Infringement

Sec. 76

Creser Precision vs. Floro International, G.R. No. 118708, February 2, 1998

Smith Kline Beckman vs. CA & Tryco Pharma Corp, GR. 126627, August 14,2003

Licensing

Secs. 85 & 93

Voluntary & Compulsory

Barry John Price vs. United Laboratories, G.R. No. 82542, September 29,1998

Smith Kline vs. Doctors Pharmaceuticals, G.R. No. 121867, July 24, 1997

Smith Kline vs. Danlex Research, G.R. No. 121267, October 23, 2001

Utility Models

Sec. 108

Del Rosario vs. CA & Janito Corporation, G.R. 115106, March 15, 1996

Industrial Design

Sec. 112

PART IV SEARCH AND SEIZURE

A.M. No. 99-20-09-SC Resolution Clarifying Guidelines on the Application forEnforceability of Search Warrants.

A.M. NO. 02-1-06-SC Rule on Search and Seizure in Civil Actions forInfringement of Intellectual Property Rights

A.M. No. 10-3-10-SC Special Rules on Intellectual Property Litigation


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SECOND DIVISION

ROMA DRUG and ROMEO G.R. No. 149907RODRIGUEZ, as Proprietorof ROMA DRUG, Present:

Petitioners,QUISUMBING, J.,

Chairperson,CARPIO-MORALES,TINGA,

- versus - VELASCO, andBRION, JJ.

Promulgated:THE REGIONAL TRIAL COURTOF GUAGUA, PAMPANGA, THEPROVINCIAL PROSECUTOR OF April 16, 2009PAMPANGA, BUREAU OF FOOD& DRUGS (BFAD) and GLAXOSMITHKLINE,

Respondents.

x----------------------------------------------------------------------------x

D E C I S I O N

TINGA, J.:

On 14 August 2000, a team composed of the National Bureau of

Investigation (NBI) operatives and inspectors of the Bureau of Food and

Drugs (BFAD) conducted a raid on petitioner Roma Drug, a duly registered

sole proprietorship of petitioner Romeo Rodriguez (Rodriguez) operating a

drug store located at San Matias, Guagua, Pampanga. The raid was

conducted pursuant to a search warrant[1]issued by the Regional Trial Court

(RTC), Branch 57, AngelesCity. The raiding team seized several imported

medicines, including Augmentin (375mg.) tablets, Orbenin(500mg.)

capsules, Amoxil(250mg.) capsules and Ampiclox(500mg.).[2]It appears that

Roma Drug is one of six drug stores which were raided on or around the

same time upon the request of SmithKline Beecham Research Limited

(SmithKline), a duly registered corporation which is the local distributor of

pharmaceutical products manufactured by its parent London-based

corporation. The local SmithKline has since merged with Glaxo Wellcome

Phil. Inc to form Glaxo SmithKline, private respondent in this case. The

seized medicines, which were manufactured by SmithKline, were imported

directly from abroad and not purchased through the local SmithKline, the

authorized Philippine distributor of these products.

The NBI subsequently filed a complaint against Rodriguez for violation

of Section 4 (in relation to Sections 3 and 5) of Republic Act No. 8203, also

known as the Special Law on Counterfeit Drugs (SLCD), with the Office of the

Provincial Prosecutor inSan Fernando, Pampanga. The section prohibits the

sale of counterfeit drugs, which under Section 3(b)(3), includes an

unregistered imported drug product. The term unregistered signifies the

lack of registration with the Bureau of Patent, Trademark and Technology

Transfer of a trademark, tradename or other identification mark of a drug in

the name of a natural or juridical person, the process of which is governed

under Part III of the Intellectual Property Code.

In this case, there is no doubt that the subject seized drugs are

identical in content with their Philippine-registered counterparts. There is no

claim that they were adulterated in any way or mislabeled at least. Their

classification as counterfeit is based solely on the fact that they were

imported from abroad and not purchased from the Philippine-registered

owner of the patent or trademark of the drugs.
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During preliminary investigation, Rodriguez challenged the

constitutionality of the SLCD. However, Assistant Provincial Prosecutor

Celerina C. Pineda skirted the challenge and issued a Resolution dated 17

August 2001 recommending that Rodriguez be charged with violation of

Section 4(a) of the SLCD. The recommendation was approved by Provincial

Prosecutor Jesus Y. Manarang approved the recommendation.[3]

Hence, the present Petition for Prohibition questing the RTC-Guagua

Pampanga and the Provincial Prosecutor to desist from further prosecuting

Rodriguez, and that Sections 3(b)(3), 4 and 5 of the SLCD be declared

unconstitutional. In gist, Rodriguez asserts that the challenged provisions

contravene three provisions of the Constitution. The first is the equal

protection clause of the Bill of Rights. The two other provisions are Section

11, Article XIII, which mandates that the State make essential goods, health

and other social services available to all the people at affordable cost; and

Section 15, Article II, which states that it is the policy of the State to protect

and promote the right to health of the people and instill health consciousness

among them.

Through its Resolution dated 15 October 2001, the Court issued a

temporary restraining order enjoining the RTC from proceeding with the trial

against Rodriguez, and the BFAD, the NBI and Glaxo Smithkline from

prosecuting the petitioners.[4]

Glaxo Smithkline and the Office of the Solicitor General (OSG) have

opposed the petition, the latter in behalf of public respondents RTC,

Provincial Prosecutor and Bureau of Food and Drugs (BFAD). On the

constitutional issue, Glaxo Smithkline asserts the rule that the SLCD is

presumed constitutional, arguing that both Section 15, Article II and Section

11, Article XIII are not self-executing provisions, the disregard of which can

give rise to a cause of action in the courts. It adds that Section 11, Article

XIII in particular cannot be work to the oppression and unlawful of the

property rights of the legitimate manufacturers, importers or distributors,

who take pains in having imported drug products registered before the

BFAD. Glaxo Smithkline further claims that the SLCD does not in fact

conflict with the aforementioned constitutional provisions and in fact are in

accord with constitutional precepts in favor of the peoples right to health.

The Office of the Solicitor General casts the question as one of policy

wisdom of the law that is, beyond the interference of the judiciary.[5]Again,

the presumption of constitutionality of statutes is invoked, and the assertion

is made that there is no clear and unequivocal breach of the Constitution

presented by the SLCD.

II.

The constitutional aspect of this petition raises obviously interesting

questions. However, such questions have in fact been mooted with the

passage in 2008 of Republic Act No. 9502, also known as the Universally

Accessible Cheaper and Quality Medicines Act of 2008.[6]
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Section 7 of Rep. Act No. 9502 amends Section 72 of the Intellectual

Property Code in that the later law unequivocally grants third persons the

right to import drugs or medicines whose patent were registered in

the Philippines by the owner of the product:

Sec. 7. Section 72 ofRepublic Act No. 8293,otherwise known as the Intellectual Property Code ofthe Philippines, is hereby amended to read as follows:

Sec. 72. Limitations of Patent Rights. The owner ofa patent has no right to prevent third parties fromperforming, without his authorization, the acts referred to inSection 71 hereof in the following circumstances:

72.1. Using a patented product which has been puton the market in the Philippines by the owner of the product,or with his express consent, insofar as such use isperformed after that product has been so put on the saidmarket: Provided, That, with regard to drugs andmedicines, the limitation on patent rights shall applyafter a drug or medicine has been introduced in thePhilippines or anywhere else in the world by the patent

owner,or by any party authorized to use the invention: Provided,

further, That the right to import the drugs andmedicines contemplated in this section shall be availableto any government agency or any private third party;

72.2. Where the act is done privately and on a non -commercial scale or for a non-commercial purpose: Provided,

That it does not significantly prejudice the economicinterests of the owner of the patent;

72.3. Where the act consists of making or using exclusively

for experimental use of the invention for scientific purposesor educational purposes and such other activities directlyrelated to such scientific or educational experimental use;

72.4. In the case of drugs and medicines, where the actincludes testing, using, making or selling the inventionincluding any data related thereto, solely for purposesreasonably related to the development and submission ofinformation and issuance of approvals by governmentregulatory agencies required under any law of thePhilippines or of another country that regulates themanufacture, construction, use or sale of any product:Provided, That, in order to protect the data submitted by the

original patent holder from unfair commercial use providedin Article 39.3 of the Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPS Agreement), theIntellectual Property Office, in consultation with theappropriate government agencies, shall issue the appropriaterules and regulations necessary therein not later than onehundred twenty (120) days after the enactment of this law;

72.5. Where the act consists of the preparation forindividual cases, in a pharmacy or by a medical professional,of a medicine in accordance with a medical shall apply aftera drug or medicine has been introduced in the Philippines oranywhere else in the world by the patent owner, or by anyparty authorized to use the invention: Provided, further, Thatthe right to import the drugs and medicines contemplated inthis section shall be available to any government agency orany private third party; xxx[7]

The unqualified right of private third parties such as petitioner to

import or possess unregistered imported drugs in the Philippines is further

confirmed by the Implementing Rules to Republic Act No. 9502

promulgated on 4 November 2008.[8]The relevant provisions thereof read:

Rule 9. Limitations on Patent Rights.The ownerof a patent has no right to prevent third parties fromperforming, without his authorization, the acts referred to inSection 71 of the IP Code as enumerated hereunder:

(i) Introduction in the Philippines or Anywhere Else inthe World.

Using a patented product which has been put on themarket in the Philippines by the owner of the product, orwith his express consent, insofar as such use is performed

after that product has been so put on the saidmarket: Provided, That, with regard to drugs and medicines,the limitation on patent rights shall apply after a drugor medicine has been introduced in the Philippines oranywhere else in the world by the patent owner, or by anyparty authorized to use the invention: Provided, further, Thatthe right to import the drugs and medicines contemplated inthis section shall be available to any government agency orany private third party. (72.1)

The drugs and medicines are deemed introducedwhen they have been sold or offered for sale anywhere else inthe world. (n)
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It may be that Rep. Act No. 9502 did not expressly repeal any

provision of the SLCD. However, it is clear that the SLCOs classification of

unregistered imported drugs as counterfeit drugs, and of corresponding

criminal penalties therefore are irreconcilably in the imposition conflict with

Rep. Act No. 9502 since the latter indubitably grants private third persons

the unqualified right to import or otherwise use such drugs. Where a statute

of later date, such as Rep. Act No. 9502, clearly reveals an intention on the

part of the legislature to abrogate a prior act on the subject that intention

must be given effect.[9]When a subsequent enactment covering a field of

operation coterminus with a prior statute cannot by any reasonable

construction be given effect while the prior law remains in operative existence

because of irreconcilable conflict between the two acts, the latest legislative

expression prevails and the prior law yields to the extent of the

conflict.[10]Irreconcilable inconsistency between two laws embracing the

same subject may exist when the later law nullifies the reason or purpose of

the earlier act, so that the latter loses all meaning and function .[11]Legis

posteriors priores contrarias abrogant.

For the reasons above-stated, the prosecution of petitioner is no

longer warranted and the quested writ of prohibition should accordingly be

issued.

III.

Had the Court proceeded to directly confront the constitutionality of

the assailed provisions of the SLCD, it is apparent that it would have at least

placed in doubt the validity of the provisions. As written, the law makes a

criminal of any person who imports an unregistered drug regardless of the

purpose, even if the medicine can spell life or death for someone in

the Philippines. It does not accommodate the situation where the drug is out

of stock in the Philippines, beyond the reach of a patient who urgently

depends on it. It does not allow husbands, wives, children, siblings, parents

to import the drug in behalf of their loved ones too physically ill to travel and

avail of the meager personal use exemption allotted by the law. It

discriminates, at the expense of health, against poor Filipinos without means

to travel abroad to purchase less expensive medicines in favor of their

wealthier brethren able to do so. Less urgently perhaps, but still within the

range of constitutionally protected behavior, it deprives Filipinos to choose a

less expensive regime for their health care by denying them a plausible and

safe means of purchasing medicines at a cheaper cost.

The absurd results from this far-reaching ban extends to implications

that deny the basic decencies of humanity. The law would make criminals of

doctors from abroad on medical missions of such humanitarian

organizations such as the International Red Cross,

the International Red Crescent, Medicin Sans Frontieres, and other like-

minded groups who necessarily bring their own pharmaceutical drugs when

they embark on their missions of mercy. After all, they are disabled from

invoking the bare personal use exemption afforded by the SLCD.
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Even worse is the fact that the law is not content with simply banning,

at civil costs, the importation of unregistered drugs. It equates the importers

of such drugs, many of whom motivated to do so out of altruism or basic

human love, with the malevolents who would alter or counterfeit

pharmaceutical drugs for reasons of profit at the expense of public safety.

Note that the SLCD is a special law, and the traditional treatment of penal

provisions of special laws is that of malum prohibitumor punishable

regardless of motive or criminal intent. For a law that is intended to help

save lives, the SLCD has revealed itself as a heartless,

soullesslegislative piece.

The challenged provisions of the SLCD apparently proscribe a range of

constitutionally permissible behavior. It is laudable that with the passage of

Rep. Act No. 9502, the State has reversed course and allowed for a sensible

and compassionate approach with respect to the importation of

pharmaceutical drugs urgently necessary for the peoples constitutionally-

recognized right to health.

WHEREFORE,the petition is GRANTEDin part. A writ of prohibition

is hereby ISSUEDcommanding respondents from prosecuting petitioner

Romeo Rodriguez for violation of Section 4 or Rep. Act No. 8203. The

Temporary Restraining Order dated15 October 2001 is hereby

made PERMANENT. No pronouncements as to costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 118708. February 2, 1998]

CRESER PRECISION SYSTEMS, INC.,petitioner, vs.COURT OF APPEALSAND FLORO INTERNATIONAL CORP., respondents.

D E C I S I O N

MARTINEZ, J.:

This petition for review on certiorariassails the decision[1].The decision

of the Court of Appeals was penned by Justice Gloria C. Paras and concurredin by Justice Salome A. Montoya and Justice Hector L. Hofilea.

1 of the Court of Appeals dated November 9, 1994 in C.A.-G.R. SP. No.34425 entitled Floro International Corp. vs. Hon. Tirso D.C Cruz and CreserPrecision System, Inc., the dispositive portion of which reads:

WHEREFORE, THE PETITION IS HEREBY GRANTED. THE COMPLAINTFOR INJUNCTION AND DAMAGES, CIVIL CASE NO. 93-1856 BEFORE THERESPONDENT JUDGE IS HEREBY ORDERED DISMISSED AND HISORDERS THEREIN OF DECEMBER 29, 1993 AND MAY 11, 1994 AREORDERED SET ASIDE.

Private respondent is a domestic corporation engaged in themanufacture, production, distribution and sale of military armaments,munitions, airmunitions and other similar materials.[2]

On January 23, 1990, private respondent was granted by the Bureau ofPatents, Trademarks and Technology Transfer (BPTTT), a Letters Patent No.UM-6938[3]covering an aerial fuze which was published in the September-October 1990, Vol. III, No. 5 issue of the Bureau of Patents Official Gazette.[4]

Sometime in November 1993, private respondent, through its president,Mr. Gregory Floro, Jr., discovered that petitioner submitted samples of itspatented aerial fuzeto the Armed Forces of the Philippines (AFP) for testing.He learned that petitioner was claiming the aforesaid aerial fuzeas its ownand planning to bid and manufacture the same commercially without licenseor authority from private respondent. To protect its right, private respondenton December 3, 1993, sent a letter[5]to petitioner advising it fro its existingpatent and its rights thereunder, warning petitioner of a possible court actionand/or application for injunction, should it proceed with the scheduledtesting by the military on December 7, 1993.

In response to private respondents demand, petitioner filed onDecember 8, 1993 a complaint[6]for injunction and damages arising from thealleged infringement before the Regional Trial Court of Quezon City, Branch88. The complaint alleged, among others: that petitioner is the first, true andactual inventor of an aerial fuze denominated as Fuze, PDR 77 CB4 whichis developed as early as December 1981 under the Self-Reliance DefensePosture Program (SRDP) of the AFP; that sometime in 1986, petitioner begansupplying the AFP with the said aerial fuze; that private respondents aerialfuze is identical in every respect to the petitioners fuze; and that the only

difference between the two fuzes are miniscule and merely cosmetic innature. Petitioner prayed that a temporary restraining order and/or writ of
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preliminary injunction be issued enjoining private respondent including anyand all persons acting on its behalf from manufacturing, marketing and/orprofiting therefrom, and/or from performing any other act in connectiontherewith or tending to prejudice and deprive it of any rights, privileges andbenefits to which it is duly entitled as the first, true and actual inventor ofthe aerial fuze.

On December 10, 1993, the trial court issued a temporary restrainingorder. Thereafter, hearings were held on the application of petitioner for theissuance of a writ of preliminary injunction, with both parties presentingtheir evidence. After the hearings, the trial court directed the parties tosubmit their respective memoranda in support of their positions.

On December 27, 1993, private respondent submitted itsmemorandum[7]alleging that petitioner has no cause of action to file acomplaint of infringement against it since it has no patent for the aerialfuzewhich it claims to have invented; that petitioners available remedy is tofile a petition for cancellation of patent before the Bureau of Patents; thatprivate respondent as the patent holder cannot be stripped of its propertyright over the patented aerial fuzeconsisting of the exclusive right tomanufacture, use and sell the same and that it stands to suffer irreparabledamage and injury if it is enjoined from the exercise of its property right overits patent.

On December 29, 1993, the trial court issued an Order[8]granting theissuance of a writ of preliminary injunction against private respondent the

dispositive portion of which reads:

WHEREFORE, plaintiffs application for the issuance of a writ of preliminaryinjunction is granted and, upon posting of the corresponding bond byplaintiff in the amount of PHP 200,000.00, let the writ of preliminaryinjunction be issued by the branch Clerk of this Court enjoining thedefendant and any and all persons acting on its behalf or by and under itsauthority, from manufacturing, marketing and/or selling aerial fuzesidentical, to those of plaintiff, and from profiting therefrom, and/or fromperforming any other act in connection therewith until further orders fromthis Court.

Private respondent moved for reconsideration but this was denied by thetrial courts in its Order[9]of May 11, 1994, pertinent portions of which read:

For resolution before this Court is the Motion for Reconsideration filed bythe defendant and the plaintiffs Opposition thereto. The Court finds nosufficient cause to reconsider its order dated December 29, 1993. During thehearing for the issuance of the preliminary injunction, the plaintiff has amplyproven its entitlement to the relief prayed for. It is undisputed that theplaintiff has developed its aerial fuze way back in 1981 while the defendantbegan manufacturing the same only in 1987. Thus, it is only logical toconclude that it was the plaintiffs aerial fuze that was copied or imitatedwhich gives the plaintiff the right to have the defendant enjoined frommanufacturing, marketing and/or selling aerial fuzes identical to those of theplaintiff, and from profiting therefrom and/or performing any other act inconnection therewith until further orders from this Court. With regards tothe defendants assertion that an action for infringement may only bebrought by anyone possessing right, title or interest to the patented

invention, (Section 42, RA 165) qualified by Section 10 , RA 165 to includeonly the first true and actual inventor, his heirs, legal representatives toassignees, this court finds the foregoing to be untenable. Sec. 10 merelyenumerates the persons who may have an invention patented which does notnecessarily limit to these persons the right to institute an action forinfringement. Defendant further contends that the order in issue isdisruptive of the status quo.On the contrary, the order issued by the Courtin effect maintained the status quo. The last actual , peaceable uncontestedstatus existing prior to this controversy was the plaintiff manufacturing andselling its own aerial fuzes PDR 77 CB4 which was ordered stopped throughthe defendants letter. With issuance of the order, the operations of theplaintiff continue. Lastly, this court believes that the defendant will not sufferirreparable injury by virtue of said order. The defendants claim is primarilyhinged on its patent (Letters Patent No. UM-6983) the validity of which isbeing questioned in this case.

WHEREFORE, premises considered, the Motion for Reconsideration is herebydenied for lack of merit.

SO ORDERED.

Aggrieved, private respondent on June 27, 1994, filed a petitionfor certiorari, mandamus and prohibition[10]before respondent Court ofAppeals raising as grounds the following:

a. Petitioner has no cause of action for infringement against

private respondent, the latter not having any patent for theaerial fuze which it claims to have invented and developedand allegedly infringed by private respondent;

b. The case being an action for cancellation or invalidation ofprivate respondents Letters Patent over its own aerial fuze, the proper venue is the Office of the Director of Patents;

c. The trial court acted in grave abuse of discretion and or inexcess of jurisdiction in finding that petitioner has fullyestablished its clear title or right to preliminary injunction;

d. The trial court acted in grave abuse of discretion and/or inexcess of jurisdiction in granting the preliminary injunction,it being disruptive of the status quo; and

e. The trial court acted in grave abuse of discretion and/or inexcess of jurisdiction in granting the preliminary injunctionthereby depriving private respondent of its property rightsover the patented aerial fuze and cause it irreparabledamages.

On November 9, 1994, the respondent court rendered the now assaileddecision reversing the trial courts Order of December 29, 1993 anddismissing the complaint filed by petitioner.

The motion for reconsideration was also denied on January 17,1995.[11]Hence, this present petition.

It is petitioners contention that it can file, under Section 42 of the

Patent Law (R.A. 165), an action for infringement not as a patentee but as anentity in possession of a right, title or interest in and to the patented
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invention. It advances the theory that while the absence of a patent mayprevent one from lawfully suing another for infringement of said patent, suchabsence does not bar the first true and actual inventor of the patentedinvention from suing another who was granted a patent in a suit fordeclaratory or injunctive relief recognized under American patent laws. Thisremedy, petitioner points out, may be likened to a civil action forinfringement under Section 42 of the Philippine Patent Law.

We find the above arguments untenable.

Section 42 of R.A. 165, otherwise known as the Patent Law, explicitlyprovides:

SECTION. 42. Civil action for infringement. Any patentee, or anyonepossessing any right, title or interest in and to the patented invention, whoserights have been infringed, may bring a civil action before the proper Court ofFirst Instance (now Regional Trial court), to recover from the infringerdamages sustained by reason of the infringement and to secure an injunctionfor the protection of his right. x x x

Under the aforequoted law, only the patentee or his successors-in-interest may file an action for infringement. The phrase anyone possessingany right, title or interest in and to the patented invention upon whichpetitioner maintains its present suit, refers only to the patentees successors-in-interest, assignees or grantees since actions for infringement of patentmay be brought in the name of the person or persons interested, whether aspatentee, assignees or grantees, of the exclusive right.[12]Moreover, there canbe no infringement of a patent until a patent has been issued, since whateverright one has to the invention covered by the patent arises alone from thegrant of patent.[13]In short, a person or entity who has not been grantedletters patent over an invention and has not acquired any right or titlethereto either as assignee or as licensee, has no cause of action forinfringement because the right to maintain an infringement suit depends onthe existence of the patent.[14]

Petitioner admits it has no patent over its aerial fuze. Therefore, it hasno legal basis or cause of action to institute the petition for injunction anddamages arising from the alleged infringement by private respondent. Whilepetitioner claims to be the first inventor of the aerial fuze, still it has no rightof property over the same upon which it can maintain a suit unless it obtains

a patent therefor. Under American jurisprudence, and inventor has nocommon-law right to a monopoly of his invention. He has the right to make,use and vend his own invention, but if he voluntarily discloses it, such as byoffering it for sale, the world is free to copy and use it with impunity. Apatent, however, gives the inventor the right to exclude all others. As apatentee, he has the exclusive right of making, using or selling theinvention.[15]

Further, the remedy of declaratory judgment or injunctive suit on patentinvalidity relied upon by petitioner cannot be likened to the civil action forinfringement under Section 42 of the Patent Law. The reason for this is thatthe said remedy is available only to the patent holder or his successors-in-interest. Thus, anyone who has no patent over an invention but claims tohave a right or interest thereto can not file an action for declaratory judgmentor injunctive suit which is not recognized in this jurisdiction. Said person,

however, is not left without any remedy. He can, under Section 28 of theaforementioned law, file a petition for cancellation of the patent within three(3) years from the publication of said patent with the Director of Patents andraise as ground therefor that the person to whom the patent was issued isnot the true and actual inventor. Hence, petitioners remedy is not to file anaction for injunction or infringement but to file a petition for cancellation ofprivate respondent patent. Petitioner however failed to do so. As such, it cannot now assail or impugn the validity of the private respondents letterspatent by claiming that it is the true and actual inventor of the aerial fuze.

Thus, as correctly ruled by the respondent Court of Appeals in itsassailed decision: since the petitioner (private respondent herein) is the

patentee of the disputed invention embraced by letters of patent UM No. 6938issued to it on January 23, 1990 by the Bureau of Patents, it has in its favornot only the presumption of validity of its patent, but that of a legal and factualfirst and true inventor of the invention.

In the case of Aguas vs. De Leon,[16]we stated that:

The validity of the patent issued by the Philippine Patent Office in favor ofthe private respondent and the question over the investments, novelty andusefulness of the improved process therein specified and described arematters which are better determined by the Philippines patent Office,composed of experts in their field, have, by the issuance of the patent inquestion, accepted the thinness of the private respondents new tiles as adiscovery. There is a presumption that the Philippine Patent Office has

correctly determined the patentability of the improvement by the privaterespondent of the process in question.

In fine, in the absence of error or abuse of power or lack or jurisdictionor grave abuse of discretion, we sustain the assailed decision of therespondent Court of Appeal.

WHEREFORE, the decision of the Court of Appeals is herebyAFFIRMED. No pronouncement as to costs.

SO ORDERED.

THIRD DIVISION

[G.R. No. 121867. July 24, 1997]

SMITH KLINE & FRENCH LABORATORIES, LTD.,petitioner, vs. COURTOF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND

TECHNOLOGY TRANSFER and DOCTORS PHARMACEUTICALS,INC.respondents.

D E C I S I O N

DAVIDE, JR., J.:
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This is an appeal under Rule 45 of the Rules of Court from thedecision [1]of 4 November 1994 of the Court of Appeals in CA-G.R. SP No.33520, which affirmed the 14 February 1994 decision[2]of the Director of theBureau of Patents, Trademarks and Technology Transfer (BPTTT) granting acompulsory non-exclusive and non-transferable license to private respondentto manufacture, use and sell in the Philippines its own brands ofpharmaceutical products containing petitioners patented pharmaceuticalproduct known asCimetidine.

Petitioner is a foreign corporation with principal office at Welwyn GardenCity, England. It owns Philippine Letters Patent No. 12207 issued by theBPTTT for the patent of the drug Cimetidine.

Private respondent is a domestic corporation engaged in the business ofmanufacturing and distributing pharmaceutical products. On 30 March1987, it filed a petition for compulsory licensing[3]with the BPTTT forauthorization to manufacture its own brand of medicine from thedrugCimetidineand to market the resulting product in the Philippines. Thepetition was filed pursuant to the provisions of Section 34 of Republic Act No.165 (An Act Creating a Patent Office Prescribing Its Powers and Duties,Regulating the Issuance of Patents, and Appropriating Funds Therefor),which provides for the compulsory licensing of a particular patent after theexpiration of two years from the grant of the latter if the patented inventionrelates to, inter alia, medicine or that which is necessary for public health orpublic safety. Private respondent alleged that the grant of Philippine LettersPatent No. 12207 was issued on 29 November 1978; that the petition wasfiled beyond the two-year protective period provided in Section 34 of R.A. No.165; and that it had the capability to work the patented product or make useof it in its manufacture of medicine.

Petitioner opposed, arguing that private respondent had no cause ofaction and lacked the capability to work the patented product; the petitionfailed to specifically divulge how private respondent would use or improve thepatented product; and that private respondent was motivated by thepecuniary gain attendant to the grant of a compulsory license. Petitioneralso maintained that it was capable of satisfying the demand of the localmarket in the manufacture and marketing of the medicines covered by thepatented product. Finally, petitioner challenged the constitutionality ofSections 34 and 35 of R.A. No. 165 for violating the due process and equal

protection clauses of the Constitution.After appropriate proceedings, the BPTTT handed down its decision on

14 February 1994, with the dispositive portion thereof providing:

NOW, THEREFORE, by virtue of the powers vested in this Office byRepublic Act No. 165, as amended by Presidential Decree No. 1263,there is hereby issued a license in favor of the herein [privaterespondent], United Laboratories, Inc., [sic]under Letters Patent No.12207 issued on November 29, 1978, subject to the following termsand conditions:

1. That [private respondent] be hereby granted a non-exclusive and non-transferable license to manufacture, useand sell in the Philippines its own brands ofpharmaceutical products containing [petitioner's] patented

invention which is disclosed and claimed in Letters PatentNo. 12207;

2. That the license granted herein shall be for theremaining life of said Letters Patent No. 12207 unless thislicense is terminated in the manner hereinafter providedand that no right or license is hereby granted to [privaterespondent] under any patent to [petitioner] or [sic]otherthan recited herein;

3. By virtue of this license, [private respondent] shall pay[petitioner] a royalty on all license products containing thepatented substance made and sold by [private respondent]in the amount equivalent to TWO AND ONE HALFPERCENT (2.5%) of the net sales in Philippinecurrency. The term "net scale" [sic]means the grossamount billed for the product pertaining to Letters PatentNo. 12207, less --

(a) Transportation charges or allowances, if any, includedin such amount;

(b) Trade, quantity or cash discounts and broker's oragent's or distributor's commissions, if any, allowed orpaid;

(c) Credits or allowances, if any, given or made on account

of rejection or return of the patented product previouslydelivered; and

(d) Any tax, excise or government charge included in suchamount, or measured by the production sale,transportation, use of delivery of the products.

In case [private respondent's] product containing the patentedsubstance shall contain one or more active ingredients admixedtherewith, said product hereinafter identified as admixed product,the royalty to be paid shall be determined in accordance with thefollowing formula:

Net Sales on Value of

PatentedROYALTY = Admixed

Product x 0.025 x Substance

Value ofPatented Value of Other

SubstanceActive Ingredients

4. The royalties shall be computed after the end of each calendarquarter to all goods containing the patented substance hereininvolved, made and sold during the precedent quarter and to be paidby [private respondent] at its place of business on or before the

thirtieth day of the month following the end of each calendar
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quarter. Payments should be made to [petitioner's] authorizedrepresentative in the Philippines;

5. [Private respondent] shall keep records in sufficient detail toenable [petitioner] to determine the royalties payable and shallfurther permit its books and records to be examined from time totime at [private respondent's] premises during office hours, to theextent necessary to be made at the expense of [petitioner] by acertified public accountant appointed by [petitioner] and acceptableto [private respondent].

6. [Private respondent] shall adopt and use its own trademark orlabels on all its products containing the patented substance hereininvolved;

7. [Private respondent] shall comply with the laws on drugs andmedicine requiring previous clinical tests and approval of propergovernment authorities before selling to the public its own productsmanufactured under the license;

8. [Petitioner] shall have the right to terminate the license granted to[private respondent] by giving the latter thirty (30) days notice inwriting to that effect, in the event that [private respondent]default [sic] in the payment of royalty provided herein or if [privaterespondent] shall default in the performance of other covenants orconditions of this agreement which are to be performed by [privaterespondent]:

(a) [Private respondent] shall have the rightprovided it is not in default to payment orroyalties or other obligations under thisagreement, to terminate the license granted toits, [sic]giving [petitioner] thirty (30) days-noticein writing to that effect;

(b) Any termination of this license as providedfor above shall not in any way operate to deny[petitioner] its rights or remedies, either atlaws [sic]or equity, or relieve [privaterespondent] of the payment of royalties orsatisfaction of other obligations incurred prior tothe effective date of such termination; and

(c) Notice of termination of this license shall befiled with the Bureau of Patents, Trademarksand Technology Transfer.

9. In case of dispute as to the enforcement of the provisions of thislicense, the matter shall be submitted for arbitration before theDirector of Bureau of Patents, Trademarks and Technology Transferor any ranking official of the Bureau of Patents, Trademarks and

Technology Transfer duly delegated by him;

10. This License shall inure to the benefit of each of the partiesherein, to the subsidiaries and assigns of [petitioner] and to the

successors and assigns of [private respondent]; and

11. This license take [sic]effect immediately.[4]

Petitioner then appealed to the Court of Appeals by way of a petition forreview, which was docketed as CA-G.R. SP No. 33520. Petitioner claimedthat the appealed decision was erroneous because:

I

... [IT] VIOLATES INTERNATIONAL LAW AS EMBODIED IN THEPARIS CONVENTION FOR THE PROTECTION OF INDUSTRIALPROPERTY AND MUST ACCORDINGLY BE SET ASIDE ANDMODIFIED.

II... [IT] IS AN INVALID EXERCISE OF POLICE POWER.

III

CONCEDING ARGUENDO THE QUESTIONED DECISIONSVALIDITY, THE BPTTTS PRONOUNCEMENT FIXING THEROYALTY AT 2.5% OF THE NET WHOLESALE PRICE INPHILIPPINE CURRENCY WAS RENDERED WITHOUT ANYFACTUAL BASIS AND AMOUNTS TO EXPROPRIATION OFPRIVATE PROPERTY WITHOUT JUST COMPENSATION WHICHIS VIOLATIVE OF THE CONSTITUTION.

IV

... [IT] SHOULD NOT HAVE PROCEEDED TO DECIDE THECASE BELOW FOR FAILURE OF PRIVATE RESPONDENT TOAFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OFPUBLICATION.[5]

In its decision of 4 November 1994,[6]the Court of Appeals affirmed intotothe challenged decision. We quote its findings and conclusion uponwhich the affirmance is anchored, viz.:

An assiduous scrutiny of the impugned decision of the publicrespondent reveals that the same is supported by substantialevidence. It appears that at the time of the filing of the petition forcompulsory license on March 24, 1987, the subject letters PatentNo. 12207 issued on November 29, 1978 has been in effect for more

than two (2) years. The patented invention relates to compoundand compositions used in inhibiting certain actions of thehistamine, hence, it relates to medicine. Moreover, after hearingand careful consideration of the evidence presented, the Director ofPatents ruled that - there is ample evidence to show that [privaterespondent] possesses such capability, having competentpersonnel, machines and equipment as well as permit tomanufacture different drugs containing patented active ingredientssuch as ethambutol of American Cyanamid and Ampicillin andAmoxicillin of Beecham Groups, Ltd.

As to the claim by the petitioner that it has the capacity to work thepatented product although it was not shown that any pretended

abuse has been committed, thus the reason for grantingcompulsory license is intended not only to give a chance to others
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to supply the public with the quantity of the patented article butespecially to prevent the building up of patent monopolities [sic].[Parke Davis v.Doctors Pharmaceuticals, Inc., 14 SCRA 1053].

We find that the granting of compulsory license is not simplybecause Sec. 34 (1) e, RA 165 allows it in cases where the inventionrelates to food and medicine. The Director of Patents alsoconsidered in determining that the applicant has the capability towork or make use of the patented product in the manufacture of auseful product. In this case, the applicant was able to show thatCimetidine, (subject matter of latters Patent No. 12207) is necessaryfor the manufacture of an anti-ulcer drug/medicine, which is

necessary for the promotion of public health. Hence, the award ofcompulsory license is a valid exercise of police power.

We do not agree to [sic]petitioners contention that the fixing of theroyalty at 2.5% of the net wholesale price amounted toexpropriation of private property without just compensation.

Paragraph 3, Section 35-B, R.A. No. 165, as amended by P.D. No.1267, states:

SEC. 35-B. Terms and Conditions of Compulsory License.

(1). x x x

(2). x x x

(3). A compulsory license shall only be granted subject to the payment ofadequate royalties commensurate with the extent to which the invention isworked. However, royalty payments shall not exceed five percent (5%) of thenet wholesale price (as defined in Section 33-A) of the productsmanufactured under the license.

If the product, substance, or process subject of the compulsory license isinvolved in an industrial project approved by the Board of Investments, theroyalty payable to the patentee or patentees shall not exceed three percent(3%) of the net wholesale price (as defined in Section 34-A) of the patentedcommodity and/or commodity manufactured under the patented process, thesame rate of royalty shall be paid whenever two or more patents are involved,which royalty shall be distributed to the patentees in rates proportional to

the extent of commercial use by the licensee giving preferential values to theholder of the oldest subsisting product patent.

The foregoing provision grants the Director of Patents the use of his sounddiscretion in fixing the percentage for the royalty rate. In the instant case,the Director of Patents exercised his discretion and ruled that a rate of 2.5%of the net wholesale price is fair enough for the parties. In Parke Davis &Co. vs. DPI and Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] it washeld that - liberal treatment in trade relations should be afforded to localindustry for as reasoned out by respondent company, it is so difficult tocompete with the industrial grants [sic] of the drug industry, among thembeing the petitioner herein, that it always is necessary that the local drugcompanies should sell at much lower (than) the prices of said foreign drugentities. Besides, foreign produce licensor can later on ask for an increase

in percentage rate of royalty fixed by the Director of Patents if local sales of

license should increase. Further, in Price vs. UNILAB, the award of royaltyrate of 2.5% was deemed to be just and reasonable, to wit [166 SCRA 133]:

Moreover, what UNILAB has with the compulsory license is the bare right touse the patented chemical compound in the manufacture of a specialproduct, without any technical assistance from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB willonly be used, distributed, and disposed locally. Therefore, the royalty rate of2.5% is just and reasonable.

It appearing that herein petitioner will be paid royalties on the sales of anyproducts [sic]the licensee may manufacture using any or all of the patentedcompounds, the petitioner cannot complain of a deprivation of propertyrights without just compensation [Price v. UNILAB, L-82542, September 19,1988].

We take note of the well-crafted petition submitted by petitioner albeit thelegal milieu and a good number of decided cases militate against the groundsposited by petitioner. In sum, considering the well-entrenched jurisprudencesustaining the position of respondents, We reiterate the rule in Basay MiningCorporation vs. SEC, to the effect that -

The legal presumption is that official duty has been performed. And it isparticularly strong as regards administrative agencies vested with powerssaid to be quasi-judicial in nature, in connection with the enforcement oflaws affecting particular fields of activity, the proper regulation and/orpromotion of which requires a technical or special training, aside from a goodknowledge and grasp of the overall conditions, relevant to said field,obtaining in the nations. The policy and practice underlying ourAdministrative Law is that courts of justice should respect the findings of factof said administrative agencies, unless there is absolutely no evidence insupport thereof or such evidence is clearly, manifestly and patentlyinsubstantial. [G.R. No. 76695, October 3, 1988, Minute Resolution;Beautifont, Inc., et al. v.Court of Appeals,et al., G.R. No. 50141, January 29,1988]

Its motion for reconsideration having been denied in the resolution[7]of31 August 1995, petitioner filed the instant petition for reviewoncertiorariwith the following assignment of errors:

I

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THATTHE BPTTT'S DECISION VIOLATES INTERNATIONAL LAW ASEMBODIED IN (A) THE PARIS CONVENTION FOR THEPROTECTION OF INDUSTRIAL PROPERTY AND (B) THE GATT

TREATY, URUGUAY ROUND, AND MUST ACCORDINGLY BE SETASIDE AND MODIFIED.

II

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THATTHE BPTTT'S DECISION IS AN INVALID EXERCISE OF POLICEPOWER, ABSENT ANY SHOWING BY EVIDENCE OF ANOVERWHELMING PUBLIC NEED FOR A COMPULSORY LICENSE

OVER CIMETIDINE IN FAVOR OF PRIVATE RESPONDENT.
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III

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THATTHE BPTTT'S PRONOUNCEMENT FIXING THE ROYALTY FOR ANINVOLUNTARY LICENSE AT 2.5% OF THE NET WHOLESALEPRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANYFACTUAL BASIS AND AMOUNTS TO EXPROPRIATION OF PRIVATEPROPERTY WITHOUT JUST COMPENSATION AND IS INVIOLATION OF THE CONSTITUTIONAL RIGHT TO DUE PROCESS.

IV

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THE

BPTTT'S ACTION WAS RENDERED NULL AND VOID FOR FAILUREOF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE

JURISDICTIONAL FACT OF PUBLICATION AS REQUIRED BY LAW.

We resolved to give due course to the petition and required the parties tosubmit their respective memoranda, which they did, with that of publicrespondent filed only on 7 February 1997.

After a careful perusal of the pleadings and evaluation of the argumentsadduced by the parties, we find this petition to be without merit.

In its first assigned error, petitioner invokes Article 5 of the ParisConvention for the Protection of Industrial Property,[8]or Paris Convention,for short, of which the Philippines became a party thereto only in

1965.[9]

Pertinent portions of said Article 5, Section A, provide:A. x x x

(2) Each country of the union shall have theright to take legislative measures providingfor the grant of compulsory licenses toprevent the abuses which might resultfrom the exercise of the exclusive rightsconferred by the patent, for example,failure to work.

x x x

(4) A compulsory license may not be applied

for on the ground of failure to work orinsufficient working before the expiration ofa period of four years from the date of filingof the patent application or three yearsfrom the date of the grant of the patent,whichever period expires last; it shall berefused if the patentee justifies his inactionby legitimate reasons. Such a compulsorylicense shall be non-exclusive and shall notbe transferable, even in the form of thegrant of a sub-license, except with thatpart of the enterprise or goodwill whichexploits such license.

It is thus clear that Section A(2) of Article 5 above unequivocally andexplicitly respects the right of member countries to adopt legislative

measures to provide for the grant of compulsory licenses to prevent abuseswhich might result from the exercise of the exclusive rights conferred by thepatent. An example provided of possible abuses is "failure to work;" however,as such is merely supplied by way of an example, it is plain that the treatydoes not preclude the inclusion of other forms or categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to thePhilippines adhesion to the Convention, fits well within the aforequotedprovisions of Article 5 of the Paris Convention. In the explanatory note of BillNo. 1156 which eventually became R.A. No. 165, the legislative intent in thegrant of a compulsory license was not only to afford others an opportunity toprovide the public with the quantity of the patented product, but also to

prevent the growth of monopolies.[10]Certainly, the growth of monopolies wasamong the abuses which Section A, Article 5 of the Convention foresaw, andwhich our Congress likewise wished to prevent in enacting R.A. No. 165.

R.A. No. 165, as amended by Presidential Decree No. 1263, promulgatedon 14 December 1977, provides for a system of compulsory licensing under aparticular patent. Sections 34 and 35, Article Two, of Chapter VIII read asfollows:

SEC. 34. Grounds for Compulsory Licensing. -- (1) Any person mayapply to the Director for the grant of a license under a particularpatent at any time after the expiration of two years from the date ofthe grant of the patent, under any of the following circumstances:

(a) If the patented invention is not being workedwithin the Philippines on a commercial scale, althoughcapable of being so worked, without satisfactory reason;

(b) If the demand for the patented article in thePhilippines is not being met to an adequate extent and onreasonable terms;

(c) If, by reason of refusal of the patentee to grant alicense or licenses on reasonable terms, or by reason ofthe conditions attached by the patentee to licensee or tothe purchase, lease or use of the patented article orworking of the patented process or machine forproduction, the establishment of any new trade orindustry in the Philippines is prevented, or the trade orindustry therein is unduly restrained;

(d) If the working of the invention within thecountry is being prevented or hindered by the importationof the patented article; or

(e) If the patented invention or article relates to foodor medicine or manufactured products or substances whichcan be used as food or medicine, or is necessary for publichealth or public safety.

(2) In any of the above cases, a compulsory license shall begranted to the petitioner provided that he has proved his capabilityto work the patented product or to make use of the patented

product in the manufacture of a useful product, or to employ thepatented process.
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(3) The term "worked" or "working" as used in this section meansthe manufacture and sale of the patented article, of the patentedmachine, or the application of the patented process for production,in or by means of a definite and substantial establishment ororganization in the Philippines and on a scale which is reasonableand adequate under the circumstances. Importation shall notconstitute "working."

x x x

SEC. 35. Grant of License. -- (1) If the Director finds that a case forthe grant is a license under Section 34 hereof has been made out,he shall, within one hundred eighty days from the date the petitionwas filed, order the grant of an appropriate license. The order shallstate the terms and conditions of the license which he himself mustfix in default of an agreement on the matter manifested orsubmitted by the parties during the hearing.

(2) A compulsory license sought under Section 34-B shall beissued within one hundred twenty days from the filing of theproponent's application or receipt of the Board of Investment'sendorsement.

The case at bar refers more particularly to subparagraph (e) ofparagraph 1 of Section 34 -- the patented invention or article relates to foodor medicine or manufactured products or substances which can be used asfood or medicine, or is necessary for public health or public safety. And itmay not be doubted that the aforequoted provisions of R.A. No. 165, asamended, are not in derogation of, but are consistent with, the recognizedright of treaty signatories under Article 5, Section A(2) of the ParisConvention.

Parenthetically, it must be noted that paragraph (4) of Section A, Article5 of the Paris Convention setting time limitations in the application for acompulsory license refers only to an instance where the ground therefor is"failure to work or insufficient working," and not to any ground orcircumstance as the treaty signatories may reasonably determine.

Neither may petitioner validly invoke what it designates as the GATTTreaty, Uruguay Round. This act is better known as the Uruguay Final Actsigned for the Philippines on 15 April 1994 by Trade and Industry SecretaryRizalino Navarro.[11]Forming integral parts thereof are the AgreementEstablishing the World Trade Organization, the Ministerial Declarations andDecisions, and the Understanding on Commitments in FinancialServices.[12]The Agreement establishing the World Trade Organizationincludes various agreements and associated legal instruments. It was onlyon 14 December 1994 that the Philippine Senate, in the exercise of its powerunder Section 21 of Article VII of the Constitution, adopted Senate ResolutionNo. 97 concurring in the ratification by the President of the Agreement. ThePresident signed the instrument of ratification on 16 December 1994.[13]Butplainly, this treaty has no retroactive effect. Accordingly, since thechallenged BPTTT decision was rendered on 14 February 1994, petitionercannot avail of the provisions of the GATT treaty.

The second and third assigned errors relate more to the factual findingsof the Court of Appeals. Well-established is the principle that the findings of

facts of the latter are conclusive, unless: (1) the conclusion is a findinggrounded entirely on speculation or conjecture; (2) the inference made ismanifestly absurd; (3) there is grave abuse of discretion in the appreciation offacts; (4) the judgment is premised on a misapprehension of facts; (5) thefindings of fact are conflicting; and (6) the Court of Appeals, in making itsfindings, went beyond the issues of the case and the same is contrary to theadmissions of both the appellant and appellee.[14]Petitioner has notconvinced us that the instant case falls under any of the exceptions. On thecontrary, we find the findings of fact and conclusions of respondent Court ofAppeals and that of the BPTTT to be fully supported by the evidence and theapplicable law and jurisprudence on the matter.

Petitioners claim of violations of the due process and eminent domainclauses of the Bill of Rights are mere conclusions which it failed toconvincingly support. As to due the process argument, suffice it to say thatfull-blown adversarial proceedings were conducted before the BPTTTpursuant to the Patent Law. We agree with the Court of Appeals that theBPTTT exhaustively studied the facts and its findings were fully supported bysubstantial evidence.

It cannot likewise be claimed that petitioner was unduly deprived of itsproperty rights, as R.A. No. 165 not only grants the patent holder a protectiveperiod of two years to enjoy his exclusive rights thereto; but subsequently,the law recognizes just compensation in the form of royalties.[15]

In Parke, Davies & Co. v. Doctors' Pharmaceuticals, Inc.,[16]we held:

The right to exclude others from the manufacturing, using, orvending an invention relating to, food or medicine should beconditioned to allowing any person to manufacture, use, or vendthe same after a period of three [now two] years from the date of thegrant of the letters patent. After all, the patentee is not entirelydeprived of any proprietary right. In fact, he has been given theperiod of three years [now two years] of complete monopoly over thepatent. Compulsory licensing of a patent on food or medicinewithout regard to the other conditions imposed in Section 34 [nowSection 35] is not an undue deprivation of proprietary interests overa patent right because the law sees to it that even after three yearsof complete monopoly something is awarded to the inventor in theform of bilateral and workable licensing agreement and a

reasonable royalty to be agreed upon by the parties and in defaultof such an agreement, the Director of Patents may fix the terms andconditions of the license.

As to the fourth assigned error, we hold that petitioner can no longerassail the jurisdiction of the BPTTT, raising this issue only for the first timeon appeal. In Pantranco North Express, Inc. v. Court of Appeals,[17]we ruledthat where the issue of jurisdiction is raised for the first time on appeal, theparty invoking it is so barred on the ground of laches or estoppel under thecircumstances therein stated. It is now settled that this rule applies withequal force to quasi-judicial bodies[18]such as the BPTTT. Here, petitionerhave not furnished any cogent reason to depart from this rule.
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WHEREFORE, the petition is hereby DENIED and the challengeddecision of the Court of Appeals in CA-G.R. SP No. 33520 is AFFIRMED intoto.

Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 82542 September 29, 1988

BARRY JOHN PRICE, JOHN WATSON CLITHERON and JOHNBRADSHAW, Assignors to ALLEN & HANBURYS, LTD., petitioners,

vs.UNITED LABORATORIES, respondent.

Castillo, Laman, Tan & Pantaleon Law Offices for petitioners.

Teodoro B. Pison for respondent.

GRIO-AQUINO, J.:

The petitioners are the owners-assignees of Philippine Patent No. 13540which was granted to them on June 26,1980 for a pharmaceutical compoundknown as "aminoalkyl furan derivatives." On October 1, 1982, respondentUnited Laboratories, Inc. (or UNILAB) filed in the Philippine Patent Office apetition Inter Partes Case No. 1683, "United Laboratories, Inc. versus Barry

John Price, John Watson CLITHERON and John Bradshaw, assignors toAllen & Hanburys Ltd.') for the issuance of a compulsory license to use thepatented compound in its own brands of medicines and pharmaceuticals andto sell, distribute, or otherwise dispose of such medicines or pharmaceuticalpreparations in the country. The petition further alleged that the patentrelates to medicine and that petitioner, which has had long experience in thebusiness of manufacturing and selling pharmaceutical products, possessesthe capability to use the subject compound in the manufacture of a usefulproduct or of making dosage formulations containing the said compound.

After the hearing, the Philippine Patent Office rendered a decision on June 2,1986, granting UNILAB a compulsory license subject to ten (1 0) terms andconditions No. 3 of which provides as follows:

3. By virtue of this license, petitioner shall pay therespondent a royalty on all license products containing thepatented substance made and sold by the Petitioner in theamount equivalent to TWO AND ONE HALF (2.5) PER CENTOF THE NET SALES in Philippine currency. The terms 'netsales' means the gross billed for the product pertaining toLetters Patent No. 13540 less-

a) Transportation charges or allowances, ifany, included in such amount;

b) Trade, quantity or cash discounts andbroker's or agent's or distributor'scommissions, if any, allowed or paid;

c) Credits or allowances, if any, given ormade on account with reflection or return ofthe product previously delivered; and

d) Any tax, excise or government chargeincluded in such amount, or measured by

the production, sale, transportation, use ordelivery of the products.

In case Petitioner's product containing the patentedsubstance shall contain one or more active ingredients asadmixed product, the royalty to be paid shall be determinedin accordance with the following formula:

Net Sales on Value ofAdmixed Product Patented Substance

Royalty = _______________ x 0.025 x ___________________

(Value of Pa Value oftended Substance) Active Ingredients

4. The royalties shall be computed after the end of eachcalendar quarter for all goods containing the patentedsubstance herein involved, made and sold during thepreceding quarter and to be paid by the Petitioner at itsplace of business on or before the thirtieth day of the monthfollowing the end of each calendar quarter. Payments shouldbe made to Respondent's authorized representative in thePhilippines; (pp. 35-36, Rollo.)

The patentees appealed the decision to the Court of Appeals (CA-G.R. No. SP-09308) which dismissed the appeal on December 4, 1 987. They have cometo his Court praying for a review of the Appellate Court's decision on thegrounds that it erred:

1. in upholding the Director's unilateral determination of theterms and conditions of the compulsory license, withoutaffording the parties an opportunity to negotiate the termsand conditions freely and by themselves;

2. in finding that the respondent possess the legally requiredcapability to make use of the petitioner's patented compoundin the manufacture of a useful product;

3. in affirming the Director's award of the entire patent to therespondent, when only one claim of the patent wascontroverted and


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4. in considering evidence that UNILABs capability to use thecompound was acquired after, not before, filing its petitionfor compulsory licensing.

The first assignment of error has no merit. The terms and conditions of thecompulsory license were fixed by the Director of Patents after a hearing andcareful consideration of the evidence of the parties and in default of anagreement between them as to the terms of the license. This he is authorizedto do under Section 36 of Republic Act No. 165 which provides:

Sec. 36. GRANT OF LICENSE.If the Director finds that acase for the grant of license under Section 34, hereof madeout, he may order the grant of an appropriate license and indefault of agreement among the parties as to the terms andconditions of the license he shall fix the terms andconditions of the license in the order.

The order of the Director granting a license under thisChapter, when final, shall operate as a deed granting a-license executed by the patentee and the other patties ininterest.

and under Section 35 of P.D. 1263, amending portions of Republic ActNo.165 which reads:

Sec. 35. GRANT OF LICENSE.(1)If the Director finds that acase for the grant of a license under Sec. 34 hereof has been

made out, he shall within one hundred eighty (180) daysfrom the date the petition was filed, order the grant of anappropriate license. The order shall state the terms andconditions of the license which he himself must fix in defaultof an agreement on the matter manifested or submitted bythe parties during the hearing.

The Court of Appeals found that the 2.5% royalty fixed by the Director ofPatents 'is just and reasonable.' We quote its observations hereunder:

Respondent-appellant contends further that the 2.5% royaltyrate is unfair to respondent-appellant as to amount to anundue deprivation of its property right. We do not hold thisview. The royalty rate of 2.5% provided for by the Director of

Patents is reasonable. Paragraph 3, Section 35-B, RepublicAct No. 165, as amended by Presidential Decree No. 1263,provides:

(3) A compulsory license shall only begranted subject to the payment of adequateroyalties commensurate with the extent towhich the invention is worked. However,royalty payments shall not exceed five percent (5%) of the net wholesale price (asdefined in Section 33-A) of the productsmanufactured under the license. If theproduct, substance, or process subject ofthe compulsory license is involved in anindustrial project approved by the Board of

Investments, the royalty payable to thepatentee or patentees shall not exceed threeper cent (3%) of the net wholesale price (asdefined in Section 34-A) of the patentedcommodity and/or commoditymanufactured under the patented process;the same rule of royalty shall be paidwhenever two or more patents are involved,which royalty shall be distributed to thepatentees in rates proportional to the extentof commercial use by the licensee givingpreferential values to the holder of the oldest

subsisting product patent.

Thus, said provision grants to the Director of Patents the useof his sound discretion in fixing the percentage for theroyalty rate and We find that the Director of Patentscommitted no abuse of this discretion. Also, there is always apresumption of regularity in the performance of one's officialduties.

Moreover, what UNILAB has with the compulsory license isthe bare right to use the patented chemical compound in themanufacture of a special product, without any technicalassistance from herein respondent-appellant. Besides, thespecial product to be manufactured by UNILAB will only be

used, distributed, and disposed locally. Therefore, the royaltyrate of 2.5% is just and reasonable. (pp. 10-11, CA Decision,pp. 44-45, Rollo)

Furthermore, as pointed out in the respondent's comment on the petition,Identical terms and conditions had been prescribed for the grant ofcompulsory license in a good number of patent cases (United Laboratories,Inc. vs. Boehringer Ingelhelm, GMBH, IPC 929, July 27, 1981; UnitedLaboratories, Inc. vs. Bristol-Myers Company, IPC 1179, Aug. 20, 1981;United Laboratories, Inc. vs. E.R. Squibb & Sons, Inc., IPC 1349, Sept. 30,1981; United Laboratories, Inc. vs. Helmut Weber, et al., IPC 949, Dec.13,1982; Oceanic Pharmacal Inc. vs. Gruppo Lepetit S.A. IPC 1549, Dec. 21,1982; United Laboratories. Inc. vs. Boehringer Ingelheim, IPC 1185, June 8,

1983; United Laboratories, Inc. vs. Pfizer Corp., IPC 1184, June 10,, 1983;Doctors Pharmaceuticals, Inc. vs. Maggi, et al., July 11, 1983; Drugmaker'sLaboratories v. Herningen et al., IPC 1679, September 22,1983; SuperiorPharmacraft Inc. vs. Maggi, et al., IPC 1759, January 10, 1984; UnitedLaboratories, Inc. vs. Van Gelder et al., IPC 1627, June 29, 1984;Drugmaker's Laboratories, Inc. vs. Janssen Pharmaceutical N.V. IPC 1555,August 27,1984; United Laboratories Inc. vs. Graham John Durant et al.,IPC 1731, August 14, 1987; United Laboratories, Inc. vs. Albert AnthonyCarr, IPC 1906, August 31, 1987).

The Director's finding that UNILAB has the capability to use the patentedcompound in the manufacture of an anti-ulcer pharmaceutical preparation isa factual finding which is supported by substantial evidence, hence, theCourt of Appeals did not commit a reversible error in affirming it (Philippine

Nut Industry, Inc. vs. Standard Brands, Inc., 65 SCRA 575; Sy Ching vs.Gaw Liu 44 SCRA 143; De Gala Sison vs. Manalo, 8 SCRA 595; Goduco vs.


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Court of Appeals, 14 SCRA 282; Ramos vs. Pepsi-Cola Bottling Company ofthe P.I., 19 SCRA 289. Of indubitable relevance to this point is the evidencethat UNILAB has been engaged in the business of manufacturing drugs andpharmaceutical products for the past thirty (30) years, that it is the leadingdrug manufacturer in the country, that it has the necessary equipment andtechnological expertise for the development of solid dosage forms or fortablet, capsule, and liquid preparations, and that it maintains standards andprocedures to ensure the quality of its products. Even if it were true, asalleged by the patentee (although it is denied by UNILAB), that its capabilityto use the patented compound was only acquired after the petition forcompulsory licensing had been filed, the important thing is that suchcapability was proven to exist during the hearing of the petition.

The patented invention in this case relates to medicine and is necessary forpublic health as it can be used as component in the manufacture of anti-ulcer medicine. The Director of Patents did not err in granting a compulsorylicense over the entire patented invention for there is no law requiring thatthe license be limited to a specific embodiment of the invention, or, to aparticular claim. The invention in this case relates to new aminoalkylderivatives which have histamine H 2blocking activity, having the generalformula (I) and physiologically acceptable salts, Noxides and dehydratesthereof. The compound ranitidine hydrochloride named in Claim 45 is alsocovered by General Claim I and several other sub-generic claims. Therefore, alicense for Claim 45 alone would not be fully comprehensive. In any event,since the petitioner will be paid royalties on the sales of any products the

licensee may manufacture using any or all of the patented compounds, thepetitioner cannot complain of a deprivation of property rights without justcompensation.

WHEREFORE, the petition for review is denied for lack of merit.

SO ORDERED.

[G. R. No. 126627. August 14, 2003]

SMITH KLINE BECKMAN CORPORATION,petitioner, vs.THEHONORABLE COURT OF APPEALS and TRYCO PHARMACORPORATION, respondents.

D E C I S I O NCARPIO-MORALES, J.:

Smith Kline Beckman Corporation (petitioner), a corporation existing byvirtue of the laws of the state of Pennsylvania, United States of America (U.S.)and licensed to do business in the Philippines, filed on October 8, 1976, asassignee, before the Philippine Patent Office (now Bureau of Patents,

Trademarks and Technology Transfer) an application for patent over aninvention entitled Methods and Compositions for Producing BiphasicParasiticide Activity Using Methyl 5 Propylthio-2-BenzimidazoleCarbamate. The application bore Serial No. 18989.

On September 24, 1981, Letters Patent No. 14561[1]for the aforesaidinvention was issued to petitioner for a term of seventeen (17) years.

The letters patent provides in its claims[2]that the patented inventionconsisted of a new compound named methyl 5 propylthio-2-benzimidazolecarbamate and the methods or compositions utilizing the compound as anactive ingredient in fighting infections caused by gastrointestinal parasitesand lungworms in animals such as swine, sheep, cattle, goats, horses, andeven pet animals.

Tryco Pharma Corporation (private respondent) is a domesticcorporation that manufactures, distributes and sells veterinary productsincluding Impregon, a drug that has Albendazole for its active ingredient andis claimed to be effective against gastro-intestinal roundworms, lungworms,tapeworms and fluke infestation in carabaos, cattle and goats.

Petitioner sued private respondent for infringement of patent and unfaircompetition before the Caloocan City Regional Trial Court (RTC).[3]It claimedthat its patent covers or includes the substance Albendazole such thatprivate respondent, by manufacturing, selling, using, and causing to be soldand used the drug Impregon without its authorization, infringed Claims 2, 3,4, 7, 8 and 9 of Letters Patent No. 14561 [4]as well as committed unfaircompetition under Article 189, paragraph 1 of the Revised Penal Code andSection 29 of Republic Act No. 166 (The Trademark Law) for advertising andselling as its own the drug Impregon although the same containedpetitioners patented Albendazole.[5]

On motion of petitioner, Branch 125 of the Caloocan RTC issued atemporary restraining order against private respondent enjoining it from

committing acts of patent infringement and unfair competition.[6]A writ ofpreliminary injunction was subsequently issued.[7]

Private respondent in its Answer[8]averred that Letters Patent No. 14561does not cover the substance Albendazole for nowhere in it does that wordappear; that even if the patent were to include Albendazole, such substanceis unpatentable; that the Bureau of Food and Drugs allowed it tomanufacture and market Impregon with Albendazole as its known ingredient;that there is no proof that it passed off in any way its veterinary products asthose of petitioner; that Letters Patent No. 14561 is null and void, theapplication for the issuance thereof having been filed beyond the one yearperiod from the filing of an application abroad for the same invention coveredthereby, in violation of Section 15 of Republic Act No. 165 (The Patent Law);and that petitioner is not the registered patent holder.

Private respondent lodged a Counterclaim against petitioner for suchamount of actual damages as may be proven; P1,000,000.00 in moraldamages; P300,000.00 in exemplary damages; and P150,000.00 inattorneys fees.

Finding for private respondent, the trial court rendered a Decision datedJuly 23, 1991,[9]the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, plaintiffs complaint should be, as itis hereby, DISMISSED. The Writ of injunction issued in connection with thecase is hereby ordered DISSOLVED.

The Letters Patent No. 14561 issued by the then Philippine Patents Office ishereby declared null and void for being in violation of Sections 7, 9 and 15 ofthe Patents Law.
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