Unfair competition

If a motion to quash the search and seizure warrants is denied, can the court nevertheless order the return of the items seized? This is the question resolved in this case of a foreign corporation engaged in the business of manufacturing shoes, clothing and other goods (CI) against Sammy, a local businessman.

Upon request of CI, the Regional Intelligence Investigation Division-National Capital Region Police Office filed applications for search warrants against Sammy for unfair competition under Section 168.3 (a) in relation to Sections 131.3, 123 (e) and 170 of Republic Act 8293 otherwise known as the Intellectual Property Code. CI claimed that Sammy employed device to deceive the public into believing that the goods sold by him are those manufactured by CI by imitation of its trademarks namely "CAT", "Caterpillar" Caterpillar and Design", "Walking Machines" and/or Track-Type Tractor and Design" and by depiction of heavy machinery and equipment which it uses to market its products, as well as statements "Licensed Merchandise Caterpillar Inc." and "We Shape the Things We Build, Thereafter, They Shape Us" found on the articles themselves or on their packaging.

On the same day, the Regional Trial Court (RTC) issued five search warrants against Sammy and his business establishments namely: Itti Shoes Corporation, Kolm’s Manufacturing and Caterpillar Boutique and General Merchandise. Pursuant to the said search warrants, various garments, footwear, bags, wallets, deodorant sprays, shoe cleaners and accessories all bearing those trademarks were seized from Sammy on August 27, 2002.

On October 21, 2002, Sammy filed a Consolidated Motion to Quash the Search Warrants. Sammy did not dispute the use of such trademarks and admitted that he owned the articles seized. But he raised the defense that he is the registered owner of said trademarks and has prior use thereof in his products. CI on the other hand only markets its products in Duty Free Shops and has not established any goodwill in the Philippines, according to Sammy. Pending resolution of said motion complaints were filed against Sammy and his affiliate entities before the DOJ.

On May 16, 2003, the RTC issued an order denying Sammy’s Motion to Quash the Search Warrants but nevertheless directed the release of the articles seized on the ground that no criminal action had yet been filed in Court against Sammy.

CI questioned this order of the RTC. It asserted that the seized articles can only be returned when a criminal case can no longer possibly materialize since said articles are crucial to the eventual prosecution of Sammy. Was CI correct?

No. CI’s assertion is incongruent with the peculiar circumstance of this case. The articles seized – thousands of clothing, footwear and accessories among others – had little or no evidentiary value for criminal action for unfair competition which CI was expected to file. An action for unfair competition is based on the proposition that no dealer in merchandise should be allowed to dress his goods in simulation of the goods of another dealer, so that purchasers desiring to buy the goods of the latter would be induced to buy the goods of the former by simulation of labels and reproduction of form, color, and general appearance of the package used by the pioneer manufacturer or dealer.

In this case, no criminal action has been prosecuted for almost a year. Thus the court had been left with the custody of highly depreciable merchandise. More importantly, these highly depreciable articles would have been superfluous if presented as evidence for the following reasons: (1) Sammy had already admitted that he is the owner of the merchandise seized which made use of the trademarks in dispute; (2) the court required Sammy to execute an undertaking to produce the articles seized when so required; (3) the court had already in its possession a complete inventory of the items seized as secondary evidence; and (4) actual samples of Sammy’s merchandise which he does not dispute as having been obtained from his stores are in the possession of the police officers who had applied for the search warrants with photographs thereof already being part of the records. When the purpose of presenting as evidence the articles seized is no longer served, there is no more justification for severely curtailing the rights of a person to his property. The value of the privacy of home and person and to afford its constitutional protection against the long reach of the government is no less than the value of human dignity. This privacy must not be disturbed except in the overriding social need and then only under stringent procedural rules (Caterpillar Inc. vs. Samson, G.R. 164605, October 27, 2006)

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E-mail at: [email protected] or jose@sison ph.com