FACTS:

Air Philippines Corporation (petitioner) and Pennswell, Inc. (respondent) are parties in this case. The respondent sold various goods to the petitioner, creating an outstanding obligation. The petitioner, however, refused to pay, claiming that it was defrauded in a previous sale. The petitioner alleged that the respondent misrepresented certain items as belonging to a new line when they were actually identical to products the petitioner had previously purchased. The petitioner argued that it would not have bought these items had it been aware of their true nature. The parties allegedly reached an agreement for the respondent to return the amount paid by the petitioner, but the respondent later demanded payment, leading to the filing of a complaint by the respondent. In the trial court, the petitioner requested a detailed list of ingredients and chemical components of certain products from the respondent, which the trial court initially granted but later reversed, deeming the requested information as trade secrets exempted from compulsory disclosure.

Air Philippines Corporation filed a Petition for Certiorari with the Court of Appeals after the Regional Trial Court denied its motion to compel the respondent, Pennswell Corporation, to disclose the detailed list of ingredients of its lubricant products. The Court of Appeals ruled in favor of the respondent, stating that the ingredients constituted trade secrets protected by law. The Court of Appeals cited previous Supreme Court decisions emphasizing the exemption of trade secrets from public scrutiny. The petitioner's Motion for Reconsideration was denied, leading to the present petition before the Supreme Court. The sole issue being considered is whether the Court of Appeals ruled correctly in upholding that the chemical components of respondent's products are trade secrets not subject to compulsory disclosure.

In the case of Cocoland Development Corporation v. National Labor Relations Commission, the issue was the legality of an employee's termination due to the unauthorized disclosure of trade secrets. The Court emphasized that any determination made by management regarding the confidential nature of trade secrets must be supported by substantial factual basis. The Court rejected the argument that an employer's determination should be conclusive without judicial scrutiny. The Court warned against giving employers the power to label anything as a trade secret to dismiss employees on the pretext of disclosing trade secrets, regardless of whether such secrets actually exist.

ISSUES:

1. Whether the chemical composition, formulation, and ingredients of the respondent's special lubricants are considered trade secrets.

2. Whether the court can order the production and inspection of the trade secrets upon a showing of good cause.

3. Whether the detailed chemical composition of the respondent's products is a trade secret and thus privileged against disclosure.

4. Whether the petitioner has the right to access and inspect the documents containing the detailed chemical composition of the respondent's products.

5. Whether or not respondent is required to disclose the chemical components of its products under the Consumer Act of the Philippines.

6. Whether or not respondent is required to disclose the active ingredients of its products under the Special Law on Counterfeit Drugs.

7. Whether or not the trade secrets of respondent are protected from disclosure under the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990.

8. Whether the petitioner should be granted access to the respondent's trade secrets in order to pursue a collection of a sum of money.

RULING:

1. The chemical composition, formulation, and ingredients of the respondent's special lubricants are considered trade secrets. The Court recognized that the manufacture and production of the respondent's products are based on a secret list of ingredients that constitute the backbone of its business. Compelling the disclosure of these trade secrets would cripple the respondent's business and put it at an undue disadvantage. The value of the information to the respondent and its competitors is also acknowledged, and the intent to keep the information confidential is evident.

2. The court can order the production and inspection of documents or things, including trade secrets, upon a showing of good cause. Section 1, Rule 27 of the Rules of Court allows parties to inspect documents or things upon a showing of good cause before the court in which an action is pending. The court may order the production and inspection of designated documents, papers, books, accounts, letters, photographs, objects, or tangible things that are not privileged, constitute or contain evidence material to any matter involved in the action, and are in the party's possession, custody, or control.

3. The Supreme Court ruled against the petitioner and affirmed the ruling of the Court of Appeals, which upheld the finding of the Regional Trial Court (RTC) that there is a substantial basis for the respondent to seek protection of the law for its proprietary rights over the detailed chemical composition of its products. The Supreme Court recognized that trade secrets are of a privileged nature and that the protection of trade secrets is evident in Philippine laws.

4. No, the Consumer Act of the Philippines does not apply to respondent's specialized lubricants as they are not consumer products.

5. No, the Special Law on Counterfeit Drugs does not apply to respondent's products as they are not drugs.

6. The trade secrets of respondent are protected from disclosure under the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990.

7. The petition is denied. The Court affirms the decision of the Court of Appeals, which ruled that the petitioner is not entitled to access the respondent's trade secrets. No costs are awarded.

PRINCIPLES:

• Trade secrets are protected by law and may include confidential information such as chemical compositions, formulations, and ingredients that have commercial value to an entity.

• The determination of trade secrets must have a substantial factual basis that can withstand judicial scrutiny, and management's determination of what constitutes a trade secret is subject to judicial review.

• In determining whether information is a trade secret, factors such as the extent of the information's knowledge outside of the business, measures taken by the employer to guard its secrecy, the value of the information to the employer and competitors, and the difficulty of obtaining the information from an independent source may be considered.

• Parties can request the production and inspection of documents or things, including trade secrets, upon a showing of good cause before the court in which an action is pending, as provided under Section 1, Rule 27 of the Rules of Court. The documents or things must not be privileged and should be material to the matter involved in the action and within the possession, custody, or control of the party.

• Trade secrets are privileged and protected by law.

• The Interim Rules of Procedure on Government Rehabilitation, as well as the Securities Regulation Code, provides for the protection of trade secrets or other confidential information belonging to a debtor.

• The Revised Penal Code penalizes the revelation of secrets or industrial secrets to the prejudice of the owner.

• The National Internal Revenue Code restricts the revelation of trade secrets by internal revenue officers or employees.

• The Toxic Substances and Hazardous and Nuclear Wastes Control Act limits access to records or information concerning chemical substances and mixtures if it would divulge trade secrets or affect the competitive position of the manufacturer, processor, or distributor.

• Intellectual and industrial property rights cases are not simple property cases, as they are intimately connected with economic development and encourage investments in new ideas and inventions.

• Trade secrets and banking transactions are recognized restrictions to the right of the people to information as embodied in the Constitution.

• The protection of industrial secrets fosters healthy competition in trade and is linked to the advancement of the economy.

• The private character of trade secrets is acknowledged in jurisprudence.

• Employers have the right to protect their trade secrets and confidential information from competitors.

• Factual findings of the trial court, when affirmed by the Court of Appeals, are binding and conclusive on the Supreme Court.

• The privilege of non-disclosure of trade secrets is not absolute but may be compelled if indispensable for doing justice.

• The right to confidentiality of trade secrets is recognized by the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990.

• In cases involving the collection of a sum of money, defenses under the laws of contracts and sales are available to the defendant.

• When weighing conflicting interests between parties, the greater interest of justice should prevail.

• Trade secrets are entitled to greater protection from discovery, as they derive value from being unknown and not readily ascertainable by the public.