View full case

WILLAWARE PRODUCTS CORPORATION v. JESICHRIS MANUFACTURING CORPORATION

FACTS:

The respondent, Jesichris Manufacturing Company, filed a complaint for damages for unfair competition against the petitioner, Willaware Products Corporation. The respondent alleged that it is engaged in the manufacture and distribution of plastic-made automotive parts, while the petitioner is engaged in the manufacture and distribution of kitchenware items. The respondent claimed that the petitioner had developed familiarity with their products due to the physical proximity of their offices and the fact that some of the respondent's employees had transferred to the petitioner. The respondent discovered that the petitioner was manufacturing and distributing the same automotive parts with exactly similar design, material, and colors, but at a lower price. The respondent alleged that the petitioner had copied their products, which constituted unfair competition and caused damage to the respondent in terms of lost and unrealized profits. The petitioner, in its answer, denied the allegations and claimed that there can be no unfair competition as the plastic-made automotive parts are mere reproductions of original parts. After trial, the RTC ruled in favor of the respondent and awarded damages, attorney's fees, and a permanent injunction against the petitioner. The CA affirmed the decision of the RTC with modifications, deleting the award of actual damages and awarding nominal damages instead. The petitioner filed a motion for reconsideration, which was denied by the CA. Hence, the present Petition for Review.

ISSUES:

  1. Whether or not there is unfair competition under human relations when the parties are not competitors and there is actually no damage on the part of Jesichris?

  2. Consequently, if there is no unfair competition, should there be moral damages and attorney's fees?

  3. Whether or not the addition of nominal damages is proper although no rights have been established?

  4. If ever the right of Jesichris refers to its copyright on automotive parts, should it be considered in the light of the said copyrights were considered to be void by no less than this Honorable Court in SC GR No. 161295?

  5. If the right involved is "goodwill" then the issue is: whether or not Jesichris has established "goodwill?"

  6. Whether the petitioner engaged in unfair competition by shifting its business and trying to discover the trade secrets of the respondent.

  7. Whether the petitioner acted in bad faith in competing with the business of the respondent.

RULING:

  1. The court held that the petition is bereft of merit. The existence of patent registration is immaterial in this case as it falls under Article 28 of the Civil Code on human relations, which covers a broader concept of "unfair competition." The law prohibits unfair competition, which involves acts that are contrary to good conscience or otherwise unlawful, such as force, intimidation, deceit, machination, or any other unjust, oppressive or high-handed method. Both characteristics of unfair competition were present in this case: (1) both parties were competitors in the manufacture of plastic-made automotive parts, and (2) the acts of the petitioner were contrary to good conscience, as it admitted to employing respondent's former employees, deliberately copying respondent's products, and selling these products to respondent's customers. Therefore, the court affirmed that petitioner committed acts amounting to unfair competition under Article 28 of the Civil Code.

  2. The Supreme Court affirmed the decision of the Court of Appeals and held that the petitioner is guilty of unfair competition under Article 28 of the Civil Code. The Court found that the petitioner engaged in unfair competition by suddenly shifting its business from manufacturing kitchenware to plastic-made automotive parts and by luring employees of the respondent to transfer to its employ. The Court also found that the petitioner acted in bad faith in competing with the business of the respondent. However, the Court modified the award of damages and attorney's fees.

PRINCIPLES:

  • Unfair competition under Article 28 of the Civil Code prohibits acts that are contrary to good conscience or otherwise unlawful, which may deprive others of a fair chance to engage in business or to earn a living.

  • Unfair competition involves an injury to a competitor or trade rival and acts characterized as "contrary to good conscience" or "shocking to judicial sensibilities" or otherwise unlawful.

  • The essence of unfair competition is a private wrong perpetrated by unconscionable means. The public injury or interest is a minor factor.

  • Unfair competition can include acts such as the discovery of trade secrets, bribery of employees, misrepresentation, interference with a competitor's contracts, or any malicious interference with the competitor's business.

  • Unfair competition is prohibited under Article 28 of the Civil Code.

  • Engaging in unfair competition includes acts such as shifting business without regard for profit, luring employees of competitors, and trying to discover trade secrets.

  • A person who acts in bad faith in competing with another's business is guilty of wanton wrong.