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CATERPILLAR v. MANOLO P. SAMSON

FACTS:

These consolidated cases involve the appeal by Caterpillar, Inc. ("Caterpillar") to reverse decisions and resolutions related to criminal complaints for unfair competition filed against Manolo P. Samson ("Samson"). Caterpillar is a foreign corporation engaged in the manufacture and distribution of footwear, clothing, and related items. Samson, on the other hand, operates retail outlets in the Philippines selling footwear, bags, clothing, and related items under the trademark "CATERPILLAR," which is registered under Trademark Registration No. 64705. On July 26, 2000, search warrants were issued by the Regional Trial Court (RTC) in Makati City to search the establishments owned by Samson. The implementation of these search warrants on July 27, 2000 led to the seizure of various products bearing Caterpillar's trademarks. Caterpillar filed several criminal complaints for unfair competition against Samson before the Department of Justice (DOJ). Additionally, Caterpillar commenced a civil action against Samson for unfair competition, damages, and cancellation of trademark. The DOJ, through Senior State Prosecutor Jude R. Romano, recommended that Samson be criminally charged with unfair competition. However, Caterpillar applied for another set of search warrants against Samson and his businesses, leading to the filing of additional criminal complaints for unfair competition. Samson filed petitions for review with the Office of the Secretary of Justice to appeal the joint resolutions recommending criminal complaints against him. He also filed a motion to suspend arraignment in the criminal cases, citing pending litigation and his pending petitions for review. The DOJ denied Samson's petition for review, and his motion for reconsideration was also denied. The RTC granted Samson's motion to suspend arraignment.

In this case, Caterpillar, Inc. (Caterpillar) filed criminal cases against Manalo P. Samson (Samson) for unfair competition under the Intellectual Property Code. However, the arraignment and other proceedings were suspended by the Regional Trial Court (RTC) based on Samson's motion, on the ground that there exists a prejudicial question involving a civil case pending in another RTC branch. The civil case seeks to cancel the trademark "Caterpillar" registered in the name of Samson. The RTC believed that the resolution of the civil case would ultimately determine the outcome of the criminal case. The RTC ordered the withdrawal of the criminal cases after the Acting Justice Secretary reversed the resolution of the State Prosecutor which filed the criminal informations against Samson. Caterpillar filed a petition for certiorari in the Court of Appeals (CA) assailing the withdrawal of the criminal cases, but it was dismissed by the CA. Caterpillar sought reconsideration but the CA denied the motion.

Caterpillar Inc. filed a complaint against Samuel Samson and his affiliate entities for trademark infringement and unfair competition. The Regional Trial Court (RTC) dismissed the complaint for lack of jurisdiction because the Intellectual Property Code (IP Code) provides that such cases should be filed with the Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO). Caterpillar sought reconsideration of the dismissal, but the Court of Appeals (CA) denied the motion. Caterpillar appealed the CA's decision.

In August 2002, Caterpillar requested the assistance of the Regional Intelligence and Investigation Division of the National Region Public Police for an investigation on Samson and his affiliate entities for selling and distributing products bearing Caterpillar's Core Marks without its consent. 16 search warrants were granted and executed, resulting in the seizure and confiscation of the infringing products. Caterpillar filed criminal complaints against Samson for violation of the IP Code. The Department of Justice (DOJ) dismissed the complaints after preliminary investigation on the ground of lack of probable cause. Caterpillar moved for reconsideration, but it was denied. The Secretary of Justice affirmed the dismissal and denied Caterpillar's motion for reconsideration. Caterpillar appealed the DOJ's dismissal to the CA. However, the CA denied due course to the petition for review, stating that an appeal under Rule 43 was improper. Caterpillar filed a motion for reconsideration, but the CA denied it. Caterpillar then filed a petition for review with the Supreme Court (G.R. No. 205972).

ISSUES:

  1. Whether the suspension of proceedings in the criminal cases was contrary to law and established jurisprudence.

  2. Whether a criminal complaint for unfair competition can proceed independently of a civil case for the same.

  3. Whether the Court of Appeals erred in dismissing the petition for certiorari.

  4. Whether there is a prejudicial question that would justify the suspension of the criminal cases for unfair competition.

  5. Whether a civil action for damages and cancellation of trademark can be considered a prejudicial question to the criminal cases for unfair competition.

  6. Whether the Court of Appeals can reverse or undo the findings and conclusions on probable cause by the Secretary of Justice.

  7. Whether there is probable cause to indict the respondent for unfair competition.

  8. Whether or not the public prosecutor committed grave abuse of discretion.

  9. Whether or not the Secretary of Justice committed grave abuse of discretion.

RULING:

  1. The appeal is meritorious. The Court ruled that Civil Case No. Q-00-41446, which was for unfair competition, damages, and cancellation of trademark, was an independent civil action that could proceed independently of the criminal cases for unfair competition. The suspension of the criminal proceedings was contrary to law and established jurisprudence. The Court also found that the allegations in Caterpillar's petition were sufficient to show grave abuse of discretion on the part of the Secretary of Justice in issuing the assailed resolutions.

  2. There is no prejudicial question that would justify the suspension of the criminal cases for unfair competition. The civil action for damages and cancellation of trademark, which relates to unfair competition, is an independent civil action under Article 33 of the Civil Code and can proceed independently of the criminal action.

  3. A civil action for damages and cancellation of trademark cannot be considered a prejudicial question to the criminal cases for unfair competition. A prejudicial question is one which arises in a civil case and its resolution is a logical antecedent of the issues to be determined in the criminal case. In this case, the resolution of the civil action for damages and cancellation of trademark will not necessarily determine the guilt or innocence of the accused in the criminal cases for unfair competition.

  4. The Court of Appeals cannot reverse or undo the findings and conclusions on probable cause by the Secretary of Justice, except upon a clear showing of grave abuse of discretion amounting to lack or excess of jurisdiction committed by the Secretary of Justice.

  5. There is no probable cause to indict the respondent for unfair competition.

  6. The Court finds that the public prosecutor did not commit grave abuse of discretion. The Court emphasizes that the trial court has the authority to review the findings of the public prosecutor and determine the existence or non-existence of probable cause. However, in this case, the Court did not find any grave abuse of discretion on the part of the public prosecutor.

  7. The Court grants the petition for review and sets aside the decision promulgated by the Court of Appeals. The Court also directs the trial court to reinstate the criminal cases and proceed with the trial without delay.

PRINCIPLES:

  • Under Article 33 of the Civil Code, a civil action for fraud may proceed independently of a criminal action.

  • The determination of the lawful owner of a trademark in a civil case does not necessarily determine the guilt or innocence of an accused in a criminal case for unfair competition.

  • The determination of probable cause lies solely within the sound discretion of the investigating public prosecutor after the conduct of a preliminary investigation.

  • The public prosecutor cannot be compelled to file a criminal information in court if he is not convinced of the sufficiency of the evidence to establish probable cause.

  • Neither can the public prosecutor be precluded from filing an information if he is convinced of the merits of the case.

  • Prior use of a trademark will controvert the claim of a subsequent user.

  • The full discretionary authority to determine the existence of probable cause is exclusive to the Executive Branch of the Government, through the public prosecutor and the Secretary of Justice. The courts are prohibited from encroaching on the executive function, unless there is a clear showing of grave abuse of discretion.

  • The public prosecutor may be found to have committed grave abuse of discretion when his exercise of discretion is arbitrary, capricious, whimsical, or despotic, and when it amounts to a refusal to perform a duty enjoined by law.

  • Grave abuse of discretion is equivalent to lack of jurisdiction and must be so patent and gross that it evades a positive duty or amounts to a refusal to perform the duty.

  • The trial court has the power to review the findings of the public prosecutor and determine the existence or non-existence of probable cause.

  • The court should exercise its power to review the public prosecutor's findings when necessary and determine if they are supported by the facts and the law.