Universal Rubber Products, Inc. vs. Court of Appeals

No. L-30266. June 29, 1984

FACTS:

Converse Rubber Corporation and  Edwardson Manufacturing Corporation sued Universal Rubber for unfair competition with damages and attorney’s fees before the Court of First Instance of Rizal. The private respondents requested for the  issuance of a subpoena duces tecum against the treasurer of Universal Rubber which was granted. 

Universal Rubber filed a motion in the court below praying that the subpoena duces tecum be quashed on the grounds that the said subpoena is both unreasonable and oppressive as (a) there is no good cause shown for the issuance thereof and (b) the question of liability should be determined first before discovery by means of a subpoena duces tecum is allowed. It also assails that private respondent is a foreign corporation not licensed to do business in the Philippines and that respondent Edwardson is merely its licensee; that respondent Converse has no goodwill to speak of and that it has no registrable right over its own name.

While this present petition remains pending before the Supreme Court, Universal Rubber manifested on April 2, 19775 that their establishment was totally burned together with all the records which were sought to be produced in court by the questioned “subpoena duces tecum” on May 3, 1970. In effect, it renders the present petition moot and academic.

ISSUES: 

(A) Whether the question of liability of petitioner should be determined first before discovery by means of a subpoena duces tecum is allowed (NO) 

(B) Whether Foreign corporation without license to do business in the Philippines are disqualified from filing and prosecuting an action for unfair competition (NO) 

HELD: 

(A) In order to entitle a party to the issuance of a “subpoena duces tecum”, it must appear, by clear and unequivocal proof, that the book or document sought to be produced contains evidence relevant and material to the issue before the court, and that the precise book, paper or document containing such evidence has been so designated or described that it may be identified. A “subpoena duces tecum” once issued by the court may be quashed upon motion if the issuance thereof is unreasonable and oppressive, or the relevancy of the books, documents or things does not appear, or if the persons in whose behalf the subpoena is issued fails to advance the reasonable cost of production thereof.

In recovering the loss suffered by the aggrieved party due to “unfair competition,” Sec. 23 of R.A. 166 grants the complainant three options within which to ascertain the amount of damages recoverable, either (1) the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights; or (2) the profit which the defendant actually made out of the infringement; or (3) the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or tradename was issued in the infringement of the rights of the complaining party. In a suit for unfair competition, it is only through the issuance of the questioned “subpoena duces tecum” that the complaining party is afforded his full rights of redress.

The argument that the petitioner should first be found guilty of unfair competition before an accounting for purposes of ascertaining the amount of damages recoverable can proceed, stands without merit. The complaint for unfair competition is basically a suit for “injunction and damages”. Injunction, for the purpose of enjoining the unlawful competitor from proceeding further with the unlawful competition, and damages, in order to allow the aggrieved party to recover the damage he has suffered by virtue of the said unlawful competition. Hence, the election of the complainant (private respondent herein) for the accounting of petitioner’s (defendant below) gross sales as damages per R.A. 166, appears most relevant. For Us, to determine the amount of damages allowable after the final determination of the unfair labor case would not only render nugatory the rights of complainant under Sec. 23 of R.A. 166, but would be a repetitious process causing only unnecessary delay.

The sufficiency in the description of the books sought to be produced in court by the questioned “subpoena duces tecum” is not disputed in this case, hence, We hold that the same has passed the test of sufficient description.

(B) The disability of a foreign corporation from suing in the Philippines is limited to suits to enforce any legal or contract rights arising from, or growing out, of any business which it has transacted in the Philippine Islands. x x x On the other hand, where the purpose of a suit is ‘to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves’, an unlicensed foreign corporation may sue in the Philippines. So interpreted by the Supreme Court, it is clear that Section 29 of the Corporation Law does not disqualify plaintiff-appellee Converse Rubber, which does not have a branch office in any part of the Philippines and is not ‘doing business’ in the Philippines, from filing and prosecuting this action for unfair competition.”

Notes: 

As a general rule, on obtaining an injunction for infringement of a trademark, complainant is entitled to an accounting and recovery of the defendant’s profits on the goods sold under that mark, as incident to, and a part of, his property right, and this rule applies in cases of unfair competition. In such case, the infringer or unfair trader is required in equity to account for and yield up his gains on a principle analogous to that which charges as trustee with the profits acquired by the wrongful use of the property of the cestui que trust, and defendant’s profits are regarded as an equitable measure of the compensation plaintiff should receive for the past harm suffered by him.

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