BERT R. BAGANO, PETITIONER, VS. THE DIRECTOR OF PATENTS AND THE INTERNATIONAL PHARMACEUTICALS, INC., RESPONDENTS.

Bagano versus International Pharmaceuticals

The Case

This is Bagano versus International Pharmaceuticals, a contest over which of two applicants owns the right to register the trademark "EFFICASCENT OIL." Bert Bagano, the petitioner, and International Pharmaceuticals, Incorporated, the respondent, each filed with the Philippine Patent Office a petition to register the same mark, and the Director of Patents heard the two petitions together as an inter partes proceeding to settle the question of priority of adoption and use. The case matters because it shows how the Supreme Court treats a finding of priority made by the Director of Patents: when that finding rests on substantial documentary and testimonial evidence, it is a question of fact that the Court will not disturb, and the prior and continuous use of a predecessor in interest inures to the benefit of the successor who registers the mark.

Procedural History

The contest began in the Philippine Patent Office, where the two competing petitions for registration were heard together on the single question of priority of adoption and use. The Director of Patents rendered judgment giving due course to the application of International Pharmaceuticals, Incorporated and rejecting the application of Bert Bagano. Bagano brought the judgment to the Supreme Court for review, assigning several errors, all of which reduced to the claim that the Director of Patents was wrong in concluding that the respondent company had priority of adoption and use of the mark.

Facts

Miguel Chiong of Cebu City owned a pharmaceutical laboratory called Tropical Herb Service, and he was given a permit by the Board of Pharmaceutical Examiners and Inspectors to prepare a pharmaceutical preparation bearing the mark "EFFICOL," which was analyzed and found not adulterated and not misbranded in October 1948. He later changed the mark of his product to "EFFICASCENT OIL" and the name of his laboratory to Tropical Pharmaceutical Laboratory, and the changes were duly approved and noted in the records of the Board in June 1949. Sales invoices showed that the product was sold to the public from 1949 to 1950.

In January 1959, Miguel Chiong, together with his daughter, sold the formula of the product, together with its goodwill, tradename, and the right to manufacture "EFFICASCENT OIL," for 10,000 pesos to the Wong brothers of Cebu City, and the final deed of sale was executed in June 1960 upon payment of the balance. The Wong brothers then formed a corporation, International Pharmaceuticals, Incorporated, to operate a laboratory for the manufacture of the product, and the product was again submitted for analysis and was permitted to continue to be manufactured and sold.

On the other side, Bert Bagano filed his petition for registration in June 1959, claiming adoption and use since February 1959, which he tried to amend during the hearing to December 1958. The Director of Patents found no convincing proof that Bagano had adopted and used the mark earlier than the respondent company, and noted that Bagano had never been issued a permit by the proper government authority to manufacture and sell the product. It also appeared that Bagano's wife had been employed by Miguel Chiong as a pharmacist from 1948 to 1957 and therefore had knowledge of the manufacture and sale of the product.

Issues

• Whether or not the Director of Patents was right in concluding that International Pharmaceuticals, Incorporated, had priority of adoption and use of the trademark "EFFICASCENT OIL."
• Whether or not the prior and continuous use of the mark by Miguel Chiong, the predecessor in interest, inures to the benefit of International Pharmaceuticals, Incorporated.
• Whether or not the findings of the Director of Patents on priority of adoption and use are questions of fact that the Supreme Court is bound to respect.

Applicable Provisions

The decision does not quote any statutory provision in full; it rests on the settled rule governing the review of findings of the Director of Patents, which the Court states in these words:

It is almost trite to state here that in cases of the nature as the one at bar, only questions of law are to be raised in order that this Court could exercise its appellate jurisdiction and review the decision.

This rule bears on the case because the errors assigned called for an examination of the evidence, which is primarily a question of fact, and the Court therefore declined to substitute its own assessment for that of the Director of Patents.

Ruling

On the first issue, the Court held that the Director of Patents was right. The evidence consisted of the permits granted by the Board of Pharmaceutical Examiners and Inspectors to Miguel Chiong to prepare, sell, and distribute his product, first under the mark "EFFICOL" and later under the mark "EFFICASCENT OIL," and of sales invoices showing that the product had been sold to the public since 1949 to 1950. The Court rejected the claim that this evidence was hearsay and self-serving, because the Director of Patents found otherwise and the Court agreed.

On the second issue, the Court held that the prior and continuous use by the predecessor in interest inures to the benefit of the corporation formed by the purchasers of the formula, goodwill, and tradename. The Court also gave weight to the circumstance that Bagano's wife had been in the employ of Miguel Chiong as a pharmacist from 1948 to 1957 and therefore had knowledge of the manufacture and sale of the product.

On the third issue, the Court held that when the Director of Patents found that the respondent company had priority of adoption and use, fully supported by documentary and testimonial evidence, such was a conclusion of fact to which the Court is bound. The Court put the governing rule this way:

When the director of Patents found that respondent International Pharmaceuticals, Inc., had priority of adoption and use, which is fully supported by the evidence, documentary and testimonial, such was a conclusion of fact to which this Court is bound.

The Court therefore affirmed the decision appealed from in all respects, with costs against the petitioner in both instances.

Doctrine

Three rules a Bar candidate should retain. First, priority of adoption and use of a trademark is a question of fact, and a finding of the Director of Patents on that question, when fully supported by documentary and testimonial evidence, binds the Supreme Court on review. Second, the prior and continuous use of a trademark by a predecessor in interest inures to the benefit of the successor, so that the successor may claim the earlier date of adoption and use. Third, the issuance of permits by the proper government authority to manufacture and sell a product, together with sales invoices showing sale to the public, sufficiently supports a finding of priority of adoption and use.

Disposition

The Supreme Court affirmed the judgment of the Director of Patents in all respects, giving due course to the application of International Pharmaceuticals, Incorporated and rejecting the application of Bert Bagano, with costs against the petitioner.

Remember This

The single line worth memorizing is that a finding of priority of adoption and use by the Director of Patents, when supported by substantial evidence, is a question of fact binding on the Supreme Court, and the prior use of a predecessor in interest inures to the successor. Examiners like to use this case on the review of administrative findings in trademark registration and on the rule that priority of adoption and use passes to a successor in interest.