PARKE, DAVIS & COMPANY, PETITIONER, VS. DOCTOR’S PHARMACEUTICALS, INC. AND TIBURCIO S. EVALLE, IN HIS CAPACITY AS DIRECTOR OF PATENTS, RESPONDENTS.

In G.R. No. L-22221^[1],
which involved the same parties in the instant case, the Court affirmed, in a
decision dated August 31, 1965 respondent Director of Patent’s decision rendered on November 15, 1963
in Inter Partes
Case No. 181 ordering petitioner Parke, Davis & Co. to grant
respondent Doctor’s Pharmaceuticals, Inc. a license to manufacture, use and
sell in the Philippines its own products containing petitioner’s chemical
called “chloramphenicol.”

The dispositive portion
of respondent official’s decision reads:

“Wherefore, the
Respondent-Patentee is hereby ordered to
grant the Petitioner a license
under Letters Patent No. 50. The
parties hereto are hereby
ordered to submit to me, within THIRTY (30) days from their receipt of a copy
of this decision a licensing agreement, and in default thereof, they
may submit within the same period their respective proposals. It must be shown
that the negotiations as to the terms and conditions thereof have been made between the parties,
and if there are points of disagreement I shall fix such terms and conditions.

If, within the said period, no licensing agreement is filed or no negotiations
therefor transpires between the parties, I shall
issue the licensing agreement in such terms and conditions as may be just and
reasonable under the circumstances.”

Under Section 36 of Republic Act 165 (Patent Law), the Director
of Patents is authorized, in case the parties failed to submit a licensing
agreement, to fix the terms and conditions of the license. Thus, after the Court’s decision in G.R. No. L-22221 became final and executory, without the parties submitting a licensing
agreement, the Director of Patents, in a resolution dated March 25, 1966 and
amended on November 25, 1966, issued a license in favor of respondent company under petitioner’s Letters Patent No. 50
for the patented chemical “chloramphenicol“, fixing the terms and conditions thereof and declaring that
the license should take effect immediately. The license provides, among others,
that respondent company should pay petitioner Parke, Davis & Co., a
royalty, on all licensed products containing “chloramphenicol”
made and sold by respondent company
in an amount equivalent to Eight
Percent (8%) of the net sales which petitioner company now claims as
grossly inadequate and proposes that it be increased to 15%. Petitioner insists
that the fixing of the royalty rate by the Director of Patents is arbitrary and
without any support in evidence pointing out that the prevailing rate for
compulsory licensing on the net sales of medicines containing the patented
article is 15% and 18% of the selling price. In asking for a 15% royalty
rate, petitioner alleges that it is the same rate prevailing in two compulsory
licenses for patents on medicine in Great Britain, and that in the case of
J.R. Geigy S.A.’s Patent in
Canada, the rate of 12 1/2% based on net sales
was allowed. On the other hand, respondent company points out that in a
licensing agreement between Collett & Co. of
Norway and
Lexal Laboratories
of the Philippines, royalties of 5% on a vitamin preparation and 7% on a pharmaceutical pellet based on net,
sales, were agreed upon.

It is settled that findings of fact of administrative bodies will
not be interfered with by courts of justice in the absence of a grave abuse of
discretion on the part of said bodies or unless the aforementioned findings are
not supported by substantial evidence.^[2]

The Court finds no abuse of discretion on the part of respondent
Director of Patents considering that in fixing the royalty rate he made a
compromise on the rate proposed by petitioner and those prevailing in other
countries. The 8% royalty rate is
midway between the rates in Canada
and Norway. In
developing countries like the Philippines, liberal treatment in trade relations
should be afforded to local industry for as reasoned out by respondent company,
“it is so difficult to compete with the industrial giants of the drug
industry, among them being the petitioner herein, that it always is necessary
that the local drug companies should sell at much lower (than) the prices of
said foreign drug entities.”^[3]

The Court agrees with then Solicitor
General, now retired Justice Antonio
P. Barredo and then Asst. Solicitor General Pacifico
de Castro, now Justice of the Supreme Court, that the 8% royalty rate is
reasonable “considering that Doctor’s Pharmaceutical, Inc. is a small
manufacturing venture compared with
Parke, Davis & Company, Inc. which is
a subsidiary of the huge mother firm, Parke, Davis & Company of Michigan,
U.S.A.” (Annex D, Petition for Review). If Doctor’s is making sufficient
profit to justify an increase of royalty later, Parke, Davis & Co., Inc. can easily demand an
increase, considering that the
latter has access to the books and
records of the former.”^[4]

The Solicitor General
correctly states that “there is no showing that Parke, Davis & Co., Inc. would
tend to suffer business losses by
the imposition of the 8% royalty nor does
it appear that it would cause other effects on the saleability
of the antibiotics and consequently the health of the consuming public by the
imposition of 8%.”^[5]

Petitioner’s argument that respondent Director of Patents has no
authority to declare the resolution containing the licensing agreement
“shall take effect immediately” is untenable for any award, order or
decision the Patent Office is immediately executory. This
is clear from the provisions of Sec. 4, Rule 44 of the Rules of Court which pro­vides
that appeal shall not stay the
award, order or decision of the Public Service Commission, the Patent Office, and the
Agricultural Inven­tions Board. Moreover, the resolution of respondent official
was issued only after the herein parties failed to submit a licensing agreement
and had left the same to the discretion of the Director of Patents.^[6]
As correctly argued by the Solicitor General “to hold that said Amended
Resolution could not be made
effectively would open the door for intermin­able litigation, thus rendering
nugatory said compulsory licensing agree­ment sanctioned by the Director of
Patents, as any implementing condition imposed therein could be the subject of
litigation.”

At any rate, the
letter patent granted to petitioner on the particular process was to expire
after seventeen years, and having been granted on February 9, 1950, the same already expired on February 9, 1967.

WHEREFORE, the instant petition is hereby dismissed and
the questioned resolution of the Director of Patents is hereby affirmed in all
respects. No costs.

Melencio-Herrera, Plana,
Vasquez, Relova, and
Gutierrez, Jr., JJ., concur.

^[1]
14 SCRA 1053.

^[2]
La Mallorca & Pampanga
Bus Co. vs. Mercado, 15 SCRA 343; Halili vs. Daplas, 14 SCRA 14.

^[3] Brief for the Respondent Doctor’s
Pharmaceuticals, Inc., p. 13.

^[4] P. 43, Rollo.

^[5] Ibid.

^[6]
Annex “D”, p. 30, Rollo.