PARKE, DAVIS & COMPANY, PLAINTIFF-APPELLANT, VS. DOCTORS’ PHARMACEUTICALS, INC. AND V-LAB DRUGHOUSE CORPORATION, DEFENDANTS-APPELLEES.

This is an appeal from the order of the Court of First Instance
of Rizal dated August 22, 1966, in Civil Case No. C-712, dismissing, on
the ground of lack of cause of action, the complaint for damages for
infringement of patent and unfair competition, with preliminary injunction,
filed by the herein appellant against the herein appellees.

On May 5, 1966, Parke, Davis & Company filed with the Court
of First Instance of Rizal, Caloocan
City Branch, the said Complaint with Preliminary Injunction against Doctors’
Pharma­ceuticals, Inc., otherwise referred to as defendant No. 1, and V-Lab Drughouse Corporation, otherwise referred to as defendant
No. 2, alleging, among others, that plaintiff is a foreign corporation
organized and existing under the laws of the State of Michigan, U.S.A., with
principal office situated in Detroit, Michigan, U.S.A.; that the laws of the
United States of America allow corporate or juristic citizens of the
Philippines to file in said country, actions for in­fringement of patents and
for unfair competition; that defendants 1 and 2 are corporations organized and
existing under the laws of the Philippines with offices respectively located at
354-B San Diego Street, Grace Park, Caloocan City and
126 Gen. Evangelista Street, Caloocan City; that on
March 21, 1957, Letters Patent No. 279 was legally issued to plaintiff by the
Patent Office of the Republic of the Philippines for an invention entitled
“Therapeutically Valuable Esters and Method for Obtaining the Same”;
that since that date, plaintiff has been and still is, the owner of said
Letters Patent No. 279 which is still in force in the Philippines; that
defendant No. 1 has knowingly infringed and is still knowingly infringing Claim
4 of said Letters Patent No. 279 of plaintiff by selling, causing to be sold,
using or causing to be used, “Chloramphenicol Palmitate“, the substance covered by said Claim 4 of
said plaintiff’s Letters Patent No. 279, under the name “Venimicetin Suspension”, willfully and without the
consent or authorization of plaintiff; that defendant No. 2 has, likewise, knowingly infringed and is still
knowingly infringing Claim 4 of said Letters Patent No. 279 by acting as
distributor of defendant No. 1 of the latter’s medicine called “Venimicetin Suspension” which contains “Chloramphenicol PaImitate“;
that plaintiff, through its wholly-owned local subsi­diary, Parke, Davis &
Company, Inc., a domestic corporation with main office at Mandaluyong,
Rizal, has at great expense, established a market and
a continuing demand for “Chloramphe­nicol Palmitate” in the Philippines and has for many years
sold and is still selling this product in the Philippines; that defendants have
derived unlawful gains and profits from the aforesaid in­fringement to the
great and irreparable injury, damage and prejudice of plaintiff, and have
deprived plaintiff of legitimate returns which plaintiff would have otherwise
received had it not been for defendants’ infringing acts; that defendants, in
advertising and selling the medi­cine of defendant No. 1 called “Venimicetin Suspension” have falsely and deceptively
concealed that the same contains “Chloramphenicol
Palmitate” and falsely and deceptively
represented the same to contain “Chloramphenicol“;
that “Chloramphenicol” and “Chloram­phenicol Palmitate”
are entirely different substances; that defendants, in advertising and selling
“Venimicetin Suspension”, have falsely and
deceptively used plaintiff’s name and represented that defendant No. 1 holds a
license from plaintiff for said medicine with, inter alia,
the following words:

“First Compulsory Licensee in the Philippines
by Parke-Davis Company Detroit, Michigan,
U.S.A.”;

that plaintiff has never granted
defendant No. 1 any kind of license for any product; that defendant No. 1 has
not even applied for a compulsory license under plaintiff’s Letters Patent No.
279, the only patent which covers “Chloramphenicol
Palmitate“; that the compulsory licensing case between plaintiff and
defendant No. 1 in the Philippine Patent Office (Inter Partes
Case No. 181) dealt with plaintiff’s Letters Patent No. 50 (which covers “Chloramphenicol“) and not with plaintiff’s Letters
Patent No. 279 (which covers “Chloramphenicol Palmitate“); that the resolution of the Director of
Patents fixing the terms and con­ditions of the compulsory license for “Chloramphenicol” has not yet become final as the same
is still subject to a pending motion for re­consideration; that even if said
resolution does become final, the com­pulsory license will not cover
defendants’ “Venimicetin Suspension” which
actually contains “Chloramphenicol Palmitate” and, therefore, defendants’ statement will
still be false and misleading; and that defendants’ use of the aforesaid false
statement is designed to induce persons to purchase and physicians to prescribe
the use of “Venimicetin Suspension” in the
mistaken belief that it is identical with the “Chloramphenicol
Palmitate” product manufactured and sold in the
Philippines by plaintiff’s subsidiary or that the active ingredient in said
product has been obtained from plaintiff and/or that said product has been made
under the supervision or control of plaintiff – thereby causing damage or loss
to plaintiff.  On the basis of the
foregoing allegations, the plaintiff prayed, among others, that defendants be
enjoined from performing the acts complained of as infringement of patent and
unfair competition and to pay the plaintiff all damages due thereto by reason
of said acts.

On May 6, 1966, the Court of First Instance issued an order
which, among others, temporarily restrained the defendants “from directly
or indirectly selling, using, causing to be sold or causing to be used any ‘Chloramphenicol Palmitate‘ not
manufactured by plaintiff or plaintiff’s wholly-owned subsidiary, Parke, Davis
& Company, Inc.” Alleging that the defendants have not complied with
such order, the plaintiff filed on May
24, 1966, a motion to punish defendants for contempt.

Before the court could act on the plaintiff’s motion for con­tempt,
the defendants filed a Motion to Dismiss, dated May 25, 1966, alleging, among
others, that the complaint states no cause of action against them since
defendant No. 1 “was granted a compulsory license to manufacture, use and
sell its own brands of medicinal preparation containing ‘chloramphenicol‘.”

On June 17, 1966,
the plaintiff filed its Opposition to Motion to Dismiss controverting,
among others, defendants’ contention that the complaint states no cause of
action.  Plaintiff pointed out that the
defendants have confused the substance which is the subject matter of the
complaint, namely, “Chloramphenicol Palmitate“, with the subs­tance covered by the
compulsory licensing case, namely, “Chloram­phenicol“,
and the Letters Patent subject of the complaint, namely, Letters Patent No.
279, with the Letters Patent subject of the com­pulsory licensing case, namely, Letters Patent No. 50.

On June 27, 1966,
the defendants filed their Reply to Opposition alleging, among others, that in
advertising and selling their product “Venimicetin
Suspension,” never do they state that the same contains “Chloramphenicol Palmitate“.  They pointed out that even in the annexes of
plaintiff’s complaint (consisting of the packages and labels allegedly used by
the defendants in said product), only the substance
“Chloram­phenicol” is stated-showing that
the substance involved is “Chloram­phenicol and
not “Chloramphenicol Palmitate“.

On July 5, 1966, the plaintiff filed its Rejoinder to Reply to
Opposition stating, among others, that while the packages and labels of
defendants’ “Venimicetin Suspension”
indicate that the same contains “Chloramphenicol“,
the truth of the matter is that said product does not contain said substance
but the substance covered by Letters Patent No. 279, namely, “Chloramphenicol Palmitate“.  This, plaintiff pointed out, is expressly
alleged in the complaint; thus, applying the rule that a motion to dismiss
hypothetically admits the truth of the allegations of the complaint, defendants
are guilty of (1) infringement of patent, by selling, causing to be sold, using
or causing to be used “Chlorampheni­col Palmitate” in their medicine called “Venimicetin Suspension”, and (2) unfair competition,
by concealing that said medicine contains “Chlor­amphenicol“,
and, by deceiving and misleading the purchasers who are made to believe that
“Venimicetin Suspension” is covered by a
compul­sory license from the plaintiff.

On the basis of the foregoing pleadings, the Court of First
Instance of Rizal issued the order dated August 22, 1966, which dismissed the
complaint on the ground of lack of cause of action, to wit:

“x x x                         x
x x.

“After a careful consideration of the arguments for and
against the motion to dismiss, and in view of the fact that the substance
covered by Letters Patent No. 50 and Letters Patent No. 279 is the same and
that is, the substance known as ‘Chloramphenicol‘,
because while under Letters Patent No. 50, the substance is referred to as ‘Chloramphenicol‘, in Letters Patent No. 279, the substance
has been denominated as ‘Chloramphenicol Palmitate‘ yet it is the opinion of the Court that ‘Chloramphenicol‘ and ‘Chloramphenicol
Palmitate‘ are the same, the difference being merely
in the taste, and this Court to state that there was in­fringement of Patent
with respect to Letters Patent No. 279 would be tantamount to preventing the de­fendant,
Doctors’ Pharmaceuticals, Inc., from exercising the right granted it by Letters
Patent No. 50.  It would further render
nugatory the decision of the Director of Patents, affirmed by the Supreme
Court, granting the defendant, Doctors’ Pharmaceuticals, Inc., the right to use
and import ‘Chloramphenicol‘.

“The defendant, V-Lab Drughouse Corpora­tion
being merely a sales representative of the defendant, Doctors’ Pharmaceuticals,
Inc., and the Court being of the opinion that there is no cause of action with
respect to the principal defendant, is likewise of the opinion that there is no
cause of action with respect to the defendant, V-Lab Drughouse
Corporation.

“It is likewise the opinion of this Court that there is no
cause of action for unfair competition because a perusal of the records of this
case will show that under paragraph 7 of the Resolution of the Director of
Patents, Annex “C” of the Motion to Dismiss, the petitioner (Doctors’
Pharmaceuticals, Inc.) shall adopt and use its own trademarks or labels on all
its products containing Chloramphenicol under license
from Parke, Davis, & Co., Inc., of Michigan, U.S.A.

“The claim of the plaintiff that the represent­ation:

‘First
Compulsory Licensee in the Philippines by Parke Davis Company, Detroit, Michigan, U.S.A.‘

is false and has a
definite tendency to deceive possible purchasers and distort the facts is not
well-taken in view of the above-mentioned (Par. 7) of the Resolution of the
Director of Patents.

“WHEREFORE, finding the ground of lack of cause of action to
be well-taken, this case is ordered DISMISSED, without pronouncement as to
costs.  The restraining order heretofore
issued is hereby lifted and set aside. 
Having reached the above conclusion, the Court will no longer pass upon
the issue of contempt.

“SO ORDERED.”

Hence, the present appeal.

We are thus tasked with the resolution of the issue of whether or
not the lower court correctly dismissed the complaint for damages for
infringement of patent and unfair competition on the ground of failure to state
a cause of action.

It is axiomatic that in resolving a motion to dismiss a complaint
on the ground of failure to state a cause of action, the court should
hypothetically assume the truth of the factual allegations of the complaint (except
allegations of facts the falsity of which the court may take judi­cial notice
of) and determine whether on the basis thereof, the com­plainant is entitled to
the relief demanded.  Had the lower court
applied the foregoing formula, it would not have dismissed, on the ground of
failure to state a cause of action, the complaint for damages for infringement
of patent and unfair competition.  For,
instead of hypo­thetically assuming the truth of the factual allegations of the
complaint, the lower court had ruled against their veracity and consequently
con­cluded that the complaint states no cause of action.

As can be gleaned from the appealed order, the pertinent portions
of which We have heretofore quoted, the lower court premised its ruling that
there is no cause of action for infringement of patent on the assumption that “Chloramphenicol” (the substance covered by Letters
Patent No. 50) and “Chloramphenicol Palmitate” (the substance covered by Letters Patent
No. 279) are the same.  Thus, instead of
hypothetic­ally assuming the truth of the plaintiff’s allegation that “Chlorampheni­col” and “Chloramphenicol
Palmitate” are two different substances, the
lower court had ruled against its veracity. 
This is clearly an error considering that the
said assumed fact cannot qualify as something which the court could take
judicial notice of nor was it competent to so find in the absence of evidence
formally presented to that effect.  The
existence of two patents separately covering said substances simply militates against
said factual assumption and requires the presenta­tion of evidence sufficient
to convince the court that said substances are indeed the same.

Had the lower court hypothetically assumed as true, for the
purpose of the motion to dismiss, the allegations in the complaint that “Chloramphenicol” and “Chloramphenicol
Palmitate” are entirely different substances and
that “Venimicetin Suspension” actually
contains “Chloramphenicol Palmitate”
and not “Chloramphenicol” as indicated in
its package and label, it necessarily would have to conclude that the complaint
states causes of action for infringement of patent and for unfair
competition.  For defendants would then
be guilty of infringement of patent by selling, causing to be sold, using and
causing to be used “Chloramphenicol Palmitate“, without the consent or authority of the
plaintiff as the holder of Letters Patent No. 279, Claim 4 of which allegedly
covers said substance.  Sections 37 and
42 of R.A. No. 165 provide:

“SEC. 37.  RIGHTS OF PATENTEES.  – A patentee shall have the exclusive right
to make, use and sell the patented machine, article or product, and to use the
patented process for the purpose of industry or commerce, throughout the
territory of the Philippines for the term of the patent; and such making,
using, or selling by any person without the authorization of the patentee,
constitutes infringe­ment of the patent.” (Underscoring supplied.)

“SEC. 42.  CIVIL ACTION FOR
INFRINGEMENT.  -Any patentee,
or anyone possessing any right, title or interest in and to the patented
invention, whose rights have been in­fringed, may bring a civil action before
the proper Court of First Instance, to recover from the infringer damages
sustained by reason of the infringement and to secure an injunction for the protection
of his rights.”

Likewise, the defendants would be guilty
of unfair competition by falsely stating that defendant No. 1’s medicine called
“Venimicetin Suspension” contains “Chloramphenicol” when in fact it actually contains
“Chloramphenicol Palmitate“,
and that it is covered by a compulsory license from the plaintiff.  Section 29 of R.A.
No. 166 provides, inter alia:

“In particular, and without in any way limiting the scope of
unfair competition, the following shall be deemed guilty of unfair com­petition:

x x x              x x x

“(c)  Any
person who shall make any false statement in the course of trade x x x.”

Clearly, the lower court erred in dismissing, on the ground of
failure to state a cause of action, the complaint for damages for infringement
of patent and unfair competition.

WHEREFORE, the appealed order of dismissal is hereby set
aside and the complaint for damages for infringement of patent and unfair
competition is hereby reinstated.  Without pronouncement as to costs.

SO ORDERED.

Barredo, (Chairman), Aquino, Guerrero, and
De Castro, JJ., concur.