Can a Foreign Corporation Sue for Unfair Competition in the Philippines?

The question of whether a foreign corporation that does not do business in the Philippines can invoke Philippine law to protect its trademarks is a recurring concern in commercial practice. In Sasot v. People (G.R. No. 143193, June 29, 2005), the Supreme Court addressed this issue in the context of a criminal prosecution for unfair competition. The ruling clarifies the procedural limits of a motion to quash and reaffirms that the capacity of a foreign complainant to sue is not a barrier to prosecution for a public crime.

The Facts of the Case

NBA Properties, Inc., a US corporation, owned trademarks and names of NBA basketball teams used on garments. In 1997, the National Bureau of Investigation (NBI) investigated the petitioners, who were engaged in manufacturing and selling counterfeit NBA products. The NBI recommended prosecution for unfair competition under Article 189 of the Revised Penal Code.

Rick Welts, as president of NBA Properties, executed a Special Power of Attorney authorizing a Philippine law firm to file complaints on the company's behalf. The document was notarized in New York and authenticated by the Philippine Consulate. Welts also executed a Complaint-Affidavit before a New York notary public.

An Information was filed against the petitioners. Before arraignment, they moved to quash, arguing that the facts charged did not constitute an offense and that the trial court lacked jurisdiction. They claimed the complaint was defective because it was not sworn before the prosecutor, that the foreign corporation could not sue in the Philippines, and that the trademarks were not being used locally.

The Issue Presented

The central issue was whether the trial court erred in denying the motion to quash. The petitioners raised several grounds, including the alleged incapacity of the foreign corporation to maintain the action and the lack of authority of its officer to represent it.

The Ruling of the Supreme Court

The Court denied the petition. It held that a special civil action for certiorari is not the proper remedy to challenge the denial of a motion to quash. The proper course is to proceed to trial, raise the defenses there, and appeal if an adverse decision is rendered. The Court found no exceptional circumstances to justify an immediate resort to certiorari.

On the substantive issues, the Court noted that the grounds for quashing an information under Section 3, Rule 117 of the 1985 Rules of Criminal Procedure are limited. Defects in the complaint filed before the fiscal and the complainant's capacity to sue are not among them. The complaint was substantially sufficient, and the absence of an oath, if any, is a mere defect of form that does not affect the accused's substantial rights.

More importantly, the Court emphasized that unfair competition under Article 189 of the Revised Penal Code is a public crime. It is an offense against the State, which is the principal injured party. The complainant's capacity to sue is therefore immaterial to the prosecution. Citing La Chemise Lacoste, S.A. v. Fernandez (G.R. Nos. L-63796-97 and L-65659, May 21, 1984), the Court reiterated that a foreign corporation's standing is not significant in a criminal case, and that enforcing treaty obligations under the Paris Convention serves the national interest.

The Court also held that the petitioners' arguments about the originality of their designs and their non-use of the complainant's logo are matters of defense that should be resolved during trial, not in a motion to quash.

Practical Takeaways

• A motion to quash is a limited remedy; defects in the complaint-affidavit or the complainant's capacity to sue are not valid grounds for quashing an information.
• Unfair competition is a public crime, so the State prosecutes it regardless of the private complainant's ability to sue.
• Foreign corporations may initiate complaints for unfair competition even if they are not doing business in the Philippines, as long as the crime is properly charged.
• Challenges to the merits of the case, such as the originality of designs or actual use of trademarks, should be raised at trial.
• Procedural missteps, like filing certiorari instead of proceeding to trial, can delay the case and do not help the accused.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.