Trademark Infringement and Probable Cause: When the Secretary of Justice Abuses Discretion

The Supreme Court's 2017 ruling in Forietrans Manufacturing Corp. v. Davidoff Et Cie SA clarifies an important boundary in Philippine criminal procedure: when may courts overturn the Secretary of Justice's finding of no probable cause in intellectual property cases? The decision affirms that while prosecutors enjoy broad discretion in preliminary investigations, that discretion is not absolute—and businesses pursuing infringement complaints benefit from knowing exactly when judicial intervention is available.

The Case: Counterfeit Cigarettes and Confusingly Similar Brands

Davidoff and Japan Tobacco, Inc. (JTI) filed complaints alleging that Forietrans Manufacturing Corporation (FMC) was producing counterfeit cigarettes. Acting on these complaints, authorities executed search warrants on FMC's premises and seized cigarettes labeled "DAGETA" and "DAGETA International," along with products bearing similarities to JTI's "Mild Seven" brand. Davidoff and JTI then filed criminal complaints for trademark infringement and false designation of origin under the Intellectual Property Code (IP Code).

The Provincial Prosecutor dismissed the complaints, and Secretary of Justice Raul Gonzalez affirmed. The Court of Appeals reversed, holding that Secretary Gonzalez had gravely abused his discretion by improperly weighing evidence—a function reserved for trial courts. The question reached the Supreme Court: did the CA err in overturning the Secretary's determination?

Probable Cause: A Low Threshold

The Supreme Court sided with the Court of Appeals, reiterating that probable cause requires only facts sufficient to create a well-founded belief that a crime has been committed and that the respondent is likely guilty. The standard is prima facie evidence—evidence facially sufficient to establish a claim unless rebutted. It does not demand proof beyond reasonable doubt or even a preponderance of evidence.

While the Court acknowledged the general policy of non-interference with executive determinations of probable cause, rooted in the separation of powers, it emphasized that this policy is not absolute. Courts may intervene upon a clear showing of grave abuse of discretion—judgment that is capricious, whimsical, or arbitrary, essentially equivalent to lacking jurisdiction. Citing Unilever Philippines, Inc. v. Tan, the Court held that dismissing a complaint despite ample supporting evidence constitutes grave error justifying judicial intervention.

The Secretary's Error: Confusing Two Different Inquiries

The Court criticized Secretary Gonzalez for essentially reviewing the judge's determination of probable cause for issuing search warrants, rather than focusing on the evidence presented during the preliminary investigation. These are distinct inquiries: a judge determines probable cause for warrants; a prosecutor assesses probable cause for filing charges.

The Court observed that the search warrant applications lacked sufficient proof of probable cause, noting that what began as a search for fake JTI and Davidoff products shifted to fake Dageta International, then to fake Dageta confusingly similar to Davidoff, and finally to mislabeled Dageta cigarettes. The Court expressed concern that the exception against unreasonable searches and seizures had been misused, undermining the very protection the constitutional provision was designed to secure.

Trademark Infringement: Likelihood of Confusion

Section 155 of the IP Code defines trademark infringement as using in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark where such use is likely to cause confusion, mistake, or deception. The crucial element is likelihood of confusion.

The Court found a prima facie case existed. Although "Davidoff" and "Dageta" are distinct names, the packaging similarities were notable: both used octagonal designs, black and red coverings, silver tear tape and printing, manufacturing codes at the base, and similar back-panel text. The Court recognized that successful infringement often involves subtle changes that confuse consumers while appearing different to courts. Similar logic applied to the JTI claim involving cigarettes deceptively similar to "Mild Seven."

False Designation of Origin

The IP Code also prohibits false designations of origin—misrepresenting the geographic source of goods in a way likely to cause confusion or deceive consumers. The complainants alleged FMC manufactured "DAGETA" cigarettes labeled "Made in Germany" despite being produced in the Philippines. Seized manufacturing equipment and inventory supported this claim. Secretary Gonzalez's dismissal of this charge without factual or legal basis further demonstrated the abuse of discretion.

Practical Takeaways

• Probable cause is a low bar. Complainants need only present prima facie evidence—not proof that would sustain a conviction.
• Prosecutors may not re-weigh evidence. Determining probable cause for filing charges is distinct from evaluating evidence at trial; dismissal based on improper weighing constitutes grave abuse.
• Packaging similarity matters. Even with different brand names, strikingly similar packaging can establish likelihood of confusion sufficient for prosecution.
• Judicial review is available. Courts will intervene when the Secretary of Justice's dismissal is capricious, whimsical, or arbitrary.
• Document everything. Evidence such as product samples, inventories, and manufacturing equipment can be decisive in establishing probable cause.

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