PEARL & DEAN (PHIL.), INCORPORATED vs.

SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED

FACTS:
1. Pearl & Dean (Phil.), Inc. (P&D) is a corporation that produces advertising display units known as light boxes. These
units consist of specially printed posters placed between plastic sheets and illuminated from behind. P&D obtained a
copyright certificate for these illuminated display units on January 20, 1981. The trademark "Poster Ads" was
registered under the Bureau of Patents, Trademarks, and Technology Transfer on September 12, 1988, although the
application was filed in 1983. From 1981 to 1988, Metro Industrial Services handled the production of these display
units for P&D.
2. In 1985, P&D engaged in negotiations with Shoemart, Inc. (SMI) regarding the installation of their light boxes at SM
City North Edsa, which was under construction at the time. As an alternative, SMI proposed SM Makati and SM Cubao,
to which P&D consented.
3. On September 11, 1985, P&D’s General Manager, Rodolfo Vergara, submitted contracts for SM Cubao and SM Makati
to SMI’s Advertising Promotions and Publicity Division Manager, Ramonlito Abano, for signing. However, only the
contract for SM Makati was returned with a signature. On October 4, 1985, Vergara sent a letter to Abano inquiring
about the SM Cubao contract and reiterating that their agreement covered both locations. SMI did not respond.
4. On January 14, 1986, SMI’s house counsel informed P&D that the contract for SM Makati was being rescinded due to
non-performance. In response, Vergara refuted the allegations and insisted that the contract for SM Cubao should still
be signed.
5. In 1988, Metro Industrial Services, the company that previously manufactured light boxes for P&D, offered to create
similar units for SMI’s stores. SMI accepted the proposal, leading to the fabrication of ten (10) light boxes. After its
contract with Metro Industrial ended, SMI engaged EYD Rainbow Advertising Corporation, which produced 300
additional light boxes in 1991, later installed in SM Megamall and SM City.
6. By 1989, P&D received reports that light boxes identical to its own had been installed at various SM branches. An
investigation confirmed that these units were present not only in SM City and the SM Cubao food court but also in
two other SM locations. Further inquiry revealed that North Edsa Marketing Inc. (NEMI) was established as a
marketing entity to sell advertising space in these illuminated display units. P&D noted that NEMI was closely affiliated
with SMI.
7. On December 11, 1991, P&D sent a letter demanding that SMI and NEMI cease using the light boxes, remove them
from SM establishments, stop using the "Poster Ads" trademark, and pay P20,000,000 in damages.
8. Following receipt of the demand letter, SMI halted the leasing of 224 light boxes, and NEMI discontinued its
advertisements for "Poster Ads." Since the demands were not fully met, P&D filed a lawsuit against SMI and NEMI for
trademark and copyright infringement, unfair competition, and damages.
9. SMI countered that its poster panels were developed independently using commonly known techniques and that
P&D's copyright did not apply to its work. SMI also argued that "Poster Ads" was a generic term and could not be
exclusively registered as a trademark. Furthermore, SMI claimed that P&D’s copyright protection was invalid since its
light boxes lacked copyright notices.
10. NEMI denied any involvement in the manufacturing or use of advertising units and aligned its defense with SMI’s
arguments, seeking similar counterclaims.
11. The RTC of Makati ruled in favor of P&D, holding SMI and NEMI jointly liable for copyright and trademark infringement
and directing them to pay damages, impound the infringing light boxes, and cease further infringement.
12. On appeal, the Court of Appeals overturned the RTC’s decision, concluding that P&D’s copyright protection covered
only the engineering drawings of the light boxes, not the boxes themselves. It also ruled that P&D’s trademark
registration did not extend to advertising display units but was limited to stationeries like letterheads and envelopes.
13. Dissatisfied with the Court of Appeals’ ruling, P&D brought the case to the Supreme Court.

ISSUES:
1. Whether the copyright protection granted to the engineering drawings of a light box extends to the actual light box
depicted in such drawings.
2. Whether the light box itself should have been separately registered for patent protection under the Bureau of
Patents, Trademarks, and Technology Transfer (now the Intellectual Property Office).
3. Whether a registered trademark owner can legally prevent others from using the mark if it is merely a shortened form
of a descriptive term for the business, goods, or services.
HELD:
1. No. The copyright granted to the engineering drawings does not automatically extend to the actual light boxes.
Copyright law protects only what is explicitly covered under its provisions. P&D’s copyright was registered under class
"O," which applies to prints, pictorial illustrations, and advertising copies, not utilitarian objects like light boxes. Since
copyright law excludes non-literary and non-artistic items, the protection remained limited to the drawings. P&D’s
 copyright did not cover the light boxes themselves, which were classified as an engineering or marketing invention
rather than a creative work subject to copyright. The Court emphasized that had SMI and NEMI reproduced the
technical drawings and distributed them, there would have been a valid claim for infringement. However, simply
constructing a light box based on a technical drawing does not fall under copyright protection, making P&D’s claim
invalid.
2. Yes. The light box should have been patented separately if P&D sought exclusive rights over its production and sale.
Copyright protects artistic and literary works, whereas patents safeguard new inventions. Since P&D did not secure a
patent, it could not prevent others from manufacturing or using the light boxes. Intellectual property law requires
patent protection for inventions, ensuring that their novelty and patentability are scrutinized. Without a patent, the
invention is considered in the public domain, allowing others to replicate and use it freely. The Court noted that had
P&D sought a patent, its rights would have been protected for 17 years. Instead, it sought indefinite exclusivity
through copyright, which contradicts the purpose of intellectual property laws.
3. No. The owner of a registered trademark cannot prevent others from using it if it is merely a contraction of a generic
term. P&D registered "Poster Ads" for stationery items like letterheads and envelopes, but it did not register the
trademark for light boxes or advertising units. Since trademark protection is limited to the goods and services listed in
the registration, P&D’s claim of infringement had no basis. Moreover, "Poster Ads" was a descriptive term for poster
advertising, and there was no evidence that the public associated it exclusively with P&D. Without proof of secondary
meaning, where a generic term acquires distinctiveness through long use, P&D could not claim exclusive rights over
"Poster Ads." The Court further noted that trademark law does not grant a monopoly over common words used in
their ordinary sense, preventing P&D from asserting a claim based on an unregistered and generic term. The claim of
unfair competition was also unsubstantiated due to a lack of evidence showing that the public identified "Poster Ads"
solely with P&D.