G.R. No. 102223 August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC., and FRANCISCO S. AGUIRRE, petitioners, vs. THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC, INC., respondents.

FACTS

Private respondents ITEC, INC. and ITEC INTERNATIONAL, INC. (ITEC) are foreign corporations not licensed to do business in the Philippines. They entered into a “Representative Agreement” with petitioner ASPAC, a domestic corporation, appointing ASPAC as their exclusive Philippine representative for selling ITEC’s products to the Philippine Long Distance Telephone Company (PLDT). A subsequent “License Agreement” allowed ASPAC to incorporate “ITEC” into its corporate name. ITEC later terminated the agreement, alleging that ASPAC and its president, Francisco Aguirre, used confidential product knowledge to develop and sell competing equipment to PLDT. ITEC filed a complaint for injunction and damages to stop the petitioners from using its trademark and selling allegedly copied products.
The petitioners moved to dismiss the complaint on two grounds: first, that ITEC, as an unlicensed foreign corporation doing business in the Philippines, lacked legal capacity to sue; and second, on the principle of forum non conveniens. The Regional Trial Court denied the motion and issued a writ of preliminary injunction. The Court of Appeals sustained this order, prompting this petition.

ISSUE

Whether the respondent foreign corporation, ITEC, which is not licensed to do business in the Philippines, has the legal capacity to sue before Philippine courts.

RULING

Yes, ITEC has the legal capacity to sue. The Supreme Court affirmed the rulings of the lower courts, applying the established doctrine that an unlicensed foreign corporation transacting business in the Philippines may sue in Philippine courts for the purpose of protecting its reputation and trademark from infringement. The legal logic is rooted in the distinction between a foreign corporation “doing business” and one merely performing isolated transactions. The prohibition against an unlicensed foreign corporation from maintaining suit is intended to bar it from recovering on claims arising from, or connected with, its business dealings in the country. However, this prohibition does not extend to suits necessary to protect the corporation’s intellectual property rights, such as trademarks, from unfair competition or infringement.
The Court found that ITEC’s cause of action did not arise from its business transactions in the Philippines but from the petitioners’ alleged acts of unfair competition and trademark infringement. The suit was essentially a protective measure to prevent the misuse of its corporate name and the appropriation of its product designs. Allowing such a suit is consistent with equity and the state’s interest in preventing fraud and protecting intellectual property, regardless of the plaintiff’s licensing status. The Court also found the ground of forum non conveniens inapplicable, as the acts complained of occurred within the Philippines and involved domestic corporations.