G.R. No. 157216; November 20, 2003
246 CORPORATION, doing business under the name and style of ROLEX MUSIC LOUNGE, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge of Branch 90 of the Regional Trial Court of Quezon City, MONTRES ROLEX S.A. and ROLEX CENTRE PHIL. LIMITED, respondents.

FACTS

Respondents Montres Rolex S.A. and Rolex Centre Phil. Limited, proprietors of the “Rolex” and “Crown Device” trademarks for watches and related items, filed a complaint for trademark infringement and damages against petitioner 246 Corporation. The complaint alleged that since July 1996, petitioner had been using the mark “Rolex” without authorization in its business name “Rolex Music Lounge” and in related advertisements for its entertainment establishment. Petitioner, in its answer, raised affirmative defenses including lack of cause of action, arguing that no infringement exists as its entertainment business is unrelated and non-competing with respondents’ luxury goods, thereby precluding consumer confusion. Petitioner also challenged the complaint’s verification and certification against forum shopping, claiming the signing counsel lacked proper authorization.
Petitioner subsequently filed a motion for preliminary hearing on these affirmative defenses, coupled with a motion to dismiss. The trial court issued a subpoena for the respondents’ counsel to testify at the preliminary hearing. Respondents opposed the motion and moved to quash the subpoena. The trial court, in an Order dated October 27, 2000, quashed the subpoena and denied petitioner’s motion for preliminary hearing on affirmative defenses with motion to dismiss. Petitioner’s motion for reconsideration was likewise denied.

ISSUE

The core issues were: (1) whether the trial court denied both the motion for preliminary hearing and the motion to dismiss; and (2) if so, whether such denial constituted grave abuse of discretion.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The trial court’s order was a denial of the motion for preliminary hearing on the affirmative defenses, not a denial on the merits of the motion to dismiss itself. A motion for preliminary hearing on affirmative defenses is a procedural device aimed at expediting the trial by resolving defenses early, but its grant is discretionary. The trial court did not commit grave abuse of discretion in refusing to hold such a hearing, as the substantive issues raised—particularly whether trademark infringement exists under Section 123.1(f) of the Intellectual Property Code concerning well-known marks—are inherently factual. These issues require a full-blained trial to determine the mark’s fame, the degree of association or dilution, and the existence of unfair advantage or detriment, not a preliminary hearing.
Similarly, the question regarding the counsel’s authority to verify the complaint is a factual matter best resolved during trial. Consequently, the quashing of the subpoena against the counsel was proper, as compelling his testimony at a preliminary stage was unnecessary. Grave abuse of discretion implies a capricious, whimsical, or despotic exercise of judgment equivalent to lack of jurisdiction. The trial court’s actions, aimed at allowing the case to proceed to trial on the merits, were within its sound discretion and did not meet this high threshold.