G.R. No. L-27004 August 16, 1983
PARKE, DAVIS & COMPANY, petitioner, vs. DOCTOR’S PHARMACEUTICALS, INC. and TIBURCIO S. EVALLE, in his capacity as Director of Patents, respondents.

FACTS

In a prior case (G.R. No. L-22221), the Supreme Court affirmed the Director of Patents’ decision ordering petitioner Parke, Davis & Company to grant respondent Doctor’s Pharmaceuticals, Inc. a compulsory license under Letters Patent No. 50 for the chemical “chloramphenicol.” The dispositive portion of that decision directed the parties to submit a licensing agreement within thirty days; in default thereof, the Director was authorized under Section 36 of Republic Act No. 165 (The Patent Law) to fix the terms and conditions. The parties failed to reach an agreement.
Consequently, the Director of Patents, in a resolution dated March 25, 1966, amended on November 25, 1966, issued the compulsory license, fixing an 8% royalty on net sales of licensed products and declaring the license immediately effective. Petitioner Parke Davis contested this, arguing the 8% rate was grossly inadequate, arbitrary, and unsupported by evidence. It insisted the prevailing international rate for compulsory licenses on medicines was 15-18%, citing examples from Great Britain and Canada. Respondent Doctor’s Pharmaceuticals countered with examples of lower agreed rates (5% and 7%) in other Philippine licensing agreements.

ISSUE

Whether the Director of Patents committed grave abuse of discretion in fixing the royalty rate at 8% and in ordering the immediate effectivity of the compulsory license.

RULING

The Supreme Court dismissed the petition and affirmed the Director of Patents’ resolution. On the royalty rate, the Court held that findings of fact by administrative agencies like the Patent Office are generally conclusive and not subject to judicial review absent a showing of grave abuse of discretion or lack of substantial evidence. The Court found no such abuse. The Director’s fixing of an 8% rate was a reasoned compromise between the higher rates cited by the petitioner (e.g., 12.5% in Canada, 15% in Great Britain) and the lower rates presented by the respondent (5% and 7% in local agreements). This was deemed reasonable, considering the policy to afford liberal treatment to local industry in developing countries like the Philippines to enable them to compete with foreign industrial giants. The Court agreed with the Solicitor General’s view that the rate was just, considering Doctor’s was a small venture compared to Parke Davis’s large multinational parent, and that petitioner had access to respondent’s records to seek an increase if future profits justified it.
Regarding the immediate effectivity of the license, the Court ruled the Director acted within his authority. Section 4, Rule 44 of the Rules of Court explicitly states that appeals do not stay awards, orders, or decisions of the Patent Office. This provision ensures the executory nature of its rulings. The immediate effect was particularly appropriate here, as the parties had failed to submit an agreement and left the matter to the Director’s discretion. To hold otherwise would invite interminable litigation and frustrate the purpose of compulsory licensing. The Court noted the patent had already expired by 1967, further rendering the issue moot.