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AIR PHILIPPINES CORPORATION Vs PENNSWELL

The Supreme Court denied the petition of Air Philippines Corporation and affirmed the decision of the Court of Appeals. The case involved a dispute over an outstanding debt owed by Air Philippines to Pennswell for industrial chemicals and lubricants. Air Philippines claimed it was defrauded, but the courts ruled that the chemical components of Pennswell's products constituted trade secrets that were not subject to compulsory disclosure. Trade secrets derive economic value from being unknown and should receive protection from discovery.

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2K views2 pages

AIR PHILIPPINES CORPORATION Vs PENNSWELL

The Supreme Court denied the petition of Air Philippines Corporation and affirmed the decision of the Court of Appeals. The case involved a dispute over an outstanding debt owed by Air Philippines to Pennswell for industrial chemicals and lubricants. Air Philippines claimed it was defrauded, but the courts ruled that the chemical components of Pennswell's products constituted trade secrets that were not subject to compulsory disclosure. Trade secrets derive economic value from being unknown and should receive protection from discovery.

Uploaded by

Rio Tolentino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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AIR PHILIPPINES CORPORATION vs. PENNSWELL, INC.

G.R. NO. 172835 : December 13, 2007

PONENTE: CHICO-NAZARIO, J.

FALLO: WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution
dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.

FACTS:

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air
transportation services. On the other hand, respondent Pennswell, Inc. was organized to engage in the
business of manufacturing and selling industrial chemicals, solvents, and special lubricants. Under the
contract, petitioner has an outstanding balance to the respondent. For failure of the petitioner to
comply with its obligation under said contracts, respondent filed a complaint.

The petitioner alleged that he was defrauded by respondent for its previous sale. Said items were
misrepresented by respondent as belonging to new line but it turned out that it was identical to what
the petitioner had previously purchased. Petitioner asserted that it was deceived by respondent which
merely altered the names and labels of such goods. During the pendency of the trial, petitioner filed a
Motion to Compel respondent to give a detailed list of the ingredients and chemical components of the
subject product. However, RTC ruled in favor of respondent affirmed by the CA.

ISSUE:

THE CHEMICAL COMPONENTS OR INGREDIENTS OF RESPONDENT’S PRODUCTS ARE TRADE SECRETS OR


INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO COMPULSORY DISCLOSURE.

RULING:

The Court ruled in affirmative. The Supreme Court declared that trade secrets and banking transactions
are among the recognized restrictions to the right of the people to information as embodied in the
Constitution. The drafters of the Constitution also unequivocally affirmed that, trade or industrial secrets
as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from
compulsory disclosure.

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner
and those of his employees to whom it is necessary to confide it. The definition also extends to a secret
formula or process not patented but known only to certain individuals using it in compounding some
article of trade having a commercial value. American jurisprudence has utilized the following factors to
determine if an information is a trade secret, to wit:

(1) the extent to which the information is known outside of the employer’s business;

(2) the extent to which the information is known by employees and others involved in the business;
(3) the extent of measures taken by the employer to guard the secrecy of the information;

(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in developing the information; and

(6) the extent to which the information could be easily or readily obtained through an independent
source.

The proviso under Sec. 1, Rule 27 of Rules of Court, the documents, papers, books, accounts, letters,
photographs, objects or tangible things that may be produced and inspected should not be privileged.
On the ground of public policy, the rules providing for production and inspection of books and papers do
not authorize the production or inspection of privileged matter; that is, books and papers which,
because of their confidential and privileged character, could not be received in evidence.

What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical
formulation of respondent’s products is not known to the general public and is unique only to it.   Hence,
the Court rules in favor of the greater interest of respondent.  Trade secrets should receive greater
protection from discovery, because they derive economic value from being generally unknown and not
readily ascertainable by the public.

DOCTRINE:

- Trade secrets should receive greater protection from discovery because they derive economic
value from being generally unknown and not readily ascertainable by the public.

RATIONALE:

- Art. 291. Revealing secrets with abuse of office. (RPC)


- Art. 292. Revelation of industrial secrets. (RPC)
- Section 278, R.A. No. 8424, otherwise known as the National Internal Revenue Code. Procuring
Unlawful Divulgence of Trade Secrets.
- R.A. No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990,
limits the right of the public to have access to records, reports or information concerning
chemical substances and mixtures including safety data submitted, if the matter is confidential
such that it would divulge trade secrets.
- Section 24 of Rule 130 which includes trade secrets as privileged

CRITIQUE:

I agree with the decision of the Supreme Court.

The respondents proved that the chemical component sought were used in its business and gives them
opportunity to obtain advantage over competitors who do not possess the information. Such disclosure
will make its business competitors imitate and market the same type of products in violation of its
propriety rights.

Pursuant to the statues and jurisprudence cited by the Court, there is no dispute that the ingredients of
the respondent’s products are trade secrets, therefore not subject to compulsory disclosure.

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