AIR PHILIPPINES CORPORATION V. PENNSWELL, INC.

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. Respondent delivered and sold to
petitioner sundry goods in trade. Under the contracts, petitioner’s total outstanding obligation amounted to
P449,864.98 with interest at 14% per annum until the amount would be fully paid. For failure of the petitioner to
comply with its obligation under said contracts, respondent filed a Complaint for a Sum of Money on 28 April 2000
with the RTC.

In its Answer, petitioner alleged that it was defrauded in the amount of P592,000.00 by respondent for its previous
sale of four items. Petitioner asserted that it was deceived by respondent which merely altered the names and labels
of such goods. Petitioner asseverated that had respondent been forthright about the identical character of the
products, it would not have purchased the items complained of.

Moreover, petitioner alleged that when the purported fraud was discovered, a conference was held between petitioner
and respondent on 13 January 2000, whereby the parties agreed that respondent would return to petitioner the
amount it previously paid. However, petitioner was surprised when it received a letter from the respondent,
demanding payment of the amount of P449,864.94, which later became the subject of respondent’s Complaint for
Collection of a Sum of Money against petitioner.

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 following products. The RTC rendered an Order granting the petitioner’s
motion.
 Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to
disclose the chemical components sought because the matter is confidential. It argued that what petitioner
endeavored to inquire upon constituted a trade secret which respondent cannot be forced to divulge.

The RTC gave credence to respondent’s reasoning, and reversed itself. Alleging grave abuse of discretion on the
part of the RTC, petitioner filed a Petition for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals,
which denied the Petition and affirmed the Order dated 30 June 2004 of the RTC. Petitioner’s Motion for
Reconsideration was denied. Unyielding, petitioner brought the instant Petition before SC.

ISSUE:
WON CA erred in upholding RTC decision denying petitioner’s motion to subject respondent’s products to
compulsory disclosure.

HELD:

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

No. The products are covered by the exception of trade secrets being divulged in compulsory disclosure. The Court
affirms the ruling of the Court of Appeals which upheld the finding of the RTC that there is substantial basis for
respondent to seek protection of the law for its proprietary rights over the detailed chemical composition of its
products.
 
 The Supreme Court has 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. SC said that the drafters of the
Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade
or industrial secrets (pursuant to the Intellectual Property Code and other related laws) 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.
 
 Rule 27 sets an
unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or tangible things that
may be produced and inspected should not be privileged. The documents must not be privileged against disclosure.
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. Such a condition is in addition to the requisite that the items
be specifically described, and must constitute or contain evidence material to any matter involved in the action and
which are in the party’s possession, custody or control.
 
 In the case at bar, petitioner cannot rely on Section 77 of
Republic Act 7394, or the Consumer Act of the Philippines, in order to compel respondent to reveal the chemical
components of its products. While it is true that all consumer products domestically sold, whether manufactured
locally or imported, shall indicate their general make or active ingredients in their respective labels of packaging, the
law does not apply to respondent. Respondent’s specialized lubricants — namely, Contact Grease, Connector
Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating, Dry Lubricant and Anti-Seize Compound — are
not consumer products.
 
 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. Both courts
uniformly ruled that these ingredients are not within the knowledge of the public. Since such factual findings are
generally not reviewable by this Court, it is not duty-bound to analyze and weigh all over again the evidence already
considered in the proceedings below.
 
 The revelation of respondent’s trade secrets serves no better purpose to the
disposition of the main case pending with the RTC, which is on the collection of a sum of money. As can be gleaned
from the facts, petitioner received respondent’s goods in trade in the normal course of business. To be sure, there
are defenses under the laws of contracts and sales available to petitioner. On the other hand, the greater interest of
justice ought to favor respondent as the holder of trade secrets. Weighing the conflicting interests between the
parties, SC 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.