Title
In-N-Out Burger, Inc. vs. Sehwani, Inc.
Case
G.R. No. 179127
Decision Date
Dec 24, 2008
A U.S.-based restaurant, IN-N-OUT BURGER, contested Philippine entities' use of a similar trademark, alleging unfair competition. The Supreme Court ruled in favor of the petitioner, affirming IPO jurisdiction and finding respondents guilty of unfair competition, awarding reduced damages.
trademark infringement
unfair competition
cancellation of trademark registration

Case Summary (G.R. No. 179127)

Factual Background

IN-N-OUT BURGER, INC. alleged ownership of the trade name and multiple trademarks including “IN-N-OUT,” “IN-N-OUT Burger & Arrow Design,” and “Double-Double,” which it registered abroad and maintained were internationally well-known; it filed Philippine trademark applications in 1997 and later learned that Sehwani, Incorporated had registered a similar mark in 1993 and that Benita’s Frites, Inc. used that mark under license. Petitioner averred that respondents used marks and a menu color scheme confusingly similar to petitioner’s, that respondents’ receipts read “representing IN-N-OUT,” and that respondents used petitioner’s registered “Double-Double” mark and other indicia, thereby misleading consumers.

Administrative Proceedings Before the IPO Bureau of Legal Affairs

Petitioner filed an administrative complaint with the IPO Bureau of Legal Affairs seeking cancellation of Sehwani’s registration and relief for unfair competition; the IPO Director of Legal Affairs found petitioner had legal capacity to sue despite not doing business in the Philippines and, while recognizing respondents’ good-faith use, cancelled Sehwani’s Certificate of Registration No. 56666 and ordered respondents to cease using the disputed marks and the mark “Double-Double.”

Appeals to the IPO Director General and Parallel Court Actions

Both parties moved for reconsideration before the IPO Bureau; respondents’ appeal to the IPO Director General was dismissed as filed out of time, prompting their CA petition in CA-G.R. SP No. 88004, which the CA denied and which this Court later affirmed in G.R. No. 171053 on 15 October 2007. Petitioner timely appealed the Bureau’s denial of its partial motion for reconsideration to the IPO Director General, who on 23 December 2005 modified the Bureau’s decision by finding respondents guilty of unfair competition and awarding actual damages (P212,574.28), exemplary damages (P500,000), and attorney’s fees (P500,000), and ordering seizure and disposition of infringing materials.

Court of Appeals Decision in CA-G.R. SP No. 92785

Respondents filed CA-G.R. SP No. 92785 to challenge the IPO Director General’s 23 December 2005 decision. The Court of Appeals, sua sponte, addressed jurisdiction and held that Section 163 of the Intellectual Property Code vested exclusive jurisdiction over certain trademark-related actions, including unfair competition, in the regular courts; accordingly, the CA reversed and set aside the Director General’s decision insofar as it pertained to Article 168 and the sections enumerated in Section 163, and dismissed respondents’ claims on those acts.

Issues Presented to the Supreme Court

Petitioner raised whether the CA erred in declaring the IPO without jurisdiction over administrative complaints for intellectual property violations; whether the petition was formally defective; and whether the CA erred in finding respondents not guilty of submitting a patently false certification of non-forum shopping and not guilty of forum shopping.

Procedural Objections, Verification, and Forum Shopping

Respondents challenged the petition’s verification as defective due to alleged notarial infirmities in a Secretary’s Certificate and the verification’s jurat; the Court explained that the challenged instruments contained jurats not acknowledgments and that counsel who personally knew the facts may properly verify pleadings, so the verification substantially complied and the Court exercised discretion to give due course in the interest of substantial justice. The Court also examined respondents’ two CA petitions for forum shopping, acknowledged overlapping reliefs and the risk of res judicata, but concluded that the second petition raised a new and timely issue—liability for unfair competition not yet ripe when the first petition filed—thus justifying relaxation of strict certification requirements; the Court warned against procedural laxity but refused dismissal.

Jurisdiction of the IPO

The Court disagreed with the CA’s conclusion of exclusive judicial jurisdiction. It analyzed Section 10 of the Intellectual Property Code, which expressly grants the Bureau of Legal Affairs the power to hear and decide cancellations and to exercise original jurisdiction in administrative complaints for violations of intellectual property rights, subject to monetary limits and remedies including cease-and-desist orders, seizure, forfeiture, fines, assessment of damages, and other sanctions, and Section 7.1(b) which vests in the IPO Director General exclusive appellate jurisdiction over decisions of the Director of Legal Affairs. The Court further noted Sections 160 and 170, which recognize a foreign owner’s right to bring civil or administrative actions and contemplate concurrent administrative, civil, and criminal remedies. Accordingly, the Court held that the IPO Director of Legal Affairs had jurisdiction to decide petitioner’s administrative complaint and that the IPO Director General had appellate jurisdiction over the Director of Legal Affairs’ decisions.

Unfair Competition: Elements and Application to the Record

The Court restated the essential elements of unfair competition as confusing similarity in the general appearance of goods and intent to deceive and defraud a competitor, with actual fraudulent intent not required; intent may be inferred from the circumstances. Invoking the IPO Director General’s factual findings, the Court observed substantial evidence that respondents used petitioner’s marks and trade dress, opened a restaurant after petitioner’s demand to desist, used petitioner’s “Double-Double” mark and packaging bearing petitioner’s trademarks, and issued receipts indicating representation of petitioner, thereby furnishing evidence of confusing similarity and an intent to deceive. The Court declined to revisit the Bureau’s 22 December 2003 cancellation of Sehwani’s registration because that ruling had been finally affirmed by this Court in G.R. No. 171053 and was thus conclusive under the doctrine of res judicata and the conclusiveness of judgment.

Damages, Exemplary Damages, and Attorney’s Fees

Applying Section 156 of the Intellectual Property Code and Section 156.3 permitting doubling of damages where actual intent to mislead is shown, the IPO Director General computed actual damages by applying a thirty percent reasonable-percentage standard to respondents’ gross sales and doubled that amount for intent, resulting in P212,574.28. The C

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