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.

Case Summary (G.R. No. 179127)

Key Individuals and Context

  • Petitioner: In‑N‑Out Burger, Inc., a California corporation signatory to the Paris Convention and TRIPS; engaged in the restaurant business but had not operated in the Philippines.
  • Respondents: Sehwani, Incorporated and Benita Frites, Inc., Philippine corporations; Sehwani held a Philippine registration for “IN N OUT (inside of the letter ‘O’ formed like a star)” and licensed Benita Frites to use that mark.
  • IPO Officials: Estrellita Beltran‑Abelardo (Director of Legal Affairs, Bureau of Legal Affairs, IPO) and Adrian Cristobal, Jr. (Director General, IPO).
  • Adjudicative Bodies: Bureau of Legal Affairs (IPO), Director General of the IPO (appellate administrative authority), Court of Appeals, and the Supreme Court.
  • Governing Legal Framework: The Intellectual Property Code (R.A. No. 8293) — key provisions invoked include Sections 7, 10, 156, 160, 163, 168, 169, and 170 — and, because the dispositive decision was rendered in 2008, the 1987 Constitution is the constitutional framework applicable to the Court’s exercise of judicial power.

Key Dates and Procedural Milestones

  • 2 June 1997: Petitioner filed trademark/service mark applications in the IPO for “IN‑N‑OUT” and “IN‑N‑OUT Burger & Arrow Design.”
  • 31 May 2000: Official Action Papers revealed Sehwani’s existing registration for “IN N OUT (star inside O).”
  • 18 Oct 2000: Petitioner sent a cease‑and‑desist demand to Sehwani; Sehwani refused but offered to surrender registration for consideration.
  • 4 June 2001: Petitioner filed an administrative complaint with the IPO (BLA) for unfair competition and cancellation of Sehwani’s registration.
  • 22 Dec 2003: IPO Director of Legal Affairs granted petitioner’s complaint in part — ordered cancellation of Sehwani’s Certificate of Registration No. 56666 and enjoined respondents from using the marks; also ordered cessation of use of the “Double‑Double” mark.
  • 2004–2005: Motions for reconsideration denied; various appeals filed before the IPO Director General and petitions to the Court of Appeals (CA).
  • 23 Dec 2005: IPO Director General modified the 22 Dec 2003 decision and found respondents guilty of unfair competition, awarding actual damages, exemplary damages and attorney’s fees, and ordering seizure/disposal of infringing products.
  • 18 Jul 2006: Court of Appeals reversed the IPO Director General’s 23 Dec 2005 decision on the ground that Section 163 of the Intellectual Property Code vests exclusive jurisdiction over certain trademark matters in the regular courts, thereby holding the IPO lacked jurisdiction to decide unfair competition.
  • 15 Oct 2007: Supreme Court decision in G.R. No. 171053 (related) affirmed aspects of the BLA decision and the question of petitioner’s capacity to sue; subsequent finality of that decision.
  • 24 Dec 2008: Supreme Court (Third Division) rendered the judgment under review reinstating in part the IPO Director General’s 23 Dec 2005 decision (with modification of exemplary damages).

Procedural History and Parallel Proceedings

  • Petitioner’s administrative complaint before the IPO BLA led to a BLA decision cancelling Sehwani’s registration and enjoining use of the marks. Both parties filed motions for reconsideration which were denied. Respondents filed two separate petitions to the Court of Appeals: CA‑G.R. SP No. 88004 challenging the dismissal by the IPO Director General of a late appeal (resulting in affirmation of the BLA decision), and CA‑G.R. SP No. 92785 challenging the IPO Director General’s later finding of unfair competition and damages. The CA treated the two petitions as distinct and, in CA‑G.R. SP No. 92785, reversed the IPO Director General on jurisdictional grounds. The Supreme Court subsequently resolved the jurisdictional and substantive issues before it in the petition at bar.

Issues Presented to the Supreme Court

  • Whether the Court of Appeals erred in holding that the IPO (specifically the IPO Director of Legal Affairs and the IPO Director General) lacks jurisdiction over administrative complaints for intellectual property violations, including unfair competition;
  • Whether the petition to the Supreme Court was formally defective (verification, notarial certificates, and certification against forum shopping); and
  • Whether respondents were guilty of submitting a patently false certification of non‑forum shopping or of forum shopping.

Formal Defects: Verification and Notarial Certificates

  • Respondents challenged the validity of the Verification/Certification signed by petitioner’s counsel, hinging on an allegedly defective Secretary’s Certificate notarized in California and on notarial deficiencies in the counsel’s jurat. The Court clarified that the California jurat constitutes a jurat (not an acknowledgment) and that Act No. 2103 / Landingin v. Republic (which govern acknowledgments) were inapplicable. A Secretary’s Certificate in this context requires only a jurat. Additionally, even if the Secretary’s Certificate had technical flaws, the counsel who signed the verification (Atty. Barranda) was competent to verify the petition because an agent or counsel who has personal knowledge of the facts may sign the verification. Verification is a formal (not jurisdictional) requirement; substantial justice and the importance of the issues justified liberal application of procedural rules. The Court admonished notaries and counsel to observe formalities but declined to dismiss the petition on these grounds.

Forum Shopping and Certification Against Forum Shopping

  • Respondents were alleged to have engaged in forum shopping by filing two petitions to the CA (CA‑G.R. SP No. 88004 and CA‑G.R. SP No. 92785). Forum shopping requires identity of parties, causes of action/reliefs, and potential for res judicata. The Court acknowledged initial appearance of forum shopping because both petitions sought relief challenging aspects of the BLA decision, but distinguished them by noting that CA‑G.R. SP No. 92785 raised the separate issue of unfair competition — an issue that could not have been raised earlier because the IPO Director General’s 23 Dec 2005 decision (finding unfair competition) had not yet been rendered when the earlier petition was filed. The Court also found the certificate against forum shopping defective for failing to refer to the earlier petition, but treated this as a non‑jurisdictional formal defect. Given the factual background and the significance of the jurisdictional question, the Court relaxed strict procedural requirements and gave due course to the petition while warning parties against laxity.

Jurisdictional Analysis: IPO vs. Regular Courts

  • The core jurisdictional dispute concerned Section 163 of the Intellectual Property Code, which provides that actions under specified sections (including Section 168 on unfair competition) shall be brought before the proper courts. The Court of Appeals read Section 163 to vest sole jurisdiction over trademark matters (including unfair competition) in the regular courts, thereby excluding IPO administrative adjudication. The Supreme Court disagreed. It relied on the express provisions of the Intellectual Property Code that delineate administrative powers and remedies: (a) Section 10 lists the designated functions of the Bureau of Legal Affairs, expressly including hearing and deciding cancellation of trademarks and exercising original jurisdiction in administrative complaints for violations of intellectual property rights (with prescribed monetary thresholds and penalties); (b) Section 7 vests exclusive appellate jurisdiction in the IPO Director General over BLA decisions; and (c) Sections 160 and 170 recognize the concurrent availability of civil, administrative and criminal remedies for trademark violations and unfair competition. The Supreme Court therefore concluded that the IPO Director of Legal Affairs had jurisdiction to adjudicate the administrative complaint, and the IPO Director General had appellate administrative jurisdiction to modify the BLA decision. Section 163 did not strip the administrative forum of jurisdiction or make regular courts exclusively competent over unfair competition claims.

Preclusive Effect of Prior Supreme Court Decision (Conclusive Findings)

  • The Supreme Court recognized that its earlier decision in G.R. No. 171053 (15 Oct 2007) had finally determined petitioner’s superior right to the “IN‑N‑OUT” trademarks vis‑à‑vis respondents and affirmed the cancellation of Sehwani’s registration. Under the doctrine of conclusiveness of judgment, the Court would not revisit that settled finding when deciding the present petition; the remaining question concerned whether respondents were properly found guilty of unfair competition and whether damages were properly awarded.

Unfair Competition: Legal Standards and Application

  • The Court recited the essential elements of unfair competition: (1) confusing similarity in the general appearance of goods or their presentation; and (2) an intent to deceive the public and defraud a competitor. The element of intent may be inferred from the circumstances and confusing similarity; actual fraudulent intent need not be proven. Applying the “substantial evidence” standard applicable in administrative proceedings, the Supreme Court found substantial evidence supporting the IPO Director General’s finding of unfair competition: respondents were using petitioner’s marks and trade dress (including “IN‑N‑OUT Burger,” the “Double‑Double” mark, wrappers, receptacles, and receipts bearing “representing IN‑N‑OUT”); respondents opened a restaurant under the “IN‑N‑OUT BURGER” name after petitioner’s demand to desist; respondents’ claimed reason for not using the star inside the “O” (making their registered mark different) was unconvincing; and respondents failed to produce use evidence to substantiate their claim of prior use since 1982. On those bases, the Court sustained the finding of unfair competition.

Damages and Remedies

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