G.R. No. 171053 - Sehwani, Inc. vs. In-N-Out Burger, Inc.

Case Summary (G.R. No. 171053)

Procedural Posture

IN-N-OUT filed an administrative complaint before the BLA-IPO seeking cancellation of Sehwani’s Trademark Registration No. 56666, injunctive relief, attorney’s fees and damages. Bureau Director Estrellita Beltran‑Abelardo rendered Decision No. 2003‑02 (22 December 2003) canceling Sehwani’s registration and ordering cessation of use. Petitioners’ motion for reconsideration was denied (Resolution No. 2004‑18, 28 October 2004). An appeal to the Director General (Appeal No. 14‑2004‑0004) was dismissed by Director General Emma C. Francisco for being filed out of time (Order dated 7 December 2004). The Court of Appeals affirmed the dismissal (CA‑G.R. SP No. 88004, 21 October 2005) and denied further motions for reconsideration; the Supreme Court denied the petition and affirmed the Court of Appeals and IPO rulings.

Factual Background

Respondent IN‑N‑OUT claimed ownership of the tradename and trademarks “IN‑N‑OUT,” “IN‑N‑OUT Burger & Arrow Design,” and “IN‑N‑OUT Burger Logo,” used since 1948 and registered in the United States and elsewhere. On 2 June 1997 respondent applied with the IPO to register its marks in the Philippines and discovered that Sehwani had secured local Trademark Registration No. 56666 for “IN N OUT” (with the inside of the letter O formed like a star) on 17 December 1993 without respondent’s authority. Sehwani entered into a license with Benitaas Frites to use “IN‑N‑OUT BURGER” at a Pasig City restaurant, prompting IN‑N‑OUT’s cancellation action.

Administrative Proceedings and Findings

Bureau Decision No. 2003‑02 found that IN‑N‑OUT had legal capacity to sue and that its marks are internationally well‑known, and consequently cancelled Sehwani’s Certificate of Registration No. 56666 and ordered Sehwani and Benitaas Frites to cease using “IN‑N‑OUT” and related logos; the Bureau also ordered cessation of use of the mark “Double‑Double.” The Bureau initially did not find petitioners guilty of unfair competition in that decision but later administrative proceedings by the IPO addressed unfair competition separately.

Appeal to the Director General and Timeliness Requirement

Under the Uniform Rules on Appeal (Office Order No. 12, s. 2002), decisions or final orders of the Bureau Director become final and executory thirty days after receipt unless a motion for reconsideration is filed or an appeal to the Director General is perfected within that period; if a motion for reconsideration is filed and later denied, the appellant has the remaining balance of the original thirty‑day period to file an appeal. The IPO records showed petitioners received the denial of reconsideration on 29 October 2004, rendering the deadline for filing the appeal memorandum 13 November 2004 (adjusted to the next working day, 15 November 2004). The Director General dismissed petitioners’ appeal for late filing.

Court of Appeals’ Ruling on Jurisdictional Timeliness

The Court of Appeals affirmed the Director General’s dismissal, holding that the right to appeal is a procedural remedy of statutory origin and that requirements for perfection of appeal are jurisdictional and must be strictly complied with. Because petitioners’ appeal memorandum was filed out of time, the Bureau’s decision and order became final and executory and the appellate tribunals lacked jurisdiction to alter them.

Issues Raised Before the Supreme Court

Petitioners raised primarily two lines of attack: (1) that dismissal of their appeal on a technicality resulted in miscarriage of justice and that substantial justice warranted consideration of their appeal on the merits; and (2) on the merits, that respondent lacked legal capacity to sue in the Philippines, that the Bureau failed to prove grounds for cancellation under Section 151 of RA 8293, and that the complaint was barred by laches or prescription. Petitioners also contested findings related to unfair competition.

Supreme Court’s Threshold Ruling on Timeliness and Counsel’s Responsibility

The Supreme Court upheld the dismissal for untimely appeal, reiterating that perfection of an appeal within prescribed periods is mandatory and jurisdictional; exceptions are rare and reserved for highly meritorious cases to avoid grave injustice, which was not shown here. The Court rejected petitioners’ excuse that counsel erred in computing the appeal period, emphasizing that inadvertent or negligent computation by counsel is inexcusable and that a client is bound by counsel’s conduct; lawyers are duty‑bound to monitor filing periods regardless of being solo practitioners or having limited staff.

Legal Capacity of Respondent under RA 8293 and International Conventions

The Court held that IN‑N‑OUT has legal capacity to sue in the Philippines under Section 160 of RA 8293, read in relation to Section 3 (international conventions and reciprocity), which permits foreign persons who meet Section 3 requirements and do not engage in business in the Philippines to bring administrative or civil actions for opposition, cancellation, infringement, unfair competition, or related claims. The Paris Convention (Articles 6 bis and 8) and the WIPO Joint Recommendation provided the international law framework invoked by respondent.

Determination that IN‑N‑OUT’s Marks Are Well‑Known and Deference to IPO’s Factual Findings

The IPO (Bureau Director) found IN‑N‑OUT’s marks to be internationally well‑known based on evidence including multiple U.S. registrations, registrations in other countries, prior IPO inter partes rulings, printed media articles, internet materials, videotaped celebrity references, and the extent of worldwide trademark registrations and advertising. The Court recognized that designation of a mark as “well‑known” is factual and that quasi‑judicial agencies like the IPO enjoy deference for factual findings supported by substantial evidence; the Court found the IPO’s findings fully substantiated.

Application of International Standards and Protection without Local Use or Registration

The Court relied on Article 6 bis of the Paris Convention (protection of well‑k

Case Syllabus (G.R. No. 171053)

Court and Citation

Supreme Court of the Philippines, Third Division.
Citation: 562 Phil. 217; G.R. No. 171053; Decision dated October 15, 2007.
Ponent: Justice Ynares‑Santiago.
Concurring Justices: Austria‑Martinez, Chico‑Nazario, Nachura, and Reyes, JJ.

Parties

Petitioners: Sehwani, Incorporated and/or BenitaaS Frites, Inc. (hereinafter “petitioners”).
Respondent: IN‑N‑OUT Burger, Inc., a foreign corporation organized under the laws of California, U.S.A., not doing business in the Philippines (hereinafter “respondent”).

Nature of the Case

Petition for review of the Court of Appeals decision in CA‑G.R. SP No. 88004 (October 21, 2005) and related Resolution (January 12, 2006) which affirmed the December 7, 2004 Order of Director General Emma C. Francisco of the Intellectual Property Office (IPO) dismissing petitioners’ appeal as filed out of time.
Underlying administrative complaint before the Bureau of Legal Affairs of the IPO (BLA‑IPO) for alleged violation of intellectual property rights, attorney’s fees and damages, with prayer for restraining order / writ of preliminary injunction.

Factual Background

Respondent alleges ownership of the tradename “IN‑N‑OUT” and trademarks “IN‑N‑OUT,” “IN‑N‑OUT Burger & Arrow Design,” and “IN‑N‑OUT Burger Logo,” used in its business since 1948 and registered in the United States and other parts of the world.
On June 2, 1997, respondent applied with the IPO for registration of its trademark “IN‑N‑OUT Burger & Arrow Design” and service mark “IN‑N‑OUT.”
Respondent discovered Sehwani, Inc. had obtained Trademark Registration No. 56666 for the mark “IN N OUT (the inside of the letter ‘O’ formed like a star)” on December 17, 1993, allegedly without respondent’s authority.
Respondent demanded that Sehwani desist from claiming ownership and voluntarily cancel Trademark Registration No. 56666; Sehwani refused and entered into a Licensing Agreement granting BenitaaS Frites, Inc. a five‑year license to use the trademark “IN‑N‑OUT BURGER” in its Pasig City restaurant.
Respondent filed complaint before the BLA‑IPO alleging trademark ownership and misuse; petitioners answered with counterclaim alleging respondent lacked legal capacity to sue in the Philippines (not doing business here), and that respondent’s mark was not registered or used in the Philippines. Sehwani asserted presumption of validity of its registration and contended respondent failed to establish statutory grounds for cancellation under Section 151 of R.A. No. 8293.

Bureau of Legal Affairs (BLA‑IPO) Decision (Director Estrellita Beltran‑Abelardo, Dec. 22, 2003, Decision No. 2003‑02)

Findings:
- Respondent has the legal capacity to sue.
- Respondent is the owner of internationally well‑known trademarks.
- Petitioners were found not guilty of unfair competition (the Decision notes this finding).
Orders and decretal relief:
- Certificate of Registration No. 56666 dated December 17, 1993 for the mark “IN‑N‑OUT (the inside of the letter ‘O’ formed like a star)” issued in favor of Sehwani, Inc. is CANCELLED.
- Sehwani, Inc. and BenitaaS Frites were ordered to permanently cease and desist from using the marks “IN‑N‑OUT” and “IN‑N‑OUT BURGER LOGO” on goods and in business.
- With regard to the mark “Double‑Double,” respondents were likewise ordered to permanently cease and desist from using the mark, considering the Office had approved it for publication and the complainant appeared to be owner.
- No costs were awarded.

Post‑decision Motions and IPO Resolutions

Petitioners filed a motion for reconsideration asserting lack of respondent’s legal capacity, lack of proved grounds for cancellation, and that the action was barred by laches; respondent filed partial reconsideration challenging the finding that petitioners were not guilty of unfair competition.
Both motions were denied: Resolution No. 2004‑18 dated October 28, 2004 denied petitioners’ motion; Resolution No. 2005‑05 dated April 25, 2005 denied respondent’s partial reconsideration.

Appeal to the Director General (Appeal No. 14‑2004‑0004) — Director General Emma C. Francisco (Order dated December 7, 2004)

The motion to admit a copy of Decision No. 2003‑02 was granted.
The appeal was DISMISSED for being filed out of time.
Rationale summarized by the Director General referencing the Uniform Rules on Appeal (Office Order No. 12, s. 2002), notably Section 2 (periods for appeal) and Section 5(c) (authority to dismiss outright if appeal not filed within prescribed period).

Court of Appeals Proceedings and Decision (CA‑G.R. SP No. 88004, October 21, 2005)

Petitioners brought the matter to the Court of Appeals; the CA dismissed the petition for lack of merit.
The CA held that the right to appeal is a procedural remedy of statutory origin and its requirements must be strictly complied with; since the appeal was filed out of time, the BLA‑IPO Decision (Dec. 22, 2003) and the October 28, 2004 Order of Bureau Director Beltran‑Abelardo became final and executory.

Additional IPO Proceedings Noted

Respondent filed a Manifestation with the Court of Appeals that on December 23, 2005, Director General Adrian S. Cristobal, Jr. rendered a Decision in Appeal 10‑05‑01 finding petitioners guilty of unfair competition (the Manifestation was lodged with the CA and noted in the record).

Issues Raised in the Supreme Court Petition

Whether the Court of Appeals erred in upholding the IPO Director General’s dismissal of Appeal No. 14‑2004‑0004 on technicality, resulting in miscarriage of justice and deprivation of intellectual property rights.
Whether substantial justice would be better served by entertaining petitioners’ appeal because the Bureau of Legal Affairs’ Decision and Resolution (1) cancelling Sehwani’s certificate of registration for the mark “IN‑N‑OUT,” and (2) ordering petitioners to permanently cease and desist from using the subject mark, are contrary to law and/or unsupported by evidence.
Petitioners reiterated arguments: counsel’s good faith mistake in computing appeal period, respondent’s lack of legal capacity to sue, absence of statutory grounds for cancellation, and that the complaint is barred by laches or prescription.

Supreme Court’s Ruling on Timeliness and Procedural Compliance

The petition was denied for lack of merit.
The Court reiterated the settled rule that perfection of an appeal within the statutory/reglementary period is mandatory and jurisdictional; failure to comply renders the questioned decision/final order final and executory and deprives the appellate court of jurisdiction.
Relief from strictness may be afforded only in highly meritorious cases to prevent grave injustice; the Cou