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

Case Summary (G.R. No. 171053)

Factual Background

IN-N-OUT Burger, Inc. alleged 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 since 1948 and registered in the United States and elsewhere. On June 2, 1997, it applied to the IPO to register the mark IN-N-OUT Burger & Arrow Design and the servicemark IN-N-OUT. In the course of its application, it discovered that 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, purportedly without authority of IN-N-OUT Burger, Inc.. Sehwani, Inc. refused to cancel its registration and entered into a Licensing Agreement with Benitas Frites, Inc. granting use of the trademark IN-N-OUT BURGER for five years at a restaurant in Pasig City.

Administrative Complaint and Pleadings

IN-N-OUT Burger, Inc. filed a complaint with the BLA-IPO for violation of intellectual property rights, attorneys' fees, damages, and prayed for injunctive relief. Petitioners answered and counterclaimed, asserting that respondent lacked legal capacity to sue because it did not do business in the Philippines, that respondent had no cause of action because its mark was not registered or used in the Philippines, and that Sehwani, Inc. as the registered owner enjoyed the presumption of valid acquisition and exclusive use. Petitioners also asserted that respondent failed to prove any ground for cancellation under Section 151 of R.A. No. 8293.

Bureau Decision and Relief

Bureau Director Estrellita Beltran-Abelardo rendered Decision No. 2003-02 on December 22, 2003. She found that IN-N-OUT Burger, Inc. had legal capacity to sue and that it owned internationally well-known trademarks. The Decision cancelled Certificate of Registration No. 56666 issued to Sehwani, Inc. and ordered Sehwani, Inc. and Benitas Frites, Inc. to permanently cease and desist from using the marks IN-N-OUT and IN-N-OUT BURGER LOGO, and also ordered cessation of use of the mark Double-Double. The Decision awarded no costs.

Post-Decision Motions and Director General Appeal

Petitioners moved for reconsideration, renewing arguments on lack of capacity, insufficiency of grounds for cancellation, and laches. Respondent filed a motion for partial reconsideration contesting the Bureau's failure to find unfair competition. The Bureau denied both motions in Resolution No. 2004-18 dated October 28, 2004, and in a separate resolution dated April 25, 2005. Petitioners then filed an appeal to the Office of the Director General. Director General Emma C. Francisco issued an Order on December 7, 2004 in Appeal No. 14-2004-0004 dismissing petitioners' appeal as filed out of time.

Court of Appeals Proceedings

Petitioners sought relief from the Court of Appeals. The Court of Appeals, in CA-G.R. SP No. 88004, affirmed the Director General’s dismissal. The appellate court emphasized that the right to appeal is a procedural remedy of statutory origin and its requirements must be strictly complied with. The Court found the appeal filed beyond the prescribed period and held the Bureau Decision and the October 28, 2004 Order final and executory.

Subsequent Administrative Finding on Unfair Competition

The record reflects that Director General Adrian S. Cristobal, Jr. rendered a Decision in Appeal 10-05-01 dated December 23, 2005, finding petitioners guilty of unfair competition. Petitioners' motion for reconsideration of administrative rulings was denied. Petitioners elevated the matter to the Supreme Court via the instant petition.

Issues Raised by Petitioners

Petitioners chiefly argued that the Court of Appeals erred in upholding dismissal of their appeal on a technicality and that substantial justice required entertaining their late-filed appeal. They contended that counsel honestly believed the resolution denying reconsideration was received on November 3, 2004, and so the appeal deadline was miscomputed in good faith. Petitioners also reiterated substantive defenses that respondent lacked capacity to sue, that no grounds for cancellation were proven, and that the complaint was barred by laches or prescription.

The Supreme Court’s Disposition

The Supreme Court denied the petition and affirmed the Decision and Resolution of the Court of Appeals dated October 21, 2005 and January 16, 2006, which upheld Director General Emma C. Francisco’s December 7, 2004 Order dismissing the appeal as filed out of time. The petition was dismissed for lack of merit.

Legal Basis and Reasoning on Timeliness

The Court reiterated that perfection of an appeal within the reglementary period is mandatory and jurisdictional; failure to comply renders the questioned decision final and deprives the appellate authority of jurisdiction. The Court noted that the rule has been relaxed only in highly meritorious cases to avoid grave injustice, but found no such circumstances here. The Court applied Section 2 and Section 5(c) of the Uniform Rules on Appeal (Office Order No. 12, s. 2002) to determine that petitioners had no remaining period to perfect their appeal after denial of reconsideration. The Court rejected petitioners' claim of excusable inadvertence by counsel, stressing the profession's duty of diligence and concluding that counsel's miscalculation was inexcusable and binds the client. The Court cited Ang v. Grageda, G.R. No. 166239, June 8, 2006, and Sameer Overseas Placement Agency, Inc. v. Levantino, G.R. No. 153942, June 29, 2005, to support the strict application of appeal periods.

Legal Basis and Reasoning on Capacity and Merits

Despite disposing of the petition on timeliness grounds, the Court addressed the substantive issues. It held that IN-N-OUT Burger, Inc. had legal capacity to sue under Section 160 in relation to Section 3 of R.A. No. 8293. The Court relied on Articles 6 bis and 8 of the Paris Convention, noting that those provisions protect well-known trademarks and tradenames and that protection may extend even where a mark is not registered or used in the country seeking protection. The Court treated Article 6 bis as self-executing and observed that determination of whether a mark is well-known is a factual matter for the competent authority. It accorded deference to the factual findings of the IPO as a quasi-judicial agency possessing expertise in intellectual property matters.

Factual Support for Well-Known Mark Finding

The Court found Director Beltran-Abelardo’s determination that IN-N-OUT is an internationally well-known mark to be supported by substantial evidence. The IPO relied on multiple United States trademark registrations and registrations in other countries, published articles and advertisements, internet materials, videotapes of celebrities referencing IN-N-OUT, and a prior inter partes IPO decision that had declared the mark well known. The Court applied the criteria in Rule 102 of the Implementing Rules of R.A. No. 8293—including the duration, extent and geographical area of use and promotion, and the quality image or reputation of the mark—in affirming the Bureau’s conclusion.

Application of International Instruments

The Court noted the relevance of the WIPO Joint Recommendation of 1999 which, although nonbinding, expands the scope of protection for well-known marks and states that a member state should not condition a well-knownness determination on prior registration or use in that state. The Court invoked Section 2, Article II of the Constitution to affirm that generally accepted principles of international law, including the Paris Convention and relevant WIPO instruments, form part of domestic law.

Cancellation Under Section 151(b) and Misrepresentation

The Court found petitioners’ contention that no gr

Case Syllabus (G.R. No. 171053)

Parties and Procedural Posture

Sehwani, Incorporated and Benitas Frites, Inc. were the petitioners below and appellants in administrative proceedings before the Intellectual Property Office Bureau of Legal Affairs (BLA-IPO).
IN-N-OUT Burger, Inc. was the complainant below and respondent in this petition, described as a foreign corporation organized under California law and not doing business in the Philippines.
The BLA-IPO Bureau Director rendered Decision No. 2003-02 canceling Trademark Registration No. 56666 and ordering cessation of use, and denied motions for reconsideration in Resolution No. 2004-18.
An appeal to the IPO Director General in Appeal No. 14-2004-0004 was dismissed by Director General Emma C. Francisco for late filing of the appeal memorandum.
The Court of Appeals affirmed the Director General's dismissal in CA-G.R. SP No. 88004 by Decision dated October 21, 2005.
The petitioners brought the present petition for review by the Supreme Court from the Court of Appeals' affirmance.

Key Factual Allegations

IN-N-OUT Burger, Inc. alleged ownership and long use since 1948 of the tradename IN-N-OUT and the trademarks IN-N-OUT Burger & Arrow Design and IN-N-OUT Burger Logo, with registrations in the United States and other countries.
Sehwani, Incorporated had obtained Philippine 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 IN-N-OUT Burger, Inc.'s authority.
Sehwani, Incorporated licensed Benitas Frites, Inc. to use the trademark IN-N-OUT BURGER for a restaurant in Pasig City.
IN-N-OUT Burger, Inc. presented United States trademark registrations, international registrations, print and audiovisual publicity evidence, and prior IPO/Inter Partes determinations to establish the mark's international reputation.
Petitioners used identical or confusingly similar marks on restaurant wrappers and receptacles, which the BLA-IPO found to misrepresent the source of goods and services.

Issues Presented

Whether the Court of Appeals gravely erred in upholding the Director General's dismissal of Appeal No. 14-2004-0004 on a procedural ground.
Whether IN-N-OUT Burger, Inc. had legal capacity to sue in the Philippines despite not doing business there.
Whether the cancellation of Trademark Registration No. 56666 and the cease-and-desist orders were supported by evidence and law.
Whether the petition was barred by bold laches or prescription.

Contentions of Parties

Petitioners contended that dismissal on a technicality resulted in a miscarriage of justice and that counsel reasonably miscomputed the appeal period.
Petitioners contended that IN-N-OUT Burger, Inc. lacked legal capacity to sue and that no statutory ground under Section 151, R.A. No. 8293 justified cancellation.
IN-N-OUT Burger, Inc. contended that it owned internationally bold well-known marks protected by the Paris Convention and WIPO instruments and that it could pursue administrative relief in the Philippines under Section 160 and Section 3 of R.A. No. 8293.

Statutory Framework

Section 160, R.A. No. 8293 permits a foreign national or juridical person that meets Section 3 requirements and does not engage in business in the Philippines to bring civil or administrative trademark actions.
Section 3, R.A. No. 8293 implements reciprocity and international treaty benefits for nationals or persons domiciled in convention countries.
Section 151(