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IN-N-OUT BURGER, INC. VS. SEHWANI INC., ET.

AL

In-N-Out Burger, Inc. vs. Sehwani Inc., et. al

Facts:

Petitioner IN-N-OUT BURGER, INC., is a business entity incorporated under the laws of California. It is a
signatory to the Convention of Paris on Protection of Industrial Property and the TRIPS Agreement. It is
engaged mainly in the restaurant business, but it has never engaged in business in the Philippines.

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.
Sometime in 1991, Sehwani filed with the BPTTT an application for the registration of the mark “IN N
OUT (the inside of the letter “O” formed like a star). Its application was approved and a certificate of
registration was issued in its name on 1993. In 2000, Sehwani, Incorporated and Benita Frites, Inc.
entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark,
“IN N OUT.”

Sometime in 1997, In-N-Out Burger filed trademark and service mark applications with the Bureau of
Trademarks for the “IN-N-OUT” and “IN-N-OUT Burger & Arrow Design. In 2000, In-N-Out Burger found
out that Sehwani, Incorporated had already obtained Trademark Registration for the mark “IN N OUT
(the inside of the letter “O” formed like a star).” Also in 2000, In-N-Out Burger sent a demand letter
directing Sehwani, Inc. to cease and desist from claiming ownership of the mark “IN-N-OUT” and to
voluntarily cancel its trademark registration. Sehwani Inc. did not accede to In-N-Out Burger’s demand
but it expressed its willingness to surrender its registration for a consideration.

In 2001 In-N-Out Burger filed before the Bureau of Legal Affairs an administrative complaint against the
Sehwani, Inc. and Benita Frites, Inc. for unfair competition and cancellation of trademark registration.

Issues:

Whether or not the Intellectual Property Office (an administrative body) have jurisdiction of cases
involving provisions of the IPC (e.g. unfair competition).[1]

Whether or not there was unfair competition.

Held:

FIRST ISSUE: Yes, the IPO (an administrative body) has jurisdiction in cases involving provisions of the IPC
(e.g. unfair competition) due to the following reasons:

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal
Affairs, thus:

Section 10. The Bureau of Legal Affairs.“The Bureau of Legal Affairs shall have the following functions:

10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks;
subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs;
and petitions for compulsory licensing of patents;
10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving
intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total
damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That
availment of the provisional remedies may be granted in accordance with the Rules of Court. Xxx

Xxx

(vi) The cancellation of any permit, license, authority, or registration which may have been granted by
the Office, or the suspension of the validity thereof for such period of time as the Director of Legal
Affairs may deem reasonable which shall not exceed one (1) year;

Xxx

(viii) The assessment of damages;

Unquestionably, petitioner’s complaint, which seeks the cancellation of the disputed mark in the name
of respondent Sehwani, Incorporated, and damages for violation of petitioner’s intellectual property
rights, falls within the jurisdiction of the IPO Director of Legal Affairs.

While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in
the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the
exclusion of administrative bodies.

Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize
the concurrent jurisdiction of civil courts and the IPO over unfair competition cases.

These two provisions read:

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action. Any
foreign national or juridical person who meets the requirements of Section 3 of this Act and does not
engage in business in the Philippines may bring a civil or administrative action hereunder for opposition,
cancellation, infringement, unfair competition, or false designation of origin and false description,
whether or not it is licensed to do business in the Philippines under existing laws.

Section 170. Penalties. Independent of the civil and administrative sanctions imposed by law, a criminal
penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand
pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is
found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1.

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the
petitioner’s administrative case against respondents and the IPO Director General had exclusive
jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs.

SECOND ISSUE: Yes. The evidence on record shows that Sehwani Inc. and Benita Frites were not using
their registered trademark but that of In-n-Out Burger. Sehwani and Benita Frites are also giving their
products the general appearance that would likely influence the purchasers to believe that their
products are that of In-N-Out Burger. The intention to deceive may be inferred from the similarity of the
goods as packed and offered for sale, and, thus, an action will lie to restrain unfair competition. The
respondents’ frauduulent intention to deceive purchasers is also apparent in their use of the In-N-Out
Burger in business signages.
The essential elements of an action for unfair competition are (1) confusing similarity in the general
appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing
similarity may or may not result from similarity in the marks, but may result from other external factors
in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from
the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent
need not be shown.

[1] IPO – Director of Legal Affairs decision

In-N-Out Burger has legal capacity to sue in the Philippines because the latter is a signatory of the
Convention of Paris on Protection of Industrial Property.

IN-N-OUT Burger, Inc. – right to use its tradename and mark to the exclusion of the others

Respondents’ use of the petitioner’s mark was made in good faith and therefore they are not guilty of
unfair competition.

IPO – Director General’s Decision

Respondents are guilty of unfair competition.

The following are ordered to be paid to In-N-Out Burger, inc.

Damages in the amount of PHP 212, 574.28

Exemplary damages in the amount of PHP 500,000

Attorney’s fees and expenses of litigation in the amount of PHP 500,000

CA Decision

Regular courts, and not the BLA-IPO, have sole jurisdiction to hear and decide cases involving provisions
of the IPC.

PEARL & DEAN (PHIL.), INC. vs SHOEMART, INC GR No. 148222 (August 15,2003)

Posted on May 12, 2017

FACTS:

Pearl and Dean is a corporation engaged in the manufacture of advertising display units referred to
as light boxes and these light boxes were marketed under the trademark Poster Ads. Pearl and Dean
entered into a contract with Shoemart, Inc. for the lease and installation of the light boxes in SM North
Edsa. However, due to construction constraints, Shoemart, Inc offered as an alternative SM Makati and
SM Cubao.
After Pearl and Dean’s contract was rescinded, exact copies of its light boxes were installed in
various SM malls, fabricated by Metro Industrial Services and later by EYD Rainbow Advertising
Corporation. Pearl and Dean sent a letter to Shoemart and its sister company, North Edsa Marketing to
cease using the light boxes and to remove them from the malls, and demanded the discontinued used of
the trademark “Poster Ads”.

Unsatisfied with the compliance of its demands, Pearl and Dean sued Shoemart which was ruled by
the trial court in their favor. On appeal, however, the Court of Appeals reversed the trial court’s
decision.

ISSUE:

Whether Pearl and Dean’s copyright registration for its light boxes and the trademark registration
of “Poster Ads” preclude Shoemart and North Edsa Marketing from using the same.

HELD:

No, Pearl and Dean secured its copyright under the classification class “o” work. This being so, its
protection extended only to the technical drawings and not to the light box itself. Pearl and Dean cannot
exclude others from the manufacture, sale and commercial use over the light boxes on the sole basis of
its copyright, certificated over the technical drawings. It cannot be the intention of the law that the right
of exclusivity would be granted for a longer time through the simplified procedure of copyright
registration with the National Library, without the rigor of defending the patentability of its “invention”
before the IPO and the public.

On the other hand, there has been no evidence that Pearl and Dean’s use of “Poster Ads” was
distinctive or well known. “Poster Ads” was too generic a name to identify it to a specific company or
entity. “Poster Ads” was generic and incapable of being used as a trademark because it was used in the
field of poster advertising, the very business engaged by Pearl and Dean. Furthermore, Pearl and Dean’s
exclusive right to the use of “Poster Ads” is limited to what is written in its certificate of registration.
Shoemart cannot be held liable for the infringement of the trademark.