G.R. No. 148222 August 15, 2003 Dean agreed.
Dean agreed. On September 11, 1985, Pearl and Deans General Manager,
PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,
vs.
SHOEMART, INCORPORATED, and NORTH EDSA MARKETING,
INCORPORATED, Respondents.
DECISION
CORONA, J.:
In the instant petition for review on certiorari under Rule 45 of the Rules of
Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001
decision1 of the Court of Appeals reversing the October 31, 1996 decision2 of
the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which
declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing
Inc. (NEMI) liable for infringement of trademark and copyright, and unfair s
FACTUAL ANTECEDENTS
The May 22, 2001 decision of the Court of Appeals3 contained a summary of
this dispute:
"Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the
manufacture of advertising display units simply referred to as light boxes.
These units utilize specially printed posters sandwiched between plastic
sheets and illuminated with back lights. Pearl and Dean was able to secure a
Certificate of Copyright Registration dated January 20, 1981 over these
illuminated display units. The advertising light boxes were marketed under
the trademark "Poster Ads". The application for registration of the trademark
was filed with the Bureau of Patents, Trademarks and Technology Transfer on
June 20, 1983, but was approved only on September 12, 1988, per
Registration No. 41165. From 1981 to about 1988, Pearl and Dean employed
the services of Metro Industrial Services to manufacture its advertising
displays.
Sometime in 1985, Pearl and Dean negotiated with defendant-appellant
Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City
North Edsa. Since SM City North Edsa was under construction at that time,
SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and
1
Rodolfo Vergara, submitted for signature the contracts covering SM Cubao
and SM Makati to SMIs Advertising Promotions and Publicity Division
Manager, Ramonlito Abano. Only the contract for SM Makati, however, was
returned signed. On October 4, 1985, Vergara wrote Abano inquiring about
the other contract and reminding him that their agreement for installation of
light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI
did not bother to reply.
Instead, in a letter dated January 14, 1986, SMIs house counsel informed
Pearl and Dean that it was rescinding the contract for SM Makati due to non-
performance of the terms thereof. In his reply dated February 17, 1986,
Vergara protested the unilateral action of SMI, saying it was without basis. In
the same letter, he pushed for the signing of the contract for SM Cubao.
Two years later, Metro Industrial Services, the company formerly contracted
by Pearl and Dean to fabricate its display units, offered to construct light
boxes for Shoemarts chain of stores. SMI approved the proposal and ten (10)
light boxes were subsequently fabricated by Metro Industrial for SMI. After
its contract with Metro Industrial was terminated, SMI engaged the services
of EYD Rainbow Advertising Corporation to make the light boxes. Some 300
units were fabricated in 1991. These were delivered on a staggered basis and
installed at SM Megamall and SM City.
Sometime in 1989, Pearl and Dean, received reports that exact copies of its
light boxes were installed at SM City and in the fastfood section of SM Cubao.
Upon investigation, Pearl and Dean found out that aside from the two (2)
reported SM branches, light boxes similar to those it manufactures were also
installed in two (2) other SM stores. It further discovered that defendant-
appellant North Edsa Marketing Inc. (NEMI), through its marketing arm,
Prime Spots Marketing Services, was set up primarily to sell advertising space
in lighted display units located in SMIs different branches. Pearl and Dean
noted that NEMI is a sister company of SMI.
In the light of its discoveries, Pearl and Dean sent a letter dated December
11, 1991 to both SMI and NEMI enjoining them to cease using the subject
light boxes and to remove the same from SMIs establishments. It also
demanded the discontinued use of the trademark "Poster Ads," and the
payment to Pearl and Dean of compensatory damages in the amount of 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby
Twenty Million Pesos (P20,000,000.00). directed:

Upon receipt of the demand letter, SMI suspended the leasing of two (1) to pay plaintiff the following damages:
hundred twenty-four (224) light boxes and NEMI took down its
(a) actual damages - 16,600,000.00,
advertisements for "Poster Ads" from the lighted display units in SMIs stores.
representing profits
Claiming that both SMI and NEMI failed to meet all its demands, Pearl and
derived by defendants
Dean filed this instant case for infringement of trademark and copyright,
as a result of infringe-
unfair competition and damages.
ment of plaintiffs copyright
In denying the charges hurled against it, SMI maintained that it independently from 1991 to 1992
developed its poster panels using commonly known techniques and available
(b) moral damages - 1,000.000.00
technology, without notice of or reference to Pearl and Deans copyright. SMI
noted that the registration of the mark "Poster Ads" was only for stationeries (c) exemplary damages - 1,000,000.00
such as letterheads, envelopes, and the like. Besides, according to SMI, the
word "Poster Ads" is a generic term which cannot be appropriated as a (d) attorneys fees - 1,000,000.00
trademark, and, as such, registration of such mark is invalid. It also stressed plus
that Pearl and Dean is not entitled to the reliefs prayed for in its complaint
since its advertising display units contained no copyright notice, in violation (e) costs of suit;
of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of (2) to deliver, under oath, for impounding in the National Library, all light
action against it and that the suit was purely intended to malign SMIs good boxes of SMI which were fabricated by Metro Industrial Services and EYD
name. On this basis, SMI, aside from praying for the dismissal of the case, also Rainbow Advertising Corporation;
counterclaimed for moral, actual and exemplary damages and for the
cancellation of Pearl and Deans Certification of Copyright Registration No. (3) to deliver, under oath, to the National Library, all filler-posters using the
PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration trademark "Poster Ads", for destruction; and
No. 4165 dated September 12, 1988.
(4) to permanently refrain from infringing the copyright on plaintiffs light
NEMI, for its part, denied having manufactured, installed or used any boxes and its trademark "Poster Ads".
advertising display units, nor having engaged in the business of advertising. It
Defendants counterclaims are hereby ordered dismissed for lack of merit.
repleaded SMIs averments, admissions and denials and prayed for similar
reliefs and counterclaims as SMI." SO ORDERED.4

The RTC of Makati City decided in favor of P & D: On appeal, however, the Court of Appeals reversed the trial court:

Wherefore, defendants SMI and NEMI are found jointly and severally liable
for infringement of copyright under Section 2 of PD 49, as amended, and
infringement of trademark under Section 22 of RA No. 166, as amended, and
are hereby penalized under Section 28 of PD 49, as amended, and Sections
Since the light boxes cannot, by any stretch of the imagination, be considered
as either prints, pictorial illustrations, advertising copies, labels, tags or box
wraps, to be properly classified as a copyrightable class "O" work, we have to
agree with SMI when it posited that what was copyrighted were the technical
drawings only, and not the light boxes themselves, thus:

2
42. When a drawing is technical and depicts a utilitarian object, a copyright
over the drawings like plaintiff-appellants will not extend to the actual
object. It has so been held under jurisprudence, of which the leading case is
Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a
copyright protection for a book entitled "Seldens Condensed Ledger or
Bookkeeping Simplified" which purported to explain a new system of
bookkeeping. Included as part of the book were blank forms and illustrations
consisting of ruled lines and headings, specially designed for use in
connection with the system explained in the work. These forms showed the
entire operation of a day or a week or a month on a single page, or on two
pages following each other. The defendant Baker then produced forms which
were similar to the forms illustrated in Seldens copyrighted books. The Court
held that exclusivity to the actual forms is not extended by a copyright. The
reason was that "to grant a monopoly in the underlying art when no
examination of its novelty has ever been made would be a surprise and a
fraud upon the public; that is the province of letters patent, not of copyright."
And that is precisely the point. No doubt aware that its alleged original design
would never pass the rigorous examination of a patent application, plaintiff-
appellant fought to foist a fraudulent monopoly on the public by conveniently
resorting to a copyright registration which merely employs a recordal system
without the benefit of an in-depth examination of novelty.
The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough
Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had
obtained a copyright over an unpublished drawing entitled "Bridge Approach
the drawing showed a novel bridge approach to unsnarl traffic congestion".
The defendant constructed a bridge approach which was alleged to be an
infringement of the new design illustrated in plaintiffs drawings. In this case
it was held that protection of the drawing does not extend to the
unauthorized duplication of the object drawn because copyright extends only
to the description or expression of the object and not to the object itself. It
does not prevent one from using the drawings to construct the object
portrayed in the drawing.
In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz
Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright
infringement when one who, without being authorized, uses a copyrighted
3
architectural plan to construct a structure. This is because the copyright does
not extend to the structures themselves.
In fine, we cannot find SMI liable for infringing Pearl and Deans copyright
over the technical drawings of the latters advertising display units.
xxx xxx xxx
The Supreme Court trenchantly held in Faberge, Incorporated vs.
Intermediate Appellate Court that the protective mantle of the Trademark
Law extends only to the goods used by the first user as specified in the
certificate of registration, following the clear mandate conveyed by Section
20 of Republic Act 166, as amended, otherwise known as the Trademark Law,
which reads:
SEC. 20. Certification of registration prima facie evidence of validity.- A
certificate of registration of a mark or trade-name shall be prima facie
evidence of the validity of the registration, the registrants ownership of the
mark or trade-name, and of the registrants exclusive right to use the same in
connection with the goods, business or services specified in the certificate,
subject to any conditions and limitations stated therein." (underscoring
supplied)
The records show that on June 20, 1983, Pearl and Dean applied for the
registration of the trademark "Poster Ads" with the Bureau of Patents,
Trademarks, and Technology Transfer. Said trademark was recorded in the
Principal Register on September 12, 1988 under Registration No. 41165
covering the following products: stationeries such as letterheads, envelopes
and calling cards and newsletters.
With this as factual backdrop, we see no legal basis to the finding of liability
on the part of the defendants-appellants for their use of the words "Poster
Ads", in the advertising display units in suit. Jurisprudence has interpreted
Section 20 of the Trademark Law as "an implicit permission to a manufacturer
to venture into the production of goods and allow that producer to
appropriate the brand name of the senior registrant on goods other than
those stated in the certificate of registration." The Supreme Court further
emphasized the restrictive meaning of Section 20 when it stated, through
Justice Conrado V. Sanchez, that:
Really, if the certificate of registration were to be deemed as including goods
not specified therein, then a situation may arise whereby an applicant may
be tempted to register a trademark on any and all goods which his mind may
conceive even if he had never intended to use the trademark for the said
goods. We believe that such omnibus registration is not contemplated by our
Trademark Law.
While we do not discount the striking similarity between Pearl and Deans
registered trademark and defendants-appellants "Poster Ads" design, as well
as the parallel use by which said words were used in the parties respective
advertising copies, we cannot find defendants-appellants liable for
infringement of trademark. "Poster Ads" was registered by Pearl and Dean
for specific use in its stationeries, in contrast to defendants-appellants who
used the same words in their advertising display units. Why Pearl and Dean
limited the use of its trademark to stationeries is simply beyond us. But,
having already done so, it must stand by the consequence of the registration
which it had caused.
xxx xxx xxx
We are constrained to adopt the view of defendants-appellants that the
words "Poster Ads" are a simple contraction of the generic term poster
advertising. In the absence of any convincing proof that "Poster Ads" has
acquired a secondary meaning in this jurisdiction, we find that Pearl and
Deans exclusive right to the use of "Poster Ads" is limited to what is written
in its certificate of registration, namely, stationeries.
Defendants-appellants cannot thus be held liable for infringement of the
trademark "Poster Ads".
There being no finding of either copyright or trademark infringement on the
part of SMI and NEMI, the monetary award granted by the lower court to
Pearl and Dean has no leg to stand on.
xxx xxx xxx
WHEREFORE, premises considered, the assailed decision is REVERSED and SET
ASIDE, and another is rendered DISMISSING the complaint and counterclaims
in the above-entitled case for lack of merit.5
4
Dissatisfied with the above decision, petitioner P & D filed the instant petition
assigning the following errors for the Courts consideration:
A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO
COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND
NEMI;
B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO
INFRINGEMENT OF PEARL & DEANS TRADEMARK "POSTER ADS" WAS
COMMITTED BY RESPONDENTS SM AND NEMI;
C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD
OF THE TRIAL COURT, DESPITE THE LATTERS FINDING, NOT DISPUTED BY THE
HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS
NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.
D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL
& EXEMPLARY DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.6
ISSUES
In resolving this very interesting case, we are challenged once again to put
into proper perspective four main concerns of intellectual property law
patents, copyrights, trademarks and unfair competition arising from
infringement of any of the first three. We shall focus then on the following
issues:
(1) if the engineering or technical drawings of an advertising display unit (light
box) are granted copyright protection (copyright certificate of registration) by
the National Library, is the light box depicted in such engineering drawings
ipso facto also protected by such copyright?
(2) or should the light box be registered separately and protected by a patent
issued by the Bureau of Patents Trademarks and Technology Transfer (now
Intellectual Property Office) in addition to the copyright of the engineering
drawings?
(3) can the owner of a registered trademark legally prevent others from using
such trademark if it is a mere abbreviation of a term descriptive of his goods,
services or business?
ON THE ISSUE OF COPYRIGHT INFRINGEMENT
Petitioner P & Ds complaint was that SMI infringed on its copyright over the
light boxes when SMI had the units manufactured by Metro and EYD Rainbow
Advertising for its own account. Obviously, petitioners position was
premised on its belief that its copyright over the engineering drawings
extended ipso facto to the light boxes depicted or illustrated in said drawings.
In ruling that there was no copyright infringement, the Court of Appeals held
that the copyright was limited to the drawings alone and not to the light box
itself. We agree with the appellate court.
First, petitioners application for a copyright certificate as well as Copyright
Certificate No. PD-R2588 issued by the National Library on January 20, 1981
clearly stated that it was for a class "O" work under Section 2 (O) of PD 49
(The Intellectual Property Decree) which was the statute then prevailing. Said
Section 2 expressly enumerated the works subject to copyright:
SEC. 2. The rights granted by this Decree shall, from the moment of creation,
subsist with respect to any of the following works:
xxx xxx xxx
(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box
wraps;
xxx xxx xxx
Although petitioners copyright certificate was entitled "Advertising Display
Units" (which depicted the box-type electrical devices), its claim of copyright
infringement cannot be sustained.
Copyright, in the strict sense of the term, is purely a statutory right. Being a
mere statutory grant, the rights are limited to what the statute confers. It
may be obtained and enjoyed only with respect to the subjects and by the
persons, and on terms and conditions specified in the statute.7 Accordingly,
it can cover only the works falling within the statutory enumeration or
description.8
P & D secured its copyright under the classification class "O" work. This being
so, petitioners copyright protection extended only to the technical drawings
and not to the light box itself because the latter was not at all in the category
5
of "prints, pictorial illustrations, advertising copies, labels, tags and box
wraps." Stated otherwise, even as we find that P & D indeed owned a valid
copyright, the same could have referred only to the technical drawings within
the category of "pictorial illustrations." It could not have possibly stretched
out to include the underlying light box. The strict application9 of the laws
enumeration in Section 2 prevents us from giving petitioner even a little
leeway, that is, even if its copyright certificate was entitled "Advertising
Display Units." What the law does not include, it excludes, and for the good
reason: the light box was not a literary or artistic piece which could be
copyrighted under the copyright law. And no less clearly, neither could the
lack of statutory authority to make the light box copyrightable be remedied
by the simplistic act of entitling the copyright certificate issued by the
National Library as "Advertising Display Units."
In fine, if SMI and NEMI reprinted P & Ds technical drawings for sale to the
public without license from P & D, then no doubt they would have been guilty
of copyright infringement. But this was not the case. SMIs and NEMIs acts
complained of by P & D were to have units similar or identical to the light box
illustrated in the technical drawings manufactured by Metro and EYD
Rainbow Advertising, for leasing out to different advertisers. Was this an
infringement of petitioners copyright over the technical drawings? We do
not think so.
During the trial, the president of P & D himself admitted that the light box
was neither a literary not an artistic work but an "engineering or marketing
invention."10 Obviously, there appeared to be some confusion regarding
what ought or ought not to be the proper subjects of copyrights, patents and
trademarks. In the leading case of Kho vs. Court of Appeals,11 we ruled that
these three legal rights are completely distinct and separate from one
another, and the protection afforded by one cannot be used interchangeably
to cover items or works that exclusively pertain to the others:
Trademark, copyright and patents are different intellectual property rights
that cannot be interchanged with one another. A trademark is any visible sign
capable of distinguishing the goods (trademark) or services (service mark) of
an enterprise and shall include a stamped or marked container of goods. In
relation thereto, a trade name means the name or designation identifying or
distinguishing an enterprise. Meanwhile, the scope of a copyright is confined
to literary and artistic works which are original intellectual creations in the
literary and artistic domain protected from the moment of their creation.
Patentable inventions, on the other hand, refer to any technical solution of a
problem in any field of human activity which is new, involves an inventive
step and is industrially applicable.
ON THE ISSUE OF PATENT INFRINGEMENT
This brings us to the next point: if, despite its manufacture and commercial
use of the light boxes without license from petitioner, private respondents
cannot be held legally liable for infringement of P & Ds copyright over its
technical drawings of the said light boxes, should they be liable instead for
infringement of patent? We do not think so either.
For some reason or another, petitioner never secured a patent for the light
boxes. It therefore acquired no patent rights which could have protected its
invention, if in fact it really was. And because it had no patent, petitioner
could not legally prevent anyone from manufacturing or commercially using
the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,12 we
held that "there can be no infringement of a patent until a patent has been
issued, since whatever right one has to the invention covered by the patent
arises alone from the grant of patent. x x x (A)n inventor has no common law
right to a monopoly of his invention. He has the right to make use of and vend
his invention, but if he voluntarily discloses it, such as by offering it for sale,
the world is free to copy and use it with impunity. A patent, however, gives
the inventor the right to exclude all others. As a patentee, he has the
exclusive right of making, selling or using the invention.13 On the assumption
that petitioners advertising units were patentable inventions, petitioner
revealed them fully to the public by submitting the engineering drawings
thereof to the National Library.
To be able to effectively and legally preclude others from copying and
profiting from the invention, a patent is a primordial requirement. No patent,
no protection. The ultimate goal of a patent system is to bring new designs
and technologies into the public domain through disclosure.14 Ideas, once
disclosed to the public without the protection of a valid patent, are subject
to appropriation without significant restraint.15
6
On one side of the coin is the public which will benefit from new ideas; on the
other are the inventors who must be protected. As held in Bauer & Cie vs.
ODonnel,16 "The act secured to the inventor the exclusive right to make use,
and vend the thing patented, and consequently to prevent others from
exercising like privileges without the consent of the patentee. It was passed
for the purpose of encouraging useful invention and promoting new and
useful inventions by the protection and stimulation given to inventive genius,
and was intended to secure to the public, after the lapse of the exclusive
privileges granted the benefit of such inventions and improvements."
The law attempts to strike an ideal balance between the two interests:
"(The p)atent system thus embodies a carefully crafted bargain for
encouraging the creation and disclosure of new useful and non-obvious
advances in technology and design, in return for the exclusive right to practice
the invention for a number of years. The inventor may keep his invention
secret and reap its fruits indefinitely. In consideration of its disclosure and the
consequent benefit to the community, the patent is granted. An exclusive
enjoyment is guaranteed him for 17 years, but upon the expiration of that
period, the knowledge of the invention inures to the people, who are thus
enabled to practice it and profit by its use."17
The patent law has a three-fold purpose: "first, patent law seeks to foster and
reward invention; second, it promotes disclosures of inventions to stimulate
further innovation and to permit the public to practice the invention once the
patent expires; third, the stringent requirements for patent protection seek
to ensure that ideas in the public domain remain there for the free use of the
public."18
It is only after an exhaustive examination by the patent office that a patent is
issued. Such an in-depth investigation is required because "in rewarding a
useful invention, the rights and welfare of the community must be fairly dealt
with and effectively guarded. To that end, the prerequisites to obtaining a
patent are strictly observed and when a patent is issued, the limitations on
its exercise are equally strictly enforced. To begin with, a genuine invention
or discovery must be demonstrated lest in the constant demand for new
appliances, the heavy hand of tribute be laid on each slight technological
advance in art."19
There is no such scrutiny in the case of copyrights nor any notice published
before its grant to the effect that a person is claiming the creation of a work.
The law confers the copyright from the moment of creation20 and the
copyright certificate is issued upon registration with the National Library of a
sworn ex-parte claim of creation.
Therefore, not having gone through the arduous examination for patents, the
petitioner cannot exclude others from the manufacture, sale or commercial
use of the light boxes on the sole basis of its copyright certificate over the
technical drawings.
Stated otherwise, what petitioner seeks is exclusivity without any
opportunity for the patent office (IPO) to scrutinize the light boxs eligibility
as a patentable invention. The irony here is that, had petitioner secured a
patent instead, its exclusivity would have been for 17 years only. But through
the simplified procedure of copyright-registration with the National Library
without undergoing the rigor of defending the patentability of its invention
before the IPO and the public the petitioner would be protected for 50
years. This situation could not have been the intention of the law.
In the oft-cited case of Baker vs. Selden21 , the United States Supreme Court
held that only the expression of an idea is protected by copyright, not the
idea itself. In that case, the plaintiff held the copyright of a book which
expounded on a new accounting system he had developed. The publication
illustrated blank forms of ledgers utilized in such a system. The defendant
reproduced forms similar to those illustrated in the plaintiffs copyrighted
book. The US Supreme Court ruled that:
"There is no doubt that a work on the subject of book-keeping, though only
explanatory of well known systems, may be the subject of a copyright; but,
then, it is claimed only as a book. x x x. But there is a clear distinction between
the books, as such, and the art, which it is, intended to illustrate. The mere
statement of the proposition is so evident that it requires hardly any
argument to support it. The same distinction may be predicated of every
other art as well as that of bookkeeping. A treatise on the composition and
use of medicines, be they old or new; on the construction and use of ploughs
or watches or churns; or on the mixture and application of colors for painting
or dyeing; or on the mode of drawing lines to produce the effect of
perspective, would be the subject of copyright; but no one would contend
7
that the copyright of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not pirated from
other works, would be valid without regard to the novelty or want of novelty
of its subject matter. The novelty of the art or thing described or explained
has nothing to do with the validity of the copyright. To give to the author of
the book an exclusive property in the art described therein, when no
examination of its novelty has ever been officially made, would be a surprise
and a fraud upon the public. That is the province of letters patent, not of
copyright. The claim to an invention of discovery of an art or manufacture
must be subjected to the examination of the Patent Office before an exclusive
right therein can be obtained; and a patent from the government can only
secure it.
The difference between the two things, letters patent and copyright, may be
illustrated by reference to the subjects just enumerated. Take the case of
medicines. Certain mixtures are found to be of great value in the healing art.
If the discoverer writes and publishes a book on the subject (as regular
physicians generally do), he gains no exclusive right to the manufacture and
sale of the medicine; he gives that to the public. If he desires to acquire such
exclusive right, he must obtain a patent for the mixture as a new art,
manufacture or composition of matter. He may copyright his book, if he
pleases; but that only secures to him the exclusive right of printing and
publishing his book. So of all other inventions or discoveries.
The copyright of a book on perspective, no matter how many drawings and
illustrations it may contain, gives no exclusive right to the modes of drawing
described, though they may never have been known or used before. By
publishing the book without getting a patent for the art, the latter is given to
the public.
xxx
Now, whilst no one has a right to print or publish his book, or any material
part thereof, as a book intended to convey instruction in the art, any person
may practice and use the art itself which he has described and illustrated
therein. The use of the art is a totally different thing from a publication of the
book explaining it. The copyright of a book on bookkeeping cannot secure the
exclusive right to make, sell and use account books prepared upon the plan
set forth in such book. Whether the art might or might not have been
patented, is a question, which is not before us. It was not patented, and is Assuming arguendo that "Poster Ads" could validly qualify as a trademark,
open and free to the use of the public. And, of course, in using the art, the the failure of P & D to secure a trademark registration for specific use on the
ruled lines and headings of accounts must necessarily be used as incident to light boxes meant that there could not have been any trademark
it. infringement since registration was an essential element thereof.1wphi1

The plausibility of the claim put forward by the complainant in this case arises ON THE ISSUE OF UNFAIR COMPETITION
from a confusion of ideas produced by the peculiar nature of the art
If at all, the cause of action should have been for unfair competition, a
described in the books, which have been made the subject of copyright. In
situation which was possible even if P & D had no registration.26 However,
describing the art, the illustrations and diagrams employed happened to
while the petitioners complaint in the RTC also cited unfair competition, the
correspond more closely than usual with the actual work performed by the
trial court did not find private respondents liable therefor. Petitioner did not
operator who uses the art. x x x The description of the art in a book, though
appeal this particular point; hence, it cannot now revive its claim of unfair
entitled to the benefit of copyright, lays no foundation for an exclusive claim
competition.
to the art itself. The object of the one is explanation; the object of the other
is use. The former may be secured by copyright. The latter can only be But even disregarding procedural issues, we nevertheless cannot hold
secured, if it can be secured at all, by letters patent." (underscoring supplied) respondents guilty of unfair competition.
ON THE ISSUE OF TRADEMARK INFRINGEMENT By the nature of things, there can be no unfair competition under the law on
copyrights although it is applicable to disputes over the use of trademarks.
This issue concerns the use by respondents of the mark "Poster Ads" which
Even a name or phrase incapable of appropriation as a trademark or
petitioners president said was a contraction of "poster advertising." P & D
tradename may, by long and exclusive use by a business (such that the name
was able to secure a trademark certificate for it, but one where the goods
or phrase becomes associated with the business or product in the mind of the
specified were "stationeries such as letterheads, envelopes, calling cards and
purchasing public), be entitled to protection against unfair competition.27 In
newsletters."22 Petitioner admitted it did not commercially engage in or
this case, there was no evidence that P & Ds use of "Poster Ads" was
market these goods. On the contrary, it dealt in electrically operated backlit
distinctive or well-known. As noted by the Court of Appeals, petitioners
advertising units and the sale of advertising spaces thereon, which, however,
expert witnesses himself had testified that " Poster Ads was too generic a
were not at all specified in the trademark certificate.
name. So it was difficult to identify it with any company, honestly
Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. speaking."28 This crucial admission by its own expert witness that "Poster
Intermediate Appellate Court,23 where we, invoking Section 20 of the old Ads" could not be associated with P & D showed that, in the mind of the
Trademark Law, ruled that "the certificate of registration issued by the public, the goods and services carrying the trademark "Poster Ads" could not
Director of Patents can confer (upon petitioner) the exclusive right to use its be distinguished from the goods and services of other entities.
own symbol only to those goods specified in the certificate, subject to any
This fact also prevented the application of the doctrine of secondary
conditions and limitations specified in the certificate x x x. One who has
meaning. "Poster Ads" was generic and incapable of being used as a
adopted and used a trademark on his goods does not prevent the adoption
trademark because it was used in the field of poster advertising, the very
and use of the same trademark by others for products which are of a different
business engaged in by petitioner. "Secondary meaning" means that a word
description."24 Faberge, Inc. was correct and was in fact recently reiterated
or phrase originally incapable of exclusive appropriation with reference to an
in Canon Kabushiki Kaisha vs. Court of Appeals.25
article in the market (because it is geographically or otherwise descriptive)
might nevertheless have been used for so long and so exclusively by one

8
producer with reference to his article that, in the trade and to that branch of
the purchasing public, the word or phrase has come to mean that the article
was his property.29 The admission by petitioners own expert witness that he
himself could not associate "Poster Ads" with petitioner P & D because it was
"too generic" definitely precluded the application of this exception.

Having discussed the most important and critical issues, we see no need to
belabor the rest.

All told, the Court finds no reversible error committed by the Court of Appeals
when it reversed the Regional Trial Court of Makati City.

WHEREFORE, the petition is hereby DENIED and the decision of the Court of
Appeals dated May 22, 2001 is AFFIRMED in toto.

SO ORDERED.

9
G.R. No. 115758 March 19, 2002
ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS
LABORATORY, petitioner,
vs.
HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and
COMPANY, and ANG TIAM CHAY, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision1 dated May 24,
1993 of the Court of Appeals setting aside and declaring as null and void the
Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial
Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary
injunction.
The facts of the case are as follows:
On December 20, 1991, petitioner Elidad C. Kho filed a complaint for
injunction and damages with a prayer for the issuance of a writ of preliminary
injunction, docketed as Civil Case No. Q-91-10926, against the respondents
Summerville General Merchandising and Company (Summerville, for brevity)
and Ang Tiam Chay.
The petitioner's complaint alleges that petitioner, doing business under the
name and style of KEC Cosmetics Laboratory, is the registered owner of the
copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by
Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she
also has patent rights on Chin Chun Su & Device and Chin Chun Su for
medicated cream after purchasing the same from Quintin Cheng, the
registered owner thereof in the Supplemental Register of the Philippine
Patent Office on February 7, 1980 under Registration Certificate No. 4529;
that respondent Summerville advertised and sold petitioner's cream products
under the brand name Chin Chun Su, in similar containers that petitioner
uses, thereby misleading the public, and resulting in the decline in the
petitioner's business sales and income; and, that the respondents should be
enjoined from allegedly infringing on the copyrights and patents of the
petitioner.
10
The respondents, on the other hand, alleged as their defense that
Summerville is the exclusive and authorized importer, re-packer and
distributor of Chin Chun Su products manufactured by Shun Yi Factory of
Taiwan; that the said Taiwanese manufacturing company authorized
Summerville to register its trade name Chin Chun Su Medicated Cream with
the Philippine Patent Office and other appropriate governmental agencies;
that KEC Cosmetics Laboratory of the petitioner obtained the copyrights
through misrepresentation and falsification; and, that the authority of
Quintin Cheng, assignee of the patent registration certificate, to distribute
and market Chin Chun Su products in the Philippines had already been
terminated by the said Taiwanese Manufacturing Company.
After due hearing on the application for preliminary injunction, the trial court
granted the same in an Order dated February 10, 1992, the dispositive
portion of which reads:
ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under
the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby
granted. Consequentially, plaintiff is required to file with the Court a bond
executed to defendants in the amount of five hundred thousand pesos
(P500,000.00) to the effect that plaintiff will pay to defendants all damages
which defendants may sustain by reason of the injunction if the Court should
finally decide that plaintiff is not entitled thereto.
SO ORDERED.3
The respondents moved for reconsideration but their motion for
reconsideration was denied by the trial court in an Order dated March 19,
1992.4
On April 24, 1992, the respondents filed a petition for certiorari with the
Court of Appeals, docketed as CA-G.R. SP No. 27803, praying for the
nullification of the said writ of preliminary injunction issued by the trial court.
After the respondents filed their reply and almost a month after petitioner
submitted her comment, or on August 14 1992, the latter moved to dismiss
the petition for violation of Supreme Court Circular No. 28-91, a circular
prohibiting forum shopping. According to the petitioner, the respondents did
not state the docket number of the civil case in the caption of their petition
and, more significantly, they did not include therein a certificate of non-forum
shopping. The respondents opposed the petition and submitted to the
appellate court a certificate of non-forum shopping for their petition.
On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No.
27803 ruling in favor of the respondents, the dispositive portion of which
reads:
WHEREFORE, the petition is hereby given due course and the orders of
respondent court dated February 10, 1992 and March 19, 1992 granting the
writ of preliminary injunction and denying petitioners' motion for
reconsideration are hereby set aside and declared null and void. Respondent
court is directed to forthwith proceed with the trial of Civil Case No. Q-91-
10926 and resolve the issue raised by the parties on the merits.
SO ORDERED.5
In granting the petition, the appellate court ruled that:
The registration of the trademark or brandname "Chin Chun Su" by KEC with
the supplemental register of the Bureau of Patents, Trademarks and
Technology Transfer cannot be equated with registration in the principal
register, which is duly protected by the Trademark Law.1wphi1.nt
xxx xxx xxx
As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393:
"Registration in the Supplemental Register, therefore, serves as notice that
the registrant is using or has appropriated the trademark. By the very fact
that the trademark cannot as yet be on guard and there are certain defects,
some obstacles which the use must still overcome before he can claim legal
ownership of the mark or ask the courts to vindicate his claims of an exclusive
right to the use of the same. It would be deceptive for a party with nothing
more than a registration in the Supplemental Register to posture before
courts of justice as if the registration is in the Principal Register.
The reliance of the private respondent on the last sentence of the Patent
office action on application Serial No. 30954 that 'registrants is presumed to
be the owner of the mark until after the registration is declared cancelled' is,
therefore, misplaced and grounded on shaky foundation. The supposed
presumption not only runs counter to the precept embodied in Rule 124 of
11
the Revised Rules of Practice before the Philippine Patent Office in Trademark
Cases but considering all the facts ventilated before us in the four interrelated
petitions involving the petitioner and the respondent, it is devoid of factual
basis. As even in cases where presumption and precept may factually be
reconciled, we have held that the presumption is rebuttable, not conclusive,
(People v. Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may
be declared an unfair competitor even if his competing trademark is
registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana
Co. v. chua Seco & Co., 14 Phil 534)."6
The petitioner filed a motion for reconsideration. This she followed with
several motions to declare respondents in contempt of court for publishing
advertisements notifying the public of the promulgation of the assailed
decision of the appellate court and stating that genuine Chin Chun Su
products could be obtained only from Summerville General Merchandising
and Co.
In the meantime, the trial court went on to hear petitioner's complaint for
final injunction and damages. On October 22, 1993, the trial court rendered
a Decision7 barring the petitioner from using the trademark Chin Chun Su and
upholding the right of the respondents to use the same, but recognizing the
copyright of the petitioner over the oval shaped container of her beauty
cream. The trial court did not award damages and costs to any of the parties
but to their respective counsels were awarded Seventy-Five Thousand Pesos
(P75,000.00) each as attorney's fees. The petitioner duly appealed the said
decision to the Court of Appeals.
On June 3, 1994, the Court of Appeals promulgated a Resolution8 denying
the petitioner's motions for reconsideration and for contempt of court in CA-
G.R. SP No. 27803.
Hence, this petition anchored on the following assignment of errors:
I
RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE
ON PETITIONER'S MOTION TO DISMISS.
II
RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO
PROMPTLY RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION.
III
IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR
RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED
PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED
PETITIONER'S RIGHT TO DUE PROCESS.
IV
RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE
THE PRIVATE RESPONDENTS IN CONTEMPT.9
The petitioner faults the appellate court for not dismissing the petition on the
ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner
contends that the appellate court violated Section 6, Rule 9 of the Revised
Internal Rules of the Court of Appeals when it failed to rule on her motion for
reconsideration within ninety (90) days from the time it is submitted for
resolution. The appellate court ruled only after the lapse of three hundred
fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof,
the appellate court denied the petitioner's right to seek the timely appellate
relief. Finally, petitioner describes as arbitrary the denial of her motions for
contempt of court against the respondents.
We rule in favor of the respondents.
Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of
the grounds for the issuance of a writ of preliminary injunction is a proof that
the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts
complained of, either for a limited period or perpetually. Thus, a preliminary
injunction order may be granted only when the application for the issuance
of the same shows facts entitling the applicant to the relief demanded.10 This
is the reason why we have ruled that it must be shown that the invasion of
the right sought to be protected is material and substantial, that the right of
12
complainant is clear and unmistakable, and, that there is an urgent and
paramount necessity for the writ to prevent serious damage.11
In the case at bar, the petitioner applied for the issuance of a preliminary
injunctive order on the ground that she is entitled to the use of the trademark
on Chin Chun Su and its container based on her copyright and patent over the
same. We first find it appropriate to rule on whether the copyright and patent
over the name and container of a beauty cream product would entitle the
registrant to the use and ownership over the same to the exclusion of others.
Trademark, copyright and patents are different intellectual property rights
that cannot be interchanged with one another. A trademark is any visible sign
capable of distinguishing the goods (trademark) or services (service mark) of
an enterprise and shall include a stamped or marked container of goods.12
In relation thereto, a trade name means the name or designation identifying
or distinguishing an enterprise.13 Meanwhile, the scope of a copyright is
confined to literary and artistic works which are original intellectual creations
in the literary and artistic domain protected from the moment of their
creation.14 Patentable inventions, on the other hand, refer to any technical
solution of a problem in any field of human activity which is new, involves an
inventive step and is industrially applicable.15
Petitioner has no right to support her claim for the exclusive use of the
subject trade name and its container. The name and container of a beauty
cream product are proper subjects of a trademark inasmuch as the same falls
squarely within its definition. In order to be entitled to exclusively use the
same in the sale of the beauty cream product, the user must sufficiently prove
that she registered or used it before anybody else did. The petitioner's
copyright and patent registration of the name and container would not
guarantee her the right to the exclusive use of the same for the reason that
they are not appropriate subjects of the said intellectual rights. Consequently,
a preliminary injunction order cannot be issued for the reason that the
petitioner has not proven that she has a clear right over the said name and
container to the exclusion of others, not having proven that she has
registered a trademark thereto or used the same before anyone did.
We cannot likewise overlook the decision of the trial court in the case for final
injunction and damages. The dispositive portion of said decision held that the
petitioner does not have trademark rights on the name and container of the
beauty cream product. The said decision on the merits of the trial court Court of Appeals, the provisions of Section 2, Rule 56, shall be observed.
rendered the issuance of the writ of a preliminary injunction moot and Before giving due course thereto, the court may require the respondents to
academic notwithstanding the fact that the same has been appealed in the file their comment to, and not a motion to dismiss, the petition xxx (italics
Court of Appeals. This is supported by our ruling in La Vista Association, Inc. supplied)". Secondly, the issue was raised one month after petitioner had
v. Court of Appeals16, to wit: filed her answer/comment and after private respondent had replied thereto.
Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to
Considering that preliminary injunction is a provisional remedy which may be
dismiss shall be filed within the time for but before filing the answer to the
granted at any time after the commencement of the action and before
complaint or pleading asserting a claim. She therefore could no longer submit
judgment when it is established that the plaintiff is entitled to the relief
a motion to dismiss nor raise defenses and objections not included in the
demanded and only when his complaint shows facts entitling such reliefs xxx
answer/comment she had earlier tendered. Thirdly, substantial justice and
and it appearing that the trial court had already granted the issuance of a final
equity require this Court not to revive a dissolved writ of injunction in favor
injunction in favor of petitioner in its decision rendered after trial on the
of a party without any legal right thereto merely on a technical infirmity. The
merits xxx the Court resolved to Dismiss the instant petition having been
granting of an injunctive writ based on a technical ground rather than
rendered moot and academic. An injunction issued by the trial court after it
compliance with the requisites for the issuance of the same is contrary to the
has already made a clear pronouncement as to the plaintiff's right thereto,
primary objective of legal procedure which is to serve as a means to dispense
that is, after the same issue has been decided on the merits, the trial court
justice to the deserving party.
having appreciated the evidence presented, is proper, notwithstanding the
fact that the decision rendered is not yet final xxx. Being an ancillary remedy, The petitioner likewise contends that the appellate court unduly delayed the
the proceedings for preliminary injunction cannot stand separately or resolution of her motion for reconsideration. But we find that petitioner
proceed independently of the decision rendered on the merit of the main contributed to this delay when she filed successive contentious motions in
case for injunction. The merit of the main case having been already the same proceeding, the last of which was on October 27, 1993,
determined in favor of the applicant, the preliminary determination of its necessitating counter-manifestations from private respondents with the last
non-existence ceases to have any force and effect. (italics supplied) one being filed on November 9, 1993. Nonetheless, it is well-settled that non-
observance of the period for deciding cases or their incidents does not render
La Vista categorically pronounced that the issuance of a final injunction
such judgments ineffective or void.17 With respect to the purported damages
renders any question on the preliminary injunctive order moot and academic
she suffered due to the alleged delay in resolving her motion for
despite the fact that the decision granting a final injunction is pending appeal.
reconsideration, we find that the said issue has likewise been rendered moot
Conversely, a decision denying the applicant-plaintiff's right to a final
and academic by our ruling that she has no right over the trademark and,
injunction, although appealed, renders moot and academic any objection to
consequently, to the issuance of a writ of preliminary injunction.1wphi1.nt
the prior dissolution of a writ of preliminary injunction.
Finally, we rule that the Court of Appeals correctly denied the petitioner's
The petitioner argues that the appellate court erred in not dismissing the
several motions for contempt of court. There is nothing contemptuous about
petition for certiorari for non-compliance with the rule on forum shopping.
the advertisements complained of which, as regards the proceedings in CA-
We disagree. First, the petitioner improperly raised the technical objection of
G.R. SP No. 27803 merely announced in plain and straightforward language
non-compliance with Supreme Court Circular No. 28-91 by filing a motion to
the promulgation of the assailed Decision of the appellate court. Moreover,
dismiss the petition for certiorari filed in the appellate court. This is
pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the
prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which
said decision nullifying the injunctive writ was immediately executory.
provides that "(I)n petitions for certiorari before the Supreme Court and the

13
WHEREFORE, the petition is DENIED. The Decision and Resolution of the
Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are
hereby AFFIRMED. With costs against the petitioner.

SO ORDERED.

14
G.R. No. 179127 December 24, 2008
IN-N-OUT BURGER, INC., petitioner,
vs.
SEHWANI, INCORPORATED AND/OR BENITAS FRITES, INC.,
respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, seeking to reverse the Decision1 dated 18 July
2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785,
which reversed the Decision2 dated 23 December 2005 of the
Director General of the Intellectual Property Office (IPO) in
Appeal No. 10-05-01. The Court of Appeals, in its assailed
Decision, decreed that the IPO Director of Legal Affairs and the
IPO Director General do not have jurisdiction over cases involving
unfair competition.
Petitioner IN-N-OUT BURGER, INC., a business entity incorporated
under the laws of California, United States (US) of America, which
is a signatory to the Convention of Paris on Protection of
Industrial Property and the Agreement on Trade Related Aspects
of Intellectual Property Rights (TRIPS). Petitioner is engaged
mainly in the restaurant business, but it has never engaged in
business in the Philippines. 3
Respondents Sehwani, Incorporated and Benita Frites, Inc. are
corporations organized in the Philippines.4
On 2 June 1997, petitioner filed trademark and service mark
applications with the Bureau of Trademarks (BOT) of the IPO for
"IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner
later found out, through the Official Action Papers issued by the
IPO on 31 May 2000, that respondent Sehwani, Incorporated had
already obtained Trademark Registration for the mark "IN N OUT
(the inside of the letter "O" formed like a star)."5 By virtue of a
15
licensing agreement, Benita Frites, Inc. was able to use the
registered mark of respondent Sehwani, Incorporated.
Petitioner eventually filed on 4 June 2001 before the Bureau of
Legal Affairs (BLA) of the IPO an administrative complaint against
respondents for unfair competition and cancellation of trademark
registration. Petitioner averred in its complaint that it is the
owner of the trade name IN-N-OUT and the following trademarks:
(1) "IN-N-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3)
"IN-N-OUT Burger Logo." These trademarks are registered with
the Trademark Office of the US and in various parts of the world,
are internationally well-known, and have become distinctive of its
business and goods through its long and exclusive commercial
use.6 Petitioner pointed out that its internationally well-known
trademarks and the mark of the respondents are all registered for
the restaurant business and are clearly identical and confusingly
similar. Petitioner claimed that respondents are making it appear
that their goods and services are those of the petitioner, thus,
misleading ordinary and unsuspecting consumers that they are
purchasing petitioners products.7
Following the filing of its complaint, petitioner sent on 18 October
2000 a demand letter directing respondent Sehwani,
Incorporated to cease and desist from claiming ownership of the
mark "IN-N-OUT" and to voluntarily cancel its trademark
registration. In a letter-reply dated 23 October 2000, respondents
refused to accede to petitioner demand, but expressed
willingness to surrender the registration of respondent Sehwani,
Incorporated of the "IN N OUT" trademark for a fair and
reasonable consideration. 8
Petitioner was able to register the mark "Double Double" on 4 July
2002, based on their application filed on 2 June 1997.9 It alleged
that respondents also used this mark, as well as the menu color
scheme. Petitioners also averred that respondent Benitas
receipts bore the phrase, "representing IN-N-OUT Burger."10 It
should be noted that that although respondent Sehwahi,
Incorporated registered a mark which appeared as "IN N OUT (the
inside of the letter "O" formed like a star)," respondents used the
mark "IN-N-OUT."11
To counter petitioners complaint, respondents filed before the
BLA-IPO an Answer with Counterclaim. Respondents asserted
therein that they had been using the mark "IN N OUT" in the
Philippines since 15 October 1982. On 15 November 1991,
respondent Sehwani, Incorporated filed with the then Bureau of
Patents, Trademarks and Technology Transfer (BPTTT) an
application for the registration of the mark "IN N OUT (the inside
of the letter "O" formed like a star)." Upon approval of its
application, a certificate of registration of the said mark was
issued in the name of respondent Sehwani, Incorporated on 17
December 1993. On 30 August 2000, respondents 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." Respondents asserted that
respondent Sehwani, Incorporated, being the registered owner of
the mark "IN N OUT," should be accorded the presumption of a
valid registration of its mark with the exclusive right to use the
same. Respondents argued that none of the grounds provided
under the Intellectual Property Code for the cancellation of a
certificate of registration are present in this case. Additionally,
respondents maintained that petitioner had no legal capacity to
sue as it had never operated in the Philippines.12
Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-
Abelardo, rendered a Decision dated 22 December 2003,13 in
favor of petitioner. According to said Decision, petitioner had the
legal capacity to sue in the Philippines, since its country of origin
or domicile was a member of and a signatory to the Convention
of Paris on Protection of Industrial Property. And although
petitioner had never done business in the Philippines, it was
widely known in this country through the use herein of products
bearing its corporate and trade name. Petitioners marks are
internationally well-known, given the world-wide registration of
the mark "IN-N-OUT," and its numerous advertisements in
various publications and in the Internet. Moreover, the IPO had
16
already declared in a previous inter partes case that "In-N-Out
Burger and Arrow Design" was an internationally well-known
mark. Given these circumstances, the IPO Director for Legal
Affairs pronounced in her Decision that petitioner had the right
to use its tradename and mark "IN-N-OUT" in the Philippines to
the exclusion of others, including the respondents. However,
respondents used the mark "IN N OUT" in good faith and were
not guilty of unfair competition, since respondent Sehwani,
Incorporated did not evince any intent to ride upon petitioners
goodwill by copying the mark "IN-N-OUT Burger" exactly. The
inside of the letter "O" in the mark used by respondents formed
a star. In addition, the simple act of respondent Sehwani,
Incorporated of inquiring into the existence of a pending
application for registration of the "IN-N-OUT" mark was not
deemed fraudulent. The dispositive part of the Decision of the IPO
Director for Legal Affairs reads:
With the foregoing disquisition, Certificate of Registration No.
56666 dated 17 December 1993 for the mark "IN-N-OUT" (the
inside of the letter "O" formed like a star) issued in favor of
Sehwani, Incorporated is hereby CANCELLED. Consequently,
respondents Sehwani, Inc. and Benitas Frites are hereby ordered
to permanently cease and desist from using the mark "IN-N-OUT"
and "IN-N-OUT BURGER LOGO" on its goods and in its business.
With regards the mark "Double-Double," considering that as
earlier discussed, the mark has been approved by this Office for
publication and that as shown by evidence, Complainant is the
owner of the said mark, Respondents are so hereby ordered to
permanently cease and desist from using the mark Double-
Double. NO COSTS. 14
Both parties filed their respective Motions for Reconsideration of
the aforementioned Decision. Respondents Motion for
Reconsideration15 and petitioners Motion for Partial
Reconsideration16 were denied by the IPO Director for Legal
Affairs in Resolution No. 2004-1817 dated 28 October 2004 and
Resolution No. 2005-05 dated 25 April 2005,18 respectively.
Subsequent events would give rise to two cases before this Court,
G.R. No. 171053 and G.R. No. 179127, the case at bar.
G.R. No. 171053
On 29 October 2004, respondents received a copy of Resolution
No. 2004-18 dated 28 October 2004 denying their Motion for
Reconsideration. Thus, on 18 November 2004, respondents filed
an Appeal Memorandum with IPO Director General Emma
Francisco (Director General Francisco). However, in an Order
dated 7 December 2004, the appeal was dismissed by the IPO
Director General for being filed beyond the 15-day reglementary
period to appeal.
Respondents appealed to the Court of Appeals via a Petition for
Review under Rule 43 of the Rules of Court, filed on 20 December
2004 and docketed as CA-G.R. SP No. 88004, challenging the
dismissal of their appeal by the IPO Director General, which
effectively affirmed the Decision dated 22 December 2003 of the
IPO Director for Legal Affairs ordering the cancellation of the
registration of the disputed trademark in the name of respondent
Sehwani, Incorporated and enjoining respondents from using the
same. In particular, respondents based their Petition on the
following grounds:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN
DISMISSING APPEAL NO. 14-2004-00004 ON A MERE
TECHNICALITY
THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND
RESOLUTION (1) CANCELLING RESPONDENTS CERTIFICATE OF
REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING
PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING
THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE
CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE.
Respondents thus prayed:
WHEREFORE, petitioners respectfully pray that this Honorable
Court give due course to this petition, and thereafter order the
17
Office of the Director General of the Intellectual Property Office
to reinstate and give due course to [respondent]s Appeal No. 14-
2004-00004.
Other reliefs, just and equitable under the premises, are likewise
prayed for.
On 21 October 2005, the Court of Appeals rendered a Decision
denying respondents Petition in CA-G.R SP No. 88004 and
affirming the Order dated 7 December 2004 of the IPO Director
General. The appellate court confirmed that respondents appeal
before the IPO Director General was filed out of time and that it
was only proper to cancel the registration of the disputed
trademark in the name of respondent Sehwani, Incorporated and
to permanently enjoin respondents from using the same.
Effectively, the 22 December 2003 Decision of IPO Director of
Legal Affairs was likewise affirmed. On 10 November 2005,
respondents moved for the reconsideration of the said Decision.
On 16 January 2006, the Court of Appeals denied their motion for
reconsideration.
Dismayed with the outcome of their petition before the Court of
Appeals, respondents raised the matter to the Supreme Court in
a Petition for Review under Rule 45 of the Rules of Court, filed on
30 January 2006, bearing the title Sehwani, Incorporated v. In-N-
Out Burger and docketed as G.R. No. 171053.19
This Court promulgated a Decision in G.R. No. 171053 on 15
October 2007,20 finding that herein respondents failed to file
their Appeal Memorandum before the IPO Director General
within the period prescribed by law and, consequently, they lost
their right to appeal. The Court further affirmed the Decision
dated 22 December 2003 of the IPO Director of Legal Affairs
holding that herein petitioner had the legal capacity to sue for the
protection of its trademarks, even though it was not doing
business in the Philippines, and ordering the cancellation of the
registration obtained by herein respondent Sehwani,
Incorporated of the internationally well-known marks of
petitioner, and directing respondents to stop using the said
marks. Respondents filed a Motion for Reconsideration of the
Decision of this Court in G.R. No. 171053, but it was denied with
finality in a Resolution dated 21 January 2008.
G.R. No. 179127
Upon the denial of its Partial Motion for Reconsideration of the
Decision dated 22 December 2003 of the IPO Director for Legal
Affairs, petitioner was able to file a timely appeal before the IPO
Director General on 27 May 2005.
During the pendency of petitioners appeal before the IPO
Director General, the Court of Appeals already rendered on 21
October 2005 its Decision dismissing respondents Petition in CA-
G.R. SP No. 88004.
In a Decision dated 23 December 2005, IPO Director General
Adrian Cristobal, Jr. found petitioners appeal meritorious and
modified the Decision dated 22 December 2003 of the IPO
Director of Legal Affairs. The IPO Director General declared that
respondents were guilty of unfair competition. Despite
respondents claims that they had been using the mark since
1982, they only started constructing their restaurant sometime in
2000, after petitioner had already demanded that they desist
from claiming ownership of the mark "IN-N-OUT." Moreover, the
sole distinction of the mark registered in the name of respondent
Sehwani, Incorporated, from those of the petitioner was the star
inside the letter "O," a minor difference which still deceived
purchasers. Respondents were not even actually using the star in
their mark because it was allegedly difficult to print. The IPO
Director General expressed his disbelief over the respondents
reasoning for the non-use of the star symbol. The IPO Director
General also considered respondents use of petitioners
registered mark "Double-Double" as a sign of bad faith and an
intent to mislead the public. Thus, the IPO Director General ruled
that petitioner was entitled to an award for the actual damages it
suffered by reason of respondents acts of unfair competition,
18
exemplary damages, and attorneys fees.21 The fallo of the
Decision reads:
WHEREFORE, premises considered, the [herein respondents] are
held guilty of unfair competition. Accordingly, Decision No. 2003-
02 dated 22 December 2003 is hereby MODIFIED as follows:
[Herein Respondents] are hereby ordered to jointly and severally
pay [herein petitioner]:
1. Damages in the amount of TWO HUNDRED TWELVE
THOUSAND FIVE HUNDRED SEVENTY FOUR AND
28/100(P212,574.28);
2. Exemplary damages in the amount of FIVE HUNDRED
THOUSAND PESOS (P500,000.00);
3. Attorneys fees and expenses of litigation in the amount of FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
All products of [herein respondents] including the labels, signs,
prints, packages, wrappers, receptacles and materials used by
them in committing unfair competition should be without
compensation of any sort be seized and disposed of outside the
channels of commerce.
Let a copy of this Decision be furnished the Director of Bureau of
Legal Affairs for appropriate action, and the records be returned
to her for proper disposition. Further, let a copy of this Decision
be furnished the Documentation, Information and Technology
Transfer Bureau for their information and records purposes.22
Aggrieved, respondents were thus constrained to file on 11
January 2006 before the Court of Appeals another Petition for
Review under Rule 43 of the Rules of Court, docketed as CA-G.R.
SP No. 92785. Respondents based their second Petition before
the appellate court on the following grounds:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN
HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN
ORDERING THEM TO PAY DAMAGES AND ATTORNEYS FEES TO
RESPONDENTS
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN
AFFIRMING THE BUREAU OF LEGAL AFFAIRS DECISION (1)
CANCELLING PETITIONERS CERTIFICATE OF REGISTRATION FOR
THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO
PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT
MARK ON ITS GOODS AND BUSINESS
Respondents assailed before the appellate court the foregoing 23
December 2005 Decision of the IPO Director General, alleging
that their use of the disputed mark was not tainted with
fraudulent intent; hence, they should not be held liable for
damages. They argued that petitioner had never entered into any
transaction involving its goods and services in the Philippines and,
therefore, could not claim that its goods and services had already
been identified in the mind of the public. Respondents added that
the disputed mark was not well-known. Finally, they maintained
that petitioners complaint was already barred by laches.23
At the end of their Petition in CA-G.R. SP No. 92785, respondents
presented the following prayer:
WHEREFORE, [respondents herein] respectfully pray that this
Honorable Court:
(a) upon the filing of this petition, issue a temporary restraining
order enjoining the IPO and [petitioner], their agents, successors
and assigns, from executing, enforcing and implementing the IPO
Director Generals Decision dated 23 December 2005, which
modified the Decision No. 2003-02 dated 22 December 2003 of
the BLA, until further orders from this Honorable Court.
(b) after notice and hearing, enjoin the IPO and [petitioner], their
agents, successors and assigns, from executing, enforcing and
implementing the Decision dated 23 December 2005 of the
Director General of the IPO in IPV No. 10-2001-00004 and to
19
maintain the status quo ante pending the resolution of the merits
of this petition; and
(c) after giving due course to this petition:
(i) reverse and set aside the Decision dated 23 December 2005 of
the Director General of the IPO in IPV No. 10-2001-00004 finding
the [respondents] guilty of unfair competition and awarding
damages and attorneys fees to the respondent
(ii) in lieu thereof, affirm Decision No. 2003-02 of the BLA dated
22 December 2003 and Resolution No. 2005-05 of the BLA dated
25 April 2005, insofar as it finds [respondents] not guilty of unfair
competition and hence not liable to the [petitioner] for damages
and attorneys fees;
(iii) reverse Decision No. 2003-02 of the BLA dated 22 December
2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005,
insofar as it upheld [petitioner]s legal capacity to sue; that
[petitioner]s trademarks are well-known; and that respondent
has the exclusive right to use the same; and
(iv) make the injunction permanent.
[Respondents] also pray for other reliefs, as may deemed just or
equitable.24
On 18 July 2006, the Court of Appeals promulgated a Decision25
in CA-G.R. SP No. 92785 reversing the Decision dated 23
December 2005 of the IPO Director General.
The Court of Appeals, in its Decision, initially addressed
petitioners assertion that respondents had committed forum
shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R.
SP No. 92785. It ruled that respondents were not guilty of forum
shopping, distinguishing between the respondents two Petitions.
The subject of Respondents Petition in CA-G.R SP No. 88004 was
the 7 December 2004 Decision of the IPO Director General
dismissing respondents appeal of the 22 December 2003
Decision of the IPO Director of Legal Affairs. Respondents
questioned therein the cancellation of the trademark registration
of respondent Sehwani, Incorporated and the order permanently
enjoining respondents from using the disputed trademark.
Respondents Petition in CA-G.R. SP No. 92785 sought the review
of the 23 December 2005 Decision of the IPO Director General
partially modifying the 22 December 2003 Decision of the IPO
Director of Legal Affairs. Respondents raised different issues in
their second petition before the appellate court, mainly
concerning the finding of the IPO Director General that
respondents were guilty of unfair competition and the awarding
of actual and exemplary damages, as well as attorneys fees, to
petitioner.
The Court of Appeals then proceeded to resolve CA-G.R. SP No.
92785 on jurisdictional grounds not raised by the parties. The
appellate court declared that Section 163 of the Intellectual
Property Code specifically confers upon the regular courts, and
not the BLA-IPO, sole jurisdiction to hear and decide cases
involving provisions of the Intellectual Property Code, particularly
trademarks. Consequently, the IPO Director General had no
jurisdiction to rule in its Decision dated 23 December 2005 on
supposed violations of these provisions of the Intellectual
Property Code.
In the end, the Court of Appeals decreed:
WHEREFORE, the Petition is GRANTED. The Decision dated 23
December 2005 rendered by the Director General of the
Intellectual Property Office of the Philippines in Appeal No. 10-
05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts
governed by Article 168 of R.A. 8293 and other sections
enumerated in Section 163 of the same Code, respondents
claims in its Complaint docketed as IPV No. 10-2001-00004 are
hereby DISMISSED.26
The Court of Appeals, in a Resolution dated 31 July 2007,27
denied petitioners Motion for Reconsideration of its
aforementioned Decision.
20
Hence, the present Petition, where petitioner raises the following
issues:
I
WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING
THE QUESTIONED DECISION DATED 18 JULY 2006 AND
RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS
NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR
INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;
II
WHETHER OR NOT THE INSTANT PETITION IS FORMALLY
DEFECTIVE; AND
III
WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING
THE QUESTIONED DECISION DATED 18 JULY 2006 AND
RESOLUTION DATED 31 JULY 2007 DECLARING THAT SEHWANI
AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY
FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B)
FORUM SHOPPING PROPER.28
As previously narrated herein, on 15 October 2007, during the
pendency of the present Petition, this Court already promulgated
its Decision29 in G.R. No. 171053 on 15 October 2007, which
affirmed the IPO Director Generals dismissal of respondents
appeal for being filed beyond the reglementary period, and left
the 22 December 2003 Decision of the IPO Director for Legal
Affairs, canceling the trademark registration of respondent
Sehwani, Incorporated and enjoining respondents from using the
disputed marks.
Before discussing the merits of this case, this Court must first rule
on the procedural flaws that each party has attributed to the
other.
Formal Defects of the Petition
Respondents contend that the Verification/Certification executed
by Atty. Edmund Jason Barranda of Villaraza and Angangco, which
petitioner attached to the present Petition, is defective and
should result in the dismissal of the said Petition.
Respondents point out that the Secretarys Certificate executed
by Arnold M. Wensinger on 20 August 2007, stating that
petitioner had authorized the lawyers of Villaraza and Angangco
to represent it in the present Petition and to sign the Verification
and Certification against Forum Shopping, among other acts, was
not properly notarized. The jurat of the aforementioned
Secretarys Certificate reads:
Subscribed and sworn to me this 20th day of August 2007 in Irving
California.
Rachel A. Blake (Sgd.)
Notary Public30
Respondents aver that the said Secretarys Certificate cannot
properly authorize Atty. Barranda to sign the
Verification/Certification on behalf of petitioner because the
notary public Rachel A. Blake failed to state that: (1) petitioners
Corporate Secretary, Mr. Wensinger, was known to her; (2) he
was the same person who acknowledged the instrument; and (3)
he acknowledged the same to be his free act and deed, as
required under Section 2 of Act No. 2103 and Landingin v.
Republic of the Philippines.31
Respondents likewise impugn the validity of the notarial
certificate of Atty. Aldrich Fitz B. Uy, on Atty. Barandas
Verification/Certification attached to the instant Petition, noting
the absence of (1) the serial number of the commission of the
notary public; (2) the office address of the notary public; (3) the
roll of attorneys number and the IBP membership number; and
(4) a statement that the Verification/Certification was notarized
within the notary publics territorial jurisdiction, as required
under the 2004 Rules on Notarial Practice. 32
21
Section 2 of Act No. 2103 and Landingin v. Republic of the
Philippines are not applicable to the present case. The
requirements enumerated therein refer to documents which
require an acknowledgement, and not a mere jurat.
A jurat is that part of an affidavit in which the notary certifies that
before him/her, the document was subscribed and sworn to by
the executor. Ordinarily, the language of the jurat should avow
that the document was subscribed and sworn to before the
notary public. In contrast, an acknowledgment is the act of one
who has executed a deed in going before some competent officer
or court and declaring it to be his act or deed. It involves an extra
step undertaken whereby the signor actually declares to the
notary that the executor of a document has attested to the notary
that the same is his/her own free act and deed.33 A Secretarys
Certificate, as that executed by petitioner in favor of the lawyers
of the Angangco and Villaraza law office, only requires a jurat.34
Even assuming that the Secretarys Certificate was flawed, Atty.
Barranda may still sign the Verification attached to the Petition at
bar. A pleading is verified by an affidavit that the affiant has read
the pleading and that the allegations therein are true and correct
of his personal knowledge or based on authentic records. 35 The
party itself need not sign the verification. A partys
representative, lawyer or any other person who personally knows
the truth of the facts alleged in the pleading may sign the
verification.36 Atty. Barranda, as petitioners counsel, was in the
position to verify the truth and correctness of the allegations of
the present Petition. Hence, the Verification signed by Atty.
Barranda substantially complies with the formal requirements for
such.
Moreover, the Court deems it proper not to focus on the
supposed technical infirmities of Atty. Barandas Verification. It
must be borne in mind that the purpose of requiring a verification
is to secure an assurance that the allegations of the petition has
been made in good faith; or are true and correct, not merely
speculative. This requirement is simply a condition affecting the
form of pleadings, and non-compliance therewith does not
necessarily render it fatally defective. Indeed, verification is only
a formal, not a jurisdictional requirement. In the interest of
substantial justice, strict observance of procedural rules may be
dispensed with for compelling reasons.37 The vital issues raised
in the instant Petition on the jurisdiction of the IPO Director for
Legal Affairs and the IPO Director General over trademark cases
justify the liberal application of the rules, so that the Court may
give the said Petition due course and resolve the same on the
merits.
This Court agrees, nevertheless, that the notaries public, Rachel
A. Blake and Aldrich Fitz B. Uy, were less than careful with their
jurats or notarial certificates. Parties and their counsel should
take care not to abuse the Courts zeal to resolve cases on their
merits. Notaries public in the Philippines are reminded to exert
utmost care and effort in complying with the 2004 Rules on
Notarial Practice. Parties and their counsel are further charged
with the responsibility of ensuring that documents notarized
abroad be in their proper form before presenting said documents
before Philippine courts.
Forum Shopping
Petitioner next avers that respondents are guilty of forum
shopping in filing the Petition in CA-G.R. SP No. 92785, following
their earlier filing of the Petition in CA-G.R SP No. 88004.
Petitioner also asserts that respondents were guilty of submitting
to the Court of Appeals a patently false Certification of Non-forum
Shopping in CA-G.R. SP No. 92785, when they failed to mention
therein the pendency of CA-G.R SP No. 88004.
Forum shopping is the institution of two or more actions or
proceedings grounded on the same cause on the supposition that
one or the other court would make a favorable disposition. It is
an act of malpractice and is prohibited and condemned as trifling
with courts and abusing their processes. In determining whether
or not there is forum shopping, what is important is the vexation
caused the courts and parties-litigants by a party who asks
22
different courts and/or administrative bodies to rule on the same
or related causes and/or grant the same or substantially the same
reliefs and in the process creates the possibility of conflicting
decisions being rendered by the different bodies upon the same
issues.38
Forum shopping is present when, in two or more cases pending,
there is identity of (1) parties (2) rights or causes of action and
reliefs prayed for, and (3) the identity of the two preceding
particulars is such that any judgment rendered in the other
action, will, regardless of which party is successful, amount to res
judicata in the action under consideration.39
After a cursory look into the two Petitions in CA-G.R. SP No. 88004
and CA-G.R. SP No. 92785, it would at first seem that respondents
are guilty of forum shopping.
There is no question that both Petitions involved identical parties,
and raised at least one similar ground for which they sought the
same relief. Among the grounds stated by the respondents for
their Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of
Legal Affairs (sic) Decision and Resolution (1) canceling [herein
respondent Sehwani, Incorporated]s certificate of registration
for the mark IN-N-OUT and (2) ordering [herein respondents] to
permanently cease and desist from using the subject mark on its
goods and business are contrary to law and/or is (sic) not
supported by evidence."40 The same ground was again invoked
by respondents in their Petition in CA-G.R. SP No. 92785,
rephrased as follows: "The IPO Director General committed grave
error in affirming the Bureau of Legal Affairs (sic) Decision (1)
canceling [herein respondent Sehwani, Incorporated]s certificate
of registration for the mark "IN-N-OUT," and (2) ordering [herein
respondents] to permanently cease and desist from using the
subject mark on its goods and business."41 Both Petitions, in
effect, seek the reversal of the 22 December 2003 Decision of the
IPO Director of Legal Affairs. Undoubtedly, a judgment in either
one of these Petitions affirming or reversing the said Decision of
the IPO Director of Legal Affairs based on the merits thereof
would bar the Court of Appeals from making a contrary ruling in
the other Petition, under the principle of res judicata.
Upon a closer scrutiny of the two Petitions, however, the Court
takes notice of one issue which respondents did not raise in CA-
G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e.,
whether respondents are liable for unfair competition. Hence,
respondents seek additional reliefs in CA-G.R. SP No. 92785,
seeking the reversal of the finding of the IPO Director General that
they are guilty of unfair competition, and the nullification of the
award of damages in favor of petitioner resulting from said
finding. Undoubtedly, respondents could not have raised the
issue of unfair competition in CA-G.R. SP No. 88004 because at
the time they filed their Petition therein on 28 December 2004,
the IPO Director General had not yet rendered its Decision dated
23 December 2005 wherein it ruled that respondents were guilty
thereof and awarded damages to petitioner.
In arguing in their Petition in CA-G.R. SP No. 92785 that they are
not liable for unfair competition, it is only predictable, although
not necessarily legally tenable, for respondents to reassert their
right to register, own, and use the disputed mark. Respondents
again raise the issue of who has the better right to the disputed
mark, because their defense from the award of damages for
unfair competition depends on the resolution of said issue in their
favor. While this reasoning may be legally unsound, this Court
cannot readily presume bad faith on the part of respondents in
filing their Petition in CA-G.R. SP No. 92785; or hold that
respondents breached the rule on forum shopping by the mere
filing of the second petition before the Court of Appeals.
True, respondents should have referred to CA-G.R. SP No. 88004
in the Certification of Non-Forum Shopping, which they attached
to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual
background of this case and the importance of resolving the
jurisdictional and substantive issues raised herein, justify the
relaxation of another procedural rule. Although the submission of
a certificate against forum shopping is deemed obligatory, it is not
23
jurisdictional.42 Hence, in this case in which such a certification
was in fact submitted, only it was defective, the Court may still
refuse to dismiss and, instead, give due course to the Petition in
light of attendant exceptional circumstances.
The parties and their counsel, however, are once again warned
against taking procedural rules lightly. It will do them well to
remember that the Courts have taken a stricter stance against the
disregard of procedural rules, especially in connection with the
submission of the certificate against forum shopping, and it will
not hesitate to dismiss a Petition for non-compliance therewith in
the absence of justifiable circumstances.
The Jurisdiction of the IPO
The Court now proceeds to resolve an important issue which
arose from the Court of Appeals Decision dated 18 July 2006 in
CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of
Appeals adjudged that the IPO Director for Legal Affairs and the
IPO Director General had no jurisdiction over the administrative
proceedings below to rule on issue of unfair competition, because
Section 163 of the Intellectual Property Code confers jurisdiction
over particular provisions in the law on trademarks on regular
courts exclusively. According to the said provision:
Section 163. Jurisdiction of Court.All actions under Sections 150,
155, 164, and 166 to 169 shall be brought before the proper
courts with appropriate jurisdiction under existing laws.
The provisions referred to in Section 163 are: Section 150 on
License Contracts; Section 155 on Remedies on Infringement;
Section 164 on Notice of Filing Suit Given to the Director; Section
166 on Goods Bearing Infringing Marks or Trade Names; Section
167 on Collective Marks; Section 168 on Unfair Competition,
Rights, Regulation and Remedies; and Section 169 on False
Designations of Origin, False Description or Representation.
The Court disagrees with the Court of Appeals.
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. The Director of Legal Affairs shall have the power
to hold and punish for contempt all those who disregard orders
or writs issued in the course of the proceedings.
(b) After formal investigation, the Director for Legal Affairs may
impose one (1) or more of the following administrative penalties:
(i) The issuance of a cease and desist order which shall specify the
acts that the respondent shall cease and desist from and shall
require him to submit a compliance report within a reasonable
time which shall be fixed in the order;
(ii) The acceptance of a voluntary assurance of compliance or
discontinuance as may be imposed. Such voluntary assurance
may include one or more of the following:
(1) An assurance to comply with the provisions of the intellectual
property law violated;
(2) An assurance to refrain from engaging in unlawful and unfair
acts and practices subject of the formal investigation
24
(3) An assurance to recall, replace, repair, or refund the money
value of defective goods distributed in commerce; and
(4) An assurance to reimburse the complainant the expenses and
costs incurred in prosecuting the case in the Bureau of Legal
Affairs.
The Director of Legal Affairs may also require the respondent to
submit periodic compliance reports and file a bond to guarantee
compliance of his undertaking.
(iii) The condemnation or seizure of products which are subject of
the offense. The goods seized hereunder shall be disposed of in
such manner as may be deemed appropriate by the Director of
Legal Affairs, such as by sale, donation to distressed local
governments or to charitable or relief institutions, exportation,
recycling into other goods, or any combination thereof, under
such guidelines as he may provide;
(iv) The forfeiture of paraphernalia and all real and personal
properties which have been used in the commission of the
offense;
(v) The imposition of administrative fines in such amount as
deemed reasonable by the Director of Legal Affairs, which shall in
no case be less than Five thousand pesos (P5,000) nor more than
One hundred fifty thousand pesos (P150,000). In addition, an
additional fine of not more than One thousand pesos (P1,000)
shall be imposed for each day of continuing violation;
(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;
(vii) The withholding of any permit, license, authority, or
registration which is being secured by the respondent from the
Office;
(viii) The assessment of damages;
(ix) Censure; and
(x) Other analogous penalties or sanctions.
10.3 The Director General may by Regulations establish the
procedure to govern the implementation of this Section.43
(Emphasis provided.)
Unquestionably, petitioners complaint, which seeks the
cancellation of the disputed mark in the name of respondent
Sehwani, Incorporated, and damages for violation of petitioners
intellectual property rights, falls within the jurisdiction of the IPO
Director of Legal Affairs.
The Intellectual Property Code also expressly recognizes the
appellate jurisdiction of the IPO Director General over the
decisions of the IPO Director of Legal Affairs, to wit:
Section 7. The Director General and Deputies Director General.
7.1 Fuctions.The Director General shall exercise the following
powers and functions:
xxxx
b) Exercise exclusive appellate jurisdiction over all decisions
rendered by the Director of Legal Affairs, the Director of Patents,
the Director of Trademarks, and the Director of Documentation,
Information and Technology Transfer Bureau. The decisions of
the Director General in the exercise of his appellate jurisdiction in
respect of the decisions of the Director of Patents, and the
Director of Trademarks shall be appealable to the Court of
Appeals in accordance with the Rules of Court; and those in
respect of the decisions of the Director of Documentation,
Information and Technology Transfer Bureau shall be appealable
to the Secretary of Trade and Industry;
The Court of Appeals erroneously reasoned that Section 10(a) of
the Intellectual Property Code, conferring upon the BLA-IPO
jurisdiction over administrative complaints for violations of
25
intellectual property rights, is a general provision, over which the
specific provision of Section 163 of the same Code, found under
Part III thereof particularly governing trademarks, service marks,
and tradenames, must prevail. Proceeding therefrom, the Court
of Appeals incorrectly concluded that all actions involving
trademarks, including charges of unfair competition, are under
the exclusive jurisdiction of civil courts.
Such interpretation is not supported by the provisions of the
Intellectual Property Code. 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. On the contrary, 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.
xxxx
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 petitioners 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.
Unfair Competition
The Court will no longer touch on the issue of the validity or
propriety of the 22 December 2003 Decision of the IPO Director
of Legal Affairs which: (1) directed the cancellation of the
certificate of registration of respondent Sehwani, Incorporated
for the mark "IN-N-OUT" and (2) ordered respondents to
permanently cease and desist from using the disputed mark on its
goods and business. Such an issue has already been settled by this
Court in its final and executory Decision dated 15 October 2007 in
G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,44
ultimately affirming the foregoing judgment of the IPO Director
of Legal Affairs. That petitioner has the superior right to own and
use the "IN-N-OUT" trademarks vis--vis respondents is a finding
which this Court may no longer disturb under the doctrine of
conclusiveness of judgment. In conclusiveness of judgment, any
right, fact, or matter in issue directly adjudicated or necessarily
involved in the determination of an action before a competent
court in which judgment is rendered on the merits is conclusively
settled by the judgment therein and cannot again be litigated
between the parties and their privies whether or not the claims,
demands, purposes, or subject matters of the two actions are the
same.45
Thus, the only remaining issue for this Court to resolve is whether
the IPO Director General correctly found respondents guilty of
unfair competition for which he awarded damages to petitioner.
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
26
the goods as offered for sale to the public. Actual fraudulent
intent need not be shown.46
In his Decision dated 23 December 2005, the IPO Director General
ably explains the basis for his finding of the existence of unfair
competition in this case, viz:
The evidence on record shows that the [herein respondents] were
not using their registered trademark but that of the [petitioner].
[Respondent] SEHWANI, INC. was issued a Certificate of
Registration for IN N OUT (with the Inside of the Letter "O"
Formed like a Star) for restaurant business in 1993. The
restaurant opened only in 2000 but under the name IN-N-OUT
BURGER. Apparently, the [respondents] started constructing the
restaurant only after the [petitioner] demanded that the latter
desist from claiming ownership of the mark IN-N-OUT and
voluntarily cancel their trademark registration. Moreover,
[respondents] are also using [petitioners] registered mark
Double-Double for use on hamburger products. In fact, the burger
wrappers and the French fries receptacles the [respondents] are
using do not bear the mark registered by the [respondent], but
the [petitioners] IN-N-OUT Burgers name and trademark IN-N-
OUT with Arrow design.
There is no evidence that the [respondents] were authorized by
the [petitioner] to use the latters marks in the business.
[Respondents] explanation that they are not using their own
registered trademark due to the difficulty in printing the "star"
does not justify the unauthorized use of the [petitioners]
trademark instead.
Further, [respondents] are giving their products the general
appearance that would likely influence purchasers to believe that
these products are those of the [petitioner]. The intention to
deceive may be inferred from the similarity of the goods as
packed and offered for sale, and, thus, action will lie to restrain
such unfair competition. x x x.
xxxx IN-N-OUT Burger and Arrow Design. In addition, in the wrappers
and receptacles being used by the [respondents] which also
[Respondents] use of IN-N-OUT BURGER in busineses signages
contained the marks of the [petitioner], there is no notice in such
reveals fraudulent intent to deceive purchasers. Exhibit "GG,"
wrappers and receptacles that the hamburger and French fries
which shows the business establishment of [respondents]
are products of the [respondents]. Furthermore, the receipts
illustrates the imitation of [petitioners] corporate name IN-N-
issued by the [respondents] even indicate "representing IN-N-
OUT and signage IN-N-OUT BURGER. Even the Director noticed it
OUT." These acts cannot be considered acts in good faith. 47
and held:
Administrative proceedings are governed by the "substantial
"We also note that In-N-Out Burger is likewise, [petitioners]
evidence rule." A finding of guilt in an administrative case would
corporate name. It has used the "IN-N-OUT" Burger name in its
have to be sustained for as long as it is supported by substantial
restaurant business in Baldwin Park, California in the United
evidence that the respondent has committed acts stated in the
States of America since 1948. Thus it has the exclusive right to use
complaint or formal charge. As defined, substantial evidence is
the tradenems "In-N-Out" Burger in the Philippines and the
such relevant evidence as a reasonable mind may accept as
respondents are unlawfully using and appropriating the same."
adequate to support a conclusion.48 As recounted by the IPO
The Office cannot give credence to the [respondents] claim of Director General in his decision, there is more than enough
good faith and that they have openly and continuously used the substantial evidence to support his finding that respondents are
subject mark since 1982 and is (sic) in the process of expanding guilty of unfair competition.
its business. They contend that assuming that there is value in the
With such finding, the award of damages in favor of petitioner is
foreign registrations presented as evidence by the [petitioner],
but proper. This is in accordance with Section 168.4 of the
the purported exclusive right to the use of the subject mark based
Intellectual Property Code, which provides that the remedies
on such foreign registrations is not essential to a right of action
under Sections 156, 157 and 161 for infringement shall apply
for unfair competition. [Respondents] also claim that actual or
mutatis mutandis to unfair competition. The remedies provided
probable deception and confusion on the part of customers by
under Section 156 include the right to damages, to be computed
reason of respondents practices must always appear, and in the
in the following manner:
present case, the BLA has found none. This Office finds the
arguments untenable. Section 156. Actions, and Damages and Injunction for
Infringement.156.1 The owner of a registered mark may recover
In contrast, the [respondents] have the burden of evidence to
damages from any person who infringes his rights, and the
prove that they do not have fraudulent intent in using the mark
measure of the damages suffered shall be either the reasonable
IN-N-OUT. To prove their good faith, [respondents] could have
profit which the complaining party would have made, had the
easily offered evidence of use of their registered trademark,
defendant not infringed his rights, or the profit which the
which they claimed to be using as early as 1982, but did not.
defendant actually made out of the infringement, or in the event
[Respondents] also failed to explain why they are using the marks such measure of damages cannot be readily ascertained with
of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N- reasonable certainty, then the court may award as damages a
OUT Burger and Arrow Design. Even in their listing of menus, reasonable percentage based upon the amount of gross sales of
[respondents] used [Appellants] marks of DOUBLE DOUBLE and the defendant or the value of the services in connection with

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which the mark or trade name was used in the infringement of IN VIEW OF THE FOREGOING, the instant Petition is GRANTED.
the rights of the complaining party. The assailed Decision of the Court of Appeals in CA-G.R. SP No.
92785, promulgated on 18 July 2006, is REVERSED. The Decision
In the present case, the Court deems it just and fair that the IPO
of the IPO Director General, dated 23 December 2005, is hereby
Director General computed the damages due to petitioner by
REINSTATED IN PART, with the modification that the amount of
applying the reasonable percentage of 30% to the respondents
exemplary damages awarded be reduced to P250,000.00.
gross sales, and then doubling the amount thereof on account of
respondents actual intent to mislead the public or defraud the SO ORDERED.
petitioner,49 thus, arriving at the amount of actual damages of
P212,574.28.

Taking into account the deliberate intent of respondents to

engage in unfair competition, it is only proper that petitioner be
awarded exemplary damages. Article 2229 of the Civil Code
provides that such damages may be imposed by way of example
or correction for the public good, such as the enhancement of the
protection accorded to intellectual property and the prevention
of similar acts of unfair competition. However, exemplary
damages are not meant to enrich one party or to impoverish
another, but to serve as a deterrent against or as a negative
incentive to curb socially deleterious action.50 While there is no
hard and fast rule in determining the fair amount of exemplary
damages, the award of exemplary damages should be
commensurate with the actual loss or injury suffered.51 Thus,
exemplary damages of P500,000.00 should be reduced to
P250,000.00 which more closely approximates the actual
damages awarded.

In accordance with Article 2208(1) of the Civil Code, attorneys

fees may likewise be awarded to petitioner since exemplary
damages are awarded to it. Petitioner was compelled to protect
its rights over the disputed mark. The amount of P500,000.00 is
more than reasonable, given the fact that the case has dragged
on for more than seven years, despite the respondents failure to
present countervailing evidence. Considering moreover the
reputation of petitioners counsel, the actual attorneys fees paid
by petitioner would far exceed the amount that was awarded to
it.52

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