1. Phil. Pharmaweath v.

Pfizer subject a beta-lactam antibiotic effectiveness increasing

amount of a compound of the formula IA. The scope of the
claims of the Patent extends to a combination of penicillin such
PHIL PHARMAWEALTH, INC., G.R. No. 167715 as ampicillin sodium and beta-lactam antibiotic like sulbactam
Petitioner, sodium.
Present:
7. Patent No. 21116 thus covers ampicillin sodium/sulbactam
CARPIO, J., Chairperson, sodium (hereafter Sulbactam Ampicillin). Ampicillin sodium is
- versus - NACHURA, a specific example of the broad beta-lactam antibiotic
PERALTA, disclosed and claimed in the Patent. It is the compound which
ABAD, and efficacy is being enhanced by co-administering the same with
MENDOZA, JJ. sulbactam sodium. Sulbactam sodium, on the other hand, is a
specific compound of the formula IA disclosed and claimed in
Promulgated: the Patent.
PFIZER, INC. and PFIZER (PHIL.) INC.,
Respondents. November 17, 2010 8. Pfizer is marketing Sulbactam Ampicillin under the brand
name Unasyn. Pfizer's Unasyn products, which come in oral
and IV formulas, are covered by Certificates of Product
Registration (CPR) issued by the Bureau of Food and Drugs
(BFAD) under the name of complainants. The sole and
exclusive distributor of Unasyn products in the Philippines is
Zuellig Pharma Corporation, pursuant to a Distribution
x--------------------------------------------------x
Services Agreement it executed with Pfizer Phils. on January
23, 2001.
DECISION 9. Sometime in January and February 2003, complainants
came to know that respondent [herein petitioner] submitted
bids for the supply of Sulbactam Ampicillin to several hospitals
PERALTA, J.: without the consent of complainants and in violation of the
complainants' intellectual property rights. x x x
Before the Court is a petition for review on certiorari seeking to annul and set xxxx
aside the Resolutions dated January 18, 2005[1] and April 11, 2005[2] by the
10. Complainants thus wrote the above hospitals and
Court of Appeals (CA) in CA-G.R. SP No. 82734.
demanded that the latter immediately cease and desist from
accepting bids for the supply [of] Sulbactam Ampicillin or
The instant case arose from a Complaint[3] for patent infringement filed against
awarding the same to entities other than complainants.
petitioner Phil Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and
Complainants, in the same letters sent through undersigned
Pfizer (Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property
counsel, also demanded that respondent immediately
Office (BLA-IPO). The Complaint alleged as follows:
withdraw its bids to supply Sulbactam Ampicillin.
xxxx
6. Pfizer is the registered owner of Philippine Letters Patent 11. In gross and evident bad faith, respondent and the
No. 21116 (the Patent) which was issued by this Honorable hospitals named in paragraph 9 hereof, willfully ignored
Office on July 16, 1987. The patent is valid until July 16, 2004. complainants' just, plain and valid demands, refused to
The claims of this Patent are directed to a method of comply therewith and continued to infringe the Patent, all to
increasing the effectiveness of a beta-lactam antibiotic in a the damage and prejudice of complainants. As registered
mammalian subject, which comprises co-administering to said
 owner of the Patent, Pfizer is entitled to protection under
Section 76 of the IP Code.
x x x x[4]
Respondents prayed for permanent injunction, damages and the forfeiture and
impounding of the alleged infringing products. They also asked for the
issuance of a temporary restraining order and a preliminary injunction that
would prevent herein petitioner, its agents, representatives and assigns, from
importing, distributing, selling or offering the subject product for sale to any
entity in the Philippines.
In an Order[5] dated July 15, 2003 the BLA-IPO issued a preliminary injunction
which was effective for ninety days from petitioner's receipt of the said Order.
Prior to the expiration of the ninety-day period, respondents filed a Motion for
Extension of Writ of Preliminary Injunction[6] which, however, was denied by
the BLA-IPO in an Order[7] dated October 15, 2003.
Respondents filed a Motion for Reconsideration but the same was also denied
by the BLA-IPO in a Resolution[8] dated January 23, 2004.
Respondents then filed a special civil action for certiorari with the CA assailing
the October 15, 2003 and January 23, 2004 Resolutions of the BLA-IPO.
Respondents also prayed for the issuance of a preliminary mandatory
injunction for the reinstatement and extension of the writ of preliminary
injunction issued by the BLA-IPO.
While the case was pending before the CA, respondents filed a
Complaint[9] with the Regional Trial Court (RTC) of Makati City for infringement
and unfair competition with damages against herein petitioner. In said case,
respondents prayed for the issuance of a temporary restraining order and
preliminary injunction to prevent herein petitioner from importing, distributing,
selling or offering for sale sulbactam ampicillin products to any entity in the
Philippines. Respondents asked the trial court that, after trial, judgment be
rendered awarding damages in their favor and making the injunction
permanent.
On August 24, 2004, the RTC of Makati City issued an Order[10] directing the
issuance of a temporary restraining order conditioned upon respondents' filing
of a bond.
In a subsequent Order[11] dated April 6, 2005, the same RTC directed the
issuance of a writ of preliminary injunction prohibiting and restraining
[petitioner], its agents, representatives and assigns from importing, distributing
or selling Sulbactam Ampicillin products to any entity in the Philippines.
Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss[12] the
petition filed with the CA on the ground of forum shopping, contending that the
case filed with the RTC has the same objective as the petition filed with the
CA, which is to obtain an injunction prohibiting petitioner from importing,
distributing and selling Sulbactam Ampicillin products.
On January 18, 2005, the CA issued its questioned Resolution[13] approving
the bond posted by respondents pursuant to the Resolution issued by the
appellate court on March 23, 2004 which directed the issuance of a temporary
restraining order conditioned upon the filing of a bond. On even date, the CA
issued a temporary restraining order[14] which prohibited petitioner from
importing, distributing, selling or offering for sale Sulbactam Ampicillin products
to any hospital or to any other entity in the Philippines, or from infringing Pfizer
Inc.'s Philippine Patent No. 21116 and impounding all the sales invoices and
other documents evidencing sales by [petitioner] of Sulbactam Ampicillin
products.
On February 7, 2005, petitioner again filed a Motion to Dismiss[15] the case for
being moot and academic, contending that respondents' patent had already
lapsed. In the same manner, petitioner also moved for the reconsideration of
the temporary restraining order issued by the CA on the same basis that the
patent right sought to be protected has been extinguished due to the lapse of
the patent license and on the ground that the CA has no jurisdiction to review
the order of the BLA-IPO as said jurisdiction is vested by law in the Office of
the Director General of the IPO.
On April 11, 2005, the CA rendered its presently assailed Resolution denying
the Motion to Dismiss, dated November 16, 2004, and the motion for
reconsideration, as well as Motion to Dismiss, both dated February 7, 2005.
Hence, the present petition raising the following issues:
a) Can an injunctive relief be issued based on an action of
patent infringement when the patent allegedly infringed has
already lapsed?
b) What tribunal has jurisdiction to review the decisions of the
Director of Legal Affairs of the Intellectual Property Office?
c) Is there forum shopping when a party files two actions with
two seemingly different causes of action and yet pray for the
same relief?[16]
In the first issue raised, petitioner argues that respondents' exclusive right to
monopolize the subject matter of the patent exists only within the term of the
patent. Petitioner claims that since respondents' patent expired on July 16,
2004, the latter no longer possess any right of monopoly and, as such, there
is no more basis for the issuance of a restraining order or injunction against
petitioner insofar as the disputed patent is concerned.
The Court agrees.
Section 37 of Republic Act No. (RA) 165,[17] which was the governing law at
the time of the issuance of respondents' patent, provides:
Section 37. Rights of patentees. A patentee shall have the
exclusive right to make, use and sell the patented machine,
article or product, and to use the patented process for the
purpose of industry or commerce, throughout the territory of
the Philippines for the term of the patent; and such making,
using, or selling by any person without the authorization of the
patentee constitutes infringement of the patent.[18]
It is clear from the above-quoted provision of law that the exclusive right of a
patentee to make, use and sell a patented product, article or process exists
only during the term of the patent. In the instant case, Philippine Letters Patent
No. 21116, which was the basis of respondents in filing their complaint with
the BLA-IPO, was issued on July 16, 1987. This fact was admitted by
respondents themselves in their complaint. They also admitted that the validity
of the said patent is until July 16, 2004, which is in conformity with Section 21
of RA 165, providing that the term of a patent shall be seventeen (17) years
from the date of issuance thereof. Section 4, Rule 129 of the Rules of Court
provides that an admission, verbal or written, made by a party in the course of
the proceedings in the same case, does not require proof and that the
admission may be contradicted only by showing that it was made through
palpable mistake or that no such admission was made. In the present case,
there is no dispute as to respondents' admission that the term of their patent
expired on July 16, 2004. Neither is there evidence to show that their
admission was made through palpable mistake. Hence, contrary to the
pronouncement of the CA, there is no longer any need to present evidence on
the issue of expiration of respondents' patent.
On the basis of the foregoing, the Court agrees with petitioner that after July
16, 2004, respondents no longer possess the exclusive right to make, use and
sell the articles or products covered by Philippine Letters Patent No. 21116.
Section 3, Rule 58, of the Rules of Court lays down the requirements for the
issuance of a writ of preliminary injunction, viz:
(a) 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 acts
complained of, or in requiring the performance of an act or
acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-
performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or
(c) That a party, court, or agency or a person is
doing, threatening, or attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action
or proceeding, and tending to render the judgment ineffectual.
In this connection, pertinent portions of Section 5, Rule 58 of the same Rules
provide that if the matter is of extreme urgency and the applicant will suffer
grave injustice and irreparable injury, a temporary restraining order may be
issued ex parte.
From the foregoing, it can be inferred that two requisites must exist to warrant
the issuance of an injunctive relief, namely: (1) the existence of a clear and
unmistakable right that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage.[19]
In the instant case, it is clear that when the CA issued its January 18, 2005
Resolution approving the bond filed by respondents, the latter no longer had a
right that must be protected, considering that Philippine Letters Patent No.
21116 which was issued to them already expired on July 16, 2004. Hence, the
issuance by the CA of a temporary restraining order in favor of the respondents
is not proper.
In fact, the CA should have granted petitioner's motion to dismiss the petition
for certiorari filed before it as the only issue raised therein is the propriety of
extending the writ of preliminary injunction issued by the BLA-IPO. Since the
patent which was the basis for issuing the injunction, was no longer valid, any
issue as to the propriety of extending the life of the injunction was already
rendered moot and academic.
As to the second issue raised, the Court, is not persuaded by petitioner's
argument that, pursuant to the doctrine of primary jurisdiction, the Director
Generalof the IPO and not the CA has jurisdiction to review the questioned
Orders of the Director of the BLA-IPO.
It is true that under Section 7(b) of RA 8293, otherwise known as claim is originally cognizable in the courts and comes into play
the Intellectual Property Code of the Philippines, which is the presently whenever enforcement of the claim requires the resolution of
prevailing law, the Director General of the IPO exercises exclusive appellate issues which, under a regulatory scheme, has been placed
jurisdiction over all decisions rendered by the Director of the BLA-IPO. within the special competence of an administrative body; in
However, what is being questioned before the CA is not a decision, but an such case, the judicial process is suspended pending referral
interlocutory order of the BLA-IPO denying respondents' motion to extend the of such issues to the administrative body for its view.[22]
life of the preliminary injunction issued in their favor.
Based on the foregoing, the Court finds that respondents' initial filing of their
RA 8293 is silent with respect to any remedy available to litigants who intend
complaint with the BLA-IPO, instead of the regular courts, is in keeping with
to question an interlocutory order issued by the BLA-IPO. Moreover, Section
the doctrine of primary jurisdiction owing to the fact that the determination of
1(c), Rule 14 of the Rules and Regulations on Administrative Complaints for
the basic issue of whether petitioner violated respondents' patent rights
Violation of Laws Involving Intellectual Property Rights simply provides that
requires the exercise by the IPO of sound administrative discretion which is
interlocutory orders shall not be appealable. The said Rules and Regulations
based on the agency's special competence, knowledge and experience.
do not prescribe a procedure within the administrative machinery to be
However, the propriety of extending the life of the writ of preliminary injunction
followed in assailing orders issued by the BLA-IPO pending final resolution of
issued by the BLA-IPO in the exercise of its quasi-judicial power is no longer
a case filed with them. Hence, in the absence of such a remedy, the provisions
a matter that falls within the jurisdiction of the said administrative agency,
of the Rules of Court shall apply in a suppletory manner, as provided under
particularly that of its Director General. The resolution of this issue which was
Section 3, Rule 1 of the same Rules and Regulations. Hence, in the present
raised before the CA does not demand the exercise by the IPO of sound
case, respondents correctly resorted to the filing of a special civil action
administrative discretion requiring special knowledge, experience and services
for certiorari with the CA to question the assailed Orders of the BLA-IPO, as
in determining technical and intricate matters of fact. It is settled that one of
they cannot appeal therefrom and they have no other plain, speedy and
the exceptions to the doctrine of primary jurisdiction is where the question
adequate remedy in the ordinary course of law. This is consistent with Sections
involved is purely legal and will ultimately have to be decided by the courts of
1[20] and 4,[21]Rule 65 of the Rules of Court, as amended.
justice.[23] This is the case with respect to the issue raised in the petition filed
In the first place, respondents' act of filing their complaint originally with the
with the CA.
BLA-IPO is already in consonance with the doctrine of primary jurisdiction.
Moreover, as discussed earlier, RA 8293 and its implementing rules and
This Court has held that:
regulations do not provide for a procedural remedy to question interlocutory
orders issued by the BLA-IPO. In this regard, it bears to reiterate that the
[i]n cases involving specialized disputes, the practice has
judicial power of the courts, as provided for under the Constitution, includes
been to refer the same to an administrative agency of special
the authority of the courts to determine in an appropriate action the validity of
competence in observance of the doctrine of primary
the acts of the political departments.[24] Judicial power also includes the duty
jurisdiction. The Court has ratiocinated that it cannot or will not
of the courts of justice to settle actual controversies involving rights which are
determine a controversy involving a question which is within
legally demandable and enforceable, and to determine whether or not there
the jurisdiction of the administrative tribunal prior to the
has been a grave abuse of discretion amounting to lack or excess of
resolution of that question by the administrative tribunal,
jurisdiction on the part of any branch or instrumentality of the
where the question demands the exercise of sound
Government.[25] Hence, the CA, and not the IPO Director General, has
administrative discretion requiring the special knowledge,
jurisdiction to determine whether the BLA-IPO committed grave abuse of
experience and services of the administrative tribunal to
discretion in denying respondents' motion to extend the effectivity of the writ of
determine technical and intricate matters of fact, and a
preliminary injunction which the said office earlier issued.
uniformity of ruling is essential to comply with the premises of
Lastly, petitioner avers that respondents are guilty of forum shopping for
the regulatory statute administered. The objective of the
having filed separate actions before the IPO and the RTC praying for the same
doctrine of primary jurisdiction is to guide a court in
relief.
determining whether it should refrain from exercising its
jurisdiction until after an administrative agency has
The Court agrees.
determined some question or some aspect of some question
arising in the proceeding before the court. It applies where the
Forum shopping is defined as the act of a party against whom an adverse
judgment has been rendered in one forum, of seeking another (and possibly
favorable) opinion in another forum (other than by appeal or the special civil
action of certiorari), or the institution of two (2) or more actions or proceedings
grounded on the same cause on the supposition that one or the other court
would make a favorable disposition.[26]
The elements of forum shopping are: (a) identity of parties, or at least such
parties that represent the same interests in both actions; (b) identity of rights
asserted and reliefs prayed for, the reliefs being founded on the same facts;
(c) identity of the two preceding particulars, 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.[27]
There is no question as to the identity of parties in the complaints filed with the
IPO and the RTC.
Respondents argue that they cannot be held guilty of forum shopping because
their complaints are based on different causes of action as shown by the fact
that the said complaints are founded on violations of different patents.
The Court is not persuaded.
Section 2, Rule 2 of the Rules of Court defines a cause of action as the act or
omission by which a party violates a right of another. In the instant case,
respondents' cause of action in their complaint filed with the IPO is the alleged
act of petitioner in importing, distributing, selling or offering for sale Sulbactam
Ampicillin products, acts that are supposedly violative of respondents' right to
the exclusive sale of the said products which are covered by the latter's patent.
However, a careful reading of the complaint filed with the RTC of Makati City
would show that respondents have the same cause of action as in their
complaint filed with the IPO. They claim that they have the exclusive right to
make, use and sell Sulbactam Ampicillin products and that petitioner violated
this right. Thus, it does not matter that the patents upon which the complaints
were based are different. The fact remains that in both complaints the rights
violated and the acts violative of such rights are identical.
In fact, respondents seek substantially the same reliefs in their separate
complaints with the IPO and the RTC for the purpose of accomplishing the
same objective.
It is settled by this Court in several cases that the filing by a party of two
apparently different actions but with the same objective constitutes forum
shopping.[28] The Court discussed this species of forum shopping as follows:
Very simply stated, the original complaint in the
court a quo which gave rise to the instant petition was
filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real
estate. On the other hand, the complaint in the Second
Case seeks to declare such purported sale involving
the same real property as unenforceable as against the
Bank, which is the petitioner herein. In other words, in
the Second Case, the majority stockholders, in
representation of the Bank, are seeking to accomplish
what the Bank itself failed to do in the original case in
the trial court. In brief, the objective or the relief
being sought, though worded differently, is the
same, namely, to enable the petitioner Bank to
escape from the obligation to sell the property to
respondent.[29]
In Danville Maritime, Inc. v. Commission on Audit,[30] the Court ruled
as follows:
In the attempt to make the two actions appear to be different,
petitioner impleaded different respondents therein PNOC in
the case before the lower court and the COA in the case
before this Court and sought what seems to be different reliefs.
Petitioner asks this Court to set aside the questioned letter-
directive of the COA dated October 10, 1988 and to direct said
body to approve the Memorandum of Agreement entered into
by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to enjoin the
PNOC from conducting a rebidding and from selling to other
parties the vessel T/T Andres Bonifacio, and for an extension
of time for it to comply with the paragraph 1 of the
memorandum of agreement and damages. One can see that
although the relief prayed for in the two (2) actions are
ostensibly different, the ultimate objective in both actions
is the same, that is, the approval of the sale of vessel in
favor of petitioner, and to overturn the letter directive of
the COA of October 10, 1988 disapproving the sale.[31]
In the instant case, the prayer of respondents in their complaint filed with the
IPO is as follows:
A. Immediately upon the filing of this action, issue an ex
parte order (a) temporarily restraining respondent, its agents,
representatives and assigns from importing, distributing,
selling or offering for sale Sulbactam Ampicillin products to the
 hospitals named in paragraph 9 of this Complaint or to any (1) temporarily restraining Pharmawealth,
other entity in the Philippines, or from otherwise infringing its agents, representatives and assigns
Pfizer Inc.'s Philippine Patent No. 21116; and (b) impounding from importing, distributing, selling or offering for
all the sales invoices and other documents evidencing sales sale infringing sulbactam ampicillin products to
by respondent of Sulbactam Ampicillin products. various government and private hospitals or to any
other entity in the Philippines, or from otherwise
B. After hearing, issue a writ of preliminary injunction enjoining infringing Pfizer Inc.'s Philippine Patent No. 26810.
respondent, its agents, representatives and assigns from
importing, distributing, selling or offering for sale Sulbactam (2) impounding all the sales
Ampicillin products to the hospitals named in paragraph 9 of invoices and other
the Complaint or to any other entity in the Philippines, or from documents evidencing
otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; sales by pharmawealth of
and sulbactam ampicillin
products; and
C. After trial, render judgment:
(3) disposing of the infringing goods
(i) declaring that respondent has outside the channels of
infringed Pfizer Inc.'s Philippine commerce.
Patent No. 21116 and that
respondent has no right whatsoever (b) After hearing, issue a writ of preliminary injunction:
over complainant's patent;
(1) enjoining Pharmawealth, its
(ii) ordering respondent to pay complainants the agents, representatives and
following amounts: assigns from importing,
distributing, selling or
(a) at least P1,000,000.00 as actual damages;
offering for sale infringing
(b) P700,000.00 as attorney's fees and litigation expenses;
sulbactam ampicillin
(d) P1,000,000.00 as exemplary damages; and
products to various
(d) costs of this suit.
government hospitals or to
(iii) ordering the condemnation, seizure or
any other entity in the
forfeiture of respondent's infringing goods or
Philippines, or from
products, wherever they may be found,
otherwise infringing Patent
including the materials and implements used
No. 26810;
in the commission of infringement, to be
disposed of in such manner as may be
(2) impounding all the sales invoices
deemed appropriate by this Honorable
and other documents evidencing
Office; and
sales by Pharmawealth of sulbactam
ampicillin products; and
(iv) making the injunction permanent.[32]
(3) disposing of the infringing goods outside the
channels of commerce.
In an almost identical manner, respondents prayed for the following in their
complaint filed with the RTC:
(c) After trial, render judgment:
(a) Immediately upon the filing of this action, issue
an ex parte order:
(1) finding Pharmawealth to have
infringed Patent No. 26810 and
 declaring Pharmawealth to have no
right whatsoever over plaintiff's Thus, the Court agrees with petitioner that respondents are indeed guilty of
patent; forum shopping.

(2) ordering Pharmawealth to pay Jurisprudence holds that if the forum shopping is not considered willful and
plaintiffs the following amounts: deliberate, the subsequent case shall be dismissed without prejudice, on the
(i) at least P3,000,000.00 as ground of either litis pendentia or res judicata.[35] However, if the forum
actual damages; shopping is willful and deliberate, both (or all, if there are more than two)
(ii) P500,000.00 as attorney's actions shall be dismissed with prejudice.[36] In the present case, the Court
fees and P1,000,000.00 as litigation expenses; finds that respondents did not deliberately violate the rule on non-forum
(iii) P3,000,000.00 as shopping. Respondents may not be totally blamed for erroneously believing
exemplary damages; that they can file separate actions simply on the basis of different patents.
and Moreover, in the suit filed with the RTC of Makati City, respondents were
(iv) costs of this suit. candid enough to inform the trial court of the pendency of the complaint filed
(3) ordering the condemnation, with the BLA-IPO as well as the petition for certiorari filed with the CA. On
seizure or forfeiture of these bases, only Civil Case No. 04-754 should be dismissed on the ground
Pharmawealth's infringing of litis pendentia.
goods or products,
wherever they may be WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions
found, including the of the Court of Appeals, dated January 18, 2005 and April 11, 2005, in CA-
materials and implements G.R. No. 82734, are REVERSED and SET ASIDE. The petition
used in the commission of for certiorari filed with the Court of Appeals is DISMISSED for being moot and
infringement, to be academic.
disposed of in such manner
as may be deemed Civil Case No. 04-754, filed with the Regional Trial Court of Makati City, Branch
appropriate by this 138, is likewise DISMISSED on the ground of litis pendentia.
Honorable Court; and
SO ORDERED.
(4) making the injunction permanent.[33]

It is clear from the foregoing that the ultimate objective which respondents seek
to achieve in their separate complaints filed with the RTC and the IPO, is to
ask for damages for the alleged violation of their right to exclusively sell
Sulbactam Ampicillin products and to permanently prevent or prohibit
petitioner from selling said products to any entity. Owing to the substantial
identity of parties, reliefs and issues in the IPO and RTC cases, a decision in
one case will necessarily amount to res judicata in the other action.

It bears to reiterate that what is truly important to consider in determining

whether forum shopping exists or not is the vexation caused the courts and
parties-litigant by a party who asks different courts and/or administrative
agencies to rule on the same or related causes and/or to grant the same or
substantially the same reliefs, in the process creating the possibility of
conflicting decisions being rendered by the different fora upon the same
issue.[34]
 2. In ‘N Out Burger v. Sehwani 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 licensing agreement, Benita Frites, Inc. was able to use
IN-N-OUT BURGER, INC, G . R. No . 179127 the registered mark of respondent Sehwani, Incorporated.
Petitioner, Present:
Petitioner eventually filed on 4 June 2001 before the Bureau of Legal
YNARES-SANTIAGO, J., Affairs (BLA) of the IPO an administrative complaint against respondents for
Chairperson, unfair competition and cancellation of trademark registration. Petitioner
- versus - AUSTRIA-MARTINEZ, averred in its complaint that it is the owner of the trade name IN-N-OUT and
CHICO-NAZARIO, the following trademarks: (1) IN-N-OUT; (2) IN-N-OUT Burger & Arrow Design;
NACHURA, and and (3) IN-N-OUT Burger Logo. These trademarks are registered with the
REYES, JJ. Trademark Office of the US and in various parts of the world, are
SEHWANI, INCORPORATED internationally well-known, and have become distinctive of its business and
AND/OR BENITAS FRITES, INC., Promulgated: goods through its long and exclusive commercial use.[6] Petitioner pointed out
Respo nde nt s. that its internationally well-known trademarks and the mark of the respondents
December 24, 2008 are all registered for the restaurant business and are clearly identical and
x-------------------------------------------------x confusingly similar. Petitioner claimed that respondents are making it appear
that their goods and services are those of the petitioner, thus, misleading
DECISION ordinary and unsuspecting consumers that they are purchasing petitioners
products.[7]

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking to reverse the Decision[1] dated 18 July 2006 rendered by the Court of
Appeals in CA-G.R. SP No. 92785, which reversed the Decision[2] 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
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 to permanently cease and desist from using the mark Double-
OUT. Respondents asserted that respondent Sehwani, Incorporated, being Double. NO COSTS. [14]
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 Both parties filed their respective Motions for Reconsideration of the
Intellectual Property Code for the cancellation of a certificate of registration are aforementioned Decision. Respondents Motion for Reconsideration[15] and
present in this case. Additionally, respondents maintained that petitioner had petitioners Motion for Partial Reconsideration[16] were denied by the IPO
no legal capacity to sue as it had never operated in the Philippines.[12] Director for Legal Affairs in Resolution No. 2004-18[17] dated 28 October
2004and Resolution No. 2005-05 dated 25 April 2005,[18] respectively.
Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-
Abelardo, rendered a Decision dated 22 December 2003,[13] in favor of Subsequent events would give rise to two cases before this Court,
petitioner.According to said Decision, petitioner had the legal capacity to sue G.R. No. 171053 and G.R. No. 179127, the case at bar.
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 G.R. No. 171053
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 On 29 October 2004, respondents received a copy of Resolution No.
and trade name. Petitioners marks are internationally well-known, given the 2004-18 dated 28 October 2004 denying their Motion for Reconsideration.
world-wide registration of the mark IN-N-OUT, and its numerous Thus, on 18 November 2004, respondents filed an Appeal Memorandum with
advertisements in various publications and in the Internet. Moreover, the IPO IPO Director General Emma Francisco (Director General
had already declared in a previous inter partes case that In-N-Out Burger and Francisco). However, in an Order dated 7 December 2004, the appeal was
Arrow Design was an internationally well-known mark. Given these dismissed by the IPO Director General for being filed beyond the 15-day
circumstances, the IPO Director for Legal Affairs pronounced in her Decision reglementary period to appeal.
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 appealed to the Court of Appeals via a Petition for
respondents used the mark IN N OUT in good faith and were not guilty of unfair Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and
competition, since respondent Sehwani, Incorporated did not evince any intent docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal
to ride upon petitioners goodwill by copying the mark IN-N-OUT Burger by the IPO Director General, which effectively affirmed the Decision dated 22
exactly. The inside of the letter O in the mark used by respondents formed a December 2003 of the IPO Director for Legal Affairs ordering the cancellation
star. In addition, the simple act of respondent Sehwani, Incorporated of of the registration of the disputed trademark in the name of
inquiring into the existence of a pending application for registration of the IN- respondent Sehwani, Incorporated and enjoining respondents from using the
N-OUT mark was not deemed fraudulent. The dispositive part of the Decision same. In particular, respondents based their Petition on the following grounds:
of the IPO Director for Legal Affairs reads:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE
With the foregoing disquisition, Certificate of ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A
Registration No. 56666 dated 17 December 1993 for the mark MERE TECHNICALITY
IN-N-OUT (the inside of the letter O formed like a star) issued
in favor of Sehwani, Incorporated is hereby THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND
CANCELLED. Consequently, respondents Sehwani, Inc. and RESOLUTION (1) CANCELLING RESPONDENTS
Benitas Frites are hereby ordered to permanently cease and CERTIFICATE OF REGISTRATION FOR THE MARK IN-N-
desist from using the mark IN-N-OUT and IN-N-OUT OUT, AND (2) ORDERING PETITIONERS TO
BURGER LOGO on its goods and in its business. With PERMANENTLY CEASE AND DESIST FROM USING THE
regards the mark Double-Double, considering that as earlier SUBJECT MARK ON ITS GOODS AND BUSINESS ARE
discussed, the mark has been approved by this Office for CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY
publication and that as shown by evidence, Complainant is the EVIDENCE.
owner of the said mark, Respondents are so hereby ordered
 Respondents thus prayed:
WHEREFORE, petitioners respectfully pray that this
Honorable Court give due course to this petition, and
thereafter order the 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, 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 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 as they pertain to acts governed by Article 168 of R.A. 8293
exclusive right to use the same; and and other sections enumerated in Section 163 of the same
Code, respondents claims in its Complaint docketed as IPV
(iv) make the injunction permanent. No. 10-2001-00004 are hereby DISMISSED.[26]

[Respondents] also pray for other reliefs, as may

deemed just or equitable.[24] The Court of Appeals, in a Resolution dated 31 July 2007,[27] denied
petitioners Motion for Reconsideration of its aforementioned Decision.

On 18 July 2006, the Court of Appeals promulgated a Decision[25] in Hence, the present Petition, where petitioner raises the following
CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the issues:
IPO Director General.
I
The Court of Appeals, in its Decision, initially addressed petitioners WHETHER OR NOT THE COURT OF APPEALS ERRED IN
assertion that respondents had committed forum shopping by the institution of ISSUING THE QUESTIONED DECISION DATED 18 JULY
CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents 2006 AND RESOLUTION DATED 31 JULY 2007
were not guilty of forum shopping, distinguishing between the respondents two DECLARING THAT THE IPO HAS NO JURISDICTION OVER
Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL
the 7 December 2004 Decision of the IPO Director General dismissing PROPERTY RIGHTS VIOLATIONS;
respondents appeal of the 22 December 2003 Decision of the IPO Director of
Legal Affairs. Respondents questioned therein the cancellation of the II
trademark registration of respondent Sehwani, Incorporated and the order
permanently enjoining respondents from using the disputed WHETHER OR NOT THE INSTANT PETITION IS
trademark. Respondents Petition in CA-G.R. SP No. 92785 sought the review FORMALLY DEFECTIVE; AND
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 III
appellate court, mainly concerning the finding of the IPO Director General that
respondents were guilty of unfair competition and the awarding of actual and WHETHER OR NOT THE COURT OF APPEALS ERRED
exemplary damages, as well as attorneys fees, to petitioner. IN ISSUING THE QUESTIONED DECISION DATED 18
JULY 2006 AND RESOLUTION DATED 31 JULY
The Court of Appeals then proceeded to resolve CA-G.R. SP No. 2007 DECLARING THAT SEHWANI AND BENITA ARE NOT
92785 on jurisdictional grounds not raised by the parties. The appellate court GUILTY OF: (A) SUBMITTING A PATENTLY FALSE
declared that Section 163 of the Intellectual Property Code specifically confers CERTIFICATION OF NON-FORUM SHOPPING; AND (B)
upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and FORUM SHOPPING PROPER.[28]
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 As previously narrated herein, on 15 October 2007, during
provisions of the Intellectual Property Code. the pendency of the present Petition, this Court already promulgated its
Decision[29] in G.R. No. 171053 on 15 October 2007, which affirmed the IPO
In the end, the Court of Appeals decreed: Director Generals dismissal of respondents appeal for being filed beyond the
reglementary period, and left the 22 December 2003 Decision of the IPO
WHEREFORE, the Petition is GRANTED. The Director for Legal Affairs, canceling the trademark registration of
Decision dated 23 December 2005 rendered by the Director respondent Sehwani, Incorporated and enjoining respondents from using the
General of the Intellectual Property Office of the Philippines in disputed marks.
Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar
 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 Public[30]
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]
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 notarialcertificates. 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 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 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 (P200,000): Provided, futher, That availmentof the
therewith in the absence of justifiable circumstances. provisional remedies may be granted in accordance with
the Rules of Court. The Director of Legal Affairs shall have
The Jurisdiction of the IPO the power to hold and punish for contempt all those who
disregard orders or writs issued in the course of the
The Court now proceeds to resolve an important issue which arose proceedings.
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 (b) After formal investigation, the Director for Legal
IPO Director for Legal Affairs and the IPO Director General had no jurisdiction Affairs may impose one (1) or more of the following
over the administrative proceedings below to rule on issue of unfair administrative penalties:
competition, because Section 163 of the Intellectual Property Code confers
jurisdiction over particular provisions in the law on trademarks on regular (i) The issuance of a cease and desist order
courts exclusively. According to the said provision: which shall specify the acts that the respondent shall
cease and desist from and shall require him to submit
Section 163. Jurisdiction of Court.All actions under a compliance report within a reasonable time which
Sections 150, 155, 164, and 166 to 169 shall be brought shall be fixed in the order;
before the proper courts with appropriate jurisdiction under
existing laws. (ii) The acceptance of a voluntary assurance
of compliance or discontinuance as may be
imposed. Such voluntary assurance may include one
The provisions referred to in Section 163 are: Section 150 on License or more of the following:
Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice
of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing (1) An assurance to comply
Marks or Trade Names; Section 167 on Collective Marks; Section 168 on with the provisions of the intellectual
Unfair Competition, Rights, Regulation and Remedies; and Section 169 on property law violated;
False Designations of Origin, False Description or Representation.
(2) An assurance to
The Court disagrees with the Court of Appeals. refrain from engaging in unlawful and
unfair acts and practices subject of
Section 10 of the Intellectual Property Code specifically identifies the the formal investigation
functions of the Bureau of Legal Affairs, thus:
(3) An assurance to
Section 10. The Bureau of Legal Affairs.The Bureau recall, replace, repair, or refund the
of Legal Affairs shall have the following functions: money value of defective goods
distributed in commerce; and
10.1 Hear and decide opposition to the application
for registration of marks; cancellation of trademarks; (4) An assurance to
subject to the provisions of Section 64, cancellation of patents reimburse the complainant the
and utility models, and industrial designs; and petitions for expenses and costs incurred in
compulsory licensing of patents; prosecuting the case in the Bureau of
Legal Affairs.
10.2 (a) Exercise original jurisdiction in
administrative complaints for violations of laws involving The Director of Legal Affairs
intellectual property rights; Provided, That its jurisdiction may also require the respondent to
is limited to complaints where the total damages claimed submit periodic compliance reports
are not less than Two hundred thousand pesos
 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 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 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
[Respondents] use of IN-N-OUT BURGER
in busineses signages reveals fraudulent intent to deceive
purchasers. Exhibit GG, which shows the business
establishment of [respondents] illustrates the imitation of
[petitioners] corporate name IN-N-OUT and signage IN-N-
OUT BURGER. Even the Director noticed it and held:
We also note that In-N-Out Burger is
likewise, [petitioners] corporate name. It has
used the IN-N-OUT Burger name in its
restaurant business in Baldwin
Park, California in the United States of
America since 1948. Thus it has the
exclusive right to use the tradenems In-N-
Out Burger in the Philippines and the
respondents are unlawfully using and
appropriating the same.
The Office cannot give credence to the [respondents]
claim of good faith and that they have openly and continuously
used the subject mark since 1982 and is (sic) in the process
of expanding its business. They contend that assuming that
there is value in the foreign registrations presented as
evidence by the [petitioner], the purported exclusive right to
the use of the subject mark based on such foreign
registrations is not essential to a right of action for unfair
competition. [Respondents] also claim that actual or probable
deception and confusion on the part of customers by reason
of respondents practices must always appear, and in the
present case, the BLA has found none. This Office finds the
arguments untenable.
In contrast, the [respondents] have the burden of
evidence to prove that they do not have fraudulent intent in
using the mark IN-N-OUT. To prove their good faith,
[respondents] could have easily offered evidence of use of
their registered trademark, which they claimed to be using as
early as 1982, but did not.
[Respondents] also failed to explain why they are
using the marks of [petitioner] particularly DOUBLE DOUBLE,
and the mark IN-N-OUT Burger and Arrow Design. Even in
their listing of menus, [respondents] used [Appellants] marks
of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow
Design. In addition, in the wrappers and receptacles being
used by the [respondents] which also contained the marks of
the [petitioner], there is no notice in such wrappers and
receptacles that the hamburger and French fries are products
of the [respondents]. Furthermore, the receipts issued by the
[respondents] even indicate representing IN-N-OUT. These
acts cannot be considered acts in good faith. [47]
Administrative proceedings are governed by the substantial evidence
rule. A finding of guilt in an administrative case would have to be sustained
for as long as it is supported by substantial evidence that the respondent has
committed acts stated in the complaint or formal charge. As defined,
substantial evidence is such relevant evidence as a reasonable mind may
accept as adequate to support a conclusion.[48] As recounted by the IPO
Director General in his decision, there is more than enough substantial
evidence to support his finding that respondents are guilty of unfair
competition.
With such finding, the award of damages in favor of petitioner is but
proper. This is in accordance with Section 168.4 of the Intellectual Property
Code, which provides that the remedies under Sections 156, 157 and 161 for
infringement shall apply mutatis mutandis to unfair competition. The remedies
provided under Section 156 include the right to damages, to be computed in
the following manner:
Section 156. Actions, and Damages and Injunction
for Infringement.156.1 The owner of a registered mark may
recover damages from any person who infringes his rights,
and the measure of the damages suffered shall be either the
reasonable profit which the complaining party would have
made, had the defendant not infringed his rights, or the profit
which the defendant actually made out of the infringement, or
in the event such measure of damages cannot be readily
ascertained with reasonable certainty, then the court may
award as damages a reasonable percentage based upon the
 amount of gross sales of the defendant or the value of the
services in connection with which the mark or trade name was
used in the infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO
Director General computed the damages due to petitioner by applying the
reasonable percentage of 30% to the respondents gross sales, and then
doubling the amount thereof on account of respondents actual intent to
mislead the public or defraud the 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]

IN VIEW OF THE FOREGOING, the instant Petition

is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP
No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the
IPO Director General, dated 23 December 2005, is hereby REINSTATED IN
PART, with the modification that the amount of exemplary damages awarded
be reduced to P250,000.00.

SO ORDERED.