SECOND DIVISION

G.R. No. 167715

other hand, is a specific compound of the formula IA disclosed and claimed

in the Patent.

November 17, 2010

PHIL PHARMAWEALTH, INC., Petitioner,

vs.
PFIZER, INC. and PFIZER (PHIL.) INC., Respondents.
DECISION

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 Services Agreement
it executed with Pfizer Phils. on January 23, 2001.

PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to annul and set aside
the Resolutions dated January 18, 20051 and April 11, 20052 by the Court of Appeals
(CA) in CA-G.R. SP No. 82734.
The instant case arose from a Complaint3 for patent infringement filed against
petitioner Phil Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and Pfizer
(Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property Office
(BLA-IPO). The Complaint alleged as follows:
xxxx
6. Pfizer is the registered owner of Philippine Letters Patent No. 21116 (the
"Patent") which was issued by this Honorable Office on July 16, 1987. The
patent is valid until July 16, 2004. The claims of this Patent are directed to
"a method of increasing the effectiveness of a beta-lactam antibiotic in a
mammalian subject, which comprises co-administering to said 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 as ampicillin sodium and beta-lactam antibiotic like
sulbactam sodium.

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 without the consent of
complainants and in violation of the complainants' intellectual property
rights. x x x
xxxx
10. Complainants thus wrote the above hospitals and demanded that the
latter immediately cease and desist from accepting bids for the supply [of]
Sulbactam Ampicillin or awarding the same to entities other than
complainants. Complainants, in the same letters sent through undersigned
counsel, also demanded that respondent immediately withdraw its bids to
supply Sulbactam Ampicillin.
11. In gross and evident bad faith, respondent and the hospitals named in
paragraph 9 hereof, willfully ignored complainants' just, plain and valid
demands, refused to comply therewith and continued to infringe the Patent,
all to the damage and prejudice of complainants. As registered owner of the
Patent, Pfizer is entitled to protection under Section 76 of the IP Code.
x x x x4

7. Patent No. 21116 thus covers ampicillin sodium/sulbactam sodium

(hereafter "Sulbactam Ampicillin"). Ampicillin sodium is a specific
example of the broad beta-lactam antibiotic disclosed and claimed in the
Patent. It is the compound which efficacy is being enhanced by coadministering the same with sulbactam sodium. Sulbactam sodium, on the

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.
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 1

In an Order5 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 Injunction6 which, however, was denied by the
BLA-IPO in an Order7 dated October 15, 2003.
Respondents filed a Motion for Reconsideration but the same was also denied by the
BLA-IPO in a Resolution8 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 BLAIPO.
While the case was pending before the CA, respondents filed a Complaint9 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 Order10 directing the issuance
of a temporary restraining order conditioned upon respondents' filing of a bond.
In a subsequent Order11 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 Dismiss12 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 Resolution13 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 order14 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 Dismiss15 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.
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 2

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 General of 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 the Intellectual
Property Code of the Philippines, which is the presently prevailing law, the Director
General of the IPO exercises exclusive appellate jurisdiction over all decisions
rendered by the Director of the BLA-IPO. However, what is being questioned before
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 3

the CA is not a decision, but an interlocutory order of the BLA-IPO denying

respondents' motion to extend the life of the preliminary injunction issued in their
favor.
RA 8293 is silent with respect to any remedy available to litigants who intend to
question an interlocutory order issued by the BLA-IPO. Moreover, Section 1(c), Rule
14 of the Rules and Regulations on Administrative Complaints for Violation of Laws
Involving Intellectual Property Rights simply provides that interlocutory orders shall
not be appealable. The said Rules and Regulations do not prescribe a procedure
within the administrative machinery to be followed in assailing orders issued by the
BLA-IPO pending final resolution of a case filed with them. Hence, in the absence of
such a remedy, the provisions of the Rules of Court shall apply in a suppletory
manner, as provided under Section 3, Rule 1 of the same Rules and Regulations.
Hence, in the present case, respondents correctly resorted to the filing of a special
civil action for certiorari with the CA to question the assailed Orders of the BLAIPO, as they cannot appeal therefrom and they have no other plain, speedy and
adequate remedy in the ordinary course of law. This is consistent with Sections 120
and 4,21 Rule 65 of the Rules of Court, as amended.
In the first place, respondents' act of filing their complaint originally with the BLAIPO is already in consonance with the doctrine of primary jurisdiction.
This Court has held that:
[i]n cases involving specialized disputes, the practice has been to refer the same to an
administrative agency of special competence in observance of the doctrine of
primary jurisdiction. The Court has ratiocinated that it cannot or will not determine a
controversy involving a question which is within the jurisdiction of the
administrative tribunal prior to the resolution of that question by the administrative
tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative
tribunal to determine technical and intricate matters of fact, and a uniformity of
ruling is essential to comply with the premises of the regulatory statute administered.
The objective of the doctrine of primary jurisdiction is to guide a court in
determining whether it should refrain from exercising its jurisdiction until after an
administrative agency has determined some question or some aspect of some
question arising in the proceeding before the court. It applies where the claim is
originally cognizable in the courts and comes into play whenever enforcement of the
claim requires the resolution of issues which, under a regulatory scheme, has been
placed within the special competence of an administrative body; in such case, the

judicial process is suspended pending referral of such issues to the administrative

body for its view.22
Based on the foregoing, the Court finds that respondents' initial filing of their
complaint with the BLA-IPO, instead of the regular courts, is in keeping with the
doctrine of primary jurisdiction owing to the fact that the determination of the basic
issue of whether petitioner violated respondents' patent rights requires the exercise
by the IPO of sound administrative discretion which is based on the agency's special
competence, knowledge and experience.
However, the propriety of extending the life of the writ of preliminary injunction
issued by the BLA-IPO in the exercise of its quasi-judicial power is no longer a
matter that falls within the jurisdiction of the said administrative agency, particularly
that of its Director General. The resolution of this issue which was raised before the
CA does not demand the exercise by the IPO of sound administrative discretion
requiring special knowledge, experience and services in determining technical and
intricate matters of fact. It is settled that one of the exceptions to the doctrine of
primary jurisdiction is where the question involved is purely legal and will ultimately
have to be decided by the courts of justice.23 This is the case with respect to the issue
raised in the petition filed with the CA.
Moreover, as discussed earlier, RA 8293 and its implementing rules and 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 judicial power of the courts, as
provided for under the Constitution, includes the authority of the courts to determine
in an appropriate action the validity of the acts of the political departments.24 Judicial
power also includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government.25
Hence, the CA, and not the IPO Director General, has jurisdiction to determine
whether the BLA-IPO committed grave abuse of discretion in denying respondents'
motion to extend the effectivity of the writ of preliminary injunction which the said
office earlier issued.
Lastly, petitioner avers that respondents are guilty of forum shopping for having filed
separate actions before the IPO and the RTC praying for the same relief.
The Court agrees.
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 4

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
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 5

or to any other entity in the Philippines, or from otherwise infringing Pfizer

Inc.'s Philippine Patent No. 21116; and (b) impounding all the sales invoices
and other documents evidencing sales by respondent of Sulbactam
Ampicillin products.
B. After hearing, issue a writ of preliminary injunction enjoining
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 the Complaint or to any other entity
in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine
Patent No. 21116; and

(a) Immediately upon the filing of this action, issue an ex parte order:
(1) temporarily restraining Pharmawealth, its agents,
representatives and assigns from importing, distributing, selling or
offering for sale infringing sulbactam ampicillin products to
various government and private hospitals or to any other entity in
the Philippines, or from otherwise infringing Pfizer Inc.'s
Philippine Patent No. 26810.
(2) impounding all the sales invoices and other documents
evidencing sales by pharmawealth of sulbactam ampicillin
products; and

C. After trial, render judgment:

(i) declaring that respondent has infringed Pfizer Inc.'s Philippine
Patent No. 21116 and that respondent has no right whatsoever over
complainant's patent;
(ii) ordering respondent to pay complainants the following
amounts:
(a) at least P1,000,000.00 as actual damages;

(3) disposing of the infringing goods outside the channels of

commerce.
(b) After hearing, issue a writ of preliminary injunction:
(1) enjoining Pharmawealth, its agents, representatives and assigns
from importing, distributing, selling or offering for sale infringing
sulbactam ampicillin products to various government hospitals or
to any other entity in the Philippines, or from otherwise infringing
Patent No. 26810;

(b) P700,000.00 as attorney's fees and litigation expenses;

(d) P1,000,000.00 as exemplary damages; and

(2) impounding all the sales invoices and other documents

evidencing sales by Pharmawealth of sulbactam ampicillin
products; and

(d) costs of this suit.

(iii) ordering the condemnation, seizure or forfeiture of
respondent's infringing goods or products, wherever they may be
found, including the materials and implements used in the
commission of infringement, to be disposed of in such manner as
may be deemed appropriate by this Honorable Office; and
(iv) making the injunction permanent.32
In an almost identical manner, respondents prayed for the following in their
complaint filed with the RTC:

(3) disposing of the infringing goods outside the channels of

commerce.
(c) After trial, render judgment:
(1) finding Pharmawealth to have infringed Patent No. 26810 and
declaring Pharmawealth to have no right whatsoever over
plaintiff's patent;
(2) ordering Pharmawealth to pay plaintiffs the following amounts:
(i) at least P3,000,000.00 as actual damages;
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 6

(ii) P500,000.00 as attorney's fees and P1,000,000.00 as

litigation expenses;
(iii) P3,000,000.00 as exemplary damages; and

basis of different patents. Moreover, in the suit filed with the RTC of Makati City,
respondents were candid enough to inform the trial court of the pendency of the
complaint filed with the BLA-IPO as well as the petition for certiorari filed with the
CA. On these bases, only Civil Case No. 04-754 should be dismissed on the ground
of litis pendentia.

(iv) costs of this suit.

(3) ordering the condemnation, seizure or forfeiture of
Pharmawealth's infringing goods or products, wherever they may
be found, including the materials and implements used in the
commission of infringement, to be disposed of in such manner as
may be deemed appropriate by this Honorable Court; and

WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of

the Court of Appeals, dated January 18, 2005 and April 11, 2005, in CA-G.R. No.
82734, are REVERSED and SET ASIDE. The petition for certiorari filed with the
Court of Appeals is DISMISSED for being moot and academic.
Civil Case No. 04-754, filed with the Regional Trial Court of Makati City, Branch
138, is likewise DISMISSED on the ground of litis pendentia.

(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.341avvphi1
Thus, the Court agrees with petitioner that respondents are indeed guilty of forum
shopping.
Jurisprudence holds that if the forum shopping is not considered willful and
deliberate, the subsequent case shall be dismissed without prejudice, on the ground
of either litis pendentia or res judicata.35 However, if the forum shopping is willful
and deliberate, both (or all, if there are more than two) actions shall be dismissed
with prejudice.36 In the present case, the Court finds that respondents did not
deliberately violate the rule on non-forum shopping. Respondents may not be totally
blamed for erroneously believing that they can file separate actions simply on the
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 7

THIRD DIVISION
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. 10-0501. 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 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-NOUT"; (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-NOUT," and its numerous advertisements in various publications and in the Internet.
Moreover, the IPO had already declared in a previous inter partes case that "In-NOut 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
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 8

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 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
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 9

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 "DoubleDouble" 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. 200302 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 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
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 10

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.
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
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
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 11

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 noncompliance 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 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-NOUT 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.
Ryan T. Rapacon>>>Intellectual Property Law cases 2 | 12

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 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
(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;
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(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:
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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-NOUT 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
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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.

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