u~~1j~()j - intellectual property...

C"f""V, .; .

IN-N-OUT BURGER, INC., Complainant-Appe

- versus-

APPEAL NO. 10-05-01 ant,

IPV No. 10-2001-00004 Administrative Complaint for Violation of Laws involving Intellectual Property Rights

1I! ~ SEHWANI INC. and/or

BENITA'S FRITES, INC., Respondents-Appe

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NOT

VILLARAZA & ANGANGCO Counsel for the Complainant-Appella 5th Floor, LTA Building 118 Perea Street, Legaspi Village

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ees, ---x

CE OF DECISION

ATTY. RAMON L. CARPIOt Counsel for Respondents-Appellees

172 C. Raymundo Avenue Maybunga, Pasig City

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01229 Makati City 1 jI /.'U~~1J~()J

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IIESTRELLITA BELTRAN-ABE 0 CARMEN G. PERALTADirector, Bureau of Legal Affairs \10 Director Intellectual Property Office ~ \ Documentation, Information and Teihnology

Transfer Bureau Intellectual Property Office

GREETINGS:

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Please be informed that on 23 December 2005, the Office of the Directo rendered a Decision in the above-enti ed case (copy attached).

Makati City, 23 December 20 5.

Very truly yours,

~ ROBERT NEREO B. SAMSON AttomeyIV Office of the Director General

General

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INTELLECTUAL PRO ERTY OFFICE OF THE PHILIPPINES

IN-N-OUT BURGER, INC., Complainant-Appe ant,

- versus-

SEHWANI INC. and/or BENITA'S FRITES, INC.,

Respondents-Appe lees. x-----------------------------------------i---x

NOT

VILLARAZA & ANGANGCO Counsel for the Complainant-Appella 5th Floor, LTA Building 118 Perea Street, Legaspi Village 1229 Makati City

ESTRELLITA BELTRAN-ABE Director, Bureau of Legal Affairs Intellectual Property Office

GREETINGS:

Please be informed that on rendered a Decision in the above-enti

Makati City, 23 December 20

(J --,....-.. " 'iii ~ • __

APPEAL NO. 10-05-01


CE OF DECISION

ATTY. RAMON L. CARPIO' t Counsel for Respondents-Appellees

172 C. Raymundo Avenue tMaybunga, Pasig City

o CARMEN G. PERALTA Director 1

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Documentation, Information and Te hnology Transfer Bureau I

Intellectual Property Office

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23 December 2005, the Office of the Directol General ed case (copy attached).

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Very truly yours, I

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ROBERT NEREO B. SAMSON Attorney IV Office of the Director General

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- -- --- ---,-----------------,

INTELLECTUAL PROPERTY OFFICE OF THE PHILIPPINES

IN-N-OUT BURGER, INC., APPEAL NO. 10-05-01J III

Complainant-Appellant,

IPV No. 10-2001-00004 Administrative Complaint for

1 j - versus- Violation of Laws involving 1 Intellectual Property Rights

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Respondents-Appellees. x-----------------------------------------------x

NOTICE OF DECISION

VILLARAZA & ANGANGCO ATTY. RAMON L. CARPIO Counsel for the Complainant-Appellant Counsel for Respondents-Appellees 5th Floor, LTA Building 172 C. Raymundo Avenue 118 Perea Street, Legaspi Village Maybunga, Pasig City 1229 Makati City

f 1l 1l )

ESTRELLITA BELTRAN-ABELARDO CARMEN G. PERALTA Director, Bureau of Legal Affairs Director Intellectual Property Office Documentation, Information and Te hnology

Transfer Bureau Intellectual Property Office

GREETINGS: 'I

Please be informed that on 23 December 2005, the Office of the Director General rendered a Decision in the above-entitled case (copy attached).

Makati City, 23 December 2005.

Very truly yours,

~ ROBERT NEREO B. SAMSON ,Attorney IV Office of the Director General

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f!I{ INTELLECTUAL PROPERTY OFFICE OF THE PHILIPPINES

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IN-N-OUT BURGER, INC., Complainant-Appellant,

- versus-


Respondents-Appellees. x-----------------------------------------------x

APPEAL NO. 10-05-01


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DECISION

TIll, mncero, the appeal from Decision No. 2003-02 dated 22 Dece~ber 2003

rendered by the Director of the Bureau of Legal Affairs (Director), the rSPOSitiVe

portion of which reads, as follows:

"With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark: 'IN-N-OUT' (the inside of the letter '0' formed like a star) issued in favor of Sehwani, Incorporated, is hereby CANCELLED. Consequently, Respondents Sehwani, Inc. and Benita's 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 the evidence, Complainant is the owner of the said mark, Respondents are also hereby ordered to permanendy cease and desist from using the mark Double-Double. NO COSTS."

TIll, case involve> the determination of whether or not Re>ponden"lpPdlee,

SEHWANI, INC. andj'or BENITA'S FRITES, INC. (Appellees) are liable for unfair

compenuon.

Records show that on 04 June 2001, Complainant-Appellant I -N-OUT ,j

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BURGER, INC. (Appellant), a foreign corporation duly organized and existing under the

laws of the State of California, United States of America, filed in the Burea of Legal

in-n-out vs.lsehWani page 1 o~ 16

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Affairs (BLA), an administrative complaint for violation of laws involving ftellectual

property rights against the Appellees,' alleging the following:

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1. It is the owner of the trade name IN-N-OUT and the following ma+s: IN-N

OUT, IN-N-OUT Burger & Arrow Design and IN-N-OUT Burger Logo;

2. Its marks are internationally well-known marks and have become diS~nCtiVe of I: !

its business and/or goods through its long and exclusive commercial use; I

3. Its marks are duly registered in the Trademark Office of the Unite4 States of , \ I

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America and in various parts of the world.2 I

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4. On 02 June 1997, it filed in the IPO trademark and service mark a~Plications for IN-N-OUT Burger & Arrow Design and IN-N-OUT; I

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5. On 31 May 2000, the IPO issued Official Action Papers, which disJosed that

Appellee SEHWANI, INC. had obtained Trademark Registration for the mrk IN N t ~ ~

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6. It sent a demand letter to Appellees to cease and desist froml claiming

ownership of the mark IN-N-OUT and to voluntarily cancel its trademark regisration;

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7. On 23 October 2000, it received a response from Appellees stating ~efuSal to f

accede to its demand but "are willing to buy peace" and "are willing to surrenfer (their)

trademark registration over IN-N-OUT in exchange for a fair and r asonable

consideration";

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!Both domestic corporations, with principal address at 172 C. Raymundo Avenue, Maybunga, ptig City. 2 Appellant claimed that its marks are duly registered and/or applied for in the trademark ort·tellectual property offices of other countries which are signatories to the Paris Convention including, but ot limited to: Australia, Benelux, Canada, Denmark, France, Gennany, Hong Kong, Japan, Mexico, Ne Zealand, Spain, South Korea, Switzerland, and the United Kingdom. I

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8. Its internationally well-known trademarks and the mark of Appell es, which

was registered for restaurant business, are clearly identical and confusingly +as tbey

all contain the words "IN" and "OUT" and the letter "N" in the middle; and

9. Appellees, in bad faith, employed deception in making it appear I that their

goods and services are those of the Appellant, misleading ordinary and unruspecting

purchasers and consumers into believing that Appellees' restaurant is thrt of the

Appellant. I

Appellant also applied for rbe issuance of. temporary restraining orJer (IRa)

and!or a writ of preliminary injunction and an order to impound sales docume ts.

In their Answer with Counterclaim, Appellees alleged that:

1. They first used the mark IN N OUT io the Philippines 00 15 octobf 1982;

2. 00 15 November 1991, Appellee SEHWANI, INC. filed an 'PPlicttiOO with

the then Bureau of Patents, Trademarks and Technology Transfer (BPITIf for the i

registration of the mark IN N OUT (the inside of the "0" formed like a star); I t

3. On 17 December 1993, a certificate of registration was issued in favor of

Appellee SEHWANI, INC.;

4. On 30 August 2000, Appellee SEHWANI, INC. licensed Appellee B NITA'S

FRITES, INC. to use its mark;

S. Appellant has no legal capacity to sue as it has never been in opera on in the

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against it as the mark IN N OUT is registered in the name of Appellee S WANI, ~

INC.; [

Philippines, the complaint states no cause of action, and, Appellant does not have any

, On 01 J,nuary 1998, Republic A" No. 8293, otherwise known as the Intellectual Property J""" of the Philippines took effect. Said Act, among other things, abolished the BPTIT and transferred ij functions

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6. Appellee SEHWANI, INC. being the registered owner of the tk IN N

OUT has in its favor the presumption that it has acquired a valid registrati01, that it is

the owner of the mark subject of registration, and, that it has the exclusive ri~ht to use

the mark; and

7. Republic Act No. 8293, otherwise known as the Intellectual Property Code of

the Philippines, provides for the grounds when a certificate of registratio~ may be

cancelled and that not one of such grounds exists in this case.

On 09 August 2001, the Director issued an Order denying the

application for the issuance of a TRO. Appellant filed a Motion for Recon ideration,

which was denied by the Director per Resolution No. 2001-02 dated 27 Nove ber 2001.

Thereafter, on 22 December 2003, the Director rendered the assailed Decisi n, which

includes a finding that the Appellees are not guilty of unfair competition.

Consequently, the Appellant moved for the partial of thereeOnSideratiO~ decision on 13 February 2004. Appellant asked the Director to declare the ~ppellees

guilty of unfair competition and order them to pay attorney's fees, damages (~ouble of

whatever amount to be awarded) and costs of suit, and the condemnation or feizure of

the products subject of the offense and forfeiture of paraphernalia and alII real and

personal properties, which have been used in the commission of the offense.

On 25 April 2005, the Director issued Resolution No. 2005-05 de ying the

Motion for Partial Reconsideration filed by the Appellant. Obviously not sa sfied, the

Appellant elevated the case to this Office on appeal.

Stripped of non-essentials, the instant appeal reiterates the Appellant's tgumen"

in the earlier proc~edings in ~he B~ that the evidence.on record clearly s~ows that

Appellees are passing off their business, goods and services for those' of I~-N-OUT

Burger and are, thus, liable for unfair competition. Appellant contends that 1he ruling

that there cannot be passing off of goods in the absence of any transaction c01ering the

sale of food items and!or restaurant serviees in the Philippines is patently withiut metit

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as sale is not an element of unfair competition. Appellant, thus, argues that Appellees

should be held liable for damages and award of attorney's fees.

Commenting on the appeal, Appellee. "'gue that no fraudulent intJ could be

imputed to them as would make them liable for unfair competition. AppelleJ contend

that Appellant cannot claim that it has already identified in the mind of the I public its

goods and/or services because the latter has never entered into any transaction I ~nvolving the same in the Philippines. Appellees also assert that they have openly and cobtinuously

used the subject mark in good faith since 1982. Appellees, thus, claim that Jy cannot

be held liable for damages, expenses of litigation and attorney's fees, there I being no

fraudulent intent or bad faith on their part.

This Office's Ruling:

After due consideration of the foregoing and the evidence on record, ts Office

finds the appeal meritorious.

On the Issue of Unfair Competition

Section 168 of Republic Act No. 8293 provides that:

"SEC. 168. Unfair Competition, Rights, Regulations and Remedies.168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same

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manner as other property rights. "168.2. Any person who shall employ deception or any other means

contrary to good faith by which he shall pass off the goods manufactured by himIfi

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~.or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefore.

"168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who

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otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

I b) Any person who by any artifice, or device, or who employs any other

means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course ofI trade or who shall commit any other act contrary to good faith of a nature

~ calculated to discredit the goods, business or services of another. "168.4. The remedies provided by Sections 156, 157 and 161 shall apply

j mutatis mutandis."

Unfair competition concerns the passing-off or attempting to pass-off e public

the goods or business of one person as and for the goods or business of ano her. The

concept is to give protection to a person who has earned goodwill on his good , business

or services. Unfair competition is a question of fact and the determinati n of the

existence thereof rests on the issue of whether or not, as a matter of fact, a def ndant, is,

by conduct, passing off defendant's goods as plaintiff's goods or defendant's b siness as

plaintiff's business. The universal test is whether the public is likely to be dec ived." In

unfair competition, fraudulent intent is essential.'

In this me, there is substantial evidence that prove, that Appellee' "1 guilty of

unfair competition.

This Office does not agree with the Director's findings that the Appelljs cannot

be held guilty of unfair competition because they were supposedly using their f~gistered

trademark in good faith. The function of a trademark is to point out distinctly re origin

or ownership of the goods to which it is affixed; to secure to him, who Ihas been

instrumental in bringing into the market a superior article of merchandise, the fFt of his

industry and skill; to assure the public that they are procuring the genuine rticle; to

prevent fraud and imposition; and to protect the manufacturer against SUbStirtiOn and

sale of an inferior and different article as his product."

The evidence on record shows that the Appellee' were not using their ~gistered trademark but that of the Appellant. Appellee SEHWANI, INC. was issued a qertificate

4 G.R. No. 8937,21 March 1914, Alhambra Cigar and Cigarette Manufacturing Co. vs. Pedro N.IMojica. 5 Del Monte Corporation vs. Court of Appeals, G. R. No. L-78325, 25 January 1990. 6 Pribhdas J. Mirpuri vs. CA, G.R. No. 114508, 19 November 1999, citing Etepha vs, Director of Patents, 16 SCRA 495 (1966), Gabriel V. Perez, 55 SCRA 406 (1974).

in-n-out ".1 hwani page 6 O~6

of Registration for IN N OUT (with the Inside of the Letter '0' Formed like Star) for

restaurant business in 1993. The restaurant opened only in 2000 but under the arne IN

N-OUT BURGER? Apparently, the Appellees started constructing the restaurant only

after the Appellant demanded that the latter desist from claiming ownership o( the mark

IN-N-OUT and voluntarily cancel their trademark regisrration." Moreover, Apbellees are

also using Appellant's registered mark Double-Double9 for use on hamburgerlproducts.

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In fact, the burger wrappers and the french fries receptacles the Appellees ar using do

not bear the mark registered by the Appellee, but the Appellant's IN-N-OU Burger's I name and trademark IN -N -OUT with Arrow design. to I

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There is no evidence '"'0 that the Appellees were authorized by the A+e11anr to

use the latter's marks in their business. Appellees' explanation that they are not using

their own registered trademark due to the difficulty in printing the "star" does ot justify

the unauthorized use of the Appellant's trademark instead.

Further, Appellees are giving their products the general appearance ,at would

likely influence purchasers to believe that these products are those of the Appe~ant. The

intention to deceive may be inferred from the similarity of the goods as Pfked and

offered for sale, and, thus, action will lie to restrain such unfair competition." is held by

the Supreme Court in the c.,e of Rueda Hermanos & Co. vs. Felix Paglinawan tCo.",

"If the contents of the two packages are same commodity, it is no defense to an action for unfair competition to show minor differences in the size or shape of the packages or in the color or wording of the labels or wrappers of the packages. If the exterior size, shape, color, and description, in other words, those things which go to make up the general outside appearance of the article are so substantially similar, as to likely deceive the ordinary purchaser, exercising ordinary care, the defendant is guilty of unfair competition."

And in the case of McDonalds Corp. et al vs. L.c. Big Mak Bur

Supreme Court held that:

? See Exhibit GG and KK 8 Exhibit Cc. 9 Certificate of Registration No. 4-1997-121146 10 See Exhibits SS, IT, UU, and VV. 11 SeeJonas Brook Bros. vs. Froelich & Kuttner, G. R. No. L-3369, 24 September 1907. lZG.R. No. 10738, 14 January 1916. 13 G.R. No. 143993,18 August 2004.

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in-n-out VS. ~hwani

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"Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors. Thus, the defendant gives his goods the general f

t' appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor."

Appellees' use of IN-N-OUT BURGER in business signages reveals ~aUdUlent

intent to deceive purchasers. Exhibit "GG", which shows the business establi hment of

Appellees illustrates the imitation of Appellant's corporate name IN-N-OUT a d signage

IN-N-OUT BURGER,14 Even the Director noticed it and held:

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\I !"We also note that In-N-Out Burger is likewise, complainant's ~.

[Appellant's] 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 tradename 'In-N-Out' Burger in the Philippines and the respondents [Appellees] are unlawfully using and appropriating the same."15

This Office cannot give credence to the Appellees' claim of good fai

they have openly and continuously used the subject mark since 1982 and is in

of expanding their business. They contend that assuming that there is val e in the

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foreign registrations presented as evidence by the Appellant, the purported exclusive ~

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right to the use of the subject mark based on such foreign registrations is not e sential to

a right of action for unfair competition. Appellees 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 0 fice finds

the arguments untenable. ! In contrast, the Appellees have the burden of evidence to prove that th y do not

have fraudulent intent in using the mark IN-N-OUT.16

Appellees could have easily offered evidence of use of their registered tradem

they claimed to be using as early as 1982,17 but did not.

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14See also Exhibits HH and II. 15 DECISION, p.14. 16 Exhibits GG to KK, QQ to VV, and YY to ZZ, all inclusive of submarkings. 17 Exhibit 1 t

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Appellee' also failed to explain why they are using the mark. of ~PPellant particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arro Design.

Even in their listing of menus"; Appellees used Appellant's marks of OUBLE

DOUBLE and IN-N-OUT Burger and Arrow Design.19 In addition, in the wrappers

and receptacles being used by the Appellees which also contained the m s of the

Appellant," there is no notice in such wrappers and receptacles that the ham~urger and

french fries are products of the Appellees. Furthermore, the receipts issurd by the

Appellees even indicate "representing IN-N-OUT"21. These acts cannot be rnsidered

acts in good faith.

There is no doubt that the Appellant has acquired goodwill on the tr de name

IN-N-OUT and its marks IN-N-OUT Burger and Arrow Design and

DOUBLE being the owner thereof. Appellant has also caused the registratio of these

name and marks in other countries22 and the filing of trademark and serv ce marks

applications here in the Philippines.f The Director in fact ruled that:

"In this regard, this Office would like to emphasize that goodwill can be obtained even when there is no existing business in a certain jurisdiction. In this regard, Complainant's [Appellant's] witness, Raymund Villanueva testified:

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I 'Atty. Villanueva: ~ Q: And Mr. Witness, you mentioned you sell t-shirts and other collectibles

which is enumerated in your catalog. Where did you sell such shirts and other products.

W'itness: A: If you open the internet and go to our website, anybody from around the

world could buy those products. During the last year, we sold products throughout the different states, in the United States and at least in four continents globally.

Q: And what are these continents, Mr. W'itness?

A: Australia, Europe, North America and (paused) Australia, Asia, Europe and North America.P'

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18 See Exhibits 00 and PP, inclusive of submarkings. 19 Exhibit PP-l. 20 See Exhibits SS, IT, UU and VV. 21 See Exhibits YY and ZZ. 22 Ibid. 23 See Exhibits G to K and NN, inclusive of submarkings. 24(franscript of Stenographic Notes, March 4, 2002, page 35).

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I Furthermore, witness, Mr. Raymund Villanueva testified on 5 March 2005

that IN-N-OUT restaurants are located in areas were there were many FilipinoAmerican population (Refer to page 7, 5 March 2002 Transcript of Stenographic notes). Annex 'G' of his affidavit is a letter from the mayor of Daly City. In the I letter, Mayor Michael Guingona said Daly City has 32,720 Filipino residents and

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that IN-N-OUT Burger is a popular dining destination there. Exhibit 'H' of Raymund Villanueva's affidavit are 'letter offers' from different persons to open IN-N-OUT stores in other countries including the Philippines. These circumstances more than sufficiendy show that the complainant has acquired goodwill and thus, provides it with a solid basis to enforce its right to use its tradename and mark 'IN-N-OUT' in the Philippines to the exclusion of others."25 (emphasis supplied)

Goodwill is protected by law on unfair competition." One who has

goodwill and reputation for his goods or business is entided to all the benefits

since goodwill is property and like any other property, is protected against inva ion." In

this case, to permit the Appellees to continue using the trade name and mark I

would be to countenance the unlawful appropriation of the benefit of a good . , which

Appellant has acquired, and would be tantamount to permitting the Appellees t grab the I reputation or goodwill of the business of Appellant." 1

tThe Director, thus, is in error when it did not hold Appellees liable or unfair ~

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competition. Neither the Director was correct when she held that the Appellan s are not

engaged in the sale, manufacturing nor importation of their products in the P . ppines."

It is not in accord with jurisprudence to include sale, as the Director w uld want Ifto impress upon, as an element of unfair competition. While indeed the cases of unfair

competition cited by the Director cover situations where the products be ring the c contested marks were sold in the Philippines, these do not imply that sale is a element

of unfair competition. Again, in the case of McDonalds Corp. et al vs. L.c. Big Mak

Burger,3D the Supreme Court enumerated the essential elements of an action or unfair

competition.

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2S DECISION, page 16. I 26 De La Rama Steamship Co. vs. National Development Co., G. R. No. L-26966, 30 October 1 70. 27 Alhambra Cigar and Cigarette Manufacturing Co. vs, Pedro N. Mojica, G. R. No. 8937,21 M ch 1914. 28 See also De La Rama case. 29 Resolution No. 2005-05 dated 25 April 2005, page 3. 3D See footnote 12.

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"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 mayor may not result form 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 similar appearnce of the goods as offered for sale to the public. Actual fraudulent intent need not be shown."

Further, in the case of Converse Rubber Corporation and E

Manufacturing Corporation vs. Jacinto Rubber & Plastics Co., Inc. and Ace

Plastic Corporation," the Supreme Court had the occasion to rule in the issue

an element of unfair competition, to wit:

'To read such conditions, as defendants-appellants seek to do, in the plain prescription of the law is to re-construct it. Indeed, goodwill established in other than a competitive milieu is no less a property right that deserves protection from unjust appropriation or injury. This, to us, is precisely the clear sense of the law when it declares without equivocation that a 'person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.'

'Plaintiffs-appellees have established goodwill. This goodwill, the trial

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court found, defendants-appellants have pirated in clear bad faith to their unjust enrichment. It is strange that defendants- appellants now say that they should be spared from the penalty of law, because they were not really in competition with plaintiffs-appellees. ",

There, is therefore, no legal basis to conclude that sale is an element of unfair

competition.

On the Issue of Award of Damages

With respect to the Appellant's claim for damages and award of attome 's fees, it

is well-established that a complaint for unfair competition is basically a suit for i junction

and damages. Injunction, for the purpose of enjoying the unlawful compe tor from

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\Iproceeding further, and damages, in order to allow the aggrieved party to re over the ~

damages he has suffered by reason of the said unlawful competirion.f With t e finding

that Appellees are guilty of unfair competition, this Office must grant the ard for

damages in favor of Appellant.

31 97 SeRA 158 (1980). 32 Foto-Quick, Inc. vs. Nicolas P. Lapena,Jr. et al, G. R. No. 76322, 11 March 1991.

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Section 168.4 of the IP Code provides that the remedies provided by

and 161 shall apply mutatis mutandis. Sections 156 and 157 of the IP Code

follows:

"Sec. 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 complainant. 156.2. On application of the complainant, the court may impound during the pendency of the action, sales invoices and other documents evidencing sales. 156.3 In cases where actual intent to mislead the public or to defraud the

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complainant is shown, in the discretion of the court, the damages may be doubled. 156.4. The complainant, upon proper showing, may also be granted injunction.

Sec, 157. Power of Court to Order Infringing Material Destroyed. 157.1 In any action arising under this Act, in which a violation of any right of the owner of the registered mark is established, the court may order that goods found to be infringing be, without compensation of any sort, disposed of outside the channels of commerce in such a manner as to avoid any harm caused to the right holder, or

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advertisements in the possession of the defendant, bearing the registered mark or trade name or any reproduction, counterfeit, copy or colorable imitation thereof, all plates, molds, matrices and other means of making the same, shall be delivered up and destroyed."

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destroyed; and all labels, signs, prints, packages, wrappers, receptacles and ~

[ Under Section 168 in relation to Section 156, the remedies against an infringer

may also be applied against a person committing unfair competition. Accor . gly, this

Office awards damages to the Appellant. However, since the amount of damag s cannot

be readily ascertained with reasonable certainty, this Office award as dama es thirty

percent (30%) of the gross sales by the Appellees. In the case of Convers Rubber

Corporation and Edwardson Manufacturing Corporation vs. Jacinto Rubber Plastics

Co., Inc. and Ace Rubber & Plastic Corporation.f the Supreme Court said that:

"It is not farfetched to assume that the net profit of the imitator which, after all is what the law contemplates as basis for damages if it were only actually ascertainable, in the manufacture of rubber shoes should not be less than 20 to

25% of the gross sales."

33 See footnote 30.

in-n-out vs. hwani page 12 0 16

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Appellant claims that Kishu Sehwani admitted that Appellee Sehwani, I c. earned

Ten Million Pesos (p10,000,000.00) a year for ten years. However, in the a sence of

substantial evidence to prove such claim and to corroborate this testimtny, such

testimony cannot be given any credence and weight in this case. In fact, wha was only !

established is that Appellees are operating one (1) outlet in Pasig City.

The evidence adduced by both parties show that the sales of Appellee B NITA'S

FRIES, INC. from 23 December 2000 to 31 March 2002 is Three Hundred ifty Four

Thousand Two Hundred Ninety Pesos and 46/100 (p354,290.46)34 Thirty

this amount is One Hundred Six Thousand Two Hundred Eighty Seven esos and

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14/100 (p106,287.14). Under Section 156.3, in cases where actual intent to lSlead the

public or to defraud the complainant is shown, in the discretion of the ourt, the

damages may be doubled. As actual intent to mislead the public or to

28/100

de raud the

complainant is shown, the amount of P106,287.14 should be doubled.

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amount is two hundred twelve thousand five hundred seventy four

(p212,574.28). Appellant is, thus, en tided to the award of this amount of dama es \ l

This Office also finds that by way of example or correction for the pu lie good,

with the objective of enhancing the protection of intellectual property and p eventing

similar acts of unfair competition, Appellees should be liable to pay Appellant xemplary

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tdamages in the amount of Five Hundred Thousand Pesos (p500,000.00). xemplary

damages are imposed not to enrich one party or impoverish another but to

deterrent against or as a negative incentive to curb socially deleterious actions."

Regarding attorney's fees, Article 2208 of the New Civil Code pro 'des that

attorney's fees may be recovered when exemplary damages are awarded or Ihere the

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court deems it just and equitable.i? It is well settled that in the recovery of ttorney's

fees, whether as a main action or as an incident of another action, the determi ation of

the reasonableness is within the prerogative of the courta." Moreover, in the ca e of Jose

34 Exhibits GGGG to UUUU and Exhibits 19 to 33. 35 See G. R. No. 118325,29 January 1997. 36 Paragraph Nos. 1 and 11. 37 COMPANIA MARITIMA, INC. et al. vs. COURT OF APPEALS and EXEQUIEL S. CO SULTA, G.R. No. 128452,16 November 1999.

in-n-our ".1 hwani page13 ott6

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I Concerning moral damages, in the case of Development Bank of the P !

4QCourt of Appeals, et. al.vs. ,

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Abrogar, et al vs. Intermediate Appellate Court, et al./8 it was held that the e ercise of

judicial discretion in the award of attorneys fees demands factual, legal and equitable

justification.

In this case, this Office finds it just and equitable to award atto y's fees.

Appellant was constrained to engage the services of counsel and incur attorney' fees and

expenses of litigation. Testimonial and documentary evidence'" have been pres nted and

offered showing that as of 2002, Appellant has already paid its counsel twe ty seven

thousand one hundred sixty seven and 35/100 us dollars (US$ 27,167.35). Thi evidence

was not disputed by the Appellees. Accordingly, this Office finds that the App llant can

recover the amount of five hundred thousand pesos (p500,000.OO) as pa

attorney's fees and expenses of litigation.

pptnes

the Supreme Court ruled that:

"In a long line of decisions, this Court has held that the claimant for moral damages must present concrete proof to justify its award, thus:

. . . while no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of indemnity being left to the discretion of the court (Art. 2216), it is, nevertheless, essential that the claimant satisfactorily prove the existence of the factual basis of the damage (Art. 2217) and its causal relation to defendant's acts. This is so because moral damages, though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. xxx

Moreover, as a general rule, moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses. It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system."

In this instance, there is no factual claim that can be the basis of the grant of

moral damages. What the witnesses of the Appellant proved is the existence of unfair

competition and not the tarnished reputation of the Appellant. The Appella t should

have offered factual evidence proving that the acts of Appellees have b mirched

38 G.R. No. L-67970, 15 January 1988. 39 See Exhibit ZZZZ. ~o G. R. No. 125838,10 June 2003.

in-n-out vs. hwani page 140 16j

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Appellant's reputation resulting to actual injury to the Appellant. In the absen e of such

evidence, this Office cannot just grant moral damages and is inclined to apply e general

rule that moral damages cannot be granted in favor of a corporation.

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Finally, under Section 157, the products of Appellees including the lab Is, signs,

prints, packages, wrappers, receptacles and materials used by them in commit9ng unfair ~

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competition should be seized and disposed of outside the channels of commerct.

\ Wherefore, premIses considered, the Appellees are held guilty f unfair

competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 's hereby

MODIFIED as follows:

Appellees are hereby ordered to jointly and severally pay Appellant:

1. Damages in the amount of TWO HUNDRED TWELVE

THOUSAND FIVE HUNDRED SEVENTY FOUR AND

28/100 (P212,S74.28);

2. Exemplary damages in the amount of FIVE HUNDRED

THOUSAND PESOS (PSOO,OOO.OO).

3. Attorney's fees and expenses of litigation in the amount of

FIVE HUNDRED THOUSAND PESOS (PSOO,OOO.OO).

All products of Appellees iocluding the labels, signs, print>, packages, ~ppers, receptacles and materials used by them in committing unfair competition s~ould be

without compensation of any sort be seized and disposed of outside the chrnels of

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commerce. i,

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Let a copy of this Decision be furnished the Director of Bureau of Le al Affairs

for appropriate action, and the records be returned to her for proper di position.

Further, let a copy of this Decision be furnished the Documentation, Infor tion and ~ 1t

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Technology Transfer Bureau for their information and records purposes.

SO ORDERED.

DEC 2 3 2:/5 Makati City.

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