SEHWANI INCORPORATED vs. IN-N-OUT BURGER, INC.

SEHWANI INCORPORATED vs. IN-N-OUT BURGER, INC.

G.R. No. 171053

October 15, 2007

YNARES-SANTIAGO, J.:

FACTS:

Respondent IN-N-OUT Burger, Inc., a foreign corporation (California, USA), and not doing business in the Philippines, filed before the Bureau of Legal Affairs of the IPO, an administrative complaint against petitioners Sehwani, Inc. and Benita’s Frites, Inc. for violation of intellectual property rights, attorney’s fees and damages with prayer for the issuance of a restraining order or writ of preliminary injunction.

Respondent, alleges that it is the owner of the tradename “IN-N-OUT” and trademarks “IN-N-OUT,” “IN-N-OUT Burger & Arrow Design” and “IN-N-OUT Burger Logo” which are used in its business since 1948 up to the present.  These tradename and trademarks were registered in the United States as well as in other parts of the world.  Petitioner Sehwani allegedly had obtained a trademark registration for the mark “IN N OUT” (with the inside letter O formed like a star) without its authority.

In their answer with counterclaim, petitioners alleged that respondent lack the legal capacity to sue because it was not doing business in the Philippines and that it has no cause of action because its mark is not registered or used in the Philippines. Petitioner Sehwani, Inc. also claimed that as the registered owner of the "IN-N-OUT" mark, it enjoys the presumption that the same was validly acquired and that it has the exclusive right to use the mark. Moreover, petitioners argued that other than the bare allegation of fraud in the registration of the mark, respondent failed to show the existence of any of the grounds for cancellation thereof under Section 151 of Republic Act (R.A.) No. 8293, otherwise known as The Intellectual Property Code of the Philippines.

The Bureau ruled in favor of In-N-Out and cancelled the registration of Shwani.

ISSUE/S:

1. Whether or not the Respondent has the legal capacity to sue for the protection of its trademarks albeit it is not doing business in the Philippines

2. Whether or not a ground exists for the cancellation of the Petitioners’ registration

RULING:

1. Yes. Section 160 RA No. 8293 provides for the right of foreign corporations to sue in trademark or service mark enforcement action, provided that it meets the requirements under Section 3 thereof, which are a) Any convention, treaty or agreement relation to intellectual property right or the repression of unfair competition wherein Philippines is also a party; and b) An extension therein of reciprocal rights.

Moreoever, Article 6 of The Paris Convention, which governs the protection of well-known trademarks, is a self-executing provision and does not require legislative enactment to give it effect in the member country.  The essential requirement therein is that the trademark must be well-known in the country where protection is sought.  In this case, Director Beltran-Abelardo found that In-n-out Burger and Arrow Design is an internationally well known mark as evidenced by its trademark registrations around the world and its comprehensive advertisements therein.

2. Yes. Section 151(b) of RA 8293 provides that a petition to cancel a registration of a mark may be filed with the Bureau of Legal Affairs by any person who believes that he is or will be damaged by the registration of a mark at any time, if the registered mark becomes the generic name for the goods or services, or a portion thereof, for which it is registered, or has been abandoned, or its registration was fraudulently or contrary to the provisions of this Act, or if the registered mark is being used by or with the permission of, the registrant so as to misrepresent the source of goods or services on or in connection with which the mark is used.  The evidence showed that not only did the petitioners use the IN-N-OUT Burger trademark for the name of their restaurant, but they also used identical or confusingly similar mark for their hamburger wrappers and French-fries receptacles, thereby effectively misrepresenting the source of the goods and services.