Tale of Two Restaurants: Appeals Court Rules for First to Use

November 23, 2015

A trademark right acquired through use under the old law is preserved under the first-to-file system of the IP Code. This is the gist of the ruling issued by the Court of Appeals in its decision in Amber’s Best Restaurant & Ihaw-Ihaw, Inc. vs. Amber Golden Plate Restaurant, CA-G.R. Sp. No. 137629.

A popular restaurant called Amber Golden Plate Restaurant (“Respondent”) started operating in 1988.  Sometime in the late 1990, an incorporator and former officer of Respondent, put up her own restaurant business using the name IHAW-IHAW SA AMBER.  The latter was registered with the Securities and Exchange Commission in 2004 as “Amber’s Best Restaurant & Ihaw-Ihaw” (“Petitioner”).  Until 2008, Petitioner conducted its business alongside Respondent’s business.

On October 7, 2008, Petitioner filed an application to register the mark AMBER’S BEST for several related goods and services.  Respondent quickly filed its own trademark application for AMBER & LOGO on October 29, 2008.  Meanwhile, Petitioner’s application was granted registration on March 9, 2009 and was cited as a blocking mark to Respondent’s application for AMBER & LOGO.

 Respondent petitioned to cancel Petitioner’s AMBER’S BEST registration claiming that it was the first to use and register AMBER as a business name, and that Petitioner’s registration was made in bad faith.  The Bureau dismissed the cancellation petition, which prompted Respondent to bring an appeal to the Director General who reversed the Bureau’s decision. Petitioner went up to the Court of Appeals on a Petition for Review.

The Court of Appeals reviewed the procedural and substantive issues. Petitioner averred that the Petition for Cancellation should have been dismissed by the Bureau because the person who signed the verification and certification of non-forum shopping, on behalf of Respondent, was not authorized by the corporation through a board resolution.  The Court disagreed.

While the established rule states that an individual corporate officer cannot exercise any corporate power pertaining to the corporation without authority from the board of directors, there are cases recognizing the authority of a corporate officer to sign the verification and certification against forum-shopping without a board resolution or secretary’s certificate so long as that officer is in a position to verify the truthfulness and correctness of the allegations and gives assurance that the allegations in the pleading have been prepared in good faith.

Here, the Court found that Ms. Fernandez was an officer of Respondent and as such she has knowledge of all matters in Respondent’s business and is therefore in a position to verify the truthfulness and the correctness of the allegations in the Petition for Cancellation.  Hence, she can properly sign the verification and certification without the need for a board resolution.  The Court concluded that Respondent has substantially complied with the requirements of verification and certification against forum shopping.

The Petition for Cancellation, the Court added, may not be dismissed based on a procedural lapse alone, since the verification and certification are only formal and not jurisdictional requirements. This means that a court can simply order the correction of unverified pleadings or act on them and waive strict compliance with the rules.

The Court also noted that Petitioner failed to raise the procedural defects at the earliest opportunity.  In the Court’s view, the defects were raised at a very late stage and was a mere afterthought on the part of the Petitioner.

As to the substantive issues, the Court agreed with the Director General’s decision to cancel the Petitioner’s registration. It explained that while the IP Code prescribes the first-to-file rule in determining priority in registration, this rule is not applied absolutely. Proof of prior and continuous use can establish ownership of a mark and such ownership constitutes sufficient evidence to cancel the registration of a trademark.  Therefore, even if Petitioner was the first to register AMBER, it will not defeat Respondent’s ownership of AMBER, the latter being the first to use this trademark, a fact which was known to Petitioner.

In reaching its conclusion, the Court relied on the case of Birkenstock Orthopaedie GMBH and Co. KG vs. Philippine Shoe Expo Marketing Corp. (GR 194307, November 20, 2013), which ruled that the presumption of ownership accorded to a registrant must necessarily yield to superior evidence of actual and real ownership of a trademark.  Ownership was awarded to Respondent based on its prior use.

In recognizing Respondent as the owner of the AMBER trademark, the Court noted the abundance of evidence explaining the genesis of this trademark, and Respondent’s use of the same in commerce long before Petitioner filed an application to register AMBER’S BEST. The Court considered Respondent’s use of AMBER since 1988, twenty years before Petitioner filed its trademark application.

The takeaway: (1) This case reaffirms the Court’s previous decisions holding that registration merely provides a presumption of ownership, and such presumption yields to superior evidence of actual and real ownership; (2) When the verification and certification of non-forum shopping gives assurance that the allegations were made in good faith, the same may be signed by an officer of a corporation even without a board resolution or a Secretary’s Certificate; (3) An officer of a corporation is deemed to have knowledge of the truthfulness of the allegations in the petition; (4) Defect in formalities is not jurisdictional and will not justify dismissal of the petition; the Court can always order such defects to be corrected; and (5) Objections relating to non-compliance of formalities must be raised at the earliest opportunity by the party asserting the same.

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