Gloria Maris Shark's Fin Restaurant, Inc. vs. Lim

A trademark registration obtained in bad faith by a corporate incorporator-director who had full knowledge of the corporation's prior and continuous use of the mark is fraudulently made and may be cancelled at any time under Section 151 of the IP Code, and the equitable doctrine of laches cannot bar such cancellation.

Pacifico Q. Lim was engaged in construction and the restaurant business and was among the incorporators of Gloria Maris Shark's Fin Restaurant, Inc., which was registered with the Securities and Exchange Commission on January 26, 1994. The corporation operated a fine-dining Chinese restaurant under the name "Gloria Maris" at the Cultural Center of the Philippines complex. Lim was also a director of the corporation and insisted on remaining a shareholder even after registering the subject trademarks in his own name and franchising the restaurant concept to other companies. The dispute centers on three trademark registrations Lim obtained from the Intellectual Property Office in 2005, more than ten years after the corporation's SEC registration, all bearing the name "Gloria Maris."

Pacifico Q. Lim was engaged in construction and the restaurant business. He claimed that prior to the establishment of Gloria Maris Shark's Fin Restaurant, Inc., he had already conceived the name "Gloria Maris Shark's Fin Restaurant" and the logo design consisting of a shark's fin enclosed in a plate of irregular shape. In 1993, Lim allegedly offered a proposal to the owners of a restaurant located on the premises of the Cultural Center of the Philippines, which was about to go out of business. After several meetings, "Gloriamaris Shark's Fin Restaurant Inc." was registered with the Securities and Exchange Commission on January 26, 1994, by incorporators Dominador B. Menguito, Pedro O. Manalo, Lorenzo Q. Dy, Edmundo L. Tan, and Lim. The corporation operated a fine-dining Chinese restaurant under the name "Gloria Maris" and had been using that name continuously since its incorporation.

Gloria Maris averred that a graphic artist was hired to submit a sample drawing of the Gloria Maris trademark, and after the trademark's approval, the Board of Directors entrusted to Lim the task of registering the trademark with the IPO. However, it was only in 2005 — more than ten years after Gloria Maris' SEC registration — that three trademarks were registered with the IPO: "GLORIA MARIS WOK SHOP & DESIGN" on August 28, 2005, "GLORIA MARIS DIMSUM KITCHEN WITH LOGO AND DESIGN" on August 28, 2005, and "GLORIA MARIS SHARK'S FIN RESTAURANT AND LOGO" on October 31, 2005. All three trademarks were registered in Lim's personal name as owner. Thereafter, Lim ventured into franchising the Gloria Maris restaurant concept to several companies.

Gloria Maris eventually discovered that, contrary to what it had believed, the trademark registration entrusted to Lim had been registered in his own name, and this discovery came after Lim had left the company. On December 4, 2009, Gloria Maris filed separate petitions to cancel Trademark Registration Nos. 4-2004-009149, 4-2004-009150, and 4-2004-009151. The BLA-IPO dismissed the petitions on February 23, 2012, relying on Lim's prima facie ownership as the registered owner and on the Affidavit of graphic artist Joey Rodriguez, who corroborated Lim's claim that he had coined the name prior to the corporation's SEC registration. The BLA-IPO also noted that neither Gloria Maris nor any of its officials opposed the trademark applications when they were published in the IPO Gazette. Gloria Maris appealed to the ODG, which reversed the BLA-IPO on August 6, 2019, finding that Gloria Maris had used the name for more than ten years prior to Lim's registration and that nothing in Rodriguez's Affidavit established that Lim had coined the name. The CA, however, reversed the ODG on March 18, 2022, reinstating the BLA-IPO's dismissal on grounds of insufficient evidence and laches.

• Unlawful Registration: Petitioner asserted that Lim's later use and registration of the "Gloria Maris" marks was unlawful, as Lim was not the owner of the mark and trade name.
• Ownership of the Mark: Petitioner insisted that Lim is not the owner of the "Gloria Maris" mark and trade name, and that the evidence it presented constituted substantial evidence to establish its ownership.
• Bad Faith and Estoppel: Petitioner claimed that it is not estopped from seeking cancellation of Lim's registrations since the subject trademarks were obtained in bad faith, and that Lim's registration is only prima facie evidence of ownership which may still be cancelled.
• Inapplicability of Laches: Petitioner argued that laches cannot bar cancellation of fraudulently obtained registrations.

• Prima Facie Ownership: Respondent maintained that he is the owner of the trademarks and echoed the CA's ruling that the evidence adduced by Gloria Maris failed to overcome the presumption that he is the prima facie owner of the registered trademarks.
• Laches: Respondent argued that laches had set in against Gloria Maris, which had been aware of his use of the name "Gloria Maris" yet only filed the Petition for Cancellation years thereafter.
• Speedy Disposition of Cases: Respondent contended that his right to speedy disposition of cases was not violated, and that Gloria Maris failed to prove that unjustified postponements were deliberately obtained by the corporation.

• Propriety of Trademark Registration: Whether Lim's registration of the "Gloria Maris" trademarks in his own name was proper, given Gloria Maris' prior and continuous use of the name.
• Bad Faith in Registration: Whether Lim registered the subject trademarks in bad faith, warranting cancellation under the IP Code.
• Applicability of Laches: Whether Gloria Maris is barred by laches from seeking cancellation of the trademark registrations.

• Propriety of Trademark Registration: No. Lim's registration of the "Gloria Maris" trademarks in his own name was unlawful, Gloria Maris having proven through substantial evidence its prior and continuous use of the name for more than ten years before the registration, with Lim's full knowledge as incorporator and director.
• Bad Faith in Registration: Yes. Lim registered the subject trademarks in bad faith, having acted with full knowledge of Gloria Maris' prior creation, use, and establishment of the brand, which constitutes unfair competition under Section 168.2 of the IP Code and renders the registrations fraudulently obtained under Section 151.
• Applicability of Laches: No. Laches cannot bar Gloria Maris from seeking cancellation, as the IP Code expressly permits cancellation at any time if registration was obtained fraudulently, and the equitable doctrine of laches cannot be used to defeat justice or condone fraud.

• Propriety of Trademark Registration: While proceedings before the IPO are administrative in nature and governed by substantial evidence, the Court found that Gloria Maris sufficiently proved its prior and continuous use of the name "Gloria Maris" since its SEC incorporation in 1994. The corporation's Bureau of Internal Revenue Certificate of Registration under the name "Gloriamaris Shark's Fin Restaurant," dated March 17, 1997, corroborated this use. Lim's claim that he conceived the name prior to incorporation was undermined by the very Affidavit of his own witness, graphic artist Joey Rodriguez, which revealed that there was already a plan for a Chinese restaurant to be named "Gloria Maris" at the CCP area when Lim engaged Rodriguez's services. The Court agreed with the ODG that nothing in Rodriguez's Affidavit established that Lim coined the name. Even without admitting evidence presented for the first time on appeal, the fact of Gloria Maris' incorporation in 1994 and its continuous use of the name for over ten years before Lim's 2005 registrations sufficed to establish prior use.

• Bad Faith in Registration: The Court defined bad faith in trademark registration as the applicant's or registrant's knowledge of prior creation, use, and/or registration by another of an identical or similar trademark. Three circumstances established Lim's bad faith: first, he registered the trademarks with full knowledge that the mark and name "Gloria Maris" had been used by the corporation for over ten years; second, he was not merely aware but was an incorporator and director of the company, and even insisted on remaining a shareholder after registering the marks; third, he reaped the fruits of the goodwill built by the corporation as a whole. The Court relied on precedent — Shangri-La International Hotel Management, Ltd. vs. Developers Group of Companies, Inc., Ecole de Cuisine Manille, Inc. vs. Renaud Cointreau & Cie, Emzee Foods, Inc. vs. Elarfoods, Inc., and Cymar International, Inc. vs. Farling Industrial Co., Ltd. — where bad faith was found when registrants had prior knowledge of another's use of the mark through business relationships, employment, or distributorship. Because fraud and bad faith in trademark go hand-in-hand, Lim's registrations were fraudulently obtained under Section 151.1(b) of the IP Code, which permits cancellation at any time if registration was obtained fraudulently or contrary to the Act.

• Applicability of Laches: Laches is an equitable doctrine evaluated by fair considerations and cannot be used to defeat justice or condone fraud. More importantly, Section 151 of the IP Code expressly provides that a registration may be cancelled at any time if it was obtained fraudulently or contrary to the provisions of the Act. Since Lim's registrations were unlawful and fraudulently obtained, laches cannot run against Gloria Maris. The corporation was not remiss in protecting its right, as evidenced by the proceedings a quo that had reached the Supreme Court.

• Bad Faith in Trademark Registration — Bad faith in the context of trademark registration means that the applicant or registrant has knowledge of prior creation, use, and/or registration by another of an identical or similar trademark. The Court applied this by identifying three circumstances showing Lim's bad faith: his full knowledge of Gloria Maris' over ten years of use, his position as incorporator and director, and his reaping of the goodwill built by the corporation.

• Fraud and Bad Faith in Trademark Go Hand-in-Hand — There is no distinction between fraud and bad faith in the context of trademark registration, as one necessarily presupposes the existence of the other. A registration obtained in bad faith is fraudulently made and is therefore cancelable under Section 151 of the IP Code at any time.

• Laches Cannot Defeat Justice or Condone Fraud — Laches is an equitable doctrine the application of which is evaluated by fair considerations; it cannot be used to defeat justice or to condone fraud. Where a statute expressly permits cancellation at any time on grounds of fraudulent registration, laches does not bar the petition.

• Substantial Evidence in IPO Proceedings — Proceedings before the IPO are administrative in nature and governed by the principles of administrative adjudication. The quantum of proof required is substantial evidence, or evidence a reasonable mind might accept as adequate to support a conclusion. Administrative agencies are not bound by the technical rules of procedure applicable in courts of law.

• Prima Facie Ownership of Registered Trademark — A certificate of registration creates a prima facie presumption of ownership in favor of the registrant, but this presumption may be overcome by substantial evidence. Where the evidence shows that the registrant was not the true owner and acted in bad faith, the presumption yields to the superior right of the prior user.

• "Thus, bad faith in the context of trademark registration means that the applicant or registrant has knowledge of prior creation, use and/or registration by another of an identical or similar trademark." — This passage provides the canonical formulation of bad faith in trademark registration adopted by the Court, serving as the controlling standard for evaluating whether a registrant's knowledge of prior use renders a registration fraudulent.

• "Laches is an equitable doctrine, the application of which is evaluated by fair considerations. As such, it cannot be used to defeat justice, or to condone fraud." — This passage articulates the ratio decidendi for the Court's rejection of laches as a bar to cancellation of fraudulently obtained trademark registrations, establishing that equitable defenses yield to statutory rights of cancellation.

• "It has been held that fraud and bad faith, in terms of trademark, go hand-in-hand. In simple words, there is no distinction between these concepts since one necessarily presupposes the existence of the other." — This passage establishes the doctrinal equivalence of fraud and bad faith in trademark law, linking the finding of bad faith directly to the statutory ground of fraudulent registration under Section 151 of the IP Code.

• Shangri-La International Hotel Management, Ltd. vs. Developers Group of Companies, Inc., 520 Phil. 935 (2006) — Followed as controlling precedent on bad faith in trademark registration, where the respondent was found to be in bad faith for appropriating the "Shangri-La" mark after its president had stayed as a guest at the petitioner's hotel.
• Ecole de Cuisine Manille, Inc. vs. Renaud Cointreau & Cie, 710 Phil. 305 (2013) — Followed as precedent on bad faith, where the petitioner's directress had trained at the respondent's culinary school, establishing full awareness of the respondent's prior use of the marks.
• Emzee Foods, Inc. vs. Elarfoods, Inc., G.R. No. 220558, February 17, 2021 — Followed as precedent on bad faith, where the petitioner's officers were former employees of the respondent and had knowledge of the subject trademarks.
• Cymar International, Inc. vs. Farling Industrial Co., Ltd., G.R. Nos. 177974 et al., August 17, 2022 — Followed as precedent on bad faith and as authority on the administrative nature of IPO proceedings and the substantial evidence standard.
• Lim vs. See, G.R. No. 193569, January 25, 2023 — Cited as authority on the definition of bad faith in trademark registration and on the exception to the rule that Rule 45 petitions involve only questions of law where findings of the ODG and CA are conflicting.
• Zuneca Pharmaceutical vs. Natrapharm, Inc., 882 Phil. 278 (2020) — Cited for the proposition that fraud and bad faith in trademark go hand-in-hand.
• Ebancuel vs. Acierto, G.R. No. 214540, July 28, 2021 — Cited for the principle that laches cannot be used to defeat justice or condone fraud.
• Birkenstock Orthopaedie GmbH and Co. KG vs. Phil. Shoe Expo Marketing Corp., 721 Phil. 867 (2013) — Cited for the principle that the primordial purpose of rules of procedure is to facilitate the attainment of justice rather than its frustration.

• Section 168.2, Republic Act No. 8293 (Intellectual Property Code) — Defines unfair competition as employing deception or any means contrary to good faith to pass off goods or services for those of one having established goodwill. The Court applied this provision to characterize Lim's bad-faith registration as unfair competition, given his knowledge of Gloria Maris' established goodwill in the "Gloria Maris" brand.
• Section 151.1(b), Republic Act No. 8293 (Intellectual Property Code) — Authorizes cancellation of a trademark registration at any time if the registration was obtained fraudulently or contrary to the provisions of the Act. The Court relied on this provision to cancel Lim's registrations and to hold that laches cannot bar cancellation, as the statute expressly permits cancellation at any time on this ground.

Caguioa and Gaerlan, JJ., concurred. Inting and Dimaampao, JJ., filed separate concurring opinions, the full text of which is not included in the provided source.