COMMERCIAL LAW

I. Electronic Commerce Act

 Electronic document refers to information or the representation of information, data,

figures, symbols, and modes of written expression described or however represented, by
which a right is established, or an obligation extinguished, or by which a fact may be
proved and affirmed, which is received, recorded, transmitted, stored and processed,
retrieved or produced electronically.
 The E-commerce law does not cover or allow e-filing or facsimile transmission as a
mode of filing pleadings in administrative cases.

II. Insurance

 Insurable interest in property may consist in:

a. An existing interest
b. An inchoate interest founded on an existing interest
c. Expectancy coupled with an interest out of which the expectancy arises.
Such insurable interest must exist when the insurance takes effect, and when the loss
occurs, but need not exist in the meantime.
 There is insurable interest in property when he derives a benefit from its existence or
would suffer a loss from its destruction, termination or injury by the happening of the
event insured against it.
 Persons who are proscribed to become donees under the rules on donation cannot be
designated as beneficiary in life insurance. These include persons in illicit relations.
 The insurable interest upon the life of another need not be based on kinship or legal
obligation to give support.
 Premium
- GR: The insurance policy is not valid and binding, unless the premium thereof is not
paid.
- Exception: When there is an agreement allowing the insured to pay the premium in-
installments and partial payment has been made at the time of the losss.

 Insurable interest in property vs life

- In property insurance, the expectation of benefit must have a legal basis. In life
insurance, the expectation benefit to be derived from the continued existence of a life
need not have any legal basis.
- In property insurance, the actual value of interest therein is the limit of the
insurance that can validly be place thereon. In life insurance, there is no limit to the
amount of insurance that may be taken upon life.
- In property insurance, an interest insured must exist when the insurance takes effect
and when the loss occurs but need not exist in the meantime. In life insurance, it is
enough that insurable interest exists at the time when the contract is made but it need
not exist at the time of loss.
 Prohibited to be insured: is a public enemy that is a citizen or national of a country
with which the Philippines is at war.
  Co-Insurance vs Reinsurance
- Co-insurance is the percentage in the value of the insured property which the insured
himself assumes or undertakes to act as insurer to the extent of the deficiency in the
insurance of the insured property. In case of loss or damage, the insurer will be liable
only for such proportion of the loss of damage as the amount of insurance bears to the
designated percentage of the full value of the property insured.
- Reinsurance is where the insurer procures a third party, called the reinsurer, to insure
him against liability by reason of such original insurance. Basically, a reinsurance is
an insurance against liability which the original insurer may incur in favor of the
original insured.
 The purchase of goods under a perfected contract of sale already vests equitable interest
on the property in favor of the buyer even while it is pending delivery.
 A life insurance is assignable. A provision, however, in the policy stating that written
notice of such an assignment should be given to the insurer is valid. The failure of the
notice of assignment would thus preclude the assignee from claiming rights under the
policy.
 If the plaintiff’s property has been insured and he has received indemnity from the
insurance company for injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the
insured against the wrong doer or the person who has violated the contract.
 Barratry is any willful misconduct in the part of the master crew in pursuance of some
lawful or fraudulent purpose without the consent of the owner and to the prejudice of the
interest of the owner.

Marine Insurance
 A constructive total loss is one which gives to a person insured a right to abandon.
 Abandonment can only be availed of when, in a marine insurance contract, the amount
to be expended to recover the vessel would have been more than three fourths of its
value.
 Warranties implied in marine insurance:
- That the ship is seaworthy to make the voyage and/or take in certain cargoes
- That the ship shall not deviate from the voyage insured
- That the ship shall carry the necessary document to show nationality or neutrality and
that it will not carry any document which will cast reasonable suspicion thereon
- That the ship will not carry contraband, especially if it is making a voyage through
belligerent waters.

Life Insurance
 Section 48 of the Insurance provides that under the incontestability clause, after a
policy of life insurance made payable upon the death of the insured shall have been
in force during the lifetime of the insured for a period of 2 years from the issuance
of the policy or last reinstatement, the insurer must make good on the policy even
though the policy was obtained through fraud, concealment or misrepresentation.
 The insurer is liable when suicide is committed after the policy has been in force for a
period of 2 years from the date of issue or its last reinstatement. The rule however admits
 of an exception so that when suicide is committed in the state of insanity, it shall be
compensable regardless of the date of commission.

II. Revised Corporation Code

 Power to Declare Dividends

- The board of directors of a stock corporation may declare dividends out of the
unrestricted retained earnings which shall be payable in cash, property, or in stock to
all stockholders on the basis of outstanding stocks held by them. Provided, that any
cash dividend due on delinquent stock shall be first applied to the unpaid balance on
the subscription plus costs and expenses, while stock dividends shall be withheld
from the delinquent stockholders until their unpaid subscription is fully paid.
Provided further, that no stock dividend shall be issued without the approval of the
stockholders representing at least 2/3 of the outstanding capital stock at a regular or
special meeting called for the purpose.

 Business Judgement Rule it provides that unless otherwise provided by the Code, all
corporate powers and prerogatives are vested directly in BOD. Directors cannot be held
liable for mistakes or errors in the exercise of their business judgement if the acted in
good faith, with due care and prudence. Contracts intra vires entered into by the board of
directors are binding upon the corporation and courts will not interfere.

 Trust Fund Doctrine provides that the capital stock, property, and other assets of the
corporation are regarded as equity in trust for the payment of the corporate creditors. The
subscribed capital stock of the corporation is a trust fund for the payment of the debts of
the corporation, which the creditors have the right to look for the satisfaction of their
credits and the corporation may not dissipate this, and the creditors may sue stockholders
directly for the unpaid subscription.

 By Doctrine of Apparent Authority, the corporation will be estopped from denying the
agent’s authority if it knowingly permits one of its officers or any agent to act within the
scope of an apparent authority and it holds him out of the public as possessing the power
to do those acts.

 When is there an ultra vires act on the part of the:

-Corporation: No corporation shall possess or exercise any corporate power except

those conferred by the Code or by its AOI and except such as are necessary or incidental
to the exercise of the powers so conferred. When the corporation does an act or engages
in an activity which is outside of its express, implied, or incidental powers set out in its
AOI, the act is deemed ultra vires.

-Board of Directors: When the Board engages in an activity or enters into a contract
without the ratificatory votes of the stockholders in those instances where the Corporation
Code so requires, such as when the corporation is made to invest in another corporation
 or engage in a business which is not in pursuit of its primary purpose, the board
resolution not ratified by the stockholders representing at least 2/3 of the outstanding
capital stock would make the transaction void, as being ultra vires.

-Corporate Officers: When a corporate officer enters into a contract on behalf of the
corporation without having been so expressly or impliedly authorized by the board of
directors, even when the act or contract falls within the corporation’s express, implied or
incidental power, then the authorized act of the corporate officer is deemed ultra vires.

 Power to Acquire Own Shares. - Provided, that the corporation has unrestricted
retained earnings in its books to cover the shares to be purchased or acquired, a stock
corporation shall have the power to purchase or acquire its own shares for a legitimate
corporate purpose or purposes, including the ff cases:
(1) To eliminate fractional shares arising out of stock dividends
(2) To collect or compromise an indebtedness to the corporation, arising out of the
unpaid subscription, in delinquency sale, and to purchase delinquent shares sold
during the said sale; and
(3) To pay dissenting or withdrawing stockholders entitled to payment for their shares
under the provisions of the Code.

 Section 31 of the RCC -READ

 The Corporation Code prohibits stock corporations from retaining surplus profits
in excess of 100% of their paid-up capital.
Power to invest funds in another corporation or business or for any other purposes.
Section 41- Majority of the BOD and 2/3 of the SH

 Section 37. Power to increase or decrease capital stock; incur, create or increase
bonded indebtedness- Majority of the BOD and 2/3 of the SH
 Read Section 28 of the RCC- Vacancies in the Office of Director or Trustee;
Emergency Board.

 Doctrine of Equality of Shares provides that all stocks issued by the corporation are
presumed to be equal with the same privileges and liabilities, provided that the article of
incorporation is silent on such differences.

Rights of the stockholder:

(1) The right to vote, including the right to appoint proxy;

(2) The right to share in the profits of the corporation including the right to declare stock
dividends;
(3) The right to a proportionate share of the assets of the corporation upon liquidation;
(4) The right of appraisal
(5) The pre-emptive right to share
(6) The right to inspect corporate books and records
(7) The right to elect directors;
 (8) Such other rights as may contractually be granted to the stockholders by the
corporation or by special law.
Right of Appraisal (Section 80)
 Appraisal right is the right of stockholder, who dissents from a fundamental or
extraordinary corporate action, to demand payment of the fair value of his shares.
- It is the right of a stockholder to withdraw from the corporation and demand payment
of the fair value of his shares after dissenting from certain corporate acts involving
fundamental changes in the corporate structure.

 When the Right of Appraisal May be Exercised

Any stockholder of a corporation shall have the right to dissent and demand payment of
the fair value of the shares in the following instances:
(a) In case an amendment to the AOI has the effect of changing or restricting the rights of
any stockholder or class of shares, or of authorizing preferences in any respect
superior to those of outstanding shares of any class, or of extending or shortening the
term of corporate existence.
(b) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate property and assets as provided in the code
(c) In case of merger and consolidation; and
(d) In case of investment of corporate funds for any purpose other than the primary
purpose of the corporation.

Preemptive Right (Section 38)

 All stockholders of a stock corporation shall enjoy preemptive right to subscribe to

all issues or disposition of shares of any class, in proportion to their respective
shareholdings, unless such right is denied by the AOI or an amendment thereto:
Provided, that such preemptive right shall not extend to shares issued in compliance with
laws requiring stock offerings or minimum stock ownership by the public; or to shares
issued in good faith with the approval of the stockholders representing 2/3 of the
outstanding capital stock in exchange for property needed for corporate purposes or in
payment of previously contracted debt.

 The shares will be offered to existing stockholders, who are entitled to preemptive right,
at a price fixed by the BOD, which shall not be less than the par value of such shares.

 Preemptive right must be exercised in accordance with the AOI of the By-laws . When
the AOI and the By-laws are silent, the BOD may fix a reasonable time within which the
stockholders may exercise the right.

Right to inspect corporate books

 The statutory right of a stockholder to inspect the books and records of a corporation
extends in consonance with equity, good faith and fair dealing- to a foreign subsidiary
wholly owned by the corporation.
  The right of inspection does not allow the stockholder to improperly use any information
that is secured thereby. The stockholder must exercise the right in good faith and for
legitimate purpose only.

Right of First Refusal- the right where the existing stockholders are given priority to buy
shares of others if the later offered those shares for sale.

 Intra-corporate controversy is one which arises between a stockholder and the

corporation and pertains to the enforcement of the parties’ correlative rights and
obligations under the Corporation Code and the internal and intra-corporate regulatory
rules of the corporation.

- It is a conflict between stockholders, members or partners and the corporation,

association or partnership regarding the regulation of the corporation. The
controversy must arise out of intra-corporate or partnership relation of the parties; or
between such corporation, partnership or association and the State insofar as it
concerns their individual franchises. It is further required that the dispute be
intrinsically connected with the regulation of the corporation.
Venue: RTC special commercial courts

 Quorum consists of the majority of the totality of the shares which have been
subscribed.

 Read Section 72 for Lost or Destroyed Certificates

 Watered Shares are those sold by the corporation for less than the par/book value
or issued value or for a consideration in any form other than cash, valued in excess
of its fair value.

 Section 71 of the Corporation Code state that holders of subscribed shares not fully paid
which are not delinquent shall have all the rights of a stockholder.

 No delinquent stock shall be voted for, entitled to vote, or be represented at any

stockholder’s meeting, nor shall the holder thereof be entitled to any of the rights of
stockholder except the rights to dividends in accordance with the provisions of this code,
until and unless payment is made by the holder of such delinquent stock for the amount
due on the distribution with accrued interest, and the costs and expenses of
advertisement, if any.

BOARD OF DIRECTORS/TRUSTEES/OFFICERS

 BOD and trustees shall exercise the corporate powers, conduct all business, and
control all properties of the corporation.
 Director-term of 1 year (holder of stocks)
 Trustees – 3 years from among the members of the non-stock corporation
 The board of the corporations vested with public interest shall have an independent
diretors constituting at least 20% of such board.
 Independent director is a person who, apart from shareholdings and fees received from
the corporation, is independent of management and free from any business or other
relationship which could, or could reasonably be perceived to materially interfere with
the exercise of independent judgment in carrying out the responsibilities as a director.
 Corporate Officers.
-President who must be a director
-Secretary who must be a citizen and a resident of the Philippines
-Treasurer-resident of the Philippines
-Such other officers as may be provided by the bylaws
-If the corporation is vested with public interest, the board shall elect a compliance
officer.
-No one shall act as president and secretary or as president and treasurer at the same time,
unless otherwise allowed in this Code.
- Two positionmay be held concurrently by the same person (e.g pres and general
manager)

 Disqualification of Directors, Trustees or Officers

A person shall be. Disqualified from being a director, trustee or officer of any corporation
if , within 5 years prior to election or appointment as, the person was:
(a) Convicted by final judgment:
(1) Of an offense punishable by imprisonment for a period exceeding 6 years
(2) For violating the corporation code; and
(3) For violating RA No. 8799, otherwise known as The Security Regulation Code
(b) Found administratively liable for any offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and (b) above.

 Removal of Directors or Trustees.

-Any director or trustee or a corporation may be removed from office by vote of the
SH holding at least 2/3 of the outstanding capital stock or 2/3 of the members entitled to
vote in case of non-stock corporation at a regular or special meeting called for the
purpose, after a previous notice to stockholders or members of such corporation of the
intention to propose such removal at the meeting.
-the Commission shall, motu proprio or upon verified complaint, and after due notice and
hearing, order the removal of a director or trustee elected despite the disqualification, or
whose disqualification arose or is discovered subsequent to an election.
-with or without cause. With cause if intended to deprive minority stockholders of the
right of representation
- While the stockholders may by a vote of 2/3, remove a director, the law also provides
however that his right may not, without just cause, be exercised so as to deprive the
minority of representation in the BOD.

 Vacancies in the Office of Director or Trustee; Emergency Board

 - Any vacancy occurring in the board of directors or trustees other than by removal or
expiration of term may be filled by the vote of at least a majority of the remaining
directors or trustees, if still constituting a quorum; otherwise, said vacancies must be
filled by the SH or members in a regular or special meeting called for that purpose.
- Term expiration -election shall be held no later than the day of such expiration at a
meeting called for the purpose.
- Removal-the election may be held on the same day authorizing the removal and the
fact must be so stated on the agenda and notice of said meeting.
- In all other cases-election shall be held not later than 45 days from the time the
vacancy arose.
- If vacancy prevents the remaining directors from constituting a quorum and
emergency action is required to prevent grave, substantial and irreparable damage to
the corporation, the vacancy may be filles from among the officers of the corp by
unanimous vote of the remaining directors and trustees.
- Any directorship or trusteeship to be filled by reason of an increase in the number of
directors or trustees shall be filled only by an election at a regular or special meeting
called for the purpose, or in the same meeting, authorizing the increase of directors or
trustees if so stated in the notice of the meeting.

 Compensation of Directors or Trustees.

- In the absence of any provision in the bylaws fixing their compensation, the directors
or trustees shall not receive any compensation in their capacity as such, except for
reasonable per diems.
- Majority of the SH or members may grant directors or trustees with compensation
and approve the amount thereof at a regular or special meeting.
- In no case shall the total yearly compensation of directors exceed 10% of the Net
income before income tax of the corporation during the preceding year.
- Directors or trustees shall not participate in the determination of their own per diems
or compensation.
- Corporation vested with public interest shall submit to the stockholders and the
Commission, an annual report of the total compensation of their directors or trustees.

 Liability of Directors, Trustees or Officers.

- A corporation would be liable for the acts of its BOD and officers if the said acts
were performed by them in accordance with powers granted to them under the
Corporation Code, the AOI and bylaws of the corporation, the laws and regulations
governing the business of, or otherwise applicable to, the corporation, and, in the case
of officers, the resolutions approved by the Board of directors.
- Directors or trustees who willfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or bad faith in
conducting the affairs of the corporation or acquire any personal or pecuniary interest
in conflict with their duty as such directors or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
-
 - A director, trustee or officer shall not attempt to acquire, or acquire any interest
adverse to the corporation in respect of any matter reposed upon them in confidence
and upon which, equity imposes a disability upon themselves to deal in their own
behalf; otherwise the said director, trustee or officer shall be liable as a trustee for the
corporation and must account for the profits which otherwise would have accrued to
the corporation.
- Any director or officer of a corporation consenting to the issuance of watered stocks,
or who having knowledge thereof, does not forthwith express his objection in writing
and file the same with the corporate secretary, shall be solidarily liable with the
stockholder concerned to the corporation and its creditors for the difference between
the fair value at the time of the issuance of the stock and the par or issued value of the
same.
- Directors are liable jointly and severally for damages sustained by the corporation,
stockholders or other persons resulting from gross negligence or bad faith in directing
the affairs of the corporation.
- A corporate director, trustee or officer may be held personally liable with the
corporation under the following circumstances:
(1) When he assents to a patently unlawful act of the corporation
(2) When he acts in bad faith or with gross negligence in directing the affairs of the
corporation, or in conflict with the interest of the corporation resulting in damages
to corporation, its stockholders or other persons
(3) When he assents to the issuance of watered stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his written objection
thereto
(4) When he agrees to hold himself liable personally and solidarily liable with
corporation; or
(5) When he is made, by a specific provision of law, to personally answer for the
corporate action.
 Disloyalty of a Director.
- Where a director, by virtue of his office , acquires business opportunity which should
belong to the corporation, thereby obtaining profits to the prejudice of such
corporation, the director must account for and refund to the latter all such profits,
unless his acts has been ratified by a vote of the SH owning or representing at least
2/3 of the outstanding capital stock. This will apply notwithstanding the fact that the
director risked his own funds in the venture.

 Business Judgement Rule it provides that unless otherwise provided by the Code, all
corporate powers and prerogatives are vested directly in BOD. Directors cannot be held
liable for mistakes or errors in the exercise of their business judgement if the acted in
good faith, with due care and prudence. Contracts intra vires entered into by the board of
directors are binding upon the corporation and courts will not interfere.

 Special Fact Doctrine

 Dealings of Directors, Trustees or Officers with the Corporation.

 - GR: A contract of the corporation with one (1) or more of its directors or trustees or
officers or their spouses and relatives within the fourth civil degree of consanguinity
or affinity is voidable, at the option of the corporation, unless all the following
conditions are present:

(1) The presence of such director or trustee in the board meeting in which the contract
was approved was not necessary to constitute a quorum for such meeting.
(2) The vote of such director or trustee was not necessary for the approval of the
contract.
(3) The contract is fair and reasonable under the circumstances; and
(4) In case of corporation vested with public interest, material contracts are approved
by at least 2/3 of the entire membership of the board, with at least a majority of
the independent directors voting to approve the material contract.
(5) In case of an officer, the contract has been previously authorized by the board of
directors.
- Where any of the 1st 3 conditions set forth in the preceding paragraphs is absent, in
the case of a contract with a director or trustee, such contract may be ratified by
the vote of the SH representing at least 2/3 of the outstanding capital stock or of at
least 2/3 of the members in a meeting called for the purpose. Provided, that full
disclosure of the adverse interest of the directors or trustees involved is made at such
meeting and the contract is fair and reasonable under the circumstances.

 Contracts Between Corporations with Interlocking Directors.

- Except in cases of fraud, and provided the contract is fair and reasonable under the
circumstances, a contract between 2 or more corporations having interlocking
directors shall not be invalidated on that ground alone. Provided that the interest of
the interlocking director in one corporation is substantial and his interest in the other
is merely nominal. He shall be subject to the provisions of the preceding section
(Section 31) insofar as the latter corporation or corporations are concerned.
- Stockholding exceeding 20% of the outstanding capital stock shall be considered
substantial for purposes of interlocking directors.

 Doctrine of Corporate Opportunity.

- It is where a director, by virtue of his office, acquires for himself a business
opportunity which should belong to the corporation, thereby obtaining profits to the
prejudice of such corporation. In such a case, a director shall refund to the corporation
all the profits he realizes on a business opportunity which:
(1) The corporation is financially able to undertake.
(2) From its nature, is in line with corporations’ business and is of practical advantage
to it.
(3) The corporation has an interest or a reasonable expectancy, unless the act has
been ratified by vote of the stockholders owning or representing at least 2/3 of the
outstanding capital stock.
 It was held that a corporation is authorized to prescribe the qualifications of its directors.
A provision in the bylaws of the corporation that no person shall qualify or be eligible for
 nomination to the BOD if he engaged in any business which competes with that of the
Corporation is valid.

STOCKS AND STOCKHOLDERS

 Subscription Contract- any contract for the acquisition of unissued stock in an existing
corporation or a corporation still to be formed shall deemed a subscription,
notwithstanding the fact that the parties refer to it as a purchase or some other contract.

II. BANKING LAWS

New Central Bank Act (RA 7653 as amended by RA No. 11211)

1. State Policies
The State shall maintain a central monetary authority that shall function and operate as an
independent and accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this policy, and
considering its unique functions and responsibilities, the central monetary authority
established, while being a government-owned corporation, shall enjoy fiscal and
administrative autonomy.

2. The Bangko Sentral and Banks in Distress

 What are the tools/remedies available to BSP to handle banks in financial distress?

- The BSP may either appoint a conservator, or a receiver, or direct closure and
liquidation of the financially distressed bank.

 When may a bank be placed under conservatorship?

- Whenever on the basis of the report of the appropriate supervising and examining
department, the Monetary Board finds that a bank or quasi-bank is in a state of
continuing inability or unwillingness to maintain a condition of liquidity deemed
adequate to protect its depositors and creditors, the Monetary Board may appoint a
conservator to take charge of the assets, liabilities and management of that institution,
reorganize management, collect all monies and debts due to said institution, and
exercise all powers necessary to restore its viability.
- The conservatorship shall not exceed 1 year.

 Does the appointment of a conservator result in the closure and liquidation of a

bank?
- A conservator merely takes over the management of the bank and assumes exclusive
power to oversee every aspect of the bank’s operations and affairs. However, the
bank retains its juridical personality even if placed under conservatorship; it is neither
replaced nor substituted by the conservator.
  When may the Monetary Board of the BSP appoint a receiver?
- A receiver is appointed under the following conditions:
(1) if the realizable value of the bank’s assets as determined by the BSP is less than
its liabilities.
(2) The institution cannot continue in business without involving probable losses to
its depositors or creditors.
(3) Has notified the BSP or publicly announced a unilateral closure or has been
dormant for a period of at least 60 days or in any manner suspended the payment
of deposit/deposit substitute liabilities or is unable to pay its liabilities as they
become due in the ordinary course of business.
- The receiver must proceed with the liquidation of the closed bank.
 Distinguish conservator from receiver.
- A conservator is appointed if the bank is in a continuing state of lack of liquidity
adequate to protect the interest of the bank’s creditors and depositors. Whereas a
receiver is generally appointed if the bank is insolvent.
- A conservator takes charge of the assets, liabilities and management of the bank in
distress, whereas a receiver shall immediately gather and take charge of all the assets
and liabilities of the institution, administer the same for the benefit of its creditors,
and exercise the general powers of the receiver under the Rules of Court.
- The bank is allowed to business under conservatorship but cannot do business if it is
placed under receivership.
- A conservator has 1 year from appointment to restore the bank’s financial viability,
whereas the receiver, upon its appointment based on any of the statutory grounds
must proceed with the liquidation of the closed bank.



Anti-Money Laundering Act of 2001

 Covered Transaction. Is a transaction in cash or other equivalent monetary instrument

involving a total amount in excess of 500,000.00 within one banking day; for covered
persons under Section 3 (a)(8), a single casino cash transaction involving an amount in
excess of 5 million or its equivalent in any other currency.
 Suspicious Transaction are transactions with covered institutions, regardless of the
amounts involved, where any of the following circumstances exist:
(1) There is no underlying legal or trade obligation, purpose or economic justification.
(2) The client is not properly identified.
(3) The amount involved is not commensurate with the business or financial capacity of
the client.
(4) Taking into account all known circumstances, it may be perceived that the client’s
transaction is structured in order to avoid being the subject of reporting requirements
under the Act.
 (5) Any circumstances relating to the transactions which is observed to deviate from the
profile of the client and/or the client’s past transactions with the covered institution.
(6) The transactions is in a way related to an unlawful activity or offense under this Act
that is about to be, is being or has been committed; or
(7) Any transactions that is similar or analogous to any of the foregoing.
 AMLA provides that the AMLC may inquire into or examine any particular deposit or
investment with any banking institutions or non-bank financial institution upon order of
any competent court in cases of violation of the AMLA provided that there has been
established a probable cause that the deposits or investments involved are in any way
related to a money laundering offense.
 Exception: AMLC has authority to inquire into bank deposits or investments without
prior court order when any of the following activities are involved:
(1) Kidnapping for ransom
(2) Violation of the Dangerous Drugs Act
(3) Hijacking
(4) Destructive arson
(5) Murder
(6) Violation of the wire/fund transfer under the AMLA
(7) Terrorism and conspiracy to commit terrorism
 It is solely the CA which has the authority to issue a freeze order upon application ex
parte by the AMLC and after the determination that probable cause exists. It is also has
the exclusive jurisdiction to extend existing freeze orders previously issued by the AMLC
vis-à-vis accounts and deposits related to money-laundering activities
 Covered Institution.
(1) Banking Institution
(2) Insurance Companies
(3) Security Dealers and brokers
(4) Pre-need Companies
(5) Other entities administering or otherwise dealing in currency and commodities
or or financial derivatives

VIII. INTELECTUAL PROPERTY CODE

A. Patents
*Patent- it is an exclusive right granted to an inventor over an invention or a utility
model or industrial design to sell, use and make the same for commerce and industry.
*Types of Patents
(1) Patentable Inventions
(2) Industrial Design
(3) Utility Models

 What may be patented:

 - Any technical solution of a problem in any field of human activity which is new,
involves an inventive step and is industrially applicable shall be patentable. It may
be , or may relate to, a product or process, or an improvement of any of the foregoing.

 What are the requisites for the patentability of an invention?

a. Novelty or newness
b. An inventive step and
c. Industrial applicability

 Define novelty as an element of patentability.

-It is best defined in the negative: an invention shall not be considered new if it forms
part of a prior art.
- Prior art shall consist of: (presupposes that the one who has made available the
patentable invention to the public is a person other than the applicant for patent)
a. Everything which has been made available to the public anywhere in the world,
before the filing date or the priority date of the application claiming the invention.

b. The whole contents of a published application for a patent, utility model, or

industrial design registration, filed or effective in the Philippines, with a filing or
priority date that is earlier than the filing or priority date of the application.

- Thus, if the inventor makes his invention available to the public but without obtaining
a patent, he cannot restrain others from using his invention. The use of the invention
does not constitute patent infringement. The rule is, no patent no protection. Neither
can anyone, from the public apply for and obtain a patent over same invention
because the application for patent will no longer satisfy the element of novelty.

- It was held that an invention must possess the essential elements or novelty,
originality, and precedence, and for the patentee to be entitled to protection, the
invention must be new to the world.

- It was held that a utility model shall not be considered “new” if before the application
for a patent it has been publicly known or publicly used in this country or has been
described in a printed publication or publications circulated within the country, or if
its is substantially similar to any other utility model so known, used or described
within the country.

 Doctrine of Prejudicial Disclosure

- Under the doctrine of non-prejudicial disclosure, the disclosure of information
contained in the application during the 12 months preceding the filing date or priority
date of the application shall not prejudice the applicant on the ground of lack of
novelty if such disclosure was made by the inventor himself.

 What is Inventive Step as an element of patentability?

 - An invention involves an inventive step if, having regard to prior art, it is not
obvious to a person skilled in the art at the time of the filing date or priority date
of the application claiming the invention.

- Only prior art made available to the public before the filing date or priority date is
considered in assessing inventive step. Thus, subsequent development in technologies
or invention cannot be used to discard the element of inventive step.

- Skilled in the art- means the criterion is only limited to a person with an average level
of skill in the concerned field. It excludes the best expert available.

- In the case if drugs and medicines, there is no inventive step if the invention results
from the mere discovery of a new form or new property of a known substance which
does not result in the enhancement of the known efficacy of that substance, or the
mere discovery of a new property or new use for a known substance, or the mere use
of known process unless such known process results in a new product that employs at
least one new reactant, are non-patentable.

 What is industrial applicability as an element of patentability?

- An invention that can be produced and used in any industry shall be industrially
applicable.

 What are the non-patentable inventions?

a. Discoveries, scientific theories and mathematical methods, and in the case of
drugs and medicines, mere discovery of a new form or new property of a known
substance which does not result in the enhancement of the known efficacy of that
substance, or the mere discovery of a new property or new use for a known substance,
or the mere use of known process unless such known process results in a new product
that employs at least one new reactant.
b. Schemes, rules and methods or performing mental acts, playing games or doing
business, and programs for computers.
c. Methods for treatment of the human or animal body by surgery or therapy and
diagnostic methods practiced on the human or animal body;
d. Plant varieties or animal breeds or essentially biological process to produce plants or
animals.
e. Aesthetic creations; and
f. Anything which is contrary to public order or morality.

 Ownership of a Patent
a. Right to a patent- belongs to the inventor, his heirs or assigns. When 2 or more
persons have jointly made an invention, the right to a patent shall belong to them
jointly.
- Patent can only be issued to the inventor, heirs or assigns.

b. First to File Rule

 - If two or more persons have made the invention separately and independently of
each other, the right to the patent shall belong to the person who filed for the same
invention, or where two or more applications are filed for the same invention, it shall
belong to the applicant who has the earliest filing date or the earliest priority date.

c. Invention created pursuant to a commission.

- The person who commission the work not under an employer-employee relationship
shall
own the patent unless otherwise provided in the contract.

- This is different from copyright where the work is owned by the one who
commissioned it, but the copyright belongs to the author or creator.

- In case the employee made the invention in the course of his employment contract,
the patent shall belong to: (a) the employee, if the inventive activity is not a part of
his regular duties even if the employee uses the time, facilities and materials of the
employer; (b) the employer, if the invention is the result of the performance of his
regularly-assigned duties, unless there is an agreement, express or implied, to the
contrary.

d. Right of Priority

- An application for patent by any person who has previously applied for the same
invention in another country which by treaty, convention or law affords similar
privileges to Filipino citizens, shall be considered as filed as of the date of the filing
of the foreign application; provided, that:
a.) The local application expressly claims priority.
b.) It is filed within 12 months from the date of the earliest foreign application was
filed. And
c.) Certified copy of the foreign application together with the English translation is
filed within 6 months from the date of filing in the Philippines.
- A patent applicant with the right of priority is given preference in the grant of a patent
when there are two or more applicant for the same invention.

d. Grounds for cancellation of a patent

a. The invention is not new or patentable.
b. The patent does not disclose the invention in a manner sufficiently clear and
complete for it to be carried out by any person skilled in the art.
c. The patent is contrary to public order or morality, or granted when the product or
the process is non-patentable.
- Once cancelled, the rights conferred by the patent shall terminate.
- That the patent is granted not in the favor of the true and actual inventor is not a
ground for cancellation of patent.
Remedy of the true and actual Inventor

- What are the remedies of a person declared by final court order as having the
right to the patent?
*If a person referred to in First to File Rule other than the applicant, is declared by
final order or decision as having right to the patent, such person may within 3 months
after the decision has become final:
a. prosecute the application as his own application in place of the applicant
b. file a new patent application in respect of the same invention
c. request that the application be refused
d. seek cancellation of the patent if one has already been issued.

- What are the remedies of the true and actual inventor deprived of the patent?
*If a person, who has deprived of the patent without his consent or through fraud, is
declared by final court order or decision to be the true and actual inventor, the court
shall order for his substitution as patentee, or at the option of the true inventor, cancel
the patent, and award actual damages and other damages in his favor if warranted by
the circumstances.

- Even the true and actual inventor, who is not a patent holder, cannot file an action for
patent infringement. Such remedy is available only to the patentee or his successors-
on-interest.

- The remedy available to the inventor who is not issued the patent is not to file a
petition for cancellation of patent with IPO but to institute the appropriate court
action to be declared the patentee and only after he has obtained judgment that he can
ask the IPO to cancel the patent of the holder.
- If the inventor was deprived of patent through fraud or without his consent, he can
ask for the cancellation of patent of the holder upon finality of the favorable court
decision; whereas, if the patent is issued not to the first filer but no fraud attended the
patent issuance, the inventor must wait for 3 months from finality of the favorable
court decision before he can seek for the cancellation of patent.

Rights conferred by a Patent

- A patent shall confer on its owner the following exclusive right
a. Where the subject matter of a patent is a product, to restrain, prohibit and
prevent any unauthorized person or entity from making, using, offering for sale,
selling or importing that product;
b. Where the subject matter of a patent is a process, to restrain, prevent or prohibit
any unauthorized person or entity from using the process, and from
manufacturing, dealing in, using, selling or offering for sale, or importing any
product obtained directly or indirectly from such process.

- Patent owners shall have the right to assign, or transfer by succession the patent, and
to conclude licensing contracts for the same.
Term of the patent shall be 20 years from the filing date of the application. The term
is not subject to extension.

Limitation of Patent Rights-Read page 225 of Commercial Law (Divina)

- Any prior user, who, in good faith, was using the invention or has undertaken
serious preparations to use the invention in his enterprise or business, before the
filing date or priority date of the application on which a patent is granted, shall
have the right to continue the use thereof as envisaged in such preparations
within the territory where the patent produces its effect.
- Government Used

Patent Infringement
- What Constitutes civil action for patent infringement?
* Intellectual property infringement basically means performing any act in violation
of the rights granted by law to the owner or holder of the intellectual property right.

- The making, using, offering for sale, selling, or importing a patented product obtained
directly or indirectly from a patented process without the authorization of the patentee
constitutes patent infringement, provided that, this shall not apply to instances
covered by limitations of patent rights, use of invention by government, compulsory
licensing and procedures on issuance of a special compulsory license .
- There can be no infringement of a patent until a patent has been issued, since
whatever right one has to the invention covered by the patent arises alone from the
grant of patent. An inventor has no common law right to a monopoly of his invention.
He has the right to make use of and vend his invention, but if he voluntarily discloses
it, such as by offering it for sale, the world is free to copy and use it with impunity. A
patent, however, gives the inventor the right to exclude all others. To be able to
effectively and legally preclude other from copying and profiting from the invention,
a patent is primordial requirement. No patent, no protection.

- When will importation of the patented product not amount to patent

infringement?

Generally, importation of the patented product without the patentee’s authorization

amounts to infringement. However, with regard to drugs and medicines, the law
allows importation by the government or any private third party once the drug or
medicine has been introduced in the Philippines or anywhere else in the world by the
patent owner, or by any party authorized to use the invention in the Philippines.

- Who may file an action for patent infringement?

Any patentee, or anyone possessing any right, title or interest in (refer to the
patentee’s successors-in-interest and assignee) and to the patented invention, whose
 rights have been infringed, may bring an action for patent infringement before a court
of competent jurisdiction.

- Burden of Proof

The burden of proof to substantiate a charge of infringement is with the plaintiff. But
where the plaintiff introduces the patent in evidence, and the same is in due form,
there is created a prima facie presumption of its correctness and validity.

Test in Patent Infringement

- What are the tests to determine infringement of patent are:

a. Literal infringement
b. Doctrine of Equivalents

- How is the literal infringement test used vis-à-vis the doctrine of equivalents?

In using literal infringement as a test, resort must be had, in the first instance, to the
words of the claim. If accused matter clearly falls within the claim, infringement is
made out and that is the end of it. The court must juxtapose the claims of the patent
and the accused product within the context of the claims and specifications to
determine whether there is exact identity of all material elements.

Under the doctrine of equivalents, infringement also occurs when a device

appropriates a prior invention by incorporating its innovative concept and albeit with
some modifications and change, performs substantially the same function in
substantially the same way to achieve substantially the same result. It requires
satisfaction of the function-means-and-result test.

Under the doctrine of equivalents, infringement is committed if the accused product

introduced only minor innovations or improvement but performs the same function in
the same way to accomplish the same result.

Defenses in Action for Infringement

- What are the defenses that can be asserted in a patent infringement suit?
a. The patent or any thereof is invalid.
b. Any of the grounds on which petition for cancellation can be brought.
c. The patent is not new or patentable.
d. Specification of the invention does not comply with the law.
e. The patent was issued not to the true and actual inventor or the plaintiff did not
derive his rights from the true and actual inventor; and
f. Prescription

Licensing
 - Voluntary Licensing

A voluntary license is an authorization given by the patent holder to another person

allowing him to produce the patented article. The license usually fixes the amount of
royalties, sets quality requirements and defines the markets in which the licensee can
sell the product.

The licensee shall be entitled to exploit the subject matter of the technology transfer
arrangement during the whole term of the technology transfer arrangement.

- Compulsory Licensing

Is when the government allows another person to produce the patented product or
process without the consent of the patent owner or plans to use the patented
invention.

- What is the period to file a petition for compulsory license?

A compulsory license may not be applied for before the expiration of a period of 4
years from the date of filing of the application or 3 years from the date of the patent
whichever period expires last.

Assignment and Transmission of Rights

- How are the rights, title or interest in and to patents and invention assigned?

Inventions and any right, title or interest in and to patents and inventions covered
thereby, may be assigned or transmitted by inheritance or bequest or may be the
subject of a license contract.

B. Trademarks
- Is any word, name, symbol, emblem, sign or device or any combination thereof
adopted and used by a manufacturer or merchant to identify his goods and distinguish
them from those manufactured, sold or dealt in by others, it is any visible sign
capable of distinguishing goods.

Marks vs Collective Marks vs. Trade Names

- Mark means any visible sign capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall include a stamped or marked
container of goods. Thus, the name and container of a beauty cream product and LPG
cylinder tank bearing a stamp or mark are proper subjects of a trademark.
- Collective Mark means any visible sign designated as such in the application for
registration and capable of distinguishing the origin or any other common
characteristic, including the quality of goods or services of different enterprises which
use the sign under the control of the registered owner of the collective mark.

- Trade name means the name or designation identifying or distinguishing an

enterprise.

Is registration with the IPO a prerequisite in an infringement suit of a trade name?

- No, a trade name previously used in trade or commerce in the Philippines need not be
registered with the IPO before an infringement suit may be filed by its owner against
the owner of an infringing trademark.

Does the owner of a trademark have a right of property to prevent others from
manufacturing, producing, or selling the same article to which it is attached?

- No, the owner of a trademark has no right of property to prevent others from
manufacturing, producing, or selling the same article to which it is attached. In other
words, the trademark confers no exclusive rights in the goods to which the mark has
been applied. The owner of the trademark can have it registered with the IPO and
after registration, preclude other from adopting the same trademark for same and
similar goods.

Acquisition of ownership of mark

- The rights in a mark shall be acquired through registration made validly in

accordance with the provisions of the law. The applicant or the registrant shall file a
declaration of actual use of the mark with evidence to that effect, within 3 years from
the filing date of the application. Otherwise, the application shall be refused, or the
mark shall be removed from the Register by the Director unless non-use is caused by
circumstances arising independently of the will of the trademark owner. Lack of
funds shall not excuse non-use of a mark.
- The IP Code contemplates that a prior user in good faith may continue to use its
mark even after the registration of the mark by the first to file registrant in good faith.

Is the registrant still required to declare actual use of the trademark?

- Yes, the applicant or registrant must declare actual use of the trademark. The
applicant or the registrant shall file a declaration of actual use of the mark with
evidence to that effect within 3 years from the filing date of the application.
Otherwise, the application shall be refused, or the mark shall be removed from the
Register by the Director.

Acquisition of ownership of trade name

- Trade name is acquired by use.
- Notwithstanding any laws or regulations providing for any obligation to register trade
names, such names shall be protected, even prior to or without registration, against
any unlawful act committed by third parties. In particular, any subsequent use of the
trade name by a third party, whether as a trade name or a mark or collective mark, or
any such use of similar trade name or mark, likely to mislead the public, shall be
deemed unlawful.
- The remedies provided for infringement of trademark in shall apply mutatis mutandis
in case of trade name infringement.

Non-registrable Marks

- A mark cannot be registered if it:

a. Consists of immoral, deceptive or scandalous matter, or matter which may
disparage or falsely suggest a connection with persons, living, or dead,
institutions, beliefs, or national symbols, or bring them into contempt or disrepute.
b. Consists of the flag or coat of arms or other insignia of the Philippines or any of
its political subdivisions, or of any foreign nation, or any simulation thereof.
c. Read page 253 of Divina Commercial Law.

- The law prohibits the registration of a mark “which may disparage or falsely suggest
a connection with persons, living or dead, institutions, beliefs.
- Thus, under Philippine law, a trade name of a national of a State that is a party to the
Paris Convention, whether or not the trade name forms part of a trademark, is
protected without the obligation of filing or registration.
- Can the name of spouses of deceased Presidents be registered as a trademark?

Yes, What the law prohibits is the registration of marks that consist of a name,
portrait or signature identifying a particular living individual except by his written
consent, or the name, signature, or portrait of a deceased President of the Philippines,
during the life of the widow, if any, except by written consent of the widow.

- What is the first to file rule in trademarks?

The first to file rule in trademarks means that the filing of the application for
registration of trademark in good faith precludes registration of the same trademark
for the same goods or services or closely related goods and services.

- Under the first to file rule in trademarks, a mark that nearly resembles a
previously registered mark, such that it is likely to deceive or cause confusion,
cannot be registered. How may confusion arise?

Confusion of goods- when the products are competing.

 Confusion of Business - exists when the products are non-competing but related
enough to produce confusion of affiliation.

Test to Determine Confusing similarity between marks.

- Likelihood of confusion is the gravamen of the offense of trademark infringement. In

determining likelihood of confusion, jurisprudence has developed two tests, the
dominancy test and the holistic test.

- Dominancy Test

The test of dominancy focuses on the similarity of the prevalent features of the
competing trademarks which might cause confusion or deception. Under the
dominancy test, if the competing trademark contains the main or essential or
dominant features of another and confusion and deception is likely to result,
infringement takes place.

As the SC asserted time and again, actual confusion is not required. Duplication or
imitation is not necessary; nor is it necessary that the infringing label should suggest
an effort to imitate. Similarity in size, form and color, while relevant, is not
conclusive. Only likelihood of confusion on the part of the buying public is necessary
so as to render 2 marks confusingly similar so as to deny the registration of the junior
mark.

- Holistic Test

The Holistic test entails a consideration of the entirety of the marks applied to the
products, including labels and packaging, in determining confusing similarity. The
scrutinizing eye of the observer must focus not only on the predominant words but
also on the other features appearing in both labels so that a conclusion may be drawn
as to whether one is confusingly similar to the other.

Infringement- defined as the colorable imitation of a registered mark or the same

container or a dominant feature thereof.

Doctrine of Unrelated Goods

- One who has adopted, used and registered a trademark on his goods cannot prevent
the adoption, use and registration of the same trademark by others on unrelated
articles of different kinds.

Well Known Mark

- is a mark which is considered by the competent authority of the Philippines to be
well-known internationally and in the Philippines, whether or not it is registered here,
as being already the mark of a person other than the applicant for registration.
Rights conferred by the registration of trademark.

- Except in cases of importation of drugs and medicines which has been introduced in
the Philippines or anywhere else in the world by the patent owner, or by any party
authorized to use the invention and off-patent drugs and medicines, the owner of a
registered mark shall have the exclusive right to prevent all 3rd parties not having the
owner’s consent from using in the course of trade identical or similar signs or
containers for goods or services which are identical or similar to those in respect of
which the trademark is registered, where such use would result in a likelihood of
confusion . In case of the use of an identical sign for identical goods or services, a
likelihood of confusion shall be presumed.

When may the IPO cancel the certificate of trademark registration?

a. Failure to file declaration of actual use within one year from the 5 th anniversary of the
trademark registration.
b. Failure to file declaration of actual use within 3 years from filing of the application
for trademark registration.
c. At any time, if the registered owner of the mark without legitimate reason fails to use
the mark within the Philippines, or to cause it to be used in the Philippines by virtue
of a license during an uninterrupted period of three years or longer.

Trademark Infringement

- Read page 289 of Divina Law Commercial Law Reviewer

What are the elements of trademark infringement?

a. The trademark being infringed is registered in the IPO.

b. The trademark is reproduced, counterfeited, copied, or colorably imitated by the
infringer.
c. The infringing mark is used in connection with the sale, offering for sale, or
advertising of any goods, business or services, or the infringing mark is applied to
labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be
used upon or in connection with such goods, business or services.
d. The use or application of the infringing mark is likely to cause confusion or mistake
or to deceive purchasers or others as to the goods or services themselves as to the
source or origin of such goods or services or the identity of such business; and
e. The use or application of the infringing mark without the consent of the trademark
owner or the assignee thereof.

What are the rights of the trademark owner?

a. He may use the trademark in trade and commerce. If he is the first user, he cannot be
sued for trademark infringement even though the trademark is registered by the first
filer.
b. He may register the trademark.
 c. He may sue for infringement in case of unauthorized use of his registered mark in
connection with the sale of the same goods or similar goods which is likely to cause
confusion to the public.

Unfair Competition

- Is one where any person employs deception or any other means contrary to good faith
by which he shall pass off the goods manufactured by him 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 produced said result.

- The passing off or attempting to pass off upon the public of the goods or business of
one person as the goods or business or another with the end and probable effect of
deceiving the public.
- Passing 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 appearance of the goods of his competitor
with the intention of deceiving the public that the goods are those of his competitor.

C. Copyright

-Copyright
* It is an intangible, incorporeal right granted by the statute to the author or originator of
certain literary or artistic productions, whereby he or she is invested, for a specific period,
with the sole and exclusive privilege of multiplying copies of the same and publishing
and selling them.
-Copyright should
be defined then as an incorporeal and intangible property granted by law to the originator
or creator of certain literary, artistic, scientific and scholarly works whereby he or she is
invested for a specific period of time a collection of economic and moral rights on the
terms specified by statute.

Copyrightable Works

- When is the starting point of protection of a Copyright?

Works are protected by the sole fact of their creation, irrespective of their mode or
form of expression, as well as of their content, quality and purpose.

- What are the classifications of protected works?

a. Original and literary works; and

b. Derivative works.
- A copyright gives no exclusive right to the art disclosed; protection is given only
to the expression of the idea not the idea itself.
- Useful Article defined as an article having an intrinsic utilitarian function that is not
merely to portray the appearance of the article or to convey information is excluded
from copyright eligibility. The only instance when a useful article may be the subject
of copyright protection is when it incorporates a design element that is physically or
conceptually separable from the underlying product. This means that the utilitarian
article can function without the design element. In such an instance, the design
element is eligible for copyright protection.

- Original Literary and artistic works (Read page 307 of Divina Commercial Law)

- What are derivative works?

The following are considered derivative works and shall also be protected by
copyright.
a. Dramatizations, translations, adaptations, abridgements, arrangement and other
alterations of literary or artistic works; and
b. Collections of literary, scholarly or artistic works, and compilations of data and
other materials which are original by reason of the selection or coordination or
arrangement of their contents.

- What is the treatment over derivative works?

They shall be protected as new works: provided however, that such new work shall
not affect the force of any subsisting copyright upon the original works employed or
any part thereof or be construed to imply any right to such use of the original works,
or to be secure or extend copyright in such original works.

One of the economic rights of the author is to carry out, prevent or authorize
derivative work. Thus, no one carry out a work derived from the original work except
the author or without his authorization.

- Does a publisher have right over the published edition of the copyrighted work?

Yes, in addition to the right to publish granted by the author, his heirs, or assigns, the
publisher shall have a copyright consisting merely of the right of reproduction of the
typographical arrangement of the published edition of the work.

Typographical arrangement covers the layout, composition, style and general

appearance of a page of a published work. In other words, the visual appearance of
the printed page is independently copyrightable from the contents of the published
work.

- What are considered as unprotected subject matter or non-copyrightable work?

 a. Idea, procedure, system, method or operation, concept, principle, discovery or
mere data as such, even if they are expressed, explained, illustrated or embodied
in a work.
b. News of the day and other miscellaneous facts having the character of mere items
of press information.
c. Any official text of a legislative, administrative or legal nature, as well as any
official translation thereof

d. Any work of the government of the Philippines. However, prior approval of the
government agency or office wherein the work is created shall be necessary for
exploitation of such work for profit. Such agency or office may, among other
things, impose as a condition the payment of royalties.

e. Statutes, rules and regulations, and speeches, lectures, sermons, addresses, and
dissertations, pronounced, read or rendered in courts of justice, before
administrative agencies, in deliberative assemblies and in meetings of public
character.

- While an idea is not copyrightable, the expression of an idea is protected by

copyright. Thus, there can be a copyright of a book which expounded on a new
accounting system the author had developed but the system itself is not copyrightable.

Rights of the copyright owner

- What intellectual Property rights are protected by copyright?

Copyright shall consist in the exclusive right :
(1) To print, reprint, publish, copy, distribute, multiply, sell and make photographs,
photo engravings, and pictorial illustrations of the works;
(2) To make any translation or other version or extracts or arrangements or adaptation
thereof; to dramatize if it be a non-dramatic work; to convert it in a non-dramatic
work if it be a drama; to complete or execute it if it be a model design
(3) To exhibit, perfom, represent, produce or reproduce the work in any manner or by
any method whatever for profit or otherwise; if not reproduced in copies for sale,
to sell any manuscripts or any record whatsoever thereof;
(4) To make any other use or disposition of the work consistent with the laws of the
land.

- Economic Rights
- Moral Rights – Read page 324 of Divina Law Commercial Review
a. Right of attribution
b. To make any alterations of his work prior to, or to withhold it from
publication
c. Right of Integrity
d. Right against false attribution
- All moral rights shall be coterminous with the economic rights of the author or
creator of the work except the right of attribution, which is in perpetuity.

First Sale Doctrine

- Provides that an individual who knowingly purchases a copy of a copyrighted work
from the copyright holder receives the right to sell, display or otherwise dispose of
that particular copy, notwithstanding the interests of the copyright owner.
- The copyright holder’s right to control the distribution of his work goes away after
the first sale of the work. -Exhaustion Principle

Right of Droite de Suite

- Droite de Suite means right to follow. This means that in every sale or lease of an
original work of painting or sculpture or of the original manuscript of a writer or
composer, subsequent to the first disposition thereof by the author, the author or his
heirs shall have an inalienable right to participate in the gross proceed of the sale or
lease to the extent of 5 percent. This right shall exist during the lifetime of the author
and for 50 years after his death.

- May the purchaser of a copyrighted book reproduce it or create a derivative

work out of it?

No, the purchaser may only distribute the work, without incurring liability, but cannot
reproduce or carry out derivative work out of it. The rights of reproduction and
transformation are distinct from the right of first public distribution.

Rental Right
Right of Public Display
Right of Public Performance

Ownership of Copyright
Limitation on Copyright-Read Page 332 of Divina Law

Doctrine of Fair Use

- Fair use is a privilege to use the copyrighted material in a reasonable manner without
the consent of the copyright owner or as copying the theme or ideas rather than their
expression. Fair use is an exception to the copyright owner’s monopoly of the use of
the work to avoid avoiding stifling “the very creativity which that law is designed to
foster”.
- Under this doctrine, the fair use of a copyrighted work for: (1) criticism and
comment; (2) news reporting; (3) teaching, including multiple copies for classroom
use; and (4) scholarship, research, and similar purposes is not an infringement of
copyright.

Factors to be considered in determining fair use?

a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes.
b. The nature of the copyrighted work.
c. The amount and substantiality of the portion used in relation to the copyrighted work
as a whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work.