Protection of Investment rule ~ it is one of the primary purposes of the Public Service Act to protect and conserve Investments which have already been made for that purpose by public service operators. Rule not applicable when: 1. When the application of the rule would be conducive to monopoly (Villa Rey Transit v. Pangasinan Transportation Co, Inc. GR No. +17684-85 May 30, 1962) 2. When the operator failed to render satisfactory service and had violated the terms and conditions of its certificate as well as the rules and regulations (Paredes v. Public Service Commission, GA No. 7111 May 30, 1955) TT OPERATIONS 20/0 5. Require any public service to properly keep books, records and accounts, and to make a report on its finances 6 Require public service to comply with laws and ordinances. What service on the part of the public utity is considered unlawful? It shall be unlawful for any public service to provide or ‘maintain any service that is unsafe, improper, or inadequate, or withhold or refuse any service which can reasonably be ‘demanded and furnished, as founded and determined by the ‘Commission In a final order which shall be conclusive and shall effect in accordance with this Act, upon appeal or otherwise. (Comm, Act, Sec. 19 fa) -*caprr SYSTEM" ee counds for suspension and remeaton of erat Ess “tabit system” has been defined as an arrangement ‘under Public Service Act: 1. The facts and circumstances on th#'strength of which fai cerca wae ned hvgeen eibepresented -otmaterally changed 2.” The holder has violated or yifully vofused to , COMMERCIAL LAW REVIEWER aa 3 ~ Copies, photostatic or otherwise, shall be furnished to interested parties at such reasonable charge asthe SEC may prescribe. 5. Order: Within forty-five (45) days after the date of filing, the SEC shall declare the registration statement effective or rejected, 6 EntryofOrder: The SEC will enter an order declaring the registration statement to be. 7. Oath by the issuer: Upon effectivity ofthe registration statement, the isuer shall state under oath in every Prospectus that all registration requirements have ‘been met and that all information are true and ‘correct as represented by the issuer or the one making, the statement. Srovrak_for Rajon snd Rewceston of Negiuztpancie 2 Statement (See. 13): 1 Thelssuer a. Has been judicially declared nsol ge as wooed any of the provision of ths Code, the ee ‘ules promulgate pursuant thereto, or any order of thes Commission of which the issuer has, ty connection with the offering for w/ statement hasbeenfied 98 06°F ee Se Has been oF & engaged fis abit tayéieage fraudulent transactions; 4. Wad'tade any fale or mideing rebelscoatiogh FE HES mtr as hy rn cae TPT ‘ori sirties, ; as fled to comoly with any raguements fil ‘Commission may impose as a for registration? 1) Ff of the security for which the r statement fhas been fled; oF — * 2. The rgtaton atament fonts fae inc oS inaccurate in any material respect or includes any untrue statements of a material fact required to be stated therein ‘or necessary to make the statement therein not misleading; 3. The issuer, any officer, director or controlling person performing similar functions, or any under writer has been convicted, by a competent judicial or administrative body, ‘upon plea of guity, or otherwise, of an offense involving ‘moral turpitude anc: /or fraud or is enjoined or restrained by the Commission or other competent or administrative body for violations of securities, commodities, and other related laws 4. Where the issuer shall have refused to comply with the ‘order of SEC for the production of all books and papers, _administration of oath, or examination of ts officers, or any ‘other person connected to its business affairs. ay eee TL OPERATIONS 2010 (BAR rd an What are the consequences of an incomplete or false ‘inaccurate statement ia a material respect in the registration statement? (Sec. 14) 1. ff the registration statement is on its face incomplete ‘or inaccurate in any material respect 3. The Commission shall issue an order directing the amendment of a registration statement. b. If the registration statement has already become effecthe, the issuer needs to ‘publish a notice of the proposed amendments in 2 newspapers of general rculation in the Philippines stating that the. offering in its current form has been cancelled oF the Commission may opt to suspend or revoke registration. ing security holders or purchasers of subject ties who have pal a portion of the seling price Sa) The issuer shall include in the above- mentioned publication an offer to rescind all transactions that have been completed for ze to date, without making any deduction “and wait for thiny (30) days for purchasers to respond to the rescission offer before “Ination of the amended offering. 1b, Purchasers may, within they (30) days from the date of such notification, renounce their purchase of securities. e |. The issuer, or any person acting on behalf of the issuer in connection with the distibution of said securities, shall, within ten (10) days from receipt of notification of such election, return the contributions paid by such purchasers without making any Seduction “Dut the changes shal result toa derogation of rights of 3. Purchasers who decide not to renounce their purchase of securities shall be subject to the terms of the amended offering. 1, at any time, the Commission finds that 2 registration statement contains any false statement or omits to state any fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may ‘conduct an examination, and, after due notice and hearing, issue ‘an order suspending. the effectivity of the registration statement. If the statement is duly amended, the suspension order may be lifted. + Advisers: Atty. ener; Heads: Erman Balas, Javin Ompor; Understudies: Nicolo Bernardo; Christian de los Santos; Volunteers Jennifer Cruz, Jay G4 ‘Duhaylongsod, Francés Espiritu, Jon Lina, Diane ipanaVEN ed ad OPERATIONS 2010 ‘Suspension of the registration of a security (Sec. 15) Lf at any time, the information contained in the registration statement filed is or has become ‘misleading, incorrect, inadequate or incomplete in any material respect, 2. The sale or offering for sale of the security registered thereunder may work or tend to work fraud 3. Pending further investigation ofthe security registered ‘to ascertain whether the registration of such security should be revoked on any ground specified inthe Code 4, Refusal to furnish information required by the Commission Notes: ‘Any sale ofthe security when the registration is suspended shall be void. ‘Upon issuance of an order of suspension, ‘shall conduct a hearing. if it determines that the sale bbe revoked, it stall issue an order security st 2 << re If during a public offering, the Commission, afte du tga hearing, revokes the effectivity of a régistfai ément pier Section 13 of te Code, of ees thereof : TER Bay ‘Twe Commission shall publish @ notice ofthe onjeror spo wee of rel cet Philippines and/or poston te Commis website She ‘a statement that the offering in its cu ‘eancelled and that the issuer, subject to person acting on behalf of the issuer in the distri subject securities and has in his possession any payment for purchase of securities has the duty to return any and all payments made by purchasers of the subject securities within ten (10) days of such publication, and simultaneously furnish the issuer a copy ofthis notice. f, OF any Upon receipt of a notice, the issuer and all persons acting on its behaif in the distribution of the subject securities shall immediately terminate the offering and return any and ail ‘payments received from purchasers within ten (30) days after the notice is first published. the public offering is afready terminated and the Commission, after due notice and hearing, revokes the effectivity of the registration statement under Section 13 of the Code, or suspends registration under Section 15 thereof, the Commission shall publish a notice of the order of revocation or suspension in ‘a newspaper of general circulation in the Philippines and/or post inthe Commission's website. ‘Note that if the public offering has already terminated, there sno more return of payments, form has bees! () ‘Material information Generally, its any fact or omission which is material to the Jvestor in making his decision whether he should invest in the secutty or not. However, the Rules provide for an enumeration lof matters considered as material information. With regard to those speciicaly included in the Ist, the Issuer cannot argue otherwise to say that those are Immatertal. The following are considered material: 1. Any event or transaction which increases or creates a risk ‘on the investments or on the securities covered by the tetistration; 2. Increase/decrease in the volume of the securtties being ‘offered at an issue price higher/lower than the range set ‘and disclosed in the registration statement and which results to a derogation of the rights of existing security psOTO OT ‘righolders,as may be determined by the Commission; 3. Major change inthe primary business ofthe registrant; {leoréaplzationof the company, 5. Change ir the work program or use of proceeds; '6 Loss, deterioration or substitution of the property underlying the securities; 7, Significant or ten percent (10%) or more change in the | financial condition or results of operation of the registrant tuBless 3 report to that effect is filed with the Commission ‘and furnished the prospective purchaser; £1 8. Classfication, de-classiistion or reclassification of, ‘A. postures which results to derogation of rights of existing ges ‘security haldars, as may be determined by the Commission. ‘sale, distribution within the Philippines ~ have to be ‘whether or not the offeror is a foreigner ot not. aa Pre-Need Plan isa contract which provides for the performance ‘of future services or the payment of future monetary ‘considerations at the time of actual need. A contract wherein plan holders pay in cash or installment at stated prices, with or ‘without ioterest oF insurance coverage and includes. life, Pension, education, interment, and other plans which the SEC may from time to time approve. Issuer An issuer is one which has sold a class of its securities ‘pursuant to See. 12 or is a Public Company. Public Tender Offer a public announced intention by 2 person ‘acting alone or in concert with other persons, to acquire equity securities ofa public company. (SECIRRs, Rule 19) Creeping Acquisition When a person seeks to acquire 35% or ‘more of equity shares In a public company, in one or more transactions, within a period of 12 months. ‘Note: Under the SRC itself, the creeping acquisition threshold is ~Aevisers: Atty lenox; Heads: Erman Baels,lavin Ompoc; Understudie: Nealo Bemardo; Chritan de los Santas; Volunteers Jennifer Cruz, ay G7 ‘Duhaylonesod, Fanci Espirit, Jon Lina, Diane panaMandatory Tender Offer ‘Any person who intends to acquire 35% or more of equity stares in a public company, whether in a single acquisition or ‘over a period of within 12 months, must submit a public tender offer to the stockholders. if the acquisition of even less than 35% results in ownership of more than 51% of total outstanding equity securities, the person making the offer is obligated to parchase all securities thus tendered. (Sec. 19) Note: These threshold limits are found in the SEC IRR's. The limits found in the SRC itseff are: a) 15% for a single acquisition; ‘and, b) 30% for a creeping acquisition. The 51% requirement Is ‘et in the SRC. LAW ON PATENTS PATENT Defined — A patent is a int_by the fs0vernment, which confers to an inventor fis legal successor, fn return for the bublic, the right fora limited period of time to exclide athe ‘rom making, Using sein oF Importcg the invention withthe = temtory ofthe country that ranted the patent ft s ate. Oe ‘Sec. 21. Patentable Inventions ~ = oh ait 4 problem in any fiel.of human 2 jan ieventive step and is industrially applicable a be patent & HE may be, fay, relate to, 9 roc, oF proces 2% Improvererit of sf OF the: voraane, ir The patent law hasa threefold 1. seeksto foster and reward 2 promotes disclosure of invent further innovation, and to permit practice the invention once the patent expires, 3. the stringent requirements of patent protection seek to ensure that ideas in the public domain remain there forthe free use ofthe public. (Pear! 4 Dean, Ine. v Shoemart 409 SCRA 231 (2003)) ELEMENTS OF PATENTABILITY. ‘L._ Newif it does not form part of the prior art 2. Inventive Step ~ if having regard to prior art, itis not ‘obvious to a person skilled inthe art at the time of the filing date or priority date of the application claiming ‘the invention 3. Industrially applicable - if the invention can be produced and used in any industry MATTER Product Process Improvement of a product or process ‘Micro-organisms [Non-biological and microbiological processes L 2 3 4. 5. a2 OPERATIONS 2010 ‘© Improved process for making mosaic precast tes ‘which resulted in an improvement of the lip width of the tiles, ensured the durabiity of the tiles, and prevented the flaking off of the edges of the tiles in the process of making tles may be patented. (Joaquin Nepomuceno, 95 0.6. 7931 (1996) Likewise, an improvement in the mascots being used by fast food restaurants to attract customers by the use of an actuator device to move the facial parts of the mascots is patentable, “where the earlier contraption did not allow such movements. Sec. 22. Nom-Patentable Inventions — The following, shall be ‘excluded from patent protection: 1, Discoveries, scientific theories, and mathematical methods; Schemes, rules and methods of performing mental acts, playing games or doing business and ‘programs for computers; see, for treatments of the human or | Body by surgery or therapy and diagnostic {© tiiethods practiced on the human or animal body. ‘This provision shall not apply to products and ‘composition for use in any of these methods; Plant varieties or animal breeds or essentially biological process for the production of plants or ‘aniqtals. This provision shall not apply to micro- ‘organisms and nombiological and micro- biological processes; 5. J Aesthetic creations; and Anything which is contrary to public order or morality. ‘When 2 discovery Is not nature's handiwork, but his ‘owe; accordingly, itis a patentable subject matter. The inventions which most benefit mankind are those that ish back the frontiers of chemistry, physics and the like" (Diamond vs. Chakroborty 447 USS. 303 (1980)) '* The mere combination of a number of old parts or elernents, which, in combination, perform or produce ‘90 new or different function or operation than that ‘heretofore performed or produced by them, is not a patentable invention, ‘* Ibis now commonplace that an application of a law of nature or mathematical formula to a known structure ‘or process may well be deserving of patent protection, (Funk Brother Seed Co. v. Kalo innoculant Co. (333 US 7) ‘© The conjunction or concert of known elements must contribute something; only when the whole in some way exceeds the sum of its parts is the accumulation of old devices patentable. (Great Atlntic & Pacific Tea Co. vs. Supermarket Equipment Corp 340 US. 147 (1950) Advisers: Atty. Simener; Heads: Erman Balls Javin Ompoc; Understuies: Nicolo Bemardo;Chrlstian de los Santor; Volunteers: Jemifer Cuz Jay G3 ‘oueyiongsod, Francis Esprit, Jon Lina, Diane tpanaPATENTABILITY OF COMPUTER PROGRAMS. GENERAL RULE ~ Computer programs, are in general, are the subjects of copyright, not of patents. EXCEPTION ~ They can be patentable if they are part of @ process like a business process. + Involvement of 2 mathematical process does not ‘automatically render it non-patentable. It is for the discovery or invention of some practical ‘method or means of producing a beneficial result or effect, that the patent is granted, and not for the result or effect itself (Diamond v. Diehr (450 US 175)) Séc. 23, Novely- An invention shal not be considered new Hit | terms part of rir at 1+ Novety isan essential requisite of, ievention or discovery. #3 known or used by others pai iscoteryby the applicant, of spplcation for a pate therefore should be denied, and i sate been granted, the court, jn 2 judiciat pr which the validity of the pater 8 Grawitin will hold it void and et ‘Appeals; 278 SCRA 688 (1997 ATERED priority date of the application cal and The whole contents of an application Utiity model or industrial design registration, published according to this Act, fled or effective in the: Philippines, with a fling or priority date that is earlier than the filing or priority date of the application. Provided, That the application which has validly claimed the filing date of an earlier application under Section 31 of this Act, shall be prior art with effect as ofthe fling date of such earlier application. Provided further, That the applicant or the inventor identified in both applications are not one and the same. WHEN AN INVENTION IS NOT NEW 1. Aninvention is not new if thas been disclosed or used in public, or sold in the market before the patent application for the invention is fled. Most often, written disclosures of inventions are founding earlier filed and published patent applications or issued patents, utlity models or Industrial designs. Patent ‘examiners carry out a search of these disclosures to determine if the invention is new. - a eT Dg OPERATIONS 2010 TAR RAR Me 2 The most common mistake fs to be unaware that premature disclosure or use of an invention before ‘he fing of any patent application would destroy the sovety of an invention and thus completely projudice the chances of obtaining valid protection. When a machine has been public used for months before an application fora patent fort was filed isnot an invention. (Frank v. Kosuyama, 59 Phil 206, 212 (2933) INVENTION Sec. 26. inventive Step - An invention involves an inventive step I having regard to prior art, itis not obvious toa person skilled si the art at the time of the filing date or priority date of the ion claiming the invention. A aba et Inthe artis an ordinary practitioner aware of general knowledge in the at a the relevant to have knowledge of all references that are sufficiently related to one another and to the pertinent at to have knowledge of all arts reasonably pertinent to, lar problems with which the inventor was ‘and -at his disposal the normal means and capacity Foutine work and experimentation. (Rules and 2° Regulations on invention, Rule 107) 2 ivol 5a wy sO RULE ON NON-OBVIOUSNESS OF THE INVENTION ‘A claimed invention isnot patentable ifthe differences between it and the prior art are such that the subject matter as a whole ‘would have been obvious at the time the invention was made to 2 person having ordinary sil in the art. The ultimate determination as to whether or not an invention is ‘obvious is a legal conclusion based on underlying factual Inquires, ncuding: 1. "scope and content of prior a 2. level of ordinary skill in the art; 3. differences between the claimed invention and the prior art; and 4. objective evidence of non-obviousness. Prior public use is a bar whether the use was with or ‘without the consent of the patentee. ‘A mere experimental use Is not the public use defined by the Act, but a single use for profit, not purposely hidden, is such. —Adhisers: Atty. Simenes; Heads: Erman Blois, avin Ompoe; Understudies: Nicolo Bernardo; Christan de los Santos; Volunteers: Jennifer Cu, fay Gq ‘Duhaylongsod, Francs spit, Jon Lina, Diane panaag ee Ee ‘he ordinary use of 2 machine or the practice of a ‘process in 2 factory in the usual course of producing artices for commercial purposes 1s a public use. (Electric Storage Battery Co. vs. Shimadzu 507 US. 613 (19399) ‘Sec. 25. Non-Prejudicial Disclosure — The disclosure of {information contained in the application during the twelve (12) ‘months preceding the filing date or priority date of the application shall not prejudice the applicant on the ground of lack of novelty ifsuch disclosure was made by: a. theinventor; b. a patent office and the information was contained in another application filed by the Inventor and should not have been disclosed by the ofce or in an appliation fled without the knowledge or consent of the inventor party which obtained the informatigifdirectly or Indirectly from the Inventor; aif a third party which the information Aicecty or indirectly from he inventor. Sec. 27. INDUSTRIAL APPLICABILITY: The inert i 8 sicher sci proms Reotbopwelfietsigl,_ gee ge fe et ‘Sec. 28. Right to a Patent — ‘The rich fo. eat ‘patent belérigs to Inventor, his hei or assigns. Whe two {ZF mofe bersons have jinly made an invention, the right to a pifent shall belong #4 tothem jointly. af Sec. 30, Inventions Created Pursuant to, Commissiod th, person who commissions the work shall: patent, unless: ‘otherwise provided in the contract. a, hs Wio 15 ENTMED 10 A PATENT OF AN INVENTION BY ANT EMPLOYEE MADE IN THE COURSE OF HIS EMPLOYMENT CONTRACT? 1. 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. Employer — if the invention is the result of the performance of his reguiarh-assigned dutics unless there is an agreement, express or implied, to the ‘contrary ‘Sec. 29. First to File Rule ~ If two (2} 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 an application for such invention, or where two or more applications are filed for the same invention, to the applicant who has the earliest filing date or, the earliest priority date. If two or more applications for the same invention have the seme filing date or priority date, the patent will be issued Jointly to all the applicants. (Rules and Regulations on Inventions, Rule Pd. REMEDY OF A TRUE INVENTOR WHO WAS CHEATED OF HIS RIGHT TO A PATENT ~ Though he may not enjoin the IPO from processing the questioned application, he may ack the court, ‘once the application is granted, either to substitute him as a patentee or to cancel the patent and ask for damages. ‘Sec. 31. Right of Priority — An application for a patent fled by ‘any person who has previously applied for the same invention in ‘another country which by treaty, convention or law affords the ‘same privileges to Filipina citizens shall be considered as filed as of the date of the filing the foreign application: Provided, that: the local application expressly clalms priority itis Bled within twelve (12) months from the date the earliest foreign application was filed © a certified copy of the foreign application together with an English translation is fled within six (6) months from the of filing in the Philippines Foreign nationals or those domiciled or have areal and establishment in a country which is id bya treaty to it Fipinos same oP rght as. its own nationals (Sec. 3) ‘THE FILING DATE OF A PATENT APPLICATION IS THE DATE WHEN THE APPLICANT FILES ALL OF THE FOLLOWING (Section 40): 1. An express or implicit Indication that @ Philippine patent is sought; 2. Information identifying the applicant; and 3. Description of the invention and one (1) or more Claims in Flipino or English Sec 32, The Application ~ The patent application shell be in Filipino or English and shall contain the following: (a) a request forthe grant of a patent; (0) 2 description of the invention; (0) drawings necessary for the understanding ofthe invention; (4) one or more claims; and {e) anabstract. ‘No patent may be granted unfess the application identifies the inventor. f the applicant is not the inventor, the Office may require to submit said authority. ot Advisers: Atty. simenex; Heads: rman Balas, Savin Ompoc; Understudies: Nolo Bemardo; Christan de los Santos; Volunteers Jenifer Cruz. ty ‘Dutaylongsod, Francs Esprit, Jon Lina, Diane Upanaa ed ee FS ATENEO ‘Sec 38. Appointment of Agent or Representative — An applicant LL Using a patented product — put on market in the who is not a resident of the Philippines must appoint and Philippines by the owner of the product, or with his ‘maintain a resident agent or representative in the Philippines ‘express consent, insofar as such use is performed after ‘upon whom notice or process for judicial or administrative that product has been so put on the sald market. procedure relating to the application for patent or the patent Provided, that, with regard to drugs and medicines, may be served, the limitation in patent rights shall apply after a drug lr medicine has been Introduced in the Philippines or REQUEST must contain: Section 34) anywhere else in the world by the patent owner, or 1. a petition forthe grant ofthe patent; any party authorized to use the invention (as amended 2. name and other data of the applicant, inventor and bby Republic Act No. 9502) the agent; and 2. Where act is done privately and on a non-commercial 3. title ofthe invention scale or for a non-commercial purpose ~ provided ‘that It does not significantly prejudice the economic DISCLOSURE AND DESCRIPTION must disclose the invention: interests ofthe owner of the patent (Section 35) 3. Where the act consists of making or using exclusively 1. ina manner sufficiently clear and complete for 4a bescivsnan,, forthe purpose of experiments that relate C0 the carried out by a person skilled in the art “Pht. subject matter ofthe patented invention 2. where the application concerns logical ‘Begunere the act consists of the preparation for Drocess othe product thereof the use of ie ‘eases, In a pharmacy or by 9 medica a micro-organism which cafitot be sufficiently 9c! professional, of a medicine in accordance with 3 Siecle inthe aplication such 9 way esto enable os ‘redial prescription or acts concerning the medicine the invention to be carried aut by 2 person eee ‘so prepared the art and such material is not-available t6:the 3 5.” Where the invention is used in any ship, vessel, pubic, the application shall with ‘aircraft or land vehicles of any other country entering deposit of such material’ * intémational ‘the territory of the Philippines temporarily or depositary institution; and YY accidently ~ provided that such invention & used 3. in accordance with the rules and regulétions by shE% © ‘exclusively forthe needs of such vessel and not used Patent Office with respect to the contents9f shen: «+ og manufacturing of anything to be sold within the dustpton ndthe overctpesenion SEMEN Hai cove Ph Sec. 71. Rights Conferred by Patent.— 2010 see. 73 gylér User — Notwithstanding Section 72 hereof, any rior .88F, who, in good faith was using the invention or has n serious preparations to use the invention in his 7LA. A patent shall confer on is owner the folowleerluye Fights: enterprise or business, before the filing date or priority date of ‘the application on which 2 patent is granted, shall have the right (@] Where the subject matter of a patent is 2 product, to ‘0 continue the use thereof as envisaged in such preparations restrain, prohibit and prevent any unauthorized person oF ‘within the territory where the patent produces effect. entity from making, using, offering for sale, selling or importing that product; ‘The right of a prior user may only be transferred or assigned (6) Where the subject matter of a patent is a process, to ‘together with his enterprise or business, or with that part of his restrain, prevent or prohibit any unauthorized person or ‘enterprise or business, or with that part of his enterprise or entity from using the process, and from manufacturing, business in which the use or preparations for use have been Gealing in, usin, selling or offering for sale, or importing made. any product obtained directly or indirectly from such process. 71.2, Patent owners shall also have the right to assign, or {OWNER — such use is subject fo the same conditions for the ‘transfer by succession the patent, and to conclude ficensing rant of compulsory licensing (Section 74) contracts forthe same. 1. Where public interest, in particular, national security, rutrtion, health or the development of other sectors, ‘Sec. 72. LIMITATIONS OF PATENT RIGHTS — The owner of @ as determined by the government, so requites or patent has no right to prevent third parties from performing, 2. A judicial or administrative body has determined that without his authorization, the acts conferred in Section 71 ‘the manner of exploitation, by the ovmer of the hereof in the folowing circumstances. patent or his license, is anti-competitive . — + Advisers: Atty Jimenes; Heads: Erman Baois, avin Ompoc; Understudies: Neal Bernardo; Chistian de los Santos; Volunteers: Jennifer Crue ay GG ‘Duhaylongsod, Francis Espira, Jon Lin, Diane pana>, COMMERCIAL LAW REVIEWER sya AL 4 Sec. 54 Term of Patent ~The term of patent shall be twenty (20) ‘years from the filing date of the application. ‘Sec 53 Contents of the Patent — The patent shall be issued in the ame of the Republic of the Philippines under the seal of the Office and shall be signed by the Director, and registered together with the description, claims and drawings, if any, in books and records of the Office. ‘Sec 75. Extent of Protection and Interpretation of Claims ~The extent of protection conferred by the patent shall be determined by the claims, which are to be interpreted in the light of the description and drawings. PATENT INFRINGEMENT —is the making, using, offering forsale, sling importing tented odo # protic baled rectly or indirect from a patented process, eta authoriation ofthe patentee. CONTRBUTORY NERINGER sn peo Mo 1. actively induces the infringement of patent or. oil z mee re wth Sporn fii product or of a product’ produced bé€ause" patented process knowing tt 12 Stele {or infringing the patented ivention and nit for substan onintingemett ‘Aside from the infringer, anyone the infringement of a patent or provides 2 component of 2 patented product or produced because of a patented process knowing it to ‘especially adopted for infringing the patented invention _and not suitable for substantial non-infringing use is Hable jointly and severally with the inftinger as 2 contributory infringer. (Subsection 76.6) '¢ To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is @ primordial requirement. No patent, no protection. (Pear! & Deon v. Shoemart, 409 SCRA 231 (2003)) ‘+ There can be no infringement of a patent if the application is still pending and the patent has not yet ‘been granted, since whatever right one has to the ‘invention covered by the patent arises alone from the grant of thereof. (Cresser Precsions Systems, Inc. v. Court of Appeals, 286 SCRA 13 (1998) + There are two tests to determine the existence of infringement of a patent: (a) fiteral infringement, and (b) the doctrine of equivalents. (Godines v. CA, 286 SCRA 328(1997)) eed OPERATIONS 2010 © In using literal infingement as a test, resort must be made to the words of the claim. if the challenged matter clearly falls within the claim, literal Infringement eaists. To determine whether the challenged matter falls within the literal meaning of the patent claim, the claims of the patent and the challenged matter should be compared within the overall context of the claims and specications, to determine whether there is exact Identity of all ‘material elements, DOCTRINE OF EQUIVALENTS INFRINGEMENT for the purpose of determining the extent of protection conferred by the patent, due account shall be taken of elements which are equivalent to the cements expressed in the claims, so that a claim shall be considered to cover not only all the elements as expressed therein, but ls equivalents. 22g inngement takes “ce when 2 deve »pridtes ‘a prior invention by incorporating its Iamorive concept and. akhowgh, wih some ‘Wadiication and change, performs substantially the "same function in substantially the same way to ‘achieve the substantially same result. “she doctrine of “equivalents infringement” takes place when a device appropriates 3 prior invention by its innovative concept and, although with tion and change, performs substantially the mn in, substantially the same way to achleve ly the same result. (Smith Kine Beckman Corp v. SCRA 33 (2003) Even if a device serves the same function as another device, ‘there is no infringement if t lacks the features, methods, oF ‘arrangements of the other device. (Casio v. Mungcal, 90 0.6. 4194 (1990) ‘+ Infringement is not limited to the unauthorized ‘manufacture of @ patented invention. It includes the Importation, marketing and use of the patented invention ‘without authorization of the patent owner. (Parke, Davis & Company v. Lukas Pharmaceuticals, In, CA-G.R. No. 53162- R (September 23, 1981)) © An action for infringement of patents falls within the {Jurisdiction of the regular courts rather than the Intellectual Property Office. (Amancor, Inc. v. Solas, AC-G.R, SP No, (06049, October 10, 1985) ‘+A civil action for infringement of a patent may be filed despite the pendency of a petition in the Intellectual Property Office for cancellation of the patent. (Abbot Laboratories (Phils) v. Salvador 7 CARA 799 (1989)} —Aassers Atty, Jimener; Heads: Erman Bais, avin Ompoc: Understudies: Nicolo Bemardo; Chistian defo Santos; Volunteers: lemfer Cruz, ay G7 ‘Duhaylongsod, Francis Esprit, ton Lina, Diane LiganaCOMMERCIAL LAW REVIEWER ale + ne dettion of uf compettion under S168 of the 1 Code does not mention any crime of unfair competition involving design patents. Since itis unclear whether the ‘rime exists, for the enactment of RA8293 did not result in the reenactment of RPC Art. 189, the matter must strictly bbe construed against the State and fiberally in favor of the accused in unfair competition. (Kenneth Roy Savage v. Taypin, 331 SCRA 697 (2000)) DEFENSES. 1. STATUTE OF LIMITATIONS - No Damages can be recovered {for acts of infringement committed more than four years before the filing of the civil actions for infringement. (Section 225) 2. OTHER DEFENSES - In addition to other defer defendant may show that the patent or any cl valid on any of the following grounds: a. What is claimed as the inven patentable; 8. The pate does nt daclosetmertion a mane ga sufficiently clear and complete for I to be carried’ “by aly person skilled in the art; or ot Sage = the ot new oF The patent is contrary to; public filer § {Sections 61 and 81; Maguaé.d "Eau {3986} 146 scRa 107) [RULES ON DAMAGES 1. Damages cannot be recovered ie vty tRNA, A ¢ known preshad = 6 committed before the infinger :had reasonable grounds to know ofthe patent. 2. Itis presumed that the ifringer had on the patented product, or onthe conta Which the article i supplied to the publ, 8Monsthessc% advertising material relating to the patented product or process, ae placed the words “Phiippine Patent” with the ‘numberof the patent. 3. No damages can be recevered for infingement committed ‘more than four (4) years before the institution ofthe action for infringement. oie of the patent if Sec, 77. Inftingement Action by a Foreign National - Any foreign national or juridical entity who meets the requirements of Section 3 of the Code and not engaged in business in the Philippines, to which a patent has been granted or assigned, may Ining an action for infringement ofthe patent, whether or not it is licensed to do business nthe Philippines under existing aw. ‘Sec. 78. Process Patents; Burden of Proof. I the subject matter of a patent is a process for obtaining a product, any identical product shall be presumed to have been obtained through the Use of the patented process if the product is new or there is substantial ikethood that the Identical product was made by the ‘process and the owner of the patent has been unable despite reasonable efforts, to determine the process actualy used. In «ordering the defendant to prove that the process to obtain the aL OPERATIONS 20/0 {$6 85, Voluntary License Contract ~ To encourage the transfer “and dissemination of technology, prevent or control practices Identical product is different from the patented process, the court shall adopt measures to protect, as far as practicable, his ‘manufacturing and business secrets. (n) Defendant must prove that the process to obtain the identical products different from the patented process. ‘The court shall adopt measures to protect, as far as practicable, defendant's manufacturing and business secrets. ‘Sec. 82 Patent Found invalid May Be Canceled - In an action {or infringement, the court shall find the patent or any claim to be invalid it shall cancel the same, and the Director of Legal ‘Airs upon receipt ofthe final judgment of cancelation by the court, shall record that fat inthe register of the Office and shal ublsh 2 atice to that effect inthe IPO Gazette. Sec BB apts i tn fer intagemert— oan action for the defendant, in addition to other defenses sth = ‘to-him, may show the invalidity of the patent, or any airs thereof, on any of the grounds on which a petition for can be brought. and conditions that may in particular cases constitute an abuse ATEWE G of Intellectual pfoperty rights having an adverse effect on tion and ‘trade, all technology transfer arrangements comply with the provisions of this Chapter. to exploit the subject matter of the TTA during the whole termof the TTA, ‘ranting further licenses to 3° persons nor from exploiting the subject matter of the TTA himself, ABSENT any contrary CASES WHEREIN EXEMPTION FROM ANY OF THE REQUIREMENTS IN A VOLUNTARY LICENSING CONTRACT MAY BE ALLOWED — where, after evaluation by the OITT Bureau, ‘substantial benefits will accrue to the economy such as: 1. High technology content Increase in foreign exchange earnings [Employment generation Regional dispersal of industries and/or substitution with or use of local raw materials or registered companies with pioneer status GENERAL RULE ~ One cannot exploit @ patent without the consent of the patentee EXCEPTION ~Through compulsory license oe + ~Aavisors: Atty. Senex; Heads: Erman Balas, Savin Ompoc; Understudies: Nicolo Bernardo; Christian de los Santos; Volunteers: Jennifer Cuz, lay GB ‘Duhaylongsod, Francis Esprit, Jn Lina, Olane Lipanaed) es Ee PERIOD FOR FILING PETTION ‘petition for a compulsory license on the ground that the patented invention isnot being worked inthe Philippines on 3 ‘commercial scale without satisfactory reason, although capable ‘of being worked, may not be filed within four years from the date of filing ofthe application forthe patent or three years from the date ofthe patent, whichever period expires later. Apatition for a compulsory license on any other ground may be flied at any time. (Subsections 94.1-2) COMPULSORY LICENSING ‘See.92. Grounds for Compulsory Ucensing — Director of Legal ‘Alfairs may grant licenses to exploit the patented invention, ASSIGNMENT Sec 103. Transmission of Rights ~ Patents or application for patents and invention to which they relate, shall be protected in ‘the same way as the rights of other property under the Civil Code. (203.2) Inventions and any right, ttle or interest in and to patents and invertions covered by them, may be assigned or transmitted by inheritance or bequest or may be the subject of a licensing ‘agreement. (103.2) [REQUIREMENTS FOR RECORDING OF ASSIGNMENT 1, ft must be in writing and accompanied by an English translation, if i is ina language other than English or ‘even without the agreement of the patent owner, in favor.of Flipino; person who has shown his capability to exploit tion, Saye must be notarized; under any ofthe f. circumstances: 6 3 be accompanied by an appointment of a resident urgency, ek 2. Where pabic Interest, In particular, acto nutrition, health or development of wa Lsetbis' national economy as determined by. late age of the Government, so requires; Lye te ee ini determined 2. Whore 2 Jute oo ‘that manner of exploitation by: tense samcompetivescr aere 4. eau otble noncommercabuse A paten fry potete, without stsacon eso : 5. If the patented invention is not lag, worked jin thé! Philippines on commercial scale, although apable of being ‘worked, without satisfactory reason. ae Provided: importation of patented article shall constitute working or using the patent. + Sec.34 of the Patent Law which authorizes the BPTT to {grant a compulsory license to 2 loca, is not contrary to the Paris Convention. The legislative intent inthe grant (of compulsory license was not only to afford others an ‘opportunity to provide the public with quantity of the patented product, but also to prevent the growth of ‘monopolies. ‘+The grant of compulsory license will not result in deprivation of property to the registrant owner without just compensation, since the owner of exclusive rights to manufacture, use and sell the patent would stil receive royalties for use of such product. (Smith Kline v. CA, 368 SCRA 9 (2001)) + th paten owner orfhis fy EO ra Advisers: Atty. imener; Heads: Erman Balls, Javin Ompoc; Undorstudes: Nicolo Bernardo; Olatsn de lt Santor; Volunteers: Jennifer Cru, ay GQ the assignee is not resicing in the Philippines; <2 4... Ke must identity the letters patent involved by number and 1 tata ene o ter dahon of 2d “ate and give the name of the owner ofthe patent and the ttle of the ievention. In the case of an application for a __ potent, shod state the application number and the fling ate of the application and give the name of the applicant “ghd the tile of the Invention. If the assignment was ‘xecuted concurrently wth or subsequent tothe execution of the appléation but before the application is fled or [§ & Sbefore its pplication number is ascertained, i should eg a8 ntify the application by its date of execution, the naggof the applicant, and the ttle ofthe invention. 5. tt accompanied by the required fees. one na 9 ‘Sec. 106.2 - The assignment of a patent is void as against any subsequent purchaser or mortgagee for valuable consideration and without notice unless it is recorded in the Intellectual Property Office within three months from the date of the assignment or prior to the subsequent purchase or mortgage. ‘Notice of the recording willbe published inthe Intellectual Property Gazette. (Rules and Regulations on Inventions, Rule 3205) ‘smusTy MODELS ‘Autilty made! isa new model of implement or tools or of any industrial product or of part of it which does not possess the ‘quality of invention but which is of practical utility by reason of its form, configuration, construction or composition. To qualify for registration, autlty model must be new and industrially applicable. (Republic Act 165, which governed patents, was amended by Republic Act 864 on 16 June 1953 by authorizing the issuance of patents for utility models.) —+ ‘buhaylongsod, Francs Espiritu, on tna, Diane UpanaTas OPERATIONS 2010 a tity model varies fom an invention, for which» patent forinventionis,ikewise avaible, ona least 3 aspects: 1. The requiste of “inventive step” ina patent for invention snot required “The manimum term of protection is only 7 years, compared toa patent which s 20 years, both reckoned fromthe date ofthe appication, 3. The provisions on uty model dispense with ts substantive examination and prefer for ass complicated system. (Ching v. Salina, 462 SCRA 261 (2005) ‘= Autilty model shall not be considered “new” i 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 within the country, or it s substantially similar to any other utility model so. known, described within the country. (Manzano, ‘Appeals, 278 SCRA 688 (1997) ut of REQUIREMENTS FOR APPLICATION FOR HE-GISTRATION 1. Reaiest or registration; : 2. Description ofthe utility model; gee 3. Clainvorclaims; ¢ 4. Drawings oF pictorial completely the tity mol and a 5. Payment ofthefiingfee. ast co {Rules and Regulations on Utility Models and ni Oe t Rule 203) GFE “iF Sec 108.3 A utility model registration shall eipce a the end of. the seventh year after the date ofthe fling of the application ‘without any renewal. nee ‘GROUNDS FOR CANCELLATION OF REGISTRATION: (Sec. 109.4) 4. The claimed invention does not qualify for registration 25 a utility model and is among the inventions which are not patentable; 2. The description and the claims do not comply with the prescribed requirements; 3. No drawing which is necessary for the understanding lof the invention was furnished; and ‘4. The owner of the registration of the utlity model i= ‘not the inventor or his successor Subject | Technicat | Uiterary or | Any sign to matter | Solution of a | artistic work | distinguish problem ‘the goods or which Is new, services of an involyes_an enterprise and 6 industrially applicable ‘Where [intelectual | The National | Intellectual right is | Property Uubrary Property registered | Office Office Duration of | 20 years from | Generally, up | 10 years Right ‘iting or | to 50 years Priority date | after the death of the author |LAW.ON TRADEMARK ‘What are trademarks? 1k" means any visible sign capable of distinguishing the (TRADEMARK) or services (SERVICE MARK) of an ‘enterprseand shal include a stamped or marked container of ods. Ra 883, Se. 124.1) “Today, the trademark is not merely a symbol of origin ‘and goodwill it is often the most effective agent for the actual creation and protection of goodwill. It se: imprints upon the public mind an anonymous and © ienpersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark ‘actually sells the goods. (Mirpuri v. CA, GR 114508 (29995 DISTINGUISfIING “TRADEMARK” FROM “TRADENAME" Under 248293, Sec. 1, a mark means any visible sign capable of ishing the goods (trademark) or services (service mark) “of an enterprise and shall include a stamped or marked ‘container of goods, while 2 tradename means the name or designation identifying or distinguishing an enterprise. ‘Simply put, a tradename refers to the business and its goodwil, while a trademark refers tothe goods. ‘TRADENAMES 1. Definition ~ the name or designation identifying or distinguishing an enterprise 2. The following may not be used as tradenames: a. If by its nature of the use to which the name or designation may be put, it is contrary to public ‘order or morals. 'b. itis liable to deceive the public asto the nature of the enterprise identified by the name. If the trade name is similar to a mark or a trade ‘name owned by another person and its use would likely mistead the public — ay -—Adhser: Atty Simener; Heads: Erman Balas, Javia Ompoe; Understudles: Molo Bernardo; Chestian de los Santos; Volunteers: Jenifer Cuz, ay 70) ‘buhaylongsod, Francis Esprit, Jon Una, Diane Upanaig COMMERCIAL LAW REVIEWER "The term ‘trademark’ is defined by RA 166, the ‘Trademark Law, as including “any word, name, symbol, ‘emblem, sign or device or any combination thereat ‘adopted and used by a manufacturer or merchant to ‘dently his goods and distinguish them for those ‘manufactured, sold, dealt n by others.” ‘+ “Tradename’ is defined by the same law as including “individual names and surnames, firm names, tradenames, devices or words used by manufacturers, industrialists, merchants, agriculturalists, and others to identify their business, vocations, or occupations; the names or titles lawfully adopted and used by natural (F juridical persons, unions, and any manufacturing, industrial, commercial, agricultural or other organizations engaged in trade or commerce”. SERS + Simply put, a tradename refers to the, ‘and its goodwill; a trademark refers to, fie goods. Canon ‘Kabushiki Kaisha v. CA, 336 SCRA 266 (2000) 3. “Registration - trade names are protected even peg or without registration. This, non-egisration'o thie“ trade name with the (Secures a Commission or the Departinentot dustry marr ee ‘him by the IP Code, 4. Right of Owner of Tradename - tnt any steequet use ofthe {id party wheter ao» ede ame coleve tar or any sich ues tate ora ay tose the Seni te ni we of trade a hi eton for eames and uncon. Functions of Trademark 1. indicate origin or ownership or the articles to which they ate attached 2. guarantee that those articles come up to a certain standard of quality advertise the articles they symbolize ‘EXERCISE OF INTELLECTUAL PROPERTY RIGHTS = MONOPOLY? 1. Monopoly ~ is the control obtained by one supplier ‘over the commercial market within a given region. In a way, Intellectual Property Rights is a form of ‘monopoly. Copyrights allow others to enjoy an author's economic rights when there Is permission. ‘Trademarks protect goodwill, it does not prevent production of similar goods. I is only allowed by the Constitution because it provides incentive for Innovation and technological advancement. ee eT et OPERATIONS 2010 SALIENT FEATURES OF THE PARIS CONVENTION ON ‘TRADEMARKS 1, National Treatment Principle — foreign rationals are to be given the same treatment in each ofthe member countries as that country makes available in its own citizens. 2. Right of Priority — any person who has duly filed registration for trademark shall enjoy a right of priority of ix(6) months. 3. Protection against Unfair Competition 4. Protection of Tradenames — protected in all countries without obligation offing or registration 5. Protection of WellXnown Marks - each country- member of the Union may refuse, cancel the registration and prohibit the use ofa trademark which '5 a reproduction, imitation or translation (or any "yg, essential part of which constitutes such), liable to confusion; of a mark considered by competent ‘lithorty where protection is sought to be well-known in the country as being the mark of a person entitled 10 the benefits ofthe convention; and used for similar ‘or identical goods. ny ible sign deserted 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 tse the sign under the control Of the registered owner of the the | collective mark. ‘Any ‘vsible sign “tapable of distigssting te pods Siidicate origin or * ownership guarantee the ‘quality of the goods Elements of a Suitable Trademark and Classification: 1. Arbitrary or Fanciful 2. Suggestive 3. Descriptive 4. Generic Nom-registrable Trademarks: 2. consists of an immoral, deceptive or scandalous matter or a matter which may disparage or falsely suggest 2 connection with persons living or dead, institutions, beliefs, oF national symbols, or bring them {nto contempt or disrepute; 'b. consists of the flag or coat of arms or other insignia of the Philippines or any ofits political subdivisions, or of any foreign nation, or any simulation of them; = Advisors: Atty. Jimener; Heads: Erman Baois,lavin Ompoc; Understules: Nicolo Bernardo; Christian de fos Santos; Volunteers: Jerefer Cru, ay 7. ‘Duhaylongsod, Francis Espirit, Jon Lina, Diane pana’ F ATENEO consists of @ name, portrait or signature identifying @ particular living individual except by his written consent, or the name, signature, or portrait of 3 deceased President of the Philippines during the lifetime of his widow except by writen consent ofthe widow, 4. isidentical with a registered vedemark belonging to @ different propeetor or a vademark with an earlier fling or priority date under any of the folowing circumstances: i. refers to same goods or services refers to closely related goods or services;or Tt, nearly resembles such a trademark 25 to be likely to deceive or couse confusion; fe. is identical with or confusingly si translation of a trademark which is red by the ‘competent authority of the Philipines 10 be well- known internationally and in the Philippines, whether Sh Se Seas oa Sure already the trademark of someone other ‘thatthe applicant for registration, and 1 See re similar goods or services. mort ne know st fn a er knowledge of the relevant seétor of te publit, rather Sept mat om eg eae A RE Philippines which has been abtained a5 result ofthe ¢ 2 | S58 promotion ofthetrademarks FO 4. is Identical with or confusingly similar translation of a trademark Which is registered in the Phlipi ‘goods oF services which are not similar ‘espect to which registration & applied for, the use the trademark in relation to thase goods or services indicates a connection between those goods and services and the owner of the registered trademark, and the interests of the owner of the registered trademarks are likey to be damaged by such use; 6. is likaly to mislead the pubic, particularly as to the nature, quality, characteristics or geographical origin ‘of the goods or services. ‘h. consists exclusively of signs that are generic for the 00d or services they seek to identify |. consists exclsively of signs or of indications that have became customary or usual to designate the goods or services, in everyday language or in bona fide and ‘established trade practice; J. consists exclusively of signs or of Indications that may serve in trade to designate the kind, quality, quantity, Intended purpose, value, geographical origin time or production of the goods or rendering ofthe services or other characteristics of the goods or service; TT es Eel) ‘Annex consists of shapes that may be necessitated by technical factors or by the nature of the goods themselves or factors that affect thelr intrinsic value; consists of colour alone, unless defined by 2 given form; 's contrary to public order or morality; 's the emblem, official seal, or name of the United Nations, whether in its full or abbreviated form. (RA 8293, $ec.123) 1D — GROUNDS FOR REFUSAL OF TRADEMARK REGISTRATION —Aduisers: Ay. menex; Heads: Erman Balots,lavin Ompoc; Undestudias: Nicolo Bernardo; Chistian de los Santos; Volunteers: Jennifer Cus lay 7. ‘The word Selecta is an ordinary or common word but ‘once adopted or coined in connection with one’s business as an emblem or asa badge of authentity, ‘may acquire @ secondary meaning as to be exclusively associated wit ts products and business. Arce & Sons ‘Selecta Biscut Co, 1 SCRA 253} ‘cal es of goods i the local market establishes “trademark use which serves as the basis for action simed at trademark pre-emption. Sales invoices are best proof of actual sales of the products in the Philippines. (Converse Rubber Corp. vs. Universal Rubber Products 147 SCRA 154) The right to use a corporate name isa property right, a fight incom which it may assert. Corporation Code vedo (2) requirements: A__ (NThatcompaintacquted a prior ight over such nameand (2) that the proposed name is either identical, deceptively or confusingly sinilar, ‘or patently deceptive. ‘The test is whether it would be confusing to an ‘ordinary person. (Philips Export BY. vs. Court of ‘Anpeois GR No. 96161) Ownership of trademark isa property right which is eentitied to protection. However, when a TM isused for 2 product in which the other perty does not deal, the use of the same trademark on the late’s product cannot be validly objected to. Trademark owner is entitled to protection when junior user (2nd user) forestall the normal expansion of the busines, but Canon Japan has felled to attach evidence that would convince that it has also embarked inthe production of Footwear products. (Conon Kabushkd vs. Cou of ‘Appeals GR No. 120900) Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. (Kho ws. Court of ‘Appecls GR No. 115758) = ‘Duhayongso, Francis Espirt, 4 Lina, Diane Lpane<=», COMMERCIAL LAW REVIEWER ‘The certificate of registration can confer the exclusive right to use its own symbol only to those goods specified In the certificate and that one who has ‘adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which ate of a different description. (Pearl & Deon ¥s. Shoemart GR No. 148222) DOCTRINE OF SECONDARY MEANING — a word or phrase originally incapable of exclusive appropriation with reference to ‘an article in the market (because it 1s geographically or ‘otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his aticle that, in the trade and to that branch of the purchasing, public, the word of phrase has come to mean that the article ‘was his property. ‘+ Unfair competition is the employment, ‘any other means contrary to goods person shal pss of the good afanutactred by him fr in which he deals, or bis for his similar goods, business, oc sere Tes OPERATIONS 2010 so ts ae those’ sec a eet Dae cere sth Under RAB293, Sec. 158, however, in any suit for infringement, the owner of the registered mark shall not be entitled to recover profits or damages unless the acts have been committed with knowledge that such limitation is likely to cause confusion, or to ‘cause mistake, or to deceive. Such knowledge is presumed if the registrant gives notice that his mark is registered by displaying with the mark the words “Registered Mark" or the letter R within a circle ori the defendant had otherwise actual notice of the registration. ‘TERRITORIAL LIMITS OF A TRADEMARK ‘The territorial limits of a trademark extend beyond the country where said trademark may have been registered. Under RA £8283, Sec. 3, any person who Is a national or wo is domiciled or spl 2 real and effective industrial establishment in @ country Js 9 party to any convention, treaty, or agreement relating iellectual_ property rights or the repression of unfair iota to whch ie Papin ae pry or eres sferoca rehtsta natonats of te Piipines by low tall be yDetiefits to the extent necessary to glve effect to any convention, treaty or reciprocal law, in dation to the rights to which any owner of an intellectual _ Sistema nae ee Sie oes tee cn eats meee at etc ng Meret ne commonly and wey aie note RED oducts ae teen: ‘ = : fereoe er Strength of the mar 10350)" oe renats 8 AS See oF slaray between the two marks a ity of the products Dissent of Justice Cruz in Asia Brewery whether the two (2) articles are distinguishat ‘when put side by side, but whether the general cor by the article upon the eye of the casual customer who is ‘unsuspicious and off his guard is such as is likely to result in confounding it with the original, not side by side comparison. ie oH How are marks acquired? The rights in @ mark shall be acquired through registration. (RA 8293, Sec.122) Nothing shall adversely affect the rights on the enforcement of rights in patents, utlity models, industrial desiens, marks and works, acquired in good falth prior tothe effective date of this ‘Act (1998). (RA 8293, Sec.236) ‘© The registration of trademark under Sec. 21 of the law 's required to give notice that this mark is registered by displaying the same with the words: “Registered Phil, Patent Office.” ‘* Failure to mark will prevent the registrant from recovering: damages for infringement, unless the offender has actual notice of the same. The victim, however, stil has a cause of action under other laws. (Cogayen v. CA, 179 SCRA 218) 7 i hood that the prior owner will bridge the gap petual contusion Defendant's good faith in adopting its own mark 7. Quality of the defendant’s product 8. Sophistication of the buyers. (Polaroid Comp vs. Polaroid Elect. Corp., 287 F. 24492) © To establish trademark infiingement, the following elements: (4) Validity of plaintt’s mark, {2) The plaintiff's ownership of tie mark, and {@) Use of the mark or its colorable imitation by the alleged infringer results in the likelihood of confusion. (McDonala’s Corporation vs. LC Big Mak Burgers Inc, GP No, 143993) ‘* The question is whether the general confusion made by the amticle upon the eye of the casual purchaser who is ‘unsuspicious and off his guard, Is such as to likely result in his confounding it with the orginal. ‘+ The general impression of the ordinary purchaser buying, buying under the normally prevalent conditions In trade ‘and giving the attention such purchasers usually give in buying that class of goods is the touchstone. (Del Monte Corp vs. Court of Appeals, GR No. 78325) + Advisers: Atty. menex; Heads: Erman lols, Javin Ompoc; Understudies: Nicolo Beardo; Cristian de ls Santos; Volunteers: Jenifer Cr, ay 73, ‘Ouhaylongsod, Francs Esprit, fon Lina, Diane LipanaGx COMMERCIAL LAW REVIEWER CENTRAL BAR Ce ‘© fone falls to establish his exclusive property right to a KINDS OF CONFUSION, WHICH CAN BE BROUGHT BY twademark, he may still obtain relief on the ground of INFRINGEMENT his competitor's unfaimess or fraud. + Conduct constitutes unfair competition i the effect is ‘When the ordinary prudent | When akhough the goods of 1 pass off onthe public the goods of one man as the purchaser would be induced | the parties are different, the ‘goods of another. (Mighty Corp v. E & Gallo Winery, to purchase one product inthe | defendant's products is such GR. No. 154342) baie that he was purchasing | as might be reasonably be ‘the other. assumed to originate with the REMEDIES AVAILABLE TO REGISTRANT IN ORDER TO STOP THE Plaintit, and the public would INFRINGEMENT OF MARK then be deceived either into 1. tudiit that belief or into the belief a Gl that there ts some connection 3b. Criminal Prosecution between the plaintiff and 2. Administrative defendant which, in fact, does not est ‘Annex F ~ CIVIL, CRIMINAL AND ADMINISTRATIVE REMEDIES SES AGAINST TRADEMARK INFRINGEMENT ON ‘Annex 6~ CAUSES OF ACTION IN TRADEMARK INFRINGEMENT It focuses om the similarity of the prevalent features of the competing trademarks that might cause confusion. ct and does not engage in business in the Philippines may bring civil or admingtrative action hereunder for opposition, reelition, infingement, unfair competition, or false designation of origin and fae description, whether or aot iis amex -€ TRADEMARK INFRINGEMENT! ve “inci ett cots he Ppyes ner gos compermon ¢ ceRT BAR DER AT oftgncrngfemnranon AELATED_G0005 DOCTRINE - when good are so related tak to the public may be, or is actualy, deceved & ete) é come from the sme maker or manufac, Wademark ert The registration of a infringement occurs. ee mark wit ave force years. and effect within the ‘+ Unfair competition is passing off or attempting to pass 1 is required, however, that the| territory ofthe. off upon the public the goods/business of one person. owner of a mark show that he is using | Philippines. a for the goods/business of another. ‘the mark or that his non-use of the ‘+ Amy conduct the end and probable effect of which is to same & due to causes beyond his deceive the public or pass off the goods or business of contro! by fling an Affidavit of Use or ‘a petson as that for another constitutes actionable Excusable NonUse, with the BT unfair competition. (Alhambra Cigar vs. Mojica, 27 within one (3) year from the 5” Phil, 266) anniversary of the registration of the marks. ‘+The faw on unfair competition is broader and more inclusive than the law on trademark infringement “The registration may also be renewed + Trademark infingement is 2 more exclusive cight for a period of ten (10) years after its derived from the trademark adoption and registration. ‘expiration, There Is no limit as to the by the person whose goods or business is first ‘number of times the registrant may astociated with it. The law on trademarks Is 2 request for the renewal of his specialized subject distinct from the law on unfair e ‘competition, although the two subjects are entwined with each other and are dealt with together in the IP Advisers: Atty mene; eae: Erman alos, avin, Ompoc: Understudles: Nicolo Bernardo; Cristian de los Santos; Volunteers: Jennifer Cruz, 5y 74 ‘Duhaylongsod, Francis Espirit, on Lina, lane ipanaA COMMERCIAL LAW REVIEWER “evan 5) ‘CANCELLATION OF REGISTRATION OF TRADEMARK 1. When = within five (5) years from the registration of mark 2. Who ~ Any person who believes that he will be damaged by the registration of a mark. 3. Grounds - Any of the grounds to reject the registration of @ mark which are enumerated as absolute or relatwe grounds for refusal. Non-use for an Uninterrupted period of three (3) years Is also 2 ground for cancellation. LAW ON CopYRIG! What is copyright? ‘A bundle of rights that an author enjoys on the form of expression ofthe ideas. ; Rights granted ee 1 Economic Rights # 2. Moral Rights 3. _ Neighboring Rights Copyright: Protection - never accorded ee complete control over all possible uses of i statute grants the copyright elder exlegerehe 1800-177 oe 2isec.193 wee ‘These aresubject to the ronntasi 3. Chapters, I, XIV cndfitersv. © These are subject tothe limitations gn Author must be a NATURAL PERSON (sec. 1 7 7 Criteria for Copyright Protection "ag 1 Originality ~act of authorship, answers the question “i make it?” 2. Copyrightabity ~ does the law sllow the work to be the subject of copyright? (Fixation is NOT REQUIRED under our IP code, See: sec. 172.2) ‘© Copytight refers to finished works, not concepts. oaguin vs. Driion, 302 SCRA 225 (1993) © It is only the treatment of the subject and the ‘expression of the idea that are protected by copyright. (Abiva v. Weinbrenner, 6 CAR (25) 1023 (1964)) Sec 171. Definitions “Author” Is the natural person who has created the work. ‘A “collective work” is a work, which has been created by two (2) for more persons at the initiative and under the direction of another with the understanding that it will be disclosed by the latter under his own name and that contributing natural persons, will not be identified. ro oa arggonnar Ls le |A ‘work of applied art” is an artistic creation with utitarian functions or incorporated in a useful article, whether made by hand or produced on an industrial scale. | WORKS THAT CAN BE PROTECTED BY COPYRIGHT (DOWAP) 1. Original Literary and Artistic Works 2. Derivative Works 3, Works of Applied Art 4. Architectural Designs [WORKS shall be protected: ‘2. By the sole factof thelr creation, not registration '. Irrespective of their made or form of expression, content, quality and purpose DERIVATIVE WORKS (section 173) 1. Dramatiations, —tanitions, adaptations “Sita. abridgments, arrangements, and other alterations of "Re titeray or artistic works; and a rf trary, scholarly or attics works, and compl: of data and other materls which are ‘hal by ceason ofthe selection or coordination oF ___arongenet oftheir contents. (THESE WORKS REQUIRE THE AUTHORIZATION OF THE OWNER THE ORIGINAL COPYRIGHT. Se sec. 177.2) Derivative Works are protected as new works provided they ATE RE G shall not: aft force of any subsisting cop upon the origi! work employed or any part thereof; or {gonstrued to imply any right to such use of the ahr wor orto seat or extend cpm nich _ pe otal won BAR WORKS NOT PROTECTED {sections 175, 176) 1. Any idea, procedure, system, method or operation {SIPOM), concept, principle, discovery, or mere data {CoPDiD) even if they are expressed, illustrated, or ‘embodied ina work 2. News of the day & other miscellaneous facts: having. character of mere items of press info 3. Official text of legislation, administrative, or legal nature (including ts translation) Public domain 5. Useful article: no separate artistic value; to be distinguished from a work of applied art in thet while the latter has utiltarian functions, there is an Identifiable artistic. work or creation incorporated thereto USEFUL ARTICLE DOCTRINE - Works whose sole purpose Is utitarian, and have no separate artistic value, are not copyrightable. aaENaSy —Adbisers:Aty. mene; Heads: Erman Balois, avin Ompoc; Understudies: Nealo Bernardo; Cristian de los Santos; Volunteers: Jenifer Cruz Jay 75, DDuhaylongsod, Francis Espirit, Jon Lin, Olan tipanadae) es ru WORKS OF PUBLIC DOMAIN - Works whose term of copyright TERMS OF PROTECTION (section 213) protection has expired. 1. _ life of the author, plus 50 years after his death, in case. of sole authorship. COPYRIGHT or ECONOMIC RIGHTS (section 177) — is the 2. _ Life of the last surviving author, plus 50 years after his ‘exclusive ight to carry out authorize and prevent the folowing: death, incase of joint authorship. (retrans - fire - diper - other) 3. 50 years from publication of anonymous or 1 Reproduction ofthe work ora substantial portion thereof reudonymous works, oF 50 yeas from making if 2 Transformation of the work, unpublished: Provided that ifthe author’ identity & 3. Fst public distribution of the original and each copy ofthe revealed prior to the expiration of such period, ‘work by sale or otherwise; protection shall be as provided in item (1). 4. Rental of the original or 2 copy of an audiovisual or 4, 25 years from the date of making, incase of works of Cinematographic work, @ work embodied in a sound applied ar. recording, a computer program, @ compilation of data and 5.50 years from publication, oF from date of making if ‘other materials or a musical work in a graphic form, “unpublished, in case of photographic works and audio- irrespective of the ownership of the original or the copy visual works. subject ofthe rental; aes 6 Pa ofthe gala cnyo hey “SSFRANSFER OR ASSIGNMENT OF COPYRIGHT (sections 180 - 7. Public performance of the work; and 363) 8 Other communication to the public of 8 work Copifight ay be assigned in whole or in part. By virtue of the of assanimert, 80 assignee is entitled to all the rights and ‘+ Sibstaitit reproduction dobse’t necessarily, mycanit®.., temedles with respect tothe copyright. that thE entire work, or gen a trae peu be i copied. et ag Assignment i tobe dstngushed from the granting ofa teense + if so much i taken that the valli tneérihal work {10 use or employ a copyrighted work. In licensing, the fcensee is substantially diminished, sis ‘inflingemetié. does sot acquire all the rights and remedies with respect to the (begs Robes, 310 CHAS (988) copyright and may not, therefore, sue for infringement. a ATENEO (OWNERSHIP OF COPMIGHTsetins 178,179) CRB TIAL setision of gitar, potoraphic or atte wor 0 2 Copyriht shal belong: pay 7 r mpearie oF periodical for publication shal PCR 71 Goftiute op license fra single publication, unless a greater — - Advisers: Atty. ener; Heads: Erman Bales, avin Ompoc; Understudies: Nieale Bernardo; Chistian de los Santor; Vohinters: Jennifer Cruz, y 76 1. Tothe author, in case of sole a 2 To all the co-authors jointly, “ig, case of joiné. [1 right isexpéssly granted. authorshi, ther ght bing governed the rules on ‘o-ownership inthe absence of any agreetiénor 10, gapptitlr or asignrart of copii does not constitute trancfer ‘each ofthe authors separately on thelr contributions, "~~ of the material object subject to it. Nor shall transfer of the ‘if the work is severable, allowing for identification the ‘copyrighted work constitute transfer or assignment of copyright. portion created by each of he authors. Copyright fs t0 be distinguished from the proverty in the 3. Totheempoyee Incase of workcreated inthe course _matera object subject tit of employment, the work not being part of tis regular dities, even ifthe time, facies and material of the _—_—A.copytightis deemed asigned Inter vios only when & & made employer are used. ining 4. To the employer, # the work is the result of the employee's performance of his regularly assigned MORAL RIGHTS - Rights granted to the owner ofa copy, duties, unless there is agreement, express or implied, independent of his economic (copyright) rights and of any tothe contrary. assignment or eense. 5. Tothe author of commissioned wor, unless there Is 2 wet stipulation tothe contrary. SCOPE OF HS MORAL RIGHTS (section 192) 6. To the producer, author of the scenario, the composer (mab -re*st} cof musk, the film dector and author of the work 1. to require that his name as author be indicated in 2 atdapted, in case of audioual work, however, subject prominent way on the copies, In connecton with the to stipulation, the producer shall exercise. the public use of is work copyright tothe extent forthe exhibition a the work. 2. to make any alterations of his wotk, prior to or 7. To the weter, in respact of letters; but, to the wit it from publication addressee or the person to whom such letters are 3. to object to any distortion, nutlaton or modiction elvers belongs the ownership thereat or other derogatory action in relation to, his work (would be prejudicial to his honor or reputation) ‘Duhaylongso, Francis Espn, 4on Una, Diane pana.4. to restrain the use of his name w/ respect to any work, ‘not of his own creation or in a distorted version of his work EXCEPTIONS TO THE MORAL RIGHTS (section 197) 1. Absent special contract at the time creator licenses/permits another to use his work, the following are deemed NOT to contravene creator's moral rights, provided they are done in accordance w/ reasonable ‘customary standards or requisites of the medium: a. Editing be Arranging. Adaptation 4. Dramatization ‘@. Mechanical and electrical reproductio (DAME) 2. Complete destruction of transferred by creator erent g (GENERAL RULE: Moral rights can be’ so stating such waiver. 2. GEE™ASine of author, tile of fis works reputation serspec tw version/adaptation ofhis fe 210 ‘work, which because of alterations, substantially tend! 10 injure fterary/artistic reputation author b. use name of author in a work that he did ‘TERM OF MORAL RIGHTS (section 198] - during the lifetime of the author and fifty (50) years after the death ofthe author. 1. Post-humous enforcers shall be named in writing to be filed in the National Library. 2. Moral rights are not assignable or subject to license. 3. Damages can be recovered under the Civil Code for Violation of moral rights. 4. It provides the same rights and remedies as a copyright owner. Sec. 194 Breach of Contract ~ An author cannot be compelled to perform is contract to create a work or for the publication of his work already in existence. However, he may be held liable for ‘damages for breach of such contract. {f creator contributes work to a collective work, the general rule is that he has waived his right of attribution unless the creator expressly reserved such right, TD OPERATIONS 2010 -Advsees: Ay. Imenes; Heads: Erman Baois, avin Ompoc; Undestudies: Nicolo Bernard; Cristian dels Santos; Volunteers: Jenifer Cr, ay 77 RIGHTS TO PROCEEDS IN SUBSEQUENT TRANSFERS (section 200) or DROIT DE SUITE - If there is a sale or ease of an original ‘work of painting, sculpture or manuscript subsequent to the first disposition by the author, the author or his heir have an inalienable right ‘0 participate in the gross proceeds to the extent of 3 WORKS NOT COVERED BY RIGHT TO PROCEEDS IN SUBSEQUENT TRANSFERS (section 201) - Prints, engravings, applied art or works of a similar kind from which the author ‘primarily derives gan from the proceeds ofthe reproduction. NEIGHBORING RIGHTS - the rights of a performer, producers and broadcasting organization in elation to an original work. NEIGHBORING RIGHTS (chapters Xil, XII, XIV) Exclusive Rights - at rights - specifically the right of the performer to to be identified as such performer. 13. Include the ght to proceeds subsequent tranaers “_ eGuivalent to 5X of the compensation received for ‘the original performance. “HEGHBORNG NETS Dos NOT APPLY TOTHE a aTewcote ote Fone) ocean wie in at eel hi Aectse ug of natural pean frou persona purses ror exalts fo teporing crent ever © sole use for the purpose of teaching or for scientific Hise ofthe broadcast ‘ACTS THAT DO NOT CONSTITUTE INFRINGEMENT (section 184) |L. Recitation or performance of 2 work 3. lawfully made accessible to public 1b. Done privately & free of charge or & Made strictly for charitable oF religious institution or society 2. Making quatations from a published work provided: Compatible w/ fair use and Extent: justified for the purpose Source & name of author, if appearing on the work, are mentioned 3. Reproduction or communication to the public by ‘mass media of articles of current PRESS provided: 2 Delivered in public 'b. Userinfo purposes & _Notexpressly reserved 4. Source: clearly indicated 4. Reproduction or communication to public of literary, artistic, scientific works. a. Partof reports of current events b. Bymeansof photo, cinema, broadcasting &_ extent necessary for that purpose — ‘Duhaylongsod, Francis Espirty Jon tna, Otzne pana., COMMERCIAL LAW REVIEWER. a A TE IN la O pale ae ‘5. inclusion of a workin any comm. to the pubic: ‘a. made by illustration for teaching purposes 'b. compatible with far uso: source/name of author, ‘mentioned 6 Recording in schools, university and educational Institutions 3. Intended for broadcast for such schools b. Recording: deleted w/in ressonable period after they were 1" broadcast ‘c._ Recordings: may NOT be made from AV works are part of the general feature films except for brief excerpts of the works. 7. Making of ephemeral recordings by broad-orgs by ts ‘own facilities and for use ofits own broadcasts 8. Use of work made by or under the of Gov't ‘2. By National Library oF any professional (SEP) institution, '. Use: public interest &. . Compatible w/ fair use 9. Public performance/comminication oe 23. "Ina plece: no admin e's by curtain Ceti bi Purpose: airn is NOT profit-mmakit “Subject to. such other thitati as maybe £ WY £ 2 provided in the regulations UTR AL BA Ramin goods, Mrunt Cap ve Moor Ine, Gt pnb fi Who. ERAT b. Either work has been publi Ki, given away? (3) transferred to another person thor or his successor in ttle (SGT) 10. Public display of original/copy of: @. Byany media means ‘a ‘11. Use: work for purpose of: — 3. Any judicial proceedings b. For eWving of professional advice by legal practitioner FAIR USE DOCTRINE {section 185) - the fair use of copyrighted ‘work for criticism, news reporting, teaching (including multiple copies for classraom use], research, and similar purposes is not aninfringement of copyright. FACTORS TO DETERMINE FAIR USE {Pucha—Naco ASU} 1. purpose & character ofthe use 2. nature of the copyrighted work 3. amount & substantiality ofthe portion used in relation to the whole thing asa whole effect ofthe use: on the potential market or the value of the copyrighted work DECOMPILATION = Fal USE 4. reproductiontransaton of code 2 to achieve interoperability of an independently created computer program EFFECT OF FAIR USE AS A DEFENSE IN INFRINGEMENT ~ The defendant relieves the prosecution of the burden of presenting ‘evidence showing the use of the copyright, as the defendant ‘admits having used it. But evidence should still be presented for ‘the purpose of proving damages. ‘+ Infringement consists In the doing of any person, without the consent of the copyright owner, of anything, the sole Fight to do which is conferred by statute to the owner of the copyright. Habana vs. Robles, 310 SCRA 511 (1999) OF INFRINGEMENT pistence ofa Valid Copyright uthorized Copving + Ditlect evidence of actual copying ingirect evidence of access to the orignal work sections 217-220 regarding infringement) “Copyright inffingement and unfair competition are not Lifted to the act of selling counterfeit goods. They cover 2 ‘hole range of acts from copying, assembling, packaging to marketing, including the mere offering for sale of ‘September 13, 2004 OF INFRINGING GOODS {section GENERAL RULE — Mere possession of infringing goods i not punishable. EXCEPTIONS — Unless one can prove that the possessor knows ‘or ought to know that the goods In his possession are an Infringing copy of the workand held for the purpose of: 1. selling, letting for hire, or exposing it for seling, letting for hire 2. distributing the article either for purposes of trade or for any other purpose that will prejudice the rights of ‘the copyright owner in the work 3. trade exhibit ofthe article in public + tf50 much s taken thatthe value ofthe originals sensibly diminished, or the labors of the orignal author are substantially and to an injurious extent appropriated by ‘another, that is sufficient to constitute infingement. (Columbia Pictures vs. CA, 261 SCRA 144 (1996)) ‘+ Iti no defense to an action for infingement that the >, COMMERCIAL LAW REVIEWER re OPERATIONS 2010 infringe the copyright. (Gan v. Ramon 5. Licup Design Group, Inc, CA-G.R. No. 17618 (1990) ‘REMEDIES FOR INFRINGEMENT. 1. awit 2. Administrative 3. Criminal Important: Doctrine of exhaustion of administrative remedies does not apply. [PRESCRIPTION (sec 226) ‘No damages may be recovered for infringement of a copyright after 4 years from the time the infringement occurred. (There is no prescription fr the criminal aspect, thus the gener 2 oda e piOviding that a corporation may be proceeded against {aw on prescription of special penal laws applies) fi" FONT Sec. 2. Corporation defined. - A corporation ian artificial ing oh eek created by operation of law, having height of sestsoh towor indent sexton oe é Theory of seputeturiaPesonanf A corporation ‘may also own its own’ property. Note that ihe the powers attributes and properties egresy sthgried by & BP Te et BO 5 Property it owas does not by any, means, belongité 8 jt sockholdes:"T6 stockholders thus have no interest such = tion also" has nd, OF corporate properties. Conversely, the interest in the properties of the stockholders." ‘+ [The Corporation] is entitled to own properties rname and its properties are not the properties of its stockholders, directors and officers. (Wise v. Man Sung Lung, 69 Phil 309) '* The interest of the stockholder over the properties of the Corporation is merely inchoate. (Saw v. Court of Appeats, GR ‘No. 90580 April 1991) ‘As a consequence of this delineation between properties of the ‘corporation and its stockholders, liquidating dividends may be ‘made subject to taxation. * The properties do not belong to the stockholders, they belong, to the corporation. Hence, upon distribution via liquidating dividends, there was a conveyance and consequently, 3 taxable transaction. (F. Guanzon and Sons, in. v. Register of Deeds of Manila, GR No, 18216 October 30, 1962) Corporate Criminal ability GENERAL RULE: Corporations cannot commit felonies punishable under the Revised Penal Code for it is incapable of the requisite intent to commit these crimes. geet at It also cannot commit crimes that are punishable under special laws because crimes are personal in nature requiting personal performance of overt acts. ‘A corporation cannot be arrested and imprisoned; hence, cannot bbe penalized fora crime punishable by imprisonment. EXCEPTIONS: 1 Acorporation may be charged and prosecuted fora crime if the imposable penalty is 2 fine. Even if the status prescribes both fine and imprisonment as penalty, 2 corporation may be prosecuted and, if found guilty, may be fined. (Ching v. Secretary of Justice, GR No. 164317 February 6, 2006) ‘timinaty, 1L15 the responsible officer who will be held ‘personally’ able for the crimes committed by the corporation. However, such laity wil ony attach to the ‘fice when'the corporation is cectly required by law to | do an act in a given manner, and the same law makes the person who fails to perform the act in the prescribed _ianner expressly lable criminally (Sia v. Court of Appeals, ‘GR No, 111808 May 5, 1997) 1, sSyboder the Anti: Money Laundering Act, juridical persons are 1M ‘ao defngll as offenders of eriminal acts. i Liability 3s ‘Wieser A of civit liability, it civilly lable in the same manner as ‘natural persons for tors, because “generally speaking, the rules governing the liability of 2 princpal or master for a tort ‘committed by an agent or servant are the same whether the Principal or master be a natural person or a corporation and ‘whether the servant or agent be a natural or artifical person {PNB v.CAB3 SCRA 237 [1978]) Recovery of Moral Damages by a Corporation ‘A corporation cannot be awarded moral damages. ‘+ The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, tt has no feelings, no emotions, no senses ‘= The statement in People v. Manero and Mambulao Lumber Co. v. PNB that a corporation may recover moral damages if t "has a good reputation that is debased, resulting in social humiliation” is an obiter dictum. (ABS-CAN v. Court of Appeals, ‘GR No, 128680 January 21, 1999) ~Advisers:Aty. mene; Heads: Erman Balas, Javin Ompoc; Understudes: Nicolo Bemardo; Christian de los Santos; Volunteers: Jenifer Crt, ay 79) ‘Duhaylongsod, Francis Espirit Jon Un, Ofane panaGi» COMMERCIAL LAW REVIEWER TT OPERATIONS 2010 However, the Supreme Court ruled in Filpinas Broadcosting Network v. Ago Medicol and Educational Center that 2 ‘crporation can recover moral damages under Article 2219(7) of the Civil Code iit was the victim of defamation. (GR Wo. 141994 January 17,2005) * [Article 2219(7)] expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. [It] does not qualfy whether the plaintiff is 2 natural or juridical person. (Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center, GR No. 141994 January 47, 2005) ‘Athough generally the corporation is in and by itself a separate ‘being from its stockholders and directors, this legal fiction is in certain instances disregarded. Piercing the Veil of Corporate Fiction corporate fiction” means that while the ¢ generally held liable for acts or labltey of its stockholders oF personality Separate and distinc from its stockholders, however, the corporate existence: gerard & under this doctrine when the corporatiof{ is fotmed oF ysert for. iegitimate purposes, particularly, a5" shield to. perpetuate fraud, defeat public convenience, statutes, achieve or peract a monopoly, justly wrong vate ue and vA EW & 0 ‘9. The parent corporation uses the property of the subsidiary asits own. 10. The directors or executives of the subsidiary do no act independently in the interest of the subsidiary but take their orders from the parent corporation. 111. The formal legal requirements of the subsidiary are not observed. (Phil. National Bonk v. Ritratto Group, Inc, GR No. 142616 July 31, 2002) ‘© Mere ownership by a single stockholder or by another corporation of all or substantially all ofthe capital stock ofthe corporation does not justify the application of the doctrine. (Francisco v. Mejia, G.R. No. 141617, August 14, 2001) of piercing cases: Casieation Oped eta ‘when corporate entity is used to commit or justify a wrong or to defend a crime. 2A Piercing, ~ when corporate entity i used to ‘efeat pubic convenience or is merely a farce since the corporation is merely the alter ego, business conduit, or ‘natrumentalty of a person or another entity. ‘S-Equity Cases — when piercing the corporate fiction is necessary to achieve justice or equity. ‘The‘three cases may appear together in one application (RF. ‘Sugay & Co. v, Reyes, GR No. 20521 December 28, 1964) obligation or defend. crime. SEG Tas, EfeMeRs that mist be present to sty plering onthe ground ma go SES AA that te isa mere alter ego: 1s an equatle doco unas ator ont wi BATON Cet Moe mere anc cont bt complete domination objective isto hold the officers and/or stockfelders able. Thus,! 2) in one case, it cannot be applied in foreclosure proceeding a nullity. (Umall v. CA, September 13, 1990} Circumstances that may indicate that the piercing doctrine should be applied: 1. The parent corporation owns all or most of the capital of the subsiciary, 2.The parent and subsidiary corporations have common directors or officers. 3, The parent company finances the subsidiary. 4.The parent company subscribed to all the capital stock of the subsidiary or otherwise causes its incorporation. 5. The subsidiary has grossly inadequate capital. 6.The parent corporation pays the salaries and other expenses or losses ofthe subsidiary 7.The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed tor by the parent corporation. 8. The papers of the parent corporation o inthe statements ofits officers, the subsidiary i described as a department ‘oF division of the parent corporation, or its business or financial responsibilty is referred to as the parent copporation’s own. ly of finances, but of policy and business practice in Seawe 2 ithe the wnsaen wast and mt ave beet 89206 08° such that the corporate entity as to this transaction had at the time no separate mind, will or existence ofits own. 2.Such control must have been used by the defendant to ‘commit a fraud or wrong to perpetuate the violation of a statutory or other positive legal breach of duty, oF 3 dishonest and an unjust act in contravention of the plaintf’s legal right, and, 3. The said control and breach of duty must have proximately ‘caused the injury or unjust loss complained of. (PNB v. Andrada Electric & Engineering Company, GR No. 142936 April 17, 2002) Grandfather Rule The “grandfather rule" is applied in determining the nationality of a corporation. It traces the rationality of the stockholders of investor corporations so as to ascertain the nationality of the corporation where the investment is made. x: MV Corporation ané AC Corporation have equal intrest in XZ Company. MV Corporation is 60% owned by Flipinos, while AC Comporation is 50% owned by Filipinos. By the grandfather Tule, MV Corporation would have a 30% Flipin interest in XYZ Company (60% of Som), wile AC Corporation would have 225%, — Advisers: Atty, Simener; Heads: Erman Bales, Savin Ompoc; Understudies: Nicole Bernardo; Ovstian de los Santos; Volunteers: Jennifer Cruz, ay Duhaylongsoe, Francis Espirt, Jon Lina, Diane panave, COMMERCIAL LAW REVIEWER a Fiipino interest in XYZ Company (50% of 50%). Hence, the total Flipino interest is only 55%. ‘The application of the test i limited however to resolving issues ‘on investments. By the Foreign Investments Act, the grandfather rule is merely an ancillary rule to the main method of ‘determining rationality, wherein corporations that are 60% ‘owned by Filipinos are automatically considered as 100% Flipino-owned. Only when a corporation is less than 60% owned shall the grandfather rule be applied. Be Using the same facts as the example supra, since MV Corporation is 60% Flipino owned then itis considered as 100% Filipino. Hence, the total Filipino interest in XYZ Company would now by 75% (100% of SOX from the MV Corporation plus 50% of 50% from the AC Corporation). SEC. 3. Classes of Corporations. Corporations fied oF organized under this Code may be stocker non-stock corporations. Corporations which have capital stock divided into shares-an are authoriéed"to' tstribute to the hoklers of such-‘sfoges dividends or allotments ofthe surp thetbgs shares held are stock corporations. tie Ge. 1 As to organizers: 9 ahd es eee ee 4. As to place af incorporation: a.Domestic ~ one incorporated under laws of the Philippines. bb. Foreign ~ one formed, organized or existing under any taws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in ‘ts own country or State. 5. As to purpose of incorporation: ‘8. Municipal corporation b. Religious corporation Educational corporation 4. Charitable, Scientific or Vocational corporation . Business corporation eo 6. het logal tats: De jure corporation — Corporation organized in fance with requirements of law; Bet cmperaign deemed de bee ant proven en Corporation where there exists 3 {law ints incorporation, i falls short ofthe requirements provided by law. ated strict oF Sibstanial conformity with ‘the statutory requirement | for incorporation Sate ‘purposes as a corporation but which “has po legal right to ‘corporate existence as against the 2. Pubie~by State only: and % O.Pivate—by pate persons sone or wii tate a 2. Asto functions: — Right to.céxist cannot be ‘attacked even jitta diet proceeding by the State 2. Public— government ofa portion of the State; and court proceeding. ». Private — usually for profit-making furictions. 3. As to governing law: ‘a. Public Spécial Laws and Local Government Code; and b. Private ~ Law on Private Corporations, ‘c. QuasiPublic — seems to be a cross between private corporations and public corporations. Usually covers school districts, water districts and the like (Phiippine Corporate Law, Cesar Vilanveva, 2001 ed) ‘+ Water districts organized under Pres. Decree No. 198, although considered as quast-public corporations and authorized to exercise the powers, rights, and privileges given to private corporations organized under the Corporation Code, and not within the jurisdiction of the SEC. (Marto Water Consumers Association, inc. v IAC GR No. 72807 September 9, 1991) . 7. As to existence of stocks: 2. Stock Corporation - Corporation in which capital stock is divided into shares and is authorized to distribute to holders thereof of such shares dividends or allotments of the surplus profits on the basis of the shares held. b.Non-stock Corporation — Corporation which does not Issue stocks and does not distribute dividends to their members. £8, Asto relationship of management and control: ‘a.Molding Company ~ one that controls another 2s 3 subsidiary or affliate by the power to elect its management; one which holds in other companies for purposes of control rather than for mere investment. b.Affiiate Company - one that is subject to common control of a mother or holding company and operated as, part of a system. Advisers: Atty ener; Heads: Erman Balol, avin Ompoc; Understudies: Nicolo Bernardo; Cristian de los Santos; Volunteers: Senolfer Cruz, ay ‘Duhaylengsod, Francis Espirit, J fon Una, Diane Liana Right to exercise powers cannot Be Inquited into collaterally in any private suit. But such inquiry may bbe made by the State in a properATENEO Parent and Subsidiary Companies — when a corporation has controling financial interest in one or more corporations, the one having in control is known as the “parent company" and the others are known as the “subsidiary companies”. 9. Asto numberof members: 2. Aesregate b Corporation Sole leven a5 persons who compose it change. May a corporation be a partner in a partnership? In Aurbach v. Sanitary Wares Manufacturing Corporation (GR No. 75875 December 15, 1989), the Court ruled against corporations as being partners in partnerships but clarified that they may enter into joint ventures. In that same case, a ‘istinction was made between partnerships and joint ventures. + The Supreme Court has held that although a corporation cannot enter into 9 partnership contract, it may however ‘engage in a joint adventure with others. (Aurbach v. Sanitary Wares Manufacturing, GR No. 75875 December 15,1980) ‘The SEC has maintained this stand on the grounds that the ‘management of a partnership Is vested in the partners and that + Lt OPERATIONS 2010 RAL BA fase will run counter to the idea that any exposure ofthe corporation should be within the control of the directors. EXCEPTION: The SEC has determined at one time that an exception can be made when it is satisfied that the main ‘objections to allowing a corporation to enter into a contract of partnership were adequately met by the proper safeguards and conditions imposed by the Commission (eg. Articles of Incorporation authorize the corporation). ‘COMPONENTS OF A CORPORATION: ‘Ltncorporators — those mentioned in the articles of ‘incorporation as originally forming and composing the corporation, having signed the articles and acknowledged the same before the notary public. a. They must be natural persons, At ast five (5) but not more than ten (15) ‘Ethey must be of Legal Age; _gpt ate est be residents ofthe Phitppines nd “Each lit ont of subscribe to atleast one share. porators All the stockholders and members of a “eorporation Including the incorporators who ace stl holders ‘Stockholders ~ Corporators ina stock corporation Members Cofporators ina non-stok caporation 5. Directors and Trustees ~ The Board of Directors Is the governing bay in a stock corporation while the Board of rustees fs the governing body ina non stock corporation, pray B Corporate “Officers ~ They are the officers who are ATION jaentii ‘as such in the Corporation Code, the Articles of DIB tnoggifaton or the By-taws of the corporation. 2, = A self-constituted organizer who finds an enterprise or venture and helps to attract investors, forms 2 ‘orporation and launches it in busines, all with 2 view to promation profits. LE0 ‘Types of Shares: 1.Common Shares — A basic dass of stock ordinarily and usually issued without extraordinary rights or privileges and entitles the shareholder to a pro rata dWision of profits; ‘may not be deprived of voting rights except as provided by aw. 2. Founders Shares ~ Given rights and privileges not enjoyed by owners of other stocks; exclusive right to vote/be voted In the election of directors shall not exceed 5 years (note: within this period, common shares are deprived of their ‘voting rights) 3. Preferred Shares ~ Issued only with par value; given preference in distribution of assets in liquidation and in payment of dividends and other preferences stated in the articles of incorporation; may be deprived of voting rights. 4. Redeemable Shares — Expressly provided in articles; have to be purchased/taken up upon expiration of period of sald shares purchased whether or not there is unrestricted Fetained earnings; may be deprived of voting rights, Advisors: Atty. Jimenez; Heads: Erman Bao, Javin Ompoc; Understudias: Nlealo Bernardo; Chlstian de loc Santos; Volunteers: Jennifer Cru, tay DDuhaylongsod, Francs Espirt, Jon Lina, Diane ipana., COMMERCIAL LAW REVIEWER TZ OPERATIONS 2010 5. Treasury Stocks ~ stocks previously issued and fully paid for and reacquired by the corporation through lawful means (purchase, donation, etc.); not entitled to vote and no dividends could be deciared thereon as corporations cannot declare dividends to self. Instances when Holders of NON-voting shares can vote: 1L, Amendments of articles of incorporation 2. Adoption/amendment of by laws 3. Increase/decrease of bonded indebtedness. 4. Increase /decrease of capital stock ‘5. Sale/dispostion of al/substantaly all corporate property 66. Merger/consoildation of corporation Z.lnvestment of funds in another corporation/another ‘business purpose 8. Corporate dissolution Preferred Cumulative Participating Share entitling its holder to preference in the ‘ahead of common stockholders and to be'paid the dividends due stockholders in dividend declarations, oF fromotin Sk for evs Renderer bea ea be delivered to stockholder/assignor after comply Watered Stock ~ Stock issued gratuitousy, than par value, services less than par value, di surplus profits exist; officer or director who does objection is solidarily liable with the stockholder for difference in value Certificate of Stock - Wiltten acknowledgment by the corporation of the stockholder’ interest in the corporation. Itis the personal property and may be mortgaged or pledged. Transfer binds the corporation when it is recorded in the corporate books. A stockholder who does not pay his subscription is not entitled to the issue of a stock certificate. ‘The total par value of the stocks subscribed by him should first be paid. ‘Methods of collection of unpaid subscriptions: 1 Call, delinquency and sale at public auction of delinquent shares; 2. Ordinary civil action; 3. Collection from cash dividends and other amounts due to stockholders if allowed by by-aws/agreed to by him. ‘Cases when Corporation can Reacquire Stock: 1. Eliminate fractional shares; 2. Corporate indebtedness arising from unpaid subscriptions; Advisors: Atty Smenes; Heads: Erman Bales JavinOmpot; Understuict: Nicole Bernardo; Cretan de ls Santos; Vokuteers: Jenifer Cruz, ley 33 3. Purchase delinquent shares; 4. brercise of appraisal right. INCORPORATION AND ORGANIZATION OF PRIVATE ‘CORPORATIONS 25-25 RULE ~ Except for instances spectically provided for by special law, there is no minimum requirement for authorized ‘capital stock to incorporate. There is however a requirement of subscription of at least twenty-five (25%) percent of the authorized capital stock as stated in the articles of incorporation AND at least twenty-five (25%) percent the total subscription ‘must be paid upon subscription. [ARTICLES OF INCORPORATION The Articles of incorporation is a basic contract document in law which defines the charter of the corporation. of the Corporation Code provides that the articles of me binding as the charter of the ‘have been fled with and registered with {7 LAlegtimatepirpose forthe amendment Majority vote of directors or tustees and the vote or ‘witten of the stockholders representing at least ) of the outstanding capital stock, without judice td the appraisal right of dissenting stockholders, be toate (2/8) of the members 1 be 3 nonstock 3. Indian in the articles, by underscoring, the change or made. s989°A copy of amended articles duly certified under oath by the ‘corporate secretary and a majorty of the directors or ‘trustees. stating the fact that said amendment or amendments have been duly approved by the required ‘ote of stockholders or members, asthe case may be. Grounds for Rejecting Incorporation or Amendment to Articles of incorporation: {L Not in prescribed form; 2. Purpose illegal, inimical; 3. Treasurer's affidavit fase; and 4. Non-compliance with required Flipino stock ownership. ‘The Commission shall give the corporation a reasonable time to correct or modify objectionable portions. ‘Note: A favorable recommendation of the appropriate {Fovernment agency to the effect that such artice or amenément |s in accordance with law is required in the following types of corporation: ‘2. Banks, banking and quasi-banking institutions b. Buliding and loan associations, € Insurance companies 4, Public utes —+ DDuhaylongsod, Francis Espity, Jon Lina, Diane panaCENTRAL €. Educational institutions f. Other corporations governed by special laws ‘When 2 Corporate Name Cannot be Used: 1.Names which are identical, deceptively or confusingly Similar to that of any existing corporation including Internationally known foreign corporation through not used inthe Philippines; 2. Name already protected by aw; 3. Name which is contrary to law, morals or public policy. ‘A corporation has the power to change its name by following the procedure laid down by law. However, such change would not result to its dissolution. Commencement of Corporate Existence and turidieaace Personality or Sec. 39. A private corporation fomed or offnied under ts Ce commences to hove corprote istence ond idea penoralty end doomed incorporated trom the dats Securities and’ Bxchonge Commision faves a ae incorporation under ofl sea ands teteypa 0 < incorporators,stociolders/membets ang’ fall constitute a body poltic and corporate ti the ails of incorporation forthe therein, unless’ said period is extendedor sooner dissolved in scordance with Li DDE FACTO CORPORATIONS A “defacto 'sdetectively created so as not to become 3 Its the result ofan attempt to incorporate ‘coupled with the exercise of corporate powers. The 63 _ a de facto corporation can only be attacked directly by the ee ‘through quo warranto proceedings. A de facto corporation will tncur the same obligations, have the same powers and rights as 2 de jure corporation. jure corporationé! ‘#3 existing law Requisites of De Facto Corporation: 1. Volid law under which the corporation was incorporated, 2. Attempt in good faith form a corporation according to the requirements of the law. Here the SC requires that you ‘must have filed with the SEC articles of incorporation and xotten the certificate with the blue ribbon and gold seal. For instance the majority of the directors are not residents (of the Philippines or the statement regarding the paid up capital stock is not true, those are defects that may make the corporation de facto. 3. User of corporate powers. The corporation must have performed acts which are peculiar to a corporation like entering Into a subscription agreement, adopting by-laws, ‘electing directors. 4.1t must act In good faith. So the moment, for example, ‘there is a decision declaring the corporation was not validly created, can no longer claim good faith, rested, tan no longer OPERATIONS 2010 i Td ‘The essential testis that the parties toa corporate entity must have been aware of the Issuance of the certificate of Incorporation by the SEC for such good faith to exist. There ‘was no instance which incorporators could pretend to bee in {g00d faith, they are duty-bound to ascertain that such 2 Certificate had in fact been issued. (Arnold Hall v. Picio, GR ‘No. 2588 June 29, 1950) CORPORATION BY ESTOPPEL It Is a corporation which Is so defectively formed so that it is not a de jure or a de facto corporation but is considered as a corporation with respect to those who cannot deny its existence because of some ‘agreement or admission or conduct on their part. The existence ‘of corporation by estoppel requires that there must be dealings, _zmong the parties on a corporate basis. Yer ‘Not required ‘Bistence i Gould bea | Nota corporation corporation by | in any. shape or ‘estoppel | fom {es oromron ma mcs 8 ater ot of Directors 2 see. 23, ‘otherwise provided in this Code, the corporate eS 3 capers ord under Code sul be rised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, oF where there is no stock, from among the members of the corporation. Auaifcations of Directors: LMust own at least one (1) share capital stock of the corporation in his own name or must be a member in the case of non stock corporations ~ Any dtector who ceases to be the owner of at least one (1) share of the capital stock ofthe corporation of which he is 2 director shall thereby cease to be a dcector. 2.4 majority of the drectors/trustees must be residents of the Philippines 3.He must not have been convicted by final judgment of an ‘offense puishable by imprisonment for a period exceeding six (6) years or a violation of the Corporation Code, committed within five (5) years before the date of his election 4. He must be of egal age 5. He must possess other qualifcatlons as may be prescribed 1 by-lows ofthe corp + Advisers: Atty. simenez; Heads: Erman Balls, Savin Ompoc; Understudies: Nicolo Bernardo; Chitin de los Santos; Volunteers: Jennifer Cruz, lay gq Duhaylongsod, Francis spirit, Jon tina, Diane panaEach duly elected director/trustee shall hold office for one (1), year. Hold-Over Principle Directors/Trustees may continue to hold office despite the lapse ‘of one year until their successors are elected and qualified. ‘Methods of Voting in the Election of Directors: 1. Straight Voting — Every stockholder “may vote such number of shares for as many persons as there are directors” to be elected; 2. Cumulative Voting for One Candidate ~ a stockholder Is. allowed to concentrate his votes and “give one candidate ‘a5 many votes as the number of directors to be elected ‘multiplied by the number of his shares shall equal”; 3. Cumulative Voting by Distribution — a st ccumnulate his shares by multiplying also, shares by the number of directors. may éhumber of his Ts OPERATIONS 2010 Instances when a Director i Hable: 1. Wilfully and knowingly voting for and assenting to patently unlawful acts of the corporation; 2. Gross negigence or bad faith in directing the affairs of the corporation; 3. Acquiting any personal or pecuniary interest in confit of uty. Usually these are acts are so unconscionable and oppressive that tamounts to-a wanton destruction of minority rights. Doctrine of Apparent Authority If a corporation knowingly permits one of ts officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public possessing the power to so do those atts; and thus, the ‘through such agent, be estopped from denying the Oy = ee ‘wil, 35 against anyone who has in good faith dealt tribute the same among as many candidates as he shall 8 « ‘Personal liability of corporate director, trustee or officer + The delegation, except forthe exeaai conifilice, musitBE HED for specific purposes. % 6 ERTRAL ote wel '» Accordingly, the general rules of ‘effects of their acts would apply. For such officers to be deemed fully coin corporation to exercise a power ofthe Board, the latter must “specially authorize them to do so. (ABS-CBN Broadcasting Corporation v.CA GR No. 128690 January 21, 1999} ‘Business Judgment Rule Questions of policy or management are left solely to the honest decision of officers and directors of a corporation and the courts are without authority to substitute ‘their judgment for the judgment of the board of directors; the board is the business manager of the corporation and so long as it acts in good faith its orders are not reviewable by the courts or the SEC. The directors are also nat lable to the stockholders in performing such acts. (Philippine Stock Exchange, Inc. v. Court of Appeals, GR No, 130644 October 27, 1997) Coverage of the Rule: 1. Resolutions and transactions entered into by the Board of Directors within the powers of the corporation cannot be reversed by the courts not even on the behest of the stockholders of the corporation; and 2. Directors and officers acting within such business judgment cannot be held personally fable for the consequences of ich acts. — Advisers: Atty Senex; Heads: Erman Boel, Jovin Orepos:Understuties: Nicole Bernardo; Oistin de lor Santos; Volunteers: Jenaifer Cuz, Jay 5 si {although not necessarily) with the corporation may so. ‘lily attach, 6 rule, only whe: _a-He assents (a) to a patently unlawful act of the "corporation, or {b) for bad faith, or grass negligence in “directing its affairs, or (c) for conflict of interest, resulting “in damages to the corporation, is stockholders or other persons; if AP He consehts to the Isuance of watered stocks or who, «having nowiedge thereof, does not forthwith File with the te secretary his written objection thereto; «.Hflerees to hold hil personaly andsokdaly Kable the corporation: oF o"0. He is made, by @ specific provision of law, to personally answer for his corporate action. (Tromat Mercantil, Inc. 1. Court of Appeals, G.. 111008 November 7, 1994) * Apparent authority is derived not merely from practice. ts existence may be ascertained through: ‘a. The general manner in which the corporation holds out an officer or agent as having the power to actor, in other words, the apparent authority to act in general, with which Itclothes him; oF b.The acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. ‘+ It requires presentation of evidence of similar acts executed either in its favor or in favor of other partes. It is not the ‘quantity of similar acts which establishes apparent authority, ‘but the vesting of a corporate officer with the power to bind the corporation. (People’s Aircargo and Worehousing Co, Inc. Court of Appecls, GR No. 117847 October 7, 1998) “+ ‘Ouhayiongsod, Francs Esprit, fon Una, Diane pane‘* I a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that the apparent authority is real as to innocent third persons dealing in good faith with such officers or agents. ‘© When the officers or agents of a corporation exceed their ‘powers in entering into contracts or doing other acts, the corporation, when it has knowledge thereof, must promptly . Right to remove directors; 2. Proprietary rights (OAPIT PIR}; ‘2. Right to dividends; b. Appraisal right: . Right to issuance of stock certificate for fully paid shares; 4d. Proportionate participation in the distribution of assets in iquidation; €¢. Right to transfer of stocks in corporate books; 4, Pre-emptive right «Right to inspect books and records; hhRight to be furnished with the most recent financial report (within 10 days from receipt of the written request.) |. Right to recover stocks unlawfully sold for delinquent payment of subseriptio 3, Remedial Rights 2. Right to file individual su; ‘Representative sult; «Derivative suits. . aoe 7 as iders/Members: Suits ~ those brought by one or more holders/members in the name and on behal{ of the ‘Corporation to redress wrongs committed against it, or protect/vindicate corporate rights whenever the offcials of the corporation refuse to sue, or the ones to be sued, or has control ofthe corporation. + A lawyer engaged as counsel for a corporation cannot represent members of the Board In a derivative suit against them. To do so would be tantamount to conflicting interest between the Board and the corporation. (Hornilia v. Slunat, ‘AC'5804 July 1, 2003). 2. Individual Actions — those brought by the shareholder in his own name against the corporation when a wrang is directly inflicted against him. 3. Representative Actions — those brought by the stockholder in behalf of himself and all other stockholders similarly situated when a wrong is committed against 2 group of stockholders. Requisites of Derivative Actions: ‘L The party bringing the sult should be @ shareholder as of the time of the act or transaction complained of. Mere trustee of shares cannot file a derivative suit; 2. He has exhausted intre-corporate remedies; and - tens 4 Advisers: Atty. smener; Heads: Erman Bao, lavin Ompoc; Understdies: Neolo Bernardo; Christian de los Santos; Volunteers: Jenifer Cuz Jay QQ) ‘Duhaylongsod, Francis Espirit, Jon Una, Diane paneaL OPERATIONS 2010 3. The cause of action actually devolved on the wrongdoings ‘or harm caused to the corporation and not to the particular stockholder bringing the suit. The injury suffered by the stockholder only gives rise to an additional cause for damages (Gochan v. Young, GR No. 131889 March 12, 2002). PRE-EMPTIVE RIGHT A pre-emptive right is the shareholders’ ‘ent to subscribe to all ksues or dispositions of shares of any ass In proportion to his present stockholdings, the purpose being to enable the shareholder to retain his proportionate ‘control in the corporation and to retain his equity in the surplus. Instances when Pre-emptive Right is NOT available: 1 Shares to be issued to comply with laws requiring stock offering or minimum stock ownership by the public, 2. Shares issued in good faith in exchange for for corporate purposes; 4. In caze the rights denied in the Arti tna 5. does not apply to shares that aré being ceoffered by shes corporation ater they were ity otered one allthe shares. ao ots ‘Agreements Affecting Voting Rights: SS Gi> 1. Proxies = a stockholders and members may vatin Inall meting of tocol or ember 2. Voting Trust Agreements ~ A st trustee the right to vote and other shares fora period not exceeding 5 However, if the voting trust was 2 requi agreement, period may exceed 5 yea automatically expire upon full payment ofthe loan. 3. Pooling or Voting Agreements ~ two or more stockholders agree that thei shares shall be voted as 2 unit. Usually concerned with the election of directors to gain control of the management. Requisites for Valid proxy: 1. The proxy shal be in witing; 2. Signed by the stockholder of member; and 3. Flied before the scheduled meeting with the corporate secretary The by-aws of the corporation may prescribe a particular form {or proxy and fixthe deadline for its submission. Generally, proxies, even those with irrevocable terms, have always been considered as revocable, unless coupled with an interest, and their revocation may be by formal notice, orally, oF by conduct as by the appearance of the stockholder or member eiving the proxy, or the issuance of a subsequent proxy, or the sale of shares. oe Requisites for Valid Voting Trust: 1 In writing and notarized _specying the terms and conditions 3.acertified copy must be filed with the corporation and with ‘the SEC. No voting trust must be used for the purposes of fraud. ‘Stockholders who are defrauded by their trustees have a rigit to revoke the trust and recover damages from such trustee, Limitations on the Right to Vote: 4.Where the Articles of Incorporation provides for Classification of shares pursuant to Sec. 6, non-voting shares are not entitled to vote except as other provided in the said section. referred or redeemable shares may be deprived of the to vote unless otherwise provided. nal shares of stock cannot be voted unless they Oe EE" Anpal stacipten - A transferee of stock if his stock transfer is not registered in tte stock and transfer book of the corporation. 7A stockholder who mortgages or pledges his shares and ‘ves authority for creditor to vote. Fight to withdraw from the corporation and nt ofthe fair value of his shares after dissenting corporate acts involving fundamental changes in {stances wherein Appratsal Right may be enercsed (TRIMS): 4. Extension or reduction of corporate term; 2. Change inthe right of stockholders, authorize preferences superior to those stockholders, or restrict the right of any stockholder; S.tnvesting of corporate funds in another business or purpose; 4.Sell or dispose of all or substantially all assets of corporation; 5. Merger or consoldation. Exercise of Appraisal Right: 1. Awaritten demand on the corporation within 30 days after the vote was taken (fllure to do so means waiver); 2.Ten (10) days from demand, the dissenting stockholder ‘must submit his certificates of stocks for notation that such certificates represent dicenting shares. 3. The price to be paid is the fair value of the shares on the date the vote was taken; 4. The fair value shal be agreed upon by the corporation and the dissenting stockholders within 60 days from the date the vote was taken. In cze there is no agreement, the fa, Advisers: Atty. menex; Heads: Enman Baois,lavin Ompec; Understudles: Nolo Bemardo; Christian de los Santas; Volunters: Jennifer Cruz, Jay gy. ‘Duhaylongsod,Franels Espitu, Jon Lina, Diane pana.eT OPERATIONS 2010 + Grounds for not allowing inspection by a stockholder: value shall be determined by a majority of the 3 4Lf the person demanding to examine the records has ‘stinguished persons one of whom shall be named by the impropedy used any information secured for prior stockholder another by the corporation and the third by the amination, ‘wo who were chosen; 2. He snot acting in good fit, 5. The right of appraisals extinguished when: Bit 1S not being exercised for a legimate purpose. a.He withdraws the demand with the corporations {Gokongweiv SEC GR No, 45911 April 12,1975) consent; The proposed actions abandoned; Doctrinal Rulings on the Right to Inspect: €. The SEC disapproves the action. 1. The demand for inspection should cover only reasonable 6 Hf the dissenting stockholder is nat paid within 30 days from hours on business days; ‘the award, he shall automaticaly be restored to all his 2. he stockholder, member, director or trustees demanding Fights as stockholder. the right is one who has not improperly used any information secured through any previous examination of BOOKS the records; 3.The demand must be accompanied with statement of the Books required to be maintained: cps". pee of the inspection, which must show good fh or 1. Book of minutes of stockholders meetings; __-#™" imate purpose. legitimate purposes include to obtain 2. Bookof minutes of board meetings; secrets (formula), nuisance suit, or to embarrass 3: Racord or Book ofall business trancactice, ities ese eee the corporation or Hs offices contest such purpose or tontend that there is evl motive behind the inspection, the _ burden of proof is with the corporation or such officer to “show the same, Stock ad Transfer Book Record of (1) Al tocks in theif not extend to post-facto repudiation of perfected (sec. 9,27) a sactions otherwise they would infringe against the non- hc eurepagensss™ impairment clause of the constitution. Thus, the law {nstance/s when is there conservatorship (Sec. 29): ‘Whenever, on the basis ofa report submitted by the appropriate: supervising or examining department, the Monetary Board finds ‘hata bank or quast-bank: 1 Isina state of continuing inability 2. Unwilingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors Powers and Responsibility of Conservator: 1 Such powers as the Monetary Board shall deem necessary “Take charge of the assets, liabilities, and the management thereot 2. Reorganize the management 3. Collet all monies and debts due sald institution 4. Exercise all powers necessary to restore its viability 5. Power to overtule or revoke the actions of the previous ‘management and board of directors of the bank or quasi- bank 6.The conservator shall report and be responsible to the ‘Monetary Board pee merely gives the conservator power to revoke contracts that are deemed to be defective — void, voidable, unenforceable, or rescissible. Hence, the conservator ‘merely takes the place ofthe bank's board 3. His power is not unilateral and he cannot simply repudiate 4 contract validly entered into or valid obligations of the bank. His authority would be only to bring court actions to assail such contracts. (First Philippine international Bank v. Ch, GA No, 125849 January 26, 1996) Note that during conservatorship, no claims can be paid. Instances when conservatorship terminated (Sec, 29) 1. When it is satisfied that the institution can continue to operate on its own and the conservatership is no longer necessary 2.The Monetary Board, on the basis of the report of the conservator or of its own findings, determine that the ‘continuance in business of the institution would involve probable loss to its depositors oF creditors, in which case the provisions of Section 30 shall apply + Advisers Atty JImenex; Heads: Erman Balols, avin Ompac; Understudes: Nicolo Bernardo; Chistian de es Santas; Volunteers: Jennifer Cruz, ay 9B ‘Ouhaylongsod, Francs Esprit, Jon Lin, Diane Liana». COMMERCIAL LAW REVIEWER Sie Instances when there is receivership (Sec. 30:) The Monetary Board may summarily and without need for prior hearing forbid the instution from doing business in. the Philippines and designate the Philippines Deposit Insurance Corporation as receiver of the banking institution whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that @ bank or quasi- banke '. Is unable to pay its labilties as they become due in the ‘ordinary course of business: Provided, That this shal! not include inability to pay caused by extraordinary demands ‘induced by financial panic in the banking community; b.Has Insufficient reallzable assets, as determined by the ‘Bangko Sentral, to meet its liabilities; or . Cannot continue in business without involving probable Section 37 that has become final, acts or “The receiver shall: 1L.Fle ex parte with the proper regional tral court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. a.tn case of quast-tanks, the liquidation plan shall be ‘adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall upon motion by the receiver after due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the Iosses tits depostors or eredtors;or sng, Metin ln aot. The rcv sl py the cost of d.tas ct Se me ape proceedings from the asets ofthe institution. Pa dat transactions which amount to fraug ion of the assets of the institution; in which cases, ~ For a quastbariky any person of recognized comm banking oF finance may be designated 351 Pie DUTIES OF A RECEIVER (Sec. 30) ey ae von ee eee et theasets and fables of the nti 2) administer the same for the benefit offs crepe, :Ciwett the assets ofthe institutions to money, dispose of "the same to creditors and other parties, for the purpose of paying the debts of such institution in accordance with the “fules on coteurrence and preference of eredit under the Civ Code ofthe Philipines and he may, inthe name ofthe institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect ‘and recover accounts and assets of, or defend any action against, the “yon &B cxerie the general powers ofa reeiverdinder theRevaed 7 The ass of ‘an institution under reseversip or Rules of Court ‘ EMAL liquidatg shall be deemed in custodia legis in the hands of 3) Shall not, with the exception expenditures, pay or commit any act transler or disposition of any asset of the Provided, That the receiver may deposit or place the fur ‘of the institution in non-speculative investments. Involve the Duty of a receiver within 90 days from Takeover (Sec. 30}: To determine whether the institution may be rehabilitated or ‘otherwise placed In such a condition so that it may be permitted. ‘to resume business with safety to its depositors and creditors, ‘and the general public: Provided, That any determination for the ‘esumption of business ofthe institution shall be subject to prior approval ofthe Monetary Board. Steps to be taken ifthe receiver determines that the institution cannot be rehabilitated or permitted to resume business in ‘accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings ‘and direct the receiver to proceed with the liquidation of the institution. administrative! {1 {0 the reéeiver and shall, from the moment the institution was, 7 tet under such receivership or liquidation, be exempt ym any order of garnishment, levy, attachment, oF ‘execution. ‘+ When a bank is prohibited from continuing to do business by ‘the Central Bank and a receiver is appointed for such bank, ‘that bank would not be able to do new business-to grant new loans oF to accept new deposits. However, the receiver is ‘obliged to collect debts owing to the bank, which debts form ppartof the assets ofthe bank. The receiver must assemble the assets and pay the obligation of the bank under receivership, ‘and take stops to prevent dissipation of such assets. ‘Accordingly, the receiver of the bank is obliged to collect pre- ‘existing debts due the bank, and foreclose mortgages securing such debts. (Larobis, Jr v. Philippine Veterans Bank, GR No. 1135706 October 1, 2004) ‘The actions of the Monetary Board taken under this section or Under Section 29 [appointment of conservator] of this Act shall be final and executory, and may not be restrained or Set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction, The petition for certiorari may only be fled by the stockholders Advisers Atty Jimenez; Heals: Erman Bao, avin Ompoc; Understuies: Micolo Beraardo; Christin de los Santas; Volunteers: Jeneifer Cruz, Jey 99 DDuhaylongsod, Francs Espirit, Jon Lina, Diane LpanaA errr ‘of record representing the majority of tha capital stock within liquidation together with the other additional expenses ten (10) days from receipt by the board of directors of the caused thereby. (Sec. 32) institution of the order directing receivership, liquidation or conservatorship, ‘The balance of revenues and earings, after the payment of all, said expenses, shall form part of the assets available for Note that the twin requirement of majority of stockholders and payment of ereitors.. ‘ling within 10 days should be observed or else action will be dismissed. Effects of Recelvership and Liquidation “The designation of a conservator under Section 29 of this Act or 4. Restriction on capacity to act the appointment of receiver under this section shall be vested 4. The appointment of a receiver operates to suspend the ‘exclusively with the Monetary Board. Furthermore, the authority of the bank, its directors and officers over its designation of a conservator is not a precondition to the property. designation of a receiver. b. The receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property (ose Mow ear Later Doctrine “= ofthe tank in any way. (vlanveva vc GR No, 117108 + The law doesnot contemplate rior notice ae eg November 5, 1297) the bank moy be drected to stop opretongl paced under 2 fe Sts anton ur ret, o receivership. The purpose Is to pifvent unwarranted Aispation ofthe bank's ests and: 86 valid exercise of a ole power bftect the depois rectors stockhaterst af ‘and the general public. (Centro! Bank of the Philppiges V-CA,