CRAMMER NOTES ON SELECTED TOPICS IN COMMERCIAL LAW

1. BANKING LAWS

1.1. NEW CENTRAL BANK ACT

1.1.1. Comparative Table

Conservatorship Receivership1/Liquidation
Legal basis Sec. 29 Sec. 30
Grounds From a REPORT of the appropriate A. From a REPORT of the head of the supervising/examining department, the MB finds that the B or QB:
supervising/examining department,
the MB finds that the B or QB is in a 1. Has notified the BSP or publicly announced a unilateral closure; dormant for at least 60 days or any manner
state of continuing: suspended payment of deposit/deposit substitutes; unable to pay liabilities as they fall due in the ordinary course of
business; except if inability is caused by extraordinary demands caused by financial panic in banking community
1. Inability; or, 2. Insufficient realizable assets to meet liabilities
2. Unwillingness 3. Cannot continue in business without involving probable losses to depositors or creditors
4. Willfully violates a Cease and Desist order under section 37 that has become final involving acts or transactions
To maintain a condition of which amount to fraud or a dissipation of assets
ADEQUATE LIQUIDITY to B. Upon a determination by PDIC that the bank may not be resolved, 2 the Monetary Board may act in accordance with
protect the interest of depositors and Section 30 of Republic Act No. 7653 or the New Central Bank Act.
creditors C. Unsound banking practices under Section 56 of the General Banking Law

Whenever a bank is ordered closed by the Monetary Board, the Corporation shall be designated as receiver and it shall
proceed with the takeover and liquidation of the closed bank in accordance with this Act. For this purpose, banks closed
by the Monetary Board shall no longer be rehabilitated. (Liquidation)
Who is in Any person B: PDIC
charge? QB and NSSLA: any person of recognized competence in banking, credit or finance

1 In the advent of RA No. 11211, Receivership, in the strict sense, does not exist anymore. Formerly, receivership is referred to as the period (max of 90days) wherein PDIC determines whether or not the
Bank may still be able to resume operations subject approval of BSP.
2 RA No. 3591 as amended by 10846 (“PDIC Charter”)

SEC. 5 (s) The term RESOLUTION refers to the actions undertaken by the Corporation under Section 11 of this Act to:
1) Protect depositors, creditors and the DIF; 2) Safeguard the continuity of essential banking services or maintain financial stability; and 3) Prevent deterioration or dissipation of bank assets.
SEC. 11. (a) The Corporation, in coordination with the Bangko Sentral ng Pilipinas, may commence the resolution of a bank under this section upon:
1) Failure of prompt corrective action as declared by the Monetary Board; or 2) Request by a bank to be placed under resolution. The Corporation shall inform the hank of its eligibility for entry into
resolution.

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 What are the Powers determined by the MB as
powers? necessary to:
1. Take charge of assets, liabilities
and management (with power to
overrule or revoke previous
actions)
2. Reorganize management
3. Collect all monies and debts due
4. All powers necessary to restore its
viability.
The receiver is authorized to adopt and implement, without need of consent of the stockholders, board of directors,
creditors or depositors of the closed bank, any or a combination of the following MODES OF LIQUIDATION:
1. Conventional liquidation;3
a. Asset Preservation and Management
b. Petition for Assistance in Liquidation
c. Winding-up
2. Purchase of assets and/or assumption of liabilities.
In addition to the powers of a receiver (Rule 59) provided under existing laws, the Corporation, as receiver of a closed
bank, is empowered to (among others):
1. Hire experts
2. Collect loans and other claims of the closed bank (also modify, compromise or restructure the terms and conditions
of such loans or claims as may be deemed advantageous to the interests of the creditors of the closed bank);
3. If the stipulated interest rate on deposits is unusually high compared with prevailing applicable interest rates, the
Corporation as receiver, may exercise such powers which may include a reduction of the interest rate to a reasonable
rate: Provided, That any modifications or reductions shall apply only to earned and unpaid interest;
4. Utilize available funds of the bank, including funds generated by the receiver from the conversion of assets to pay
for reasonable costs and expenses incurred for the preservation of the assets, and liquidation of, the closed bank,
without need for approval of the liquidation court;
5. Charge reasonable fees for the liquidation of the bank from the assets of the bank: Provided, That payment of these
fees, including any unpaid advances under the immediately preceding paragraph, shall be subject to approval by the
liquidation court;
6. Distribute the available assets of the closed bank, in cash or in kind, to its creditors in accordance with the Rules on
Concurrence and Preference of Credits under the Civil Code or other laws;
7. Exercise such other powers as are inherent and necessary for the effective discharge of the duties of the Corporation
as receiver.

Grounds for 1. MB is satisfied that institution can 1. Action of MB (in closures) is final and executory;
termination or operate on its own and a. Petition for Certiorari
remedies b. GADALEJ

3
A petition for assistance in the liquidation is a special proceeding for the liquidation of a closed bank, and includes the declaration of the concomitant right of its creditors and the order of payment of their
valid claims in the disposition of its assets. Any proceeding initiated under this section shall be considered in rem. Jurisdiction over all persons affected by the proceeding shall be considered as acquired upon
publication of the order setting the case for initial hearing in any newspaper of general circulation in the Philippines. The liquidation court shall have exclusive jurisdiction to adjudicate disputed claims against
the closed banks, assist in the enforcement of individual liabilities of the stockholders, directors and officers and decide on all other issues as may be material to implement the distribution plan adopted by
the Corporation for general application to all closed banks. The provisions of Republic Act No. 8799, otherwise known as ‘The Securities Regulation Code’, and Supreme Court Administrative Matter No.
00-8-10-SC, entitled, ‘The Rules of Procedure on Corporate Rehabilitation’, shall not be applicable to the petition for assistance in the liquidation of the closed bank.”

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 conservatorship is no longer c. Stockholders representing majority of the Capital Stock
necessary; or d. Within 10 days from receipt of order of MB
2. Based on Report or own findings,
MB determines that continuance
of the business would involve
probable loss to depositors and
creditors
3. Action of MB is final and
executory;
a. Petition for Certiorari
b. GADALEJ
c. Stockholders
representing majority of
the Capital Stock
d. Within 10 days from
receipt of order
Time limit One (1) year n/a
Status of Bank is open Bank is “forbidden from doing business in the Philippines” (is thus Closed)
Operations
Upon the designation of the Corporation as receiver of a closed bank, it shall serve a notice of closure to the highest-
ranking officer of the bank present in the bank premises, or in the absence of such officer, post the notice of closure in the
bank premises or on its main entrance. The closure of the bank shall be deemed effective upon the service of the
notice of closure. Thereafter, the receiver shall takeover the bank and exercise the powers of the receiver as provided in
this Act.

The placement of a bank under liquidation shall have the following effects:
1. Juridical personality only for winding up affairs
2. All powers and functions of directors, officers and stockholders are terminated; the receiver shall exercise all
authorities as may be required to facilitate the liquidation of the closed bank for the benefit of all its creditors.
3. On the assets – custodia legis
4. On labor relations - the employer-employee relationship between the closed bank and its employees shall be deemed
terminated upon service of the notice of closure of the bank
5. Contractual obligations - The receiver may cancel, terminate, rescind or repudiate any contract of the closed bank
that is not necessary for the orderly liquidation of the bank, or is grossly disadvantageous to the closed bank, or for
any ground provided by law.
6. Obligations on interest payments shall cease upon its closure by the Monetary Board without prejudice to the first
paragraph of Section 85 of Republic Act No. 7653 (payments due to BSP):

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 a. That the receiver shall have the authority, without need for approval of the liquidation court, to assign, as
payment to secured creditors, the bank assets serving as collaterals to their respective loans up to the extent
of the outstanding obligations, including interest as of date of closure of the hank, as validated by the
receiver. The valuation of the asset shall be based on the prevailing market value of the collaterals as
appraised by an independent appraiser on an ‘as is where is’ basis.
7. From the time of closure, the closed bank shall not be liable for the payment of penalties and surcharges arising
from the late payment or non-payment of real property tax, capital gains tax, transfer tax and similar charges.
8. The receiver may impose, on behalf of the closed bank, charges and fees for services rendered after bank closure,
such as, but not limited to, the execution of pertinent deeds and certifications.
9. Except for actions pending before the Supreme Court, actions pending for or against the closed bank in any court
or quasi-judicial body shall, upon motion of the receiver, be suspended for a period not exceeding one hundred
eighty (180) days and referred to mandatory mediation. Upon termination of the mediation, the case shall be referred
back to the court or quasi-judicial body for further proceedings.
10. The execution and enforcement of a final decision of a court other than the liquidation court against the assets of a
closed bank shall be stayed. The prevailing party shall file the final decision as a claim with the liquidation court and
settled in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.
11. Payment of docket and other court fees relating to all cases or actions filed by the receiver with any judicial or quasi-
judicial bodies shall be deferred until the action is terminated with finality. Any such fees shall constitute as a first
lien on any judgment in favor of the closed bank or in case of unfavorable judgment, such fees shall be paid as
liquidation costs and expenses during the distribution of the assets of the closed bank.
12. Assumptions and Presumptions
a. All assets, records, and documents in the possession of the closed bank at the time of its closure are
presumed held by the bank in the concept of an owner.
b. The exercise of authority, functions, and duties by the receiver under this Act shall be presumed to have
been performed in the regular course of business.
c. Assets and documents of the closed bank shall retain their private nature even if administered by the
receiver. Matters relating to the exercise by the receiver of the functions under this Act shall be subject to
visitorial audit only by the Commission on Audit.”

Notes Modes of Liquidation

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 Conventional liquidation; 4 Purchase of assets and assumption of liabilities.

4 CONVENTIONAL LIQUIDATION
A. ASSET MANAGEMENT AND CONVERSION
(a) The assets gathered by the receiver shall be evaluated and verified as to their existence, ownership, condition, and other factors to determine their realizable value. In the management, preservation and
disposition of assets, the receiver shall be guided by cost-benefit considerations, resources of the closed bank, and potential asset recovery.
(b) The conversion of the assets of the closed bank shall be carried out in a fair and transparent manner in accordance with the rules and procedures as may be determined by the receiver.
(c) In the management and/or conversion of the assets of the closed bank, the receiver shall have the authority to: (1) Represent the closed bank before the Land Registration Authority (LRA), the Bureau
of Lands, the Register of Deeds, the Land Transportation Office (LTO), the Assessor’s Office or other appropriate office of the local government unit, the Securities and Exchange Commission (SEC), or
such other similar government agencies or private entities in: (i) Verifying the authenticity of ownership documents; (ii) Registering the interest of the closed bank on a specific property; iii) Consolidating
ownership over an asset of the closed bank; (iv) Securing certified true copies of documents held by the foregoing agencies/entities in relation to an asset of the closed bank; (v) Securing the appropriate
certification from the foregoing agencies/entities in relation to an asset of the closed bank; and (vi) Performing other related activities; 2) Conduct a physical or ocular inspection of the properties owned by,
or mortgaged to, the closed bank, to determine their existence and present condition; (3) Determine the disposal price of assets in accordance with generally accepted valuation principles, standards and
practices, subject to such guidelines as the receiver may determine; (4) Dispose real or personal properties of the closed bank through bidding, negotiated sale or any other mode including lease with option
to purchase, whether by piece or by lot, as may be reasonably determined by the receiver based on cost-benefit considerations and to allow efficient distribution of assets to creditors; and (5) Engage third
parties to assist in the liquidation, manage and/or dispose the assets, handle cases filed against or by the closed bank, subject to such guidelines as determined by the receiver.
(d) Notwithstanding any provision of law to the contrary, the following rules shall apply to the management and/or conversion by the receiver of the assets of the closed bank: (1) Upon notification of the
closure of a bank, the LRA, the Bureau of Lands, the Register of Deeds, the LTO, the assessor’s office or other appropriate office of the local government unit, or such other similar government agencies
shall not allow any transaction affecting the assets of the closed bank without the consent of the receiver. (2) Upon issuance by the Monetary Board of the resolution ordering the closure of a bank, any
person or entity in custody or possession of assets or records of the closed bank, including, but not limited to, the closed bank’s deposit accounts, titles to real property, collaterals, promissory notes, evidence
of indebtedness or investments shall immediately turn over custody of said assets and records to the receiver. Such obligation shall cover evidences of deposit such as passbooks or certificates of deposit
issued by the bank to its depositors. Pending turnover, all persons or entities in custody or possession of any asset or record of the closed bank shall hold the said assets or records in trust for the receiver.
(3) The persons or entities in custody or possession of such asset shall not allow, authorize or cause the withdrawal, transfer, disposition, removal, conversion, concealment, or other transaction involving or
relating to the subject asset, unless otherwise directed by the receiver.
(e) The receiver shall have the authority to invest funds received from the conversion of the assets of the closed bank in government securities, other government-guaranteed marketable securities or
investment-grade debt instruments.
(f) The proceeds of the sale of the bank and branch licenses shall be for the benefit of the creditors of the closed bank which shall be distributed in accordance with this Act and the Rules on Concurrence
and Preference of Credits under the Civil Code or other laws.”

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Process
CONVENTIONAL LIQUIDATION (Petition for Liquidation) PURCHASE OF ASSETS ANDASSUMPTION OF LIABILITIES refers
1. The petition shall be filed in the RTC which has jurisdiction over the to a transaction where an insured bank purchases any or all assets AND assumes
principal office of the closed bank or the principal office of the receiver, any or all liabilities of another bank under resolution or liquidation, as provided
at the option of the latter. in this Act.
a. The petition shall be filed ex parte within a reasonable period
from receipt of the Monetary Board Resolution placing the bank The receiver shall have the authority to facilitate and implement the purchase of
under liquidation. the assets of the closed bank and the assumption of its liabilities by another
2. All persons or entities with claims against the assets of the closed bank insured bank, without need for approval of the liquidation court. The exercise of
shall file their claims with the receiver within sixty (60) days from the date this authority shall be in accordance with the Rules on Concurrence and
of publication of the notice of closure. Claims filed outside the foregoing Preference of Credits under the Civil Code or other laws, subject to such terms
prescribed period shall be disallowed. and conditions as the Corporation may prescribe. The disposition of the branch
a. Claims denied by the receiver shall be filed with the liquidation licenses and other bank licenses of the closed bank shall be subject to the
court within sixty (60) days from receipt of the final notice of approval of the Bangko Sentral ng Pilipinas.
denial of claim Such action of the receiver to determine whether a bank may be the subject of a
b. A claim whose validity has not yet been determined with finality purchase of assets and assumption of liabilities transaction shall be final and
at the time of the submission of the final asset distribution plan, executory, and may not be set aside by any court.
either by reason of a pending suit or for whatever reason, shall
be considered as contingent claim and shall not be paid under the
proposed final asset distribution plan.
3. Upon finality of the order approving the final asset distribution plan, the
petition for assistance in the liquidation of a closed bank shall henceforth
be, for all intents and purposes, considered closed and terminated and the
receiver, its officers, employees or agents, are forever discharged from any
and all claims and/or liability arising from or in connection with the
liquidation of the closed bank.
a. The creditors shall have a period of six (6) months from the date
of publication of notice of the approval by the court of the final
asset distribution plan of the closed bank within which to claim
payment of the principal obligations and surplus dividends.
During this six-month period, the receiver shall hold as trustee
the assets allocated in the final asset distribution plan for said
creditors. Failure by the creditor to comply with the documentary
requirements within the prescribed period and/or refusal to
accept the asset as payment shall be deemed as abandonment or
waiver of his or her right to payment

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 b. The individual stockholders of record or their duly-authorized
representative or the court-appointed stockholders’
representative shall have a period of six (6) months from
publication of notice of the approval by the court of the final
asset distribution plan of the closed bank within which to claim
the residual assets. During this six-month period, the receiver
shall hold as trustee the assets allocated in the final asset
distribution plan for said stockholders of record. “Failure by the
individual stockholders of record or their duly-authorized
representative or the court-appointed stockholders’
representative to comply with the documentary requirements
within the prescribed period and/or refusal to accept the residual
assets in kind shall be deemed as abandonment or waiver of right
to receive the residual assets
4. After the lapse of the six-month period provided above, all assets which
remain unclaimed by the creditors and/or stockholders of record shall be
turned over to the Bureau of Treasury.
5. The receiver shall continue to keep all the pertinent records of the closed
bank for a period of six (6) months from the date of publication of the
approval of the final asset distribution plan.
6. After the lapse of this period, the receiver is authorized to dispose of the
same in accordance with the rules and regulations to be prescribed by the
receiver.”
7. The receiver shall submit a final report on the implementation of the
approved final asset distribution plan to the Monetary Board and the SEC
after the expiration of the winding-up period provided in this Act.
8. The Supreme Court shall promulgate the appropriate procedural rules to
implement this section.

1.2. SECRECY OF BANK DEPOSITS

RA 1405 RA 6426
Coverage Local Currency Deposits Foreign Currency Deposits
Investment in PH Bonds
Prohibited Acts 1. may not be examined, inquired or looked into by any person, government official, bureau or office,

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 2. unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof
any information concerning said deposits.

Exceptions 1. Written consent 1. Written Consent

2. Rules 57 & 39 2. Rules 57 & 39 (Only for FOREIGN TRANSIENTS)
3. BIR 3. BIR
4. FRIA 4. FRIA
5. CISA 5. CISA
6. BSP/PDIC 6. BSP/PDIC
7. AMLA 7. AMLA
8. HSA 8. HSA
9. TFPSA 9. TFPSA
10. Independent Auditor5 10. Independent Auditor
11. Impeachment
12. Order of Court in cases of bribery or dereliction of duty
13. Money is subject matter of litigation
14. Act 3696
15. RA 3019
16. Plunder
17. Ombudsman
attachment, garnishment, or any Yes No, except transients
other order or process of any
court, legislative body,
government agency or any
administrative body whatsoever.

1.3. PDIC

Covered Excluded

5 SECTION 58. Independent Auditor. — The Monetary Board may require a bank, quasi-bank or trust entity to engage the services of an independent auditor to be chosen by the bank, quasi-bank or trust
entity concerned from a list of certified public accountants acceptable to the Monetary Board. The term of the engagement shall be as prescribed by the Monetary Board which may either be on a continuing
basis where the auditor shall act as resident examiner, or on the basis of special engagements, but in any case, the independent auditor shall be responsible to the bank's, quasi-bank's or trust entity's board
of directors. A copy of the report shall be furnished to the Monetary Board. The Monetary Board may also direct the board of directors of a bank, quasi-bank, trusty entity and/or the individual members
thereof, to conduct, either personally or by a committee created by the board, an annual balance sheet audit of the bank, quasi-bank or trust entity to review the internal audit and control system of the bank,
quasi-bank or trust entity and to submit a report of such audit. (6-Da)

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 Deposit Any unpaid balance of money or its equivalent received by
a bank in the usual course of business and for which it has
given or is obliged to give credit to a commercial, checking,
savings, time or thrift account, evidenced by a passbook,
certificate of deposit, or other evidence of deposit issued
in accordance with Bangko Sentral ng Pilipinas rules and
regulations and other applicable laws, together with such
other obligations of a bank, which, consistent with banking
usage and practices, the Board of Directors shall determine
and prescribe by regulations to be deposit liabilities of the
bank.
6 PDIC Charter, SEC. 26 (e) Splitting of Deposits: Whenever a deposit account with an outstanding balance of more than the statutory macimum amount of insured deposit maintained under the main of
natural or juridical persons is broken down and transferred into two (2) or more account in the name/s of natural or juridical personas or entited who have no beneficial ownership on transferred deposits
in their names within one hundred (120) days immediately preceding a closure order issued by the MB for the purpose of availing of the maximum deposit insurance coverage
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That any obligation of a bank which is payable at the office
of the bank located outside of the Philippines shall not be
a deposit for any of the purposes of this Act or included as
part of the total deposits or of insured deposit:
Provided, further, That subject to the approval of the
Board of Directors, any insured bank which is
incorporated under the laws of the Philippines which
maintains a branch outside the Philippines may elect to
include for insurance its deposit obligations payable only at
such branch.
PDIC shall not pay deposit insurance for the following
accounts or transactions:
1. Investment products such as bonds and securities,
trust accounts, and other similar instruments;
2. Deposit accounts or transactions which are
fictitious or fraudulent as determined by PDIC;
a. Splitting of deposits 6 or creation of
fictitious or fraudulent loans or deposit
accounts (SEC. 26 (e))
3. Deposit accounts or transactions constituting,
and/or emanating from, unsafe and unsound
banking practice/s, as determined by the
Corporation, in consultation with the Bangko
Sentral ng Pilipinas, after due notice and hearing,
and publication of a directive to cease and desist
issued by PDIC against such deposit accounts,
transactions or practices; and
4. Deposits that are determined to be the proceeds of
an unlawful activity as defined under Republic Act
No. 9160, as amended.
Extent 1. The deposit liabilities of any bank which is engaged in Uninsured or will not be paid by PDIC:
the business of receiving deposits as herein defined on 1. In excess of maximum deposit liability
the effective date of this Act, or which thereafter may a. depositor shall retain his or her claim for
engage in the business of receiving deposits, shall be any uninsured portion of his or her
insured with the Corporation. deposit, which legal preference shall be the
2. Insured deposit: the amount due to any bonafide same as that of the subrogated claim of the
depositor for legitimate deposits in an insured bank as Corporation for its payment of insured
of the date of closure: deposits.
a. all deposits in the bank maintained in the same 2. The passbook, certificate of deposit, or other
right and capacity for his or her benefit either evidence of deposit is determined by PDIC to be as
in his or her own name or in the name of NOT an authentic document or record of the
others. issuing bank:
b. but not to exceed Five hundred thousand
pesos (P500,000.00). Such amount shall be
determined according to such regulations as
the Board of Directors may prescribe.
3. A joint account regardless of whether the conjunction
‘and’, ‘or’, ‘and/or’ is used, shall be insured separately
from any individually-owned deposit account:
Provided, if the account is held:
a. jointly by two or more natural persons, or by
two or more juridical persons or entities, the
maximum insured deposit shall be divided into
as many equal shares as there are individuals,
juridical persons or entities, unless a different
sharing is stipulated in the document of
deposit, and
b. by a juridical person or entity jointly with one
or more natural persons, the maximum
insured deposit shall be presumed to belong
entirely to such juridical person or entity:
c. Provided, further, That the aggregate of the
interest of each co-owner over several joint
accounts, whether owned by the same or
different combinations of individuals, juridical
persons or entities, shall likewise be subject to

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 the maximum insured deposit of Five hundred
thousand pesos (P500,000.00)
How paid Whenever an insured bank:
1. shall have been closed by the Monetary Board
pursuant to Section 30 of Republic Act No. 7653,
or
2. upon expiration or revocation of a bank’s corporate
term,

payment of the insured deposits on such closed bank shall

be made by the Corporation as soon as possible7 either:
1. by cash or
2. by making available to each depositor a transferred
deposit in another insured bank in an amount equal
to insured deposit of such depositor:

Provided, however, That the Corporation, in its discretion,

may require proof of claims to be filed before paying the
insured deposits, and that in any case where the
Corporation is not satisfied as to the validity of a claim for
an insured deposit, it may require final determination of a
court of competent jurisdiction before paying such claim:

Unless waived by the Corporation, if the depositor in the

closed bank shall:
1. fail to claim his insured deposits with the
corporation within 2 years from actual take over by
the receiver, or
2. does not enforce his claim filed with PDIC within
two years after within two years after the two year
period to file the claim,

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That failure to settle the claim, within six (6) months from the date of filing of claim for insured deposit, where such failure was due to grave abuse of discretion, gross negligence, bad faith, or malice, shall,
upon conviction, subject the directors, officers or employees of the Corporation responsible for the delay, to imprisonment from six (6) months to one (1) year: Provided, furthermore, That the period shall
not apply if the validity of the claim requires the resolution of issues of facts and or law by another office, body or agency including the case mentioned in the first proviso or by the Corporation together
with such other office, body or agency.”

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 all rights of the depositor (against PDIC) shall be barred;
however, all rights of the depositor against the closed bank
and its shareholders or the receivership estate to which the
corporation may have become subrogated shall thereupon
revert to the depositor. Thereafter the corporation shall be
discharged from any liability on the insured deposit.

The Corporation, upon payment of any depositor as

provided for in Section 19 of this Act, shall be:
1. subrogated to all rights of the depositor against the
closed bank to the extent of such payment. Such
subrogation shall include the right on the part of the
Corporation to receive the same dividends and
payments from the proceeds of the assets of such
closed bank and recoveries on account of
stockholders’ liability as would have been payable
to the depositor on a claim for the insured deposits;
and,
2. All payments by the Corporation of insured
deposits in closed banks partake of the nature of
public funds, and as such, must be considered a
preferred credit in the order of preference under
Article 2244 (9) of the New Civil Code.”

1.4. GENERAL BANKING LAW

1.4.1. Nature of Bank funds and Bank deposits

Bank deposits, which are in the nature of a simple loan or mutuum, must be paid upon demand by the depositor. (MBTC v. Rosales, GR No. 183204, 13 Jan 2014)

Bank deposits are in the nature of irregular deposits. They are really 'loans because they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as
loans and are to be covered by the law on loans (Art. 1980 Civil Code Gullas vs. Phil. National Bank, 62 Phil. 519). Current and saving deposits, are loans to a bank because it can use the same.
The petitioner here in making time deposits that earn interests will respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and not a depositor. The

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respondent Bank was in turn a debtor of petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay its obligation as a debtor and not a breach of trust arising from a depositary's
failure to return the subject matter of the deposit (Emphasis supplied). Serrano vs. Central Bank of the Philippines (96 SCRA 102 [1980])

Hence, the relationship between the private respondent and the Nation Savings and Loan Association is that of creditor and debtor; consequently, the ownership of the amount
deposited was transmitted to the Bank upon the perfection of the contract and it can make use of the amount deposited for its banking operations, such as to pay interests on deposits
and to pay withdrawals. While the Bank has the obligation to return the amount deposited, it has, however, no obligation to return or deliver the same money that was deposited. And, the
failure of the Bank to return the amount deposited will not constitute estafa through misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code, but it will only
give rise to civil liability over which the public respondents have no- jurisdiction. Guingona et al v. Fiscal of Manila et al G.R. No. L-60033, 04 April 1984

1.4.2. Diligence required of banking functions

With banks, the degree of diligence required, contrary to the position of petitioner PNB, is more than that of a good father of a family considering that the business of banking is imbued
with public interest due to the nature of their functions. The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. Thus, the law imposes
on banks a high degree of obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of banking. Section 2 of Republic Act No. 8791,
which took effect on 13 June 2000, makes a categorical declaration that the State recognizes the "fiduciary nature of banking that requires high standards of integrity and performance."
(Cagungun et al., v. Planters Devt Bank, GR. No. 158674, 17 Oct 2005)

In Philippine Bank of Commerce v. Court of Appeals15 upholding a long standing doctrine, we ruled that the degree of diligence required of banks, is more than that of a good father of a family where
the fiduciary nature of their relationship with their depositors is concerned. In other words banks are duty bound to treat the deposit accounts of their depositors with the highest degree of
care. But the said ruling applies only to cases where banks act under their fiduciary capacity, that is, as depositary of the deposits of their depositors. But the same higher degree of diligence
is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. (Reyes v. CA, GR. No. 118492, 15 August 2001)

1.4.3. Prohibitions on Banks and its Directors Etc

Prohibited Acts of Directors Officers ETC
No director, officer, employee, or agent of any bank shall —
1. Make false entries in any bank report or statement or participate in any fraudulent
transaction, thereby affecting the financial interest of, or causing damage to, the
bank or any person;
2. Without order of a court of competent jurisdiction, disclose to any unauthorized
person any information relative to the funds or properties in the custody of the
bank belonging to private individuals, corporations, or any other entity: Provided,
That with respect to bank deposits, the provisions of existing laws shall prevail;
3. Accept gifts, fees or commissions or any other form of remuneration in
connection with the approval of a loan or other credit accommodation from said
bank;
Conducting Business in an Unsafe or Unsound Manner
In determining whether a particular act or omission, which is not otherwise prohibited by
any law, rule or regulation affecting banks, quasi-banks or trust entities, may be deemed as
conducting business in an unsafe or unsound manner for purposes of this Section, the
Monetary Board shall consider any of the following circumstances:
1. The act or omission has resulted or may result in material loss or damage, or
abnormal risk or danger to the safety, stability, liquidity or solvency of the
institution;
2. The act or omission has resulted or may result in material loss or damage or
abnormal risk to the institution's depositors, creditors, investors, stockholders or
to the Bangko Sentral or to the public in general;
3. The act or omission has caused any undue injury, or has given any unwarranted
benefits, advantage or preference to the bank or any party in the discharge by the

- 13 -
 4. Overvalue or aid in overvaluing any security for the purpose of influencing in any
way the actions of the bank or any bank; or
5. Outsource inherent banking functions.
6. No bank shall employ casual or nonregular personnel or too lengthy probationary
personnel in the conduct of its business involving bank deposits.
director or officer of his duties and responsibilities through manifest partiality,
evident bad faith or gross inexcusable negligence; or
4. The act or omission involves entering into any contract or transaction manifestly
and grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not
the director or officer profited or will profit thereby. Whenever a bank, quasi-bank
or trust entity persists in conducting its business in an unsafe or unsound manner,
the Monetary Board may, without prejudice to the administrative sanctions
provided in Section 37 of the New Central Bank Act, take action under Section 30
of the same Act and/or immediately exclude the erring bank from clearing, the
provisions of law to the contrary notwithstanding. (n)

1.5. AMLA

1.5.1. To be drawn.

2. DATA PRIVACY ACT

2.1. NOTABLE DEFINITIONS

2.1.1. Consent of the data subject refers to any freely given, specific, informed indication of will, whereby the data subject agrees to the collection and processing of personal information
about and/or relating to him or her. Consent shall be evidenced by written, electronic or recorded means. It may also be given on behalf of the data subject by an agent
specifically authorized by the data subject to do so

2.1.2. Data subject refers to an individual whose personal information is processed.

2.1.3. Personal information refers to any information whether recorded in a material form or not, from which the identity of an individual is apparent or can be reasonably and directly
ascertained by the entity holding the information, or when put together with other information would directly and certainly identify an individual.

2.1.4. Personal information controller refers to a person or organization who controls the collection, holding, processing or use of personal information, including a person or
organization who instructs another person or organization to collect, hold, process, use, transfer or disclose personal information on his or her behalf. The term excludes:

2.1.4.1. A person or organization who performs such functions as instructed by another person or organization; and

2.1.4.2. An individual who collects, holds, processes or uses personal information in connection with the individual's personal, family or household affairs.

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 2.1.5. Personal information processor refers to any natural or juridical person qualified to act as such under this Act to whom a personal information controller may outsource the
processing of personal data pertaining to a data' subject.

2.1.6. Processing refers to any operation or any set of operations performed upon personal information including, but not limited to, the collection, recording, organization, storage,
updating or modification, retrieval, consultation, use, consolidation, blocking, erasure or' destruction of data.

2.1.7. Privileged information refers to any and all forms of data which under the Rules of Court and other pertinent laws constitute privileged communication.

2.1.8. Sensitive personal information refers to personal information:

2.1.8.1. About an individual's race, ethnic origin, marital status, age, color, and religious, philosophical or political affiliations;

2.1.8.2. About an individual's health, education, genetic or sexual life of a person, or to any proceeding for any offense committed or alleged to have been committed by such
person, the disposal of such proceedings, or the sentence of any court in such proceedings;

2.1.8.3. Issued by government agencies peculiar to an individual which includes, but not limited to, social security numbers, previous or current health records, licenses or its
denials, suspension or revocation, and tax returns; and

2.1.8.4. Specifically established by an executive order or an act of Congress to be kept classified.

2.2. DISTINCTIONS

Personal Information Sensitive Personal Information

Definition any information whether recorded in a material form or not, from which the 1. About an individual's race, ethnic origin, marital status, age, color, and
identity of an individual is apparent or can be reasonably and directly ascertained religious, philosophical or political affiliations;
by the entity holding the information, or when put together with other
information would directly and certainly identify an individual 2. about an individual's health, education, genetic or sexual life of a person,
or to any proceeding for any offense committed or alleged to have been
committed by such person, the disposal of such proceedings, or the
sentence of any court in such proceedings;

3. Issued by government agencies peculiar to an individual which includes,

but not limited to, social security numbers, previous or current health

- 15 -
 records, licenses or its denials, suspension or revocation, and tax returns;
and

4. Specifically established by an executive order or an act of congress to be

kept classified.

Rules on The processing of personal information shall be permitted only if not otherwise The processing of sensitive personal information and privileged information
processing prohibited by law, and when at least one of the following conditions exists shall be prohibited, except in the following cases:

Conditions/criteria 1. Consent 1. Consent

2. Contract with individual 2. Existing laws and regulations

3. Vital interests/ life and health; 3. Life and health

4. Legal obligation 4. Processing by non-stock, non-profit organizations

5. National emergency, public order and safety, or functions of public authority 5. Medical treatment
as required by law; or
6. Lawful rights and interest in court proceedings or legal claims
6. Constitutional or statutory mandate of public authority

7. Legitimate interest of the pic or third parties

2.3. SCOPE

2.3.1. Generally: DPA applies to the processing of all types of personal information and to any natural and juridical person involved in personal information processing including
those personal information controllers and processors who, although not found or established in the Philippines, use equipment that are located in the Philippines, or those
who maintain an office, branch or agency in the Philippines subject to the immediately succeeding paragraph: Provided, That the requirements of Section 5 are complied with.

2.3.2. This Act does not apply to the following·(exceptions):

2.3.2.1. Matters of public concern (government information)

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 2.3.2.2. journalistic, artistic, literary or research purposes;

2.3.2.3. Research purposes, intended for public benefit

2.3.2.4. Law enforcement and regulatory functions of public authority (Secrecy of Bank Deposits Act; Foreign Currency Deposit Act; Credit Information System Act (CISA);

2.3.2.5. Compliance with BSP regulated banks and financial institutions with CISA, ALMA etc.

2.3.2.6. Resident of foreign jurisdictions with applicable data privacy laws.

2.3.3. Extraterritorial Application. - This Act applies to an act done or practice engaged in and outside of the Philippines by an entity if:

2.3.3.1. The act, practice or processing relates to personal information about a Philippine citizen or a resident;

2.3.3.2. The entity has a link with the Philippines, and the entity is processing personal information in the Philippines or even if the processing is outside the Philippines as
long as it is about Philippine citizens or residents such as, but not limited to, the following: (1) A contract is entered in the Philippines; (2) A juridical entity
unincorporated in the Philippines but has central management and control in the coutitry; and (3) An entity that has a branch, agency, office or subsidiary in the
Philippines and the Parent or affiliate of the Philippine entity has access to personal information; and

2.3.3.3. The entity has other links in the Philippines such as, but not limited to: (1) The entity carries on business in the Philippines; and (2) The personal information was
collected or held by an entity in the Philippines.

2.4. DATA PRIVACY PRINCIPLES

Obligations of the PIC or PIP

Adhere to Data Privacy Principles Uphold Rights of Data Subject Implement security measures

1. Transparency 1. Information 1. Organizational

2. Legitimate Purpose 2. Access 2. Physical
3. Proportionality 3. Data Portability 3. Technical
4. Rectification
5. Erasure or blocking
6. To object
7. To File a Complaint
8. To damages

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 Crammer
Selected Commercial
November 2019
x-----------------x
 Crammer
Selected Commercial
November 2019
x-----------------x

Patents Trademarks Copyright

Definition Patent: Mark: It is the legal protection extended to the owner of
It is a grant issued by the Gov’t through the IPO Phil. It is any visible sign capable of distinguishing the goods the rights in an original work
an exclusive right grated for a product, process or an (trademark) or services (service mark) of an enterprise
improvement of a product or process which is new, and shall include a stamped or marked container of Original Work
inventive and useful. This exclusive right gives the inventor goods; to every production in the literary, scientific and
the right to exclude others from making using or selling the artistic domain.
product of his invention during the life of the patent. Collective mark:
any visible sign designated as such in the application
Utility Model: for registration and capable of distinguishing the origin
It is a protection option which is designed to protect or any other common characteristic, including the
innovations that are now sufficiently inventive to meet the quality of goods or services of different enterprises
threshold required for standard patents application. It may which use the sign under the control of the registered
be any useful machine, implement tools, product, owner of the collective mark;
composition, process, improvement or part of the same,
that is of practical utility, novelty and industrial Trade name:
applicability. It entitled to seven (7) years of protection the name or designation identifying or distinguishing
from filing date, without renewal. an enterprise;

Industrial Design:
It is any composition of lines and colors or any three-
dimensional form, whether or not associated with lines or
color; provided that such composition or form gives a
special appearance to and can serve as pattern for an
industrial product or handicraft. It shall be valid for five (5)
years from filing date of the application. It may be renewed
for not more than two (2) consecutive periods of five (5)
years each, by paying the renewal fee.
Subject Inventions 1. Books, pamphlets, articles and other
Matter writings
2. Periodical and newspapers
3. Lectures, sermons, addresses,
dissertations prepared for oral delivery,
whether or not reproduced in writing or
other ,material form
 4. Letters
5. Dramatic or dramatico-musical
compositions, choreographic works or
entertainment in dumb show
6. Musical compositions with or without
words
7. Work of drawing, painting architecture,
engraving, lithography or other works of
art, models, designs for works of art
8. Original ornamental designs or models
for articles of manufacture, whether or
not registrable asn industrial design, and
other works of applied art
9. Illustrations, maps, plans, sketches, charts
and three-dimensional works relative to
geography, topography, architecture or
science
10. Drawings or plastic works of a scientific
or technical character
11. Photographic works including works
produced by a process analogous to
photography, lantern slides
12. Audiovisual works and cinematographic
works and works produced by a process
analogous to cinematography or any
process for making audio-visual
recordings
13. Pictorial illustrations and advertisements
14. Computer programs
15. Other literary, scholarly, scientific and
artistic works
Where to IPO IPO (except tradename) No need. But you may deposit with National
register Library
Term 20 years 10 years, subject to renewal 1. Original Work – 50 years during the life of the
author and for 50 years after his death

20

Requisites 1. Technical solution to any field of human activity. It may
be or may relate to a product, or process, or an
improvement of any of the following
2. Novelty (new; not part of prior art);
a. Everything which has been made available to the public
anywhere in the world, before the filing date or the
priority date of the application claiming the invention
(a) A request for registration;
(b) The name and address of the applicant;
(c) The name of a State of which the applicant is a
national or where he has domicile; and the name of a
State in which the applicant has a real and effective
industrial or commercial establishment, if any;
(d) Where the applicant is a juridical entity, the law
under which it is organized and existing;
21
2. Works of Joint Ownership – during the
lifetime of the last surviving author and for 50
years after his death
3. Anonymous or Pseudonymous work – 50
years from the date on which the work was
first lawfully published
a. If author’s identity is revealed or no longer in
doubt – during the life of the author (or last
surviving author) and for 50 years after his
death
b. If not published – 50 years from the making
of the work
4. Works of Applied Art – 25 years from the date
of making
5. Photographic works – 50 years from
publication
a. If not published – 50 years from making
6. Audio visual works – 50 years from
publication
a. If not published – 50 years from making
7. Performances not incorporated in recordings
– 50 years from the end of the year in which
the performance took place
8. Sound or image and sound recordings for
performances incorporated therein – 50 years
from the end of the year in which the
recording took place
9. Broadcasts – 20 years from the date the
broadcast took place
Need not be registered;
1. Application should be accomplished in
duplicate, typewritten and the affidavit at
the back should be duly notarized and
affixed with Fifteen Pesos
(P15.00) documentary stamp. Another
set of Fifteen Pesos (Php 15.00 ) worth
b. The whole contents of an application for patent, utility
model or industrial design registration, published in
accordance with the Act, filed or effective in the
Philippines, with a filing date of an earlier application
under section 31 of IP code shall be prior art with effect
as of the filing date of such earlier application: provided
further, that the applicant or the inventor identified in
both applications are not one and the same.
3. Inventive Step: if having regard to prior art, it is not
obvious to a person skilled in the art the time of the
filing date or priority date of the application claiming
the invention
4. Industrial Applicability: An invention that can be
produced and used in any industry shall be industrially
applicable.
(e) The appointment of an agent or representative, if
the applicant is not domiciled in the Philippines;
(f) Where the applicant claims the priority of an earlier
application, an indication of:
i) The name of the State with whose national office the
earlier application was filed or if filed with an office
other than a national office, the name of that office,
ii) The date on which the earlier application was filed,
and
iii) Where available, the application number of the
earlier application;
(g) Where the applicant claims color as a distinctive
feature of the mark, a statement to that effect as well
as the name or names of the color or colors claimed
and an indication, in respect of each color, of the
principal parts of the mark which are in that color;
(h) Where the mark is a three-dimensional mark, a
statement to that effect;
(i) One or more reproductions of the mark, as
prescribed in the Regulations;
(j) A transliteration or translation of the mark or of
some parts of the mark, as prescribed in the
Regulations;
(k) The names of the goods or services for which the
registration is sought, grouped according to the classes
of the Nice Classification, together with the number of
the class of the said Classification to which each group
of goods or services belongs; and
(l) A signature by, or other self-identification of, the
applicant or his representative.
22
of documentary stamps, should be
stapled to the application form to be
affixed by the office to the copyright
certificate.
2. Application should be accompanied by
two (2) copies of the work as
deposit, Two Hundred Pesos (P200.00)
as registration fee. If through mail,
registration fee should be in postal money
order addressed to the Director, The
National Library.
3. If the work applied for registration is an
original ornamental design (classification
H), it should be accompanied by a
technical description of the design.
4. If the work applied for registration is
published work, two (2) printed
copies with copyright notice printed in
front or at the back of the title page if it is
a book and on any clear space thereof if
non-book material, shall accompany
the application
The copyright notice shall be in the form
Philippine Copyright 20__(year of publication) by
____________(name of copyright owner.)
No. 8 of the application should be filled up by
stating the specific date when the work is finished
and likewise No. 9 be filled up to indicate when
the work is published.
A “published work” for purposes of registration
means that the work has been disseminated to the
public prior to its registration with the Copyright
Office.
5. If the work applied for registration is
unpublished work, two (2)
manuscript and/or xerox copies of the
 work without the copyright notice shall
accompany the application.
“Unpublished work” for purposes of registration
means that the work has not been disseminated to
the public at the time of registration.
6. If the applicant is non-resident foreigner,
he/she should appoint a local authorized
agent by a special power of attorney to
complete the copyright application for
and in his/her behalf .
7. If the claimant is not the author, a
document supporting the claim such as a
deed of assignment or a waiver of
copyright ownership;
8. If the applicant is a proprietor or a
corporation, a photocopy of the
certificate of business name or SEC
certificate (whichever is applicable)
should be attached to the application.

Specific 1. First to File Rule: if two (2) or more persons have made 1. Economic rights which enable the creator to
Rights the invention separately and independently of each obtain remuneration from the exploitation of
conferred other, the right to the patent shall belong to the person his works by the third parties
who filed an application for such invention, or where a. Reproduction
two (2) or more applications are filed for the same b. Transformation
invention, to the applicant who has the earliest filing c. First Public Distribution
date or, the earliest priority date d. Rental
2. Right of Priority: an application for patent filed by any e. Public Display
person who has previously applied for the same f. Public Performance
invention in another country which by treaty g. Other Communication to the Public
convention, or law affords similar privileges to Filipino 2. Moral Rights which make it possible for the
Citizens, shall be considered as filed as of the date of creator to undertake measures to maintain and
filing the foreign application; provided, that: protect the personal connection between
a. The local application expressly claims priority himself and the work. The Right:
b. It is filed within twelve (2) months from the date of the a. Of attribution
earliest foreign application; and b. Of Alteration
c. Of Integrity

23
 c. A certified copy of the foreign application together with
an English translation is filed within six (6) months
from filing date in the Philippines.
3. Right to Patent: the right to a patent belongs to the
inventor, his heirs and assigns. When two (2) or more
persons have jointly made an invention, the right to a
patent shall belong to them jointly.
4.
Infringement Patent Infringement: the unauthorized making, using,
offering for sale or selling any patented invention or
products of the patented invention without consent of the
patent holder
Tests:
1. Literal Infringement: resort must be had, in the first
instance, to the words of the claim. If the accused
matter clearly falls within the claim, infringement is
made our and that is the end of it. To determine
whether the particular item falls within the literal
meaning o the patent claims, the court must juxtapose
the claims of the particular patent ad the accused
product within the overall context of the claims and
specifications, to determine whether there is exactly
identity of all material elements
2. Doctrine of Equivalents: infringement takes place
when a device appropriates a prior invention by
incorporating its innovative concept and, although with
some modification and change, performs substantially
the same function the same way to achieve substantially
the same result. It requires the satisfaction of the
function-means-and-result test
d. To restrain use of his name
Trademark Infringement: the unauthorized use of a It consists in infringing any right secured or
trademark or servicemark on or in connection with protected under the code. It may also consist in
goods/services in a manner that is likely to cause aiding or abetting such. The law also provides for
confusion, deception, or mistake about the source of the liability of a person who at the time when the
the goods and/or services. copyright subsists in a work has in his possession
an article which he knows, or ought to know, to
Tests: be an infringing copy of the work for the purpose
1. Dominancy Test: focuses on the similarity of the of:
main, prevalent or essential features f the 1. Selling or letting for hire, or by way of trade
competing trademarks that might cause confusion. offering or exposing for sale or hire, the article
Infringement takes place when the competing 2. Distributing the article for the purpose of
trademark contains the essential features of trade, or for any other purpose to an extent
another. Imitation or an effort to imitate is that will prejudice the rights of the owner in
unnecessary. The question is whether the use of the work
the marks is likely to cause confusing or deceive 3. Trade exhibit of the article to the public
purchasers.
2. Holistic Test: the focus is not only on the
predominant words but also on the other features
appearing on the labels.
Trademark Infringement v. Unfair Competition
1. Infringement is the unauthorized use of a
trademark; Unfair competition is the passing off
one’s goods as those of another
2. TMI fraudulent intent is not required; UC it is
essential
3. TMI prior registration is a prerequisite; UC
registration is not necessary
24
Not covered 1. Discoveries, scientific theories and mathematical
methods;
2. Schemes, rules and methods of performing mental acts,
playing games or doing business, and programs for
computers;
3. Methods for treatment of the human or animal body by
surgery or therapy and diagnostic methods practiced on
the human or animal body. This provision shall not
apply to products and composition for use in any of
these methods;
4. Plant varieties or animal breeds or essentially biological
process for the production of plants or animals. This
provision shall not apply to microorganisms and non-
biological and microbiological processes. Provisions
under this subsection shall not preclude Congress to
consider the enactment of a law providing sui generis
protection of plant varieties and animal breeds and a
system of community intellectual rights protection:
5. Aesthetic creations; and
6. Anything which is contrary to public order or morality.
(Sec. 8, R.A. No. 165a)
1. Consists of immoral, deceptive or scandalous 1. Any idea, procedure, system, method or
matter, or matter which may disparage or falsely operation, concept, principle, discovery or
suggest a connection with persons, living or dead, mere data as such, even if they are expressed,
institutions, beliefs, or national symbols, or bring explained, illustrated or embodied in a work
them into contempt or disrepute; 2. News of the day and other misc. facts having
2. Consists of the flag or coat of arms or other a character of mere item of press information
insignia of the Philippines or any of its political 3. Any official test of legislature, administrative
subdivisions, or of any foreign nation, or any or legal nature, as well as official translations
simulation thereof; thereof
3. Consists of a name, portrait or signature
identifying a particular living individual except by
his written consent, or the name, signature, or
portrait of a deceased President of the Philippines,
during the life of his widow, if any, except by
written consent of the widow;
4. Is identical with a registered mark belonging to a
different proprietor or a mark with an earlier filing
or priority date, in respect of: cd i. The same goods
or services, or ii. Closely related goods or services,
or iii. If it nearly resembles such a mark as to be
likely to deceive or cause confusion;
5. Is identical with, or confusingly similar to, or
constitutes a translation of a mark which is
considered by the competent authority of the
Philippines to be well-known internationally and in
the Philippines, whether or not it is registered here,
as being already the mark of a person other than
the applicant for registration, and used for
identical or similar goods or services: Provided,
That in determining whether a mark is well-
known, account shall be taken of the knowledge of
the relevant sector of the public, rather than of the
public at large, including knowledge in the
Philippines which has been obtained as a result of
the promotion of the mark;
6. Is identical with, or confusingly similar to, or
constitutes a translation of a mark considered well-
25
 known in accordance with the preceding
paragraph, which is registered in the Philippines
with respect to goods or services which are not
similar to those with respect to which registration
is applied for: Provided, That use of the mark in
relation to those goods or services would indicate
a connection between those goods or services, and
the owner of the registered mark: Provided
further, That the interests of the owner of the
registered mark are likely to be damaged by such
use;
7. Is likely to mislead the public, particularly as to the
nature, quality, characteristics or geographical
origin of the goods or services;
8. Consists exclusively of signs that are generic for
the goods or services that they seek to identify;
9. Consists exclusively of signs or of indications that
have become customary or usual to designate the
goods or services in everyday language or in bona
fide and established trade practice;
10. 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 of the services, or other characteristics
of the goods or services;
11. Consists of shapes that may be necessitated by
technical factors or by the nature of the goods
themselves or factors that affect their intrinsic
value;
12. Consists of color alone, unless defined by a given
form; or
13. Is contrary to public order or morality.

Ownership 1. The right to a patent belongs to the inventor, his heirs 1. Generally, the natural person who created the
and assigns. When two (2) or more persons have jointly literary and artistic work owns the copyright
to the same

26
 made an invention, the right to a patent shall belong to
them jointly.
2. For work created during or in the course of
employment
a. Employee - if the work is not part of his regular duties,
even if he used the time, facilities and materials of the
employer
b. Employer – if the work is the result of the performance
of his regularly assigned duties, unless there is an
express or implied agreement to the contrary
3. Pursuant to a Commission: The person who
commissions the work shall own the patent, unless
otherwise provided on the contract
Defenses
27
2. For work created during or in the course of
employment
a. Employee 0 if the work is not part of his
regular duties, even if he used the time,
facilities and materials of the employer
b. Employer – if the work is the result of the
performance of his regularly assigned duties,
unless there is an express or implied
agreement to the contrary
3. For commissioned works: the person who
commissioned the work owns the work but
the copyright thereto remains with the
creator, unless there is a written agreement to
the contrary
4. For audio-visual works: the producer, author
of the scenario, composer of the music, film
direct, and the author of the work adapted
Fair Use: It is a privilege to use copyrighted
material in a reasonable manner without the
consent of the owner or as copying the theme or
ideas rather than their expression. It is an
exception to the owner’s monopoly of the use of
the work to avoid stifling the “very creativity
which the that law is designed to foster. In
determining whether the use made of a work in
any particular case is fair use, the factors to be
considered include the following:
1. The purpose and character of the use,
including whether such use is of a commercial
nature or is non-profit educational purposes
2. The nature of the copyrighted work
3. The amount and substantiality of the portion
used in relation to the copyrighted work as a
whole
4. The effect of the use upon the potential
market for or value of the copyrighted wok