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INTELLECTUAL PROPERTY CODE

INTELLECTUAL PROPERTY consists of:
1. COPYRIGHT AND RELATED Copyright: confined to literary and artistic works which are original intellectual creations in the
RIGHTS literary and artistic domain protected from the moment of creation
2. TRADEMARKS AND Trademark: any visible sign capable of distinguishing the goods (trademark) or services
SERVICE MARKS (service mark) of an enterprise and shall include a stamped or marked container of goods

Trade name: the name or designation identifying or distinguishing an enterprise

3. PATENTS Patentable inventions: any technical solution of a problem in any field of human activity
which is new, involves an inventive step and is industrially applicable
4. GEOGRAPHIC INDICATIONS Indications which identify a good as originating in the territory, where a given quality,
reputation or other characteristics of the good is essentially attributable to its geographical
origin.

Example: Indications which identify wine as coming from a specific region in France
5. LAYOUT DESIGNS
(TOPOGRAPHIES) OF
INTEGRATED CIRCUITS
6. PROTECTION OF Natural and legal persons shall have the possibility of preventing information lawfully within
UNDISCLOSED their control from being disclosed to, acquired by, or used by others without their consent in a
INFORMATION manner contrary to honest commercial practices (i.e., breach of contract, breach of
confidence, fraudulent inducement, etc.) so long as the information:
a. Is secret in the sense that it is not, as a body or in the precise configuration and
assembly of its components, generally known among or readily accessible to
persons within the circles that normally deal with the kind of information in question;
b. Has commercial value because it is secret; and
c. Has been subject to reasonable steps under the circumstances, by the person
lawfully in control of the information, to keep it secret
7. INDUSTRIAL DESIGNS Any composition of lines or colors or any three-dimensional form, whether or not associated
with lines or colors

CONCEPTS:
8. Utility model Models of implement or tools of any industrial product even if not possessed of the quality of invention
but which is of “ practical utility”
9. “Drugs and Any chemical compound or biological substance, other food, intended for use in the treatment,
medicines” prevention, or diagnosis of disease in humans or animals

KHO v. CA: Trademark, copyright, and patents are different intellectual property rights that cannot be interchanged with one
another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise
and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation
identifying or distinguishing an enterprise. Meanwhile, the scope of copyright is confined to literary and artistic works which are
original intellectual creations in the literary and artistic domain protected from the moment of creation. Patentable inventions, on the
other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is
industrially applicable.
COPYRIGHT: Right over literary and artistic works which are original intellectual creations in the literary and artistic domain
protected from the moment of creation
UNPROTECTED WORKS: The trade name and container of a medicated cream is the proper subject of trademark. Hence,
copyright and patent registration of the name and container would not guarantee the registrant the right to the exclusive use of the
same, not being the proper subjects thereof
Patentable inventions refer to any technical solution of a problem in any field of human activity which is new, involves an inventive
step and is industrially applicable

INTERNATIONAL LAW RELATED PROVISIONS:

Any person who is a national or who is domiciled or has a real and effective industrial establishment in a
country which:
1. is a party to any convention, treaty, or agreement relating to intellectual property rights or the
repression of unfair competition to which the Philippines is also a party; or
RECIPROCITY
2. extends reciprocal rights to nationals of the Philippines by law, shall be entitled to benefits to the
extent necessary to give effect to any provision of such convention, treaty, or reciprocal law, in
addition to the rights to which any owner of an intellectual property rights is otherwise entitled by this
act
Each member of the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
NATIONAL
shall accord to nationals of the other members no less favorable than that it accords its own nationals with
TREATMENT
regard to the protection of intellectual property
With regard to the protection of intellectual property, any advantage, favor, privilege, or immunity granted
MOST-FAVORED-
by a Member to the nationals of any other country shall be accorded immediately and unconditionally of
NATION TREATMENT
the nationals of all other members of WTO’s TRIPS

THE INTELLECTUAL PROPERTY OFFICE (IPO) – THE BODY THAT ADMINISTERS THE POLICIES SOUGHT TO BE
IMPLEMENTED UNDER THE IPC
Functions of the IPO:
1. Examine applications for grant of letters patent for inventions and register utility models and industrial designs
2. Examine applications for the registration of marks, geographic indications, integrated circuits
3. Register technology transfer arrangements and settle disputes involving technology transfer payments
4. Promotes the use of patent information as a tool for technology development
5. Punish regularly in its own publication the patents, marks, utility models and industrial designs, issued and approved, and the
technology transfer arrangement registered
6. Administratively adjudicate contested proceedings affecting intellectual property rights

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7. Coordinate with other government agencies and the private sector to strengthen the protection of intellectual property rights in the
country
8. Original jurisdiction over disputes relating to the term of a license involving the author’s rights
9. Enforcement functions supported by other government agencies like the PNP, NBI, and Bureau of Customs
10. Visitorial powers

COPYRIGHT
DEFINITIONS:
COPYRIGHT Right over literary and artistic works which are original intellectual creations in the literary and artistic domain
protected from the moment of creation
Author natural person who has created the work
Collective work which has been created by two (2) or more natural persons at the initiative and under the direction of
Work 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
Joint Work work prepared by two or more authors with the intention that their contributions be merged into inseparable or
interdependent parts of a unitary whole, i.e., medical textbook that is jointly authored by two or three experts
Work of an artistic creation with utilitarian functions or incorporated in a useful article, whether made by hand or produced
Applied Art on an industrial scale
Performers actors, singers, musicians, dancers, and other persons who act, sing, declaim, play in, interpret, or otherwise
perform literary and artistic work

CIVIL CODE PROVISIONS:

Intellectual creation is one of the modes of acquiring ownership under the Civil Code

Letters and other private communications in writing are owned by the person to whom they are addressed and delivered, but they
cannot be published or disseminated without the consent of the writer or his heirs

The following persons acquire ownership by intellectual creation:

1. Author with regard to his literary, dramatic, historical, legal, philosophical, scientific or other
work
2. Composer as to his musical composition
3. Painter, sculptor, or other artist with respect to the product of his art
4. Scientist or technologist or any other with regard to his discovery or invention
person

WHEN RIGHTS OVER COPYRIGHTS ARE CONFERRED: from the moment of creation
- The work is deemed created if something original is expressed in a fixed manner

WHO OWNS THE COPYRIGHT?

1. One creator creator, his heirs, or assigns own the copyright
2. Joint creator GENERAL Co-authors shall be the original owners of the copyright and in the absence of
RULE: agreement, their rights shall be governed by the rules on co-ownership
EXCEPTION: Work of joint authorship consists of parts that can be separately and the author
of each parts that can be used separately and the author of each part can be
identified, the author of each part shall be the original owner of the copyright in
the part that he has created
4. Commissioned work the person commissioning owns the work
ownership of the copyright remains the creator, unless there is a written stipulation to the contrary
5. Audio-visual work producers for purposes of exhibition
for all other purposes, the producer, the author of the scenario, the composer, the film director, the
photographic director and the author of the work are the owners
6. Pseudonymous and unless the author is undisputably known, the publisher shall be presumed to be the representative
anonymous works of the author
7. Employee’s work during employer, if the result of regular functions or duties
the course of employee owns it if it is not part of his duties
employment

DURATION OF COPYRIGHT:
1. Literary artistic works and during the life of the creator and for fifty (50) years after his death
derivative works
2. Joint creation the economic rights shall be protected during the life of the last surviving author and for
fifty (50) years after the death of the last surviving author
3. Anonymous or a until the end of fifty (50) years following the date of their first publication
pseudonymous work the fifty (50) year duration commences from January 1 following the date of publication
4. Work of applied art twenty-five (25) years from the date of making
5. Photographic works fifty (50) years from the publication of the work, or from making if unpublished
(the same term is given to audio-visual works produced by photography or analogous
processes)
6. Broadcast twenty (20) years from the date of broadcast

COPYRIGHTABLE OBJECTS
LITERARY AND ARTISTIC WORKS DERIVATIVE WORKS
1. Books, pamphlets, articles, and other writings 1. Dramatizations, translations, adaptations, abridgments,
2. Periodicals and newspapers arrangements, and other alterations of literary or artistic works
3. Lectures, sermons, addresses, dissertations prepared 2. Collection of literary, scholarly or artistic works, and
for oral delivery, whether or not reduced in writing or compilations of fata and other materials which are original by
other material form reason of their selection or coordination arrangement of their
4. Letters – this includes electronic messages and sms contents
(text) messages
5. Dramatic or dramatico-musical compositions;
choreographic works or entertainment in dumb shows
6. Musical compositions, with or without words
7. Works of drawing, painting, architecture, sculpture,

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engraving, lithography or other works of art; models or
designs for works of art
8. Original ornamental designs or models for articles of
manufacture, whether or not registrable as an industrial
design, and other works of applied art
9. Illustration, maps, plans, sketches, charts and three (3)
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 audiovisual
records
13. Pictorial illustrations and advertisements
14. Computer programs
15. Other literary, scholarly, scientific and artistic works

UNPROTECTED WORKS: Any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such,
even if they are expressed, explained, illustrated or embodied in a work
EXAMPLES:
1. Format of a television game show
2. Format of presentation of names in a telephone directory
3. Another person can still paint the painting of the oath taking of a president even if there is another person who previously painted
the same scene
4. New of the day and other miscellaneous facts having the character of mere items of press information
5. Any official text of a legislative, administrative or legal nature, as well as any official translation
6. Any work of the Government of the Philippines
o However, prior approval of the government agency or office wherein the work is created shall be necessary for
exploitation of such work for profit. Such agency or office may, among other things, impose as a condition the payment of
royalties. No prior approval or conditions shall be required for the use of any purpose of statutes, rules and regulations,
and speeches, lectures, sermons, addresses, and dissertations, pronounced, read or rendered in courts of justice, before
administrative agencies, in deliberative assemblies and in meetings of public character

PEARL & DEAN [PHIL.] v. SHOEMART: UNPROTECTED WORKS: Copyright registration over a drawing or pictorial illustration
which depicts light boxes or box-type electrical devices protects the drawing but not the light box depicted there
PURPOSES OF PATENT LAW: The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention;
second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once
the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there
for the free use of the public.

The law attempts to strike an ideal balance between the two interests: The patent system thus embodies a carefully crafted bargain
for encouraging the creation and disclosure of new useful and non-obvious advances in technology and design, in return for the
exclusive right to practice the invention for a number of years. The inventor may keep his invention secret and reap its fruits
indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive
enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people,
who are thus enabled to practice it and profit by its use.
PREJUDICIAL DISCLOSURE: Whatever right one has to the invention covered by the patent arises alone from the application date.
Thus, if the inventor voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity. Ideas,
once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint.

For example, there would be prejudicial disclosure if the inventor secured a copyright certificate for drawings that depicted light
boxes. On the assumption that the light boxes are patentable inventions, there would be prejudicial disclosure to the public by
submitting the engineering drawing thereof to the National Library for purposes of registering his copyright

RIGHTS OF AUTHORS PUBLISHER’S RIGHTS PERFORMER’S RIGHTS

Economic Rights Moral Rights
Economic rights shall 1. Require that the
consist of the exclusive authorship of the
right to: (a) carry out, (b) works be
authorize, or (c) prevent attributed to him,
the following acts: in a prominent
1. Reproduction of the way on the copies,
work or substantial and with the public
portion of the work use of the work
2. Dramatization, 2. Make any
translation, alterations of his
adaptation, work prior to, or to
abridgment, withhold it from
arrangement or publication
other transformation 3. Object to any
of the work distortion,
3. First public mutilation or other
distribution of the modification of, or
original and each other derogatory
copy of the work action in relation
4. Rental of the original to, his work which
or a copy of an would be
audio-visual or prejudicial to his
cinematographic honor or
1. The right to publish Performers shall enjoy the following exclusive
granted by the author, rights:
his heirs, or assigns 1. As regards their performances, the right of
2. The publisher shall authorizing:
have a copyright a. The broadcasting and other
consisting merely of communications to the public
the right of of their performance
reproduction of the b. The fixation of their unfixed
typographical performance
arrangement of the 2. The right of authorizing the direct or
published edition of the indirect reproduction of their
work performances fixed in sound recordings or
3. If submitted to audiovisual works or fixations in any
newspaper, magazine manner or form
and the like, the right to 3. The right of authorizing the first public
publish once materials distribution of the original and copies of
sent by a writer, a their performance fixed in sound
photographer, an artist recordings or audiovisual works or fixations
to a periodical or through sale or rental or other forms of
newspaper publisher, transfer of ownership
but such writer or artist 4. The right of authorizing the commercial
retains his copyright on rental to the public of the original and
the piece copies of their performances fixed in sound
recordings or audiovisual works or

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work reputation fixations, even after distribution of them by,
5. Public display of the 4. Restrain the use or pursuant to the authorization by the
original or a copy of of his name with performer
the work respect to any 5. The right of authorizing the making
6. Public performance work not of his available to the public of their
of the work own creation or in performances fixed in sound recordings or
7. Other a distorted version audiovisual works or fixations, by wire or
communication to of his work wireless means, in such a way that
the public of the members of the public may access them
work from a place and time individually chosen
by them
6. MORAL RIGHTS OF PERFORMERS – the
right to claim to be identified as the
performer of his performances. Exception:
where the omission is dictated by the
manner of the use of the performance, and
to object to any distortion, mutilation or
other modification of his performances that
would be prejudicial to his reputation

ACTS THAT DO NOT INFRINGE COPYRIGHT:

1. Recitation or performance of a work:
a. made accessible to the public
b. privately done
c. free of charge
d. strictly for a charitable or religious institution
2. Making of quotations from a published work:
a. compatible with fair use
b. extent is justified by the purpose
c. source and name of the author, appearing on work must be mentioned
3. Reproduction or communication to the public by mass media of articles on current political, social, economic, scientific or religious
topic, lectures, addresses and other works, delivered in public:
a. for information purposes
b. not expressly reserved
c. source is already indicated
4. Reproduction and communication to the public of literary, scientific or artistic works as part of reports of current events by means of
photography, cinematography or broadcasting to the extent necessary for the purpose
5. Inclusion of a work in a publication, broadcast, or other communication to the public, sound recording or film if made by way of
illustration for teaching purposes compatible with fair use and the source and name of the author, appearing on work, must be
mentioned
6. Recording made in schools, universities, or educational institutions of a work included in a broadcast for the use of such schools,
universities or educational institutions. Such recording must be deleted within a reasonable period; such recording may not be
made from audio-visual works which are part of the general cinema repertoire of feature films except for briefs excerpts of the work
7. Making of ephemeral recordings:
a. by a broadcasting organization
b. by means of its own facilities
c. for use in its own broadcast
8. Use made of a work by or under the direction or control of the Government (Government, National Library, Educational, Scientific,
or professional institutions) for public interest compatible with fair use
9. Public performance or the communication to the public of a work in a place where no admission fee is charged by a club on
institution for charitable or educational purpose only and the aim is not profit-making
10. Public display of the original or a copy of the work not made by means of a fil, slide, television image or otherwise on screen or by
means of any other device or process either the work has been published, sold, given away, or transferred to another person by
the author or his successors in title
11. Any use made of a work for the purpose of any judicial proceedings; or for the giving of professional advice by a legal practitioner
12. Single copy reproduction of a published work by natural person exclusively for research and private study (even without
authorization of owner)
13. Reproduction by non-profit libraries of:
a. fragile works
b. isolated articles in composite works
c. brief portions of published works
d. to preserve or replace copy that is lost, destroyed or rendered non-usable
14. One back-up copy of computer program

FAIR USE: privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as copying
the theme or ideas rather than their expression
- Fair use of a copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use,
scholarship, research and similar purpose is NOT an infringement of copyright

FACTORS TO CONSIDER TO DETERMINE WHETHER USE IS FAIR OR NOT:

1. PURPOSE AND THE CHARACTER It must be for “criticism, comment, news reporting, teaching, including multiple copies
OF THE USE for classroom use, scholarship, research, and similar purposes.

The purpose and character requirement is important in view of copyright’s goal to

promote creativity and encourage creation of works. Hence, commercial use of the
copyrighted work can be weighed against fair use

Transformative Test: generally used in reviewing the purpose and character of the
usage of the copyrighted word. This court must look into whether the copy of the
works adds “new expression, meaning or message” to transform it into something else

“Meta-use” can occur without necessarily transforming the copy-righted work used –
for the kind of use that does not necessarily transform the original work by adding
expressing, meaning, or message, but only changes the purposes of the work.

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Example: There is meta-use of photos if a news story consisted about the photos
themselves or at least a public reaction to them
2. NATURE OF THE COPYRIGHTED If the nature of the work is more factual than creative, then fair use will be weighed in
WORK favor of the user
3. AMOUNT AND SUBSTANTIALLY OF An exact reproduction of copyrighted work, compared to a small portion of it, can
THE PORTIONS USED result in the conclusion that its use is not fair. There may also be cases where, though
the entirely of the copyrighted work is used without consent, its purpose determines
that the usage is still fair.

Example: A parody using a substantial amount of copyrighted work may be

permissible as fair use as opposed to a copy of a work produced purely for economic
gain
4. EFFECT OF THE USE UPON THE If this court finds that the use had or will have a negative impact on the copyrighted
POTENTION MARKET OF THE work’s markets, then the use is deemed unfair
COPYRIGHTED WORK
DECOMPILATION: may also constitute fair use under the criteria enumerated above to the extent that such decompilation is done for
the purpose of obtaining the information necessary to achieve interoperability
- reproduction of the code and translation of the forms of a computer program to achieve the interoperability of an independently
created computer program with other programs

IMPORTATION FOR PERSONAL PURPOSES: The importation of a copy of a work by an individual for his personal purposes shall be
permitted without the authorization of the author of, or other owner of copyright

INFRINGEMENT
Where there is piracy or substantial reproduction

If so much is taken the value of the original work is substantially diminished or the labors of
HOW MADE
the original author are substantially and to an injurious extent appropriated by another

Lack of intent to pirate is not a defense

1. Directly commits an infringement
2. Benefits from the infringing activity of another person who commits an infringement if the
A PERSON INFRINGES A RIGHT
person benefiting has been given notice of infringing activity and has the right and ability
PROTECTED UNDER THIS ACT
to control the activities of the other person
WHEN ONE
3. With knowledge of infringing activity, induces, causes or materially contributes to the
infringing conduct of another
1. Injunction to prevent infringement
2. Action for damages which should be filed within four (4) years. Damages are assessed
on the basis of the proof alleged by the plaintiff of sales made by the defendant of the
infringing work minus whatever costs the defendant may be able to prove and
REMEDIES
appreciated by the court
3. Criminal case. The infringer also exposes himself to criminal liability wherein the law
prescribes penalties of imprisonment and fines, including subsidiary imprisonment in
case of insolvency
A corporation that provides satellite television service is not infringing the broadcasting and
copyright of the television station if the satellite television provider merely carries or
simultaneously retransmits the signals transmitted by the television station in its unaltered
form pursuant to the Must Carry Rule.

RE-TRANSMISSION Must Carry Rule: The NTC requires satellite and cable television provided to carry all local
stations

While the Rome Convention gives broadcasting organization the right to authorize or prohibit
rebroadcasting of its broadcast, this protection does not extend to satellite or cable
retransmission
means any technology, device or component that, in the normal course of its operation,
restricts acts in respect of a work, performance or sound recording, which are not authorized
by the authors, performers or producers of sound recordings concerned or permitted by law

Circumvention of technological measures does not itself constitute infringement.

TECHNOLOGICAL MEASURES - However, such circumvention may increase the penalty for infringement of copyright
provided that such infringement is first established

Example: Jailbreak or rooting is not by itself illegal. However, they are usually in violation of a
warrant and they can also increase the penalty for infringement of copy right if it can be
established that it was used in infringing the copyright
A lessor or owner of the place (such as a mall) where the infringement of copyright may be
committed may be held liable only if it can be established that he or she:
1. benefitted from the infringing activity
INFRINGEMENT BY LESSOR
2. has been given notice of the infringing activity and a grace period to act on the same
3. has the right and ability to control the activities of the person who is doing the
infringement
Reproduction or distribution of published articles or materials in a specialized format (but with
indication of the original owner and of the date of the original publication) exclusively for the
FORMAT FOR THE BLIND
use of the blind, visually and reading impaired persons on a non-profit basis shall NOT
constitute infringement

ABS-CBN v. PMMSI: INFRINGEMENT: Re-transmission. A corporation that provides satellite television service is not infringing the
broadcasting and copyright of the television station if the satellite television provider merely carries or simultaneously retransmits the
signals transmitted by the television station in its unaltered form pursuant to the Must Carry Rule. Under the Must Carry Rule, the
NTC requires satellite and cable television provided to carry all local stations. While the Rome Convention gives broadcasting

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organization the right to authorize or prohibit rebroadcasting of its broadcast, this protection does not extend to satellite or cable
retransmission.

TRADEMARK
TRADEMARK any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and
shall include a stamped or marked container of goods
TRADE NAME name or designation identifying or distinguishing an enterprise

No need to register trade names in order to secure protection for them

COLLECTIVE any visible sign designated as such in the application for registration and capable of distinguishing the origin or
MARK any other common characteristic, including the quality of goods or services of different enterprises which use the
sign under the control of the registered owner of the collective mark

BASIC REQUIREMENTS:
1. There must be a visible sign
2. It must be capable of distinguishing the goods of an enterprise (DISTINCTIVENESS)

FUNCTIONS
1. To indicate the origin of the goods to which they are attached
2. To guarantee the standard of quality of the goods
3. To advertise the goods

HOW MARKS ARE ACQUIRED

The rights in a mark shall be acquired through registration with the Intellectual Property Office or IPO

Registration is necessary before one can file an action for infringement

Actual use
- Prior use in the Philippines is not required before registration
- There must be actual use after registration.
o The registrant shall file a declaration of actual use of the mark with evidence to that effect within three (3) years from the
filing date of application otherwise it may be cancelled
o The registrant is required to file a declaration of actual use and evidence to that effect, or shall show valid reasons for
non-use within one (1) year from the fifth anniversary date of registration
- Certificate of registration of a mark shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the
mark, and of the registrant’s exclusive right to use the same
o Registrant’s right may be questioned by a person who has a better right, including a prior actual user
- Registration is also not important to protect the goodwill that identifies in the mind of the public the goods he manufactures or deals
in
- Registration of a mark is NOT necessary for purposes of filing a case for unfair competition or false designation of origin
o Unfair competition is present when:
 There is passing off of a product format of another
 Giving goods (or service) the appearance of goods of another

TIME OF REGISTRATION = FILING DATE OF APPLICATION

The filing date of an application shall be the date on which the IPO received the following indications and elements:
1. express or implicit indication that the registration of the mark is sought
2. identity of the applicant
3. indications sufficient to contact the application of his representative
4. reproduction of the mark
5. list of the goods or services for which registration is sought

Right may also be protected from the priority date

Subject to the rules on reciprocity, where the application is filed in the Philippines and the same applicant previously filed an application
in the countries covered by the reciprocity rule under Section 3 of the IPC, the application is deemed filed as of the day the application
was first filed in the foreign country
- There will be no registration in the Philippines until registered in such foreign country

MARKS THAT CANNOT BE REGISTERED:

1. Immoral, deceptive or scandalous matter, or matter which may disparage or falsely suggest a connection with persons, living or
dead, institutions, beliefs or national symbols, or bring them into contempt or disrepute
2. Consists of the flag or coat of arms or other insignia of the Philippines or any of its political subdivisions, or of any foreign nation, or
any simulation thereof
3. Consists of a name, portrait or signature identifying a particular living individual except 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. Identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of:
a. the same goods or services
b. closely related goods or services
c. if it nearly resembles such a mark as to be likely to deceive or cause confusion
5. Generic terms for goods or services
6. Descriptive marks including characteristics of goods like quality or quantity
7. Customary sign in everyday language
8. Color by itself
9. Shapes

LIMITATIONS
DOCTRINE OF A generic or descriptive mark may later acquire the characteristic of distinctiveness and can later be
SECONDARY MEANINGS registered if it acquires a meaning which is different from its ordinary connotation.

There must be exclusive and continuous use for a period of at least five (5) years

Examples:

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1. “Selecta” for bakery products
2. “Ang Tibay” for shoes
Although they cannot be registered by themselves, generic and descriptive marks, colors and shapes
COMPOSITE MARKS may be part of the composite mark but there should be disclaimer and the person who registers them
as part of a mark will not acquire ownership thereto
Marks may be registered even if they are contractions of or coined from generic and descriptive terms
CONTRACTIONS AND
COINED MARKS
Examples: “Salonpas”
Generic and descriptive terms may also be registered as trademarks if they are used in an arbitrary or
fanciful manner
ARBITRARY USE
Examples:
1. “Ivory” is generic for elephant tusk but arbitrary and can be registered for soap
2. “Papa” for ketchup
INTERNATIONALLY WELL-KNOWN MARKS: The persons who may question the mark (that is, oppose registration, petition for the
cancellation thereof, sue for unfair competition) include persons whose internationally well-known mark, whether or not registered, is
identical with or confusingly similar to constitutes a translation of a mark that is sought to be registered or is actually registered
- There is also protection for internationally known marks registered in the Philippines for goods that are not similar with respect to
which registration is applied for

Foreign marks that are not registered are still accorded protection against infringement and/or unfair competition under the Paris
Convention and Nice Convention

RIGHTS CONFERRED:
1. The right to the exclusive use of the mark for one’s own goods or services
2. The right to prevent others from the use of the same mark for identical goods or services in the course of trade
3. The right to the exclusive use of one’s already registered mark even for goods or services into which one’s venture expands, if
used by others for dissimilar products is likely to damage the business interests of the first venture

DURATION: ten (10) years subject to indefinite renewal for periods of ten (10) years each

INFRINGEMENT
ELEMENTS OF TRADEMARK INFRINGEMENT:
1. The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same
need not be registered
2. The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer
3. The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or
services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or services
4. The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or other
as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business
5. It is without the consent of the trademark or trade name owner or the assignee

TYPES OF CONFUSION
CONFUSION OF GOODS
When an otherwise prudent purchaser is induced to
purchase one product in the belief that he is purchasing
another, in which case defendant’s goods are then bought
as the plaintiff’s and its poor quality reflects badly on the
plaintiff’s reputation
CONFUSION OF BUSINESS
Wherein the goods of the parties are different but the defendant’s
product can reasonably (though mistaken) be assumed to originate
from the plaintiff, thus deceiving the public into believing that there is
some connection between the plaintiff and defendant which, in fact,
does not exist

MIGHTY CORPORATION v. E&J GALLO: CONFUSION OF GOODS: When an otherwise prudent purchaser is induced to
purchase one product in the belief that he is purchasing another, in which case defendant’s goods are then bought as the plaintiff’s
and its poor quality reflects badly on the plaintiff’s reputation.
HOLISTIC TEST: The Holistic Test requires the entirely of the marks in question be considered in resolving confusing similar.
Comparison of words is not the only determining factor. The trademarks in their entirety as they appear in their respective labels or
hand tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must
focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his
conclusion whether one is confusingly similar to other.
USE OF IDENTICAL MARKS NOT NECESSARILY PROHIBITED: The mark which contains the word GALLO can be used for
cigarettes without infringing the rights of the owner of another mark which also contains the same word but which was registered for
wine. It was noted that the dominant feature of the GALLO cigarette trademark is the device of a rooster and the name of the
manufacturer are clearly stated. The labels for the GALLO wine are diverse.
RELATED GOODS AND NON-RELATED; VARIABLES TO CONSIDER: It has been held that where the products are different, the
prior owner’s chance of success is a function of many variables:
1. strength of his mark
2. degree of similarity between the two marks
3. reciprocal of defendant’s good faith in adopting its own mark
4. quality of defendant’s product
5. proximity of the products
6. likelihood that the prior owner will bridge the gap
7. actual confusion
8. sophistication of the buyers

TEST:
The Court must consider:
1. the resemblance between the trademarks – MOST IMPORTANT FACTORS
2. the similarity of the goods to which the trademarks are attached
3. the likely effect on the purchaser
4. the registrant’s express or implied consent and other fair and equitable considerations

TWO TESTS IN DETERMINING SIMILARITY AND LIKELIHOOD OF CONFUSION IN TRADEMARK RESEMBLANCE:

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DOMINANCY TEST HOLISTIC TEST
Focuses on the similarity of the prevalent features of the competing Requires the entirely of the marks in
trademarks which might cause confusion or deception, and thus question be considered in resolving
infringement. confusing similar

If the competing trademark contains the main, essential or dominant Comparison of words is not the only
features of another, and confusion or deception is likely to result, determining factor
infringement takes place.
The trademarks in their entirety as they
Duplication or imitation is not necessary; nor is it necessary that the appear in their respective labels or hand
infringing label should suggest an effort to imitate. tags must also be considered in relation to
the goods to which they are attached.
The question is whether the use of the marks involved is likely to cause
confusion or mistake in the mind of the public or deceive purchaser. The discerning eye of the observer must
focus not only on the predominant words
CONTROLLING TEST but also on the other features appearing in
both labels in order that he may draw his
conclusion whether one is confusingly
similar to other.
1. “McJoy” and “Big Mack” infringe the trademark of McDonald’s and
the latter’s dominant feature is “Mc” or “Mac”
2. “Master Flavor” is an infringement of the registered marks “Master
Roast” and “Master Roast”
3. The use of the stylized “S” by respondent in its Strong rubber shoes
infringes on the mark already registered by Sketchers USA with the
IPO. While it is undisputed that petitioner’s stylized “S” is within an
example
oval design, the Court ruled that the dominant feature of the trade is
s
the stylized “S”, as it precisely the stylized “S” which catches the eye
of the purchaser. Thus, even if respondent did not use an oval
design, the mere fact that it used the same stylized “S,” the same
being the dominant feature of Sketcher USA’s trademark, already
constitutes infringement under the Dominancy Test
4. The dominant feature of the mark “Papa Ketsarap” is “Papa,” hence,
“Papa Boy” for other sauces cannot be registered

MCDONALD’S CORP. v. L.C. BIG MAK BURGER, INC.: DOMINANCY TEST: The Dominancy test is now embodied in Section 155
of the IPL and is therefore the controlling test

GREAT WHITE SHARK ENT. v. CAVALDE, JR.: HOLISTIC TEST: The Holistic Test requires the entirely of the marks in question
be considered in resolving confusing similar. Comparison of words is not the only determining factor. The trademarks in their entirety
as they appear in their respective labels or hand tags must also be considered in relation to the goods to which they are attached.
The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both
labels in order that he may draw his conclusion whether one is confusingly similar to other.

AURAL EFFECTS/IDEM SONANS RULE: In dominancy test, what are taken into account are signs, color, design, peculiar shape or
name, or some special easily remember earmarks of the brand that readily attracts and catches the attention of the ordinary consumer.
- The aural effect of the words and letters contained in the marks should be considered in determining the issue of confusing
similarity.
EXAMPLES OF CONFUSINGLY SIMILAR MARKS: EXAMPLES OF NOT CONFUSINGLY SIMILAR:
1. PYCNOGENOL is confusingly similar to PCO- LOLANE is not a colorable imitation of ORLANE due to distinct visual and
GENOL aural differences using the dominancy test
2. “DERMALINE DERMALINE, INC.” is confusingly
similar to “DERMALIN”
3. “NANNY” is confusingly similar to “NAN”; “NAN is
the prevalent feature”

DERMALINE, INC. v. MYRA PHARMACEUTICALS: AURAL EFFECTS/IDEM SONANS RULE: In dominancy test, what are taken
into account are signs, color, design, peculiar shape or name, or some special easily remember earmarks of the brand that readily
attracts and catches the attention of the ordinary consumer.
EXAMPLES OF CONFUSINGLY SIMILAR MARKS: “DERMALINE DERMALINE, INC.” is confusingly similar to “DERMALIN”
EXPANSION OF BUSINESS RULE: The protection to which the owner of a trademark is entitled is not limited to guarding his goods
or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use
by a junior appropriator of a trademark or trade name is likely to lead to a confusion of source as where prospective purchasers
would be misled into thinking that the complaining party has extended his business into the field or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of his business.

SOCIETE DES PRODUIT NESTLÉ S.A. v. MARTIN DY, JR.: “NANNY” is confusingly similar to “NAN”; “NAN is the prevalent
feature”
EXPANSION OF BUSINESS RULE: The protection to which the owner of a trademark is entitled is not limited to guarding his goods
or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use
by a junior appropriator of a trademark or trade name is likely to lead to a confusion of source as where prospective purchasers
would be misled into thinking that the complaining party has extended his business into the field or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of his business.

EXPANSION OF BUSINESS RULE: The protection to which the owner of a trademark is entitled is not limited to guarding his goods or
business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a
junior appropriator of a trademark or trade name is likely to lead to a confusion of source as where prospective purchasers would
be misled into thinking that the complaining party has extended his business into the field or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of his business.

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USE OF IDENTICAL MARKS NOT NECESSARILY PROHIBITED
The use of identical marks does not, by itself, lead to a legal conclusion that there is trademark infringement if they are NOT used for
identical, similar or related goods.
Examples:
1. Registration of the trademark “SHELL” for cigarettes was allowed although there is prior registrant for gasoline and petroleum
products
2. The trademark ESSO was allowed for cigarettes although the same was registered by another for petroleum products
3. The registration of the trademark CANNON was allowed for sandals despite the prior registration of the same for paints, chemical
products, toner and dyestuff
4. The mark which contains the word GALLO can be used for cigarettes without infringing the rights of the owner of another mark
which also contains the same word but which was registered for wine. It was noted that the dominant feature of the GALLO
cigarette trademark is the device of a rooster and the name of the manufacturer are clearly stated. The labels for the GALLO wine
are diverse.

CANON KABUSHIKI KAISA v. CA and NRS RUBBER CORPORATION: USE OF IDENTICAL MARKS NOT NECESSARILY
PROHIBITED: The registration of the trademark CANNON was allowed for sandals despite the prior registration of the same for
paints, chemical products, toner and dyestuff

NICE CLASSIFICATION OF GOODS NOT CONTROLLING IN INFRINGEMENT CASES

The mere uniformity in categorization, by itself, does not automatically preclude the registration of what appears to be an identical mark;
such circumstance does not necessarily result in any trademark infringement.

The mere fact that the products both fall under the same category of goods under the Nice Classification of Goods does not by itself
result in the finding of infringement.
- The emphasis should be on the similarity of the products involved
o NOT on the arbitrary classification or general description of their properties or characteristics

Examples:
1. The Court allowed the trademark registration of “KOLIN” over its specific goods of television sets and DVD players although
another corporation has a prior registration for automatic voltage regulator; converter recharger; stereo booster; AC-DC regulated
power supply, step-down transformer, and PA amplified AC-DC that also belongs to Class 9 of the Nice Classification of Goods
2. The Court ordered the approval of Acoje Mining’s application for registration of the trademark LOTUS for its soy sauce even
through Philippine Refining Company has prior registration and use of such identical mark for its edible oil which, like soy sauce,
also belonged to Class 47
3. The Court upheld the Patent’s Director’s registration of the same trademark CAMIA for Ng Sam’s ham under Class 47, despite
Philippine Refining Company’s prior trademark registration and actual use of such mark on its lard, butter, cooking oil (all of which
belonged to Class 47), abrasive detergents, polishing materials and soaps
4. The Court dismissed Hickok’s petition to cancel private respondent’s HICKOK trademark registration for its Marikina shoes as
against petitioner’s earlier registration of the same trademark for handkerchiefs, briefs, belts and wallets

RELATED GOODS AND NON-RELATED: Confusion of goods is evident where the litigants are actually in competition
- However, confusion of business may arise between non-competing interests and goods that are related or would tend to indicate a
connection between the foods and the owner of the mark
Non-competing goods may be those which, though they are not in actual competition, are so related
RELATED GOODS to each other that it can reasonably be assumed that they originate from one manufacturer, in which
case, confusion of business can arise out of the use of similar marks
(No single factor is preeminent):
1. The business (and its location) to which the goods belong
2. The class of product to which the goods belong
3. The product’s quality, quantity, or size, including the nature of the package, wrapper or
container
4. The nature and cost of the articles
RELATED GOODS HOW 5. The descriptive properties, physical attributes or essential characteristics with reference to their
DETERMINED form, composition, texture or quality
6. The purpose of the goods
7. Whether the article is bought for immediate consumption, that is, day-to-day household items
8. The fields of manufacture
9. The conditions under which the article is under purchased
10. The channels of trade through which the goods flow, how they are distributed, marketed,
displayed, and sold
Where the products are different, the prior owner’s chance of success is a function of many
variables:
9. strength of his mark
10. degree of similarity between the two marks
11. reciprocal of defendant’s good faith in adopting its own mark
VARIABLE TO CONSIDER
12. quality of defendant’s product
13. proximity of the products
14. likelihood that the prior owner will bridge the gap
15. actual confusion
16. sophistication of the buyers
INTERNATIONALLY WELL- Other persons or entities cannot use the internationally “well-known” mark even for unrelated goods
KNOWN MARK

IMPORTATION OF MEDICINE: There is no infringement of trademarks or trade names of imported or sold drugs and medicines as
well as imported or sold off-patent drugs and medicines which bear marks that have not been tampered, unlawfully modified or infringed
upon

USE OF CONTAINER: The mere unauthorized use of a container bearing a registered trademark in connection with the sale,
distribution or advertising of goods or services which is likely to cause confusion, mistake or deception among the buyers or consumers
can be considered as trademark infringement.
- Trademark infringement is committed when one LPG dealer refilled the LPG containers bearing the registered marks of the
trademark owner, without the consent of the latter

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PROTECTION OF TRADE NAME: A trade name (including a corporate name) need not be registered with the IPO before an
infringement suit may be filed by its owner against the owner of an infringing trademark

Example: The trademark “San Francisco Coffee” is an infringement of the trade name “San Francisco Coffee & Roastery, Inc.” even if
the said trade name is not registered with the IPO

COFFEE PARTNERS, INC. v. SAN FRANCISCO COFFEE AND ROASTERY, INC.: PROTECTION OF TRADE NAME: Example:
The trademark “San Francisco Coffee” is an infringement of the trade name “San Francisco Coffee & Roastery, Inc.” even if the said
trade name is not registered with the IPO

UNFAIR COMPETITION:
UNFAIR This involves employing deception or any other means contrary to good faith by which a person passes off his
COMPETITION goods or business or service for those of one who has already established goodwill thereto
ESSENTIAL 1. Confusing similarity in the general appearance of the goods
ELEMENTS 2. Fraud or intent to deceive the public and defraud a competition
Whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer
TEST
making his purchases under the ordinary conditions of the particular trade to which the controversy relates

SUPERIOR COMMERCIAL ENTERPRISES, INC. v. KUNNAN ENTERPRISES, LTD.: Test of unfair competition: Whether the acts
of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the
ordinary conditions of the particular trade to which the controversy relates

INFRINGEMENT OF TRADEMARK UNFAIR COMPETITION

There is unauthorized use of a trademark
It is not necessary to establish fraudulent intent in a case
for infringement of trademark
Registration of the trademark is necessary for the filing of
an action for infringement of trademark
Involves the passing off of one’s goods as those of another and giving
one’s goods the appearance of that of another
It is necessary to establish fraudulent intent in an unfair competition
case
Prior registration of a trademark is not necessary in unfair competition
Broader as it includes cases that are covered not only by the IPC but
also by Article 27 of the New Civil Code

INTER PARTES CASES: These are contested cases filed before the Intellectual Property Office
Include:
1. Opposition against the registration of a mark published for opposition
2. Petition to cancel the registration of a mark

PATENTS: include:
1. petition to cancel an invention patent, utility model registration, industrial design registration or any claim or parts of a claim
2. petition for compulsory licensing

INTER PARTES CASES PERIOD TO FILE GROUND/S VENUE

Opposition to application Within 30 days after Registration will damage the oppositor IPO
for registration publication
Cancellation Within 5 years from date Mark is confusingly similar IPO
of registration
Cancellation At any time 1. Mark becomes generic (Genericide Policy”) or descriptive IPO
Examples: Aspirin, thermos, and escalator are originally
distinctive marks that became generic or descriptive
2. Abandonment – failure to use it for an uninterrupted period of
three (3) years
3. Mark is being used to misrepresent the source of goods or
services
An administrative complaint for violations of laws involving intellectual property rights can be filed with the IPO where the total damages
claimed are not less than P200,000.00

PATENTS
PATENTABLE any technical solution of a problem in any field of human activity which is new, involves an inventive step and is
INVENTION industrially applicable
1. A technical solution of a problem in any field of human activity
REQUISITES 2. It must be novel invention
3. Industrially applicable
The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention; second, it
promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the
invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that
ideas in the public domain remain there for the free use of the public.

PURPOSES The law attempts to strike an ideal balance between the two interests: The patent system thus embodies a
carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances
in technology and design, in return for the exclusive right to practice the invention for a number of years. The
inventor may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the
consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17
years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus
enabled to practice it and profit by its use.
TERM OF A 20 years from the filing date of application
PATENT

DEFINITIONS:

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1. Novel that which does not form part of the prior act
2. “Prior act” a. that which has been made available to the public anywhere in the world before the filing fate or the
priority date of application
b. that which forms part of an application whether for patent, utility model or industrial designed, effective
in the Philippines

Provided, That the inventor or applicants are not the same and the contents of the application are
published in accordance with the requirements of patent application rules and the filing date of prior art is
earlier
3. Inventive step an invention involves an inventive step if, having regard to prior art, it is not obvious to a “person skilled in
the art” at the time of the filing date or priority date of the application claiming the invention

In case of drugs and medicine, there NO inventive step if the invention results from:
a. Mere discovery of a new form or new property of a known substance which does not result in the
enhancement of the known efficacy of that substance
b. Mere discovery of any new property or new use for a known substance
c. Mere use of a known process unless such known process results in a new product that employs at
least one new reactant
4. Person skilled in presumed to be an ordinary practitioner aware of what was common general knowledge in the art at the
the Art relevant date.

He is presumed to have knowledge of all references that are sufficiently related to one another and to the
pertinent art and to have knowledge of all arts reasonably pertinent to the particular problems with which
the inventor was involved

He is presumed also to have had at his disposal the normal means and capacity to routine work and
experimentation
5. Industrial an invention that can be produced and used in any industry
applicability

CLASSES OF PATENTABLE NON-PATENTABLE INVENTIONS

INVENTIONS
1. Useful machine 1. Discoveries, scientific theories, mathematical method
2. Product 2. Schemes, rules, and methods of performing mental acts, playing games, or doing business
3. Process and programs for computer
4. Improvement of (1), (2), or 3. Methods for treatment of the human body or animal body by surgery or therapy and
(3) diagnostic methods practiced on the human or animal body
5. Microorganism 4. Plant varieties or animal breeds of essentially biological process for the production of plants
6. Non-biological and or animals
microbiological process 5. Aesthetic creations
6. Anything which is contrary to public order or morality
7. In case of drugs and medicine, there NO inventive step if the invention results from:
a. Mere discovery of a new form or new property of a known substance which does
not result in the enhancement of the known efficacy of that substance
b. Mere discovery of any new property or new use for a known substance
c. Mere use of a known process unless such known process results in a new product
that employs at least one new reactant

PERSONS ENTITLED TO RIGHT: INVENTOR, HIS HEIRS OR ASSIGNS

When two or more persons have jointly made an invention, the right to a patent shall belong to them jointly

FIRST TO FILE RULE: If two or more persons have made the invention separately and independently of each other, the right to the
patent shall belong to the person who first filed an application for such invention

LIMITATIONS OF PATENT RIGHTS:

The following acts are NOT PROHIBITED:
Using a patented product which has been put on the market in the Philippines by the owner of the product,
OWNER’S CONSENT or with his express consent, insofar as such use is performed after the product has been so put on the
market
Importation of drugs and medicines by a government agency or by any private third party.
PARALLEL
IMPORTATION Private parties must secure a license to import from BFAD
- However, parallel importation for other patented products is not allowed without the authority of the
owner and may constitute infringement
Acts done privately and on a non-commercial purpose
NON-COMMERCIAL
Condition: The act does not significantly prejudice the economic interest of the owner of the patent
The act consists of making or using exclusively for experimental use of the invention for scientific purposes
EXPERIMENTAL USE or educational purposes and such other activities directly related to such scientific or educational
experimental use
Testing, using, making or selling the invention including any data related thereto of drugs and medicine,
DRUGS AND solely for purposes reasonably related to the development and submission of information and issuance of
MEDICINE approvals by government regulatory agencies required under any law of the Philippines or of another
country that regulates the manufacture, construction, use or sale of any product
MEDICINE Preparation for individual cases, in a pharmacy or by a medical professional, of a medicine in accordance
INDIVIDUAL with a medical prescription after a drug or medicine has been introduced in the Philippines or anywhere
PREPARATION else in the world by the patent owner, or. by any party authorized to use the invention
The exclusive right of the patent owner is exhausted after the first authorized sale, meaning, the purchaser
PATENT may thereafter use, repair and resell the product
EXHAUSTION - However, the purchaser may not reconstruct the product from the parts of products that were already
used

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PREJUDICIAL DISCLOSURE NON-PREJUDICIAL DISCLOSURE
Whatever right one has to the invention covered by the patent arises alone Any disclosure of the invention made within 12
from the application date. months before the filing date does not prejudice the
application if the disclosure is made:
Thus, if the inventor voluntarily discloses it, such as by offering it for sale, the 1. inventor himself (or by anyone who has the right
world is free to copy and use it with impunity. to patent)
2. patent office
a. when the information of the latter office
Ideas, once disclosed to the public without the protection of a valid patent, was contained in another application
are subject to appropriation without significant restraint. filed by the inventor that should not
have been disclosed by the office
For example, there would be prejudicial disclosure if the inventor secured a b. it is contained in a third person’s
copyright certificate for drawings that depicted light boxes. On the application filed without the knowledge
assumption that the light boxes are patentable inventions, there would be or consent of the inventor and the third
prejudicial disclosure to the public by submitting the engineering drawing person obtained the information
thereof to the National Library for purposes of registering his copyright directly from the inventor
3. third party – such party obtained the information
directly or indirectly from the inventor

INFRINGEMENT
making, using, offering for sale, selling, or importing a patented product or a product obtained directly
INFRINGEMENT or indirect from a patented process, or the use of a patented process without the authorization of the
patentee
1. restrain the unauthorized entity from making, using offering for sale, selling or importing the
product
THE PATENTEE SHALL 2. to prevent or prohibit the use of the process or from selling, offering for sale or importing product
HAVE THE EXCLUSIVE obtained from the process
RIGHT: 3. recover damages in a civil action for infringement which can be equivalent to royalty or an
amount that does not exceed 3 times the amount of actual damages
4. to ask that the court to order that the infringing products or goods to be destroyed
STEPTS IN DETERMINING 1. Determine if there is literal infringement. If there is literal infringement, the defendant is liable
THE PRESENCE OF 2. If there is no literal infringement, then the doctrine of equivalents should be applied
INFRINGEMENT
There is infringement of patent under this test if one makes, uses or sells an item that contains all the
elements of the patent claim.

LITERAL INFRINGEMENT This test is satisfied in either of the following:

1. Exactness rule. The item that is being sold, made or used conforms exactly to the patent claim
of another
2. Addition rule: One makes, uses, or sells an item that has all the element of the patent claim of
another plus other elements
An infringement also takes place when a device appropriate a prior invention by incorporating its
innovative concept and, although with some modification and change, perform substantially the same
function in substantially the same way to achieve substantially the same result.

The principle or mode of operation must be the same or substantially the same.

Requires satisfaction of the function-means-and-result test, the patentee having the burden to show
DOCTRINE OF that all three components of such equivalency test are met
EQUIVALENTS
Cannot be applied when the infringing invention is clearly beyond what is written in the claim

When the language of the patentee’s claims is clear and distinct. The patentee is bound thereby and
may not claim anything beyond them. And so are the courts bound, such that they may not add to or
detract from the claims matters not expressed or necessarily implied, nor may they enlarge the patent
beyond the scope of that which the inventor claimed and the patent office allowed, even if the
patentee may have been entitled to something more than the words it had chosen would include

COMPULSORY LICENSING
a license issued by the Director General of the Intellectual Property Office to exploit a
COMPULSORY LICENSING patented invention without the permission of the patent holder, either by manufacture or
through parallel importation
1. National emergency or other circumstances of extreme urgency
2. Where the public interest, in particular, national security, nutrition, health or the
development of other vital sectors of the national economy as determined by the
appropriate agency of the Government, so requires
3. Where a judicial or administrative body has determined that the manner of exploitation
by the owner of the patent or his licensee is anti-competitive
4. In case of public non-commercial use of the patent by the patentee, without
GROUNDS
satisfactory reason
5. If the patented invention is not being worked in the Philippines on a commercial scale,
although capable of being worked, without satisfactory reason: Provided, That the
importation of the patented article shall constitute working or using the patent
6. Where the demand for patented drugs and medicines is not being met to an adequate
extent and on reasonable terms, as determined by the Secretary of the Department of
Health
IN WHOSE FAVOR granted to any person who has shown his capability to exploit the invention
TIME WHEN APPLICATION FOR before the expiration of a period of four (4) years from the date of filing of the application or
COMPULSORY LICENSE CANNOT three (3) years from the date of the patent whichever period expires last
BE APPIED
REQUIREMENT TO OBTAIN A The Compulsory license will only be granted after the petitioner has made efforts to obtain
LICENSE ON REASONABLE authorization from the patent owner on reasonable commercial terms and conditions but
COMMERCIAL TERMS such efforts have not been successful within a reasonable period of time

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Effort to obtain authorization is not required in the following instances:

1. Where the petition for compulsory license seeks to remedy a practice determined after
judicial or administrative process to be anti-competitive
2. In situations of national emergency or other circumstances of extreme urgency
3. In cases of public non-commercial use
4. In cases where the demand for the patented drugs and medicines in the Philippines is
not being met to an adequate extent and on reasonable terms, as determined by the
Secretary of the Department of Health

VOLUNTARY LICENSE AND TECHNOLOGY TRANSFER AGREEMENT

contracts or agreements involving the transfer of systematic knowledge for the manufacture of a
product, the application of a process, or rendering of a service including management contracts; and
TECHNOLOGY the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of
TRANSFER computer software except computer software developed for mass market
ARRANGEMENTS
It is in the nature of VOLUNTARY LICENSE CONTRACT
IPO through the Director of the Documentation, Information and Technology Transfer Bureau shall
exercise quasi-judicial jurisdiction in the settlement of disputes between parties to a technology transfer
JURISDICTION
arrangement arising from technology transfer payments, including the fixing of appropriate amount or
rate of royalty
comes into play when two or more inventions are claimed in a single application but are of such a
nature that a single patent may not be issued for them.
DIVISIONAL
APPLICATIONS The applicant is thus required “to divide,” that is, to limit the claims to whichever invention he may elect,
whereas those inventions not elected may be made the subject of separate applications which are
called “divisional applications”

PROHIBITED PROVISIONS MANDATORY PROVISIONS

Provisions that are adverse to competition and trade are Included in voluntary license contracts:
prohibited. 1. Applicable laws are Philippine laws and in the event of litigation,
the venue shall be the proper court in the place where the
These prohibited provisions which are deemed prima facie licensee has its principal office
to have an adverse effect on competition and trade are 2. Continued access to improvements in techniques and processes
enumerated in Sections 87.1 to 87.13 of the IPC. related to the technology shall be made available during the
period of the technology transfer arrangement
3. If Arbitration is provided for in the technology transfer
Examples: arrangement, the applicable procedure is:
1. licensor reserves the right to fix the sale or resale a. Arbitration Law of the Philippines
prices of the products manufactured on the basis of the b. Arbitration Rules of the United Nations Commission on
license International Trade Law (UNCITRAL)
2. restrictions regarding the volume and structure of c. Rules of Conciliation and Arbitration of the International
production Chamber of Commerce and the venue of arbitration
3. restriction regarding the volume and structure of shall be the Philippines or any neutral country
production d. The Philippine taxes on all payments relating to the
technology transfer arrangement shall be borne by the
licensor
A Technology Transfer Agreement or any Voluntary License that contains a prohibited provision or does not contain any of the
mandatory provisions shall be considered UNENFORCEABLE.
- However, registration with the IPO is not necessary to make it enforceable

TRADE SECRETS
plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it
is necessary to confide it

includes secret formula or process not patented, but known only to certain individuals using it in compounding
some article of trade having a commercial value

may consist of any formula, pattern, device, or compilation of information that:

1. is used in one’s business
2. gives the employer an opportunity to obtain an advantage over competitor who do not possess the
information

can be a:
1. chemical composition
TRADE
2. formulation
SECRETS
3. ingredients
4. price list
5. catalogue
6. specialized customer list

protected even if it is not patentable.

- covered by the propriety rights of the owner of the trade secret and the said owner cannot be compelled to
disclose its trade secret
- Courts cannot generally issue an injunction to compel such disclosure

ingredients of consumer products are not trade secrets

- However, ingredients of chemicals supplied to airline companies are not consumer products
o Consumer products are primarily for personal, family, household or agricultural purposes
APPLICABLE not covered by the constitutional right to information
LAWS

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protected under Section 66.2 of the SRC, Article 291 and 292 of the RPC, Section 278 of the NIRC, Section 12
of Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990
The following factors can be utilized to determine if an information is a trade secret, to wit:
1. extent to which the information is known outside of the employer’s business
2. extent to which the information is known by employees and others involved in the business
FACTORS 3. extent of measures taken by the employer to guard the secrecy of the information
4. value of the information to the employer and to competitors
5. amount of effort or money expended by the company in developing the information
6. extent to which the information could be easily or readily obtained through an independent source

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BANKING & RELATED LAWS

BANKING
entities engaged in the lending of funds obtained in the form of deposits form the public
BANKS - required that banks are stock corporations and that its fund are obtained from the public
o deposits of 20 or more persons
entities engaged in the borrowing of funds through the issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivables
and other obligations
QUASI-BANKS
Deposit substitutes: alternative forms of obtaining funds from the public, other that deposits, through
the issuance, endorsement, or acceptance of debt instruments for the borrower’s own account, for the
purpose of relending or purchasing of receivables and other obligation
A bank has a vital role in providing an environment conducive to the sustained national economy.

Banking is fiduciary in nature that requires high stands of integrity and performance

Consequences of nature of business:

1. It is subject to heavy and close supervision and/or regulation by the BSP
NATURE OF BUSINESS 2. It is required to exercise utmost diligence in the handling of deposits
3. There are special rules on strikes and lock-outs – any strike or lockout involving banks, if
unsettled after seven calendar days shall be reported by the BSP to the Secretary of Labor who
has two options:
a. he may assume jurisdiction over and decide the dispute
b. certify the same to the NLRC
The law also allows the President of the Philippines to, at any intervene and assume jurisdiction
over such labor dispute in order to settle or terminate the same
A banking or quasi-banking corporation cannot be incorporated without authority from the BSP
AUTHORITY TO
INCORPORATE AND
OPERATE The Articles of Incorporation to be filed with the SEC should be accompanied by the favorable
recommendation of the BSP, otherwise, it shall not be accepted or approved

NOT ENGAGED IN BANKING BANKING

Investment company that performs functions Investment company which loans out the money of its customers, collects
- Investment company that is engaged solely in the interests, and charges a commission to both lender and borrower
investing, reinvesting or trading in securities

SIMEX INTERNATIONAL [MANILA] INCORPORATED v. CA: CONSEQUENCES OF NATURE OF BUSINESS: It is required to

exercise utmost diligence in the handling of deposits

CLASSIFICATION OF BANKS
1. UNIVERSAL BANKS banks that have authority to exercise, in addition to the powers and functions of
commercial banks, powers of an investment house and the power to invest in non-allied
enterprises
2. COMMERCIAL BANKS banks that are given all such power necessary to engage in commercial banking in
addition to general corporate powers; commercial banking includes the power to accept
drafts, issue letter of credits, discounting and negotiation of negotiable instruments and
evidence of debt, accept and create demand deposits and the like
3. RURAL BANKS banks that are created to make needed credit available and readily accessible in the rural
areas for the purpose of promoting comprehensive rural development
4. THRIFT BANKS include savings and mortgage banks, private development banks, and stock savings and
loans association
5. COOPERATIVE BANKS banks that primarily provide financial, banking and credit services to cooperative
organizations and their members
6. ISLAMIC BANKS
7. OTHER CLASSIFICATION OF
BANKS AS DETERMINED BY
THE MB OF THE BSP

DISTINCTIONS:
as to capitalization different minimum capitalization requirements
as to purpose Some of the banks have specific purposes and social functions.
RURAL BANKS – meant to hasten rural development
as to powers or There are functions and powers that are not exercised by one that are exercise by others
functions Some banks may exercise certain powers only upon prior approval of the Monetary Board
UNIVERSAL BANKS and COMMERCIAL BANKS – can create and accept demand deposits without
separate authority; may be involved in quasi-banking functions
OTHER BANKS – must secure authority from the Monetary Board
UNIVERSAL BANKS – may act as an investment house

as to who can be RURAL BANKS – public officers can be directors

directors OTHER BANKS – public officers are prohibited
as to incorporators GENERAL RULE: Incorporators of banks are natural persons
EXCEPTION: RURAL BANKS – can be organized or established by cooperatives and corporations
primarily organized to hold equities in rural banks
as to foreign equity RURAL BANK – wholly owned by Filipinos
OTHER BANKS – 100% of outstanding capital of other banks can be acquired by foreign banks
as to necessity of public Public offering of shares is necessary for domestic banks seeking authority to act as UNIVERSAL
offering BANKS

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OTHER BANKS – no such requirement

ENTRY OF FOREIGN BANKS

FULL ENTRY OF FOREIGN BANKS IN THE PHILIPPINES: to create a more competitive environment and encourage greater foreign
participation

The Monetary Board may authorize foreign banks to operate in the Philippine banking system through any one of the following modes
of entry:
1. by acquiring, purchasing or owning up to 100% of the voting stock of an existing bank
2. by investing in up to 100% of the voting stocks of a new banking subsidiary incorporated under the laws of the Philippines
3. by establishing branches with full baking authority

FUNCTIONS OF BANK
Basic Function Other Functions
DEPOSIT LOAN Universal banks and commercial banks (as well as other banks depending on the type of bank
FUNCTION FUNCTION and/or the corresponding authority given by the Monetary Board may also exercise any of the
following functions:
1. Receive in custody funds, documents, and valuable objects
2. Act as financial agent and buy and sell, by order of and for the account of their customers,
shares, evidences of indebtedness and all types of securities
3. Make collections and payments for the account of others and perform such other services
for their customers as are not incompatible with banking business
4. Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or
administrator of investment management/ advisory/ consultancy accounts
5. Rent out safety deposit boxes – this is special type of deposit and not mere lease; hence it
cannot be stipulated that the bank is relieved from any liability

PROHIBITED ACTS:
1. engaging in insurance business
2. outsourcing of functions
Example: a bank cannot hire another company to accept deposit

DEPOSIT FUNCTION
Fixed, savings and current deposits of money in banks and similar institutions shall be governed by the
provisions concerning simple loan
SIMPLE LOAN
BANK – debtor
DEPOSITOR – creditor
1. The bank can make use as its own the money deposited. Said amount is not being held in trust for the
depositor nor is it being kept for safekeeping
2. Third persons who may have a right to the money deposited cannot hold the bank responsible unless
there is a court order or garnishment. The duty of the bank is to its creditor-depositor and not to third
persons. IF a third person has a valid right over the money deposited, he must prove the same before a
court of competent jurisdiction
CONSEQUENCES:
3. The officers of the bank cannot be held liable for estafa if they authorized the use of the money deposited
by the depositor. There would be no liability for estafa under Article 315(1)(b) of the RPC even if the bank
failed to return the amount deposited
4. The bank has the right to compensation. It can set off the deposits with the indebtedness of the depositor
that are due and demandable
5. Deposits are common preferred credit

GUINGONA v. CITY FISCAL OF MANILA: CONSEQUENCES OF SIMPLE LOAN: The officers of the bank cannot be held liable for
estafa if they authorized the use of the money deposited by the depositor. There would be no liability for estafa under Article 315(1)
(b) of the RPC even if the bank failed to return the amount deposited

DEPOSITORS:
MINORS MARRIED WOMAN
They can open bank accounts in their own right provided that: They are allowed to open bank
1. they are at least seven years of age accounts without the assistance of
2. they are able to read and write and have sufficient discretion their husbands
3. they have not otherwise disqualified by any other incapacity
4. the accounts should only be saving or time deposits

Parents may nevertheless deposit for their minor children and guardians for their wards

Thrift Banks – if any guardian shall give notice in writing to any thrift bank not to make
payments of deposits, dividends, or interest to the minor of whom he is the guardian, then
such payment shall be made only to the guardian

KINDS OF DEPOSITS:
1. DEMAND DEPOSITS all those liabilities of banks which are denominated in Philippine currency and are subject to
payment in legal tender upon demand by presentation of checks subject to the following
rules:
a. Generally, only a universal bank or commercial bank can accept or create demand
deposits
b. A bank, other than a universal bank or commercial bank cannot accept demand
deposits except upon prior approval of the Monetary Board
c. Temporary overdrawing against current accounts shall not be allowed unless caused
by normal bank charges and other fees incidental to handling such accounts
d. Drawing against uncollected deposits (i.e., uncleared checks) are generally prohibited
2. SAVINGS ACCOUNT This is the most common type of deposit and is usually evidence by a passbook

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a. Banks are prohibited from issuing/accepting withdrawal slips or any other similar
instruments designed to effect withdrawals of saving deposits without requiring the
depositors concerned to present their passbooks and accomplishing the necessary
withdrawal system
b. The requirement of presentation of passbook is usually included in the terms and
conditions printed in the passbook. A bank is negligent if it allows the withdrawal
without requiring the presentation of a passbook
3. NEGOTIABLE ORDER OF interest-bearing deposit account that combine the payable on demand feature of checks
WITHDRAWAL ACCOUNTS and investment feature of saving account
(NOW) ACCOUNTS
4. TIME DEPOSITS an account with fixed term

INTERESTS: Demand, savings, NOW accounts, time deposits and deposit substitutes shall not be subject to interest ceiling

OTHER ACCOUNTS: Bank accounts may be opened by one individual or by two or more persons.
- Whenever two or more persons open an account, the same may be an “and/or account? or an “and” account

GENERAL RULE: Anonymous accounts are prohibited

EXCEPTION: Peso and Foreign currency non-checking deposit accounts, which may be “ numbered
accounts”
However, the law and BSP rules require that necessary measures and undertaken by the bank to record and establish the true identity
of the depositor.
Know-your-client (KYC Principle): Banks are required to have face-to-face contact and personal interview of the customer especially
prior to account opening or the commencement of banking relationship

Joint accounts may be subject of a survivorship agreement whereby the co-depositors agree to permit either of them to withdrawn
the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them.

VITUG v. CA: Joint accounts may be subject of a survivorship agreement whereby the co-depositors agree to permit either of
them to withdrawn the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them.

SECRECY OF BANK DEPOSITS

PESO DEPOSITS
All deposits of whatever nature with banks or banking institutions in the Philippines including investments in
bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are
PESOS DEPOSITS
considered absolutely confidential and may not examined, inquired or looked into by any person, government
official, bureau or office
The following cannot be done in connection with bank deposits:
1. Bank deposits may not be examined, inquired or looked into by any person, government official, bureau
or office
2. Any official or employee of a banking institution may not disclose to any person other than those
PROHIBITED ACTS mentioned in Section 2 any information concerning said deposits
3. In camera inspection of the bank deposit record

A news reporter that reported what he overheard from the conversation of two bank employees about a
bouncing check of a depositor is NOT violating the law
EXCEPTIONS A bank depositor may be inquired into in the following cases:
1. When there is written permission of the depositor or investor; Example: A stockholder cannot inspect the
bank deposits of his corporation without the consent of the latter; his right to inspect as shareholder is
subject to bank secrecy law
2. Impeachment cases
3. Upon the order of a competent court in cases of bribery or dereliction of duty of public officials
4. Upon the order of a competent court in cases where the money deposited or invested is the subject of
litigation
5. Upon order of the competent court or tribunal in cases involving explained wealth under the Anti-Graft
and Corrupt Practices Act – note that not all violations of R.A. 3019 fall under the exceptions; the
exception applies even if the unexplained wealth was placed in another person’s name
6. Upon inquiry by the Commissioner of Internal Revenue for the purpose of determining the net estate of a
deceased depositor
7. Upon the order of a competent court, by the Anti-Money Laundering Council where there is probable
cause of money laundering; Example: A Committee of the House of Representative is not authorized to
order the examination of deposits
8. Examination by the Anti-Money Laundering Council (AMLC) even without court order, in the three cases
mentioned in Section 11 of the Anti-Money Laundering Act
9. Disclosure to the Treasurer of the Philippines for dormant deposits for at least ten (10) years under the
Unclaimed Balances Act
10. Report of banks to AMLC of covered and/or suspicious transactions
11. Upon order of the Court of Appeals, examination by law enforcement officers in terrorism cases under
the Human Security Act
12. Investigation where AMLC is authorized to look into or examine deposits and investments with any
banking institution or non-bank financial institution and their subsidiaries and affiliates without court order
13. Philippine Deposit Insurance Corporation’s inquiry into and examination of deposit accounts and all
information related thereto in case thereto in case there is a finding of unsafe or unsound banking
practice under Eighth paragraph of Section 8 of R.A. No. 3591 as amended by R.A. No. 9576
14. Examination and inquiry into deposit records by PDIC when there is failure of prompt corrective action
as declared by the Monetary Board due to capital deficiency
15. When there is a waiver in case of DOSRI loans
16. Disclosure to the BSP in the course of examination to ensure compliance with the Anti-Money
Laundering Act and testing of numbered accounts

Non-disclosure without Court order of any information relative to the funds or properties of its clients is also
required.

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- However, bank deposits shall continue to be governed by the Law on Secrecy of Bank Deposits
Examples: A bank cannot disclose matters relating to the trust accounts of the client with the bank both
under Section 55(b) of the GBL and R.A. No. 1405.

One of the exceptions is when there is a written waiver. Mere silence is not sufficient and failure to object
during the proceedings where a bank deposit is involved does not amount to waiver. In the case an insolvent
where a receiver is appointed, the conformity of the receiver is necessary for the written waiver to be valid
SUBJECT MATTER The inquiry into bank deposits allowable under R.A. No. 1405 must be premised on the fact that the money
OF LITIGATION deposited in the account is itself the subject of the action

EJERCITO v. SANDIGANBAYAN: Non-disclosure without Court order of any information relative to the funds or properties of its
clients is also required. However, bank deposits shall continue to be governed by the Law on Secrecy of Bank Deposits
Examples: A bank cannot disclose matters relating to the trust accounts of the client with the bank both under Section 55(b) of the
GBL and R.A. No. 1405.

BSP GROUP, INC. v. SALLY GO: SUBJECT MATTER OF LITIGATION: Example: The criminal Information filed with the trial court
charged the accused with qualified theft by abusing his employer’s trust and confidence and stealing cash in the amount of
P1,534,135.50. On the premise that the accused had deposited the stolen amounts to her personal banking account, the prosecution
moved for the issuance of subpoena duces tecum ad testificandum against the respective managers or records custodians of the
bank. The trial court granted the motion and issued the corresponding subpoena. The Supreme Court ruled that there is violation of
the law on secrecy bank deposits. The High Court explained that the admission of testimonial and documentary evidence relative to
respondent’s Security Bank account serves no other purpose than to establish the existence of such account, its nature and the
amount kept in it. It constitutes an attempt by the prosecution at an impermissible inquiry into a bank deposit account the privacy and
confidentiality of which is protected by law.

FOREIGN CURRENCY DEPOSITS

The above-enumerated exceptions do not apply to foreign currency deposits. There is only one exception under the Foreign Currency
Deposits Act although another is provided for under the Anti-Money Laundering Law. Therefore, the exceptions are:
1. When there is written consent of the depositor under Section 8 of the Foreign Currency Deposits Act
2. Under Section 11 of the Anti-Money Laundering Act
3. Under Section 27 and 28 of the Human Security Act
4. Under Section 10 of R.A. No. 10168 where the AMLC is authorized to inquire into or examine deposits and investments with any
banking institution or non-bank financial institution and their subsidiaries and affiliates without a court order
5. Examination and disclosure to the Commissioner of Internal Revenue under Section 6(F) of the NIRC
6. Disclosure of the BSP in the course of examination to ensure compliance with the Anti-Money Laundering Act
7. Philippine Deposit Insurance Corporation’s inquiry into and examination of deposit accounts and all information related thereto in
case there is a finding of unsafe or unsound banking practice under the Eighth paragraph of Section 8 or R.A. No. 3591

SECRECY OF DEPOSITS UNDER THE ANTI-MONEY LAUNDERING LAW:

GENERAL The AMLC may inquire into deposits upon order of the court when there is probable cause that the deposits are
RULE: related to the crime of unlawful activities.
EXCEPTION: A court order is not even necessary when the offense or unlawful activity involved is any of the following:
1. Kidnapping for ransom
2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15, and 16 of R.A. No. 9165 (Dangerous Drugs Act)
3. Hijacking and other violations under R.A. No. 6235; destructive arson and murder, as defined under RPC
including those perpetrated by terrorist against non-combatant persons and similar targets

GARNISHMMENT
Bank accounts may be garnished by the creditors of the depositor. There is no violation of the Law
GARNISHMENT on Secrecy of Bank Deposits if the accounts are garnished. The amount of the deposit is actually
not disclosed and the intent of the legislature does not cover garnishment
DEPOSITS THAT ARE 1. Foreign Currency Deposits
EXEMPT FROM 2. Those exempt under the Rules of Civil Procedure like provision for the family for four months
GARNISHMENT

SALVACION, ET. AL. v. CENTRAL BANK OF THE PHILIPPINES: DEPOSIT THAT ARE EXEMPT FROM GARNISHMENT;
FOREIGN CURRENCY DEPOSITS: The Supreme Court ruled, by way of exception, that foreign currency deposits of an American
tourist who was found guilty of repeatedly raping a 12-year old child is subject to garnishment

DEPOSIT INSURANCE
DEPOSIT INSURANCE
All deposit liabilities of banks are insured with the Philippine Deposit Insurance Corporation
the 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 passbook, certificate of deposit or other evidence of deposit or issued in
accordance with BSP rules and regulations and other applicable laws.

DEPOSIT
include such other obligations of a bank, which, consistent with banking usage and practices, the
PDIC Board shall determine and prescribe by regulations to be deposit liabilities of the bank

INSURED DEPOSIT
CAN THE MAXIMUM
DEPOSIT INSURANCE BE
ADJUSTED?
In the case of any negotiable certificate of deposit, the owner or holder thereof shall be recognized as
a depositor ONLY if his name is registered as owner/ holder thereof in the books of the issuing bank
the amount due to any bona fide depositor for legitimate deposits in an insured bank as of the date of
closure but not to exceed P500,000.00
Full payment of the amount of the insured deposit will be made by PDIC subject to payment of the
depositor’s obligation to the bank, if any, thereafter
Yes, the maximum deposit insurance cover may be adjusted in such amount, for such a period,
and/or for such deposit products, provided the following are complied with:
1. The Monetary Board has determined that there is a condition that there is a condition that

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DEPOSITS NOT COVERED
BY INSURANCE
SPLITTING OF DEPOSIT
threatens the monetary and financial stability of the banking system that may have systemic
consequences
2. The adjustments are approved by a unanimous vote of the Board of Directors of PDIC in a
meeting called for the purpose and chaired by the Secretary of Finance
3. The adjustments are approved by the President of the Philippines
The PDIC shall not pay deposit insurance for the following accounts or transactions, whether
denominated, documented, recorded or booked as deposit by the bank:
1. The amount in excess of the insured deposit of P500,000.00
2. Deposit that is payable in a place outside the Philippines (Examples: in foreign branches)
3. Investment products such as bonds and securities, trust accounts, and other similar instruments
4. Deposit accounts or transactions which are fictitious or fraudulent
5. Deposit accounts or transactions constituting, and/or emanating from, unsafe and unsound
banking practice/s as determined by PDIC’s Board after notice and hearing and publication of
cease and desist order
6. Deposits that are determined to be the proceeds of an unlawful activity as defined under Anti-
Money Laundering Law
7. Deposits accounts that resulted from splitting of deposit
8. Money placements by the head office of a foreign bank in its branch in the Phils., because there
is only one entity
9. Inter-branch deposits: refer to funds of one branch or the Head Office of a bank in another
branch. These branches are part of one and the same juridical entity
10. When the transfer of funds of a branch in the Philippines of a foreign bank, which resulted in
inter-branch transactions, took place in the books of accounts of the branch in the head office
located abroad, the inter-branch transaction is not covered by deposit insurance because it is
payable outside the Philippines
occurs whenever a deposit account with an outstanding balance of more than P500,000.00 under the
name of a person is broken down and transferred to two or more accounts in the names of persons
or entities who have no beneficial ownership in the transferred deposits within 120 days immediately
preceding or during a bank-declared bank holiday or immediately preceding a closure order issued
by the Monetary Board for the purpose of availing of the maximum deposit insurance coverage.

This a CRIMINAL ACT and the deposits are not entitled to any insurance payment
There shall be added together all deposits in the bank maintained in the same right and capacity for
his benefit either in his own name or in the name of others

1. A joint account regardless of whether the conjunction “and,” “or,” “and/or” is used, shall be
insured separately from any individually-owned deposit account
2. If the account is held jointly by two or more natural persons, or by two or more juridical persons
DETERMINATION OF or entities, the maximum insured deposit shall be divided into as many equal shares as there are
AMOUNT DUE individuals, juridical persons or entities, unless a different sharing is stipulated in the document
of deposit
3. If the account is held 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
4. 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 the maximum insured deposit of P500,000.00
The proceeds of the insurance shall be paid by the PDIC within six months to the depositor counted
from the filing of the claim whenever the insured bank is closed on account of insolvency; otherwise
the concerned officer, director or employee of PDIC shall have criminal liability if there is grave abuse
of discretion, gross negligence, bad faith or malice

An insured bank shall be deemed to have been closed on account of insolvency when ordered
WHEN PAYMENT IS MADE closed by the Monetary Board of the BSP

The claim must be filed within two years from actual takeover by the receiver

The insurance coverage may be terminated if a bank does not comply within 30 days from receipt of
notice, with a cease and desist order issued by the PDIC related to a deposit-related unsafe or
unsound banking practice

PHILIPPINE DEPOSIT INSURANCE CORP. v. CA: The liability of the PDIC for insured deposits rests upon the existence of
deposits with the insured bank, not on the negotiability or non-negotiability of the certificates evidencing these deposits. In fact, the
claimant cannot recover even if he can present a negotiable certificate of deposit if there is actually no deposit
PDIC did not validly reject the claim. MB Bank and its client should be given the benefit of the doubt that they were not aware that
the Monetary Board Resolution had been passed. Mere conjectures that MB Bank had actual knowledge of its impending closure did
not suffice. The Resolution could not thus have nullified the transactions that were entered into prior to the receipt of the Resolution
of MB Bank.

POWERS BEFORE CLOSURE POWERS AFTER CLOSURE

1. PDIC is authorized to make loans to, or purchase
the assets of, or assume liabilities of, or make
deposits in a bank in danger of closing upon its
acquisition by a qualified investor or in the
qualified investor that makes the purchase
2. PDIC can institute corrective actions if no
corrective action is implemented by the Monetary
Board
3. PDIC is authorized to terminate the insured
status of a bank if the latter engages in unsafe
and unsound banking practices
4. PDIC to implement “resolution” as a preventive
1. There is no more 90-day receivership period and the PDIC can proceed
directly to liquidation when a bank is ordered closed
2. PDIC has the authority to facilitate and implement the purchase of the
assets of the closed bank and the assumption of its liabilities by
another bank without need for approval of the liquidation court; PDIC
shall resort to the immediate assignment od encumbered assets to
creditors as well as the purchase of assets of assumption of liabilities
as a mode of liquidation
3. Banks shall ordered closed by the Monetary Board shall no longer be
rehabilitated

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mechanism in relation to banks with problems

UNCLAIMED BALANCES: include credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and
interest thereon with banks, buildings and loads associations, and trust corporations, as hereinafter defined, in favor of any person
known to be dead or who has not made further deposits or withdrawals during the preceding 10 years or more.
Deposits that have become dormant for a period of 10 years may be escheated in favor of the government
- There should be notice to the depositor of the unclaimed balance.
- The bank (including building and loan associations and trust companies) is required to report (sworn statement) to the Treasurer of
the Philippines the existence of such deposits. The Treasurer will in turn inform the Solicitor General who will then initiate the
proper escheat proceedings in Court.
- Publication of a list of unclaimed balanced
- Such unclaimed balances, together with the increase and proceeds thereof, shall be deposited with the Treasurer of the
Philippines to the credit of the Government of the Philippines to be used as the Congress may direct

RCBC v. HI-TRI DEV. CORP.: UNCLAIMED BALANCES: There should be notice to the depositor of the unclaimed
balance.

LOAN FUNCTIONS OF BANK

1. A bank shall grant loans and other credit accommodations only in amounts and for the periods of time
essential for the effective completion of the operations to be financed
BASIC RULES/ 2. Such grant of loans and other credit accommodations shall be consistent with safe and sound banking
RESTRICTIONS practices
3. Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is capable
of fulfilling his commitments to the banks
1. Amortization schedule of bank loans and other credit accommodations shall be adapted to the nature of
operations to be financed
2. For loans and other credit accommodations with maturities of more than 5 years, provisions must be
PAYMENTS made for periodic amortization payments, but such payment musts be made at least annually
3. A borrower may at any time prior to the agreed maturity date prepay, in whole or in part, the unpaid
balance of any bank loan and other credit accommodation, subject to such reasonable terms and
conditions as may be agreed upon between the bank and its borrower
Ceiling – the total amount of loans, credit accommodations and guarantees that may be extended by a bank
to any person, partnership, association, corporation or other entity shall at no time exceed 25% of the net
worth of such bank

SINGLE
Basis for determining compliance with the single borrower’s limit: total credit commitment of the bank to the
BORROWER’S
LIMIT
The total amount of loans, credit accommodations and guarantees may be increased by an additional 10% of
the net worth of the bank provided the additional liabilities of any borrower are adequately secured by trust
receipts, shipping documents, warehouse receipts or other similar documents transferring or securing title
covering readily marketable, non-perishable goods which must be fully covered by insurance

DOSRI ACCOUNTS
Restrictions (not a total prohibition) are imposed on borrowings and security arrangement by directors,
DOSRI ACCOUNTS
officers and stockholders of the bank and their related interest (hence, the term DOSRI)
1. The borrower is a director, officer or any stockholder of a bank (and related interests)
2. He contracts a loan or any form of financial accommodation
3. The loan or financial accommodation is from:
a. his bank
b. a bank that is a subsidiary of a bank holding company of which both his bank and lending
REQUISITES UNDER
bank are subsidiaries
ARTICLE 26, NCBA
c. a bank in which a controlling proportion of the shares is owned by the same interest that
owns a controlling proportion of the shares of his bank
4. The loan or financial accommodation of the director, officer or stockholder, singly or with that of his
related interest, is in excess of 5% of the capital and surplus of the lending bank or in the maximum
amount permitted by law, whichever is lower

RESTRICTIONS UNDER THE GBL: RESTRICTIONS UNDER SECTION 26, NCBA:

1. Procedural The account should be upon written approval of the
Requirement majority of all the directors of the lending bank excluding
the director concerned
2. Arms Length The account should be upon terms not less favorable to
Rule the bank than those offered to others
3. Reportorial The resolution approving the loan shall be entered in the
Requirement records of the bank and a copy of the entry shall be
transmitted forthwith to the Supervising and Examination
Sector of the BSP
4. Aggregate The Monetary Board may regulate the amount of loans,
Ceilings credit accommodations and guarantees that may be
extended, directly or indirectly, by a bank to its directors,
officers, stockholders and their related interests, as well
as investments of such bank in enterprises owned or
controlled by said directors, officers, stockholders and
their related interest. The Manual of Regulations for
Banks provided that the aggregate of 15% of the total
loan portfolio of the bank or 100% of the combined
capital account whichever is lower
5. Individual The outstanding loans, credit accommodations and
Ceilings guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related
interests, shall be limited to an amount equivalent to
1. The borrower shall be required by the lending
bank to waive the secrecy of his deposits of
whatever nature in all banks in the
Philippines. The directors, officers or
stockholders are required to make such
waiver if they themselves are the borrowers
2. The accounts are subject to examination but
any information obtained from an examination
of his deposits shall be held strictly
confidential and may be used by examiners
only in connection with their supervisory and
examination responsibility or by the BSP in an
appropriate legal action it may initiate
involving the deposit account

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their respective unencumbered deposits and book value
of their paid-in capital contribution in the bank

The ceilings do not apply to loans, credit

accommodations and guarantees:
a. secured by assets considered by the Monetary
Board as non-risk items
b. under a fringe benefit plan approved by the BSP
c. extended by cooperative banks to its cooperative
stockholders

COLLATERALS
Value of Collaterals: The loan shall not exceed 75% of the appraised value of the real property plus 60% of the appraised value of the
improvement or 75% of the appraised value of the chattel
- The collateral value cap may, however, be reduced by the Monetary Board, or increased in special cases

Foreclosure of Mortgage:
Redemption Period for Natural Persons Redemption Period for Juridical Persons
The mortgagor or debtor, who is a natural person, whose A juridical person, whose property has been sold
real property has been sold for the full or partial payment pursuant to an extrajudicial foreclosure, shall have
REDEMPTION of his obligation shall have the right within one year after the right to redeem the property but not after the
PERIOD the sale of the real estate, to redeem the property. The registration of the certificate of foreclosure sale with
one-year redemption period should be counted from the the proper Register of Deed which in case shall be
date of the registration of the certificate of same with the more than three months after foreclosure,
Register of Deeds whichever is earlier
Redemption may be exercised by paying the amount due under the mortgage deed, with interest thereon at the
REDEMPTION
rate specified in the mortgage, and all the costs and expenses incurred by a bank or institution from the sale and
PRICE
custody of said property less the income derived therefrom
The purchaser at the auction sale concerned whether in a judicial or extrajudicial foreclosure shall have the right
POSSESSION to enter upon and take possession of such property immediately after the date of the confirmation of the auction
sale and administer the same in accordance with law
Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this
INJUNCTION provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court
AND BOARD conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the
foreclosure

Shares: No bank shall purchase or acquire shares of its own capital or accept its own shares as a security for a loan, except when
authorized by the Monetary Board
- In every case the stock so purchased or acquired shall, within six months from the time of its purchase or acquisition, be sold or
disposed of at a public or private sale

PROHIBITED ACTS OF BORROWERS:

1. Fraudulently overvalue property offered as security for a loan or other credit accommodation for a bank
2. Furnish false or make misrepresentation or suppression of material facts for the purpose of obtaining, renewing, or increasing a
loan or other credit accommodation or extending the period
3. Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation
4. Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other form of compensation in order to
influence such persons into approving a loan or other credit accommodation application

OWNERSHIP OF BANKS
FOREIGN OWNERSHIP FILIPINO STOCKHOLDINGS STOCKHOLDINGS OF FAMILY GROUPS
OR RELATED INTERESTS
Individuals and Non- Foreign Banks limiting ownership and control law does not prohibit ownership of the
banks of the voting stock of a stock by members of the same family or
control up to 40% of the not subject to 40% domestic bank to a maximum related interests
voting stock of a domestic limitation of 40% - shall apply to Filipinos
bank and domestic non-bank stockholdings of individuals related to each
foreign banks may corporations other within the fourth degree of
percentage of foreign- acquire 100% of the - refer to individual equity consanguinity or affinity, legitimate or
owned voting stock shall be voting stocks of an participation common-law shall be considered family
determined by the existing bank or grounds or related interest and must be
citizenship of the individual invest in up to 100% fully disclosed in all transactions by such
stockholders in that bank of the voting stocks individuals, corporations or related groups
of a new subsidiary with the bank
the citizenship of the
corporation which is a
stockholder in a bank shall
follow the citizenship of the
controlling stockholders of
the corporation
- Controlling
stockholders:
individuals holding
more than 50% of the
voting stock of the bank

PARTICULARS OWNERSHIP
CEILING
1. Voting shares of stock of a foreign individual or a foreign non-bank corporation in:
a. UB/KB and TB 40%
b. RB 60%
2. Aggregate ownership of the voting shares of stock of foreign individual and/or foreign non-bank
corporation in:

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a. UB/KB
b. TB/RB 40%
60%
3. Voting shares of stock of a qualified foreign bank in UB, KB, TB and RB 100%
4. Combined ownership of the voting shares of stock of qualified foreign banks in UB, KB, TB and RB 100%
5. Voting shares of stock of a Filipino individual or a Philippine non-bank corporation in:
a. UB/KB and TB 40%
b. RB 60%
Voting shares of stock of a qualified Philippine corporation in UB, KB, TB and RB prior to effectivity of
R.A. No. 10641
c. Combined ownership of an individual and corporation/s which is/are wholly-owned or a majority 60%
of the voting shares of stock of which is owned by such individual in:
i. UB/KB/TB
ii. RB 40%
60%

DIRECTORS AND OFFICERS

There shall be at least five, and a maximum of 15 members of the board of directors of a bank, two of whom
shall be independent directors

Merged or consolidated banks: maximum number of directors is 21

Independent director: a person other than an officer or employee of the bank, its subsidiaries or affiliates or
related interest

COMPOSITION OF Non-Filipino citizens may become members of the board of directors of a bank to the extent of the foreign
BOARD participation in the equity of said bank

GENERAL RULE: No appointive or elective public official, whether full-time or part-time, shall at the same
time serve as officer of any private bank, save in cases where such service is incident to financial
assistance provided by the government or a government-owned or controlled corporation to the bank or
unless otherwise provided under existing laws
EXCEPTION: Section 5 of the Rural Banks Act of 1992 provides that nothing in the said Act “shall be
construed as prohibiting any appointive or elective official from serving as director, officer, consultant or in
any capacity in the bank”
The meetings of the board of directors may be conducted through modern technologies such as, but not
MEETINGS
limited to, teleconferencing and video-conferencing
Fit and Proper Rule: The Monetary Board is authorized to pass rules providing for the qualifications and
disqualifications of individuals elected or appointed bank directors or officers and to disqualify those found
unfit after due notice.
QUALIFICATIONS
In determining whether an individual is fit and proper to hold the position of a director or officer of a bank,
regard shall be given to his integrity, experience, education, training, and competence

REGULATIONS TO MAINTAIN LIQUIDITY AND SECURITY

REGULATIONS TO MAINTAIN LIQUIDITY AND SECURITY
Certain regulatory provisions in the General Banking Law as well as the
New Central Bank are geared towards the purpose of maintaining liquidity
and security. These regulations include those relating to loans and other
matters:
1. The Monetary Board shall prescribe the minimum ratio which the net
worth of a bank must bear to its total risk assets which may include
contingent accounts
2. The law imposes limits on loans, credit accommodations and
guarantees that may be extended by banks
3. Limitation is placed on the bank’s exposure to directors, officers,
stockholders, and their related interest
4. The law imposes restrictions on the value of collaterals on loans
5. The Monetary Board may provide for restrictions on unsecured loans
6. The Monetary Board may prescribe the maturities and other terms and
conditions for various types of loans and accommodations
7. The law provides restrictions on dividend declaration
DIVIDENDS
Dividend declaration by a bank is prohibited in the
following instances:
1. if the dividends will be greater than its
accumulated net profits then on hand, deducting
therefrom its losses and bad debts
2. if its clearing account with Bangko Sentral is
overdrawn
3. if it is deficient in the required liquidity floor for
government deposits for five or more consecutive
days
4. if it does not comply with the liquidity standards/
ratio prescribed by the Bangko Sentral for
purposes of determining funds available for
dividend declaration
5. if it has committed a major violation as may be
determined by the Bangko Sentral

OWNERSHIP OF REAL PROPERTY

Any bank may acquire real estate as shall be necessary for its own use in the conduct of its business
- However, the total investment in such real estate and improvements thereon, including bank equipment, shall not exceed 50% of
combined capital accounts
- Unless otherwise provided by the Monetary Board, the equity investment of a bank in another corporation engaged primarily in real
estate shall be considered as part of the bank’s total investment in real estate

A bank may acquire, hold or convey real property under the following circumstances:
1. Such as shall be mortgaged to it in good faith by way of security of debts
2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings
3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it shall purchase to
secure debts due it

Any real property acquired or held under the circumstances enumerated in the above paragraph shall be disposed of by the bank within
a period of five years or as may be prescribed by the Monetary Board.
- After said period, the bank may continue to hold the property for its own use, subject to the limitations mentioned earlier, that is, the
investment should not be more than 50% of the combined capital accounts

LOANS TO BANKS

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LOANS WITHOUT COLLATERAL
The BSP may extend loans and advances to
banking institutions for a period of not more than
seven days without any collateral for the purpose of
providing liquidity.
EMERGENCY LOANS
The BSP, upon the approval of at least five members of the Monetary Board,
may also grant emergency loans or advances in the amount not exceeding
50% of the bank’s total deposits and deposit substitutes. The loans shall be
released in two or more tranches

BSP = lender of last resort

CONSERVATORSHIP
Whenever, on the basis of a report submitted by the appropriated supervising or examining department, the
Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, the
GROUNDS Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary.

The conservatorship shall not exceed one year

The powers that may be conferred to the conservator are such powers as may be necessary for the following
purposes:
POWERS OF 1. To take charge of the assets, liabilities, and the management of the subject bank
CONSERVATOR 2. To reorganize the management of the subject bank
3. To collect all monies and debts due said institution
4. To exercise all powers necessary to restore the bank’s viability

RECEIVERSHIP AND LIQUIDATION

The PDIC, as statutory receiver of a bank, may be appointed and directed to proceed with liquidation
whenever, upon report of the head of the supervising and examining department, the Monetary Board finds
that the bank:
1. Has notified the BSP or announced a unilateral closure, or has been dormant for 60 days or suspended
payment of its deposits, or is unable to pay its liabilities as they become due in the ordinary course of
business, except if the inability to pay is caused by extraordinary demands induced by financial panic in
GROUNDS the banking community
2. Has insufficient realizable assets, as determined by the BSP, to meet its liabilities
3. Cannot continue in business without involving probable losses to its depositors or creditors
4. Has willfully violated a cease and desist order under Section 37 of the NCBA that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assents of the institution

The closure can be based on the report of the head of the supervising and examining department of the BSP
1. immediately gather and take charge of all the assets and liabilities of the institution, and administer the
DUTIES OF same for the benefit of its depositors and creditors
RECEIVER 2. exercise the general powers of a receiver under the Revised Rules of Court
3. proceed with the liquidation of the bank and dispose of the assets and wind up the affairs of the bank
No prior hearing is necessary in appointing a receiver and in appointing a receiver and in closing the bank
CLOSE-NOW-
HEAR-LATER It is enough that subsequent judicial review is provided for
SCHEME - to require such previous hearing would not only be impractical but would tend to defeat the very purpose
of the law when it invested the Monetary Board with authority

EFFECT OF RECEIVERSHIP AND LIQUIDATION

Section 12(a) of the PDIC 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”

Bank closed by the Monetary Board shall no longer be rehabilitated

NO REHABILITATION

There will be no preference even if the claimant-depositor obtained a writ of preliminary

ON THE CORPORATE
FRANCHISE OR EXISTENCE
ON THE POWERS AND
FUNCTIONS OF ITS DIRECTORS,
OFFICERS AND STOCKHOLDER
ON THE ASSETS
attachment.
- After the declaration of insolvency, the remedy of the depositors is to intervene in the
liquidation proceedings
Upon placement by the Monetary Board of a bank under liquidation, it shall continue as a
body corporate until the termination of the winding-up period
1. Such continuation as a body corporate shall only be for the purpose of liquidating,
settling and closing its affairs and for the disposal, conveyance or distribution of its
assets
2. The receiver shall represent the closed bank in all cases by or against the closed bank
and prosecute and defend suits by or against it. In no case shall the bank be reopened
and permitted to resume banking business after being placed under liquidation
The powers, voting rights, functions and duties, as well as the allowances, remuneration and
perquisites of the directors, officers, and stockholders of the bank are terminated upon its
closure.
The directors, officers, and stockholders shall be barred from interfering in any way with the
assets, records, and affairs of the bank
Upon the service of notice of closure, all the assets of the closed bank shall he deemed in
custodial egis in the hands of the receiver, as such, these assets may not be subject to
attachment, garnishment, execution, levy or any other court processes

A judge, officer of the course or any person who shall issue, order, process or cause the
issuance or implementation of the garnishment order, levy, attachment or execution, shall be
liable under Section 27 of the PDIC law.

Collaterals securing the loans and advances granted by the Bangko Sentral ng Pilipinas
shall not be included in the assets of the closed bank for distribution to other creditors. The

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ON LABOR RELATIONS
CONTRACTUAL OBLIGATIONS
proceeds in excess of the amount secured shall be returned by the BSP to the receiver
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 in accordance with the
PDIC law.
Payment of separation pay or benefits provided for by law shall be made from available
assets of the bank in accordance with the Rules on Concurrence and Preference of Credits
under the Civil Code or other laws
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
The liability of a bank to pay interest on deposits and all other obligations as of closure shall
cease upon its closure by the Monetary Board without prejudice to the first paragraph of
Section 85 of the New Central Bank Act.

The receiver shall have the authority, without need for approval of the liquidation court, to
ON INTEREST PAYMENTS 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 bank, as validated by the receiver.

LIABILITY FOR PENALTIES AND
SURCHARGES FOR LATE
PAYMENT AND NONPAYMENT OF
TAXES
BANK CHARGES AND FEES ON
SERVICES
ACTIONS PENDING FOR OR
AGAINST THE CLOSED BANK
FINAL DECISIONS AGAINST THE
CLOSED BANK
DOCKET AND OTHER COURT
FEES
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 in where is’ basis
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
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
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 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
The execution and enforcement of a final decision of a court other than the liquidation court
against the assets of a closed 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
Payment of docket and other court dee 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

JUDICIAL REVIEW
The actions of the Monetary Board taken under Section 30 or under Section 29 of the NCBA shall be final
REMEDY UNDER
and executory, and may not be restrained or set aside by the court except on petition for certiorari on the
SECTION 30 OF
ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to
NCBA
amount to lack or excess of jurisdiction
The power and authority of the Monetary Board to close banks and liquidate them thereafter when public
GROUND: GRAVE interest so requires is an exercise of police power of the State. Police power, however, may not be
ABUSE OF exercised arbitrarily or unreasonably and could be set aside if it is either capricious, discriminatory,
DISCRETION whimsical, arbitrary, unjust, or is tantamount to a denial of due process and equal protection clauses of the
Constitution
The petition for certiorari may only be filed by the stockholders of record representing the majority of capital
stock within 10 days from receipt by the board of directors of the institution of the order directing
WHO MAY receivership, liquidation or conservatorship
QUESTION
The petition may not be filed by the receiver or the conservator that was appointed

TRUST OPERATIONS OF BANKS

A bank may be authorized by the Monetary Board to engage in trust business and act as a trustee or
administer any trust or hold property in trust or on deposit for the use, benefit, or behoof of others.
PRIOR AUTHORITY
The Securities and Exchange Commission shall not register the articles of incorporation and by-laws or
any amendment thereto of any trust entity, unless accompanied by a certificate of authority issued by the
BSP
Any activity resulting from a trustor-trustee relation (trusteeship) involving the appointment of a trustee by
a trustor for the administration, holding, management of funds and/or properties of the trustor by the
trustee for the use, benefit or advantage of the trustor or of others called beneficiaries
TRUST BUSINESS
A trust-licensed bank may also be involved in other fiduciary business which refers to any activity resulting
from a contract or agreement whereby a bank binds itself to render services or to act in a representative
capacity such as in an agency, guardianship, administratorship or wills, properties or estates,
executorship, receivership, and other similar services which do not create or result in a trusteeship
POWERS OF TRUST A trust entity, in addition to the general powers incident to corporations, shall have the power to:
ENTITY 1. Act as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic
and to accept and execute any trust consistent with law
2. Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of the
estate of any minor or other incompetent person, and as receiver and depositary of any moneys paid

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into court by parties to any legal proceedings and of property of any kind which may be brought under
the jurisdiction of the court
3. Act as the executor of any will when it is named the executor thereof
4. Act as administrator of the estate of any deceased persons, with the will annexed, or as administrator
of the estate of any deceased person when there is no will
5. Accept and execute any trust for the holding, management, and administration of any estate, real or
personal, and the rents, issues and profits thereof
6. Establish and manage common trust funds, subject to such rules and regulations as may be
prescribed by the Monetary Board
The law prohibits the integration of the properties and funds of all the other businesses of the bank with
those of the trust business.

The trust business and all funds, properties or securities received by any trust entity, properties or
SEPARATION OF
securities received by any trust entity as executor, administrator, guardian, trustee, receiver, or depositary
TRUST BUSINESS
shall be kept separate and distinct from the general business including all other funds, properties, and
OF BANKS
assets of such trust entity.

The accounts of all such funds, properties, or securities shall likewise be kept separate and distinct from
the accounts of the general business of the trust entity

BANGKO SENTRAL NG PILIPINAS

(BSP) is the central monetary authority maintained by the State to function and operate as an
BANGKO SENTRAL NG
independent and accountable body corporate in the discharge of its mandated responsibilities
PILIPINAS
concerning money, banking and credit
to maintain price stability conducive to a balanced and sustainable growth of the economy and
employment
PRIMARY OBJECTIVE
promote and maintain monetary stability and the convertibility of the peso
1. Proves policy directions in the areas of money, credit and banking
2. Has supervision over the operations of banks
3. Exercises regulatory and examination powers over the quasi-banking operations of non-banks
financial institutions
4. Has the sole power and authority to issue currency within the territory of the Republic of the
Philippines
5. Has the power to issue regulations to prevent the circulation of foreign currencies, or currency
substitutes as well as the reproduction of facsimiles of BSP notes
6. Has the power to investigate, make arrests, conduct searches and seizure for the purpose of
maintaining the integrity of the currency
BASIC FUNCTIONS
7. Has the power to engage in foreign exchange transactions in order to maintain price stability
8. Has the power to make rediscounts, discounts, loans and advances to banking and other
financial institutions to influence the volume of credit consistent with the objectives of price
stability
9. Has the power to engage in open market operations – purchase and sale of securities –
exclusively in accordance with its objective of achieving price stability
10. Act as the banker of the government
11. Has the power to engage in marketing and stabilization of securities for the account of the
government
12. Act as the financial advisor of the government
The BSP is a government-owned and controlled corporation that is invested by law with corporate
powers.

The corporate powers specified in Section 5 of the New Central Bank Act are as follows:
1. the power to adopt, alter and use a corporate seal which shall be judicially noticed
CORPORATE POWERS 2. to enter into contracts
3. to lease or own real and personal property
4. to sell or otherwise dispose of its real and personal property
5. to sue and be sued
6. to perform any and all things that may be necessary or proper to carry out the purposes of the
New Central Bank Act
7. to compromise, condone or release, in whole or in part, any claim of or settled liability
Operations and activities of banks shall be subject to supervision of the BSP.

Section 4 of the GBL provides that “supervision” shall include the following:
1. Issuance of rules of conduct or the establishment of standards of operation for uniform
application to all banking and financial institutions
2. The conduct of examination of the bank and its wholly owned or controlled enterprise
The PDIC may also conduct a regular annual examination upon prior approval of the MB.
BANK SUPERVISION Special Examination without prior MB approval may be made by PDIC if there is an impending
bank closure
3. Overseeing to ascertain that laws and regulations are complied with
4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or sound
basis
5. Inquiring into the solvency and liquidity of the institution
6. Enforcing prompt corrective action
BANKER AND FINANCIAL The BSP is designated as the official depositary of the Government, its political subdivisions and
ADVISION OF instrumentalities
GOVERNMENT - authorized to engage the services of the other banking institutions to act as its agent
- authorized to act as agent of the Government, its instrumentalities and subdivisions in the
issuance of securities representing the obligations of the Government, its instrumentalities and
subdivisions

The BSP is likewise the financial advisor of the Government

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- Section 123 of the NCBA provides that before undertaking any credit operation abroad, the
Government, through the Secretary of Finance, shall request the opinion, in writing, of the
Monetary Board on the monetary implications of the contemplated action
The Governor shall be the chief executive officer of the BSP.

His powers and duties shall be to:

1. prepare the agenda for the meetings of the Monetary Board and to submit for the consideration
of the Board the policies and measures to implement the NCBA
2. execute and administer the policies and measures approved by the Monetary Board
THE GOVERNOR 3. direct and supervise the operations and internal administration of the BSP
4. appoint and fix the remunerations and other emoluments of personnel below the rank of a
department head
5. render opinions, decisions, or rulings, which shall be final and executory on matters regarding
application or enforcement of laws pertaining to banks, quasi-banks and financial institutions
supervised by the BSP (may be reversed or modified by the Monetary Board)
6. exercise such other powers as may be vested in him by the Monetary Board

RELATED LAWS

PHILIPPINE DEPOSIT INSURANCE CORPORATION (R.A. No. 3591)

PRIMARY FUNCTIONS: to act as:
1. DEPOSITS INSURER Insurer of deposit: The PDIC shall, as a basic policy, promote and safeguard the interest of
the depositing public by way of providing permanent and continuing insurance coverage on all
insured
2. CO-REGULATOR OF BANKS As bank regulator, the PDIC is empowered to examine and investigate banks.
3. RECEIVER AND The PDIC as receiver shall control, manage and administer the affairs of the closed banks.
LIQUIDATOR OF CLOSED Banks closed by the Monetary Board shall NO LONGER BE REHABILITATED
BANKS

PDIC v. PHIL. COUNTRYSIDE RURAL BANK: PHILIPPINE DEPOSIT INSURANCE CORPORATION; PRIMARY FUNCTIONS: to
act as (1) deposit insurer, (2) co-regulator of banks, and (3) receiver and liquidator of closed banks.
EXAMINATION: Examination involves an evaluation of the current status of a bank and determines its compliance with the set
standards regarding solvency, liquidity, asset valuation, operations, systems, management, and compliance with banking laws, rules
and regulations. Such a process then involves an intrusion into a bank’s records.
INVESTIGATION: Investigation is conducted based on specific findings of certain acts or omissions which are subject of a complaint
or a Final Report of Examination made by PDIC. Investigation does not involve a general evaluation of the status of bank. An
investigation zeroes in on specific acts and omissions uncovered via an examination, or which are cited in a complaint. Although it
also involves a detailed evaluation, an investigation centers on specific acts of omissions and, thus, requires a less invasive
assessment.
PRIOR CONSENT FOR EXAMINATION: An examination of banks requires the prior consent of the Monetary Board, whereas an
investigation does not require prior MB consent
REASONS WHY PRIOR CONSENT OF BSP IS NOT NECESSARY FOR INVESTIGATION:
1. Time is always of essences, and it is prudent to expedite the proceedings if an accurate conclusion is to be arrived at, as an
investigation is only as precise as the evidence on which it is based
2. An investigation is based on reports of examination and an examination is conducted with prior Monetary Board approval
3. A lengthy process provide unscrupulous individuals the opportunity to cover their tracks

REGULATOR: EXAMINATION AND INVESTIGATION OF BANKS

EXAMINATION INVESTIGATION
an evaluation of the current status of a bank and determines conducted based on specific findings of certain acts or omissions
its compliance with the set standards regarding solvency, which are subject of a complaint or a Final Report of Examination
liquidity, asset valuation, operations, systems, management, made by PDIC
and compliance with banking laws, rules and regulations
Investigation does not involve a general evaluation of the status of
Such a process then involves an intrusion into a bank’s bank.
records.
An investigation zeroes in on specific acts and omissions uncovered
via an examination, or which are cited in a complaint. Although it also
involves a detailed evaluation, an investigation centers on specific
acts of omissions and, thus, requires a less invasive assessment.
Prior Consent for Examination: An examination of banks Reasons why Prior Consent of BSP Not Necessary for
requires the prior consent of the Monetary Board, whereas Investigation:
an investigation does not require prior MB consent 4. Time is always of essences, and it is prudent to expedite the
proceedings if an accurate conclusion is to be arrived at, as an
investigation is only as precise as the evidence on which it is
based
5. An investigation is based on reports of examination and an
examination is conducted with prior Monetary Board approval
6. A lengthy process provide unscrupulous individuals the
opportunity to cover their tracks

REHABILITATION RECEIVER OF BANKS:

A judge, officer of the court or any person who shall issue, order, process or cause the issuance or implementation of the writ of
garnishment, levy, attachment or execution shall be criminally liable under R.A. No. 3591

The powers of PDIC as receiver includes the power to collect loans and other claims of the closed bank, and for the purpose, modify,
compromise or restructure the terms and conditions of such loans or claims as may be deemed advantageous to the interest of the
creditors and claimants of the closed

The liability of the banks for deposits and all other obligations as of closure shall cease upon closure by the Monetary Board

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ANTI-MONEY LAUNDERING ACT

MONEY-LAUNDERING – crime committed by any person who knowing that any monetary instrument or property represents, involves,
or relates to the proceeds of any unlawful activity:
1. transacts said monetary instrument or property
2. converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or property
3. conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with respect to said
monetary instrument or property
4. attempts or conspires to commit money laundering offenses referred to in (1), (2) or (3)
5. aids, abets, assists in or counsels the commission of the money laundering offenses referred to in (1), (2) or (3)
6. performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in (1), (2) or (3)
7. failure to report to the Anti-Money Laundering Council (AMLC) by any covered person knowing that a covered or suspicious
transaction is required under the Anti-Money Laundering Law to be reported

COVERED COVERED ENTITIES: SUSPICIOUS UNLAWFUL ACTIVITY:

TRANSACTION: TRANSACTION:
transaction in cash 1. Persons supervised or regulated by BSP, such Transactions with Any act or omission or
or other equivalent as: covered institutions, series or combination
monetary instrument a. Banks regardless of the amount thereof involving or
involving a total b. Non-banks involved, where any of having relation to the
amount in excess of c. Quasi-banks the following following:
P500,000.00 within d. Trust entities circumstances exist: 1. Kidnapping for
one banking day e. Pawnshops 1. there is no ransom
f. Non-stock saving and loan underlying legal or 2. Sections 4, 5, 6, 8, 9,
CASINO: a single associations trade obligation, 10, 11, 12, 13, 14,
casino transaction g. Electronic money issuers purpose or economic 15, and 16 of the
involving an amount h. All other persons and their justification Comprehensive
in excess of P5 subsidiaries and affiliates 2. the client is not Dangerous Drugs
Million or its supervised or regulated by the properly identified Act
equivalent in any BSP 3. the amount involved 3. Section 3
other currency i. foreign exchange is not commensurate paragraphs B, C, E,
dealers with the business or G, H and I of the
ii. money changes financial capacity of Anti-Graft and
iii. remittance and transfer the client Corrupt Practices Act
companies 4. taking into account 4. Plunder
2. Persons supervised or regulated by IC, such all known 5. Robbery and
as: circumstances, it extortion
a. Insurance companies may be perceived 6. Jueteng and Masiao
b. Pre-need companies that the client’s 7. Piracy on high seas
c. Insurance agents transaction is 8. Qualified theft
d. Insurance brokers structured in order to 9. Swindling
e. Professional reinsurers avoid being the 10. Smuggling
f. Reinsurance brokers subject of reporting 11. Violations of
g. Holding companies requirements under Electronic
h. Holding company systems the AMLA Commerce Act of
i. Mutual benefit associations 5. any circumstances 2000
j. All other persons and their relating to the 12. Hijacking; destructive
subsidiaries and affiliates transaction which is arson and murder
supervised or regulated by the IC observed to deviate 13. Terrorism and
3. Persons supervised or regulated by SEC, such from the profile of conspiracy to commit
as: the client and/or the terrorism
a. Securities dealers, brokers, client’s past 14. Financing of
salesmen, investment houses, transactions with the terrorism under
and other similar persons covered institution Section 5, 6, 7, and 8
managing securities or rendering 6. the transaction is in of Terrorism
services, such as investment any way related to Financing Prevention
agents, advisors, or consultants an unlawful activity and Suppression Act
b. mutual funds or open-end or offense under the of 2012
investment companies, close- AMLA that is about 15. Bribery, and
end investment companies or to be, is being or has Corruption of Public
issuers, or other similar entities been committed Officers
c. other entities, administering or 7. any transaction that 16. Frauds and Illegal
otherwise dealing in is similar or Exactions and
commodities, or financial analogous to any of Transactions
derivatives based thereon, the foregoing 17. Malversation of
valuable objects, cash Public Funds and
substitutes, and other similar Property
monetary instruments or 18. Forgeries and
properties, supervised or Counterfeiting
regulated by the SEC 19. Violations of
4. The following Designated Non-Financial Sections 4 to 6 of the
Businesses and Professions (DNFBPs): Anti-Trafficking in
a. Jewelry deals, dealers in Persons Act of 2003
precious metals, and dealers in 20. Violations of
precious stones Sections 78 to 79 of
b. Company service providers the Revised Forestry
which, as a business, provide Code of the
any of the following services to Philippines
third parties: 21. Violations of
i. acting as a formation Sections 86 to 106 of
agent of juridical the Philippine
persons Fisheries Code of
ii. acting as (or arranging 1998

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for another person to 22. Violations of
act as) a director or Sections 101 to 107
corporate secretary of a of the Philippine
company, a partner of a Mining Act of 1995
partnership, or a similar 23. Violations of Section
position in relation to 27(c), (e), (f), (g),
other juridical persons and (i) of the Wildlife
iii. providing a registered Resources
office; business address Conservation and
or accommodation, Protection Act
correspondence or 24. Violations of Section
administrative address 7(b) of the National
for a company, a Caves and Cave
partnership or any other Resources
legal person or Management
arrangement Protection Act
iv. acting as (or arranging 25. Violation of the Anti-
for another person to Carnapping Act
act as) a nominee 26. Violations of
share-holder for another Sections 1, 3, and 5
person of the Laws on
c. Persons, including lawyers and Illegal/ Unlawful
accountants, who provide any of Possession,
the following services: Manufacture,
i. Managing of client Dealing In,
money, securities or Acquisition or
other assets Disposition of
ii. Management of bank, Firearms,
savings, securities or Ammunition or
other assets Explosives
iii. Organization of 27. Violation of P.D. No
contributions for the 1612
creation, operation or 28. Violation of Section
management of 65 of the Migrant
companies Workers and
iv. Creation, operation or Overseas Filipinos
management of juridical Act of 1996
persons or 29. Violation of the
arrangements, and Intellectual Property
buying and selling Code of the
business entities Philippines
30. Violation of Section 4
Casino – refers to a business authorized by the of the Anti-Photo and
appropriate government agency to engage in Video Voyeurism of
gaming operations: Act of 2009
1. “Internet-based casinos”: casinos in which 31. Violation of the Anti-
persons participate by the use of remote Child Pornography
communication facilitates such as, but not Act of 2009
limited to, internet, telephone, television, radio 32. Violations of
or any other kind of electronic or other Sections 5, 7, 8, 9,
technology for facilitating communication 10(c), (d) and (e), 11,
2. “Ship-based casino”: casinos, the operation of 12, and 14 of the
which is undertaken on board a vessel, ship, Special Protection of
boat or any other water-based craft wholly or Children Against
partly intended for gambling Abuse, Exploitation
and Discrimination
33. Fraudulent practices
NOT COVERED – Lawyers and accountants who and other violations
are: under Securities
1. authorized to practice their profession in the Regulation Code of
Philippines 2000
2. engaged as independent legal or accounting 34. Felonies or offenses
professionals, in relation to information of a similar nature
concerning their clients, or where disclosure of that are punishable
information would compromise client under the penal laws
confidences or the attorney-client relationship of other countries
“Independent legal or accounting
professionals”: lawyers and accountants
working in a private firm or as sole
practitioners who by way of business provide
purely legal, notarial or accounting services to
their clients

OBLIGATIONS OF COVERED INSTITUTIONS:

1. CUSTOMER IDENTIFICATION Covered institutions shall establish and record the true identity of its clients based on official
documents
- They shall maintain a system of verifying the true identity of their clients and, in case of
corporate clients, require a system of verifying their legal existence and organization
structure, as well as the authority and identification of all persons purporting to act on
their behalf
2. RECORD KEPPING All records of all transactions of covered institutions shall be maintained and safely stored for
five years from the dates of transactions.
- Closed accounts: the records on customer identification, account files and business
correspondence, shall be preserved and safely stored for at least five years from the
dates when they were closed

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3. REPORTING OF COVERED Covered institution shall report to the Anti-Money Laundering Council (AMLC) all covered or
AND SUSPICIOUS suspicious transactions within five working days from occurrence thereof
TRANSACTION - unless AMLC prescribes a longer period not exceeding 15 working days

Conviction of the unlawful activity is not necessary before a report is made

FREEZING OF MONETARY INSTRUMENT OR PROPERTY

The Court of Appeals may issue a Freeze Order under the following conditions:
1. There must be a verified ex parte petition by the AMLC
2. CA must determine that probable cause exists that any monetary instrument or property is in any way related to an unlawful
activity as defined in Section 3(i) of R.A. 9160.
3. The freeze order shall be effective immediately for a period of 20 days
4. The CA shall then conduct a summary hearing, with notice to the parties, to determine whether or not to modify or lift the freeze
order, or extend its effectivity
5. The freeze order shall be for a period not exceeding six month

The Court of Appeals should act on the petition to freeze within 24 hours from filing of the petition.
- If the application is filed a day before a nonworking day, the computation of the 24-hours period shall exclude the nonworking days

If no case is filed against a person whose account has been frozen within the period determined by the Court of Appeals, not exceeding
six months, the freeze order shall be deemed ipso facto lifted

REMEDY: A person whose account has been frozen may file a motion to lift the freeze order and the court must resolve this motion
before the expiration of the freeze order

No court shall issue a temporary restraining order or a writ of injunction against any freeze order, except the Supreme Court

The freeze order is without prejudice to an asset preservation order that the Regional Trial Court having jurisdiction over the
appropriate anti-money laundering case or civil forfeiture case may issue on the same account depending upon the circumstances of
the case, where the Court of Appeals will remand the case and its records

The freeze order or asset preservation order issued under this Act shall be limited only to the amount of cash or monetary
instrument or value of property that the court finds there is probable cause to be considered as proceeds of his predicate
offense
- shall not apply to amounts in the same account in excess of the amount or value of the proceeds of the predicate offense

AUTHORITY OF AMLC TO INQUIRE INTO AND EXAMINE BANK DEPOSITS

The AMLC may inquire into or examine any particular deposit or investment, including related accounts, with any banking institution or
non-bank financial institution. This can be either upon order of the court or even without court order in certain exceptional cases
COURT ORDER REQUIRED NO COURT ORDER
Examination by AMLC based on a Court Order upon Ex Parte No court order shall be required for the examination of bank
Application – in cases of violations of R.A. No. 9160, when it has deposits by AMLC in cases involving:
been established that there is probable cause that the deposits or 1. Kidnapping for ransom
investments, including related accounts involved, are related to: 2. Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, and 16 of
1. an unlawful activity the Comprehensive Dangerous Drugs Act
2. a money laundering offense 3. Hijacking and other violations under R.A. No. 6235;
destructive arson and murder, as defined under the
Revised Penal Code, including those perpetrated by
terrorist against non-combatant persons and similar
targets
4. Felonies or offenses of a nature similar to those
mentioned in Section 3(i)(1), (2), and (12) which are
punishable under the penal laws of other countries
5. Terrorism and conspiracy to common terrorism as
defined and penalized under R.A. No 93872
RELATED ACCOUNTS. A court order ex parte must first be
obtained before the AMLC can inquire into Related Accounts.
- refer to accounts, the funds and sources of which originated
from and/or are materially linked to the monetary instrument(s)
or property(ies) subject of the freeze order(s)
The Court of Appeals must act on the application within 24 hours
from the filing

The authority of AMLC to inquire into or examine the main account and the related accounts shall comply with the requirements of
Article III, Sections 2 and 3 of the 1987 Constitution
- Section 11 of the AMLA providing for ex-parte application and inquiry by the AMLC into certain bank deposits and investments
does not violate substantive due process, there being no physical seizure of property involved at that stage
o It is the preliminary and actual seizure of the bank deposits or investments in question which brings these within reach of
the judicial process, specifically a determination that the seizure violated due process
- There is also no violation of the right to privacy
o The Supreme Court explained that the law provides safeguards before a bank inquiry order is issued, ensuring adherence
to the general state policy of preserving the absolutely confidential nature of Philippine bank accounts:
1. The AMLC is required to establish probable cause as basis for its ex parte application for bank inquiry order
2. The CA, independent of the AMLC’s demonstration of probable cause, itself makes a finding of probable
cause that the deposits or investments are related to an unlawful activity under Section 3(i) or a money
laundering offense under Section 4 of the AMLA
3. A bank inquiry court order ex parte for related accounts is preceded by a bank inquiry court order ex parte
for the principal account which court order ex parte for related accounts is separately based on probable
cause that such related account is materially linked to the principal account inquired into
4. The authority to inquire into or examine the main or principal account and the related accounts shall comply
with the requirements of Article III, Sections 2 and 3 of the Constitution

REPUBLIC v. EUGENIO: Inquiry into deposits under Section 11 does not require a pre-existing criminal

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case.

TRUTH IN LENDING ACT (R.A. No. 3765)

The law assures full disclosure by requiring the lender to give the borrower all the details regarding the
transaction.

Section 4: Any creditor shall furnish to each person to whom credit is extended, prior to the consummation
of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with
rules and regulations prescribed by the Board, the following information:
1. cash price or delivered price of the property or service to be acquired
2. amounts, if any, to be credited as down payment and/or trade-in
3. difference between the amount set forth under clauses (1) and (2)
4. charges, individually itemized, which are paid or to be paid by such person in connection with the
DISCLOSURE
transaction but which are not incident to the extension of credit
REQUIREMENT
5. total amount to be financed
6. finance charge expressed in terms of pesos and centavos
7. percentage that the finance bears to the total amount to be financed expressed as a simple annual rate
on the outstanding unpaid balance of the obligation

The imposition of interest and finance charges is VOID if not disclosed in the disclosure statement
1. Although penalty charges are not stated in the disclosure statement, reference to the penalty charges in
the promissory note constitutes substantial compliance with the disclosure requirement of the Truth in
Lending Act
2. Even if disclosed, exorbitant interest rate may be declared unconscionable
to protect users of credit from lack of awareness of the true cost thereof, proceeding from the experience
RATIONALE that banks are able to conceal such true cost by hidden charges, uncertainty of interest rates, deduction of
interests from the loaned amount, and the like
Truth in Lending Act may also be violated if the agreement provides for an escalation clause on interest
which is dependent solely on the will of the bank
ESCALATION
CLAUSE
Example: the following provision is void: “The interest shall be at the rate indicative of (the bank’s) retail rate
or as determined by the Branch Head of the Bank
Subsequent compliance with the disclosure requirement cannot be deemed in substantial compliance with
SUBSEQUENT the Truth in Lending Act
COMPLAINCE
Example: The bank gave the details only when demand for payment was being made
Violation of the Truth in Lending Act gives rise to both criminal and civil liabilities.

The penalty therefor is an amount of P100.00 or in an amount equal to twice the finance charge required by
the creditor in connection with such transaction, whichever is greater
LIABILITY
- except that the liability shall not exceed P2,000,000.00 on any credit transaction

The action to recover such penalty may be instituted by the aggrieved private person separately and
independently from the criminal case for the same offense
PRESCRIPTIVE One years from the date of demand
PERIOD - not from the date of execution of the promissory note

DEFINITION:
1. CREDIT - any loan, mortgage, deed of trust, advance, or discount
- any conditional sales contract
- any contract to sell, or sale or contract of sale or property or services, either for present or future delivery,
under which part or all of the price is payable subsequent to the making of such sale or contract
- any rental-purchase contract
- any contract or arrangement for the hire, bailment, or leasing of property
- any option, demand, lien, pledge, or other claim against, for the delivery of, property or money
- any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out
of any of the foregoing
- and any transaction or series of transactions having a similar purpose or effect
2. FINANCE interest, fees, services, charges, discounts, and such other charges incident to the extension of credit as the
CHARGE Board may, by regulation, prescribe
3. CREDITOR any person engaged in the business of extending credit (including any person who as a regular business
practice makes loans or sells or rents property or services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge

CONSUMER ACT (R.A. No. 7394)

The Consumer Act of the Philippines requires disclosure for consumer credits
1. CONSUMER a natural person who is a purchaser, lessee, recipient or prospective purchaser, lessor or recipient of
consumer products, services or credit
2. CONSUMER any credit extended by a creditor to a consumer for the sale or lease of any consumer product or service
CREDIT under which part or all of the price or payment therefor is payable at some future time, whether in full or in
installments
3. CONSUMER a loan made by the lender to a person which is payable in installments for which a finance charge is or may
LOAN be imposed

includes credit transacrtions pursuant to an open-end credit plan other than a seller credit card

REQUIRED DISCLOSURES ON CONSUMER LOANS NOT EXEMPTED TRANSACTIONS

UNDER OPEN-END CREDIT PLAN
Any creditor extending a consumer loan or in a transaction which is 1. those involving extension of credits for business or

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neither a consumer credit sale not under an open-end consumer commercial purposes, or to the Government and
credit plan shall disclose, to the extent applicable, the following governmental agencies and instrumentalities, juridical
information: entities or to organizations
1. amount of credit of which the debtor will have the actual use, 2. those in which the debtor is the one specifying the definite
or which is or will be paid to him or for his account or to set of credit terms such as bank deposits, insurance
another person on his behalf contracts, sale of bonds or analogous transactions
2. all charges, individually itemized, which are included in the
amount of credit extended but which are not part of the finance
charge
3. total amount to be financed or the sum of amounts referred to
in paragraphs (a) and (b)
4. finance charge expressed in terms of pesos and centavos
5. effective interest rate
6. percentage that the finance charge bears to the total amount
to be financed expressed as a simple annual rate on the
outstanding unpaid balance of the obligation
7. default, delinquency or similar charges payable in the event of
late payments
8. description of any security interest held or to be held or to be
retained or acquired by the creditor in connection with the
extension of credit and a clear identification of the property to
which the security interest relates

HUMAN SECURITY ACT OF 2007

EXAMINATION AND SEQUESTRATION OF DEPOSITS
EXAMINATION OF BANK DEPOSITS SEQUESTRATION
The Court of Appeals designated as a special court to The CA may likewise order the sequestration of deposits belonging:
handle anti-terrorism cases may authorize in writing 1. to any person suspected of or charged before a competent Regional
any police or law enforcement officer and the members Trial Court for the crime of terrorism or the crime of conspiracy to
of his/her duly authorized in writing by the anti-terrorism commit terrorism
council: 2. to a judicially declared and outlawed organization, association, or
1. to examine, or cause the examination of, the group of persons
deposits, placements, trust accounts, assets and 3. to a member of such organization, association, or groups of persons.
records in a bank or financial institution
2. to gather or cause the gathering of any relevant They shall be seized, sequestered, and frozen in order to prevent their
information about such deposits, placements, trust use, transfer, or conveyance for purposes that are inimical to the safety
accounts, assets, and records from a bank or and security of the people or injurious to the interest of the State.
financial institution
Grounds. The CA may authorize, the examination of Meaning of Sequestration. The sequestered bank deposits shall be
accounts, after a satisfactory finding of the existence of deemed as property held in trust by the bank or financial institution for
probable cause in a hearing called for the purpose of: such person and the government during the pendency of the investigation
1. a person charged with or suspected of the crime of of the person suspected of or during the pendency of the trial of the
terrorism or, conspiracy to commit terrorism person charged with any of the said crimes, as the case may be and their
2. of a judicially declared and outlawed terrorist use or disposition while the case is pending shall be subject to the
organization, association, or group of persons approval of the court before which the case or cases are pending
3. of a member of such judicially declared and
outlawed organization, associations, or group of
persons
Penalty. A person convicted of the crime of terrorism
shall suffer the penalty of 40 years of imprisonment,
without the benefit of parole as provided for in the
Indeterminate Sentence Law
Effective Period. Thirty (30) days from the date of
receipt of the written order of the authorizing division of
the Court of Appeals by the applicant police or law
enforcement official renewable for another period which
shall not exceed 30 days form the expiration of the
original period

TERRORISM: committed by any person who commits an act punishable under any of the following provisions of the Revised Penal
Code thereby sowing and creating a condition of widespread and extraordinary fear and panic among the populace, in order to coerce
the government to give in to an unlawful demand:
1. Article 122 (Piracy in General and Mutiny in the High Seas or in the Philippine Waters)
2. Article 134 (Rebellion or Insurrection)
3. Article 134-A (Coup d’etat), including acts committed by private persons
4. Article 248 (Murder)
5. Article 267 (Kidnapping and Serious Illegal Detention)
6. Article 324 (Crimes Involving Destruction)
7. P.D. No. 1613 (The Law on Arson)
8. R.A. No. 6969 (Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990)
9. R.A. No. 5207 (Atomic Energy Regulatory and Liability Act of 1968)
10. R.A. No. 6235 (Anti-Piracy and Anti-Highway Robbery Law of 1974)
11. P.D. No. 1866 (Decree Codifying the Laws on Illegal and Unlawful Possession, Manufacture, Dealing in, Acquisition or Disposition
of Firearms, Ammunitions or Explosives)

THE TERRORISM FINANCING AND PREVENTION AND SUPPRESION ACT (R.A. No. 10168)
FINANCING OF R.A. No. 10168 imposes criminal liability on any person who, directly or indirectly, willfully and without
TERRORISM lawful excuse, possesses, provides, collects or uses property or funds or makes available property, funds
or financial service or other related services, by any means, with the unlawful and willful intention that they
should be used, in full or in part:
1. to carry out or facilitate the commission of any terrorist act
2. by a terrorist organization, association or group

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3. by an individual terrorist

The penalty is also imposed on any person who organizes or directs others to commit financing of terrorism

An attempt or conspiracy to commit the same crime is also penalized

The AMLC is authorized to investigate:
1. any property or funds that are in any way related to financing of terrorism or acts of terrorism
AUTHORITY TO 2. property or funds of any person or persons in relation to whom there is probable cause to believe that
AMLC TO such person or persons are committing or attempting or conspiring to commit, or participating in or
INVESTIGATE facilitating the financing of terrorism or acts of terrorism
3. to inquire into or examine deposits and investments with any banking institution or non-bank financial
institution and their subsidiaries and affiliates without a court order
The AMLC, either upon its own initiative or at the request of the Anti-Terrorism Council (ATC), is authorized
to issue an ex parte order to freeze without delay:
1. property or funds that are in any way related to financing or terrorism or acts of terrorism
2. property or funds of any person, group of persons, terrorist organization, or association, in relation to
whom there is probable cause to believe that they are committing or attempting or conspiring to
commit, or participating in or facilitating the commission of financing of terrorism or acts of terrorism

Period of effectivity of freeze order issued by AMLC: Twenty (20) days,

- extendible by the Court of Appeals up to a period not exceeding six months upon petition by AMLC.
- The 20-day period shall be tolled upon filing of a petition to extend the effectivity of the freeze order
AUTHORITY TO
FREEZE The AMLC is also authorized to issue a freeze order with respect to property or funds of a designated
organization, association, group or any individual to comply with binding terrorism-related Resolutions
- said freeze order shall be effective until the basis for the issuance thereof shall have been lifted
o Hence, the 20-day limit does NOT apply
- During the effectivity of the freeze order, an aggrieved party may, within 20 days from issuance, file
with the Court of Appeals a petition to determine the basis of the freeze order according to the principle
of effective judicial protection

If the property or funds subject of the freeze order under the immediately preceding paragraph are found to
be in any way related to financing of terrorism or act of terrorism committed within the jurisdiction of the
Philippines, said property or funds shall be the subject of civil forfeiture proceedings

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