remittance and transfer companies and

ANTI-MONEY LAUNDERING ACT OF 2001 other similar entities and all other
RA 9160 AS AMENDED persons and their subsidiaries and
affiliates supervised or regulated by the
Bangko Sentral ng Pilipinas (BSP);
The Anti-Money Laundering Act of 2001
2. Insurance companies, pre-need
(AMLA) according to Sec 2; Declaration of
companies and all other persons
Policy it is hereby declared the policy of the supervised or regulated by the
State to protect and preserve the integrity and Insurance Commission (IC);
PAMANTASAN NG LUNGSOD NG MAYNILA confidentiality of bank accounts and to ensure 3. (i) Securities dealers, brokers, salesmen,
(University of the City of Manila) that the Philippines shall not be used as a investment houses and other similar
General Luna, corner Muralla St., Intramuros, Manila money laundering site for the proceeds of any persons managing securities or
1002 Metro Manila rendering services as investment agent,
unlawful activity. Consistent with its foreign
advisor, or consultant,
policy, the State shall extend cooperation in
transnational investigations and prosecutions (ii) Mutual funds, close-end investment
of persons involved in money laundering companies, common trust funds, and
In partial fulfillment of the requirements for the subject other similar persons,
Regulatory Framework and Legal Issues in Business activities wherever committed
(iii) Transfer companies and other
(ACN 2210A-4)
POLICY OF THE LAW similar entities; and
(iv) Other entities administering or
1. To protect and preserve the integrity otherwise dealing in currency,
and confidentiality of bank accounts commodities or financial derivatives
Finals Reviewer: and to ensure that the Philippines shall based thereon, valuable objects, cash
ANTI-MONEY LAUNDERING ACT not be used as a money laundering site
for the proceeds of any unlawful
substitutes and other similar monetary
instruments or property supervised or
OF 2001 (RA 9160) activity. regulated by the Securities and
2. To pursue the State's foreign policy to Exchange Commission (SEC);
AS AMENDED extend cooperation in transnational
investigation and prosecutions of 4. Jewelry dealers in precious metals, who,
persons involved in money laundering as a business, trade in precious metals,
activities wherever committed as well as for transactions in excess of One
the implementation of targeted million pesos (P1,000,000.00);
Submitted by: 5. Jewelry dealers in precious stones, who,
financial sanctions related to the
Adlawan, Reymar financing of the proliferation of as a business, trade in precious stones,
Matabang, Rochelle weapons of mass destruction, terrorism, for transactions in excess of One
Sergida, Ma. Joyce Ann Theresa and financing of terrorism, pursuant to million pesos (P1,000,000.00);
the resolutions of the United Nations 6. Company service providers which, as a
Security Council. (RA 9160, Sec. 2 as business, provide any of the following
amended by R.A.11521) services to third parties:
a. Acting as a formation agent of
juridical persons;
COVERED PERSONS b. Acting as (or arranging for
Submitted to:
NOTE: Covered "Institutions" was changed to another person to act as) a
Atty. Aloi Renz P. Santos director or corporate secretary of
Covered "Persons" under RA 10365.
a company, a partner of a
Covered persons, natural or juridical, refer to: partnership, or a similar position
in relation to other juridical
1. Banks, non-banks, quasi-banks, trust
May 2024 persons;
entities, foreign exchange dealers,
c. Providing a registered office of
pawnshops, money changers,
business address or
 accommodation correspondence customer or to any person in his/her
or administrative address for a REQUISITES FOR EXCLUSION: behalf; and 3. Reporting of Covered and
company,a partnership or any 1. They must be acting as independent 5. 'Gaming operations' refer to the Suspicious Transactions.
other legal person or
legal professionals; activities of the casino offering games GR: Covered persons shall report to the AMLC
arrangement’,and
d. Acting as (or arranging for 2. Authorized to practice in the of chance and any variations thereof all covered transactions and suspicious
another person to act as) a Philippines; approved by the appropriate transactions within five (5) working days
nominee shareholder for 3. Continue to be subject to the provisions government authorities. (RA 10927, Sec. from occurrence thereof.
another person; and of their respective codes of conduct 3, amending RA 9160, Sec. 3).
7. Persons who provide any of the and/or professional responsibility or XPN: The AMLC prescribes a different period
following services: any of its amendments (Ibid). OBLIGATIONS OF COVERED PERSONS not exceeding fifteen (15) working days.
a. Managing of client money, 1. Customer Identification Covered
securities or other assets;
NOTE: Lawyers and accountants acting as persons shall: NOTE: Should a transaction be determined to
b. Management of bank, savings or
securities accounts; independent legal professionals are not a. Establish and record the true be both a covered transaction and a suspicious
c. Organization of contributions required to report covered and suspicious identity of its clients based on transaction, the covered person shall be
for the creation, operation or transactions if the relevant information was official documents. required to report the same as a suspicious
management of companies; and obtained in circumstances where they are b. Maintain a system of verifying transaction. (RA 10365, Sec. 7, amending RA
d. Creation, operation or subject to professional secrecy or legal the true identity of their clients; 9160, Sec. 9)
management of juridical persons
professional privilege. (RA 10365, Sec. 7, and
or arrangements, and buying
and selling business entities. amending RA 9160, Sec. 9) c. In case of corporate clients, NO LIABILITY IN REPORTING COVERED
8. Casinos, including internet and require a system of verifying AND SUSPICIOUS TRANSACTIONS (SAFE
ship-based casinos, with respect to For purposes of covered persons under Section their legal existence and HARBOR PROVISIONS)
their casino cash transactions related to 3(a)(8), the following terms are hereby defined organizational structure, as well No administrative, criminal or civil
the gaming operations. (RA 10365, Sec. as follows: as the authority and proceedings shall lie against any person for
1, amending RA 9160, Sec. 3[a]) 1. 'Casino' refers to a business authorized identification of all persons having made a covered transaction report or a
9. Real estate developers and brokers. (RA by the appropriate government agency purporting to act on their behalf. suspicious transaction report in the regular
1152, Sec. 2, amending RA 9160, Sec. 3 to engage in gaming operations; performance of his duties and in good faith,
[a]) 2. 'Internet-based casinos' shall refer a NOTE: The BSP may conduct annual testing whether or not such reporting results in any
10. Offshore gaming operators, as well as casinos in which persons participate by solely limited to the determination of the criminal prosecution under the Act or any
their service providers, supervised, the use of remote communication existence and true identity of the owners of other Philippine law. (Rule 9.c.5. Implementing
accredited or regulated by the facilities such as, but not limited to, such accounts. Rules and Regulations of R.A. 9160, as
Philippine Amusement and Gaming internet, telephone, television, radio or Anonymous accounts, accounts under amended)
Corporation (PAGCOR) or any any other kind of electronic or other fictitious names, and all other similar accounts When reporting covered or suspicious
government agency. (RA 10365, Sec. 1, technology for facilitating shall be absolutely prohibited. Peso and transactions to the AMLC, covered persons
amending RA 9160, Sec. 3[a]) communication; and foreign currency non-checking numbered and their officers and employees shall not be
3. 'Ship-based casino' shall refer to accounts shall be allowed. deemed to have violated:
The term "covered persons" shall exclude casinos, the operation of which is 1. The Law on Secrecy of Bank Deposits
lawyers and accountants undertaken on board a vessel, ship, 2. Record Keeping - All records of all or Ra 1405, as amended;
These persons must be acting as boat or any other water-based craft transactions of covered persons shall be 2. Foreign Currency Deposit Act or RA
independent legal professionals in relation to wholly or partly intended for gambling; maintained and safely stored for five (5) No. 6426, as amended,
information concerning their clients or where 4. 'Casino cash transaction' refers to years from the date of transactions. 3. General Banking Laws or RA 8791; and
disclosure of information would compromise transactions involving the receipt of 4. Other similar laws. (RA 10365, Sec 7.
client confidences or the attorney-client cash by a casino paid by or on behalf of NOTE: With respect to closed accounts, the amending RA 9160, Sec. 9)
relationship. (RA 10365, Sec. 1, amending RA a customer, or transactions involving records shall be preserved and safely stored for
9160, Sec. 3[a]) the payout of cash by a casino to a at least five (5) years from the dates when they
were closed.
PROHIBITED COMMUNICATIONS covered persons under Section 3(a) (9), a 1. transacts said monetary instrument or 4. Plunder under Republic Act No. 7080,
Officers and employees of covered persons single cash transaction involving an amount in property; as amended;
shall not: excess of Seven Million Five Hundred 2. converts, transfers, disposes of, moves, 5. Robbery and extortion under Articles
1. Communicating, directly or indirectly, Thousand Pesos (P7,500,000.00) or its acquires, possesses or uses said 294, 295, 296, 299, 300, 301 and 302 of
in any manner or by a means, to any equivalent in any other currency. (RA 11521, monetary instrument or property; the Revised Penal Code, as amended;
person, the fact that a covered or Sec. 2, amending RA 9160, Sec. 3[b]) 3. conceals or disguises the true nature, 6. Jueteng and Masiao punished as illegal
suspicious transaction report was made, source, location, disposition, movement gambling under Presidential Decree No.
the contents thereof, or any other SUSPICIOUS TRANSACTIONS or ownership of or rights with respect 1602;
information in relation thereto. to said monetary instrument or 7. Piracy on the high seas under the
A transaction with covered persons, property; Revised Penal Code, as amended and
NOTE: If the reporting is done by any person regardless of the amounts involved, where any 4. attempts or conspires to commit money Presidential Decree No. 532;
in the regular performance of his duties in of the following circumstances exist: laundering offenses referred to in 8. Qualified theft under Article 310 of the
good faith, no administrative, criminal or civil 1. There is no underlying legal or trade paragraphs (a), (b) or (c); Revised Penal Code, as amended;
proceedings shall lie against said person, obligation, purpose or economic 5. aids, abets, assists in or counsels the 9. Swindling under Article 315 and Other
whether or not such reporting results in any justification; commission of the money laundering Forms of Swindling under Article 316 of
criminal prosecution under this Act of any 2. The client is not properly identified; offenses referred to in paragraphs (a), the Revised Penal Code, as amended;
other law (Safe harbor provision). 3. The amount involved is not (b) or (c) above; and 10. Smuggling under Republic Act Nos. 455
commensurate with the business or 6. performs or fails to perform any act as a and 1937;
2. Communicating, directly or indirectly, financial capacity of the client; result of which he facilitates the offense 11. Violations of Republic Act No. 8792,
in any manner or by any means, to any 4. Taking into account all known of money laundering referred to in otherwise known as the Electronic
person or entity, the media, the fact circumstances, it may be perceived that paragraphs (a), (b) or (c) above. Commerce Act of 2000;
that a covered or suspicious transaction the client's transaction is structured in Money laundering is also committed by any 12. Hijacking and other violations under
has been reported or is about to be order to avoid being the subject of covered person who, knowing that a covered Republic Act No. 6235; destructive
reported, the contents of the report, or reporting requirements under the Act; or suspicious transaction is required under arson and murder, as defined under the
any other information in relation 5. Any circumstances relating to the this Act to be reported to the Anti-Money Revised Penal Code, as amended;
thereto. transaction which is observed to Laundering Council (AMLC), fails to do so. 13. Terrorism and conspiracy to commit
3. Publishing or airing in any manner or deviate from the profile of the client (Sec. 4, RA 10365, amending Sec. 4, RA 9160) terrorism as defined and penalized
form by the mass media, electronic and/or the client's past transactions under Sections 3 and 4 of Republic Act
mail, or other similar devices. with the covered person; UNLAWFUL ACTIVITIES OR PREDICATE No. 9372;
In case of violation of these prohibitions, the CRIMES 14. Financing of terrorism under Section 4
6. The transactions is in a way related to
concerned officer and employee of the covered an unlawful activity or offense under and offenses punishable under Sections
person and media shall be held criminally Unlawful activity refers to any act or 5, 6, 7 and 8 of Republic Act No. 10168,
this Act that is about to be, is being or
liable. (Sec. 7, RA 10365 amending Sec. 9, RA omission or series or combination thereof otherwise known as the Terrorism
has been committed; or
9160) involving or having direct relation to the Financing Prevention and Suppression
7. Any transactions that are similar or
following: Act of 2012:
analogous to any of the foregoing. (RA
COVERED TRANSACTIONS 1. Kidnapping for ransom under Article 15. Bribery under Articles 210, 211 and 211-A
9160 as amended by RA 9194, Sec. 3[b-1])
267 of Act No. 3815, otherwise known as of the Revised Penal Code, as amended,
A transaction in cash or other equivalent the Revised Penal Code, as amended; and Corruption of Public Officers under
MONEY LAUNDERING, HOW IT
monetary instrument involving a total amount COMMITTED 2. Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 Article 212 of the Revised Penal Code, as
in excess of Five hundred thousand pesos and 16 of Republic Act No. 9165, amended;
(P500,000.00) within one (1) banking day; for Money laundering is committed by any otherwise known as the Comprehensive 16. Frauds and Illegal Exactions and
covered persons under Section 3(a)(8), a single person who, knowing that any monetary Dangerous Drugs Act of 2002; Transactions under Articles 213, 214, 215
casino transaction involving an amount in instrument or property represents, involves, or 3. Section 3 paragraphs B, C, E, G, H and I and 216 of the Revised Penal Code, as
excess of Five million pesos (P5,000,000.00) or relates to the proceeds of any unlawful activity: of Republic Act No. 3019, as amended, amended;
its equivalent in any other currency. For otherwise known as the Anti-Graft and
Corrupt Practices Act;
17. Malversation of Public Funds and 27. Violation of Presidential Decree No. cause by the competent authority: for assistance from a foreign State, or
Property under Articles 217 and 222 of 1612, otherwise known as the Provided, further, that there must be a believed by the Council, on the basis for
the Revised Penal Code, as amended; Anti-Fencing Law; finding of fraud, willful substantial evidence, to be, in whole or
18. Forgeries and Counterfeiting under 28. (Violation of Section 6 of Republic Act misrepresentation or malicious intent in part, wherever located, representing,
Articles 163, 166, 167, 168, 169 and 176 of No. 8042, otherwise known as the on the part of the taxpayer: Provided, involving, or related to directly or
the Revised Penal Code, as amended; Migrant Workers and Overseas finally, that in no case shall the AMLC indirectly, in any manner or by any
19. Violations of Sections 4 to 6 of Republic Filipinos Act of 1995, as amended by institute forfeiture proceedings to means, the proceeds of an unlawful
Act No. 9208, otherwise known as the Republic Act No. 10022; recover monetary instruments, property activity.
Anti-Trafficking in Persons Act of 2003; 29. Violation of Republic Act No. 8293, or proceeds representing, involving or 3. To institute civil forfeiture proceedings
20. Violations of Sections 78 to 79 of otherwise known as the Intellectual relating to a tax crime, if the same has and all other remedial proceedings
Chapter IV, of Presidential Decree No. Property Code of the Philippines; already been recovered or collected by through the Office of the Solicitor
705, otherwise known as the Revised 30. Violation of Section 4 of Republic Act the Bureau of Internal Revenue (BIR) in General;
Forestry Code of the Philippines, as No. 9995, otherwise known as the a separate proceeding; and 4. To cause the filing of complaints with
amended; Anti-Photo and Video Voyeurism Act of 36. Felonies or offenses of a similar nature the Department of Justice or the
21. Violations of Sections 86 to 106 of 2009; that are punishable under the penal Ombudsman for the prosecution of
Chapter VI, of Republic Act No. 8550, 31. Violation of Section 4 of Republic Act laws of other countries. [Sec. 2, RA money laundering offenses;
otherwise known as the Philippine No. 9775, otherwise known as the 11521, amending Sec 3(i) of RA 9160] 5. To investigate suspicious transactions
Fisheries Code of 1998; Anti-Child Pornography Act of 2009; and covered transactions deemed
22. Violations of Sections 101 to 107, and 110 32. Violations of Sections 5, 7, 8, 9, 10(c), ANTI-MONEY LAUNDERING COUNCIL suspicious after an investigation by
of Republic Act No. 7942, otherwise (d) and (e), 11, 12 and 14 of Republic Act (AMLC) AMLC, money laundering activities and
known as the Philippine Mining Act of No. 7610, otherwise known as the other violations of this Act;
1995; Special Protection of Children Against The AMLC shall be composed of: 6. To apply before the Court of Appeals,ex
23. Violations of Section 27(c), (e), (f), (g) Abuse, Exploitation and 1. The Governor of the Bangko Sentral ng parte, for the freezing of any monetary
and (i), of Republic Act No. 9147, Discrimination; Pilipinas (BSP) as Chairman; instrument or property alleged to be
otherwise known as the Wildlife 33. Fraudulent practices and other 2. The Commissioner of the Insurance laundered, proceeds from, or
Resources Conservation and Protection violations under Republic Act No. 8799, Commission as member; and instrumentalities used in or intended
Act; otherwise known as the Securities 3. The Chairman of the Securities and for use in any unlawful activity as
24. Violation of Section 7(b) of Republic Regulation Code of 2000; Exchange Commission (SEC) as defined in Section 3(i) hereof;
Act No. 9072, otherwise known as the 34. Violations of Section 19 (a)(3) of member.(RA 9160, as amended by RA 7. To implement such measures as may be
National Caves and Cave Resources Republic Act No. 10697, otherwise 9194, Sec. 7) necessary and justified under this Act
Management Protection Act; known as the ‘Strategic Trade to counteract money laundering;
25. Violation of Republic Act No. 6539, Management Act’, in relation to the FUNCTIONS 8. To receive and take action in respect of,
otherwise known as the proliferation of weapons of mass any request from foreign states for
Anti-Carnapping Act of 2002, as destruction and its financing pursuant The AMLC shall act unanimously in the assistance in their own anti-money
amended; to United Nations Security Council discharge of its functions as defined laundering operations provided in this
26. Violations of Sections 1, 3 and 5 of Resolution Numbers 1718 of 2006 and hereunder: Act;
Presidential Decree No. 1866, as 2231 of 2015; 1. To require, receive and analyze covered 9. To develop educational programs on
amended, otherwise known as the 35. Violations of Section 254 of Chapter II, or suspicious transaction reports from the pernicious effects of money
decree Codifying the Laws on Title X of the National Internal Revenue covered persons; laundering, the methods and
Illegal/Unlawful Possession, Code of 1997, as amended, where the 2. To issue orders addressed to the techniques used in the money
Manufacture, Dealing In, Acquisition or deficiency basic tax due in the final appropriate Supervising Authority or laundering, the viable means of
Disposition of Firearms, Ammunition assessment is in excess of Twenty- five the covered persons to determine the preventing money laundering and the
or Explosives; million pesos (P25,000,000.00) per true identity of the owner of any effective ways of prosecuting and
taxable year, for each tax type covered monetary instrument or property punishing offenders;
and there has been finding of probable subject of a covered transaction or
suspicious transaction report or request
10. To enlist the assistance of any branch, including funds and assets derived or explanation, the freeze order shall
department, bureau, office, agency, or generated therefrom, by individuals or ISSUANCE OF FREEZE ORDER automatically be dissolved.
instrumentality of the government, entities designated and listed under The Court of Appeals may issue a freeze
including government-owned and United Nations Security Council order which shall be effective immediately, for EXTENSION: The fifteen (15)-day freeze order
-controlled corporations, in Resolution Numbers 1718 of 2006 and a period of twenty (20) days: of the AMLC may be extended upon order of
undertaking any and all anti- money 2231 of 2015 and their successor a. Upon a verified ex parte petition by the the court, provided that the fifteen (15)-day
laundering operations, which may resolutions as well as any binding AMLC; and period shall be tolled pending the court’s
include the use of its personnel, resolution of the Security Council; and b. After determination that probable decision to extend the period.
facilities and resources for the more 16. To preserve, manage or dispose assets cause exists that any monetary
resolute prevention, detection, and pursuant to a freeze order, asset instrument or property is in any way PERIOD OF THE FREEZE ORDER
investigation of money laundering preservation order, or judgment of related to an unlawful activity as The total period of the freeze order
offenses and prosecution of offenders; forfeiture: Provided, however, that defined in Section 3(i) hereof issued by the Court of Appeals under this
11. To impose administrative sanctions for pending their turnover to the national provision shall not exceed (6) months
the violation of laws, rules, regulations, government, all expenses incurred in SECTION 10 OF R.A. NO. 9160 - depending upon the circumstances of thecase:
and orders and resolutions issued relation to the duties herein mentioned AUTHORITY TO FREEZE
pursuant thereto. shall be deducted from the amount to Two requisites for the issuance of a NOTE: if there is no case filed against a person
12. To require the Land Registration be turned over to the national govern. freeze order: whose account has been frozen within the
Authority and all its Registries of Deeds (Sec. 3 of RA 11521 amending Sec. 7 of (1) the application ex-parte by the AMLC period determined by the court, the freeze
to submit to the AMLC, reports on all RA 9160) and order shall be deemed ipso facto lifted:
real estate transactions involving an (2) the determination of probable cause by
amount in excess of Five hundred FREEZING OF MONETARY INSTRUMENT the CA AUTHORITY TO INQUIRE INTO BANK
thousand pesos (P500,000.00) within OR PROPERTY DEPOSITS
fifteen (15) days from the date of PROBABLE CAUSE
registration of the transaction, in a PURPOSE Refers to the sufficiency of the relation The AMLC may inquire into or examine
form to be prescribed by the AMLC. To give the government the necessary between an unlawful activity and the property any particular deposit or investment,
The AMLC may also require the Land time to prepare its case and to file the or monetary instrument. including related accounts, with any banking
Registration Authority and all its appropriate charges without having to worry institution or non-bank financial institution
Registries of Deeds to submit copies of about the possible dissipation of the assets EFFECTIVITY provided
relevant documents of all real estate that are in any way related to the suspected Under Section 10 of R.A. no. 1960 the 1. It is upon order of any competent court;
transactions. (Sec. 6, RA 10365 illegal activity. issuance of freeze order shall be effective 2. Based on an ex parte application; and
amending Sec. 7, RA 9160) immediately, on the account for a period not 3. In cases of violations of this Act, when
13. To apply for a search and seizure order OBJECTIVE OF A FREEZE ORDER exceeding fifteen (15) days. Notice to the it has been established that there is
with any competent court in the To temporarily preserve monetary depositor that his account has been frozen probable cause that the deposits or
conduct of its investigation. instruments or property that are in any way shall be issued simultaneously with the investments, including related accounts
14. To apply for the issuance of subpoena related to an unlawful activity or money issuance of the freeze order. involved, are related to an unlawful
ad testificandum and/or subpoena laundering, by preventing the owner from activity as defined in Section 3(i) hereof
duces tecum with any competent court utilizing them during the duration of the To the Depositor: shall have seventy-two or a money laundering offense under
in the conduct of its investigation. freeze order. (72) hours upon receipt of the notice to Section 4 hereof
15. To implement targeted financial explain why the freeze order should be lifted.
sanctions in relation to proliferation of JURISDICTION IN CHARGE FOR The CA is mandated to resolve the
weapons of mass destruction and its VIOLATIONS OF AMLA AMLC: has seventy-two (72) hours to application within 24 hours from receipt of
financing, including ex parte freeze, 1. RTC – all cases on money laundering dispose of the depositor’s explanation. the application. A resolution denying the
without delay, against all funds and 2. Sandiganbayan – Those committed by application “must state the specific reasons
other assets that are owned and public officers and private persons in NOTE: If it fails to act within seventy-two for such dismissal” and dismissal orders can
controlled, directly or indirectly, conspiracy with them. (Sec. 5 R.A. 9160, (72) hours from receipt of the depositor’s be appealed before the SC through a petition
as amended) for certiorari (a special civil action).
 3. Drugs- violation of Dangerous Drugs This petition must be submitted to (1) Track down, freeze, restrain, and seize
DISTINCTIONS BETWEEN A BANK Act. the court that rendered the conviction and assets that are believed to be the
INQUIRY ORDER AND A FREEZER 4. Arson forfeiture order within 15 days of the proceeds of unlawful activities,
ORDER (RA 9160, SEC. 10 VS. SEC. 11) 5. Murder (RA 10167, Sec. 2, amending RA order, or else the forfeiture order following the procedures laid out in
9160, Sec.11) becomes final and enforceable. This the Act.
BANK INQUIRY FREEZE provision applies to both civil and (2) Provide necessary information to the
ORDER ORDER RELATED ACCOUNTS criminal forfeitures. foreign state, as per the procedures in
DEFINITION a provisional a provisional Refers to accounts, the funds and the Act.
remedy that remedy sources of which originated from and/or are c. PAYMENT IN LIEU OF FORFEITURE (3) Apply for an order of forfeiture in
allows the aimed at materially linked to the monetary instrument If the court has issued an order of court, provided that the application is
AMLC to blocking or or property subject of the freeze order. forfeiture for monetary instruments or accompanied by an authenticated
examine or restraining property related to money laundering copy of the order of a court in the
inquire into monetary LIMITATIONS ON EXAMINATION offenses under Section 4, but the assets requesting state for the forfeiture of
particular bank instruments
The authority to inquire into or cannot be located, altered, destroyed, or the monetary instrument or property
accounts or or properties
investment with in any way examine the main account and the related worthless due to the offender's actions, or of a person convicted of money
a bank or related to an accounts shall comply with the requirements if they are concealed, transferred, or laundering in the requesting state.
non-bank unlawful of Sec. 2 and 3, Art. III of the 1987 located outside the court's jurisdiction, NOTE: a certification or affidavit from a
financial activity, as Constitution. (RA 9160, as amended by RA the court can order the convicted offender competent officer of the requesting
institution, herein 10167, Sec. 11) to pay an amount equal to the value of the state must be submitted, confirming
notwithstanding defined, forfeited assets instead of enforcing the that the conviction and forfeiture
the provisions of from being
FORFEITURE PROVISIONS (Sec.12 of R.A. forfeiture order. This provision also order are final and no further appeal
Republic Act No. transacted,
1405, as converted, 9160) applies to both civil and criminal is possible.
amended; concealed, forfeitures.
Republic Act No. moved or a. CIVIL FORFEITURE C. OBTAINING ASSISTANCE FROM
6426, as disposed Occurs when a covered transaction MUTUAL ASSISTANCE AMONG STATES FOREIGN STATES
amended; without report is made, and the court orders the (Sec.13 of R.A. 9160) The AMLC may make a request to any
Republic Act No. affecting the seizure of any monetary instrument or foreign State for assistance in
8791; and other ownership property in whole or in part, directly or Mainly about giving assistance to other states
bank secrecy thereof (1) tracking down, freezing, restraining
indirectly, connected to the report. The and at the same time requesting for it in and seizing assets alleged to be
laws.
Revised Rules of Court on civil forfeiture relation to money-laundering offenses. proceeds of any unlawful activity;
APPLICATION does not The will then be applied in these situations. (2) obtaining information that it needs
contemplate ex applications A. REQUEST FOR ASSISTANCE FROM A relating to any covered transaction,
parte for freeze b. CLAIM PROCESS ON FORFEITURE FOREIGN STATE money laundering offense or any
proceedings in orders be
ASSETS AMLC may execute the request or other matter directly or indirectly
applications for filed ex parte
bank inquiry When a court orders the forfeiture of refuse to execute the same and inform the related
orders monetary instruments or property in a foreign State of any valid reason for not (3) to the extent allowed by the law of the
criminal prosecution for money executing the request or for delaying the foreign State, applying with the
laundering offenses under Section 4 of the execution thereof. The principles of proper court therein for an order to
CASES WHERE NO COURT ORDER SHALL
BE REQUIRED IN ORDER FOR THE AMLC Act, the offender or anyone claiming mutuality and reciprocity shall, for this enter any premises belonging to or in
TO INQUIRE INTO DEPOSIT, ownership can file a verified petition for purpose, be at all times recognized. the possession or control of, any or all
INVESTMENT OR RELATED ACCOUNTS a declaration that the assets belong to of the persons named in said request,
them and request the separation or B. POWERS OF THE AMLC TO ACT ON A and/or search any or all such persons
No need of court order in cases of (HKMAD) exclusion of the relevant monetary REQUEST FOR ASSISTANCE FROM A named therein and/or remove any
1. Kidnapping instrument or property. FOREIGN STATE. document, material or object named
2. Hijacking AMLC can: in said request:
 Provided, That the documents laundering or provide details of their
accompanying the request in support conviction. GLOSSARY (DEFINITION OF TERMS)
of the application have been duly (3) Include sufficient details about the
person's identity. BANK INQUIRY ORDER - a provisional
authenticated in accordance with the
(4) Provide specifics to identify any
applicable law or regulation of the remedy that allows the AMLC to examine or
covered institution that may have
foreign State; and relevant information, documents, inquire into particular bank accounts or
(4) applying for an order of forfeiture of materials, or objects. investment with a bank or non-bank financial
any monetary instrument or property (5) Ask the concerned covered institution institution
in the proper court in the foreign for any information, documents,
State: materials, or objects that could assist FREEZE ORDER - a provisional remedy aimed
in the investigation or prosecution. at blocking or restraining monetary
Provided, That the request is
(6) Specify how and to whom the obtained
accompanied by an authenticated instruments or properties in any way related to
information, documents, materials, or
copy of the order of the regional trial objects should be produced. an unlawful activity, as herein defined, from
court ordering the forfeiture of said (7) Provide all necessary details for the being transacted, converted, concealed, moved
monetary instrument or property of a requested state's court to issue the or disposed without affecting the ownership
convicted offender and an affidavit of necessary writs, orders, or processes thereof
the clerk of court stating that the needed by the requesting state.
(8) contain such other information as may
conviction and the order of forfeiture PROBABLE CAUSE - refers to the sufficiency
assist in the execution of the request.
are final and that no further appeal of the relation between an unlawful activity
lies in respect of either. F. AUTHENTICATION OF DOCUMENTS and the property or monetary instrument.
● A document is considered
D. LIMITATIONS ON REQUEST FOR authenticated when it is signed or
MUTUAL ASSISTANCE. certified by a judge, magistrate, or
The AMLC may refuse to equivalent officer in or of the
cooperate with a request for assistance if requesting state.
the requested action contradicts the ● The document must be authenticated
Philippine Constitution or if it is likely to by the oath or affirmation of a witness
harm the national interest of the or sealed with an official or public seal
Philippines. However, this refusal may be of a minister, secretary of state, or
overridden if there is a treaty between the officer in or of the requesting state's
Philippines and the requesting state government or department.
concerning mutual assistance in money NOTE: The certificate of authentication
laundering cases can be made by a representative of the
Philippines' embassy or legation,
E. REQUIREMENTS FOR REQUESTS for consulate, or consular agent in the foreign
MUTUAL ASSISTANCE FROM
state where the record is kept, and it
FOREIGN STATES.
A request for mutual assistance from a should be authenticated by the seal of
foreign State must their office.
(1) Confirm that an investigation or
prosecution is ongoing or that the G. EXTRADITION
person named in the request has been The Philippines shall negotiate for
convicted of a money laundering the inclusion of money laundering
offense.
offenses as herein defined among
(2) State the grounds for investigating or
prosecuting the person for money extraditable offenses in all future treaties.
 GLOSSARY (REQUISITES) 2. Communicating, directly or indirectly, When reporting covered or suspicious CASES WHERE NO COURT ORDER SHALL
in any manner or by any means, to any transactions to the AMLC, covered persons BE REQUIRED IN ORDER FOR THE AMLC TO
COVERED PERSONS person or entity, the media, the fact and their officers and employees shall not INQUIRE INTO DEPOSIT, INVESTMENT OR
REQUISITES FOR EXCLUSION: that a covered or suspicious transaction be deemed to have violated: RELATED ACCOUNTS
1. They must be acting as independent has been reported or is about to be 1. The Law on Secrecy of Bank Deposits No need of court order in cases of
legal professionals; reported, the contents of the report, or or Ra 1405, as amended; (HKMAD)
2. Authorized to practice in the any other information in relation 2. Foreign Currency Deposit Act or RA 1. Kidnapping
Philippines; thereto. No. 6426, as amended, 2. Hijacking
3. Continue to be subject to the provisions 3. Publishing or airing in any manner or 3. General Banking Laws or RA 8791; and 3. Drugs- violation of Dangerous Drugs
of their respective codes of conduct form by the mass media, electronic 4. Other similar laws. (RA 10365, Sec 7. Act.
and/or professional responsibility or mail, or other similar devices. amending RA 9160, Sec. 9) 4. Arson
any of its amendments (Ibid). 5. Murder (RA 10167, Sec. 2, amending RA
MONEY LAUNDERING IS COMMITTED BY: The AMLC shall be composed of: 9160, Sec.11)
OBLIGATIONS OF COVERED PERSONS: (1) any person who, knowing that any 1. The Governor of the Bangko Sentral ng
1. Customer Identification Covered monetary instrument or property Pilipinas (BSP) as Chairman;
persons shall: represents, involves, or relates to the 2. The Commissioner of the Insurance
a. Establish and record the true proceeds of any unlawful activity: Commission as member; and
identity of its clients based on (a) transacts said monetary 3. The Chairman of the Securities and
official documents. instrument or property; Exchange Commission (SEC) as
b. Maintain a system of verifying (b) converts, transfers, disposes of, member.(RA 9160, as amended by RA
the true identity of their clients; moves, acquires, possesses or 9194, Sec. 7)
and uses said monetary instrument
c. In case of corporate clients, or property;
require a system of verifying (c) conceals or disguises the true
their legal existence and nature, source, location, ISSUANCE OF FREEZE ORDER
organizational structure, as well disposition, movement or The Court of Appeals may issue a freeze
as the authority and ownership of or rights with order which shall be effective immediately, for
identification of all persons respect to said monetary a period of twenty (20) days:
purporting to act on their behalf. instrument or property; a. Upon a verified ex parte petition by the
2. Record Keeping - All records of all (d) attempts or conspires to commit AMLC; and
transactions of covered persons shall be money laundering offenses b. After determination that probable
maintained and safely stored for five (5) referred to in paragraphs (a), (b) cause exists that any monetary
years from the date of transactions. or (c); instrument or property is in any way
3. Reporting of Covered and (e) aids, abets, assists in or counsels related to an unlawful activity as
Suspicious Transactions. the commission of the money defined in Section 3(i) hereof
laundering offenses referred to
PROHIBITED COMMUNICATIONS in paragraphs (a), (b) or (c)
Officers and employees of covered persons above; and Two requisites for the issuance of a freeze
shall not: (f) performs or fails to perform any order:
1. Communicating, directly or indirectly, act as a result of which he 1. the application ex-parte by the AMLC
in any manner or by a means, to any facilitates the offense of money and
person, the fact that a covered or laundering referred to in 2. the determination of probable cause by
suspicious transaction report was made, paragraphs (a), (b) or (c) above. the CA
the contents thereof, or any other
information in relation thereto.
 A. DATA PRIVACY ACT (RA 10173) It also guarantees the freedom of expression
and speech under Article III, Sec.4, which
Declaration of Policy states:
It is the policy of the State to protect the No law shall be passed abridging the freedom of
fundamental human right of privacy, of speech, of expression, or of the press, or the
communication while ensuring free flow of right of the people peaceably to assemble and
information to promote innovation and petition the government for redress of
PAMANTASAN NG LUNGSOD NG MAYNILA growth. The State recognizes the vital role of grievances.
(University of the City of Manila) information and communications technology
General Luna, corner Muralla St., Intramuros, Manila in nation-building and its inherent obligation PERSONAL INFORMATION
1002 Metro Manila to ensure that personal information in
information and communications systems in Any information whether recorded in a
the government and in the private sector are material form or not from which the identity
In partial fulfillment of the requirements for the subject secured and protected. (Sec. 2, RA 10173) of an individual is apparent or can be
Regulatory Framework and Legal Issues in Business reasonably and directly ascertained by the
(ACN 2210A-4) B. NATIONAL PRIVACY COMMISSION entity holding the information or when put
together with other information would directly
This comprehensive privacy law established and certainly identify an individual. [Sec. 3(g),
the National Privacy Commission (‘NPC’) RA 10173]
tasked with administering and implementing
Finals Reviewer:
the provisions of the Data Privacy Act (‘DPA’). It must be:
Data Privacy Act (R.A. 10173) The NPC is headed by a Privacy Commissioner 1. Collected for specified and legitimate
and assisted by two Deputy Commissioners. It purposes determined and declared
is attached to the Department of Information before, or as soon as reasonably
and Communications Technology (‘DICT’), practicable after collection, and later
Submitted by: which itself was only created in 2016 or about processed in a way compatible with
Franco, Angeline S. four years after the enactment of the DPA. The such declared, specified and legitimate
Padojinog, Princess Dianne creation of DICT created a kind of legal purposes only;
Viñas, Mireille Richelle V. anachronism since the DPA had provided that
the NPC would be attached to the then 2. Processed fairly and lawfully;
non-existent DICT.
3. Accurate, relevant and, where necessary
CONSTITUTIONAL BASIS for purposes for which it is to be used
the processing of personal information,
Submitted to:
The Right to Information and kept up to date; inaccurate or
Atty. Aloi Renz P. Santos Communications Privacy is recognized incomplete data must be rectified,
under Article III, Sec. 3(1) of the Constitution, supplemented, destroyed or their
which states: further processing restricted;
The privacy of communication and
correspondence shall be inviolable except upon 4. Adequate and not excessive in relation
May 2024 lawful order of the court, or when public safety to the purposes for which they are
or order requires otherwise, as prescribed by collected and processed;
law.
5. Retained only for as long as necessary
for the fulfillment of the purposes for
 which the data was obtained or for the 4. Specifically established by an executive transferred to third parties: Provided, Requisites:
establishment, exercise or defense of order or an act of Congress to be kept finally, That consent of the data subject ProNE-Act
legal claims, or for legitimate business classified. [Sec. 3(l), RA 10173] was obtained prior to processing; 1. It must involve any processing of
purposes, or as provided by law; and personal information
GR: The processing of sensitive personal 5. The processing is necessary for 2. By either natural or juridical persons
6. Kept in a form which permits information and privileged information shall purposes of medical treatment, is 3. Whether or not found in the
identification of data subjects for no be prohibited, carried out by a medical practitioner or Philippines that uses equipment or
longer than is necessary for the a medical treatment institution, and an maintains an office, branch or agency in
purposes for which the data were XPNs: adequate level of protection of personal the Philippines.
collected and processed: Provided, that 1. The data subject has given his or her information is ensured; or 4. Either acting as a controller or
personal information collected for consent, specific to the purpose prior to processor
other purposes may lie processed for the processing, or in the case of 6. The processing concerns such personal
historical, statistical or scientific privileged information, all parties to the information as is necessary for the This Act does not apply to the following:
purposes, and in cases laid down in law exchange have given their consent prior protection of lawful rights and interests 1. Information about any individual who
may be stored for longer periods: to processing; of natural or legal persons in court is or was an officer or employee of a
Provided, further, that adequate proceedings, or the establishment, government institution that relates to
safeguards are guaranteed by said laws 2. The processing of the same is provided exercise or defense of legal claims, or the position or functions of the
authorizing their processing. (Sec. 11, for by existing laws and regulations: when provided to government or public individual, including:
RA 10173) Provided, That such regulatory authority. (Sec. 13, RA 10173) a. The fact that the individual is or
enactments guarantee the protection of was an officer or employee of the
SENSITIVE PERSONAL INFORMATION the sensitive personal information and NOTE: government institution;
the privileged information: Provided, Confidential information- Generally, the b. The title, business address and
Any information: further, That the consent of the data effect of confidentiality will result in the office telephone number of the
1. About an individual’s race, ethnic subjects is not required by law or information being inadmissible in any court, individual;
origin, marital status, age, color, and regulation permitting the processing of in any proceeding. c. The classification, salary range
religious, philosophical or political the sensitive personal information or and responsibilities of the
affiliations. the privileged information; Privileged information- any and all forms of position held by the individual;
data which under the Rules of the Court and
2. About an individual’s health, education, 3. The processing is necessary to protect and other pertinent laws constitute privileged d. The name of the individual on a
genetic or sexual life of a person, or to the life and health of the data subject or communication. [Sec.3(k), RA 10173] document prepared by the
any proceeding for any offense another person, and the data subject is individual in the course of
committed or alleged to have been not legally or physically able to express SCOPE employment with the
committed by such person, the disposal his or her consent prior to the government;
of such proceedings, or the sentence of processing; This Act applies to the processing of all types
any court in such proceedings; of personal information and to any natural and 2. Information about an individual who is
4. The processing is necessary to achieve juridical person involved in personal or was performing service under
3. Issued by government agencies peculiar the lawful and noncommercial information processing including those contract for a government institution
to an individual which includes, but not objectives of public organizations and personal information controllers and that relates to the services performed,
limited to, social security numbers, their associations: Provided, That such processors who, although not found or including the terms of the contract, and
previous or current health records, processing is only confined and related established in the Philippines, use equipment the name of the individual given in the
licenses or its denials, suspension or to the bona fide members of these that are located in the Philippines, or those course of the performance of those
revocation, and tax returns; and organizations or their associations: who maintain an office, branch or agency in services;
Provided, further, That the sensitive the Philippines subject to the immediately
personal information are not succeeding paragraph: Provided, That the
requirements of Section 5 are complied with.
3. Information relating to any including any applicable data privacy the Philippines and the parent 4. Adequate and not excessive in relation
discretionary benefit of a financial laws, which is being processed in the or affiliate of the Philippine to the purposes for which they are
nature such as the granting of a license Philippines. (Sec. 4, RA 10173) entity has access to personal collected and processed;
or permit given by the government to information; and
an individual, including the name of Sec. 5, RA 10173 5. Retained only for as long as necessary
the individual and the exact nature of PROTECTION AFFORDED TO 3. The entity has other links in the for the fulfillment of the purposes for
the benefit; JOURNALISTS AND THEIR SOURCES Philippines such as, but not limited to: which the data was obtained or for the
a. The entity carries on business in establishment, exercise or defense of
Nothing in this Act shall be construed as to
4. Personal information processed for the Philippines; and legal claims, or for legitimate business
have amended or repealed the provisions of
journalistic, artistic, literary or research b. The personal information was purposes, or as provided by law; and
Republic Act No. 53, which affords the
purposes; collected or held by an entity in
publishers, editors or duly accredited reporters
the Philippines. (Sec.6, RA 10173) 6. Kept in a form which permits
of any newspaper, magazine or periodical of
5. Information necessary in order to carry identification of data subjects for no
general circulation protection from being
out the functions of public authority C. PROCESSING OF PERSONAL longer than is necessary for the
compelled to reveal the source of any news INFORMATION
which includes the processing of purposes for which the data were
report or information appearing in said
personal data for the performance by collected and processed: Provided, That
publication which was related in any General Data Privacy Principles
the independent, central monetary personal information collected for
confidence to such publisher, editor, or The processing of personal information shall
authority and law enforcement and other purposes may lie processed for
reporter. be allowed, subject to compliance with the
regulatory agencies of their historical, statistical or scientific
constitutionally and statutorily requirements of this Act and other laws purposes, and in cases laid down in law
EXTRATERRITORIAL APPLICATION allowing disclosure of information to the
mandated functions. Nothing in this may be stored for longer periods:
Act shall be construed as to have public and adherence to the principles of Provided, further, That adequate
This Act applies to an act done or practice transparency, legitimate purpose and
amended or repealed Republic Act No. safeguards are guaranteed by said laws
engaged in and outside of the Philippines by proportionality.
1405, otherwise known as the Secrecy of authorizing their processing. (Sec. 11,
an entity if:
Bank Deposits Act; Republic Act No. RA 10173)
6426, otherwise known as the Foreign Personal information must, be:
1. The act, practice or processing relates 1. Collected for specified and legitimate
Currency Deposit Act; and Republic Act NOTE: The personal information controller
to personal information about a purposes determined and declared
No. 9510, otherwise known as the must ensure implementation of personal
Philippine citizen or a resident; before, or as soon as reasonably
Credit Information System Act (CISA); information processing principles set out
practicable after collection, and later herein.
2. The entity has a link with the processed in a way compatible with
6. Information necessary for banks and
Philippines, and the entity is processing such declared, specified and legitimate
other financial institutions under the PRINCIPLES OF TRANSPARENCY,
personal information in the Philippines purposes only; LEGITIMATE PURPOSE, AND
jurisdiction of the independent, central
or even if the processing is outside the PROPORTIONALITY
monetary authority or Bangko Sentral
Philippines as long as it is about 2. Processed fairly and lawfully;
ng Pilipinas to comply with Republic
Philippine citizens or residents such as, The processing of personal data shall be
Act No. 9510, and Republic Act No.
but not limited to, the following: 3. Accurate, relevant and, where necessary allowed subject to adherence to these 3
9160, as amended, otherwise known as
a. A contract is entered in the for purposes for which it is to be used principles below:
the Anti-Money Laundering Act and
Philippines; the processing of personal information,
other applicable laws; and
b. A juridical entity unincorporated kept up to date; inaccurate or 1. Transparency.
in the Philippines but has incomplete data must be rectified, No surprises in how the data collected
7. Personal information originally
central management and control supplemented, destroyed or their is being processed.
collected from residents of foreign
in the country; and further processing restricted;
jurisdictions in accordance with the
c. An entity that has a branch, ● Data subject must be aware of the
laws of those foreign jurisdictions,
agency, office or subsidiary in nature, purpose, and extent of the
 processing of their personal data, The processing of personal info is necessary: SENSITIVE PERSONAL INFO & organizations or their
including the: 1. As the data subject has given their PRIVILEGED INFO associations:
○ Risks and safeguards involved, consent. [SEC 13] b. Provided, further, that the
○ Identity of personal information GR: The processing of sensitive personal sensitive personal information is
controller, 2. For contract information and privileged information shall not transferred to third parties:
○ Rights as a data subject, and a. related to fulfillment of a be prohibited, c. Provided, finally, that consent of
how these can be exercised. contract with data subject or the data subject was obtained
b. in order to take steps at the XPN: following cases below. prior to processing;
● Any info and communication relating request of the data subject prior
to the processing of personal data to entering into a contract. Where the processing: 5. Is necessary for medical treatment, is
should be easy to access and 1. Is because data subject has given their carried out by a medical practitioner or
understand, using clear and plain 3. For compliance with a legal obligation consent, a medical treatment institution, and an
language. to which the personal information a. specific to the purpose prior to adequate level of protection of personal
controller is subject; the processing, or information is ensured; or
2. Legitimate purpose b. if privileged information, all
Required by law and not contrary to 4. To protect vitally important interests parties to the exchange have 6. Personal info as is necessary for the
public morals. of the data subject, including life and given their consent prior to protection of lawful rights and interests
● The processing of info shall be health; processing; of natural or legal persons in court
compatible with a declared and proceedings, or the establishment,
specified purpose which must 5. In order to 2. Is provided for by existing laws and exercise or defense of legal claims, or
not be contrary to law, morals, a. respond to national regulations: when provided to government or
or public policy. emergency, a. Provided, such regulatory public authority.
b. comply with requirements of enactments guarantee the
3. Proportionality public order and safety, or protection of the sensitive SUBCONTRACT OF PERSONAL INFO
Collect only what is needed and c. fulfill functions of public personal information and the
required to commensurate to the authority which necessarily privileged information: A personal information controller may
benefits. includes the processing of b. Provided, further, that consent subcontract the processing of personal info
● The processing of info shall be personal data for the fulfillment of the data subjects is not Provided: [SEC 14]
adequate, relevant, suitable, of its mandate; or required by law or regulation 1. Personal info controller shall be
necessary, and not excessive in permitting the processing of the responsible for
relation to a declared and 6. For the purposes of the legitimate sensitive personal info/privileged a. ensuring proper safeguards are
specified purpose. interests pursued by the personal info; in place to ensure confidentiality
● (Sec. 18, IRR of RA 10173) information controller or by a third of the personal info processed,
Personal data shall be processed party or parties to whom the data is 3. Is necessary to protect the life and b. prevent its use for unauthorized
only if the purpose of the disclosed, health of the data subject or another purposes, and generally, comply
processing could not reasonably person, and the data subject is not with the requirements of this
be fulfilled by other means. XPN: such interests are overridden by legally or physically able to express Act and other laws for
fundamental rights and freedoms of the their consent prior to the processing; processing of personal
CRITERIA FOR LAWFUL PROCESSING data subject which require protection information.
OF PERSONAL INFO under the Philippine Constitution. 4. Is necessary to achieve the lawful and
noncommercial objectives of public 2. The personal information processor
The processing of personal info shall be organizations and their associations: shall comply with all the requirements
permitted only if (1) not otherwise prohibited a. Provided, that such processing is of this Act and other applicable laws.
by law,and (2) when at least one of the ff. only confined and related to the
conditions exists: [SEC 12] bona fide members of these
 EXTENSION OF PRIVILEGED ● organization, g. The period for which the be made as the sole basis for any
COMMUNICATION ● storage, information will be stored; decision significantly affecting or
● updating or modification, h. The existence of their rights will affect the data subject;
Personal information controllers may invoke ● retrieval, [right to access, correction, to g. Date when his or her personal
the principle of privileged communication ● consultation, lodge a complaint before the information concerning the data
over privileged information that they lawfully ● use, Commission] subject were last accessed and
control or process. Subject to existing laws and ● consolidation, modified; and
regulations, any evidence gathered on ● blocking, GR: Any info supplied to the data subject on h. The designation, or name or
privileged information is inadmissible. [SEC ● erasure or destruction these matters shall not be amended without identity and address of the
15] prior notification of data subject (a.1). personal information controller;
D. RIGHTS OF DATA SUBJECT XPN:
Personal Information Controller [PIC] ● Personal info be needed pursuant to a d. RIGHT TO RECTIFICATION/ OBJECT/
It refers to a person or organization who Rights of the Data Subject [SEC 16]: The data subpoena or CORRECT
controls the collection, holding, processing or subject is entitled to: (FAI-REI) ● If the collection and processing are for 4. Rectification
use of personal information, including a obvious purposes, To dispute the inaccuracy or error in the
person or organization who instructs another a . RIGHT TO BE INFORMED ○ For performance/ in relation to a personal info and have PIC correct it
person or organization to collect, hold, 1. Information - Be informed whether contract or service or immediately and accordingly unless the
process, use, transfer or disclose personal personal info pertaining to him or her ○ Necessary/ desirable in the request is vexatious or unreasonable.
information on his or her behalf. shall be, are being or have been context of an ● If the personal info has been corrected,
processed; employer-employee relationship, the PIC shall ensure the accessibility
The term excludes: between the collector and the of both the new and the retracted info
1. A person or organization who performs 2. Before entering their personal info into data subject, and the simultaneous receipt of the
such functions as instructed by another the processing system of the PIC, or at ○ Info is being collected and new and the retracted info by recipients
person or organization; and the next practical opportunity, its PIC processed as a result of legal thereof:
2. An individual who collects, holds, obligation for data subject be obligation; ○ Provided, 3rd parties who have
processes or uses personal information informed of the ff: previously received such
in connection with the individual’s a. Description of the personal c. RIGHT TO ACCESS processed personal information
personal, family or household affairs. information to be entered into 3. Access - Reasonable access to, need shall he informed of its
[Sec. 3(h), RA 10173] the system; upon demand, the following: inaccuracy and its rectification
b. Purposes of info to be upon reasonable request of the
Personal Information Processor [PIP] processed; a. Contents of their personal info data subject;
Any natural or juridical person qualified to act c. Scope and method of the that were processed;
as such under this Act to whom a personal personal info processing; b. Sources from which personal e. RIGHT TO ERASE
information controller may outsource the d. The recipients or classes of information were obtained; 5. Erasure/Blocking/Objection
processing of personal data pertaining to a recipients to whom info may be c. Names and addresses of To Suspend, withdraw or order the blocking,
data subject. [Sec. 3(i), RA 10173] disclosed; recipients of the personal removal or destruction of his or her personal
e. Methods utilized for automated information; information from the PIC’s filing system upon
Processing access, if the same is allowed by d. Manner by which such data discovery and substantial proof that the
It refers to any operation or any set of the data subject, and the extent were processed; personal info are:
operations performed upon personal info [Sec. to which such access is e. Reasons for the disclosure of ○ incomplete,
3(j), RA 10173] authorized; the personal information to ○ outdated,
f. The identity and contact recipients; ○ False,
Including, but not limited to the data: details of the personal f. Info on automated processes ○ unlawfully obtained,
● collection, information controller or its where the data will or likely to ○ used for unauthorized purposes
● recording, representative;
 ○ not necessary for purposes for NON-APPLICABILITY there is no other legal ground for the DUTIES AND RESPONSIBILITIES OF
which they were collected. processing; PERSONAL INFORMATION CONTROLLER
● PIC may notify 3rd parties who have Limitations on the Transmissibility of the
previously received such processed Right and Right to Portability [SEC19] 2. The data subject objects to the Under R.A. No. 10173 or the Data Privacy Act
personal information; and delete it on processing and there are no overriding of 2012, these are the duties and
the file system. The provisions on transmissibility of rights & legitimate grounds for the processing; responsibilities of a Personal Information
right to portability are not applicable: Controller:
f. RIGHT TO DAMAGES 3. The personal data have to be erased for 1. To implement reasonable and
6. Indemnification – To be indemnified a. If the processed personal information compliance with a legal obligation in appropriate organizational, physical,
for any damages sustained due to such are used only for the needs of scientific Union or Member State law to which and technical measures intended for
inaccurate, incomplete, outdated, false, and statistical research plus, the controller is subject; the protection of personal information
unlawfully obtained, or unauthorized ○ On this basis, no activities are against any accidental or unlawful
use of personal information. carried out & no decisions are 4. The personal data have been collected destruction, alteration and
taken regarding the data subject: in relation to the offer of information disclosure, as well as against any other
RIGHTS OF DATA SUBJECT ARE plus, society services. unlawful processing.
TRANSMISSIBLE ○ Provided, the personal info shall
2. To implement reasonable and
be held under strict Where the controller has made the personal
The lawful heirs and assigns of the data appropriate measures to protect
confidentiality and used only for data public and obliged to erase the personal
subject may invoke the rights of the data personal information against natural
the declared purpose. data, the controller shall take reasonable steps,
subject for: [SEC 17] dangers such as accidental loss or
to inform controllers which are processing the
a. which he or she is an heir or assignee at destruction, and human dangers such
b. If processing of personal info is for the personal data that the data subject has
any time after the death of the data as unlawful access, fraudulent misuse,
purpose of investigations in relation requested the erasure by such controllers of
subject or unlawful destruction, alteration, and
to any criminal, administrative or tax any links to, or copy or replication of, those
b. when the data subject is incapacitated contamination.
liabilities of a data subject. personal data.
or incapable of exercising the rights as
enumerated in the immediately 3. The determination of the
These limitations on rights shall only be to the XPN Right to be Forgotten:
preceding section. appropriate level of security under
minimum extent necessary to achieve the 1. Freedom of expression and
this section must consider
purpose of the research or investigation. information;
a. the nature of the personal
2. Compliance with a legal obligation
g. RIGHT TO DATA PORTABILITY [SEC 18] information to be protected
RIGHT TO BE FORGOTTEN which requires processing by Union or
The data subject, whose personal data is b. the risks represented by the
Member State law to which the
processed electronically and in a structured This is the term for Right to Erasure in SEC processing
controller is subject or for the
& commonly used format, shall have the right 16e that is used in other parts of the world. c. the size of the organization and
performance of a task carried out in the
to obtain from the PIC a copy of their data This is a term and right contained in Article 17 complexity of its operations
public interest or in the exercise of
undergoing processing in an electronic or of the General Data Protection Regulation d. current data privacy best
official authority vested in the
structured format, which is commonly used (GDPR), for those who live and outside of the practices
controller;
and allows for further use by the data subject. European Union (EU). [SEC 16e] e. the cost of security
3. Reasons of public interest in the area of
implementation
public health;
● The Commission may specify the The ff are additional points here that allow a
4. Archiving purposes in the public Subject to guidelines as the
electronic format referred to above, as data subject to the right erase their personal
interest, scientific or historical research Commission may issue from time to
well as the technical standards, data and the controller shall have the
purposes or statistical purposes time, the measures implemented must
modalities, and procedures for their obligation to erase these data without undue
5. Establishment, exercise, or defense of include:
transfer. delay:
legal claims.
1. The data subject withdraws consent a. Safeguards to protect its
EXAMPLE: request bank statement on which the processing is based, and computer network against
 accidental, unlawful, or Commission and affected data of a criminal investigation not more than Two million pesos
unauthorized usage or subjects when sensitive personal related to a serious breach. (Php2,000,000.00) shall be imposed on
interference with or hindering of information or other information that persons who, due to negligence,
their functioning or availability. may, under the circumstances, be used Period to report: If there is likelihood of risk provided access to personal information
b. A security policy with respect to enable identity fraud are reasonably to individuals, the data processor must report without being authorized under the Act
to the processing of personal believed to have been acquired by an data breaches within 72 hours. or any existing law.
information unauthorized person, and the
PENALTIES b. A penalty of imprisonment ranging
c. A process for identifying and personal information controller or the
from three (3) years to six (6) years and
accessing reasonably Commission believes (but such Section 25. Unauthorized Processing of a fine of not less than Five hundred
foreseeable vulnerabilities in unauthorized acquisition is likely to Personal Information and Sensitive thousand pesos (Php500,000.00) but
its computer networks, and for give rise to a real risk of serious Personal Information not more than Four million pesos
taking preventive, corrective and harm to any affected data subject.
a. A penalty of imprisonment ranging (Php4,000,000.00) shall be imposed on
mitigating action against
Notification to the Commission: The from one (1) year to three (3) years and persons who, due to negligence,
security incidents that can lead
notification shall at least describe the a fine of not less than Five hundred provided access to sensitive personal
to a security breach.
nature of the breach, the sensitive thousand pesos (Php500,000.00) but information without being authorized
d. Regular monitoring for
personal information possibly not more than Two million pesos under the Act or any existing law.
security breaches and a process
for taking preventive, corrective involved, and the measures taken by (Php2,000,000.00) shall be imposed on
Section 27. Improper Disposal of Personal
and mitigating action against the entity to address the breach. persons who process personal
Information and Sensitive Personal
security incidents that can lead Notification may be delayed only to the information without the consent of the
Information
to a security breach. extent necessary to determine the scope data subject, or without being
of the breach, to prevent further authorized under the Act or any a. A penalty of imprisonment ranging
4. The personal information controller disclosures, or to restore reasonable existing law. from six (6) months to two (2) years
must further ensure that third parties integrity to the information and and a fine of not less than One hundred
processing personal information on its communications system. thousand pesos (Php100,000.00) but
b. A penalty of imprisonment ranging
behalf shall implement the security not more than Five hundred thousand
a. In evaluating if notification is from three (3) years to six (6) years and
measures required by this provision. pesos (Php500,000.00) shall be
unwarranted, the Commission a fine of not less than Five hundred
imposed on persons who knowingly or
may take into account thousand pesos (Php500,000.00) but
5. The employees, agents or negligently dispose, discard, or
compliance by the personal not more than Four million pesos
representatives of a personal abandon the personal information of an
information controller with this (Php4,000,000.00) shall be imposed on
information controller who are involved individual in an area accessible to the
section and existence of good persons who process sensitive personal
in the processing of personal public or has otherwise placed the
faith in the acquisition of information without the consent of the
information shall operate and hold personal information of an individual in
personal information. data subject, or without being
personal information under strict its container for trash collection.
authorized under the Act or any
confidentiality if the personal b. The Commission may exempt a
existing law. b. A penalty of imprisonment ranging
information are not intended for public personal information controller
from one (1) year to three (3) years and
disclosure. This obligation shall from notification where, in its
Section 26. Accessing Personal Information a fine of not less than One hundred
continue even after leaving the public reasonable judgment, such
and Sensitive Personal Information Due to thousand pesos (Php100,000.00) but
service, transfer to another position or notification would not be in the
Negligence not more than One million pesos
upon termination of employment or public interest or in the interests
(Php1,000,000.00) shall be imposed on
contractual relations. of the affected data subjects. a. A penalty of imprisonment ranging
persons who knowingly or negligently
c. The Commission may authorize from one (1) year to three (3) years and
dispose, discard or abandon the
6. The personal information controller postponement of notification a fine of not less than Five hundred
sensitive personal information of an
shall promptly notify the where it may hinder the progress thousand pesos (Php500,000.00) but
individual in an area accessible to the
 public or has otherwise placed the sensitive personal information are immediately preceding section without If the offender is an alien, he or she
sensitive personal information of an stored. the consent of the data subject, shall be shall, in addition to the penalties herein
individual in its container for trash subject to imprisonment ranging from prescribed, be deported without further
collection. Section 30. Concealment of Security one (1) year to three (3) years and a fine proceedings after serving the penalties
Breaches Involving Sensitive Personal of not less than Five hundred thousand prescribed.
Section 28. Processing of Personal Information pesos (Php500,000.00) but not more
Information and Sensitive Personal than One million pesos If the offender is a public official or
Information for Unauthorized Purposes a. A penalty of imprisonment ranging employee and he or she is found guilty
(Php1,000,000.00).
from one (1) year and six (6) months to of acts penalized under Sections 54 and
a. A penalty of imprisonment ranging five (5) years and a fine of not less than 55 of these Rules, he or she shall, in
b. Any personal information controller or
from one (1) year and six (6) months to Five hundred thousand pesos addition to the penalties prescribed
personal information processor, or any
five (5) years and a fine of not less than (Php500,000.00) but not more than herein, suffer perpetual or temporary
of its officials, employees or agents, who
Five hundred thousand pesos One million pesos (Php1,000,000.00) absolute disqualification from office, as
discloses to a third party sensitive
(Php500,000.00) but not more than shall be imposed on persons who, after the case may be.
personal information not covered by
One million pesos (Php1,000,000.00) having knowledge of a security breach
the immediately preceding section
shall be imposed on persons processing and of the obligation to notify the Section 35. Large-Scale
without the consent of the data subject,
personal information for purposes not Commission pursuant to Section 20(f)
shall be subject to imprisonment a. The maximum penalty in the
authorized by the data subject, or of the Act, intentionally or by omission
ranging from three (3) years to five (5) corresponding scale of penalties
otherwise authorized under the Act or conceals the fact of such security
years and a fine of not less than Five provided for the preceding offenses
under existing laws. breach
hundred thousand pesos shall be imposed when the personal
b. A penalty of imprisonment ranging
Section 31. Malicious Disclosure (Php500,000.00) but not more than data of at least one hundred (100)
from two (2) years to seven (7) years
Two million pesos (Php2,000,000.00). persons are harmed, affected, or
and a fine of not less than Five hundred
a. Any personal information controller or involved, as the result of any of the
thousand pesos (Php500,000.00) but Section 33. Combination or Series of Acts
personal information processor, or any above-mentioned offenses.
not more than Two million pesos
of its officials, employees or agents,
(Php2,000,000.00) shall be imposed on a. Any combination or series of acts as
who, with malice or in bad faith,
persons processing sensitive personal defined in Sections 25 to 32 shall make
discloses unwarranted or false
information for purposes not the person subject to imprisonment
information relative to any personal
authorized by the data subject, or ranging from three (3) years to six (6)
information or sensitive personal
otherwise authorized under the Act or years and a fine of not less than One
information obtained by him or her,
under existing laws. million pesos (Php1,000,000.00) but not
shall be subject to imprisonment
more than Five million pesos
Section 29. Unauthorized Access or ranging from one (1) year and six (6)
(Php5,000,000.00).
Intentional Breach months to five (5) years and a fine of
not less than Five hundred thousand Section 34. Extent of Liability
a. A penalty of imprisonment ranging pesos (Php500,000.00) but not more
from one (1) year to three (3) years and than One million pesos a. If the offender is a corporation,
a fine of not less than Five hundred (Php1,000,000.00). partnership or any juridical person, the
thousand pesos (Php500,000.00) but penalty shall be imposed upon the
not more than Two million pesos Section 31. Unauthorized Disclosure responsible officers, as the case may be,
(Php2,000,000.00) shall be imposed on who participated in, or by their gross
a. Any personal information controller or
persons who knowingly and unlawfully, negligence, allowed the commission of
personal information processor, or any
or violating data confidentiality and the crime. Where applicable, the court
of its officials, employees, or agents,
security data systems, breaks in any way may also suspend or revoke any of its
who discloses to a third party personal
into any system where personal and rights under this Act.
information not covered by the
 GLOSSARY (REQUISITES) personal data for the fulfillment GLOSSARY (DEFINITION OF TERMS) Filing system- any act of information relating
of its mandate; or to natural or juridical persons to the extent
Data Privacy Act 12. For the purposes of the legitimate Commission- The National Privacy that, although the information is not
ProNE-Act interests pursued by the personal Commission created by virtue of this Act. processed by equipment operating
1. It must involve any processing of information controller or by a third automatically in response to instructions given
personal information party or parties to whom the data is Confidential information- specifically for that purpose, the set is structured, either
2. By either natural or juridical persons disclosed, protected under the Rules of Court (such as by reference to individuals or by reference to
3. Whether or not found in the XPN: such interests are overridden by doctor-patient or attorney-client privilege) or criteria relating to individuals, in such a way
Philippines that uses equipment or fundamental rights and freedoms of the statute (such as arbitration proceedings and that specific information relating to a
maintains an office, branch or agency data subject which require protection awards under the Domestic Arbitration Law). particular person is readily accessible.
in the Philippines. under the Philippine Constitution. Generally, the effect of confidentiality will
4. Either acting as a controller or result in the information being inadmissible in Information and Communications System-
processor Subcontract of Personal Information [SEC any court, in any proceeding. system for generating, sending, receiving,
14] storing or otherwise processing electronic data
Criteria for Lawful Processing of Personal 3. Personal info controller shall be Consent of the data subject- any freely given, messages or electronic documents and
Information [SEC 12] responsible for specific, informed indication of will, whereby includes the computer system or other similar
The processing of personal info shall be a. ensuring proper safeguards are the data subject agrees to the collection and device by or which data is recorded,
permitted only if (1) not otherwise prohibited in place to ensure confidentiality processing of personal information about transmitted or stored and any procedure
by law,and (2) when at least one of the ff. of the personal info processed, and/or relating to him or her. Consent shall be related to the recording, transmission or
conditions exists: b. prevent its use for unauthorized evidenced by written, electronic or recorded storage of electronic data, electronic message,
purposes, and generally, comply means. It may also be given on behalf of the or electronic document.
The processing of personal info is necessary: with the requirements of this data subject by an agent specifically
7. As the data subject has given their Act and other laws for authorized by the data subject to do so. National Privacy Commission- commission
consent. processing of personal created by virtue of this act.
8. For contract information. Data Privacy Act (RA 10173)- It is the policy
a. related to fulfillment of a 4. The personal information processor of the State to protect the fundamental human Personal Information- Any information
contract with data subject or shall comply with all the requirements right of privacy, of communication while whether recorded in a material form or not
b. in order to take steps at the of this Act and other applicable laws. ensuring free flow of information to promote from which the identity of an individual is
request of the data subject prior innovation and growth. The State recognizes apparent or can be reasonably and directly
to entering into a contract. Rights of Data Subject Are Transmissible the vital role of information and ascertained by the entity holding the
9. For compliance with a legal obligation [SEC 17] communications technology in information or when put together with other
to which the personal information The lawful heirs and assigns of the data nation-building and its inherent obligation to information would directly and certainly
controller is subject; subject may invoke the rights of the data ensure that personal information in identify an individual. [Sec. 3(g), RA 10173]
10. To protect vitally important interests subject for: information and communications systems in
of the data subject, including life and c. which he or she is an heir or assignee at the government and in the private sector are Personal information- any information
health; any time after the death of the data secured and protected. (Sec. 2, RA 10173) whether recorded in a material form or not,
11. In order to subject or from which the identity of an individual is
a. respond to national Data subject- individual whose personal apparent or can be reasonably and directly
d. when the data subject is incapacitated
emergency, information is processed. ascertained by the entity holding the
or incapable of exercising the rights as
b. comply with requirements of enumerated in the immediately information, or when put together with other
Direct marketing- communication by
public order and safety, or preceding section information would directly and certainly
whatever means of any advertising or
c. fulfill functions of public identify an individual.
marketing material which is directed to
authority which necessarily
particular individuals.
includes the processing of
Personal Information Controller [PIC] - A order or an act of Congress to be kept
person or organization who controls the classified. [Sec. 3(l), RA 10173]
collection, holding, processing or use of
personal information, including a person or Subcontract- a contract between a party to an
organization who instructs another person or original contract and a third party
organization to collect, hold, process, use, especially: one to provide all or a specified part
transfer or disclose personal information on of the work or materials required in the
his or her behalf. original contract. Essentially engage a third PAMANTASAN NG LUNGSOD NG MAYNILA
party to do your work. (University of the City of Manila)
Personal Information Processor [PIP] - Any General Luna, corner Muralla St., Intramuros, Manila
natural or juridical person qualified to act as 1002 Metro Manila
such under this Act to whom a personal
information controller may outsource the
processing of personal data pertaining to a
data subject. [Sec. 3(i), RA 10173] In partial fulfillment of the requirements for the subject
Regulatory Framework and Legal Issues in Business
Privileged Information- refers to any and all (ACN 2210A-4)
forms of data which under the Rules of the
Court and other pertinent laws constitute
privileged communication. [Sec.3(k), RA 10173]

Processing- any operation or any set of Finals Reviewer:

operations performed upon personal
information including, but not limited to, the Electronic Commerce Act of 2000
collection, recording, organization, storage, (R.A. No.8792)
updating or modification, retrieval,
consultation, use, consolidation, blocking,
erasure or destruction of data.

Sensitive personal information- refers to

personal information: (1) About an individual’s
race, ethnic origin, marital status, age, color, Submitted by:
and religious, philosophical or political Aragon, Alyssa Alexis C.
affiliations; (2) About an individual’s health, Areja, Trisha Clarisse G.
education, genetic or sexual life of a person, or Delos Santos, Mary S.
to any proceeding for any offense committed
or alleged to have been committed by such
person, the disposal of such proceedings, or
the sentence of any court in such proceedings; Submitted to:
(3) Issued by government agencies peculiar to Atty. Aloi Renz P. Santos
an individual which includes, but not limited
to, social security numbers, previous or
current health records, licenses or its denials,
suspension or revocation, and tax returns; and
(4) Specifically established by an executive May 2024
 ELECTRONIC COMMERCE ACT of 2000 and technology to recognize the described or however represented, by which a proceed with the transaction
(R.A.NO. 8792) authenticity and reliability of electronic right is established, or an obligation authenticated by the same. (Sec. 8, R.A.
documents related to such activities; extinguished, or by which a fact may be proved No. 8792)
POLICY OF THE LAW (Sec. 2) and and affirmed, which is received, recorded,
2. Promote the universal use of transmitted, stored, processed, retrieved, or Electronic Signature
The law is a recognition of the State of: electronic transaction in the produced electronically. (Sec. 5(f), R.A. No.
1. The vital role of information and government and general public. (Sec. 3, 8792) This refers to any distinctive mark,
communications technology (ICT) in R.A. No. 8792) characteristic and/or sound in electronic form,
nation-building; This includes digitally signed representing the identity of a person, and
2. The need to create an SPHERE OF APPLICATION (Sec. 4) documents and any print-out or output, attached to or logically associated with the
information-friendly environment readable by sight or other means, which electronic data message or electronic
which supports and ensures the This Act shall apply to any kind of data accurately reflects the electronic data message document or any methodology or procedures
availability, diversity, and affordability message and electronic document used in or electronic document. (Sec. 1(h), Rule 2, employed or adopted by a person and
of ICT products and services; the context of commercial and A.M. No. 01-7-01-SC or the Rules on Electronic executed or adopted by such person with the
3. The primary responsibility of the non-commercial activities to include domestic Evidence) intention of authenticating or approving an
private sector in contributing and international dealings, transactions, electronic data message or electronic
investments and services in arrangements, agreements, contracts, and NOTE: Under the Rules on Electronic document. (Sec. 5(e), R.A. No. 8792)
telecommunications and information exchanges and storage of information. (Sec. 4, Evidence, the term “electronic document” may
be used interchangeably with “electronic data NOTE: For the purposes of the Rules on
technology; R.A. No. 8792)
message”. (Divina, 2021; Sec. 1(h), Rules on Electronic Evidence, an electronic signature
4. The need to develop, with appropriate
Electronic Evidence) includes digital signature. (Sec. 1(j), Rule 2,
training programs and institutional LEGAL RECOGNITION OF ELECTRONIC
Rules on Electronic Evidence)
policy changes, human resources for DATA MESSAGES, DOCUMENTS, AND
Legal Recognition of Electronic Signatures
the information technology age, a SIGNATURES Digital Signature
(Sec. 8)
labor force skilled in the use of ICT
and a population capable of Legal Recognition of Electronic Data This refers to an electronic signature
An electronic signature on the electronic
operating and utilizing electronic Messages (Sec. 6) consisting of a transformation of an electronic
document shall be equivalent to the signature
appliances and computers; of a person on a written document if that document or an electronic data message using
5. Its obligation to facilitate the transfer Information shall not be denied legal effect,
signature is proved by showing that a an asymmetric or public cryptosystem, such
and promotion of technology and to validity, or enforceability solely on the grounds
prescribed procedure, not alterable by the that a person has the initial untransformed
ensure network security, that it is in the data message purporting to
parties interested in the electronic document, electronic document and the signer’s public
connectivity, and neutrality of give rise to such legal effect, or that it is merely
existed under which: key can accurately determine the following:
technology for the national benefit; referred to in that electronic data message.
and (Sec. 6, R.A. No. 8792) I. Whether the transformation was
a. A method is used to identify the party
6. The need to marshal, organize, and sought to be bound and to indicate said created using the private key that
Electronic Data Messages
deploy national information party’s access to the electronic corresponds to the signer’s public key;
infrastructures, comprising in both This refers to information generated, document necessary for his consent or and
telecommunications network and sent, received, or stored by electronic, optical, approval through the electronic II. Whether the initial electronic
strategic information services, or similar means. (Sec. 5(c), R.A. No. 8792) signature; document had been altered after the
including their interconnection to the b. Said method is reliable and appropriate transformation was made. (Sec. 1(e),
global information networks. (Sec. 2, Legal Recognition of Electronic for the purpose for which the electronic Rule 2, Rule on Electronic Evidence)
R.A. No. 8792) Documents (Sec. 7) document was generated or
communicated, in the light of all PRESUMPTION RELATING TO
OBJECTIVES OF THE LAW (Sec. 3) Electronic documents shall have the legal circumstances, including any relevant ELECTRONIC SIGNATURES
effect, validity, or enforceability as any other agreement;
document or legal writing. (Sec. 7, R.A. No. In any proceedings involving an electronic
The Act aims to: c. It is necessary for the party sought to be
8792) signature, it shall be presumed that:
1. Facilitate domestic and international bound, in or order to proceed further
dealings, transactions, with the transaction, to have executed a. The electronic signature is the
arrangements, agreements, Electronic Document or provided the electronic signature; signature of the person to whom it
contracts, and exchanges and and correlates; and
This refers to information or the
storage of information through the d. The other party is authorized and b. The electronic signature was affixed by
representation of information, data, figures,
utilization of electronic, optical, and enabled to verify the electronic that person with the intention of
symbols, or other mode of written expression,
similar medium, mode, instrumentality, signature and to make the decision to signing or approving the electronic
 document unless the person relying on by these rules. (Sec. 2, Rule 3, Rules on GR: An offer, the acceptance of an offer and ELECTRONIC COMMERCE IN CARRIAGE
the electronically signed electronic Electronic Evidence) such other elements required under existing OF GOODS
document knows or has notice of laws for the formation of contracts may be
defects in or unreliability of the Evidential Weight of Electronic Data expressed in, demonstrated and proved by Scope of application
signature or reliance on the electronic Message or Electronic Document means of electronic data messages or
signature is not reasonable under the electronic documents. (Sec. 16(1), R.A. No. This applies to any action in connection with,
circumstances. (Sec. 9, R.A. No. 8792) In assessing the evidential weight of an 8792) or in pursuance of, a contract of carriage of
electronic data message or electronic goods, including but not limited to:
Note: Under the Rules on Electronic Evidence, document, the reliability of the manner in Note: No contract shall be denied validity or
upon the authentication of an which it was generated, stored or enforceability on the sole ground that it 1. (i) Furnishing the marks, number,
electronic signature, the disputable communicated, the reliability of the manner in is in the form of an electronic data quantity, or weight of goods; (ii) stating
presumptions are: which its originator was identified, and other message or electronic document, or or declaring the nature or value of
relevant factors shall be given due regard. that any or all of the elements required goods; (iii) issuing a receipt for goods;
a. The electronic signature is that of the under existing laws for the formation of (iv) confirming that goods have been
person to whom it correlates; Note: Under the Rules on Electronic Evidence, contracts is expressed, demonstrated loaded;
b. The electronic signature was affixed by the following are the factors for and proved by means of electronic data 2. (i) Notifying a person of terms and
that person with the intention of assessing evidentiary weight: messages or electronic documents. conditions of the contract; (ii) giving
authenticating or approving the (Ibid.) instructions to a carrier;
electronic document to which it is a. The reliability of the manner or method 3. (i) Claiming delivery of goods; (ii)
related or to indicate such person’s in which it was generated, stored, or XPN: When the parties otherwise agree. authorizing release of goods; (iii) giving
consent to the transaction embodied communicated, including but not notice of loss of, or damage to goods;
therein; and limited to input and output procedures, Electronic Transactions made through 4. Giving any other notice or statement in
c. The methods or processes utilized to controls, tests and checks for accuracy Networking among Banks connection with the performance of the
affix or verify the electronic signature and reliability of the electronic data contract;
operated without error or fault. (Sec. 3. message or document, in the light of all Electronic transactions made through 5. Undertaking to deliver goods to a
Rule 6, Rules on Electronic Evidence) the circumstances as well as any networking among banks, or linkages thereof named person or a person authorized
relevant agreement; with other entities or networks, and vice versa, to claim delivery;
ADMISSIBILITY AND EVIDENTIAL b. The reliability of the manner in which shall be deemed consummated upon the 6. Granting, acquiring, renouncing,
WEIGHT OF ELECTRONIC DATA MESSAGE its originator was identified; actual dispensing of cash or the debit of one surrendering, transferring, or
OR ELECTRONIC DOCUMENT c. The integrity of the information and account and the corresponding credit to negotiating rights in goods; and
communication system in which it is another. (Sec. 16(2), R.A. No. 8792) 7. Acquiring or transferring rights and
In any legal proceedings, nothing in the recorded or stored, including but not obligations under the contract. (Sec. 25,
application of the rules on evidence shall deny limited to the hardware and computer Note: The obligation of one bank, entity, or R.A. No. 8792)
the admissibility of an electronic data message programs or software used as well as person similarly situated to another
or electronic document in evidence: programming errors; arising therefrom shall be considered Note: Where one or more data messages are
d. The familiarity of the witness or the absolute and shall not be subjected to used to effect any action in
a. On the sole ground that it is in person who made the entry with the the process of preference of credits. subparagraphs (6) and (7), no paper
electronic form; or communication and information (Ibid.) document used to effect any such
b. On the ground that it is not in the system; action is valid unless the use of
standard written form, and the e. The nature and quality of the Choice of Security Methods electronic data message or electronic
electronic data message or electronic information which went into the document has been terminated and
document meeting and complying with Subject to applicable laws and/or rules and
communication and information replaced by the use of paper
the requirements under Secs. 6 or 7 of guidelines promulgated by the Department of
system upon which the electronic data documents. The replacement of
the Act shall be the best evidence of the Trade and Industry (DTI) with other
message or electronic document was electronic data messages or electronic
agreement and transaction contained appropriate government agencies, the parties
based; or documents by paper documents shall
therein. to any electronic transaction shall be free to
f. Other factors which the court may not affect the rights or obligations of
determine the type of level of electronic data
consider as affecting the accuracy or the parties involved. (Sec. 26, R.A. No.
Note: Under the Rules on Electronic Evidence, message and electronic document security
integrity of the electronic document or 8792)
an electronic document is admissible in needed, and to select and use or implement
electronic data message. (Sec. 1, Rule 7,
evidence if it complies with the rules on appropriate technological methods that will Transport documents
Rule on Electronic Evidence)
admissibility prescribed by the Rules of suit their needs. (Sec. 24, R.A. No. 8792)
Court and related laws and is Formation and Validity of Electronic
authenticated in the manner prescribed Contracts
The use of one or more data messages or documents be created, or retained and/or e. other attributes required to communications, digital or otherwise,
electronic documents meets the following submitted, (3) issue permits, licenses or electronic data messages or between or among points specified by a
requirements: certificates of registration or approval, or (4) electronic documents or user, of electronic documents of the
provide for the method and manner of payments; and user's choosing; or
1. Where the law requires that any action payment or settlement of fees and other f. the full or limited use of the 2. The necessary technical means by
referred to contract of carriage of goods obligations to the government, shall: documents and papers for which electronic documents of an
be carried out in writing or by using a compliance with the government originator may be stored and made
paper document. Sec. 26(1), R.A. No. 1. Accept the creation, filing or retention requirements: Provided, that this accessible to designated or
8792); and of such documents in the form of Act shall be itself mandate any undesignated third party. [Sec. 5(j), RA
electronic data messages or electronic department of the government, 8792]
Note: The rule applies whether the documents; organ of state or statutory
requirement is in the form of an 2. Issue permits, licenses, or approval in corporation to accept or issue Extent of liability
obligation or whether the law simply the form of electronic data messages or any document in the form of
provides consequences for failing either electronic documents; electronic data messages or No person or party shall be subject to any civil
to carry out the action in writing or to 3. Require and/or accept payments, and electronic documents upon the or criminal liability in respect of the electronic
use a paper document. (Sec. 26(2), R.A. issue receipts payments, acknowledging adoption, promulgation and data message or electronic document for
No. 8792) such through systems using electronic publication of the appropriate which the person or party acting as a service
data messages or electronic documents; rules, regulations guidelines. provider merely provides access if such
2. In the grant of a right to, or acquisition or liability is founded on:
(Sec. 27, RA 8792)
of an obligation by, one person, where 4. Transact the government business
the law requires that, in order to effect and/or perform governmental functions Authority of the Department of Trade and 1. The obligations and liabilities of the
this, the right or obligation must be using electronic data messages or Industry parties under the electronic data
conveyed to that person by the transfer, electronic documents, and for the message or electronic document; or
or use of, a paper document. (Sec. purpose, are authorized to adopt and 1. The DTI shall directly supervise the 2. The making, publication, dissemination
26(3), R.A. No. 8792) promulgate the appropriate rules, promotion and development of or distribution of such material or any
regulations, or guidelines, to, among electronic commerce in the country statement made in such material,
Note: The standard of reliability required shall with relevant government agencies; and including possible infringement of any
others, specify:
be assessed in the light of the purpose 2. The DTI is empowered to promulgate right subsisting in or in relation to such
a. The manner and format in
for which the right or obligation was rules and regulations, as well as provide material. (Sec. 30, RA 8792)
which such electronic data
conveyed and in the light of all the quality standards or issue certifications,
messages or electronic
circumstances, including any relevant and perform such other functions as REQUISITES:
documents shall be filed,
agreement. (Sec. 26(4), R.A. No. 8792) may be necessary for the
created, retained or issued; a. The service provider does not have
b. where and when such electronic implementation of the Act in the area
If a rule of law is compulsorily applicable to a actual knowledge, or is not aware of the
data messages or electronic of electronic commerce to include the
contract of carriage of goods which is in, or is facts or circumstances from which it is
documents have to signed, the installation of an online public
evidenced by, a paper document, that rule apparent, that the making, publication,
use of an electronic signature, information and quality and price
shall not be inapplicable to such a contract of dissemination or distribution of such
the type of electronic signature monitoring system for goods and
carriage of goods which is evidenced by one or material is unlawful or infringes any
required; services aimed in protecting the
more electronic data messages or electronic rights subsisting in or in relation to
c. the format of an electronic data interests of the consuming public. (Sec.
documents. (Sec. 26(6), R.A. No. 8792) such material;
message or electronic document 29, RA 8792)
b. The service provider does not
Reason: The fact that the contract is and the manner the electronic knowingly receive a financial benefit
signature shall be affixed to the EXTENT OF LIABILITY OF A SERVICE
evidenced by such electronic data messages or directly attributable to the unlawful or
electronic data message or PROVIDER
electronic documents instead of a paper infringing activity; and
document. electronic document; c. The service provider does not directly
Service provider
d. the control processes and commit any infringement or other
ELECTRONIC TRANSACTIONS IN procedures as appropriate to This refers to a provider of: unlawful act and does not induce or
GOVERNMENT ensure adequate integrity, cause another person or party to
security and confidentiality of 1. On-line services or network access or commit any infringement or other
All departments, bureaus, offices and agencies electronic data messages or the operator of facilities therefor, unlawful act and/or does not benefit
of the government, as well as all electronic documents or records including entities offering the financially from the infringing activity
government-owned and controlled of payments; transmission, routing, or providing of or unlawful act or another person or
corporations, that (1) require or accept the connections for online party. (Ibid.)
filing of documents, (2) require that
NOTE: The following matters shall not be communication manner that infringes
affected:
devices, without the intellectual property
knowledge and rights. [Sec. 33(b), RA
1. Any obligation founded on contract;
2. The obligation of a service provider as consent of the owner 8792]
such under a licensing or other of the computer or
information and
regulatory regime established under Violations of the Same penalties as
communications
written law; Consumer Act and provided in those
system, including the
3. Any obligation imposed under any other relevant laws. (Ibid.)
introduction of
written law; or pertinent laws
computer viruses and
4. The civil liability of any party to the through
the like, resulting in
extent that such liability forms the transaction covered
basis for injunctive relief issued by a the corruption,
destruction, by or using
court under any law requiring that the electronic data
alteration, theft or
service provider take or refrain from messages or
loss of electronic data
actions necessary to remove, block or electronic
messages or
deny access to any material, or to documents [Sec.
electronic
preserve evidence of a violation of law. 33(c), RA 8792]
documents. [Sec. 33
(Ibid.)
(a), RA 8792]
Other violations of 1. Maximum penalty
OBLIGATION OF CONFIDENTIALITY the provisions of of One Million
Piracy 1. Minimum fine of
One Hundred this Act [Sec. 33(d), Pesos (P1,000,000);
Except for the purposes authorized under this
unauthorized Thousand Pesos RA 8792] or
Act, any person who obtained access to any
electronic key, electronic data message or copying, (P100,000.00) and a
reproduction, maximum 2. Six (6) years
electronic document, book, register,
dissemination, or commensurate to imprisonment.
correspondence, information, or other
distribution, the damage (Ibid.)
material pursuant to any powers conferred
under this Act, shall not convey to or share the importation, use, incurred; and
same with any other person. (Sec. 32, RA 8792) removal, alteration,
substitution, 2. Mandatory
PROHIBITED ACTS AND PENALTIES modification, storage, imprisonment of six
uploading, (6) months to three
downloading, (3) years. (Ibid.)
PROHIBITED ACTS PENALTIES
communication,
Hacking or 1. Minimum fine of making available to
crackling One Hundred the public, or
Thousand Pesos broadcasting of
- unauthorized access (P100,000.00) and a protected material,
into or interference maximum electronic signature
in a computer commensurate to or copyrighted works
system/server or the damage including legally
information and incurred; and protected sound
communication recordings or
system; 2. Mandatory phonograms or
imprisonment of six information material
- any access in order (6) months to three on protected works,
to corrupt, alter, (3) years. (Ibid.) through the use of
steal, or destroy telecommunication
using a computer or networks, such as,
other similar but not limited to,
information and the internet, in a
 GLOSSARY (DEFINITION OF TERMS) decipherable only with a matching electronic electronic document sends, receives and/or
key. (Sec. 5(g), R.A. No. 8792) stores or provides other services in respect of
Admissibility - refers to the question of that electronic data message or electronic
whether certain evidence is to be considered at Electronic Signature - refers to any document. (Sec. 5(h), R.A. No. 8792)
all, while probative value refers to the question distinctive mark, characteristic and/or sound
of whether the admitted evidence sufficiently in electronic form, representing the identity of Originator - refers to a person by whom, or
proves an issue. a person, and attached to or logically on whose behalf, the electronic document
associated with the electronic data message or purports to have been created, generated
Addressee - refers to a person who is intended electronic document or any methodology or and/or sent. The term does not include a
by the originator to receive the electronic data procedures employed or adopted by a person person acting as an intermediary with respect
message or electronic document, but does not and executed or adopted by such person with to that electronic document. (Sec. 5(i), R.A.
include a person acting as an intermediary the intention of authenticating or approving No. 8792)
with respect to that electronic data message or an electronic data message or electronic
electronic document. (Sec. 5(a), R.A. No. 8792) document. (Sec. 5(e), R.A. No. 8792) Piracy - unauthorized copying, reproduction,
dissemination, or distribution, importation,
Computer - refers to any device or apparatus Evidential Weight - the degree to which use, removal, alteration, substitution,
singly or interconnected which, by electronic, evidence convinces triers of fact to either modification, storage, uploading,
electro-mechanical, optical and/or magnetic accept or reject a factual assertion. Refers to downloading, communication, making
impulse, or other means with the same the strength of a single piece of evidence or to available to the public, or broadcasting of
function, can receive, record, transmit, store, the whole set of evidence presented on an protected material, electronic signature or
process, correlate, analyze, project, retrieve issue, such that the overall weight of the copyrighted works including legally protected
and/or produce information, data, text, evidence can be said to favor one side or the sound recordings or phonograms or
graphics, figures, voice, video, symbols or other. information material on protected works,
other modes of expression or perform any one through the use of telecommunication
Hacking - unauthorized access into or networks, such as, but not limited to, the
or more of these functions. (Sec. 5(b), R.A. No.
interference in a computer system/server or internet, in a manner that infringes
8792)
information and communication system; any intellectual property rights. [Sec. 33(b), RA
Digital Signature - refers to an electronic access in order to corrupt, alter, steal, or 8792]
signature consisting of a transformation of an destroy using a computer or other similar
electronic document or an electronic data information and communication devices, Service provider - refers to a provider of (i)
message using an asymmetric or public without the knowledge and consent of the Online services or network access, or the
cryptosystem. owner of the computer or information and operator of facilities therefore, including
communications system, including the entities offering the transmission, routing, or
Electronic Data Messages - refers to introduction of computer viruses and the like, providing of connections for online
information generated, sent, received, or resulting in the corruption, destruction, communications, digital or otherwise, between
stored by electronic, optical, or similar means. alteration, theft or loss of electronic data or among points specified by a user, of
(Sec. 5(c), R.A. No. 8792) messages or electronic documents. [Sec. 33 (a), electronic documents of the user's choosing;
RA 8792] or (ii) The necessary technical means by which
Electronic Document - refers to information electronic documents of an originator may be
or the representation of information, data, Information and Communication System - stored and made accessible to a designated or
figures, symbols, or other mode of written refers to a system for generating, sending, undesignated third party. [Sec. 5(j), RA 8792]
expression, described or however represented, receiving, storing or otherwise processing
by which a right is established, or an electronic data messages or electronic
obligation extinguished, or by which a fact documents and includes the computer system
may be proved and affirmed, which is received, or other similar device by or in which data is
recorded, transmitted, stored, processed, recorded or stored and any procedures related
retrieved, or produced electronically. (Sec. 5(f), to the recording or storage of electronic data
R.A. No. 8792) message or electronic document. (Sec. 5(d),
R.A. No. 8792)
Electronic key - refers to a secret code which
secures and defends sensitive information that Intermediary - refers to a person who in
crosses over public channels into a form behalf of another person and with respect to a
particular electronic data message or
 GLOSSARY (REQUISITES) 1. Minimum fine of One Hundred
Thousand Pesos (P100,000.00) and a
Extent of liability maximum commensurate to the
damage incurred; and
a. The service provider does not have 2. Mandatory imprisonment of six (6)
actual knowledge, or is not aware of the months to three (3) years. (Ibid.)
facts or circumstances from which it is
apparent, that the making, publication, Other violations of the provisions of this
dissemination or distribution of such Act [Sec. 33(d), RA 8792]
material is unlawful or infringes any
PAMANTASAN NG LUNGSOD NG MAYNILA
rights subsisting in or in relation to 1. Maximum penalty of One Million Pesos
such material; (University of the City of Manila)
(P1,000,000); or
b. The service provider does not 2. Six (6) years imprisonment. (Ibid.) General Luna, corner Muralla St., Intramuros, Manila
knowingly receive a financial benefit 1002 Metro Manila
directly attributable to the unlawful or Piracy
infringing activity; and 1. Minimum fine of One Hundred
c. The service provider does not directly Thousand Pesos (P100,000.00) and a
commit any infringement or other maximum commensurate to the In partial fulfillment of the requirements for the subject
unlawful act and does not induce or damage incurred; and Regulatory Framework and Legal Issues in Business
cause another person or party to 2. Mandatory imprisonment of six (6) (ACN 2210A-4)
commit any infringement or other months to three (3) years. (Ibid.)
unlawful act and/or does not benefit
financially from the infringing activity Violations of the Consumer Act and other
or unlawful act or another person or relevant pertinent laws [Sec. 33(c), RA 8792]
party. (Ibid.) Finals Reviewer:
Factors for assessing evidentiary weight:
Same penalties as provided in those laws. Financial Rehabilitation, Insolvency,
(Ibid.)
a. The reliability of the manner in which
Liquidation and
it was generated, stored, or Suspension of Payments
communicated;
b. The reliability of the manner in which
its originator was identified;
c. The integrity of the information and
communication system in which it is Submitted by:
recorded or stored; Dinolan, Joven Claude J.
d. The familiarity of the witness or the Lazaro, Jaspher S.
person who made the entry with the
Luminate, Eloisa M.
communication and information
system; Marcial, Shane Mae C.
e. The nature and quality of the Ubongen, Christine Joy O.
information which went into the
communication and information
system; or
f. Other factors affecting the accuracy or
integrity of the electronic document Submitted to:
(Sec. 1, Rule 7, Rule on Electronic Atty. Aloi Renz P. Santos
Evidence)

Penalties:

Hacking or Crackling
May 2024
FINANCIAL REHABILITATION AND 2. Jurisdiction over all persons GROUP OF DEBTORS UNDER FRIA commencement date, which can either
INSOLVENCY ACT OF 2010 ( R.A No. affected shall be acquired upon be secured or unsecured.
10142) publication of the notice of Group of Debtors refers to:
commencement in a newspaper 1. Financially related corporations 1. Unsecured creditors - are
DECLARATION OF POLICY BEHIND – parent, subsidiary or affiliates
of general circulation in the those whose claim or a portion
FRIA
Philippines. 2. Partnerships – more than 50% of thereof is neither secured,
3. Proceedings shall be summary which is owned by the same preferred nor subordinated.
It is the policy of the State to encourage
and non-adversarial. (Section 3) person 2. Secured creditors - are those
debtors, both juridical and natural
3. Single Proprietorships whose claims are secured by a
persons, and their creditors to
PURPOSE lien (either by law, agreement or
collectively and realistically resolve and
EXCLUDED DEBTORS UNDER FRIA by judicial judgment) which
adjust competing claims and property
1. To encourage debtors and legally entitled a creditor to
rights.
creditors to collectively and 1. Banks resort to the property subject of
realistically resolve and adjust 2. Pre-need companies a lien for payment of his claim.
In furtherance thereof, the State shall
competing claims and property 3. Insurance companies and Example: loan secured by a
ensure a timely, fair, transparent,
rights through rehabilitation. 4. Government Agencies or units – mortgage. Lien of workers and
effective and efficient rehabilitation or
2. If not feasible, to facilitate governed by their respective suppliers on inventory.
liquidation of debtors.
speedy and orderly liquidation of special laws. Attachment issued by the court.
debtor’s assets and the
The rehabilitation or liquidation shall
settlement of their obligations. Note: Government Financial Institutions WHAT IS MEANT BY “CLAIM” ?
be made with a view to ensure or
other than banks and Government
maintain certainty and predictability in
DEBTOR UNDER FRIA Owned and Controlled Corporations Refers to all claims or demands of
commercial affairs, preserve and
(GOCCs) are covered by FRIA unless whatever nature or character against
maximize the value of the assets of
Debtor as defined under the law are their charter provides otherwise. the debtor or its property, whether for
these debtors, recognize creditor rights
insolvent: money or otherwise, liquidated or
and respect priority of claims, and
1. Sole proprietorship registered QUALIFICATIONS AS INSOLVENT unliquidated, fixed or contingent,
ensure equitable treatment of creditors UNDER FRIA
with the DTI; matured or unmatured, disputed or
who are similarly situated.
2. Partnership registered with the undisputed, including, but not limited
SEC Shall refer to the financial condition of to:
When rehabilitation is not feasible, it is a debtor that is generally:
3. Corporations organized and 1. All claims of the government,
in the interest of the State to facilitate a 1. Unable to pay its or his liabilities
existing under the laws of the whether national or local,
speedy and orderly liquidation of these as they fall due; or
Philippines; or including taxes, tariffs and
debtor's assets and the settlement of 2. Has liabilities greater than its or
4. Individual debtors which are customs duties; and
their obligations. (Section 2) his assets.
natural persons who are 2. Claims against directors and
residents and citizens of the officers of the debtor arising
NATURE OF PROCEEDINGS UNDER CREDITORS UNDER FRIA
Philippines. from acts done in the discharge
FRIA
of their functions falling within
Creditors include natural or juridical the scope of their authority.
1. In rem. Meaning it is a persons which have a claim against the
proceeding which binds the debtor that arose on or before
whole world. This inclusion does not, however,
prohibit the creditors or third parties
from filing cases against the directors 2. The purpose is to suspend or SUSPENSION ORDER commerce or industry in which
and officers acting in their personal delay the payment of debts. the petitioning individual is
capacities. 3. The amount of indebtedness is Suspension Order - Upon motion filed engaged
not affected (not reduced or by the individual debtor, the court may 2. Making any payment outside of
PROCEEDING COVERED BY FRIA discharged). issue an order suspending any pending the necessary or legitimate
4. The number of creditors is execution against the individual debtor. expenses of his business or
1. Rehabilitation – voluntary or immaterial. industry
involuntary GR: As a rule, no creditor shall sue or
2. Pre-negotiated rehabilitation DISTINCTION BETWEEN institute to collect his claim from the REQUIREMENTS FOR CREDITOR’S
3. Liquidation – voluntary or SUSPENSION OF PAYMENTS FROM debtor from the time of the filing of the MEETING
involuntary REHABILITATION petition for suspension of payments
4. Suspension of payments and for as long as the proceedings Creditors’ Meeting - the debtor shall
SUSPENSION remain pending. attach to his petition a proposed
REHABILITATION
SUSPENSION OF PAYMENTS OF PAYMENTS agreement with creditors, which shall
XPN: be approved in a creditors’ meeting.
This involves calling the creditors to a Applies only to Applies to business 1. Quorum: presence of creditors
1. Those creditors having claims for:
individual organizations also.
meeting to propose and agree on a A. Personal labor holding at least 3/5 of the
debtors.
schedule of payments and to prevent B. Maintenance liabilities of the debtor.
the debtor from making any payment Debtor has Debtor is insolvent. C. Expense of last illness and 2. Approval: double majority is
outside the necessary or legitimate sufficient assets funeral of the wife or children of required:
expenses of the business, and the to cover its a. 2/3 of the creditors
the debtor
liabilities.
issuance of a suspension order to If incurred in the 60 days voting; and
prevent pending executions against the Secured Debtors Secured debtors are immediately prior to the filing of b. Claims of the majority
debtor. are not affected. affected by stay the petition. vote amount to at least
order. 3/5 of the total liabilities
COVERAGE SUSPENSION OF 2. Secured creditors
Filed by debtor. Maybe filed by
PAYMENTS creditors. A creditor whose claim is incurred
Note: The suspension order shall lapse within 90 days prior to the filing of the
It is an action available only to No minimum When creditors file, when 3 months shall have passed petition for suspension is not entitled
Individual Debtors. requirement for the claims must be: to vote.
without the proposed agreement being
the amount of 1. at least 1M or
claims. 2. at least 25% accepted by the creditors or as soon as
Note: Not available as a remedy to such agreement is denied. Creditors not affected by the
of the
insolvent juridical debtors. subscribed suspension order may refrain from
capital stock PROHIBITED ACTS OF DEBTORS attending the meeting and voting
KEY FEATURES OF SUSPENSION or partners’ therein and he shall not be bound by
OF PAYMENTS contribution, After filing and during pendency, the any agreement determined in the
whichever is
debtor cannot: meeting. However, if they should join in
1. The debtor has sufficient higher.
1. Sell, transfer, encumber or the voting they shall be bound in the
properties to cover all his debts dispose in any manner his same manner as are other creditors.
but he foresees the impossibility property, except those used in
of meeting his debts when they the ordinary operations of
respectively fall due.
 3. Disapproval: the proceedings Majority of no substantial likelihood for the
shall be terminated and the Partnership THE COURT ISSUES A debtor's successful rehabilitation.
partnership
creditors shall be at liberty to COMMENCEMENT WITH A STAY
enforce their rights. Majority of the ORDER "Claims" - in rehabilitation refer to all
directors or
demands against the debtor or its
trustees; AND 1. Suspends all actions or
COURT-SUPERVISED property, including those from the
Corporation Stockholders
REHABILITATION proceedings, in court or government and claims against
representing 2/3 of
otherwise, for the enforcement directors and officers related to their
outstanding
REHABILITATION capital/members of of claims against the debtor. official duties.
non-stock
Refers to the restoration of the debtor corporation 2. Suspends all actions to enforce However, creditors can still pursue legal
to a condition of successful operation any judgment, attachment, or action against directors and officers in
and solvency. If it is shown that its 2. Involuntary – initiated by the other provisional remedies their personal capacities.
continuance of operation is creditor or group of creditors, if: against the debtor.
economically feasible; and its creditors a. There is no genuine issue STAY ORDER
can recover by way of the present value of fact or law on the 3. Prohibits the debtor from
of payments projected in the plan, more claim/s of the selling, encumbering, Preserves the preference of secured
if the debtor continues as a going petitioner/s; transferring, or disposing of any creditors, but enforcement of this
concern than if it is immediately b. No payments on the due of its properties except in the preference is temporarily suspended.
liquidated. and demandable debts ordinary course of business.
have been made for at EXCEPTIONS TO STAY ORDER
TYPES OF REHABILITATION FOR least 60 days; 4. Prohibits the debtor from
INSOLVENT JURIDICAL c. The debtor has failed making any payment of its 1. Cases pending appeal in the
generally to meet its liabilities outstanding as of the Supreme Court as of the
1. Court-Supervised Rehabilitation commencement date except as commencement date.
liabilities as they fall due;
2. Pre-Negotiated (Out-of-Court) may be provided for by law.
or
Rehabilitation 2. Cases pending or filed at
d. A creditor, other than
petitioner/s has initiated COMMENCEMENT DATE specialized courts or
TYPES OF COURT-SUPERVISED quasi-judicial agencies.
foreclosure proceedings
REHABILITATION The date when the court issues the
against the debtor that
will prevent the debtor Commencement Order, retroactive to 3. Enforcement of claims against
1. Voluntary – initiated by the the filing date of the petition for
from paying its debts as sureties and others solidarily
debtor, upon showing that: voluntary or involuntary proceedings,
they become due or will liable with the debtor, and
a. The debtor is insolvent; usually within 5 days of filing.
render it insolvent. third-party or accommodation
and
mortgagors.
b. The viability of COMMENCEMENT ORDER
WHO WILL FILE
rehabilitation
4. Actions by customers or clients
WHO WILL FILE Creditors with claims or aggregate of Remains effective throughout the entire of securities market participants
whose claim is at least P1M or 25% of duration of the rehabilitation to recover moneys and securities
Sole Owner/Proprietor proceeding but may be lifted if there's
Proprietorship the subscribed capital stock or partners’ entrusted to them.
contributions, whichever is higher.
 5. Actions by securities market d. The debtor committed viability, prepare and recommend a the rehabilitation receiver and the
participants or regulatory acts of misrepresentation Rehabilitation Plan, and implement the creditors.
agencies to settle such claims or in fraud of creditors. approved plan.
liabilities. Note: They cannot act on behalf of any
3. Converting the proceedings to QUALIFICATIONS OF A creditor or give consent without written
6. Actions by licensed brokers to liquidation if there is no REHABILITATION authorization from the creditor.
sell pledged securities for substantial likelihood for
settlement of transactions. successful rehabilitation. Qualifications of a Rehabilitation Acts of Debtors/Owners/Partners/
Receiver: Directors or Officers which may
7. Clearing and settlement of 1. Filipino citizenship subject him/them to liability:
financial transactions through MANAGEMENT OF THE DEBTOR’S 2. Six-month residency in the
clearing agencies. BUSINESS Philippines preceding 1. Dispose or cause to be
nomination disposed of - any property of the
8. Criminal actions against During rehabilitation: 3. Knowledge of insolvency and debtor other than in the
individual debtors or associated 1. Managed by the existing board commercial laws ordinary course of business or
persons, which are not affected and/or management. 4. No conflict of interest authorize or approve any
by proceedings under the FRIA. transaction in fraud of creditors
2. Court may appoint a MANAGEMENT COMMITTEE or in a manner grossly
COURT ACTIONS rehabilitation receiver or disadvantageous to the debtor
management committee upon Replaces management and governing and/or creditors; or
under the Act: motion. body of the debtor, assuming their
1. Giving due course to the petition rights and responsibilities, when 2. Conceal or authorize or
if the debtor is insolvent and Grounds for Appointment of appointed by the court. approve concealment - from
there is a substantial likelihood Rehabilitation the creditors, or embezzles or
for successful rehabilitation. Receiver/Management Committee: Creditors from specific classes have the misappropriates, any property
2. Denying or dismissing the 1. Actual or eminent danger of option to formally establish a of the debtor.
petition if: dissipation, loss, wastage, or committee, or they may collectively
a. The debtor is not destruction of the debtor’s assets create a committee representing each THE EXTENT OF THE LIABILITY
insolvent. or properties. class of creditors, including:
1. Secured creditors Whichever is higher between:
b. The petition is a sham 2. Paralyzation of the business 2. Unsecured creditors 1. Double the value of the property
filing intended to delay operations of the debtor. 3. Trade creditors and suppliers sold, embezzled or disposed; or
creditor rights 3. Gross mismanagement, fraud, or 4. Employees of the debtor 2. Double the value of the
enforcement. other wrongful conduct by transaction involved
existing management of the ROLE OF THE CREDITORS’
c. The petition, debtor. COMMITTEE REHABILITATION PLAN
rehabilitation plan, or
attachments contain REHABILITATION RECEIVER To assist the rehabilitation receiver in A plan by which the financial
materially false or communicating with the creditors and well-being and viability of an insolvent
misleading statements. Appointed by the court to preserve shall be the primary liaison between debtor can be restored using various
asset value, assess rehabilitation means including, but not limited to:
 1. Debt forgiveness objecting class of CONFIRMATION OF THE Note: If no plan is confirmed within the
2. Debt rescheduling creditors with REHABILITATION PLAN said period, the proceedings may upon
3. Reorganization or compensation which has motion, or motu propio, be converted
quasi-reorganization a net present value The court shall issue an order into one for the liquidation of the debtor.
4. Dacion en pago greater than that which confirming the Rehabilitation Plan
5. Debt-equity conversion they would have received if: EFFECT OF CONFIRMATION OF
6. Sale of the business (or parts of if the debtor were under 1. No objections are filed within THE REHABILITATION PLAN
it) as a going concern; or liquidation. the relevant period or;
7. Setting up of new business entity The confirmation of the
8. Other similar arrangements SUBMISSION OF THE 2. If objections are filed, the court Rehabilitation Plan by the court
As may be approved by the court or REHABILITATION PLAN finds them lacking in merit, or shall result in the following:
creditors
Upon approval of the Rehabilitation 3. The court determines that the 1. The Rehabilitation Plan and its
REQUIRED APPROVAL Plan, the receiver must submit it to basis for the objection has been provisions shall be binding upon
the court for confirmation. Within 5 cured, or the debtor and all persons who
1. Creditors representing more days of receiving the plan, the court may be affected by it, including
than 50% of total claims and will inform creditors of its submission 4. The court determines that the the creditors, whether or not
the confirmation of the court; or for confirmation, provide access to the debtor has complied with an such persons:
plan, and allow creditors to file order to cure the objection. a. Have participated in the
2. The court even without objections. “The court may confirm the proceedings
approval of the creditors or Rehabilitation Plan notwithstanding b. Opposed the
even over the objections of the GROUNDS FOR THE OBJECTION unresolved disputes over claims if the Rehabilitation Plan
creditors, in the following cases: OF THE CREDITORS Rehabilitation Plan has made adequate c. Whether or not their
a. The Rehabilitation Plan provisions for paying such claims.” claims have been
complies with the Objection of creditors - may be filed scheduled
requirements of the FRIA; within 20 days from receipt of notice Note: The court has the authority to
from the court that the Rehabilitation approve or execute the Rehabilitation 2. The debtor shall comply with
b. The rehabilitation Plan has been submitted for Plan, even without consent from the the provisions of the
receiver recommends confirmation, on the following grounds: owners, partners, or stockholders of the Rehabilitation Plan and shall
the confirmation of the insolvent debtor, if the terms are take all actions necessary to
Rehabilitation Plan; 1. The creditors’ support was essential for restoring the financial carry out the Plan
induced by fraud; stability and viability of the debtor,
c. The shareholders, regardless of conflicting provisions in 3. Payments shall be made to the
owners or partners of 2. Documents or data relied upon other laws. creditors in accordance with the
the juridical debtor lose in the plan are materially false or provisions of the Rehabilitation
at least their controlling misleading; or PERIOD OF CONFIRMATION Plan
interest as a result of the
Rehabilitation Plan; and 3. The plan is in fact not supported It must be within 1 year from the date
by the voting creditors. of filing the petition.
d. The rehabilitation plan
would likely provide the
 PRE-NEGOTIATED OUT-OF-OF COURT OR INFORMAL An approved restructuring or
(OUT-OF-COURT) RESTRUCTURING AGREEMENTS May be agreed upon rehabilitation plan under an informal
OR REHABILITATION PLANS by the parties workout framework carries the same
Pre-negotiated Rehabilitation - a (OCRA) pending negotiation legal weight as the previously discussed
pre-approved rehabilitation plan by the and finalization of confirmed plan.
insolvent debtor and some creditors This one is similar to a pre-negotiated Standstill the out-of-court or
awaits court supervision before rehabilitation plan, but such plan has Period informal
The confirmation of the
been pre-approved by a larger majority restructuring/
enforcement. Rehabilitation Plan by the court
of the debtor's creditors. workout agreement
or Rehabilitation shall result in the following:
HOW TO FILE A PETITION FOR Plan, effective and
THE APPROVAL OF A MINIMUM REQUIREMENTS enforceable against The Rehabilitation Plan and its
PRE-NEGOTIATED all parties involved. provisions are binding on the debtor and
REHABILITATION PLAN 1. The debtor must agree to the
all affected parties, including creditors,
out-of-court or informal
regardless of their status.
Petition by Debtor: restructuring/ workout Standstill period; but also against a. Have participated in the
1. An insolvent debtor, alone or agreement or rehabilitation plan the other creditors, if: proceedings,
with any creditor, can submit a 2. Approved by creditors: 1. Such agreement is approved by b. Opposed the Rehabilitation
verified petition to the court for a. Representing at least 67% creditors representing more Plan, or
approval of a pre-negotiated of the secured than 50% of the total liabilities c. Whether or not their claims
Rehabilitation Plan. obligations; of the debtor; have been scheduled
2. The plan must be endorsed or b. Representing at least 75%
Note: This applies to all types of
approved by creditors with at of the unsecured 2. Notice is published in a rehabilitation.
least ⅔ or two-thirds of the obligations newspaper of general
debtor's total liabilities. c. Holding at least 85% of circulation in the Philippines PUBLICATION REQUIREMENT
3. This includes secured creditors the total liabilities, once a week for 2 consecutive
with over 50% of the total secured and unsecured. weeks; The notice of the Rehabilitation Plan or
secured claims and unsecured
restructuring agreement or Plan shall
creditors with over 50% of the STANDSTILL AGREEMENT vs. 3. The standstill period does not be published once a week for at least
total unsecured claims. STANDSTILL PERIOD
exceed 120 days from the date 3 consecutive weeks in a newspaper of
of effectivity. general circulation in the Philippines.
PERIOD FOR APPROVAL OF THE An extrajudicial
SUBMITTED PRE-NEGOTIATED
agreement between Note: The notice should invite creditors THE EFFECTIVITY OF THE PLAN
REHABILITATION PLAN
the debtor and to join negotiations for out-of-court
The court shall have a maximum period Standstill
creditors outlining rehabilitation or restructuring, clarifying The Rehabilitation Plan or
of 120 days from the date of the filing Agreement the terms for that the resulting agreement will bind restructuring agreement shall take
negotiating and all creditors upon meeting the required effect upon the lapse of 15 days from
of the petition to approve the
entering into an majority vote. the date of the last publication of
Rehabilitation Plan.
OCRA (Out-of-Court the notice thereof.
Restructuring CRAM DOWN EFFECT
If the court fails to act within the said
Agreement).
period, the Rehabilitation Plan shall
be deemed approved.
 LIQUIDATION more than himself) to avoid its being attached or
P500,000 in taken on legal process;
Liquidation is the proceeding where: involuntary Posting of bond May be initiated
1. Claims are filed liquidation by creditors not by the creditors e. That he has suffered his
2. The assets of the insolvent required
property to remain under
Rules on Applicable
debtor are disposed Liquidation order Liquidation order attachment or legal process
concurrence and
3. Proceeds are divided among the preference of issued without issued only after for 3 days for the purpose of
creditors credits DO NOT trial trial hindering or delaying the
apply liquidation or of defrauding his
Number of Must be 3 or more
LIQUIDATOR creditors;
creditors creditors whose
SIMILARITIES BETWEEN immaterial claim is at least
It is one appointed by the court who VOLUNTARY AND INVOLUNTARY P1M or at least f. That he has confessed or
will facilitate the liquidation LIQUIDATION 25% of the offered to allow judgment in
proceedings. He may likewise be subscribed capital favor of any creditor or
appointed by the creditors who have 1. Debtor is insolvent stock or partners’ claimant for the purpose of
filed their claims within the period set contributions,
2. P500,000 – is the qualifying hindering or delaying the
whichever is
by court. amount: liquidation or of defrauding any
higher. (same with
a. More than P500,000 – for rehabilitation) creditors or claimant;
DISTINCTIONS BETWEEN voluntary liquidation
LIQUIDATION AND SUSPENSION b. At least P500,000 – for g. That he has willfully
OF PAYMENTS ACTS OF INSOLVENCY
involuntary liquidation suffered judgment to be taken
DIFFERENCE BETWEEN a. That such person is about to against him by default for the
SUSPENSION OF LIQUIDATION VOLUNTARY AND INVOLUNTARY purpose of hindering or delaying
depart or has departed from
PAYMENTS LIQUIDATION the liquidation or of defrauding
the Republic of the
Debtor has Debtor is already Philippines, with intent to his creditors;
sufficient assets to insolvent VOLUNTARY INVOLUNTARY defraud his creditors;
cover liabilities h. That he has suffered or
Acts of insolvency Creditors must
b. That being absent from the procured his property to be
Payment of Obligations are need not be prove acts of
alleged and insolvency Republic of the Philippines, taken on legal process with
obligations is discharged
stayed proved with intent to defraud his intent to give a preference to one
creditors, he remains absent; or more of his creditors and
Applies only to Also applies to The individual A creditor or thereby hinder or delay the
individual debtors business debtor files the group of creditors
c. That he conceals himself to liquidation or defraud any one of
organizations petition files the petition
avoid the service of legal his creditors;
Filed by the May be initiated The debtor is not Apples even in the process for the purpose of
debtor by the creditors absent as he is the case of an absent i. That he has made any
hindering or delaying the
one who files the debtor (one who assignment, gift, sale,
No minimum Debt of the petition resides or has liquidation or of defrauding his
creditors; conveyance or transfer of his
amount of individual must be departed from the
liabilities at least P500,000 Philippines, estate, property, rights or
in voluntary cannot be found d. That he conceals, or is credits with intent to hinder or
liquidation and or conceals removing, any of his property
 delay the liquidation or defraud than 45 days from the date of the
his creditors; 1. When a petition for c. Order the sheriff to take last publication.
rehabilitation is filed and it is possession and control of all the
j. That he has, in contemplation established that the debtor is property of the debtor, except THE RIGHTS OF SECURED
of insolvency, made any indeed insolvent but there is no those that may be exempt from CREDITORS
payment, gift, grant, sale, substantial likelihood for the execution;
conveyance or transfer of his debtor to be successfully The liquidation order will not affect
estate, property, rights or credits; rehabilitated. d. Order the publication of the the right of a secured creditor to
petition or motion in a enforce his lien in accordance with the
k. That being a merchant or 2. If no rehabilitation plan is newspaper of general circulation applicable contract or law. He may:
tradesman, he has generally confirmed within a period of 1 once a week for 2 consecutive
defaulted in the payment of his year from the filing of the weeks; 1. Waive his right under the
current obligations for a period petition for rehabilitation. security or lien, prove his claim
of 30 days; e. Direct payments of any claims in the liquidation proceedings
3. Failure of rehabilitation or and conveyance of any property and share in the distribution of
l. That for a period of 30 days, dismissal of the petition for due the debtor to the liquidator; assets of the debtor; or
he has failed, after demand, to rehabilitation on technical 2. Maintain his rights under the
pay any moneys deposited with grounds; or f. Prohibit payments by the security or lien. In which case:
him or received by him in a debtor and the transfer of any a. The value of the property
fiduciary; and 4. Upon filing of the verified property by the debtor; may be fixed in a manner
motion of the debtor during the agreed upon by the
m. That an execution having pendency of the g. Direct all creditors to file their creditor and the
been issued against him on court-supervised or claims with the liquidator within liquidator.
final judgment for money, he pre-negotiated rehabilitation the period set by the rules of
shall have been found to be proceedings. procedure; i. Value is less than
without sufficient property the claim – the
subject to execution to satisfy Thereupon, the court shall issue the h. Authorize the payment of liquidator may
the judgment Liquidation Order mentioned in administrative expenses as they convey the
Section 112 hereof. become due; property to the
THE COURT CONVERT creditor and the
REHABILITATION PROCEEDINGS LIQUIDATION ORDER i. State that the debtor and latter will be
TO LIQUIDATION PROCEEDINGS creditors who are not admitted in the
Section 112. Liquidation Order: The petitioner/s may submit the liquidation
Conversion by the court into Liquidation Order shall: names of other nominees to the proceedings as a
liquidation proceedings: During the position of liquidator; and creditor for the
pendency of court-supervised or a. Declare the debtor insolvent; balance
pre-negotiated rehabilitation j. Set the case for hearing for the
proceedings, the court may order the b. Order the liquidation of the election and appointment of the ii. Value exceeds the
conversion of rehabilitation debtor and, in the case of a liquidator, which date shall not claim – the
proceedings to liquidation juridical debtor, declare it as be less than 30 days nor more liquidator may
proceedings, in the following cases: dissolved; convey the
 property to the number of votes cast in terms of GROUNDS FOR THE REMOVAL OF debt shall be set off against the other,
creditor and waive amount of claims, and who is qualified A LIQUIDATOR and only the balance, if any shall be
the debtor’s right shall be appointed as the liquidator. allowed in the liquidation proceedings.
of redemption Removal: He may be removed at any
upon receiving the COURT-APPOINTED LIQUIDATOR time by the court for cause, either motu OPPOSITION OR CHALLENGE TO
excess from the propio or upon motion of any creditor CLAIMS
creditor. The court may appoint the liquidator if: entitled to vote for the election of the
a. On the date set for the election liquidator. Within 30 days from the expiration of
b. The liquidator may sell of the liquidator, the creditors the period for filing of applications for
the property and satisfy do not attend; REGISTRY OF CLAIMS UNDER THE recognition of claims, creditors,
the secured creditor’s b. the creditors who attend, fail or DETERMINATION OF CLAIMS IN individual debtors, owner/s of the sole
refuse to elect a liquidator; LIQUIDATION proprietorship-debtor, partners of the
entire claim from the
proceeds of the sale; or c. after being elected, the partnership-debtor and shareholders or
Within twenty (20) days from his members of the corporation-debtor and
liquidator fails to qualify; or
assumption into office the liquidator other interested parties may submit a
c. The secured creditor may d. a vacancy occurs for any reason
shall prepare a preliminary registry of challenge to claim or claims to the
enforce the lien and whatsoever, In any of the cases
claims of secured and unsecured court, serving a certified copy on the
foreclose on the property provided herein, the court may
creditors. liquidator and the creditor holding the
pursuant to applicable instead set another hearing of
laws. the election of the liquidator. challenged claim.
Secured creditors who have waived
their security or lien, or have fixed the Upon the expiration of the 30-day
ELECTION OF LIQUIDATOR Note: A rehabilitation receiver, who
value of the property subject of their period, the rehabilitation receiver shall
was administering the debtor prior to
security or lien by agreement with the submit to the court the registry of
Only creditors who have filed their the commencement of the liquidation,
liquidator and is admitted as a claims containing the undisputed
claims within the period set by the may also be appointed as a
creditor for the balance, shall be claims that have not been subject to
court, and whose claims are not liquidator.
considered as unsecured creditors. challenge. Such claims shall become
barred by the statute of limitations,
will be allowed to vote in the election QUALIFICATIONS OF THE final upon the filling of the register and
LIQUIDATOR The liquidator shall make the registry may be subsequently set aside only on
of the liquidator.
available for public inspection and grounds of fraud, accident, mistake or
The liquidator shall have the provide publication notice to inexcusable neglect.
A secured creditor will not be
qualifications enumerated above for creditors, individual debtors owner/s of
allowed to vote, unless:
rehabilitation receivers, as follows: the sole proprietorship-debtor, the Submission of Disputed Claims to
a) he waives his security or lien; or
1. Citizen of the Philippines partners of the partnership-debtor and the Court
b) has the value of the property
2. Resident of the Philippines in shareholders or members of the The liquidator shall resolve disputed
subject of his security or lien
the 6 months immediately corporation-debtor, on where and when claims and submit his findings thereon
fixed by agreement with the
preceding the nomination they may inspect it. All claims must be to the court for final approval. The
liquidator, and is admitted for
3. Has the requisite knowledge of duly proven before being paid. liquidator may disallow claims.
the balance of his claim.
insolvency and commercial laws
4. No conflict of interest RIGHT OF OF SET-OFF
The creditors entitled to vote will
elect the liquidator in open court.
If the debtor and creditor are mutually
The nominee receiving the highest
debtor and creditor of each other one
 LIQUIDATION PLAN satisfaction of the court, and Order Removing the Debtor from
shall be conclusive evidence of the List of Registered Entities at the
Within 3 months from his that fact. Securities and Exchange
assumption into office, the Commission
Liquidator shall submit a Liquidation SALE OF ASSETS IN LIQUIDATION Upon determining that the
Plan to the court. The Liquidation Plan liquidation has been completed, the
shall, as a minimum enumerate: The liquidator may sell the court shall issue an Order approving
1. All the assets of the debtor unencumbered assets of the debtor and the report and ordering the SEC to
2. A schedule of liquidation of the convert the same into money. remove the debtor from the registry of
assets and legal entities.
3. Payment of the claims General Rule: The sale shall be made
at public auction. TERMINATION OF PROCEEDINGS
Exempt Property to be Set Apart Exceptions: A private sale may be
a. It shall be the duty of the court, allowed with the approval of the court Upon receipt of evidence showing that
upon petition and after hearing, if; the debtor has been removed from the
to exempt and set apart, for the a. the goods to be sold are of a registry of legal entities at the SEC. The
use and benefit of the said perishable nature, or are liable court shall issue an Order terminating
insolvent, such real and personal to quickly deteriorate in value, the proceedings.
property as is by law exempt or are disproportionately
from execution, and also a expensive to keep or maintain;
homestead; or
b. but no such petition shall be b. the private sale is for the best
heard as aforesaid until it is first interest of the debtor and his
proved that notice of the hearing creditors. With the approval of
of the application therefor has the court, unencumbered
been duly given by the clerk, by property of the debtor may also
causing such notice to be posted be conveyed to a creditor in
it at least 3 public places in the satisfaction of his claim or part
province or city at least 10 days thereof.
prior to the time of such
hearing, which notice shall set With the approval of the court,
forth the name of the said unencumbered property of the
insolvent debtor, and the time debtor may also be conveyed to a
and place appointed for the creditor in satisfaction of his
hearing of such application, and claim or part thereof.
shall briefly indicate the
homestead sought to be
exempted or the property sought
to be set aside;
c. and the decree must show that
such proof was made to the
 GLOSSARY (DEFINITION OF Management Committee - replaces the plaintiff to the defendant.
TERMS) management and governing body of the
debtor, assuming their rights and Secured creditors - are those whose
Claims - in rehabilitation refer to all responsibilities, when appointed by the claims are secured by a lien (either by
demands against the debtor or its court. law, agreement or by judicial judgment)
property, including those from the which legally entitled a creditor to
government and claims against Pre-negotiated Rehabilitation - a resort to the property subject of a lien
directors and officers related to their pre-approved rehabilitation plan by the for payment of his claim.
official duties. insolvent debtor and some creditors
awaits court supervision before Suspension of Payments - This
Cram down effect - An approved enforcement. involves calling the creditors to a
restructuring or rehabilitation plan meeting to propose and agree on a
under an informal workout framework Rehabilitation - refers to the schedule of payments and to prevent
carries the same legal weight as the restoration of the debtor to a condition the debtor from making any payment
previously discussed confirmed plan. of successful operation and solvency. outside the necessary or legitimate
expenses of the business, and the
Creditor - Creditors include natural or Rehabilitation plan - a plan by which issuance of a suspension order to
juridical persons which have a claim the financial well-being and viability of prevent pending executions against the
against the debtor that arose on or an insolvent debtor can be restored debtor.
before commencement date, which can using various means
either be secured or unsecured. Suspension Order - Upon motion filed
Standstill Agreement - an by the individual debtor, the court may
extrajudicial agreement between the
Debtor - Under FRIA, a debtor is: issue an order suspending any pending
debtor and creditors outlining the
1. Sole proprietorship registered terms for negotiating and entering into execution against the individual debtor.
with the DTI; an OCRA (Out-of-Court Restructuring
2. Partnership registered with the Agreement). Unsecured creditors - are those
SEC whose claim or a portion thereof is
3. Corporations organized and Standstill Period - may be agreed neither secured, preferred nor
upon by the parties pending subordinated.
existing under the laws of the
negotiation and finalization of the
Philippines; or out-of-court or informal restructuring/
4. Individual debtors which are workout agreement or Rehabilitation
natural persons who are Plan, effective and enforceable against
residents and citizens of the all parties involved.
Philippines.
Stay Order - preserves the preference
of secured creditors, but enforcement of
Liquidator - It is one appointed by the
this preference is temporarily
court who will facilitate the liquidation suspended.
proceedings. He may likewise be
appointed by the creditors who have Set-off - counterclaim made by a
filed their claims within the period set defendant against a plaintiff for
by court. reduction or discharge of a debt by
reason of an independent debt owed by
 GLOSSARY (REQUISITES) Grounds for Appointment of creditors with over 50% of the
Rehabilitation total unsecured claims. Required Approval
QUALIFICATIONS AS INSOLVENT Receiver/Management Committee: Minimum requirements in 1. Creditors representing more
UNDER FRIA 1. Actual or eminent danger of Rehabilitation Plan than 50% of total claims and
Shall refer to the financial condition of dissipation, loss, wastage, or 1. The debtor must agree to the the confirmation of the court; or
a debtor that is generally: destruction of the debtor’s assets out-of-court or informal a.
1. Unable to pay its or his liabilities or properties. restructuring/ workout 2. The court even without
as they fall due; or agreement or rehabilitation plan approval of the creditors or
2. Has liabilities greater than its or 2. Paralyzation of the business 2. Approved by creditors: even over the objections of the
his assets. operations of the debtor. a. Representing at least 67% creditors, in the following cases:
of the secured a. The Rehabilitation Plan
KEY FEATURES OF SUSPENSION OF 3. Gross mismanagement, fraud, or obligations; complies with the
PAYMENTS other wrongful conduct by b. Representing at least 75% requirements of the FRIA;
1. The debtor has sufficient existing management of the of the unsecured i. =
properties to cover all his debts debtor. obligations b. The rehabilitation
but he foresees the impossibility c. Holding at least 85% of receiver recommends
of meeting his debts when they Grounds for Rehabilitation Plan the total liabilities, the confirmation of the
respectively fall due. 1. The creditors’ support was secured and unsecured. Rehabilitation Plan;
2. The purpose is to suspend or induced by fraud;
delay the payment of debts. 2. Documents or data relied upon Qualifications of a Rehabilitation c. The shareholders,
3. The amount of indebtedness is in the plan are materially false or Receiver: owners or partners of
not affected (not reduced or misleading; or 1. Filipino citizenship the juridical debtor lose
discharged). 3. The plan is in fact not supported 2. Six-month residency in the at least their controlling
4. The number of creditors is by the voting creditors. Philippines preceding interest as a result of the
immaterial. nomination Rehabilitation Plan; and
How to File a Petition for the 3. Knowledge of insolvency and
Approval of a Pre-Negotiated commercial laws The confirmation of the
Confirmation of Rehabilitation Plan Rehabilitation Plan 4. No conflict of interest Rehabilitation Plan by the court
The court shall issue an order Petition by Debtor: shall result in the following:
confirming the Rehabilitation Plan 1. An insolvent debtor, alone or Rehabilitation Plan
if: with any creditor, can submit a but not limited to: 1. The Rehabilitation Plan and its
1. No objections are filed within verified petition to the court for 1. Debt forgiveness provisions shall be binding upon
the relevant period or; approval of a pre-negotiated 2. Debt rescheduling the debtor and all persons who
2. If objections are filed, the court Rehabilitation Plan. 3. Reorganization or may be affected by it, including
finds them lacking in merit, or 2. The plan must be endorsed or quasi-reorganization the creditors, whether or not
3. The court determines that the approved by creditors with at 4. Dacion en pago such persons:
basis for the objection has been least ⅔ or two-thirds of the 5. Debt-equity conversion a. Have participated in the
cured, or debtor's total liabilities. 6. Sale of the business (or parts of proceedings
4. The court determines that the 3. This includes secured creditors it) as a going concern; or b. Opposed the
debtor has complied with an with over 50% of the total 7. Setting up of new business entity Rehabilitation Plan
order to cure the objection. secured claims and unsecured 8. Other similar arrangements
 c. Whether or not their 3. The standstill period does not
claims have been exceed 120 days from the date
scheduled of effectivity.
The confirmation of the
2. The debtor shall comply with Rehabilitation Plan by the court
the provisions of the shall result in the following:
Rehabilitation Plan and shall 1. Have participated in the
take all actions necessary to proceedings, PAMANTASAN NG LUNGSOD NG MAYNILA
carry out the Plan 2. Opposed the Rehabilitation (University of the City of Manila)
Plan, or General Luna, corner Muralla St., Intramuros, Manila
3. Payments shall be made to the 3. Whether or not their claims 1002 Metro Manila
creditors in accordance with the have been scheduled
provisions of the Rehabilitation The extent to the liability
Plan Whichever is higher between:
In partial fulfillment of the requirements for the subject
d. The rehabilitation plan 1. Double the value of the property
Regulatory Framework and Legal Issues in Business
would likely provide the sold, embezzled or disposed; or
(ACN 2210A-4)
objecting class of 2. Double the value of the
creditors with transaction involved
compensation which has
a net present value
greater than that which
Finals Reviewer:
they would have received Government Procurement Reform Act
if the debtor were under (RA 9184)
liquidation.

Submitted by:
Standstill period; but also against
Academia, Julia Mikaella S.
the other creditors, if:
Delos Santos, Lady Jean C.
1. Such agreement is approved by Hantic, Mariela D.
creditors representing more
than 50% of the total liabilities
of the debtor;
2. Notice is published in a Submitted to:
newspaper of general Atty. Aloi Renz P. Santos
circulation in the Philippines
once a week for 2 consecutive
weeks;

May 2024
GOVERNMENT PROCUREMENT REFORM COMPETITIVE BIDDING Utilization of G-EPS Types of APP
ACT (R.A. 9184) ● Procurement of common supplies 1. Indicative APP
Competitive Bidding - refers to the method - G-EPS established by GPPB 2. Approved APP
R.A. 9184, entitled “An Act Providing for the of procurement that is open to participation ● Procurement of non-common use
Modernization, Standardization and by any interested party. items, infrastructure projects, and Factors to be Considered in Preparing APP
Regulation of the Procurement Activities of consulting services, agencies a. The APP should include all procurement
the Government and for other Purposes,” Processes in Competitive Bidding - may hire service providers to activities planned for the year
otherwise known as the Government ● Advertisement undertake their electronic b. The APP shall include only those
Procurement Reform Act ● Prebid conference procurement procurements that are considered crucial
● Eligibility screening of prospective to the efficient discharge of governmental
Government Procurement bidders PROCUREMENT PLANNING functions.
The process by which the government acquires ● Receipt and opening of bids c. The APP shall include provisions for
the goods and services it needs by purchasing ● Evaluation of bids All procurement should be within the budget of foreseeable emergencies based on
from commercial businesses. Since taxpayer’s ● Post-qualification the Procuring Entity and should be historical records
money is being used, there are regulations on ● Award of contract meticulously and judiciously planned by the d. Scheduling of procurement activities
how to use it properly and responsibly. (Sec 5.e, RA 9184) Procurement Entity. (Sec 7, RA 9184) should be done to efficiently manage the
conduct of procurement transactions
Governing Principles on Government GR. All Procurement shall be done through Project Procurement Management Plan
Procurement Competitive Bidding (PPMP) BIDS AND AWARDS COMMITTEE
a) Transparency - procurement process - a component of the Project
and implementation XPN. When Alternative Modes of Procurement Management Plan Bids and Awards Committee (BAC)
b) Competitiveness - equal opportunity to applies - serves as a guide document in the A committee established in accordance with
those eligible and qualified to (Sec 1o, RA 9184) procurement and contract Article V of R.A. No. 9184, which refers to the
participate in public bidding implementation process body responsible for the procurement
c) Streamlined procurement process - PHILIPPINE GOVERNMENT ELECTRONIC Types of PPMP activities from the pre-procurement
procurement process shall be simple PROCUREMENT SYSTEM 1. Initial PPMP conference up to the recommendation of
and adaptable in order to ensure an 2. Revised PPMP award.
effective and efficient method Philippine Government Electronic
d) System of accountability Procurement System (PhilGEPS) Preparation of the PPMP BAC Structure:
e) Public monitoring of the procurement - Single portal that shall serve as the ● Development of Project Requirements Each Procuring Entity shall establish in its
process and the implementation of PRIMARY & DEFINITIVE source of the ● Writing the Technical Specifications, head office a single BAC to undertake the
awarded contracts government procurement. Scope of Work, and Terms of Reference functions in order to facilitate
- authorized to approve changes in the ● Determining the Approved Budget for professionalization and harmonization of
Scope of Application procurement process to adapt to the Contract procedures and standards.
This Act shall apply to the Procurement of improvements in modern technology ● Scheduling of Significant Activities
Infrastructure Projects, Goods, and Consulting (modifications should be consistent during Procurement The BACs may be organized either according
Services, regardless of source of funds, with Sec 3, RA 9184) ● Method of Procurement (Sec 10, RA 9184) to:
whether local or foreign, by all branches and - Shall include a feature that provides for ● Formatting the PPMP (a) geographical location of PMO or
instrumentalities of government, its an audit trail for on-line transactions end-user or implementing units of the
departments, offices and agencies, including and allow the CoA to verify the security Annual Procurement Plan (APP) Procuring Entity;
government-owned and/or -controlled and integrity of the systems at any time. - A document that consolidates the (b) nature of procurement
corporations and local government units, (Art. III, RA 9184) various PPMPs submitted by the various
subject to the provisions of Commonwealth PMOs and end-user units within the BAC Composition:
Act No. 138. Procuring Entity The Head of Procuring Entity (HoPE) shall
designate at least five (5) but not more than
seven (7) members to the BAC of i. One representative each from the regular THE PROCUREMENT PROCESS
unquestionable integrity and procurement offices under the Office of the Local Chief BAC Secretariat
proficiency. Executive (Office of the Administrator, Budget To assist the BAC in the conduct of its I. Preparation of Bidding Documents
Office, Legal Office, Engineering Office, functions, the HoPE shall create a Secretariat
The BAC for NGAs, departments, bureaus, General Services Offices) that will serve as the main support unit of the The bidding documents shall be prepared by
offices, or instrumentalities of the GoP, ii. A representative from the end user unit BAC. the Procuring Entity following the standard
including the judicial and legislative branches, forms and manuals prescribed by the GPBB.
constitutional commissions, SUCs, GOCCs, and b.) For Barangays Honoraria of BAC Members
GFIs shall be composed of the following: The Procuring Entity may grant payment of The Procuring Entity may require additional
i. The BAC shall be composed of at least five honoraria to the BAC members in an amount documents requirements or specifications
Regular Members: (5), but not more than seven (7) regular not to exceed twenty five percent (25%) of necessary to complete the information
a) Chairperson, at least third (3rd) ranking members of the Sangguniang Barangay, except their respective basic monthly salary subject to required for the bidders to prepare and submit
permanent official of the Procuring the Punong Barangay availability of funds. The Department of their respective bids.
Entity; ii. The Punong Barangay, being the Local Chief Budget and Management (DBM) shall
b) An officer, who is at least a fifth (5th) Executive, shall designate the Chairperson, promulgate the necessary guidelines. Access to Information - In all stages of the
ranking permanent official Vice-Chairperson, and members of the BAC preparation of the Bidding Documents, the
procuring entity shall ensure equal access to
if not available, an officer of the next BIDDING DOCUMENTS information. No aspect of the Bidding
lower rank with knowledge or Functions of the BAC: Documents shall be released on any
experience in procurement who a) advertise and/or post the invitation to Bidding Documents prospective bidder or having direct or indirect
represents the legal or administrative bid; Documents issued by the Procuring Entity as interest in the project to be procured.
area of the Procuring Entity; b) conduct pre-procurement and pre-bid the basis for Bids, furnishing all information
conferences; necessary for a prospective bidder to prepare a II. Invitation to Bid
c) An officer, who is at least a fifth (5th) c) determine the eligibility of prospective bid for the Goods, Infrastructure Projects, and
ranking permanent official bidders; Consulting Services to be provided. A. Pre-Procurement Conference
d) receive and open bids;
if not available, an officer of the next e) conduct the evaluation of bids; The Bidding Documents shall include the GR: Prior to issuance of the invitation to bid,
lower rank with knowledge or f) undertake post-qualification following: the BAC is mandated to hold a
experience in procurement who proceedings; a) Approved Budget for the Contract; pre-procurement conference on each and
represents the finance area of the g) resolve requests for reconsideration; b) Instructions to Bidders, including every procurement
Procuring Entity h) recommend award of contracts to the criteria for eligibility, bid evaluation
HoPE or his duly authorized and post qualification; XPN: Contracts below a certain level or
Provisional Members: representative; c) Terms of Reference; amount specified in the IRR.
d) An officer who has technical expertise i) recommend the imposition of d) Eligibility Requirements;
relevant to the procurement; sanctions, and perform other related e) Plans and Technical Specifications; This process shall assess the readiness of the
e) A representative from the end-user or functions including the creation of f) Form of Bid, Price Form, and List of procurement in terms of confirming the
implementing unit who has knowledge Technical Working Group (TWG) Goods or Bill of Quantities; certification of availability of funds, as well as
of procurement laws and procedures g) Delivery Time or Completion Schedule; reviewing all relevant documents in relation to
Observers h) Form and Amount of Bid Security; their adherence to law.
The BAC for Local Government Units shall be To enhance the transparency of the process, i) Form and Amount of Performance
composed of the following: the BAC shall, in all stages of the procurement Security and Warranty; and B. Advertising and Contents of the
process, invite, in addition to the j) Form of Contract, and General and Invitation to Bid
a) For Provinces, Cities, and Municipalities representative of the Commission on Audit, at Special Conditions of Contract
least two (2) observers to sit in its proceedings. In line with the principle of transparency and
competitiveness, all bidding shall be
advertised in such manner and for such length shall be submitted in a sealed envelope, BAC shall evaluate the FINANCIAL FAILURE OF BIDDING
of time as may be necessary under the identified as a modification of the original bid component of the bids. There shall be a failure of bidding if:
circumstances, in order to ensure the widest and stamped received by the BAC. 1. No bids are received
possible dissemination such as posting in: The bids that passed the preliminary 2. No bid qualifies as the Lowest
1. The Procuring Entity’s premises WITHDRAWAL OF BIDS: A bidder may examination shall be ranked from lowest to Calculated Responsive Bid/ Highest
2. The newspapers of general circulation withdraw his bid, provided this is done highest in terms of their corresponding Rated Responsive Bid
3. The PHILGEPS and the website of the BEFORE the deadline for the receipt of bids. In calculated price shall be referred to as the 3. Whenever the bidder with highest
Procuring entity such case he shall n longer be allowed to “Lowest Calculated Bid” rated/ lowest calculated responsive bid
submit another Bid for the same contract, refuses, without justifiable cause to
C. Pre-bid conference directly or indirectly. BID EVALUATION OF SHORT LISTED accept the award of contract.
BIDDERS FOR CONSULTING SERVICES:
At least one pre-bid conference shall be BID SECURITY: All bids shall be accompanied shall be evaluated and ranked using numerical Under any of the above circumstances, the
conducted for each procurement, unless by a Bid security, which shall serve as ratings contract may be re-advertised and re-bid.
otherwise provided in the IRR. guarantee that, after receipt of the Notice of
Award, the winning bidders shall enter into 1. Experience After the second failed bidding; the BAC may
III. Receipt and Opening of Bids contract with the Procuring Entity with the 2. Performance resort to an alternative procurement;
procuring entity within the stipulated time 3. Quality or Personnel negotiated procurement.
The BAC or, under special circumstances shall and furnish the required performance security. 4. Price
determine the eligibility of prospective bidders The specific amounts and allowable forms of 5. Methodology Single Calculate/ Rated and Responsive
for the procurement of Goods and the Bid security shall be prescribed in the IRR. Bid Submission
Infrastructure Projects, based on the bidders’ The Bid with the highest calculated rating A single calculate/ rated and responsive bid
compliance with the eligibility requirements. BID VALIDITY: Bids and Bid securities shall shall be the “Highest Rated Bid.” shall be considered for award if it falls under of
be valid for such a reasonable period of time the following:
A bid shall have two (2) components, namely: indicated in the documents. V. Post Qualification 1. After advertisement, Only one
1. Technical components This is the stage where the bidder with prospective bidder submits a letter of
2. Financial components BID OPENING: The BAC shall publicly open the Lowest Calculated Bid, in the case intent and meets the eligibility
all bids at the time, date, and place specified in of Goods and Infrastructure Projects, or requirements or criteria.
Subject to the following rules: the bidding document. the Highest Rated Bid, in the case of 2. After advertisement, More than one
a. Bids’ components should be in Consulting Services, WILL undergo prospective bidder applies for
separate sealed envelopes, IV. Bid Evaluation verifications and validation whether he eligibility check, but only one bidder
submitted simultaneously has passed all the requirements and meets the eligibility requirements
b. Bids shall be received by the BAC on The BAC shall examine first the technical conditions. 3. After the eligibility check, more than
such date, time, and place specified in components of the bids using PASS/ FAIL one bidder meets the eligibility
the invitation to bid. criteria. Only the bids that passed shall be If the Bid passes all the criteria for requirements, BUT only one bidder
c. Deadline for the receipt of bids shall be considered for opening and evaluation of their post-qualification, his Bid shall be considered: submits a bid.
fixed by the BAC, giving prospective financial component.
bidders sufficient time to prepare their 1. Lowest Calculated Responsive Bid - in VI. Award, Implementation, and
bids ABC shall be the upper limit or ceiling for the the case of Goods and Infrastructure. Termination of contract
d. Bids submitted after the deadline shall Bid prices, Bid prices that exceed this ceiling 2. Highest Rated Responsive Bid - in the
not be accepted. shall be disqualified. case of Consulting Services. NOTICE AND EXECUTION OF AWARD

MODIFICATION OF BIDS: A bidder may BID FOR THE PROCUREMENT OF GOODS If the Bid didn’t pass, he shall be Within a period not exceeding fifteen (15)
modify his bid, provided that this is done AND INFRASTRUCTURE PROJECTS: the “POST-DISQUALIFIED”. calendar days from the determination and
BEFORE the deadline for the receipt of bids. It declaration by the BAC of the Lowest
Calculated Responsive Bid or Highest Rated If no action on the contract is taken by the VII. Contract implementation and days after the receipt of the
Responsive Bid, and the recommendation of head of the procuring entity, or by his duly termination notice.
the award, the HoPE or his duly authorized authorized representative, or by the concerned
representative shall approve or disapprove the board, in the case of government owned The rules and guidelines for the c. Supplier fails to perform any
said recommendation. and/or -controlled corporations, within the implementation and termination of contracts other obligations under the
periods specified in the preceding paragraph, awarded pursuant to the provisions shall be stipulations of the contract.
NOTICE OF AWARD: In case of approval, the the contract concerned shall be deemed prescribed in the IRR.
Head of the Procuring Entity or his duly approved. II. In contracts for infrastructure
authorized representative shall immediately SPLITTING OF GOVERNMENT projects- the entity shall TERMINATE
issue the Notice of Award to the bidder with the PERFORMANCE SECURITY CONTRACTS: this means the division or a contract for default when ANY of the
Lowest Calculated Responsive Bid or Highest Prior to the signing of the contract, the breaking up of government of the Philippine following conditions attend its
Rated Responsive Bid. winning bidder shall, as a measure of contracts into smaller quantities and amount, implementation:
guarantee for the faithful performance and or dividing contract implementation into
ENTERING INTO THE CONTRACT compliance with his obligations under the artificial phases or sub-contracts for the a. Due to the contractor’s fault and while
1. Within ten (10) calendar days from contract, be required to post a performance purpose of EVADING or CIRCUMVENTING the the project is on-going; it incurred a
receipt of the Notice of Award, the security in such form and amount as specified requirements of the law and it IRR. negative slippage of 15% or more
winning bidder shall formally enter into in the Bidding Documents.
contract with the Procuring Entity. Absolute rule: splitting of Government b. Due to the contractor’s fault, and after
FAILURE TO ENTER INTO CONTRACT Contracts is NOT allowed. the contract time has expired; it
2. When further approval of higher AND POST PERFORMANCE SECURITY incurred a negative slippage of 10% or
authority is required, the approving If the bidder with the Lowest Calculated GROUNDS FOR TERMINATION more.
authority for the contract shall be given Responsive Bid or Highest Rated Responsive
a maximum of twenty (20) calendar days Bid fails, refuses or unable to enter into 1. Termination for Default c. The contractor:
to approve or disapprove it. contract with the Procuring Entity, or if the I. in contracts for Goods: 1. Abandons the work, refuses or
3. In the case of government-owned bidder fails to post the required performance a. Outside of force majeure; the fails to comply with a valid
and/or -controlled corporations, the security within the period stipulated in the supplier fails to deliver or instruction or fails to proceed
concerned board shall take action on Bidding Documents, the BAC shall disqualify perform any or all of the Goods expeditiously and without delay
the said recommendation within thirty the said bidder and shall undertake within the period/s specified in despite a written notice by the
(30) calendar days from receipt thereof. post-qualification for the next-ranked the contract. procuring entity.
Lowest Calculated Bid or Highest Rated 2. Does not actually have on the
NOTICE TO PROCEED: The Procuring Entity Bid. Or within any extension thereof project site the minimum
shall issue the Notice to Proceed to the granted by the Procuring Entity essential equipment listed in the
winning bidder not later than seven (7) This procedure shall be repeated until an pursuant to a request made by Bid.
calendar days from the date of approval of the award is made. However, if no award is the supplier prior to the delay, 3. Does not execute the works in
contract by the appropriate authority. possible, the contract shall be subjected to a and such failure amounts to at accordance with the contract or
new bidding. least 10 % of the contract price. blatantly neglects to carry out its
PERIOD OF ACTION ON PROCUREMENT obligations.
ACTIVITIES RESERVATION CLAUSE b. As a result of force majeure, the 4. Neglects or refuses to remove
The head of the Agency reserves the right to supplier is unable to deliver or materials or to perform a new
The procurement process from the opening of (1) reject any and all Bids, (2) declare a failure perform any or all of the Goods, work that has been rejected as
bids up to the award of contract shall not of bidding, or (3) not award the contract. amounting to at least 10 % of the defective or unsuitable.
exceed three (3) months. contract price, for a period of 5. Sub-lets any part of the contract
NOT LESS THAN 60 calendar works w/o the approval of the
procuring entity.
 with the P.E. if the works are completely ALTERNATIVE METHODS OF b) Direct Contracting or Single Source
III. In contracts for consulting Services- stopped for a continuous period of AT PROCUREMENT Procurement – a method of
LEAST 60 DAYS. Procurement that does not require
a. Outside of force majeure, the Conditions for Use of Alternative Methods elaborate Bidding Documents because
consultant fails to deliver or perform i. Failure of the procuring entity to of Procurement the supplier is simply asked to submit a
the Outputs and Deliverables within deliver, within reasonable time, price quotation or a pro-forma invoice
the periods stipulated, or with any supplies, materials,right of way, or a. The BAC recommended the use of together with the conditions of sale,
extension. other items it is obligated to furnish alternative methods to the Head of the which offer may be accepted
b. As a result of force majeure, consultant under the terms of the contract Procuring Entity (HoPE) immediately or after some negotiations.
is unable to deliver or perform a b. HoPE or his duly authorized representative
material portion of the Outputs and ii. Prosecution of the work is disrupted has given prior approval of the use of any c) Repeat Order – a method of
Deliverables for a period of not less by the adverse peace and order of the alternative methods of procurement; Procurement that involves a direct
than 60 days after the consultant’s situation, as certified by the AFP, and c. The conditions surrounding the Procurement of Goods from the
receipt of the notice form the procuring approved by the Secretary of National procurement at hand justify the use of any previous winning bidder, whenever
entity stating that the circumstances of Defense. of the alternative methods of procurement, there is a need to replenish Goods
force majeure is deemed to have ceased. as provided for in Sections 48-54, Article procured under a contract previously
c. The consultant fails to perform any b. Contracts for consulting services- the XVI of R.A. 9184 and Sections 48-54, Rule awarded through Competitive Bidding.
other obligations. consultant may terminate its contract if XVI of its 2016 IRR
the procuring entity is in material d) Shopping – a method of Procurement
2. Termination for Convenience: procuring breach of its obligations pursuant to Subject to the prior approval of the HoPE or whereby the Procuring Entity simply
entity may terminate the contract, in whole or the contract and has not remedied the his duly authorized representative, and requests for the submission of price
in part, at any time of its convenience. same within 60 days following its whenever justified by the conditions provided quotations for readily available
receipt of the consultant’s notice of in this Act, the Procuring Entity may resort to off-the-shelf Goods or ordinary/regular
3. Termination for insolvency: procuring specifying such breach. any of the following alternative methods of equipment to be procured directly from
entity shall terminate the contract if the Procurement: suppliers of known qualification.
Supplier/ Contractor/ Consultant is declared DISCLOSURE OF RELATIONS
BANKRUPT or INSOLVENT as determined by a) Limited Source Bidding or Selective e) Negotiated Procurement – a method
a court of competent jurisdiction. All bidding documents shall be accompanied Bidding – a method of Procurement of Procurement that may be resorted
by a sworn affidavit of the bidder that he or that involves direct invitation to bid by under extraordinary circumstances
4. Termination for Unlawful Acts: procuring she or any officer of their corporation in not the Procuring Entity from a set of whereby the Procuring Entity directly
entity may terminate the contract in case it is related to the Head of the Procuring Entity by preselected suppliers or consultants negotiates a contract with a technically,
determined prima facie that the Supplier/ consanguinity or affinity up to the third civil with known experience and proven legally and financially capable supplier,
Contractor/ Consultant has engaged, before or degree. capability relative to the requirements contractor or consultant.
during the implementation of the contract; of a particular contract.
such as Failure to this provision; AUTOMATIC
1. Corrupt, fraudulent, collusive and DISQUALIFICATION OF THE BID. Limited Source Bidding may be resorted to
coercive practices only in any of the following conditions:
2. Drawing up or using forged documents 1. Procurement of highly specialized types
3. Any other acts of Goods and Consulting Services
which are known to be obtained only
5. Termination by Contractor/ Consultant from a limited number of sources
2. Procurement of major plant
a. Contracts for infrastructure projects: components where it is deemed
contractor may terminate its contract advantageous.
 GLOSSARY (DEFINITION OF TERMS) GLOSSARY (REQUISITES)
Limited Source Bidding - also known as
Annual Procurement Plan (APP) - a Selective Bidding is a method of Procurement Governing Principles on Government
document that consolidates the various that involves direct invitation to bid by the Procurement
PPMPs submitted by the various PMOs and Procuring Entity from a set of preselected a) Transparency
end-user units within the Procuring Entity suppliers or consultants with known b) Competitiveness
experience and proven capability relative to c) Streamlined procurement process
Bidding Documents - documents issued by the requirements of a particular contract. d) System of accountability
the Procuring Entity as the basis for Bids, e) Public monitoring of the procurement
furnishing all information necessary for a Negotiated Procurement – a method of process and the implementation of
prospective bidder to prepare a bid for the Procurement that may be resorted under awarded contracts
Goods, Infrastructure Projects, and Consulting extraordinary circumstances whereby the
Services to be provided. Procuring Entity directly negotiates a contract Advertising of the Invitation to Bid
with a technically, legally and financially 1. The Procuring Entity’s premises
Bids and Awards Committee (BAC) - a capable supplier, contractor or consultant. 2. The newspapers of general circulation
committee established in accordance with 3. The PHILGEPS and the website of the
Article V of R.A. No. 9184, which refers to the Post Qualification - a stage where the bidder Procuring entity
body responsible for the procurement with the Lowest Calculated Bid, in the case of
activities from the pre-procurement Goods and Infrastructure Projects, or the Bid Components
conference up to the recommendation of Highest Rated Bid, in the case of Consulting 1. Technical components
award. Services, WILL undergo verifications and 2. Financial components
validation whether he has passed all the
Competitive Bidding - refers to the method requirements and conditions. Types of PPMP
of procurement that is open to participation 1. Initial PPMP
by any interested party. Project Procurement Management Plan 2. Revised PPMP
(PPMP) - serves as a guide document in the
Direct Contracting - also known as Single procurement and contract implementation Types of APP
Source Procurement is a method of process 1. Indicative APP
Procurement that does not require elaborate 2. Approved APP
Bidding Documents because the supplier is Repeat Order – a method of Procurement
simply asked to submit a price quotation or a that involves a direct Procurement of Goods Processes in Competitive Bidding
pro-forma invoice together with the conditions from the previous winning bidder, whenever ● Advertisement
of sale, which offer may be accepted there is a need to replenish Goods procured ● Prebid conference
immediately or after some negotiations. under a contract previously awarded through ● Eligibility screening of prospective
Competitive Bidding. bidders
Government Electronic Procurement ● Receipt and opening of bids
System (G-EPS) - the primary and definitive Shopping – a method of Procurement ● Evaluation of bids
source of information on government whereby the Procuring Entity simply requests ● Post-qualification
procurement for the submission of price quotations for ● Award of contract
readily available off-the-shelf Goods or
Government Procurement - the process by ordinary/regular equipment to be procured
which the government acquires the goods and directly from suppliers of known qualification.
services it needs by purchasing from
commercial businesses with regulations on
how to use it properly and responsibly.
 INSURANCE Insurance as an Uberrimae Fides contract
(1993 Bar)
Laws governing contracts of insurance in
the Philippines The contract of insurance is one of perfect
1. R.A. 10607 (July 23, 2012) good faith (uberrimae fidei) not for the
2. New Civil Code insured alone, but equally so for the insurer; in
3. Special Laws fact, it is more so for the latter, since its
PAMANTASAN NG LUNGSOD NG MAYNILA dominant bargaining position carries with it
(University of the City of Manila) ________________________________________ stricter responsibility (Qua Chee Gan vs. Law
General Luna, corner Muralla St., Intramuros, Manila Union and Rock Insurance, Co. Ltd., GR No.
CONCEPT OF INSURANCE L-4611, December 17, 1955).
1002 Metro Manila ________________________________________

It requires the parties to the contract to

Contract of insurance
communicate that which a party knows and
In partial fulfillment of the requirements for the subject ought to communicate, that is, the duty to
It is an agreement whereby one undertakes for
Regulatory Framework and Legal Issues in Business disclose in good faith all facts material to
a consideration to indemnify another against
(ACN 2210A-4) the contract.
loss, damage or liability arising from an
unknown or contingent event. [IC, Sec. 2 (a)]
Insurance as contracts of adhesion (Fine
Print Rule)
Finals Reviewer: It must have all the essential elements of a
valid contract as enumerated in Art. 1318 of
Insurance Law the New Civil Code.
While generally, stipulations in a contract
come about after deliberate drafting by the
parties thereto, there are certain contracts in
“Doing an insurance business” or
which almost all the provisions of which have
“transacting an insurance business”
Submitted by: been drafted only by one party, usually a
(ISRA)
Baua, MJ Son A. corporation. Such contracts are called
1. Making or proposing to make, as
Cruz, Chloe Maryse B. contracts of adhesion, because the only
Insurer, any insurance contract;
David, Michael Angelo T. participation of the other party is the signing
2. Making or proposing to make, as
Monzales, Jasmine Nichole G. of his signature or his 'adhesion' thereto.
Surety, any contract of suretyship as a
Insurance contracts fall into this category
vocation and not as merely incidental
(Sweet Lines, Inc. vs. Teves, GR No. L-37750,
to any other legitimate business or
May 19, 1978).
activity of the surety;
3. Doing any kind of business,
Rules in the construction or
including a Reinsurance business,
Submitted to: interpretation of insurance contracts
specifically recognized as constituting
Atty. Aloi Renz P. Santos
the doing of an insurance business.
GR: If the terms of the contract clearly
4. Doing or proposing to do Any
show the intention of the parties, there
business in substance equivalent to
shall be no room for interpretation.
any of the foregoing in a manner
designed to evade the provisions of
May 2024 XPN: If there are ambiguities in the
the Insurance Code.
terms of an insurance contract, they have to
be resolved in favor of the insured and
strictly against the insurer because an on RA 10607 is on demutualization or Consent of spouse not necessary 3. Every policy executed by way of
insurance contract being a contract of conversion of mutual insurance The consent of the spouse is not necessary for gaming or wagering (ICC, Sec. 25)
adhesion, most of its terms is not a companies into stock corporations the validity of an insurance policy taken ________________________________________
product of mutual negotiation between the (IC, as amended by RA 10607, Sec. 280). out by a married person on his or her life or
parties as they are prepared by the insurance that of his or her children (IC, Sec. 3). ELEMENTS OF AN
INSURANCE CONTRACT
company in final printed forms (De Leon, 3. Cooperatives - are now expressly
________________________________________
2014). included in the term insurer or Consent of the person insured is not
insurance company. However, the essential to the validity of the policy. SPEAR:
Parties to the contract of insurance cooperative must: (Su-Ca) So long as it could be proved that the insured 1. Scheme to distribute losses - Such
1. Insurer - party who assumes or a. Sufficient capital and asset has an insurable interest at the inception of assumption of risk is part of a
accepts the risk of loss and required under the Insurance the policy, the insurance is valid even general scheme to distribute actual
undertakes for a consideration to Code and the pertinent without such consent (IC, Sec. 10). losses among a large group or
indemnify the insured on the regulations issued by the substantial number of persons bearing
happening of a specified contingency Commission (IC, as amended, Effect of death of policy’s original owner a similar risk.
or event. Sec. 192). All rights, title and interest in the policy of
b. Certificate of authority to insurance taken out by an original owner on 2. Payment of premium - As consideration
2. Insured - person in whose favor the operate issued by the the life or health of the person insured shall for the insurer's promise, the insured
contract is operative and is Commission which should be automatically vest in the latter upon the makes a ratable contribution called
indemnified. renewed every year (IC, as death of the original owner, unless otherwise "premium", to a general insurance
amended, Sec. 193, Sundiang Sr. provided for in the policy (IC, Sec. 3). fund.
Note: The insured is not always the person to & Aquino, 2014).
whom the proceeds are paid. Note: Prior to the effectivity of the Insurance 3. Existence of insurable interest -
Persons who may be insured (2000 Bar) Code of 2013, the term used was "minor" The insured possesses an interest of
3. Assured/Beneficiary - a person Anyone except a public enemy may be insured instead of "the person insured". A minor some kind susceptible of pecuniary
designated by the terms of the policy (IC, Sec. 7). cannot enter into any contract of insurance estimation, known as "insurable
to receive the proceeds of the with any insurance company. interest".
insurance. A public enemy is a nation at war with
the Philippines and every citizen or subject Games of chances cannot be insured 4. Assumption of Risk - The insurer
Note: The term insurer no longer includes of such nation. It does not include mobs, An insurance for or against the drawing of assumes that risk of loss for a
individuals under RA 10607. Hence, an thieves or robbers (Bouvier’s Law Dictionary). any lottery, or for or against any chance or consideration.
individual natural person is no longer allowed ticket in a lottery drawing a prize is not
to be an insurer. Subject matter of a contract of insurance authorized (IC, Sec. 4). 5. Risk of loss - The insured is subject to a
Anything having an appreciable pecuniary risk of loss through the destruction or
However, it includes the following: value, which is subject to loss or deterioration, Void stipulations in an insurance contract impairment of that interest by the
1. Professional reinsurer - any person, or of which one may be deprived so that his happening of designated peril.
partnership, association or corporation pecuniary interest is or may be prejudiced. Stipulations in an insurance contract which
that transacts solely and exclusively provides: Note: The inherent uncertainty of events is
reinsurance business in the Event or peril insured against 1. For the payment of loss whether the normally described in terms of risk. A
Philippines. It is any contingent or unknown event, person insured has or does not have contract possessing only the last three
whether past or future, which may damnify a any insurable interest in the elements enumerated above is a risk-shifting
2. Mutual Insurance Companies - The person having an insurable interest, or create a subject-matter of insurance; device, but NOT a contract of insurance
law also provides for the procedure for liability against him subject to the provisions 2. That the policy shall be received as which is a risk-distributing device (De Leon,
mutualization of domestic stock life of Chapter I of the Insurance Code (IC, Sec. proof of such interest; 2006).
insurance companies. A new provision 3).
________________________________________ in itself is a valuable MARINE INSURANCE
extraordinary causes events, results from
consideration. (De Leon, 2014) connected with the natural and
CHARACTERISTICS & NATURE OF AN 4. Unilateral - It imposes legal duties only Marine Insurance includes: navigation. inevitable action of
INSURANCE CONTRACT on the insurer who promises to 1. Loss of or damage to: the sea, from the
________________________________________ a. Vessels, cargo, freightage, profits, ordinary wear and
indemnify the insured. (De Leon, 2014)
The following are the characteristics and and all kinds of property and tear of the ship.
nature of an insurance contract: interests therein, in connection
5. Conditional - It is subject to conditions
1. Consensual - It is perfected by the with any and all risks or perils of Rules on All Risks Policy
the principal one of which is the
meeting of the minds of the parties as navigation A marine insurance policy providing that the
happening of the event insured against.
to the object, cause and consideration b. Person or property appertaining insurance was to be “against all risks” must
of the insurance contract to a marine, inland marine, be construed as creating a special insurance
6. Contract of Indemnity - Recovery is
commensurate with the amount of loss transit or transportation and extending to other risks than are usually
2. Voluntary insurance contemplated, and covers all losses except
suffered.
GR. The parties may incorporate such terms c. Precious stones, jewels, jewelry, such as may arise from the fraud of the
GR. The insurer promises to make good only
and conditions as they may deem convenient. precious metals, whether in the insured.
the loss of the insured.
Provided, they do not contravene any provision course of transportation or
of law and are not opposed to public policy, otherwise; and FIRE INSURANCE
XPNs. The principle is not applicable to life
law, morals, good customs, or public order. d. Instrumentalities of
and accident insurance, where the result is
death, because life is not capable of pecuniary transportation and Fire insurance shall include insurance against
XPNs. Insurance contracts that may be communication, excluding loss by:
estimation.
required by law such as: buildings, aids to navigation and 1. Fire, lightning, windstorm, tornado, or
a. For motor vehicles; transportation, and appurtenant earthquake; and
7. Personal - It is personal between the
b. As a condition to granting a license to facilities for the control of 2. Other allied risks, when such risks are
insurer and insured. Each party has in
conduct business or calling affecting waterways. [IC, Sec. 101 (a)] covered by extension to fire insurance
view the character, credit and conduct
the public safety or welfare; policies or under separate policies. (IC,
of the other.
c. For employees; or 2. Marine protection and indemnity Sec. 169)
Note: Unlike property policies, life insurance
d. Social insurance for members of the insurance against legal liability of the
policies are generally assignable like any chose
GSIS and for employees of the private insured for loss, damage, or expense Alterations in use or condition
in action. (De Leson, 2014)
sector covered by the SSS. incident maintenance, use, repair, or An alteration in the use or condition of a thing
________________________________________
construction of any vessel, craft or insured from that to which it is limited by the
3. Aleatory - The liability of the insurer CLASSES OF INSURANCE CONTRACTS instrumentality in use of ocean or policy;
depends upon some contingent event, ________________________________________ inland waterways, including liability of 1. Entitles an insurer to rescind a contract
the happening of an uncertain future the insured for personal injury, illness of the insurance if such alteration:
event. Thus, it is not a contract of 1. Marine
or death or for loss of or damage to the a. Increases the risks;
chance. In an insurance contract, each 2. Fire
property of another person [IC, Sec. 101 b. Was made without the consent
party takes a risk: 3. Casualty
(b)] of the insurer; and
a. For the insurer - risk of having to 4. Suretyship
c. Was made through th means
pay the indemnity if the 5. Life Insurance
Two kinds of risks within the control of the insured
contingent event happens. 6. Microinsurance
(IC, Sec. 170)
b. For the insured - risk of paying 7. Compulsory motor vehicle liability PERILS OF THE PERILS OF THE
SEA SHIP 2. Does not affect a contract of fire
the premium without receiving insurance
insurance if the alteration does not
anything therefor if the 8. Compulsory Insurance coverage for It covers casualties It covers losses increase the risk. (IC, Sec. 172)
contingent event does not agency-hired workers due to unusual which, in the
happen except protection, which violence or ordinary course of
 CASUALTY INSURANCE 6. Burglary and theft insurance - an covered peril. (Vda. De Gabriel v. CA,
The third party The liability extends
insurance against loss of property by liability is only up to to the amount of G.R. No. 103883, November 14, 1996)
It is an insurance covering loss or liability the depredations of burglars and the extent of the actual and other
arising from an accident or mishap, excluding thieves. insurance policy and damages. SURETYSHIP
certain types of loss which by law or custom 7. Health insurance - an indemnity to that required by law.
are considered as failing exclusively within the persons for expense and loss of time Contract of suretyship
scope of other types of insurance such as fire occasioned by disease. Health and "No action clause” It is an agreement whereby a party called
or marine. (IC, Sec. 176) accident insurance are either covered It is a requirement in a policy of liability the “surety” guarantees the performance by
under life (Sec. 180) or casualty insurance which provides that suit and final another party called the “principal or
Coverage of casualty insurance insurance. (Sec. 174) judgment be first obtained against the obligor” of an obligation or undertaking in
(P3-EMo-BuHO) insured, that only thereafter can the person favor of a third party called the “obligee”.
1. Personal accident insurance - a form 8. Other substantially similar kinds of injured recover on the policy. It expressly
of insurance which undertakes to insurance (Perez, 2006) disallows suing the insurer as co-defendant It is essentially a credit accommodation
indemnify the assured against the (Guingon v. Del Monte, supra). which includes official recognizances,
expense, loss of time, and suffering Two divisions of casualty insurance stipulations, bonds or undertakings issued by
resulting from accidents causing him A "no action" clause must yield to the any company by virtue and under the
physical injury. provisions of the Rules of Court regarding provisions of Act No. 536, as amended by
ACCIDENT INTENTIONAL
multiplicity of suits (Shafer v. RTC Judge, Act No. 2206 (IC, Sec. 177).
2. Public utility insurance - indemnifies The terms Intentional as used supra)
against liability on account of injuries "accident" and in an accident Nature of liability of surety
to the person or property of another. "accidental" have policy excepting
Rules in accident insurance
been taken to intentional injuries
It may extend to automobiles, 1. For death or injury to be covered by the The liability of the surety or sureties shall be:
mean that which inflicted by the
elevators, flywheels, libel, theaters, happens by chance insured or any policy, such should not be the (SLC)
and vessels. or fortuitously, other person, natural or probable result of the 1. Solidary - Joint and several with the
without intention or implies the exercise insured voluntary act, or if obligor and
3. Plate glass insurance - an insurance design, which is of the reasoning something unforeseen occurs in the 2. Limited or fixed - Limited to the
against loss from accidental breaking unexpected, unusual faculties, doing of the act which produces the amount of the bond (It cannot be
of plate-glass windows, doors, or unforeseen. consciousness, and extended by implication).
injury, which may result in death (Dela
volition.
showcases, etc. Cruz v. Capitol Insurance & Surety Co., 3. Contractual - It is determined strictly
supra). by the terms of the contract of
4. Employer's liability and workmen's Liability of the insurer vs. Liability of the suretyship in relation to the principal
insurance - the risk insured against insured contract between the obligor and the
2. Suicide and willful exposure to
is the liability of the assured to make needless peril are in pari matere obligee (IC, Sec. 178).
compensation or pay damages for an INSURER INSURED because they both signify a disregard
accident, injury, or death, occurring to a for one’s life. Voluntary exposure to a Suretyship vs. Property Insurance
servant or other employee, in the The liability is direct Liability is direct and
known danger is generally held to
but the insurer can be held liable
course of his employment. negate the accidental character of
cannot be held with all the parties at SURETYSHIP PROPERTY
solidarily liable with fault. whatever followed from the known INSURANCE
5. Motor vehicle liability insurance - is a the insured and danger (De Leon, 2010).
contract of insurance against passenger other parties at fault. It is an accessory The principal
contract contract itself.
and third-party liability for death or 3. The insured beneficiary has the
Liability is based on Liability is based on
bodily injuries and damage to property burden of proof in demonstrating that There are three There are only two
contract. tort.
arising from motor vehicle accidents. the cause of death is due to the parties; the surety, parties: insurer and
 b. Payment bond - covers the obligee, the surety shall collect only a an insured or beneficiary, under the
obligor/debtor, and insured.
the obligee/creditor payment of laborers and reasonable amount; contract, may exercise any right.
material men.
More of a credit Generally a contract 5. If the non-acceptance of the bond be Note: the minor's father or mother can act on
accommodation with of indemnity
2. Fidelity Bonds - They pay an due to the fault or negligence of the their behalf without needing court permission
surety assuming
employer for loss growing out of a surety, no service fee, stamps, or taxes or giving of a bond, as long as the minor's
primary liability
dishonest act of his employee. For the imposed shall be collected by the interest doesn't exceed P500,000 or a
Surety is entitled to No right of recovery purposes of underwriting, they are surety; and reasonable amount set by the Commissioner.
reimbursement from for the loss the classified as:
the principal and his insurer may sustain a. Industrial bond - required by 6. In the case of a continuing bond (for a
guarantors for the except when the 3. In the absence or in case of the
private employers to cover loss term longer than one year or with no
loss it may suffer insurer is entitled to incapacity of the father or mother, the
under the contract subrogation. through dishonesty of fixed expiration date), the obligor shall
following shall act as guardian without
employees; and pay the subsequent annual premium
A bond may be May be canceled the need of a court order:
b. Public official bond - required as it falls due until the contract is
canceled by or with unilaterally either by ● the grandparent
of public officers for the faithful canceled (IC, Sec. 179) (De Leon, 2010).
the consent of the the insured or by the ● the eldest brother or sister at
performance of their duties and
obligee or by the insurer on ground least eighteen (18) years of age;
commissioner or by provided by law. as a condition of entering upon LIFE INSURANCE
or
the court the duties of their offices.
● any relative who has actual
It is insurance on human lives and insurance
Requires acceptance Does not need custody of the minor insured or
3. Judicial bonds - required in appertaining thereto or connected therewith.
of the obligee before acceptance of any beneficiary
connection with judicial proceedings (IC, Sec. 181)
it becomes valid and third party.
enforceable (Ibid) Note: as long as such person is not otherwise
Every contract or undertaking for the payment disqualified or incapacitated.
A risk-shifting A risk-disturbing Rules of payment of premiums in of annuities including contracts for the
device, the premium device, the premium payment of lump sums under a retirement Kinds of Insurance Policies (GO LITE)
suretyship
paid being in the paid being program where a life insurance company
1. The premium becomes a debt as 1. Group Insurance
nature of a service considered a ratable
soon as the contract of suretyship or manages or acts as a trustee for such - Essentially a single insurance contract
fee. contribution to a
common fund. (De bond is perfected and delivered to the retirement program shall be considered a life that provides coverage for many
Leon, 2010) obligor (IC, Sec. 77); insurance contract for purposes of the individuals. Example: Life or Health
Insurance Code. (IC, Sec. 181) insurance for the employees of one
Types of surety bonds (CoFiJud) 2. The contract of suretyship or bonding employer
1. Contract bonds - These are shall not be valid and binding unless It includes every contract or pledge for the - The coverage terms for group insurance
connected with construction and and until the premium therefor has payment of endowments or annuities. It may are usually stated in a master
supply contracts. It protects the been paid; be made payable on the death of the person, agreement or policy that is issued by
owner against a possible default by or on his surviving a specified period, or the insurer to a representative of the
the contractor or his possible failure 3. Where the obligee has accepted the otherwise contingently on the continuance or group or to the employer. (Domingo,
to pay materials, men, laborers and bond, it shall be valid and enforceable cessation of life. (IC, Sec. 182) 2023)
sub-contractors. There may be two notwithstanding that the premium has
bonds: not been paid (Philippine Pryce Person who may exercise any right under the 2. Ordinary life, general life or old-line
a. Performance bond - covers the Assurance Corp. v. CA, G.R.No. policy (IC, Sec. 182) policy
faithful performance of the 107062, February 21, 1994); 1. In absence of a judicial guardian, the - Insured is required to pay a certain
contract; and father may exercise any right. fixed premium annually or at more
4. If the contract of suretyship or bond 2. In the absence or incapacity of the frequent intervals throughout his entire
is not accepted by, or filed with the father, the mother, of any minor, who is
 life and the beneficiary is entitled to years from the date of its issue or of its on a daily basis, does not exceed 7.5%
occurs. when the loss
receive payment under the policy only last reinstatement; occurs. of the current daily minimum wage
after the death of the insured. (De Leon, rate for nonagricultural workers in
2014) 2. The suicide is committed within a As to the need of legal basis Metro Manila; and
shorter period as provided in the policy; Insurable interest Insurable interest 2. The maximum sum of guaranteed
3. Limited payment – Insured pays or need not have any must have a legal benefits is not more than 1,000 times
premium for a limited period. legal basis. basis. of the current daily minimum wage
● If he dies within the period, his 3. The suicide is committed in the state of rate for nonagricultural workers in
Liability of insurer
beneficiary is paid; insanity regardless of the date of Metro Manila. (IC, Sec. 187)
● If he outlives the period, he does commission. (IC, Sec. 183) The liability of the
not get anything. insurer to make Liability is uncertain No insurance company or mutual benefit
Note: Any stipulation extending the 2-year payment is certain, because the
association shall engage in the business of
period is null and void. the only uncertain happening of the
4. Industrial life – entitles the insured to peril insured against microinsurance unless it possesses all the
element being when
pay premiums weekly, or where is uncertain. requirements as may be prescribed by the
such payment must
premiums are payable monthly or Life Insurance vs. Fire/Marine Insurance be made. Commissioner. (IC, Sec. 188)
often.
LIFE INSURANCE FIRE/MARINE As to termination of contract COMPULSORY MOTOR VEHICLE
5. Term insurance – insured pays INSURANCE LIABILITY INSURANCE
premium only once, and he is insured May be terminated May be canceled by
As to kind of contract
for a specified period. by the insured but either party and is Definitions
● If he dies within the period, his Contract of Contract of cannot be canceled usually for a term of 1. Motor Vehicle
investment indemnity by the insurer and is one year
beneficiaries benefit.
usually a long- term - Any vehicle propelled by any power
● If he outlives the period, no As to transferee/assignee’s interest contract. other than muscular power using the
person benefits from the
public highways, but excepting road
insurance. May be transferred The transferee or
Is it necessary to provide proof of loss rollers, trolleys cars, street sweepers,
or assigned to any assignee must have
person even if he has an insurable interest sprinklers, lawn mowers, bulldozers,
6. Endowment – insured pays premium
no insurable interest. in the thing insured. The beneficiary is The insured is graders, forklifts, amphibian trucks,
for specified period. (Sundiang Sr. & under no obligation required to submit and cranes if not used in public
Aquino, 2014) As to consent of insurer to prove actual proof of his actual highways, vehicles which run only on
● If he outlives the period, the face financial loss as a pecuniary loss as a
The consent of the rails or tracks, and tractors, trailers and
value of the policy is paid to Consent, in the result of the death of condition precedent
insurer is not traction engines of all kinds used
him; absence of waiver by the insured in order to collecting the
essential to the exclusively for agricultural purposes.
● If not, his beneficiaries receive the insurer, is to collect the insurance.
validity of the (Sec. 3[a] of RA 4136)
essential in the insurance.
the benefit. assignment of a life
policy unless assignment of the 2. Passenger
expressly required. policy.
Contract of life annuity - Any fare-paying person being
It is a contract to pay the insured, or a named transported and conveyed in and by a
MICROINSURANCE motor vehicle for transportation of
person or persons, a sum or sums periodically
during life or certain period. (Perez, 2006) passengers for compensation, including
Microinsurance - is a financial product or
persons expressly authorized by law or
When must insurable interest exist service that meets the risk protection needs of
The insurer in Life Insurance contract by the vehicle’s operator or his agents
Need not exist after Must exist not only the poor where:
shall be liable in case of suicide if: to ride without fare. (IC, Sec. 386, [b])
the insurance takes when the insurance 1. The amount of contributions,
1. The suicide is committed after the
effect or when loss takes effect but also premiums, fees or charges, computed
policy has been in force for a period of 2
 3. Third Party - Any person other than a injuries and damage to property arising coverage shall include 3. A certification issued by the
passenger as defined in this section from motor vehicle accidents. passenger liability. Insurance Commissioner to the effect
(Ibid) and shall also EXCLUDE: ● Registration of any vehicle will not be that a cash deposit in the amount
● member of the household, or renewed or made without complying required as limit of indemnity has been
Duties of MVOs or LTOs in contemplation
● member of the family within the with the requirement. made with him by the MVO or LTO.
of the cancellation of the policy
second degree of consanguinity (CMVLI, supra, IC, Sec. 393)
or affinity, Purpose of Motor Vehicle Liability
1. Give to the insurance or surety
● the motor vehicle owner or land Insurance “No fault indemnity clause”
company concerned a written notice
transportation operator, as To give immediate financial assistance to It is a clause where the insurer is required to
of his intention to cancel;
likewise defined herein, or victims of motor vehicle accidents and/or pay a third party injured or killed in an
2. Secure, before the insurance policy or
● His employee in respect of their dependents, especially if they are poor accident without the necessity of proving
surety bond ceases to be effective,
death, bodily injury, or damage regardless of financial capability of motor fault or negligence on the part of the
another similar policy or bond to
to property arising out of and in vehicle owners or operators responsible for the insured.
replace that one canceled;
the course of employment. (Sec. accident sustained. (First Integrated Bonding
3. Without making any replacement,
386, [c], Ibid) Insurance Co., Inc. v. Hernando, G.R. No. Rules under the “no fault indemnity clause”
make a cash deposit in sufficient
L-51221, July 31, 1991) 1. The total indemnity in respect of any
amount with the Insurance
4. Owner or Motor vehicle owner (MVO) one person shall not exceed P15,000
Commissioner and secure a
- Actual legal owner of a motor vehicle, Note: The insurer’s liability accrues for all motor vehicles. (Ins. Memo. Circ.
certification from the Insurance
whose name such vehicle is duly immediately upon the occurrence of the injury No. 4-2006)
Commissioner regarding the deposit
registered with the Land Transportation or event upon which the liability depends.
made for presentation to and filing with
Office. (Sec. 386, [d], Ibid) 2. Proof of loss:
Persons required to maintain a the Land Transportation Office.
a. Police report of accident
compulsory motor vehicle liability (CMVLI, supra) (IC, Sec. 393-394)
5. Land transportation operator (LTO) b. Death certificate and evidence
insurance (CMVLI) policy to operate motor
- The owner or owners of motor vehicles sufficient to establish proper
vehicle/s in public highways Effects of the cancellation of the policy
for transportation of passengers for payee
compensation, including school buses. 1. Motor vehicle owner (MVO) c. Medical report and evidence of
GR: Upon receipt of the notice of such
(Sec. 386, [e], Ibid) 2. Land transportation operator (LTO). medical or hospital
cancellation, the Land Transportation Office
(Sec. 387, Ibid) disbursement. (IC, Sec. 391)
shall order the immediate confiscation of
Motor Vehicle Liability Insurance
Scope of coverage required for compulsory the plates of the motor vehicle concerned.
It is a protection coverage that will answer for 3. Claim may be made against one motor
motor vehicle liability insurance
legal liability for losses and damages for vehicle only. (Sec. 391 [c], Ibid)
XPNs: No confiscation will be ordered if said
bodily injuries or property damage that may
Office receives any of the following:
be sustained by another arising from the use For MVOs For LTOs 4. In case injury of an occupant of a
1. An evidence or proof of a new and
and operation of a motor vehicle by its owner. vehicle, the claim shall lie against the
The coverage must be The coverage must be valid CMVLI cover which may be
(Compulsory Motor Vehicle Liability Insurance, comprehensive against comprehensive against
insurer of the vehicle in which the
either an insurance policy or guaranty
prepared and distributed by the Insurance third party liability for both passenger and occupant is riding, mounting or
in cash or surety bond;
Commission) death or bodily third-party liabilities dismounting from. (Ibid)
injuries. for death or bodily
2. A signed duplicate of an endorsement
Note: injuries. (Ins. Memo. 5. In any other case (not an occupant),
or addendum issued by the insurance
● It is the only compulsory insurance If the private motor Cir. No. 3-81) claim shall lie against the insurer of
vehicle is being used to company concerned showing revival
coverage under the Insurance Code. the directly offending vehicle. (Ibid)
transport passengers or continuance of the CMVLI cover;
● The policy refers to a contract of
for compensation, the or
insurance against passenger and 6. In all cases, the right of the party
third-party liability for death or bodily paying the claim to recover against the
 owner of the vehicle responsible for the Each migrant worker deployed by a ________________________________________ contract in the Philippines, unless it is likewise
accident shall be maintained. (Ibid) recruitment or manning agency shall be authorized to do so by the laws of its domicile.
covered by a compulsory insurance policy VARIABLE CONTRACTS [IC, Sec. 238 (a)]
Note: This no-fault claim does NOT apply to ________________________________________
which shall be secured at no cost to the
property damage. If the total indemnity claim
worker. (Sec. 1, Rule XVI of the Omnibus Rules It shall mean any policy or contract on either a Determining qualifications to issue
exceeds P15,000 and there is controversy in
and Regulations Implementing RA 8042 as group or an individual basis issued by an variable contracts
respect thereto, the finding of fault may be
amended) insurance company providing:
availed of by the insurer only as to the excess. Commissioner shall always consider the
The first P15, 000 shall be paid regardless 1. Benefits or other contractual payments following:
Policy coverage
of who's at fault. (CMVLI, supra) or values thereunder to vary so as to
The insurance policy shall be effective for the 1. The history, financial and general
reflect investment results of:
“Theft Clause” duration of the migrant worker’s employment condition of the company: Provided,
a. any segregated portfolio of
contract and shall cover, at the minimum the ● if it’s a foreign company, it must have
Where a car is unlawfully and wrongfully investments; or
following: deposited with the Commissioner the
taken without the knowledge and consent of b. A designated separate account in
1. Accidental death; securities, in the form of bonds issued
the owner, such taking constitutes “theft” and which amounts received, in
2. Natural death; by the Government of the Philippines
it is the theft clause, not the authorized driver connection with such contracts
3. Permanent total disablement; or its instrumentalities with an actual
clause which should apply. (Perla Compania de shall have been placed and
4. Repatriation cost; market value of Two million pesos (Php
Seguros, Inc. v. CA, supra) accounted for separately and
5. Subsistence allowance; 2,000,000.00). These securities are
apart from other investments
There is theft if the vehicle is taken with intent 6. Money claims; intended to ensure the protection and
and accounts; and/or
to gain without the consent of the 7. Compassionate visit; security of the company's variable
insured-owner. Thus, there is theft even if: 8. Medical evacuation; and contract holders in the Philippines.
2. This contract may also provide benefits
9. Medical repatriation. (Sec. 2, Rule XVI
or values incidental thereto payable in
1. The vehicle is returned; of the Omnibus Rules and Regulations 2. The character, responsibility and fitness
fixed or variable amounts, or both.
Implementing RA 8042 as amended) of the officers and directors of the
2. The vehicle was stolen by the driver of company; and
Insurance Company on variable contracts
the insured (Alpha Insurance and Surety Qualifications to provide for the worker’s
Company vs. Castor, G.R. 198174, insurance coverage 3. The law and regulation under which
GR: No insurance company authorized to
September 2, 2013); the insurance company must: the company is authorized in the state
transact business in the Philippines shall issue,
of domicile to issue such contracts. [IC,
1. Be a reputable private insurance deliver, sell, or use any variable contract in the
3. The vehicle was taken to the owner of a Sec. 238 (c)]
company; Philippine
repair shop for the purpose of repair ________________________________________
2. Be duly registered with the Insurance
and in order to attach accessories.
Commission; XPNs: INSURABLE INTEREST
(Paramount Insurance v. Spouses
3. Be in existence and operational for at ● Unless and until such company shall ________________________________________
Remondeulaz, G.R. No. 173773,
least five (5) years; have satisfied the Commissioner that its
November 28, 2012) (Sundiang Sr. & Interest which a person is deemed to have in
4. Have a net worth of at least five financial and general condition and
Aquino, 2014) the subject matter insured, where he has a
hundred million pesos (Php methods of operations, and the
relation or connection with or concern in it,
500,000,000.00); and issuance and sale of variable contracts
COMPULSORY INSURANCE COVERAGE such that the person will derive pecuniary
5. Have a current year certificate of are not and will not be hazardous to
FOR AGENCY-HIRED WORKERS benefit or advantage from the preservation
authority. the public or to its policy and
of the subject matter insured and will suffer
contract owners.
It is an insurance mechanism made available pecuniary loss or damage from its
by the law to provide insurance protection destruction, termination, or injury by the
Note: No foreign insurance company shall be
for the OFWs. happening of the event insured against.
authorized to issue, deliver, or sell any variable
Mere hope or expectancy is not insurable reduce the latter’s vested rights. (Go v. - This class includes the following:
beneficiary, the latter
Redfern, 72 Phil. 71, 25 April 1941) (SELD)
A mere contingent or expectant interest in must have insurable
a. His Spouse and of his children.
interest over the life
anything, not founded on an actual right to b. Any person on whom he
of the insured. 4. The irrevocably designated beneficiary
the thing, nor upon any valid contract for it, is depends wholly or in part for
may obtain a policy loan to the Education or support, or in
not insurable. (IC, Sec. 16)
As to the need of legal basis extent stated in the schedule of whom he has a pecuniary
Insurable Interest in Life Insurance vs. values attached to the policy. (Gercio v. interest.
Need not have such Must have legal basis
Insurable Interest in Property Sun Life Assurance of Canada, 48 Phl. c. Of any person under a Legal
legal basis. to the expectation of
53, 28 September 1925) obligation to him for the
the benefit.
LIFE PROPERTY payment of money, or respecting
property or services, of which
Change in Beneficiary 5. The insured cannot take the cash
As to extent death or illness might delay or
surrender value assigned or even prevent the performance.
GR: The insured shall have the right to change
GR: Every person Limited to the actual borrow on said policy without the d. Of any person upon whose life
has an unlimited value of the property the beneficiary he designated in the policy.
consent of the beneficiary. any estate or interest vested in
insurable interest in him Depends.
XPN: If the insured expressly waived this right
his own life
in the said policy. IN LIFE/HEALTH Persons prohibited from being designated
XPN: Where life as beneficiaries (1998 BAR)
In the event the insured does not change the Two General Classes of Life Policies
insurance is taken Under Article 739 in relation to Art. 2012 of the
beneficiary during his lifetime, the designation 1. Insurance upon one’s life
out by a creditor on New Civil Code, the following are prohibited
the life of the debtor, shall be deemed Irrevocable - are those taken out by the insured upon
designation of beneficiaries: (CAP)
insurable interest is XPN: Under Sec. 64 of the Family Code, the his own life for the benefit of: (HET)
limited to the a. Himself 1. Those made between persons who were
innocent spouse is allowed to revoke the
amount of debt. b. His Estate, in case it matures guilty of Adultery or concubinage at the
designation of the other spouse as irrevocable time of donation.
When must insurable interest exist only at his death
beneficiary after legal separation.
c. Third person who may be
Note: The guilt of the donor and donee may
Must exist at the Must exist twice. Effect of Irrevocable Designation of a designated as beneficiary be proved by preponderance of evidence in the
time the policy takes Both at the time the Beneficiary: same civil action.
effect and need not policy takes effect
A person who insures his own life can
exist thereafter. (IC, and the time of loss, 1. Insured cannot assign the policy if the
designate any person as his beneficiary, 2. Those made between persons found
Sec. 19) but need not exist in designation of the beneficiary is
whether or not the beneficiary has an guilty of the same criminal offense, in
the period in irrevocable. The irrevocable consideration thereof.
between. (IC, Sec. 19) insurable interest in the life of the insured
beneficiary has a vested right. (2005
subject to the limits under Article 2012 in
As to beneficiary’s interest BAR; Sundiang Sr. & Aquino, 2014) 3. Those made to a public officer or his
relation to Article 739 of the New Civil Code. wife, descendants or ascendants by
GR: The beneficiary The beneficiary must (De Leon, 2010) reason of his office.
2. The beneficiary designated in a life
need not have have insurable
insurance contract cannot be changed
insurable interest interest over the 2. Insurance upon life of another The designation of the above-enumerated
over the life of the thing insured. without the consent of the persons is void but the policy is binding. The
- are those taken out by the insured upon
insured if the beneficiary. (Gercio v. Sun Life estate will get the proceeds. (Sundiang Sr. &
the life of another.
insured himself Insurable interest is Assurance of Canada, 48 Phil. 53, 28 - Where a person names himself Aquino, 2009)
secured the policy. an indispensable September 1925) beneficiary in a policy he takes on the
requirement. life of another, he must have Beneficiary willfully brought about the
insurable interest in the life of the death of the insured (2008 BAR)
XPN: However, if the 3. A new beneficiary cannot be added
life insurance was to the irrevocably designated latter. GR: The interest of a beneficiary in a life
obtained by the beneficiary for this would in effect insurance policy shall be forfeited when the
beneficiary is the principal, accomplice, or
accessory in willfully bringing about the NOTE: Existence of insurable interest is a right of the insured to indemnity for 3. Risk or peril insured against is the same
death of the insured. matter of public policy. Hence, the principle of loss. (IC, Sec. 21) 4. Interest insured is the same
In such a case, the share forfeited shall pass on estoppel cannot be invoked. (Sundiang Sr. & 5. Person insured is the same
NOTE: After the occurrence of the peril
to the other beneficiaries, unless otherwise Aquino, 2014)
insured against, the insured acquired a vested NOTE: There is no double insurance even
disqualified. In the absence of other
beneficiaries, the proceeds shall be paid in right over the proceeds of the policy. though two policies were both issued over
A common carrier or depository’s extent of
accordance with the policy contract. If the 4. A change of interest in one or more the same subject matter and both covered
insurable interest in a thing held by him
policy contract is silent, the proceeds shall be distinct things, separately insured by the same peril insured against if the two
paid to the estate of the insured. (IC, Sec. 12) one policy does NOT avoid the policies were issued to two different entities
A carrier or depositary has an insurable
insurance as to the others. (IC, Sec. 22) which have separate and distinct insurable
interest in a thing held by him as such, to the
XPNs: (IUD) interest over the said subject matter. (Malayan
extent of his liability but not to exceed the
5. A change of interest by will or Insurance Co. vs. Philippine First Insurance Co.,
1. Insanity of the beneficiary at the time value thereof, because the loss of the thing by
succession, on the death of the insured, G.R. No. 184300, July 11, 2012)
he killed the insured. the carrier or depositary may cause liability
does NOT avoid an insurance; and his
2. The insured’s death was against him to the extent of its value. (IC,
unintentionally caused. interest in the insurance passes to the Double insurance is not prohibited by law
Sec. 15)
3. The beneficiary acted in self-defense. person taking his interest in the It is not contrary to law and hence, in case of
insured. (IC, Sec. 23) double insurance, the insurers may still be
Change of interest in any part of a thing
made liable up to the extent of the value of the
IN PROPERTY insured
6. A transfer of interest by one of several thing insured but not to exceed the amount of
Every interest in property, whether real or partners, joint owners, or owners in the policies issued.
“Change of interest” contemplated by law is
personal, or any relation thereto, or liability in common, who are jointly insured, to
an absolute transfer of the insured’s entire A provision in the policy that prohibits double
respect thereof, of such nature that the others does NOT avoid an
interest in the property insured to one not insurance is valid. However, in the absence of
contemplated peril might directly damnify the insurance even though it has been
previously interested or insured. (Perez, 2006) such prohibition, double insurance is allowed.
insured, is insurable interest. (IC, Sec. 13) agreed that the insurance shall cease
(Perez, 2006)
GR: A change of interest in any part of a thing upon an alienation of the insured. (IC,
Insurable Interest in Property: (ExInEx)
insured unaccompanied by a corresponding Sec. 24) Nature of the liability of the several
1. An existing interest – The existing change in interest in the insurance suspends insurers in double insurance (2005 BAR)
interest in the property may be legal or the insurance to an equivalent extent, until the 7. When the policy is so framed that it
equitable title. In double insurance, the insurers are
interest in the thing and the interest in the will insure to the benefit of
considered as co-insurers. Each one is bound
insurance are vested in the same person. (IC, whomsoever, during the continuance of
Examples of insurable interest arising to contribute ratably to the loss in proportion
Sec. 20; Sec.58) the risk, may become the owner of the
from legal title: to the amount for which he is liable under his
interest insured. (IC, Sec. 57)
XPNs: (PLADS-POF) contract. This is known as the “principle of
a. Trustee, as in the case of the
contribution” or “contribution clause”. [IC,
seller of property not yet 1. When there is a prohibition against DOUBLE INSURANCE AND OVER
INSURANCE Sec. 96(e)]
delivered; alienation or change of interest without
b. Mortgagor of the property the consent of the insurer in which case Over insurance
Double insurance exists where the same
mortgaged; or the policy is not merely suspended but person is insured by several insurers There is over insurance whenever the insured
c. Lessor of the property leased. avoided. separately, in respect to the same subject and obtains a policy in an amount exceeding the
(De Leon, supra) 2. In life, accident, and health insurance. interest. (IC, Sec. 95) value of his insurable interest. (Perez, 2006)
2. An inchoate interest founded on an (IC, Sec. 20)
existing interest. 3. A change of interest in a thing insured, Requisites of double insurance (STRIP)
3. An expectancy coupled with an existing after the occurrence of an injury which 1. Subject matter is the same
interest in that out of which the results in a loss does NOT affect the 2. Two or more insurers insuring
expectancy arises.
separately
Double Insurance vs. Over insurance Waiver of violation Extent of insurable interest of mortgagor This kind of policy covers only such interest as
and mortgagee (1999 BAR) the mortgagee has at the issuance of the
When the insurer, with the knowledge of the
DOUBLE OVER INSURANCE policy.
INSURANCE existence of other insurances, which the 1. Mortgagor – The mortgagor of property,
insurer deemed a violation of the contract, as owner, has an insurable interest to The mortgagee may be made a beneficial
As to the value of insurable interest preferred to continue the policy, its action the extent of its value even though the payee through any of the following:
There may be no When the amount of amounted to a waiver of annulment of the mortgage debt equals such value.
1. He may become the assignee of the
over insurance as the insurance is contract. (Perez, 2006 citing Gonzales Lao v.
policy with the consent of the insurer;
when the sum total beyond the value Yek Tong Lin Fire & Marine Ins. Co., G.R. No. 2. Mortgagee – The mortgagee as such has
2. He may be the pledgee without such
of the amounts of of the insured’s L-33131, December 13, 1930) an insurable interest in the mortgaged
the policies issued insurable interest. consent of the insurer;
property to the extent of the debt
does not exceed MULTIPLE OR SEVERAL INTERESTS ON 3. A rider making the policy payable to
secured; such interest continues until
the insurable SAME PROPERTY the mortgagee “as his interest may
the mortgage debt is extinguished.
interest of the appear” may be attached; or
Instances where more than one insurable NOTE: In case of an insurance taken by the
insured. 4. A “standard mortgage clause”
interest may exist in the same property. mortgagee alone and for his benefit, the
As to number of insurer/s containing a collateral independent
mortgagee, after recovery from the insurer, is
1. Trust - both trust or and trustee have contract between the mortgagee and
There are two or There may be only not allowed to retain his claim against the
insurable interest over the property in the insurer may be attached.
more insurers one insurer, with mortgagor but it passes by subrogation to the
trust.
insuring the same whom the insured insurer to the extent of the insurance money Effects if the insurance is procured by
2. Corporation - both the corporation and
subject matter. takes insurance paid. (De Leon, 2010) mortgagor for benefit of mortgagee, or
its stockholders have insurable interest
beyond the value of policy assigned to mortgagee
his insurable over the assets.
interest. 3. Partnership - both the firm and “Standard or union mortgage clause” 1. The contract is deemed to be upon the
partners have insurable interest over its interest of the mortgagor; hence he
assets. It is a clause that states that the acts of the
does not cease to be party to the
4. Assignment - both the assignor and mortgagor do not affect the mortgagee.
Additional or other insurance clause (2008 contract.
assignee have insurable interest over The purpose of the clause is to make a
BAR) separate and distinct contract of insurance on
the property assigned. 2. Any act of the mortgagor prior to the
A clause in the policy that provides that the 5. Lease - the lessor, lessee and the interest of the mortgagee. (De Leon, 2010)
loss, which would otherwise avoid the
policy shall be void if the insured procures sub-lessees have insurable interest over insurance affects the mortgagee even if
additional insurance without the consent the property in lease. “Open or loss-payable mortgage clause”
the property is in the hands of the
of the insurer. (Pioneer Insurance and Surety 6. Mortgage - both the mortgagor and It is a clause which provides for the payment
mortgagee.
Corp vs. Yap, G.R. No. L-36232, December 19, mortgagee have insurable interest over of loss, if any, to the mortgagee as his interest
1974) the property mortgaged. may appear and under it, the acts of the
3. Any act which under the contract of
mortgagor affect the mortgagee. (De Leon,
The insurer may insert an “other insurance Insurable interest of mortgagor and insurance is to be performed by the
2010)
clause” to prevent the danger that the insured mortgagee in case of a mortgaged property mortgagor may be performed by the
will over insure his property and thus avert the are NOT the same (1999, 2010 BAR) In a policy obtained by the mortgagor with mortgagee with the same effect.
possibility of perpetration of fraud. It is lawful loss payable clause in favor of the mortgagee
Each has an insurable interest in the property as his interest may appear, the mortgagee is 4. In case of loss, the mortgagee is entitled
and specifically allowed under Sec. 75 of the
mortgaged and this interest is separate and only a beneficiary under the contract, and to the proceeds to the extent of his
Insurance Code which provides that “a policy
distinct from the other. Therefore, insurance recognized as such by the insurer but not credit at the time of loss and.
may declare that a violation or a specified
taken by one in his name only and in his favor made a party to the contract itself.
provision thereof shall avoid it, otherwise the
alone does not insure to the benefit of the 5. The debt is extinguished upon recovery
breach of an immaterial provision does not
other. The same is not open to objection that by the mortgagee to the extent of his
avoid it.”
there is double insurance.
 credit. (Sundiang Sr. & Aquino, 2014, ________________________________________ Types of policy of insurance (OVR) mentioned and written on the blank spaces
citing IC, Sec. 8) provided in the policy. It should be
PERFECTION OF CONTRACT OF 1. Open – one in which the value of the
countersigned by the insured or owner unless
NOTE: The rule on subrogation by the insurer INSURANCE thing insured is not agreed upon, and
he was the one who applied for the same. (IC,
to the right of the mortgagee does not apply in ________________________________________ the amount of the insurance merely
Sec. 50)
this case. Policy of insurance represents the insurer’s maximum
liability. The value of such thing Cover notes
Assignment of policy to mortgagee is not a It is the written document embodying the insured shall be ascertained at the time
payment terms and stipulations of the contract of Persons who wish to be insured may get
of the loss. (IC, Sec. 60)
insurance between the insured and insurer. protection before the perfection of the
The assignment is merely to afford the
insurance contract by securing a cover note.
mortgagee a greater security for the settlement 2. Valued – is one which expresses on its
The policy is not necessary for the The cover note issued by the insurer shall be
of the mortgagor’s obligation and should not face an agreement that the thing
perfection of the contract. (Sundiang Sr. & deemed an insurance contract as
be construed as payment in just the same way insured shall be valued at a specific
Aquino, 2014) contemplated under Section 1(1) of the
that delivery of negotiable instruments does sum. (IC, Sec. 61)
Insurance Code subject to the following rules:
not constitute payment until the proceeds are Form of an insurance contract
realized or collected. (Perez, 2006) 3. Running – one which contemplates 1. The cover note shall be issued or
1. The policy shall be in printed form
successive insurances, and which renewed only upon prior approval of
NOTE: The exception of this rule is the which may contain blank spaces to be
provides that the object of the policy the Insurance Commission;
“Mortgage Redemption Insurance.” filled in.
may be from time to time defined, 2. The cover note shall be valid and
especially as to the subjects of binding for not more than sixty (60)
2. Any rider, clause, warranty or
insurance, by additional statements or days from the date of its issuance;
Effects of “mortgage redemption” endorsement purporting to be part of
indorsements. (IC, Sec. 62) 3. No separate premium (separate from
insurance procured by the mortgagor the contract of insurance and which is
the policy or main contract) is required
pasted or attached to said policy is not Basic contents of a policy (3PAI2R)
A “mortgage redemption insurance” is for the cover note;
binding on the insured, unless the
simply a kind of life insurance procured by the 1. Parties 4. The cover note may be canceled by
descriptive title or name of the rider,
mortgagor, with the mortgagee as beneficiary, 2. Period during which the insurance is to either party upon prior notice to the
clause, warranty or endorsement is also
up to the extent of the mortgage indebtedness. continue other of at least seven (7) days;
mentioned and written on the blank
Its rationale is to give protection to both the 3. Property or life insured 5. The policy should be issued within sixty
spaces provided in the policy.’
mortgagee and the mortgagor. 4. Amount of insurance, except in open or. (60) days after the issuance of the cover
running policies note;
In case the mortgagor-insured dies, the 3. Unless applied for by the insured or
5. Interest of the insured in the property if 6. The sixty (60)-day period may be
proceeds of such insurance will be applied to owner, any rider, clause, warranty or
he is not the absolute owner extended upon written approval of the
the payment of the mortgage debt to the endorsement issued after the original
6. Risk insured against Insurance Commission; and
mortgagee, thereby relieving the heirs of the policy shall be countersigned by the
7. Rate of premium (IC, Sec. 51) 7. The written approval of the Insurance
mortgagor of the burden of paying the debt. insured or owner.
Commission is dispensed with upon the
(Great Pacific Assur. Corp. v. CA, et. al., G.R. Rider
NOTE: Notwithstanding the foregoing, the certification of the president,
No. 113899, October 13, 1999) policy may be in electronic form subject to the vice-president or general manager of
An attachment to an insurance policy that
pertinent provisions of Republic Act No. 8792, modifies the conditions of the policy by the insurer that the risk involved, the
otherwise known as the ‘Electronic expanding or restricting its benefits or values of such risks and premium
Commerce Act’ and to such rules and excluding certain conditions from the therefor, have not as yet been
regulations as may be prescribed by the coverage. (Black’s Law Dictionary) determined or established and the
Commissioner. (IC, Sec. 50) extension or renewal is not contrary to
Riders are not binding on the insured unless
or is not for the purpose of violating the
the descriptive title or name thereof is
Insurance Code or any rule.
OFFER AND ACCEPTANCE / CONSENSUAL 2. If he pays the premium with his PREMIUM PAYMENT Payment of the premium to the agent of the
application, his application will be insurance company is binding on it.
Perfection of an insurance contract Premium
considered an offer. (De Leon, 2010)
NOTE: An insurance company which delivers
The contract of insurance is perfected when It is an agreed price for assuming and
a policy to an insurance broker, is deemed to
the assent or consent is manifested by the DELAY IN ISSUANCE OF POLICY carrying the risk – that is, the consideration
have authorized the latter to receive the
meeting of the offer and the acceptance upon paid to an insurer for undertaking to
Delivery of policy payment of the premium. (IC, Sec. 306)
the thing and the cause which are to indemnify the insured against a specified peril.
constitute the contract. Mere offer or proposal Delivery is not necessary in the formation of (De Leon, 2010) “Cash and carry” rule (2003 BAR)
is not contemplated. (De Lim v. Sun Life the contract of insurance since the contract of
The burden is on an insured to keep a policy in GR: No policy or contract of insurance issued
Assurance Co., G.R. No. L-15774, November 29, insurance is consensual.
force by the payment of premiums, rather than by an insurance company is valid and binding
1920)
The mere delivery of an insurance policy to on the insurer to exert every effort to prevent unless and until the premium thereof has been
Cognition Theory someone does not give rise to the formation of the insured from allowing a policy to elapse paid. Any agreement to the contrary is void.
a contract in the absence of proof that he had through a failure to make premium payments.
Mere submission of the application without XPN: (ICE GAP)
agreed to be insured. The continuance of the insurer's obligation is
the corresponding approval of the policy does
conditional upon the payment of premiums, A policy is valid and binding even when
not result in the perfection of the contract of The contract may be completed prior to
so that no recovery can be had upon a lapsed there is non-payment of premium:
insurance. delivery of the policy or even without the
policy, the contractual relation between the
delivery of the policy depending upon the 1. When there is an agreement allowing
Insurance contracts through correspondence parties having ceased. (Philippine Phoenix
intention of the parties. The policy may the insured to pay the premium in
follow the “cognition theory” wherein an Surety & Insurance Company vs.Woodworks,
contain a provision that states that the installments and partial payment has
acceptance made by letter shall not bind the Inc. G.R. No. L-25317 August 6, 1979)
insurance is not effective until the delivery of been made at the time of loss. (Makati
person making the offer except from the time
the policy. (De Leon, 2010) Premium vs. Assessment Tuscany Condominium Corp. v. CA, G.R.
it came to his knowledge. (Enriquez v. Sun Life
No. 95546, Nov. 6, 1992)
Assurance Co., GR No. L-15895, Nov. 29, 1920) Two types of delivery (ACma)
PREMIUM ASSESSMENT
Offer in property and liability insurance 1. Actual – delivery to the person of the 2. When there is an agreement to grant
As to losses
insured. the insured credit extension for the
It is the insured who makes an offer to the
2. Constructive Levied and paid to Collected to meet payment of the premium and loss
insurer, who accepts the offer, rejects it, or meet. anticipated actual losses.
a. By mail –If policy was mailed occurs before the expiration of the
makes a counter-offer. The offer is usually losses.
already and premium was paid credit term. (2007 BAR; NCC, Art. 1306;
accepted by an insurance agent on behalf of
and nothing is left to be done by As to debt UCPB General Insurance v. Masagana
the insurer. (De Leon, 2010)
the insured, the policy is Telemart, G.R. No. 137172, Apr. 4, 2001)
considered constructively Premium is not a Assessment properly
Offer in life and health insurance
debt. levied is a debt,
delivered if insured died before 3. When estoppel bars the insurer to
It depends upon whether the insured pays the unless otherwise
receiving the policy. expressly agreed. invoke non- recovery on the policy.
premium at the time he applies for insurance.
b. By agent –If delivered to the
1. If he does not pay the premium, his agent of the insurer, whose duty Acceptance of Premium 4. In case of life or industrial life policy
application is considered an invitation is ministerial, or delivered to the whenever the grace period provision
Acceptance of premium within the stipulated
to the insurer to make an offer, which agent of the insured, the policy applies, or whenever under the broker
period for payment thereof, including the
he must then accept before the contract is considered constructively and agency agreements with duly
agreed grace period, merely assures
goes into effect. delivered. (De Leon, 2010) licensed intermediaries, a ninety
continued effectivity of the insurance
(90)-day credit extension is given. No
policy in accordance with its terms.
credit extension to a duly licensed
intermediary should exceed ninety (90)
 days from date of issuance of the policy. Non-payment of premiums by reason of Payments in addition to regular premium period of 30 days to pay subsequent
(IC, Sec. 77) the circumstances or conduct of the installments.
An insurer may contract and accept payments,
insurer
in addition to regular premium, for the
5. When there is acknowledgment in a 5. Extended insurance – After paying at
GR: Non-payment of premiums does not purpose paying future premiums on the policy
policy of a receipt of premium, which least three full yearly payments,[IC,
merely suspend but put an end to an or increase the benefits thereof. (IC, Sec. 84)
the law declares to be conclusive Sec.233 (f)] the insured has the right to
insurance contract since the time of the
evidence of payment, even if there is NON-DEFAULT OPTIONS IN LIFE keep the policy in effect for a period
payment is peculiarly of the essence of the
stipulation therein that it shall not be INSURANCE equal to or more than the net value of
contract. (De Leon, 2010)
binding until the premium is actually the insurance purchased with a single
paid. This is without prejudice however XPN: (IWW) Devices used to prevent the forfeiture of a premium upon default.
to right of insurer to collect life insurance after the payment of the first
1. The insurer has become insolvent and premium;
corresponding premium. (IC, Sec. 77) 6. Reinstatement - The policyholder has
has suspended business, or has refused
the right to reinstate the contract
without justification a valid tender of 1. Cash surrender value – The amount the
6. When the public interest so requires, as within 3 years of defaulting on
premiums. insurer agrees to pay to the
determined by the Insurance premium payments, unless the cash
2. Failure to pay was due to the wrongful policyholder if he surrenders the policy
Commissioner. surrender value is paid. Once the
conduct of the insurer. and discharges his claim against it. extension term has elapsed, the
Non-payment of premiums 3. The insurer has waived his right to
corporation will accept adequate
demand payment NOTE: If the policyholder fails to pay a
Non-payment of the premium will not entitle documentation of insurability and
the insured to recover the premium from Fortuitous events will not prevent forfeiture premium after three full annual payment. Please pay any outstanding
the insurer. The continuance of the insurer’s of the policy when the premium remains premiums have been paid, he or she is premiums or debts owed to the firm
obligation is conditioned upon the payment of unpaid. Hence, non-payment of premium by entitled to the CSV. under this insurance.
the premium, so that no recovery can be had reason of a fortuitous event is not an excuse.
upon a lapsed policy, the contractual relation 2. Paid up Insurance – The insured has REINSTATEMENT OF LAPSED POLICY OF
Non-payment of premiums occasioned by war the right, upon default, after paying at LIFE INSURANCE
between the parties having ceased. If the peril
causes complete abrogation of the insurance. least three yearly payments, to have the
insured against had occurred, the insurer Purpose of the reinstatement provision
Hence, war does not excuse non-payment. policy remain in force from the date of
would have had a valid defense against
(Constantino vs. Asia Life Insurance Company, default for the remainder of the The section clarifies the procedures for
recovery under the policy.
G.R. No. L-1669 August 31, 1950) insurance period without further regaining a policy's premium-paying status
Non-payment of the first premium prevents premium payment. It reduces the once it has lapsed.
Instances when payment of premium
the contract from becoming binding original sum of insurance, but for the
becomes a debt or obligation The statute allows policy owners to restore
notwithstanding the acceptance of the same duration as originally specified.
application or the issuance of the policy, 1. In fire, casualty and marine insurance, their policies within three years of defaulting
unless waived. But nonpayment of the balance the premium payable becomes a debt as on premium payments, subject to specific
3. Automatic Loan Clause - states that if a
of the premium due does not produce the soon as the risk attaches. infractions. Consider using a longer time that
premium is not paid on time, it will be
cancellation of the contract. 2. In life insurance, the premium becomes benefits the insured. The insured does not
deducted from the policy's loan value
a debt only when, in the case of the first have an absolute right to reinstatement. The
With respect to subsequent premiums, non- until it is used up. If the insured pays
premium, the contract has become insurer has the discretion to deny
payment does not affect the validity of the the premiums from other sources, the
binding, and in the case of subsequent reinstatement if they are not satisfied with the
contracts unless, by express stipulation, it is insurance remains in full validity and
premiums, when the insurer has insured's insurability and have not paid all
provided that the policy shall in that event be effect.
continued the insurance after maturity overdue premiums and other debts to the
suspended or shall lapse. (De Leon, 2010) insurer.
of the premium, in consideration of the 4. Grace period – After paying the initial
insured’s express or implied promise to premium, the insured has a grace
pay. (De Leon, 2010)
 REFUND OF PREMIUMS the total sum covered across all policies Instances wherein a contract of insurance CONCEALMENT
exceeds the insurable value of the risk. may be canceled by the insurer
Instances when the insured is entitled to Concealment is a neglect to communicate
the event of over-insurance by
recover premium already paid or a portion 1. Nonpayment of premium that which a party knows and ought to
c. Indouble insurance, the insurer is not
thereof. 2. Conviction of a crime arising out of acts communicate.
accountable for the whole amount of
increasing the hazard insured against
1. Whole insurance taken, as his obligation is According to Section 27 of the Insurance Code,
3. A determination by the Commissioner
restricted to the property insured. As a "a concealment entitles the injured party to
a. When no portion of the insured item is that the continuation of the policy
result, the insurer is not entitled to a rescind a contract of insurance." Additionally,
exposed to any of the risks covered. would violate or would place the
portion of the premium equal to the Section 168 of the Insurance Code allows the
insurer in violation of the Insurance
insurance excess above the insured's insurer to cancel the contract if the insured
b. When the contract is voidable due to Code
insurable interest. item's use or condition changes.
fraud or misrepresentation by the 4. Physical changes in the property
● In the event of several insurers
insurer or their agent. insured which result in the property Requisites:
over-insuring, the insured is
becoming uninsurable
entitled to a ratable return of the 1. A party knows a fact which he neglects
c. Insurance may be voidable if the 5. Discovery of fraud or material
premium proportionate to the to communicate or disclose to the other
insured was unaware of certain misrepresentation
amount by which the aggregate party;
circumstances. 6. Discovery of other insurance coverage
total covered in all policies 2. Such party concealing is duty bound to
that makes the total insurance in excess
exceeds the insurable value of disclose such fact to the other;
d. When the insurer did not incur any of the value of the property insured
the object insured. 3. Such party concealing makes no
obligation under the policy due to the 7. Discovery of willful or omissions or
warranty as to the fact concealed;
insured's default, except for real fraud. When the insured is not entitled to return reckless acts increasing the hazard
4. The other party has no means of
of premiums paid insured against.
ascertaining the fact concealed; and
e. Rescission is awarded when an insurer
1. In life insurance policies The insurer can only terminate a non-life 5. The fact must be material.
breaches their contract.
2. If the contract is illegal and the parties insurance policy with prior notice to the
NOTE: If a contract is voidable, the insured are in pari delicto. insured. Any cancellation notice must be
Test of materiality
may be entitled to a premium refund if it is 3. If the policy is annulled, rescinded or if based on one or more of the aforementioned
The likelihood of a party generating an
later canceled under the New Civil Code. a claim is denied by reason of fraud incidents that occurred after the policy's
assessment of the drawbacks of a proposed
4. If the peril insured against has existed, effective date.
If a policy is canceled, revoked, or a claim is contract or making inquiries, rather than the
and the insurer has been liable for any
refused due to fraud, the insured cannot get a Notice of cancellation of the contract occurrence itself, determines the
period, the peril being entire and
premium refund. communication's validity.
indivisible Cancellation notices must be in writing, sent
2. Pro rata or delivered to the named insured at the
________________________________________ NOTE: If important information is withheld,
address shown in the policy, or to a broker
a. When an insurance policy is for a the damaged party has the right to withdraw,
RESCISSION OF INSURANCE CONTRACTS authorized by the policy owner to receive the
specific time period and the insured regardless of intent.
________________________________________ notice on their behalf. The notice must state:
surrenders it before it expires, except:
● Policy is not set for a certain Instances wherein a contract of insurance 1. Which grounds under Section 64 are Facts not conveyed to the insurer raises
time period. may be rescinded relied on; and presumption that the failure of the insured to
● The short-term rate has been 2. Upon written request, the insurer will communicate must have been intentional
1. Concealment
decided upon; or provide the reasons for cancellation. rather than inadvertent. Good faith is not a
2. Misrepresentation/ omission
● in a life insurance policy. defense because of the Uberrimae Fidei
3. Breach of warranties
b. When there is too much insurance. Doctrine.
Premiums will be reimbursed
proportionally to the amount by which
Concealment in marine insurance XPN: In answer to inquiries of the other. knowledge of the fact concealed on the Instances whereby concealment made by
In maritime insurance, concealment rules are part of the party charged with an agent procuring the insurance binds
Note: That neither side is obligated to provide
stronger as the insurer relies heavily on the concealment. the principal
their own opinions, since they would not
insured to transmit information. In addition to 1. Where it was the duty of the agent to
contribute to the application's evaluation.
important facts, each party must disclose all 3. Good faith is not a defense in acquire and communicate information
relevant information, including third-party Matters that must be disclosed even in the concealment. Concealment, whether of the facts in question.
beliefs and expectations regarding a material absence of inquiry intentional or unintentional, entitles
fact. Concealing a risk in a maritime insurance the injured party to rescind the contract 2. Where it was possible for the agent, in
1. Those material to the contract
contract, as outlined in Section 112 of the of insurance. the exercise of reasonable diligence to
2. Those which the other has no means of
Insurance Code, does not invalidate the whole have made such communication before
ascertaining
contract. Instead, it exempts the insurer from 4. The matter concealed need not be the the making of the insurance contract.
3. Those as to which the party with the
any losses caused by the disguised risk. cause of loss.
duty to communicate makes no Note: If the insured fails to disclose
warranty information to their agent, or if the agency is
Test in ascertaining the existence of 5. To be guilty of concealment, a party
at fault, the policy may be invalid, even if the
concealment Note: The insurer's decision to approve a life must have knowledge of the fact
insured is acting in good faith.
If an applicant is aware of factors that may insurance policy is heavily influenced by the concealed at the time of the
affect the insurer's decision, they must report insured's health status. The insured's failure to effectiveness of the policy. MISREPRESENTATION/OMISSIONS
them in good faith, even if not asked. disclose a sickness to the insurer does not
Representation
always result in death, as long as the insurer
In order for concealment to produce the
Matters that need not be disclosed was misled in estimating the risks of the A statement made by the insured to the
effect of avoiding the policy, it should take
GR: The parties are not bound to proposed policy or conducting inquiries. insurance company, either oral or written, that
place at the time the contract is entered
communicate information of the following affects the risk and encourages the insurer to
into
matters: Evidence of insurability - It encompasses take it on.
more than just good health, including the To avoid the policy, concealment should occur
1. Those which, in the exercise of ordinary Section 37 requires that representations be
insured's work, habits, financial status, and during the contract signing process rather
care, the other ought to know and of made, changed, or withdrawn prior to policy
risk selection criteria. than thereafter. The responsibility of
which, the former has no reason to release. It can be changed or removed before
disclosure terminates with the contract's
suppose him ignorant; the insurance starts, but not after.
Right to information of material facts may fulfillment. The waiver of a medical
2. Those of which the other waives
be waived examination in a non-medical insurance Characteristics of representation
communication;
contract highlights the importance of
3. Those which the other knows; 1. Expressly by the terms of the contract 1. Not a part of the contract but merely a
providing information about the applicant's
4. Those which prove or tend to prove the 2. Impliedly the failure to make an inquiry collateral inducement to it
health history and diseases, which the insurer
existence of a risk excluded by a as to such facts, where they are 2. Oral or written
considers when determining whether to issue
warranty, and which are not otherwise distinctly implied in other facts from 3. Must be presumed to refer to the date
the policy. Failure to share information
material; which information is communicated. the contract goes into effect
received after policy implementation will not
5. Those which relate to a risk excepted 4. Altered or withdrawn before the
Rules on concealment result in contract cancellation.
from the policy and which are not insurance is effected but not afterwards
otherwise material; and 1. If there is concealment under Section Note: This rule states that if information is 5. Made before or at the time of issuing
6. The nature or amount of the interest of 27, the remedy of the insurer is withheld after a contract is signed, it is no the policy and not after.
one insured, except if he is not the rescission since concealment vitiates longer relevant and will not affect the other
owner of the property insured. the contract of insurance. party's decision to enter the contract.

2. The party claiming the existence of

concealment must prove that there was
Similarities of concealment and An erroneous opinion or belief will not Effects of misrepresentation regardless of any mistake, fraud, concealment
representation avoid the insurance policy or misrepresentation of the insured or his
1. The insurer can choose to cancel the
agent.
1. Both deal with the same subject matter Incorrect information in opinion, belief, or insurance contract, but the policy
and occur prior to the signing of the knowledge, or unfulfilled intentions, do not remains valid. The aggrieved party has The purpose of the law is to give protection
contract. invalidate insurance contracts unless the right to retract whenever the to the insured or his beneficiary by limiting
2. Concealment or representation prior to fraudulent. representation becomes incorrect. the rescinding of the contract of insurance on
loss or death results in the same 2. When an insurer accepts a premium the ground of fraudulent concealment or
To escape responsibility, the insurer must
remedy: rescission or cancellation. with knowledge of the reason for misrepresentation to a period of only two (2)
demonstrate both the materiality of the
3. The standard for materiality is the rescission, they forgo the right to years from the issuance of the policy or its last
insured's view and their purpose to deceive.
same. rescind. reinstatement. (Manila Bankers Life Insurance
4. The laws of concealment and Misrepresentation Corporation v. Aban, G.R. No. 175666, July 29,
Effect of collusion between the insurer’s
representation apply equally to both life 2013)
This arises when facts do not match the agent and the insured
and non-life insurance.
assumptions or requirements. It allows insurers to investigate whether a
5. The aggrieved party has the right to Even if the agent appears to be working within
Misrepresentation is an affirmative defense. To policy was obtained through fraud,
withdraw an insurance contract based their power, their actions undermine the
avoid culpability, insurers must provide concealment, or misrepresentation. However,
on concealment or misleading policy. The agent has ceased to represent his
acceptable and compelling evidence to prove it also warns scheming individuals that their
representation, whether deliberate or principal. As he represents himself, the insurer
their defense. attempts at insurance fraud will be quickly
otherwise. is not obligated to honor the insurance.
6. Since the insurance arrangement is discovered, discouraging them from engaging
Note: In cases where the insured lacks medical
Concealment vs. Misrepresentation in such illegal activity.
deemed to be one of greatest good faith knowledge to discern between "peptic ulcer"
on the part of both parties to the and "tumor," the deceased's declaration that Note: The two-year time can be reduced, but
CONCEALMENT MISREPRESENTATION
agreement, the laws on concealment the tumor was "associated with ulcer of the not extended by specification.
and representation apply equally to the stomach" should be taken in good faith.
insurer. Fraudulent The insured The insured intentionally
Defenses that are not barred by
withholds essential makes false
Kinds of representation incontestability clause
In order to terminate an insurance contract, details from the representations to
the insurer must show the insured's purpose. insurer. persuade the insurer to The following defenses are not barred by the
1. Oral or written sign the insurance
Insurers must show their affirmative defense incontestability clause:
2. Affirmative - Any claim regarding the contract.
of misrepresentation.
presence or non-existence of a fact 1. That the person taking the insurance
when the contract commences. Requisites of misrepresentation (UIM) lacked insurable interest as required by
3. Promissory - Any promises made after Application of concealment and
law;
the contract is signed, or statements 1. The insured stated a fact which is misrepresentation in case of loss or death
2. That the cause of the death of the
about what will happen throughout the untrue;
GR: If the concealment or misrepresentation is insured is an excepted risk;
insurance period. 2. Such fact was stated with knowledge
discovered before loss or death, the insurer 3. That the premiums have not been paid
that it is untrue and with intent to
Representation as to a future undertaking can cancel the policy. If the discovery is after 4. That the conditions of the policy
deceive or which he states positively as
loss or death, the insurer can refuse to pay. relating to military or naval service have
true without knowing it to be true and
A depiction of the future is considered a been violated
which has a tendency to mislead; and XPN: The incontestability clause under
promise unless it is only a statement of belief 5. That the fraud is of a particularly
3. Such a fact in either case is material to paragraph 2 of Section 48.
or anticipation that can be verified with vicious type;
the risk.
current knowledge. 6. That the beneficiary failed to furnish
A representation cannot qualify an express “Incontestability Clause”
proof of death or to comply with any
condition in a contract of insurance, but it can A life insurance policy shall be incontestable
condition imposed by the policy after
qualify an implicit warranty. after two years from the date of issuance,
the loss has happened; or
 7. That the action was not brought within 2. Promissory warranty – one in which the Effects of breach of warranty Omission
the time specified. insured undertakes that something
1. Material If one party fails to communicate information
shall be done or omitted after the
Remedy of the injured party in case of that could prove a warranty false, the other
policy takes effect and during its GR: Violation of material warranty or of
misrepresentation party can cancel the insurance contract.
continuance. material provision of a policy will entitle the
If there is misrepresentation, the aggrieved other party to rescind the contract.
party has the right to withdraw from the 3. Express warranty – a statement in a
XPN: (with regard to “promissory” warranties)
moment the representation becomes untrue. policy, of a matter relating to the
person or thing insured, or to the risk, a. Loss occurs before the time of
Exercise of the right to rescind the
as a fact. performance of the warranty;
contract
4. Implied warranty – an agreement or b. The performance becomes unlawful at
Non-life insurance policies need exercise prior
stipulation not expressed in the policy the place of the contract; or
to any contract-related activity, such as
but the existence of which is admitted c. Performance becomes impossible.
collecting a claim.
or presumed from the fact that the
The defenses indicated in the second contract of insurance has been 2. Immaterial
paragraph of section 48 of the IC are only executed. GR: It will not avoid the policy.
applicable during the 2-year incontestability
period for life insurance policies. Warranty vs. Representation XPN: When the policy expressly provides, or
declares that a violation thereof will avoid it.
BREACH OF WARRANTIES WARRANTY REPRESENTATION
If the policy includes an "Other Insurance
Warranties Considered parts of Collateral Clause" that requires the insured to disclose
If the insured person makes statements or the contract. inducement to the
any other insurance coverage on the property,
contract.
promises in the insurance policy that turn out the insured's failure to do so isn't
to be untrue or are not fulfilled, the insurance automatically a breach, unless there's a
company can void the policy. It doesn't matter Always written on the May be written in a specific provision stating that such a violation
if the insurer was actually harmed by the false face of the policy, totally disconnected will void the policy.
information or unmet promises. actually or by paper or may be oral.
reference. Effect of a breach of warranty without
Purpose of warranties fraud

To prevent the risk of increasing moral or Must be strictly Only substantial The coverage can only be avoided after a
physical hazards caused by the actions of the complied with. proof is required. violation, and the insured can claim:
insured or changes in the property's condition.
1. If the contract is breached after its
Its falsity or non- Its falsity renders the
Basis of warranties start, the premium paid will be
fulfillment operates as policy void on the
a breach of contract. ground of fraud. returned pro-rata.
The insurer considered the condition of the
2. If a contract is broken at its beginning,
property when the policy became effective.
all premiums will be affected.
Kinds of warranties Presumed material. Insurer must show its
materiality in order Effect of breach of warranty with fraud:
1. Affirmative warranty – one which to defeat an action
on the policy. 1. Policy is avoided from the beginning
relates to matters which exist at or
and never becomes binding.
before the issuance of the policy.
2. The insured is not entitled to a refund
of the premium.
 GLOSSARY (DEFINITIONS) Land transportation operator (LTO) - The the necessity of proving fault or negligence on
Fidelity Bonds - They pay an employer for owner or owners of motor vehicles for the part of the insured.
Assured - a person designated by the terms loss growing out of a dishonest act of his transportation of passengers for
Omission- If one party fails to provide facts
of the policy to receive the proceeds of the employee. compensation, including school buses.
that might establish a guarantee is untrue, the
insurance.
Group Insurance - Essentially a single Life Insurance - It is insurance on human other party may cancel the insurance
insurance contract that provides coverage for lives and insurance appertaining thereto or arrangement.
Burglary and theft insurance - an
many individuals. connected therewith.
insurance against loss of property by the Open or loss payable clause - an insurance
depredations of burglars and thieves. Health insurance - an indemnity to persons Limited payment – Insured pays premium for provision authorizing payment in the event of
for expense and loss of time occasioned by a limited period. loss to a person or entity other than the
Change of interest - is an absolute transfer of disease. named insured with an insurable interest in
the insured’s entire interest in the property Misrepresentation - During negotiations, the covered property or, in some cases, jointly
insured to one not previously interested or Incontestability clause - A life insurance
one party makes a false or misleading to the insured and the other person or entity.
insured. policy shall be incontestable after two years
statement of fact to another in order to induce (IRMI)
from the date of issuance, regardless of any
the other party to enter into a contract.
Compulsory Insurance Coverage for mistake, fraud, concealment or Ordinary life, general life or old-line policy
Agency-hired workers - It is an insurance misrepresentation of the insured or his agent. - Insured is required to pay a certain fixed
Motor Vehicle - any vehicle propelled by any
mechanism made available by the law to premium annually or at more frequent
Industrial bond - required by private power other than muscular power using the
provide insurance protection for the OFWs. intervals throughout his entire life and the
employers to cover loss through dishonesty of public highways except vehicles which run
beneficiary is entitled to receive payment
Concealment - Is a failure to convey what a employees. only on rail or tracks and vehicles used in
under the policy only after the death of the
party knows and ought to communicate. agricultural purposes.
insured.
Industrial life – entitles the insured to pay
Contract bonds - These are connected
premiums weekly, or where premiums are Motor vehicle liability insurance - is a
with construction and supply contracts. Passenger - Any fare-paying person being
payable monthly or often. contract of insurance against passenger and
transported and conveyed in and by a motor
third-party liability for death or bodily injuries
Contract of Insurance - It is an agreement vehicle for transportation of passengers for
Insurable Interest - Interest which a person and damage to property arising from motor
whereby one undertakes for a consideration to compensation, including persons expressly
is deemed to have in the subject matter vehicle accidents.
indemnify another against loss, damage or authorized by law or by the vehicle’s operator
insured, such that the person will derive
liability arising from an unknown or or his agents to ride without fare.
pecuniary benefit or advantage from the Motor Vehicle Liability Insurance - It is a
contingent event. Performance bond - covers the faithful
preservation of the subject matter insured and protection coverage that will answer for legal
performance of the contract.
Contract of life annuity - It is a contract to will suffer pecuniary loss or damage from its liability for losses and damages for bodily
pay the insured, or a named person or persons, destruction, termination, or injury by the injuries or property damage that may be
Personal accident insurance - a form of
a sum or sums periodically during life or happening of the event insured against. sustained by another arising from the use and
insurance which undertakes to indemnify
certain period. operation of a motor vehicle by its owner.
the assured against the expense, loss of
Insured - person in whose favor the contract
Double insurance - exists where the same time, and suffering resulting from accidents
is operative and is indemnified. Motor Vehicle Owner (MVO) - Actual legal
person is insured by several insurers causing him physical injury.
owner of a motor vehicle, whose name such
separately, in respect to the same subject and
Insurer - party who assumes or accepts the vehicle is duly registered with the Land
interest. Plate glass insurance - an insurance against
risk of loss. Transportation Office.
loss from accidental breaking of plate-glass
Endowment – insured pays premium for
windows, doors, showcases, etc.
specified period. If he outlives the period, the Judicial bonds - required in connection No Fault Indemnity Clause - It is a clause
face value of the policy is paid to him; If not, with judicial proceedings where the insurer is required to pay a third Policy of insurance - It is the written
his beneficiaries receive the benefit. party injured or killed in an accident without document embodying the terms and
stipulations of the contract of insurance Third-party - Any person other than a GLOSSARY (REQUISITES) Persons prohibited from being designated
between the insured and insurer. passenger as beneficiaries (CAP)
The insurer in Life Insurance contract
Premium - It is an agreed price for assuming 1. Those made between persons found
Warranty - A written guarantee offered to the shall be liable in case of suicide if: (ASI)
guilty of the same Criminal offense, in
and carrying the risk that is, the consideration
purchaser of a product by its maker that consideration thereof.
paid to an insurer for undertaking to 1. The suicide is committed After the 2. Those made between persons who were
promises to repair or replace it if necessary
indemnify the insured against a specified peril. policy has been in force for a period of 2 guilty of Adultery or concubinage at the
within a certain period of time.
years from the date of its issue or of its time of donation.
Professional Insurer - any person,
last reinstatement; 3. Those made to a Public officer or his
partnership, association or corporation that wife, descendants or ascendants by
transacts solely and exclusively reinsurance 2. The suicide is committed within a
reason of his office.
business in the Philippines. Shorter period as provided in the
policy; or Beneficiary willfully brought about the
Public official bond - required of public 3. The suicide is committed in the state of death of the insured
officers for the faithful performance of their Insanity regardless of the date of
duties and as a condition of entering upon the commission. GR: The interest of a beneficiary in a life
duties of their offices. Insurance upon one’s life - are those taken insurance policy shall be forfeited
Public utility insurance - indemnifies out by the insured upon his own life for the
XPNs: (IUD)
against liability on account of injuries to the benefit of: (HET)
person or property of another. It may a. Himself a. Insanity of the beneficiary at the time
extend to automobiles, elevators, flywheels, b. His Estate, in case it matures only at his he killed the insured.
libel, theaters, and vessels. death b. The insured’s death was
c. Third person who may be designated as Unintentionally caused.
Rider - an attachment to an insurance policy beneficiary c. The beneficiary acted in self-Defense.
that modifies the conditions of the policy by Requisites of double insurance (STRIP)
expanding or restricting its benefits or Insurance upon life of another
excluding certain conditions from the - are those taken out by the insured upon 1. Subject matter is the same
coverage. the life of another. 2. Two or more insurers insuring
- This class includes the following: separately
Standard or union clause - an insurance (SELD) 3. Risk or peril insured against is the same
provision that covers the mortgage lender but a. His Spouse and of his children.
4. Interest insured is the same
not the borrower for a loss involving the b. Any person on whom he depends
wholly or in part for Education or 5. Person insured is the same
mortgaged property. (Insuranceopedia)
support, or in whom he has a pecuniary Devices used to prevent the forfeiture of a
Suretyship - a credit accommodation which interest.
life insurance after the payment of the first
includes official recognizances, stipulations, c. Of any person under a Legal obligation
to him for the payment of money, or premium; (C-PAGER)
bonds or undertakings. 1. Cash surrender value – The amount the
respecting property or services, of
Term insurance – insured pays premium only which death or illness might delay or insurer agrees to pay to the
once, and he is insured for a specified period. prevent the performance. policyholder if he surrenders the policy
d. Of any person upon whose life any and discharges his claim against it.
Theft Clause - Where a car is unlawfully and estate or interest vested in him
2. Paid up Insurance – The insured has
wrongfully taken without the knowledge and Depends.
the right, upon default, after paying at
consent of the owner, such taking constitutes least three yearly payments, to have the
“theft” and it is the theft clause, not the policy remain in force from the date of
authorized driver clause which should apply. default for the remainder of the
insurance period without further
 premium payment. It reduces the insurer in violation of the Insurance 2. Promissory warranty – one in which the
original sum of insurance, but for the Code insured undertakes that something
same duration as originally specified. 4. Physical changes in the property shall be done or omitted after the
3. Automatic Loan Clause - states that if a insured which result in the property policy takes effect and during its
premium is not paid on time, it will be becoming uninsurable continuance.
deducted from the policy's loan value 5. Discovery of fraud or material 3. Express warranty – a statement in a
until it is used up. If the insured pays misrepresentation policy, of a matter relating to the
the premiums from other sources, the 6. Discovery of other insurance coverage person or thing insured, or to the risk,
insurance remains in full validity and that makes the total insurance in excess as a fact.
effect. of the value of the property insured 4. Implied warranty – an agreement or
4. Grace period – After paying the initial 7. Discovery of willful or omissions or stipulation not expressed in the policy
premium, the insured has a grace reckless acts increasing the hazard but the existence of which is admitted
period of 30 days to pay subsequent insured against. or presumed from the fact that the
installments. contract of insurance has been
Requisites of Concealment:
5. Extended insurance – After paying at executed.
(NeD-NoW-NomMa)
least three full yearly payments,[IC,
Sec.233 (f)] the insured has the right to 1. A party knows a fact which he neglects
keep the policy in effect for a period to communicate or disclose to the other
equal to or more than the net value of party;
the insurance purchased with a single 2. Such party concealing is duty bound to
premium upon default. disclose such fact to the other;
6. Reinstatement - The policyholder has 3. Such party concealing makes no
the right to reinstate the contract warranty as to the fact concealed;
within 3 years of defaulting on 4. The other party has no means of
premium payments, unless the cash ascertaining the fact concealed; and
surrender value is paid. Once the 5. The fact must be material.
extension term has elapsed, the
Characteristics of representation
corporation will accept adequate
(COW-DAW-BA)
documentation of insurability and
payment. Please pay any outstanding 1. Not a part of the contract but merely a
premiums or debts owed to the firm collateral inducement to it
under this insurance. 2. Oral or written
3. Must be presumed to refer to the date
Instances wherein a contract of insurance the contract goes into effect
may be canceled by the insurer 4. Altered or withdrawn before the
(NCDP-Discovery of FraME WOR
insurance is effected but not afterwards
5. Made before or at the time of issuing
1. Nonpayment of premium the policy and not after.
2. Conviction of a crime arising out of acts
increasing the hazard insured against Kinds of warranties (APEI)
3. A determination by the Commissioner 1. Affirmative warranty – one which
that the continuation of the policy relates to matters which exist at or
would violate or would place the before the issuance of the policy.
 countries, particularly those within the
PHILIPPINE COMPETITION ACT (PCA, Association of SouthEast Asian Nations
R.A NO. 10667) (ASEAN) region. (Lim and Recalde, 2016)

Enacted in 2015, Republic Act No. 10667 or PROSPECTIVE APPLICATION

the Philippine Competition Act (PCA) is
the country’s primary competition law. It GR: The Act shall have no retroactive effect.
defines, prohibits, and penalizes (PCA, Sec. 56)
anti-competitive practices, with the aim of
enhancing economic efficiency and promoting XPN: An existing business structure, conduct,
free and fair competition in trade, industry, practice or any act that may be in violation of
PAMANTASAN NG LUNGSOD NG MAYNILA
and all commercial economic activities. the Act shall be subject to penalties only if it is
(University of the City of Manila) not cured or is continuing upon the expiration
General Luna, corner Muralla St., Intramuros, Manila AREAS COVERED of 2 years after the effectiveness of the act.
1002 Metro Manila (PCA, Sec. 53)
1. Creation of the Commission, its
powers and functions; NOTE: Violations of Article 186 of the Revised
2. Prohibited anti-competitiveacts; Penal Code that occurred before the PCA came
In partial fulfillment of the requirements for the subject 3. Guide in disposition of cases; into effect can still be prosecuted unless they
Regulatory Framework and Legal Issues in Business 4. Fines and penalties; are barred by the statute of limitations, and
(ACN 2210A-4) 5. Enforcement provisions; and are subject to the procedures outlined in
6. Miscellaneous provision. Section 31 of this Act. (PCA, Sec. 55)

STATE POLICY THE PHILIPPINE COMPETITION

COMMISSION
Finals Reviewer: Legislative policies
Nature and Jurisdiction of the Commission
Philippine Competition Act 1. Enhance economic efficiency and
RA 10667 ensure open and fair competition The Philippine Competition Commission
across trade, industry, and all business (PCC) has been established as an independent
activities. Additionally, create a quasi-judicial entity tasked with enforcing the
National Competition Policy to be national competition policy and achieving the
executed by the Government of the goals of the Act. (PCA, Sec. 5).
Submitted by: Republic of the Philippines and all its
Erejer, Shyra political entities collectively; The Philippine Competition Commission
Opalec, Michelle Ann D. 2. Avoid economic concentration that (PCC) holds the original and primary
Sadim, Jennielyn M. could dominate the production, responsibility for enforcing and carrying out
distribution, trade, or industry in a way the provisions of the Act, along with its
Soleta, Princess Daniel E.
that unfairly restricts competition or implementing rules and regulations. (PCA,
interferes with the functioning of the Sec. 12) Additionally, it possesses the unique
free market; and exclusive power to begin and conduct a
3. Penalize all forms of anti-competitive fact-finding or preliminary inquiry into
agreements, abuse of dominant enforcing this Act when there are reasonable
position and anti-competitive mergers grounds. (PCA, Sec. 31).
Submitted to: and acquisitions, with the objective of
Atty. Aloi Renz P. Santos protecting consumer welfare and NOTE: The Act explicitly adopts the doctrine
advancing domestic and international of primary jurisdiction in recognition of the
trade and economic development. highly technical character of the contemplated
(PCA, Sec. 2) cases,requiring a specialized administrative
agency to have primary jurisdiction to dispose
NOTE: The Act aims to align Philippine of them. (Limand Recalde, 2016)
May 2024 competition law with similar laws in other
 POWERS AND FUNCTIONS interim orders such as show cause enforcement of this Act and submit 19. Charging reasonable fees to defray the
orders and cease and desist orders, annual and special reports to Congress, administrative cost of the services
1. Carry out inquiries, investigations, and following due notice and a hearing in including proposed legislation for the rendered. (PCA, Sec. 12)
hearings, and resolve cases involving accordance with the implementing regulation of commerce, trade, or
any breaches of this Act and other rules and regulations of this Act; industry;
existing competition laws either on its 7. Upon order of the court, undertake 12. Monitor and analyze the practice of COMPOSITION AND QUALIFICATIONS
own initiative or upon receiving a inspections of business premises and competition in markets that affect the
verified complaint from a party with an other offices, land and vehicles, as used Philippine economy; implement and Composition of the Commission
interest or a referral from the relevant by the entity, where it reasonably oversee measures to promote
regulatory agency. Additionally, initiate suspects that relevant books, tax transparency and accountability; and The Commission is headed by a Chairperson
the necessary civil or criminal legal records, or other documents which ensure that prohibitions and and four Commissioners who enjoy a
actions; relate to any matter relevant to the requirements of competition laws are seven-year security of tenure. (PCA, Secs. 6
2. Evaluate proposed mergers and investigation are kept, in order to adhered to; and 7).
acquisitions, set notification thresholds, prevent the removal, concealment, 13. Conduct, publish, and disseminate
establish notification requirements and tampering with, or destruction of the studies and reports on anti-competitive The Chairperson and Commissioners, holding
procedures, and use its authority to books, records, or other documents; conduct and agreements to inform and ranks equivalent to a cabinet secretary and
block mergers and acquisitions that 8. Issue adjustment or divestiture orders guide the industry and consumers; undersecretary respectively, are to be
would significantly hinder, restrict, or including orders for corporate 14. Intervene or participate in appointed by the President.
diminish competition in the relevant reorganization or divestment in the administrative and regulatory
market; manner and under such terms and proceedings requiring consideration of Qualifications
3. Monitor and undertake consultation conditions as may be prescribed in the the provisions of this Act that are
with stakeholders and affected agencies rules and regulations implementing initiated by government agencies such 1. Citizens and residents of the
for the purpose of understanding this Act. Adjustment or divestiture as the Securities and Exchange Philippines;
market behavior; orders, which are structural remedies, Commission, the Energy Regulatory 2. Of good moral character;
4. Should substantial evidence reveal that should only be imposed: Commission, and the National 3. Of recognized probity and
an entity has participated in an a. Where there is no equally Telecommunications Commission; independence and must have
anticompetitive agreement or exploited effective behavioral remedy or 15. Assist the National Economic and distinguished themselves professionally
its dominant position, the authority, b. Where any equally effective Development Authority, in consultation in public, civic or academic service in
after due notice and hearing, may behavioral remedy would be with relevant agencies and sectors, in any of the following fields:
intervene to halt or rectify the more burdensome for the the preparation and formulation of a a. Economics;
situation. The remedies applied may enterprise concerned than the national competition policy; b. Law;
include, but are not limited to, issuing structural remedy. Changes to 16. Act as the official representative of the c. Finance;
injunctions, mandating divestments, the structure of an enterprise as Philippine government in international d. Commerce; or
and ordering the disgorgement of it existed before the competition matters; e. Engineering;
excess profits, all within the reasonable infringement was committed 17. Promote capacity building and the 4. Must have been in the active practice of
guidelines established by the would only be proportionate to sharing of best practices with other their professions for at least 10 years;
implementing rules and regulations of the substantial risk of a lasting competition-related bodies; and
this Act; or repeated infringement that 18. Advocate pro-competitive policies of 5. Must not have been candidates for any
5. Conduct administrative proceedings, derives from the very structure the government by: elective national or local office in the
impose sanctions, fines or penalties for of the enterprise; a. Reviewing economic and immediately preceding elections,
any noncompliance with or breach of administrative regulations, motu whether regular or special. (PCA, Sec.
this Act and its implementing rules and 9. Deputize any and all enforcement proprio or upon request, as to 6)
regulations (IRR) and punish for agencies of the government or enlist whether or not they adversely
contempt; the aid and support of any private affect relevant market NOTE: At least one (1) shall be a member of
6. The authority may issue subpoenas institution, corporation, entity, or competition, and advising the the Philippine Bar with at least 10 years of
duces tecum and subpoenas ad association, in the implementation of concerned agencies against such experience in the active practice of law, and at
testificandum to compel the production its powers and functions; regulations; and least one (1) shall be an economist. (Ibid.).
of books, records, or other relevant 10. Monitor compliance by the person or b. Advising the Executive Branch
documents or data and require entities concerned with the cease and on the competitive implications Prohibitions and Disqualifications
personal appearances before the desist order or consent judgment; of government actions, policies,
Commission. It can also summon 11. Issue advisory opinions and guidelines and programs; and ● Shall not, during their tenure, hold any
witnesses, administer oaths, and issue on competition matters for the effective other office or employment.
 ● Shall not, during their tenure, directly activities, agreements, or arrangements are Entities belonging to a single economic entity
or indirectly practice any profession, NOTE: They are held free and harmless to the designed solely to facilitate collective may be defined as entities under control of the
except in a teaching capacity, fullest extent permitted by law from any bargaining in respect of conditions of ultimate parent entity. (Lim and Recalde, 2016)
participate in any business, or be liability, and be indemnified for any and all employment. (PCA, Sec. 3)
financially interested in any contract liabilities, losses, claims, demands, damages, An ultimate parent entity exercises control
with, or any franchise, or special deficiencies, costs and expenses of whatsoever NOTE: The broad application of provisions on when it possesses the ability to substantially
privileges granted by the government. kind and nature that may arise in connection agreements and abuse of dominance may influence or direct the actions or decisions of
● Shall strictly avoid conflict of interest in with the exercise of their powers and restrict the employees’ exercise of their right to an entity, whether by contract, agency or
the conduct of their office. performance of their duties and functions collective bargaining. (Lim and Recalde, 2016) otherwise. [PCA, Sec. 4(f)]
● Shall not be qualified to run for any except when their actions are found to be in
office in the election immediately willful violation of the PCA, performed with NEXUS TO PHILIPPINE MARKET TEST: Whether the purported parent entity
succeeding their cessation from office; evident bad faith or gross negligence. (PCA, exercises decisive influence over the activities
and Sec. 43). The tests for the size of the person and the of its subsidiary or affiliate. (Lim and Recalde,
size of the transaction indicate when 2016)
NOTE: The election is not a Barangay COVERED PERSONS AND ENTITIES international trade might be relevant to trade
election or a Sangguniang Kabataan in the Philippines. Specifically: Presumption of control
election. Scope and Application
● Shall not be allowed to personally 1. Where all the subject assets are in the GR: When the parent owns directly or
appear or practice as counsel or agent 1. Any person or entity engaged in any Philippines, the gross annual revenues indirectly, through subsidiaries, more than
on any matter pending before the trade, industry and commerce (TIC) in or value of assets in the Philippines; one-half (1/2) of the voting power of an entity;
Commission for 2 years following their the Philippines; and 2. Where all the subject assets are outside
cessation from office. (PCA, Sec. 8) the Philippines, the gross annual XPN: It can clearly be demonstrated that such
Entity- any person, natural or juridical, revenue of such assets generated in or ownership does not constitute control.
NOTE: No spouse or relative by sole proprietorship, partnership, into the Philippines and the value of
consanguinity or affinity within the combination or association in any form, assets in the Philippines of the Control also exists even when an entity owns
fourth civil degree of any of the whether incorporated or not, domestic acquiring entity; or one-half (1/2) or less of the voting power of
Commissioners, the Chairperson, and or foreign, including those owned or 3. Where some of the subject assets are another entity when:
the Executive Director may appear as controlled by the government, engaged inside and some outside the
counsel nor agent on any matter directly or indirectly in any economic Philippines, the gross annual revenues a. There is power over more than one-half
pending before the Commission or activity. [PCA, Sec. 4(h),] generated in or into the Philippines and (1/2) of the voting rights by virtue of an
transact business directly or indirectly any assets acquired outside the agreement with investors;
therein. NOTE: Government’s public activity Philippines. (Lim and Recalde, 2016) b. There is power to direct or govern the
a. During the incumbency of the (jure imperii) is not covered by the Act. financial and operating policies of the
concerned Commissioner or (Lim and Recalde, 2016) SINGLE ECONOMIC ENTITY DOCTRINE entity under a statute or agreement;
Executive Director; and c. There is power to appoint or remove
b. During the 2-year ban. (Ibid.) 2. International trade having direct, An entity that controls, or is controlled by, or the majority of the members of the
substantial, and reasonably foreseeable is under common control with another entity board of directors or equivalent
COMPENSATION AND PROTECTION effects in TIC in the Philippines, or entities, have common economic interests, governing body;
including those that result from acts and are not otherwise able to decide or act d. There is power to cast the majority
Extent of protection provided by the Act done outside the Philippines. (PCA, independently of each other, shall not be votes at meetings of the board of
Sec. 3) considered competitors. (PCA, Sec. 14) directors or equivalent governing body;
GR: The Chairperson, the Commissioners, e. There exists ownership over or the right
officers, employees, and agents of the NOTE: The Act may apply to E.g. parent company and its subsidiary to use all or a significant part of the
Commission shall not be subject to any action, international trade having nexus to the assets of the entity; or
claim or demand in connection with any act Philippine market. (Lim and Recalde, NOTE: Entities belonging to a single economic f. There exists rights or contracts which
done or omitted by them in the performance 2016) entity are considered as a single person, and confer decisive influence on the
of their duties and exercise of their powers. not as different parties whose acts will decisions of the entity. (PCA, Sec. 25)
(PCA, Sec. 42,) Excluded from the Coverage of the PCA otherwise normally be covered by the Act.
ANTI-COMPETITIVE AGREEMENTS
XPN: Actions and omissions found to be in Combinations or activities of workers or CONTROL
willful violation of the Act, performed in employees nor to agreements or arrangements General Elements
evident bad faith or gross negligence. (Ibid.) with their employers when such combinations,
Entities may be held liable under Section 14 a. Limiting production - Setting, limiting, Dominant Position 4. The barrier to entry is not an indispensable
of the Philippine Competition Act when the or controlling production, markets, and natural result of the entity's superior
following elements are present technical development, or investment. Dominant position refers to a position of product or process, business acumen or legal
1. Parties are competitors economic strength that an entity or entities rights or laws.
2. An agreement needs to exist between or b. Market sharing - Dividing or sharing the hold which makes it capable of controlling the
among the involved parties in order to
market, whether by volume of sales or relevant market independently from any or a 3. Bundling or tying - In general, there is
achieve a certain thing;
purchases, territory, type of goods or combination of the following: competitors, "bundling" when two or more products are
3. The contract needs to have significant
impact of foreclosure on the pertinent services, buyers or sellers or any other custom offered to the customer with inducements to
market; and means; take both, rather than take them separately.
4. There is no objective justification for Elements:
The inducement normally takes the form of a
such understanding. Elements:
The key element is the ability to discount, which the customer will not get if he
i. There is an agreement; separately buys the products.
independently control or take unilateral action
Types of Anti-competitive agreements ii. The parties are competitors or do not
having foreclosure effects on the relevant
belong to a single economic entity; Form of a tying arrangement, where the
market.
1. Per se cartel agreements - The following iii. The subject of the agreement is either other party is made to accept obligations
agreements, between or among competitors, to limit the production or divide or share COERCIVE MONOPOLY CONDUCT that are unrelated to the transaction.
are per se prohibited: the market; and
iv. The object or effect of the agreement The following are the potential abusive 1. When the entity has a dominant position in
1. Price fixing – Restricting competition substantially prevents, restricts, or lessens conduct of coercive monopolists: the relevant market.
as to price, or components thereof, or competition. 2. It makes a subject to acceptance of other
other terms of trade. 1. Predatory pricing - It is the selling of obligations having no connection with the
2. Bid rigging – Fixing price at an auction Note: This acts are subject to the object or goods or services below cost with the object of transaction.
or in any form of bidding including effect test and/or rule of reason defense. driving competition out of the relevant 3. The conduct has a foreclosure effect; and
cover bidding, bid suppression, bid market. [PCA, Sec.15(a)] 4. The entity has no objective justification for
rotation and market allocation and its conduct. (Tetra Pak v. European
other analogous practices of bid 2. Imposing barriers to competition - It is Commission, June 10 1990
DETERMINING EXISTENCE OF
manipulation; the imposing of barriers to entry or
ANTI-COMPETITIVE CONDUCT
committing acts that prevent competitors 4. Discriminatory pricing - It refers to
Elements:
Conduct from growing within the market in an setting prices or other terms or conditions that
i. There is an agreement
anti-competitive manner except those that discriminate unreasonably between customers
ii. The parties are competitors or do not
It refers to any type or form of undertaking, develop in the market as a result of or arising or sellers of the same goods or services, where
belong to an economic entity; and
collective recommendation, independent or from a superior product or process, business such customers or sellers are
iii. The subject of the agreement is either to fix
concerted action or practice, whether formal acumen, or legal rights or laws. [PCA, Sec. contemporaneously trading on similar terms
price or order terms of trade or rig a
or informal. [PCA, Sec. 4(c)] 15(b)] and conditions, where the effect may be to
competitive bidding
lessen competition substantially: Provided,
Elements: Elements: That the following shall be considered
Note: Substantial foreclosure effect is not
The entity is guilty of this type of exclusionary permissible price differentials:
required, and objective justification may not be 1. The entity must have market power.
conduct when:
raised as defense. This penalizes competitors 2. The entity commits abusive conduct.
making particular stipulations and is not 3. The conduct must have substantial
1. It has a dominant position in the relevant
subject to object or effect test defense. foreclosure effect on the relevant market; and 1. Socialized pricing for the less fortunate
market;
2. Non-per se cartel agreements– The sectors of the economy.
4. There is no objective justification for the 2. It imposes barriers to entry or committing
following agreements, between or among 2. Price differential which reasonably or
conduct. acts that prevent competitors from growing
competitors which have the object or effect of approximately reflects differences in the cost
within the relevant market;
substantially preventing, restricting, or DOMINANT POSITION of manufacture, sale, or delivery resulting from
3. Such conduct must have foreclosure effect
lessening competition shall be prohibited: differing methods, technical conditions, or
on competition; and
quantities in which the goods or services are merchandising, exclusive distributorship, technical development. ACQUISITION
sold or delivered to the buyers or sellers. selective distributorship, and franchising 3. The conduct has foreclosure effect on
3. Price differential or terms of sale offered in agreements. competition; and Acquisition
response to the competitive price of payments, 4. The limitation is not "a result of or due to a
services or changes in the facilities furnished Permissible restrictive clauses or vertical superior product or process, business acumen Refers to an asset or securities purchase, so
by a competitor; and agreements The Act provides the following or legal rights or laws." that:
4. Price changes in response to changing block exemptions:
market conditions, marketability of goods or 1. One economic undertaking will gain control
services, or volume. (Sec. 15[d], RA 10667) 1. "Permissible franchising, licensing, exclusive over the whole or part of another economic
merchandising or exclusive distributorship ANTI COMPETITIVE MERGERS AND undertaking:
Instances when discriminatory pricing is agreements such as those which give each ACQUISITION 2. Two (2) or more economic undertakings
prohibited. party the right to unilaterally terminate the will gain control over another economic
agreement: or undertaking; or
GR: Merger or acquisition agreements that
1. The entity has dominant position in the 2. Agreements protecting intellectual property 3. One or more economic undertakings will
have received a favorable ruling from the
relevant market; rights, confidential information, or trade gain control over one or more economic
Commission may not be challenged. Once
2. The entity discriminates between customers secrets." (ibid) undertakings.
it is secured, the transaction cannot be
or sellers of the same products;
6. Imposing unfair price- In general, a price challenged anymore, as it enjoys the no-look
3. The discrimination is in the form of Note: These separate economic undertakings
is unfair when it is higher or lower than what back protection under Section 23.
difference in price, terms or conditions (i.e., need not be the same, or need not operate in the
price differential), when such customers or could be objectively justified. same market
XPN: When the ruling was obtained on the
sellers contemporaneously trade on similar basis of fraud or false material
Elements:
terms and conditions; information.
4. There is no justifiable reason for such 1. The entity must have a dominant position in
discrimination; Two categories of M&As EXCLUDED TRANSACTIONS
the relevant market;
5. The discrimination must have a reasonable 2. It must directly or indirectly impose unfairly
1. Those which meet the prescribed
possibility to substantially prevent, restrict or low purchase prices for the goods or services.
notification thresholds- reviewed by the 1. In a share purchase, when the purpose is
lessen competition (i.e., there is a possible 3. Its counterparty must be considered a
Commission through compulsory notification “solely for investment and not used for voting
competitive injury); and marginalized supplier; and
regime (under Sec. 17); and or exercising control and not to otherwise
6. It does not fall under any of the block 4. The conduct has a foreclosure effect.
2. Those which do not meet the prescribed bring about, or attempt to bring about the
exemptions (i.e., permissible price
notification thresholds- reviewed by the prevention, restriction, or lessening of
differentials). 7. Limiting production, markets or
Commission through the parties’ voluntary competition in the relevant market.” (PCA,
technical development - Limiting Sec. 21)
notification or the Commission’s motu proprio
production, markets or technical development
5. Restrictive vertical agreements - investigation. (PCA IRR, Rule 4, Sec. 1)
is impermissible when the same results in 2. In an asset purchase, considering the
Restrictive vertical agreements refer to
prejudice to consumers and is not "a result of Contemplated M&As provisions of Section 21, when the asset is not
distribution and supply agreements providing
or due to a superior product or process, used in business and/or not being purchased
prima facie restrictive clauses, such as Merger The fusion of two (2) or more
business acumen or legal rights or laws." [PCA, for use in business that will “bring about the
exclusive dealing or minimum-quantity economic undertakings into a single
Sec. 15(i)] prevention, restriction, or lessening of
obligations, resale price maintenance, formal undertaking.
or de facto restriction on parallel trade, and competition in the relevant market.”
online sales bans. Note: It is not limited to statutory merger or NOTIFICATION REGIMES
Elements:
consolidation, as contemplated in the
Different forms of vertical agreements
1. The entity must have a dominant position in Corporation Code. It may refer to an economic Two major notification regimes
Distribution and supply agreements may be in the relevant market. undertaking, regardless of whether the same is
the form of agency, licensing, exclusive 2. It must limit production, markets or for profit or not. (Lim and Recalde, 2016)
1. Compulsory Notification - Parties to a The Commission pursuant to its authority transaction is an acquisition, a merger or subject enterprise must meet the P3.2
merger or acquisition agreement wherein the under Section 12(h) may “issue adjustment or consolidation, or a joint venture. [PCA IRR, billion threshold;
size of the transaction exceeds Three Billion divestiture orders including orders for Rule 4, Section 3, pars. (b) to (e)]
Two Hundred Million Pesos corporate reorganization or divestment.” b. Under the control test, the acquiring
(P3,200,000,000.00) as determined under PCA 1. Size of transaction test for acquisitions entity must directly or indirectly gain
IRR, Rule 4, Sec. 3 (b) or the size of party NOTE: Notwithstanding its void character, control or further control (i.e., 35% or
exceeds Seven Billion Eight Hundred Million innocent third parties may not be prejudiced In case of acquisitions (i.e., de facto merger or 50% voting control, respectively) of the
Pesos (P7,800,000,000.00) (Commission with respect to their completed transactions consolidation), the main object of inquiry is subject enterprise. Gaining further
Resolution No. 01-2024) are prohibited from under the doctrine of operative facts. the place of subject assets: control requires another round of
consummating their agreement until thirty notification.
(30) days after providing notification to the NOTIFICATION THRESHOLDS a. Where all the subject assets are in
Commission. (PCA, Sec. 17) the Philippines, the gross annual For purposes of the enterprise value test,
The Commission has authority to prescribe revenues or value of assets in the assets in the form of shares or intervening
2. Voluntary Notification - Where the notification thresholds contemplated in Philippines must meet the P3.2 billion corporations (i.e., investment in subsidiaries
Commission is notified of a merger that is not Section 17. threshold; or affiliates) are excluded to arrive at the value
subject to the notification requirement under of consolidated assets at the enterprise (or
the IRR or is covered by an effective exemption Prescribed thresholds for compulsory b. Where all the subject assets are single economic entity) level.
circular or guideline issued by the notification outside the Philippines, the gross
Commission, the parties shall be informed annual revenues of such assets and the 3. Test in case joint ventures
within fifteen (15) days from submission of The Commission has provided the value of assets in the Philippines of the
their Forms. Nevertheless, should the parties following thresholds vis-à-vis the following acquiring entity must meet the P3.2 In the formation of a joint venture (other than
request to have their merger undergo review, tests: billion threshold; in connection with a merger or consolidation),
the Commission may, in its discretion, give the contributing entities shall be deemed
due course to the voluntary notification, 1. Size of person test - exceeds P7.8Bn; c. Where some of the subject assets are acquiring entities, and the joint venture be
subject to the periods provided under Section 2. Size of transaction test - exceeds P3.2Bn. inside and some outside the deemed the acquired entity.” Thus, when
13 of the Commission’s Rules on Merger (Commission Resolution No. 01-2024) Philippines, the gross annual revenues individually the joint venture partners do not,
Procedure. (PCC Rules on Merger Procedure, “generated in or into the Philippines by but combined they, meet the P7.8 billion tests,
Sec.3.2) request to have their merger undergo REASON: To lessen the workload of the assets acquired outside the Philippines” then the size of person test is met. [PCA IRR,
review, the Commission may, in its discretion, Commission by not having the need to review must collectively meet the P3.2 billion Rule 4, Sec 2 (c)]
give due course to the voluntary notification, every single M&A. The threshold is merely for threshold, and the value of assets in the
subject to the periods provided under Section notification purposes and not for approval. Philippines of the acquiring entity must On the other hand, Rule 4, Sec. 3 (d) provides:
13 of the Commission’s Rules on Merger similarly meet the P3.2 billion “in a notifiable joint venture transaction, an
Procedure. (PCC Rules on Merger Procedure, Size of person test threshold. acquiring entity shall be subject to the
Sec.3.2) notification requirements if either:
The size of person test or size of acquiring or 2. Size of transaction test for statutory
Consequence of non-compliance with target entity test requires at least one of the mergers or consolidations a. The aggregate value of the assets that
notification requirement parties to the transaction must have gross will be combined in the Philippines or
annual revenues “in, into or from” or assets in, The size of transaction test requires the hurdle contributed into the proposed joint
1. The parties may be liable to administrative the Philippines worth at least P7.8 billion. of both the enterprise value test AND control venture exceeds Three Billion Two
fine, ranging from 1% to 5% of the transaction [PCA IRR, Rule 4, Sec. 3(a)] test, specifically: Hundred Pesos (Php3,200,000,000.00);
value; and or
Size of transaction test a. Under the enterprise value test, the
2. The transaction shall also be considered gross annual revenues “from sales in, b. The gross revenues generated in the
void. (PCA, Sec. 17) There are different variations of the size of into or from the Philippines” or the Philippines by assets to be combined in
transaction test depending on whether the value assets in the Philippines of the the Philippines or contributed into the
 proposed joint venture exceed Three received by the parties: Provided, that in no share, significant competitors, 3. Holding themselves out to the public as
Billion Two Hundred Pesos case shall the total period for review by the customers, suppliers, or consumers in one entity or giving the appearance of
(Php3,200.000,000.00).” Commission of the subject agreement exceeds the relevant market, their objectives; having combined their operations;
ninety (90) days from initial notification by and a. Answering the target company's
How “value at the transaction” ascertained the parties. (Ibid.) 5. Significant terms of the transaction. telephones using the name of
the merged entity; or
The P3.2 billion transaction value threshold Voluntary notification; when filed In general, the Commission needs information b. Allowing the target’s employees
considers gross annual revenues and/or value that will assist in determining whether the to use e-mail addresses and
of assets, and are ascertained as follows: The Act does not explicitly set the period for transaction or transactions under review hand out business cards of the
filing voluntary notification. "substantially prevent, restrict or lessen merged entity.
1. In case of gross annual revenues, from the competition in the relevant market or in the 4. Relocating or integrating physical
"last regularly prepared annual statement of GR: Parties may file voluntary notification at market or goods or services." (Sec. 20, RA operations;
income and expense" of the concerned entity; any time before or after the consummation of 10667) 5. Posting employees at the other party's
2. In case of value of assets, from the "last the transaction, offices;
NOTE: A party may refuse to supply irrelevant
regularly prepared balance sheet or the most 6. Allowing representatives of one party to
information. (Lim and Recalde, 2016)
recent audited financial statements in which XPN: They may no longer file such negotiate contracts or settle legal
those assets are accounted for" of the notification if a third party has filed a disputes on behalf of the other;
concerned entity. complaint or the Commission has commenced 7. Appointing individuals of one party to
a fact finding or preliminary inquiry. PREMATURE CONSUMMATION OF manage or operate divisions of the
TIMING OF NOTIFICATION TRANSACTION other; or
When transaction deemed consummated 8. Providing one party with access to the
Gun-jumping
Compulsory notification; when filed other party’s computer systems.
GR: A transaction is considered consummated It refers to the premature consummation of
Parties to the merger or acquisition agreement when all parties have discharged their Premature sharing of commercially
transaction, which is penalized under Section
referred to in the preceding section wherein respective obligations. sensitive information
17 (and/or Section 29). This may take the form
the value of the transaction exceeds three of premature integration, sharing of When the parties, before merger clearance or
billion pesos two hundred million pesos XPN: In case of M&As, where "closing" is commercially sensitive information or lapse of the applicable waiting period, share
(P3,200,000,000.00) are prohibited from treated as the consummation. It is at closing improper exercise of control over the other sensitive information that is not essential in
consummating their agreement until thirty where the parties make the exchange, where entity. (Guidance on Pre Merger Exchanges of the negotiation and closing of the transaction.
(30) days after providing notification to the one party delivers the subject of the Information; PCC Rules on Merger Procedure)
Commission in the form and containing the transaction and the other the consideration, This may refer to any of the following:
information specified in the regulations issued which may be in cash and/or promise to pay a Premature integration
by the Commission. (PCA, Sec. 17) definite amount in the future. The full 1. Pricing, pricing plans, or discounts;
payment of the price by one party may not be There is premature integration when parties 2. Customers’ confidential information;
Purpose: To give the Commission at least dependent on the delivery by the other party treat the subject undertakings to have merged 3. Costs;
thirty (30) days from receipt of notice and of the subject matter of the transaction. or combined, even without merger clearance 4. Products offered or in development;
prescribed information to either issue a or lapse of the applicable waiting period. This 5. Marketing or strategic plans; or
decision or, if necessary, request additional may take the form of any of the following: 6. Methods or formula used to determine
relevant information. REQUIRED INFORMATION costs or prices.
1. Taking possession of the other‘s assets.
such as inventory, machinery,
NOTE: The issuance of such a request has the
1. Nature of the subject transaction; equipment, customer and supplier lists;
effect of extending the period within which Premature exercise of control
2. Relevant product market; 2. Operating such assets. including its
the agreement may not be consummated for
3. Relevant geographic market; manufacturing facilities;
an additional sixty (60) days, beginning on the There is premature exercise of control when
day after the request for information is 4. Parties‘ affiliates, their relationship, the acquiring entity, before merger clearance
their respective businesses, market
or lapse of the applicable waiting period starts competition and noncompetition issues, but 1. PCC’s jurisdiction; parties. Such terms may provide the right of
to exercise control over the target the concerned sector regulator shall be 2. public interest; the Commission to implement adjustment or
'undertaking, including the approval of the consulted and afforded reasonable opportunity 3. resource allocation; divestment.
following: to submit its own opinion and 4. strength of supporting evidence; or
recommendation on the matter before the 5. overall effect of the merger on the The violation of the agreement (e.g., violation
1. Ordinary course of business contracts; Commission makes a decision on any case.” market. (Section 13.8, PCC Rules on of behavioral remedy) can take the form of an
2. Customer proposals; Merger Procedure) abuse of dominant position, which can be
3. Prices, discounts, quotations, or terms Thus, “a favorable recommendation by a motu proprio investigated and acted upon by
of contracts; governmental agency with a competition NOTE: A complainant has no standing to take the Commission pursuant to Section 31. In this
4. Licensing strategies; or mandate shall give rise to a disputable part in the investigation. However, the case, there is a violation prior to the
5. Hiring or personnel decisions. presumption that the proposed merger or complainant will be informed of PCC’s action Commission’s proceedings that may be the
acquisition is not violative of (the) Act." (Sec. on the complaint. The PCC may also decide to subject of the Commission's adjustment or
17, RA 10667) communicate or consult with the complainant divestiture order pursuant to Section 12 (h)
at any stage of the proceedings in line with its
COMMISSION’S DECISION ON Such favorable recommendation does not power to gather information. In addition, the
NOTIFICATION dispense with the Commission’s mandate to PROHIBITED M&As
complainant is entitled to a copy of the
review the transaction. non-confidential version of the decision on the
The Commission may clear the transaction merger (Section 13.9, PCC Rules on Merger
NOTE: The Senate identified the EEG and the M&As that substantially prevent, restrict or
when it has no substantial impact on Procedure).
NTC as the other agencies with a competition lessen competition in the relevant market or in
competition in the relevant market. It may mandate. The Commission is free to have a the market for goods or services as may be
REMEDIES
also exempt the transaction. In accordance MOA with any agency and, for matters of determined by the Commission (are)
with Section 21. Otherwise, the Commission efficiency, ask for a ruling or comment on a prohibited. (PCA, Sec. 20)
may order any of the following: matter within that agency’s expertise. That Legally enforceable agreements
said, primary jurisdiction over competition Exceptions of Block M&A
1. Prohibit the implementation of the The contemplated agreement must, at a
will rest solely with the Commission. (Senate
agreement; minimum, stipulate on: The Commission is authorized to permit an
Interpellations, 02 September 2014))
2. Prohibit the implementation of the otherwise prohibited M&As when parties,
agreement unless and until it is Opposition to an application for merger 1. The identified behavioral or structural presumably with the information supplied
modified by changes specified by the while the PCC’s review is on-going remedies and their implementation; during Phase 2 Review or during the
Commission; or 2. The monitoring scheme; and negotiations for legally enforceable
3. Prohibit the implementation of the The PCC may investigate any merger that the 3. The remedies of the Commission in agreements, establish either a rule of reason
agreement unless and until the agency has reasonable grounds to believe is case of breach. and/or white knight justification, specifically:
pertinent party or parties enter into likely to substantially prevent, restrict, or
legally enforceable agreements lessen competition in the market (Section 13.1, NOTE: The agreement may stipulate on 1. The concentration has brought about or
specified by the Commission. (PCA, PCC Rules on Merger Procedure). Complaints submission of periodic reports, detailing the is likely to bring about gains in
Sec. 18) from businesses and consumers will be extent of parties’ compliance. Further, the efficiencies that are greater than the
considered as inputs in deciding on whether Commission may exercise its power to monitor effects of any limitation on competition
Effect of a favorable recommendation by a or not PCC will open an investigation (Section compliance by the person or entities that result or likely to result from the
government agency with competition 13.4, PCC Rules on Merger Procedure). concerned with the consent judgment. merger or acquisition agreement; or
mandate on the Commission’s merger 2. A party to the merger or acquisition
control proceedings PCC will consider each complaint on its merits Commission’s remedies in case of parties' agreement is faced with actual or
to determine if an investigation is warranted non compliance imminent financial failure, represents
Under Section 32, the Commission has original (Section 13.7, PCC Rules on Merger Procedure). the and least the agreement
and primary jurisdiction in the enforcement The Commission may exercise any of the
In deciding on whether or not to consider a anti-competitive arrangement among
and regulation of all competition-related remedies stipulated in the agreement. As a
complaint, the PCC shall take into account the the known alternative uses for the
issues, “even if the issue involves both rule, the terms of the agreement primarily
following: failing entity’s assets. (PCA, Sec. 21)
govern the relationship between or among the
The burden of proof lies with the parties CRIMINAL PENALTIES suffered by the corporation, its stockholders or POSSIBLE DEFENSES
seeking the exemption. (PCA, Sec. 22) members and other persons.
Anti-competitive acts
FINES AND PENALTIES OTHER FINES AND PENALTIES 1. Possible defense against the charge of
Under Section 30, criminal penalties are “failure to comply with an order of
HIT-WHERE-IT-HURTS limited to: the Commission”
The Act penalizes certain acts having adverse
1. Per se cartel violations; and effect on the Commission’s proceedings. It also If the concerned entity fails to comply
The Act follows the hit-where-it-hurts 2. Cartel violations without rule of reason penalizes violation of any of the provisions of with a ruling, order or decision of the
principle by prescribing heavy administrative justifications. the Act (in general), the IRR and the Commission within forty five (45) days
fines on violators. (Lim and Recalde, 2016) Commission’s decisions, orders or rulings. from its service, a daily fine of up to P2
The violation is penalized by imprisonment
Thus, Section 29 provides the following million will be imposed. The
In general, the Act treats as an offense the from two (2) to seven (7) years, and a fine of
administrative penalties: contemplated order assumes the
commission of any of the anti-competitive not less than fifty million pesos
Commission has validly and lawfully
acts, including the parties’ consummation of (P50,000,000.00) but not more than two 1. Administrative penalty for failure or issued such order. If it were otherwise,
M&As covered by compulsory notification hundred fifty million pesos (P250,000,000.00). refusal to comply with Commission’s the entity may not be held liable.
without prior clearance from the Commission decisions, orders or rulings; NOTE: The
NOTE: These are in addition to administrative
or its inaction. The commission of any such penalty ranges from P50,000 up to P2 2. Possible defense against the charge of
fines, as described earlier.
offense merits corresponding fines and million for each violation. The “supplying of incorrect or
penalties, including criminal penalties for Adjustment Commission may impose a similar misleading information”
certain violations. (Lim and Recalde, 2016) penalty for each day of delay in
While administrative fines are reviewed and complying with any of such decisions, The contemplated information in
adjusted every five (5) years, criminal penalties orders or rulings, subject to a 45-day Section 29(c) assumes the same to be
ADMINISTRATIVE FINES under Section 30 are not explicitly made grace period. relevant and material to the issue in
subject to adjustment. 2. Administrative fine for supplying question, i.e., were it not for such
“intentionally or negligently” incorrect incorrect or misleading information,
Section 29 provides administrative fines for Imprisonment the Commission would have decided
or misleading information in relation to
violations of Sections 14, 15 and 20. The fine differently. Thus, the supply of
Imprisonment is imposed upon the “an application for a binding ruling, a
shall be based on a schedule, with due regard irrelevant or immaterial information,
responsible “officers, directors, or employees proposal for a consent judgment,
to the gravity and duration of the violation. albeit erroneous or misleading, will not
holding managerial positions, found to be proceedings relating to a show cause
Further, the range depends on whether the make the entity liable for
“knowingly and willfully responsible for such order, or application for modification of
fine is imposed on first offense (i.e., from a administrative fine under this
violation.” The elements of knowledge and the Commission’s ruling, order or
base amount up to P100 million), or on second subparagraph.
willfulness are important, and the prosecution approval, as the case may be;
offense (i.e., not less than P100 million, but
not more than P250 million). The second must specifically prove them by proof beyond 3. Possible defense against the charge of
NOTE: The amount of fine is likewise
offense (which merits a higher fine, with reasonable doubt to secure conviction. “violating the provision of the IRR”
schedular, ranging from a base amount up to
higher thresholds) presumably involves the P1 million.
NOTE: The above is consistent with Section 31 The contemplated violation of the IRR
same, and not of different, character of the
of the Corporation Code (Liability of directors, in Section 12(e) in relation to Section
first offense. The fines will be increased every 3. Administrative fine for other violations,
trustees or officers) imposing a liability on 29(d) assumes the purported violated
five years to maintain their real value. including violations of the IRR, ranging
directors of trustees who willfully and provision is valid and issued in
from P50,000 up to P2 million. Section
Factors in imposing the fine knowingly vote for or assent to patently accordance with the Commission’s
12(e) specifically authorizes the
unlawful acts of the corporation or who are quasi- legislative authority. Thus, an
Commission to impose sanctions, fines
1. Gravity; and guilty of gross negligence or bad faith in entity may not be held liable if the
or penalties on such violations.
2. Duration of the violation (Sec. 29, RA directing the affairs of the corporation. Such violated IRR provision has no relation
10667) directors or trustees shall be liable jointly and to the proper implementation of the
severally for all damages resulting therefrom
 Act, or is irrelevant or immaterial to the TRIPLE PENALTY RULE 1. At the time the entity comes forward, Scope of the immunity
issue in question. the Commission has not received
information about the activity from any The program shall include the immunity from
For an administrative regulation to have Treble damage concept where a violator of the other source; any suit or charge of affected parties and third
the force of penal law: law is liable to a private party for triple the 2. Upon the entity’s discovery of illegal parties, exemption, waiver, or gradation of
amount of damages that he suffers as a result activity, it took prompt and effective fines and/or penalties giving precedence to the
a. The provision claimed to be of the violation. The Act adopts the triple entity submitting such evidence. An entity
action to terminate its participation
violated must be sanctioned by penalty rule with respect to the applicable cooperating or furnishing information,
therein;
the law that it seeks to administrative and/or criminal fine, if the document or data to the Commission in
3. The entity reports the wrongdoing with
implement (i.e., relevant and violation involves the trade or movement of connection to an investigation being
candor and completeness and provides
material to its proper basic necessities and prime commodities as conducted shall not be subjected to any form
full, continuing, and complete
implementation); defined by Republic Act No. 7581, as amended. of reprisal or discrimination. Such reprisal or
cooperation throughout the
b. The violation of the (PCA, Sec. 41) discrimination shall be considered a violation
investigation; and
administrative regulation must of this Act subject to the sanctions provided in
4. The entity did not coerce another party
be made a crime by the NOTE: The triple penalty clause does not the Act. (PCA, Sec. 35)
to participate in the activity and clearly
delegating statute itself; and apply to the penalty of imprisonment.
was not the leader in, or the originator
c. The penalty for such violation Sanction on person giving false or
All fees, fines, penalties collected by the of, the activity. (PCA, Sec. 35)
must be provided by the statute misleading information
itself. (Hon. Perez U. LPG Commission shall not be retained by the
Availability of immunity if the
Refillers Association, GR. No. Commission, but will be remitted to the An entity found to have reported false,
Commission has already commenced its
159149, June 26, 2006; People v. National Treasury and shall accrue to the misleading or malicious information, data, or
investigation
Maceren, GR. No. L-32166, general funds. document may be penalized by a fine not less
October 18, 1977) Even after the Commission has received than the penalty imposed in the section
However, the funds necessary for the reported to have been violated by the entity
information about the illegal activity after a
continuous and effective operation of the complained of. (PCA, Sec. 35)
4. Possible defense against the charge of fact finding or preliminary inquiry has
Commission shall be included in the annual
“violation of confidentiality of commenced, the reporting entity will be
General Appropriations Act. (PCA, Sec. 51)
information” granted leniency, provided that: (1) Upon the
ENFORCEMENT AND OTHER PROVISION
entity’s discovery of illegal activity, it took
A person may not be held liable for prompt and effective action to terminate its
LENIENCY PROGRAM Extent of the authority of the commission
violation of confidentiality clause under participation therein; and (2) The entity
Section 34, if the information reports the wrongdoing with candor and The Commission shall have:
purportedly to be protected by the The Commission shall develop a Leniency completeness and provides full, continuing,
confidentiality rule: Program to be granted to any entity in the 1. Power to inquire, investigate, hear and
and complete cooperation throughout the
form of immunity from suit or reduction of decide on cases involving violations of
investigation and the following additional
a. Has not been properly any existing competition laws,
any fine which would otherwise be imposed requirements are complied with:
established as confidential including the Act; a. Upon complaint of
on a participant in an anti-competitive
business information; 1. The entity is the first to come forward any interested party; b. Upon referral of
agreement as provided in Section 14(a) and
b. Has been the subject of a waiver; and qualify for leniency; another regulatory agency; or c. On its
14(b) of this Act in exchange for the voluntary
or 2. At the time the entity comes forward, own.
disclosure of information regarding such an
c. Is “mandatorily required to be the Commission does not have evidence 2. Power to institute civil and criminal
agreement which satisfies specific criteria
disclosed by law or by a valid against the entity that is likely to result charges; and
prior to or during the fact-finding or
order of a court of competent in a sustainable conviction; and 3. Power to issue injunctions, requirement
preliminary inquiry stage of the case. (PCA,
jurisdiction or of a government 3. The Commission determines that of divestment, and disgorgement of
Sec. 35)
or regulatory agency, including granting leniency would not be unfair excess profits against violators, after
an exchange. Conditions for the grant of immunity from to others. (Ibid.) due hearing.
suit
NOTE: It has no price-setting or regulation The Commission may deputize any and all While the Supreme Court implicitly
function. (Lim and Recalde, 2016) enforcement agencies of the government or recognized in Stonehill v. Diokno (GR. No.
enlist the aid and support of any private L-19550, June 19, 1967) the right of Search vs. Inspect
Powers of the Commission relative to institution, corporation, entity or association, corporations against unreasonable searches
enforcement of the Act to carry out the raid. [PCA, Section 12 (i)] and seizures, its discussion was a mere obiter Search Inspection
dictum. It cannot be used as authoritative
In addition to its authority to conduct merger Dawn Raid vs. Search and Seizure basis to confer to corporations such “An examination of a to examine;
control proceedings, the Commission has
constitutional right. The US case of Hale v. man’s house or other scrutinize;
authority to: buildings or investigate; look
Henkel (201 US. 43, 1906) cited in some cases
Particulars Search and Dawn raid premises, or of his into; check; or View
1. Conduct a fact finding or preliminary did not state that corporations have the
Seizure person, or of his for the purpose of
inquiry (PCA, Sec. 3); inherent right against unreasonable searches
vehicle, aircraft, etc. ascertaining the
2. Conduct an administrative Basis Constitutio PCA, Sec 12 and seizures. It merely recognized that with a view to the quality, authenticity,
investigation (PCA, Sec. 31); n, Article (g) individuals do not waive such constitutional discovery of or conditions of an
3. Forbear the implementation of the Act; III, Sec 2 rights just because they decided to form a contraband or illicit item, product,
(PCA, Sec. 28, RA 10667) collective body. or stolen property, or document,
Pre-requisites Probable Reasonable some evidence of residence, business,
4. Increase the schedule of fines every five for issuance cause that a suspicion the
Thus, the Act had to explicitly require a court’s guilt to be used in etc.”
years (PCA, Sec. 29); crime has books and the prosecution of a
order before the Commission can conduct a
5. Investigate ad enforce its orders and been records criminal action for
committed relevant to to dawn raid in order to protect the concerned
resolutions (PCA, Sec 33) some crime or
Commission's entity.
6. Develop a leniency (or whistle-blowing) offense with which
investigation he is charged. A
program (PCA, Sec. 35); Probable Cause vs. Reasonable Suspicion
will be prying into hidden
7. Grant non-adversarial remedies, such as removed, places for that which
issuance of binding ruling, show cause concealed, Probable Cause Reasonable is concealed and it is
order and consent order (PCA, Sec. 37); tampered Suspicion not a search to
8. Cite contumacious persons in contempt with, or observe that is open
(PCA, Sec. 38); destroyed. to view. Probing or
Such facts and Presupposes the
9. Issue a writ of execution (PCA, Sec. 40); exploration for
Scope Search and Inspection circumstances which existence of facts or
and something that is
Seizure would lead a information which
concealed or hidden
10. Issue implementing rules and reasonably discreet would satisfy an
from searcher; an
regulations. (PCA, Sec. 50) and prudent man to objective observer
invasion, a quest
The Constitution cannot be the basis for believe that an that the person
with some sort of
offense has been concerned may have
the court’s dawn raid order; force, either actual
committed and that committed an
or constructive”
DAWN RAIDS the objects sought in offense.
The Constitution (Article III, Sec. 2) does not (Emphasis supplied)
connection with the
squarely apply to juridical persons. It distinctly NOTE: What may be (Black’s Law
offense are in the
uses the term “people” in Section 2, unlike regarded as Dictionary, abridged
place sought to be
“Dawn raids” refer to the authority’s surprise “reasonable” will fifth ed., p. 701
“person” in Section 1 (on due process and searched. (Del
visits and inspection of office premises, Castillo v People, however depend
equal protection clause).
records and files in order to enforce GR. No. 135128, upon all the
competition law. The Supreme Court has ruled in Valmonte v. January 30, 2012) circumstances.” (Fox, There is some There is some
Belmonte, Jr. (GR. No. 74930, February 13, Campbell and elements of force in element of
NOTE: The Act explicitly vests on the Hartley v. the United search voluntariness
1989) that juridical persons do not have the
Commission the authority to issue subpoena Kingdom, August 30,
right to privacy since the entire basis of the 1990, § 32, Series A
and conduct dawn raids.
right to privacy is an injury to the feelings and No. 182)
sensibilities of the party and a corporation
On-site interviews
would have no such ground for relief.
The Act does NOT explicitly sanction the or preliminary inquiry on possible violations produced in the course of fact-finding or 7. The Commission should, in all
conduct of on-site interviews of the entity’s of the law. preliminary inquiry, shall terminate the same controversial questions, render its
officers and employees. Similarly, on-site by: decision in such a manner that the
interviews cannot be implied from or PURPOSE: To prevent entities from being parties to the proceeding can know the
considered incidental to the exercise of the subjected to multiple investigations by 1. Issuing a resolution ordering its closure various issues involved, and the reasons
different government agencies endowed by if no violation or infringement of this for the decision rendered. (Ang Tibay v.
Commission’s inspection power. other law with competition authority. Act is found; or Court of Industrial Relations, GR. No. L
2. Issuing a resolution to proceed, on the 46496, February 27. 1940)
Commission’s remedy to secure relevant Conditions to initiate such fact finding or basis of reasonable grounds, to the
documents and testimony preliminary inquiry conduct of a full administrative Actions of the Commission following its
investigation. (PCA, Sec. 31,) administrative investigation
1. Following its dawn raid, the The Act contemplates a possible violation of
Commission may secure relevant the Act based on “reasonable grounds,” before AUTHORITY TO CONDUCT The Commission’s investigation may either:
documents and computer files by the Commission may initiate such fact finding ADMINISTRATIVE INVESTIGATION
issuing a subpoena duces tecum against or preliminary inquiry. (PCA, Sec. 31, RA 1. Exonerate the respondent entity;
persons in possession of such 10667) Requirements in the conduct of the 2. Result in issuance of injunction, order
documents and files; Commission’s administrative investigation of divestment, adjustment,
2. Further, the Commission may issue a Reasonable ground can be ascertained from disgorgement of excess profits, levy of
subpoena ad testificandum against the allegations in the verified complaint filed Administrative due process requires the administrative sanctions, fines, or
persons to secure their testimony that by an interested party or parties, or in the Commission to provide due notice and penalties (PCA, Sec. 12,); or
is deemed relevant to its investigation. referral by a regulatory agency. hearing. (PCA, Sec. 31) 3. File a criminal complaint with DOJ~
[PCA, Sec. 12(f)] OFC, in case it finds a probable
Powers of the Commission relative to the Additionally:
violation.
conduct of such fact-finding or
preliminary inquiry 1. The right to a hearing, which includes
On the other hand, the private party who
the right of the concerned party to
AUTHORITY TO CONDUCT FACT-FINDING initiated the investigation could use the
The Commission may gather relevant present his case and submit supporting
OR PRELIMINARY INQUIRY Commission’s findings as basis of his private
information through the exercise of any of its evidence;
action.
Section 12 powers, “by administering oaths, 2. The duty of the Commission to
Scope of the Commission’s authority to issuing subpoena duces tecum and consider the evidence presented; Evaluating the evidence gathered during
conduct fact finding or preliminary summoning witnesses, and commissioning 3. The Commission’s decision must be its administrative investigation
inquiry T consultants or experts.” (PCA, Sec. 33) supported by evidence;
4. The Commission’s evidence must be The Commission should decide the case on
The Commission is the sole and exclusive NOTE: Disclosure of privileged “substantial,” i.e., such relevant the basis of substantial evidence, i.e., such
authority to initiate and conduct a fact-finding communications cannot be compelled through evidence as a reasonable mind accepts relevant evidence that a reasonable mind
or preliminary inquiry for the enforcement of a subpoena. In particular, documents and as adequate to support a conclusion; might accept as adequate to support a
the Act (Sec. 31, RA 10667) papers in the hands of entity’s counsel are 5. The Commission’s decision must be conclusion.
subject to attorney-client privilege if those rendered on the evidence presented at
1. Motu proprio; documents and papers relate to confidential the hearing, or at least contained in the Treatment of the Commission’s technical
2. Upon the filing of a verified complaint communications between the entity and record and disclosed to the parties findings by court and other administrative
by an interested party; or counsel. affected; agency
3. Upon referral by a regulatory agency. 6. The Commission must act on its own
Possible actions of the Commission The Commission has presumed expertise in
independent consideration of the law
No Parallel Action principle following the conduct of fact finding or ascertaining and analyzing important factual
and facts of the controversy, and not
preliminary inquiry elements in resolving competition- related
The Commission shall have sole and exclusive simply accept the views of a
issues or disputes.
authority to initiate and conduct fact finding The Commission, after considering the subordinate in arriving at a decision;
statements made, or documents or articles and
NOTE: Technical findings should, as a rule, be whole or in part, in all or specific cases, on an business structure, conduct, practice, or The Commission shall issue a show cause
given great weight and respect by the other entity or group of entities, if in its act (PCA Sec. 53); order:
tribunals that will conduct follow-up determination: 2. Request for a binding rule, with regard
1. Enforcement is not necessary to the to the contemplated ot future acts 1. When the entity is conducting its
proceedings. The entity has the burden to business, in whole or in part in a
attainment of the policy objectives of where no prior complain or
demonstrate such findings are erroneous. The this Act; investigation has been initiated (PCA manner that may not be in accord with
concerned tribunal shall, in turn, weigh the Sec. 37); the provisions of the Act or other
evidence and theories of the parties, and 2. Forbearance will neither impede 3. Provide a justification before the competition laws; and
decide based on the following quantum of competition in the market where the Commission when it issues a Show 2. It finds that the issuance of a show
evidence: entity or group of entities seeking Cause Order, in the interest of the cause order would be in the interest of
exemption operates nor in related public (PCA Sec. 37).; the public. [PCA, Sec. 37 (b)]
1. DOJ-OFC, evidence establishing the markets; and 4. Propose for a Consent Order, at any
3. Forbearance is consistent with public time prior to the conclusion of the Consent order
respondent is probably guilty of the
interest and the benefit and welfare of Commission’s inquiry (PCA Sec. 37);
offense charged; An entity may secure a consent order “at any
the consumers 5. Propose for a plea of Nolo Contendere,
2. Court trying the criminal action, proof time prior to the conclusion by the
in criminal proceeding for possible
beyond reasonable doubt that the Commission of its inquiry.” [PCA, Sec. 37(c)]
Provided that the forbearance will be granted violation of Sec 14(a) or Sec 14(b). (PCA
accused committed such offense; for a maximum period of one year. Any Sec. 37) The consent order allows an entity to
3. Court trying the civil action, extension to the period will have to be minimize its administrative fine and civil
preponderance of evidence; or expressly approved by the Commission. NOTE: To prevent businesses from being liability to a private party, without in any
4. Sector regulator, substantial evidence. Extension of the duration of an exemption unduly harassed, the Act provides that resort manner admitting a violation of the Act or any
shall not be longer than one year. (PCA Sec 28 to non adversarial administrative remedies other competition laws.
Enforcement of the Commission’s ruling, and PCA IRR Rule 9, Sec 1) must first be made before any administrative,
civil and criminal actions are filed against the NOTE: A consent order shall not bar any
order, resolution, decision or judgment
Public Hearing parties concerned. inquiry for the same or similar acts if
Upon the finality of its binding ruling, order, continued or repeated (ibid)
A public hearing shall be held to assist the
resolution, decision, judgment, or rule or Commission in making its determination of a Binding ruling With regard to the civil liability aspect, the
regulation, collectively, the Commission may proper forbearance. The Commission’s order same needs the agreement of the concerned
issue a writ of execution to enforce its decision exempting the relevant entity, or group of An entity may secure a binding ruling on the private party. This scheme is similarly
entities under this Rule shall be made public. effects of a particular agreement, conduct or beneficial to such party since it will dispense
and the payment of the administrative fines.”
Conditions may be attached to the forbearance stipulation prior to the filing of complaint by with the possible protracted lengthy civil
(PCA, Sec. 40)
if the Commission deems it appropriate to an interested party or motu proprio proceedings.
ensure the long-term interests of consumers. investigation by the Commission. (PCA, Sec.
The Commission shall monitor the compliance
In the event that the basis for the issuance of 37, RA 10667) Should such private party refuse to give
by the entity or entities concerned, their consent and subsequently pursue a private
the exemption order ceases to be valid, the
officers, and employees, with the final and Such requests may cover prospective action, the entity’s recourse to the consent
order may be withdrawn by the Commission.
executory binding ruling, cease and desist agreements, conduct or stipulations. order scheme shall not be considered an
(PCA IRR Rule 9, Sec 2)
order, or approval of a consent judgment. admission of violation of the Act or any other
Show cause order
Upon motion of an interested party or parties, competition laws. (PCA, Sec. 45)
the Commission shall issue a certification or NON ADVERSAL REMEDIES Any person who has cause of action to enjoin
resolution to the effect that the entity or an entity from continuing with its identified
entities concerned have, or have not, as the The PCA adopts voluntary compliance as its business conduct may file a verified complaint Nolo contendere plea vs. Ordinary Plea
main implementing mechanism as opposed to and request the Commission for the issuance
case may be, complied with a final and
the litigation process. It seeks to achieve this of a show cause order. [PCA, Sec. 37 (b)] A plea of nolo contendere or “no contest plea”
executory ruling, order, or approval. [PCA, Sec.
by making the following available refers to a plea where the accused does not
12(j); and Sec. 37 (d)] non-adversal administrative remedies before The entity, in turn, may immediately give accept nor deny responsibility for the charges,
the Commission. justifications for its action, without the but agrees to accept punishment as if he had
FORBEARANCE BY THE COMMISSION 1. Renovation of the existing agreements elaborate proceedings required in an ordinary pleaded guilty. (PCA, Sec. 36,) It has the same
or restructuring of business within two action. legal effect as a guilty plea, i.e., the accused
The Commission may forbear from applying (2) years non-conforming existing will have a criminal record.
the provisions of the PCA for a limited time, in
A plea of nolo contendere cannot be used enjoined the implementation of such decision former’s finding of probable cause. The A person having a cause of action against the
against the defendant entity to prove liability pending appeal. DOJ-OFC may dismiss the Commission’s entity must file the private action with the
in a civil suit arising from the criminal action criminal complaint, if it finds there is no concerned Regional Trial Court (PCA, Sec. 44)
nor in another cause of action. This is not the In case any of such actions is commenced reasonable ground to believe that a crime has notwithstanding the provisions of BP 129.
case in an ordinary plea, which could affect or while the Commission’s decision is on appeal been committed and that the accused is not
influence the decision in the civil aspect, to be and therefore not yet final, and the appellate probably guilty thereof. (Sec. 4, Rule 112, Rules Consequence if a person files a civil action
issued by the court in the same or separate court has not enjoined the implementation of of Court) without the Commission’s prior
action. (PCA, Sec. 36) such decision pending appeal, the DOJ-OFC, administrative determination
the court or the concerned sector regulator, as Possible defenses of the accused
This plea is available not only to natural applicable, may conduct its own proceedings Under Section 45, the Commission’s
persons but also to juridical entities, which and have an independent finding of facts and 1. The accused are not competitors, i.e., affirmative finding is a condition precedent in
may be held liable to a fine under Section 30. law, as applied to the issue. they belong to different relevant filing a private action. This requirement is
markets, or they belong to the single consistent with the doctrine of primary
NOTE: This plea is limited only to criminal Criminal Action economic entity; jurisdiction. It is an element of the
cases. 2. In case the entities involved are complainant’s cause of action, the absence of
Administrative Investigation vs. juridical persons, the accused are not which is a ground for the defendant to move
The accused may make the plea at any time up Preliminary Investigation corporate officers, directors, or for the dismissal of the action for being
to his arraignment and thereafter, with the employees holding managerial premature, or a condition precedent for filing
permission of the court, which shall accept the The Act has carefully differentiated the positions, or they have no knowledge or the claim has not been complied with. (Sec. 1
plea only after weighing its effect on the Commission’s “administrative investigation” cannot be considered willfully par. j, Rule 16, Rules of Court)
parties, the public and the administration of and the DOJ-OFC’s “preliminary responsible for the offense charged;
justice. investigation.” The former always precedes the 3. There is no agreement between them,
latter. specifically the stipulations Administrative Action
The court must issue a decision on the basis of contemplated in the offense charged; or
law and evidence presented. The court cannot Under Section 31, the Commission must 4. In case of Section 14(b) Violations, the
utilize the nolo contendere plea as basis for its endorse matters to the DOJ-OFC for agreement has no foreclosure effect on The Commission exercises original and
decision. preliminary investigation if the evidence so competition, i.e., the effect on primary jurisdiction in the enforcement and
warrants. Specifically: “(if) the evidence so competition is de minimis or the act regulation of all competition-related issues.
Under the Rules of Court, a plea of guilty later warrants, the Commission may file before the has objective justifications.
withdrawn, or an unaccepted offer of a plea of DOJ criminal complaints for violations of this The Commission shall still have jurisdiction if
guilty to lesser offense, is not admissible in Act or relevant laws for preliminary Jurisdiction over criminal actions under the issue involves both competition and
evidence against the accused who made the investigation and prosecution before the the Act noncompetition issues, but the concerned
plea or offer. ( Rule 130, Sec. 27,) proper court. The DOJ shall conduct such sector regulator shall be consulted and
preliminary investigation in accordance with When the DOJ-OFC finds probable cause afforded reasonable opportunity to submit its
In case of conviction, the court’s decision the Revised Rules of Criminal Procedure.” considering the complaint and evidence own opinion and recommendation on the
(based on proof beyond reasonable doubt) (Section 31) Under the Act, these cases are presented by the Commission, it shall file the matter before the Commission makes a
shall include its decision on the civil aspect, or limited to Section 14(a) and (b) violations, corresponding information with the concerned decision on any case. (PCA, Sec. 32,)
may be used by third parties against the penalized under Section 30. Regional Trial Court, regardless of the
accused in the separate private actions, as the penalties and fines. (PCA, Sec. 44) GR: The concerned sector regulator is not
case may be. The (Office for Competition) OFC under the prohibited from conducting a parallel
Department of Justice (DOJ-OFC) shall only NOTE: The standard test of jurisdiction under investigation on non-competition-related
FOLLOW-ON ACTIONS conduct preliminary investigation and BP 129 does not apply. issues falling under its jurisdiction. (PCA, Sec.
undertake prosecution of all criminal offenses 32,)
The findings or decision of the Commission arising under (the) Act and other Civil Action
may be the basis of: competition-related laws in accordance with XPN: The findings of the Commission
Section 31. constitute as prejudicial questions to the
a. Criminal action While the Commission has authority to issues before the concerned sector regulator.
b. Civil Action or Scope of DOJ-OFC’s preliminary impose administrative fines, it has no
c. Other Administrative action. investigation authority to award damages in favor of private PRESCRIPTION
persons.
This action may thereafter be immediately The DOJ-OFC is not a rubber stamp of the The Act provides a five-year prescriptive
commenced, unless the Commission’s decision Commission. The latter’s affirmative Jurisdiction over civil actions under the period reckoned, as follows:
has been appealed and the appellate court has determination will not readily give rise to the Act
 1. For criminal actions, from the time the GLOSSARY (DEFINITION OF TERMS)
violation is discovered by the offended Reasonable Suspicion - Presupposes the
party, the authorities, or their agents; existence of facts or information which would
and Consent order - allows an entity to minimize satisfy an objective observer that the person
2. For administrative and civil actions, its administrative fine and civil liability to a concerned may have committed an offense.
from the time the cause of action private party, without in any manner
accrues. (PCA, Sec. 46) admitting a violation of the Act or any other Search - An examination of a man’s house or
competition laws. other buildings or premises, or of his person,
JURISDICTION AND AUTHORITY OVER or of his vehicle, aircraft, etc. with a view to
THE COMMISSION Entity - any person, natural or juridical, sole the discovery of contraband or illicit or stolen
proprietorship, partnership, combination or property, or some evidence of guilt to be used
Its decisions, orders or rulings are appealable association in any form, whether incorporated in the prosecution of a criminal action for
to the Court of Appeals, (PCA, Sec. 39) and or not, domestic or foreign, including those some crime or offense with which he is
only subject to the supervisory function of the owned or controlled by the government, charged. A prying into hidden places for that
CA and Supreme Court for purposes of filing engaged directly or indirectly in any economic which is concealed and it is not a search to
petitions under Rule 65 of the Rules of Court. activity. [PCA, Sec. 4(h),] observe that is open to view. Probing or
exploration for something that is concealed or
It is placed under the Office of the President hidden from searcher; an invasion, a quest
but with numerous safeguards to protect its Dawn raid - refer to the authority’s surprise with some sort of force, either actual or
independence. (Senate Interpellations, 20 visits and inspection of office premises, constructive.
August 2014) records and files in order to enforce
competition law.
Subpoena ad testificandum - judicial order
Gun-jumping - It refers to the premature compelling a named individual to appear
consummation of transaction. before a specific court or legal tribunal to
provide oral testimony concerning a particular
Inspection - to examine; scrutinize; matter under investigation or litigation under
investigate; look into; check; or View for the the threat of penalties for non-compliance.
purpose of ascertaining the quality,
authenticity, or conditions of an item, product, Test - done to assess whether the purported
document, residence, business, etc.” parent entity exercises decisive influence over
the activities of its subsidiary or affiliate. (Lim
Nolo contendere plea - “no contest plea” and Recalde, 2016).
refers to a plea where the accused does not
accept nor deny responsibility for the charges, Triple Penalty Rule - Treble damage concept
but agrees to accept punishment as if he had where a violator of the law is liable to a private
pleaded guilty. (PCA, Sec. 36,) It has the same party for triple the amount of damages that he
legal effect as a guilty plea, i.e., the accused suffers as a result of the violation.
will have a criminal record.

Premature integration - happens parties

treat the subject undertakings to have merged
or combined, even without merger clearance
or lapse of the applicable waiting period

Probable Cause - Such facts and

circumstances which would lead a reasonably
discreet and prudent man to believe that an
offense has been committed and that the
objects sought in connection with the offense
are in the place sought to be searched.
 GLOSSARY (REQUISITES) d. Commerce; or Required Information for Notification Considerations of PCC in deciding whether
e. Engineering; or not to consider a complaint
Areas covered by Philippine Competitive 4. Must have been in the active practice of 1. Nature of the subject transaction;
Act their professions for at least 10 years; 2. Relevant product market; 1. PCC’s jurisdiction;
1. Creation of the Commission, its and 3. Relevant geographic market; 2. public interest;
powers and functions; 5. Must not have been candidates for any 4. Parties‘ affiliates, their relationship, 3. resource allocation;
2. Prohibited anti-competitiveacts; elective national or local office in the 4. strength of supporting evidence; or
their respective businesses, market
3. Guide in disposition of cases; immediately preceding elections,
share, significant competitors, 5. overall effect of the merger on the
4. Fines and penalties; whether regular or special. (PCA, Sec.
customers, suppliers, or consumers in market. (Section 13.8, PCC Rules on
5. Enforcement provisions; and 6)
the relevant market, their objectives; Merger Procedure)
6. Miscellaneous provision.
and
Prohibitions and Disqualifications 5. Significant terms of the transaction
Legislative policies
1. Shall not, during their tenure, hold any Exception on Block M&A
1. Enhance economic efficiency and other office or employment.
1. The concentration has brought about or
ensure open and fair competition 2. Shall not, during their tenure, directly Forms of Premature Integration
or indirectly practice any profession, is likely to bring about gains in
across trade, industry, and all business
activities. Additionally, create a except in a teaching capacity, 1. Taking possession of the other‘s assets. efficiencies that are greater than the
National Competition Policy to be participate in any business, or be such as inventory, machinery, effects of any limitation on competition
executed by the Government of the financially interested in any contract equipment, customer and supplier lists; that result or likely to result from the
Republic of the Philippines and all its with, or any franchise, or special 2. Operating such assets. including its merger or acquisition agreement; or
political entities collectively; privileges granted by the government. 2. A party to the merger or acquisition
manufacturing facilities;
2. Avoid economic concentration that 3. Shall strictly avoid conflict of interest in
3. Holding themselves out to the public as agreement is faced with actual or
could dominate the production, the conduct of their office.
4. Shall not be qualified to run for any one entity or giving the appearance of imminent financial failure, represents
distribution, trade, or industry in a way
that unfairly restricts competition or office in the election immediately having combined their operations; the and least the agreement
interferes with the functioning of the succeeding their cessation from office; c. Answering the target company's anti-competitive arrangement among
free market; and telephones using the name of the known alternative uses for the
4. Penalize all forms of anti-competitive 5. Shall not be allowed to personally failing entity’s assets. (PCA, Sec. 21)
the merged entity; or
agreements, abuse of dominant appear or practice as counsel or agent
d. Allowing the target’s employees
position and anti-competitive mergers on any matter pending before the
Commission for 2 years following their to use e-mail addresses and
and acquisitions, with the objective of
protecting consumer welfare and cessation from office. (PCA, Sec. 8) hand out business cards of the Factors in imposing the fine
advancing domestic and international merged entity.
trade and economic development. 4. Relocating or integrating physical 1. Gravity; and
(PCA, Sec. 2) Covered Persons and Entities operations; 2. Duration of the violation (Sec. 29, RA
5. Posting employees at the other party's 10667)
1. Any person or entity engaged in any
trade, industry and commerce (TIC) in offices;
Qualifications of PCC
the Philippines; and 6. Allowing representatives of one party to
1. Citizens and residents of the 2. International trade having direct, negotiate contracts or settle legal
Limitation of Criminal Penalty (sec 30)
Philippines; substantial, and reasonably foreseeable disputes on behalf of the other;
2. Of good moral character; effects in TIC in the Philippines, 7. Appointing individuals of one party to 1. Per se cartel violations; and
3. Of recognized probity and including those that result from acts manage or operate divisions of the 2. Cartel violations without rule of reason
independence and must have done outside the Philippines. (PCA,
other; or justifications
distinguished themselves professionally Sec. 3)
8. Providing one party with access to the
in public, civic or academic service in
any of the following fields: other party’s computer systems.
a. Economics;
b. Law;
c. Finance;
Conditions for the grant of immunity from present his case and submit supporting Non-adversal administrative remedies
suit under Leniency Program evidence; 1. Renovation of the existing agreements
2. The duty of the Commission to or restructuring of business within two
1. At the time the entity comes forward, (2) years non-conforming existing
consider the evidence presented;
the Commission has not received business structure, conduct, practice, or
3. The Commission’s decision must be act (PCA Sec. 53);
information about the activity from any supported by evidence; 2. Request for a binding rule, with regard
other source; 4. The Commission’s evidence must be to the contemplated ot future acts
2. Upon the entity’s discovery of illegal “substantial,” i.e., such relevant where no prior complain or
activity, it took prompt and effective evidence as a reasonable mind accepts investigation has been initiated (PCA
action to terminate its participation as adequate to support a conclusion; Sec. 37);
therein; 3. Provide a justification before the
5. The Commission’s decision must be
3. The entity reports the wrongdoing with Commission when it issues a Show
rendered on the evidence presented at Cause Order, in the interest of the
candor and completeness and provides the hearing, or at least contained in the public (PCA Sec. 37).;
full, continuing, and complete record and disclosed to the parties 4. Propose for a Consent Order, at any
cooperation throughout the affected; time prior to the conclusion of the
investigation; and 6. The Commission must act on its own Commission’s inquiry (PCA Sec. 37);
4. The entity did not coerce another party independent consideration of the law 5. Propose for a plea of Nolo Contendere,
to participate in the activity and clearly in criminal proceeding for possible
and facts of the controversy, and not
was not the leader in, or the originator violation of Sec 14(a) or Sec 14(b). (PCA
simply accept the views of a Sec. 37)
of, the activity. (PCA, Sec. 35) subordinate in arriving at a decision;
and
7. The Commission should, in all
Extent of the Authority of the Commission controversial questions, render its
decision in such a manner that the
1. Power to inquire, investigate, hear and parties to the proceeding can know the
decide on cases involving violations of various issues involved, and the reasons
any existing competition laws, for the decision rendered.
including the Act; a. Upon complaint of
any interested party; b. Upon referral of
another regulatory agency; or c. On its
Actions of the Commission following its
own.
administrative investigation
2. Power to institute civil and criminal
charges; and 1. Exonerate the respondent entity;
3. Power to issue injunctions, requirement 2. Result in issuance of injunction, order
of divestment, and disgorgement of of divestment, adjustment,
excess profits against violators, after disgorgement of excess profits, levy of
due hearing. administrative sanctions, fines, or
penalties (PCA, Sec. 12,); or
3. File a criminal complaint with DOJ~
Requirements in the conduct of the OFC, in case it finds a probable
Commission’s administrative investigation violation

1. The right to a hearing, which includes

the right of the concerned party to
 INTELLECTUAL PROPERTY LAWS Integrated Circuit means a product, in its final
Intellectual property rights consists of: form, or an intermediate form, in which the
(CMP-GILU) elements, at least one of which is an active
COPYRIGHT AND RELATED GOODS element, and some or all of the
RIGHTS interconnections are integrally formed in
and/or on a piece of material, and which is
Literary and artistic works which are intended to perform an electronic function
intellectual creation in the literary and artistic
PAMANTASAN NG LUNGSOD NG MAYNILA domain that are protected from the moment Undisclosed Information - is a secret in the
of creation. sense that it is not, as a body or in precise
(University of the City of Manila) MARK (TRADE, SERVICE, AND configuration and assembly components,
General Luna, corner Muralla St., Intramuros, Manila COLLECTIVE) generally known among, or readily accessible
1002 Metro Manila to persons within the circles that normally
Any visible sign that is capable of deal with the kind of information in question.
distinguishing goods or services on an
enterprise. also known as business identifier. Has commercial value because it is a secret
PATENT
In partial fulfillment of the requirements for the subject
Has been subjected to reasonable steps under
Regulatory Framework and Legal Issues in Business A technical solution of a problem in any field the circumstances, by the person lawfully in
(ACN 2210A-4) of human activity which is new, involves an control of the information, to keep it a secret.
inventive step, and is industrially (Article 39, TRIPS Agreement)
applicable.
PEARL AND DEAN vs SHOEMART INC.
Geographic indications - indication which [G.R. No. 148222]
identifies a good as originating in the territory,
Finals Reviewer: where a given quality, reputation or other Pearl & Dean and SMI Inc. had agreed to
characteristic of the good is essentially install light boxes (poster ads) in SMI's chain
Intellectual Property Law attributable to its geographical origin. (Art. 22, of stores but were unable to reach an
Trade‐related goods Aspects of Intellectual agreement; as a result, SMI hired third-party
Property Rights) installers. The court ruled that there was no
copyright, trademark, or patent infringement
Industrial designs - is any composition of because Pearl & Dean's copyright protection
lines or colors or any three-dimensional form, only extended to the technical drawings and
whether or not associated-with lines or colors: not the light box itself, their trademark
Provided, That such composition or form gives registration for "Poster Ads" was limited to
a special appearance to and can serve as stationery and did not cover the light boxes,
pattern for an industrial product or handicraft. and they had not secured a patent for the
invention, preventing them from acquiring
Atty. Aloi Renz P. Santos Layout designs (Topographies) of patent rights to protect it.
Integrated Circuits - is synonymous with
'Topography' and means the PEARL & DEAN, INC. vs. SHOEMART, INC.
three-dimensional disposition, however [G.R. No. 148222], ibid
expressed, of the elements, at least one of
Pearl and Dean negotiated with Shoemart, Inc.
which is an active element, and of some or all
(SMI) for their installation of light boxes
of the interconnections of an integrated
trademarked as "Poster Ads," but the contract
circuit, or such a three-dimensional
was rescinded because SM City North Edsa
disposition prepared for an integrated circuit
was under construction, leading SMI to offer it
fintended for manufacture."
with SM Makati and SM Cubao, which was
agreed by Pearl and Dean Inc. and after that,

April 2024
Pearl and Dean Inc. discovered an exact copy Leon's patent and the Court found that De 2. A patent office and the information was property of a known substance which does not
installed in SM City and SM Cubao by SMI and Leon's process was an improvement of the old contained: result in the enhancement of the known
North Edsa Marketing Inc. (NEMI), which process of tile-making and therefore a. In another application filled by efficacy of that substance.(Sec 26.2 as
after, the court ruled that there was no patent patentable. the inventor and should have amended by R.A 9502)
infringement because they only registered for not have been disclosed by the
PRIOR ART JESSIE G.CHING vs. WILLIAM SILINAS
trademark so they could not legally prevent office,or
anyone from manufacturing or commercially b. In an application filed without [G.R . NO. 161295]
using the contraption. 1. Everything which has been made a the knowledge or consent of the
inventor by a third party which Jessie G. Ching holds the position of owner
available to the public anywhere in the
PATENTABLE INVENTION obtained the information and general manager at Jeshicris
world, before the filling date or the
directly or indirectly from the Manufacturing Co., which produces a Utility
priority date of the application claiming
Any technical solution of any problem in any inventor. Model referred to as the "Leaf Spring Eye
the invention.
field of human activity which is new, involves 3. A third party which obtained the Bushing for Automobiles.” The main issue in
an inventive step and industrially information directly or indirectly from this case revolves around whether the
2. The whole contents of a published petitioner's model qualifies for copyright
applicable. It may be,or may relate to a the inventor. (Sec 25 IPC)
application, filed or effective in the protection. The Court ruled that since the
product or process or an improvement of any
Philippines, with a filling or priority THE BURDEN OF PROVING WANT OF works were utility models rather than artistic
of the foregoing. (Sec. 21)
date that is earlier than the filling or NOVELTY OF AN INVENTION or literary creations, they did not fall under
THE CONDITIONS FOR PATENTABILITY priority date of the copyright protection. Both the Leaf Spring Eye
application.Provided that the Bushing and Vehicle Bearing Cushion were
application which has validity claimed The burden of proving want of novelty is on
NIA deemed practical articles lacking in artistic
the filling date of an earlier application him who avers it and the burden is heavy one
design or value.
1. Novelty - An invention shall not be under Section 31 of the IPC, there shall which is met only by clear and satisfactory
considered new if it forms part of prior be a prior art with effect as of the filling proof which overcomes every reasonable THE TEST OF NON-OBVIOUSNESS
art. (Sec. 23 IPC) date of such earlier application. doubt.(Manzano v CA, G.R No. 113388)
If any person possessing ordinary skill in the
2. Involves an inventive step - If having
Provided further that the applicant or MANZANO, A. vs. CA & MADOLARIA, M. art was able to draw the inferences and he
regard, to the prior art, it is not obvious
the inventor identified in both [G.R . NO. 113388] constructs that the supposed inventor drew
to a person skilled in the art at that
applications are not one and the same. from prior art, then the latter did not really
time of filling date or priority date of
(Sec. 24 IPC) Angelita Manzano sought to cancel Melecia invent.
the application claiming the invention.
Madolaria's patent for a gas burner, claiming it
3. Industrially Applicable - An invention THE “MADE AVAILABLE TO THE PUBLIC’ A PERSON OF ORDINARY SKILL
was not new and she was not the true and
that can be produced and used in any AND ITS EFFECTS A person who is presumed to:
actual owner; however, the Philippine Patent
industry, shall be industrially
Office finds Madolaria's invention novel and 1. Be an ordinary practitioner aware of
applicable. (Sec. 27 IPC)
To be “made available to the public” means patentable, with the Court affirming the what was common general knowledge
AGUAS vs. DE LEON AND CA.,[G.R. No. atleast one member of the public has been decision and emphasizing the importance of in the art at the relevant date
L-32160] able to access knowledge of the inventions supporting oral testimony and allegations with 2. Have knowledge of all references that
without any restriction on passing the substantial evidence, which the petitioner has are sufficiently related goods to one
Conrado G. De Leon, was granted and issued
knowledge on the others. failed to provide, the petition was denied. another and to pertinent art and to
Letters Patent No. 658 by the Philippines
Patent Office for his invention of certain new have knowledge of all parts reasonably
When a work has already been made INVENTIVE STEPS
and useful improvements in the process of pertinent to the particular problems
available to the public,it shall be
making mosaic pre-cast tiles and he then filed with which the inventor was involved.
non-patentable for absence of novelty.
a complaint for infringement of patent against An invention involves an inventive step 3. Have has at his disposal the normal
petitioner Domiciano Aguas and F.H. Aquino NON PREJUDICIAL DISCLOSURE if,having regard to prior art,it is not obvious to means and capacity for routine work
& Sons. On the hand, Aguas argued that De a person skilled in the art at that time of the and experimentation. (Rules and
Leon's patent was unlawfully secured through filling date or priority date of the application Regulations on Inventions, Rule 207)
When the disclosure of information contained
misrepresentations and that his own products, in the application during the 12 month period claiming the invention.(Sec 26 IPC)
which had been duly patented, were different before the filing date or the priority date of the Note: In the case of drugs and medicines there
from those of De Leon. The Supreme Court application if such disclosure was made by: is no inventive step if the invention results
held that Aguas' evidence did not overcome
1. The inventor from the mere discovery of a new form or new
the legal presumption of the validity of De
 OTHER FORMS OF PATENTABLE NON‐PATENTABLE INVENTIONS 3. 2 or more persons invented separately “aerial fuze”, however the Court of Appeals
INVENTIONS and independently of each other - To affirms that legal basis and the right to the
PAD‐SCAD person who FILED an application patented “aerial fuze” will fall to whom person
1. Discoveries, scientific theories and 4. 2 or more applications are filed - the registered it first therefore the Court confirms
Other Forms of Patentable Inventions
mathematical methods applicant who has the EARLIEST that the right to a patent was in favor to Floro
1. Industrial Design – any composition filing date, or the EARLIEST International Corp.
of lines or colors or any 2. In the case of Drugs and medicines, PRIORITY date. (First to file rule).
PERSON WHO MAY APPLY FOR A PATENT
three-dimensional form, whether or mere discovery of a new form or new (Sec. 29, IPC)
not associated with lines or colors. property of a known substance which 5. Inventions created pursuant to a
Any person who is a national or who is
Provided that such composition or form does not result in the enhancement of commission - Person who
domiciled or has a real and effective industrial
gives a special appearance to and can the efficacy of that substance commissions the work, unless
establishment in a country which is a party to
serve as pattern for an industrial otherwise provided in the contract
any convention, treaty, or agreement relating
product or handicraft. (Sec. 112, IPL) 3. Schemes, rules and methods of (Sec. 30.1, IPC)
to intellectual property rights or the repression
performing mental acts, playing games 6. Employee made the invention in the
of unfair competition, to which the Philippines
2. Integrated circuit – a product, in its or doing business, and programs for course of his employment contract:
is also a party, or extends reciprocal rights to
final form, or an intermediate form, in computers a. The EMPLOYEE, if the
nationals of the Philippines by law. (Sec. 3,
which the elements, at least one of inventive activity is NOT a part
IPC)
which is an active elements and some 4. Methods for treatment of the human or of his regular duties even if
STEPS IN THE REGISTRATION OF A
of all of the interconnections are Animal body the employee uses the time,
PATENT
integrally formed in and or on a piece facilities, and materials of the
1. Filing of the application
of material, and in which is intended to 5. Plant varieties or animal breeds or employer.
2. Accordance of the filing date
perform an electronic function. essentially biological process for the b. The EMPLOYER, if the
3. Formality examination
production of plants or animals. This invention is the result of the
4. Classification and search
3. Layout design/topography – the provision shall not apply to performance of his
5. Publication of application
three-dimensional disposition, however microorganisms and non‐biological regularly-assigned duties,
6. Substantive examination
expressed, of the elements, at least one and microbiological processes unless there is an agreement,
7. Grant of patent
of which is an active element, and of express or implied, to the
8. Publication upon grant
some or all of the interconnections of 6. Aesthetic creations contrary. (Sec. 30.2, IPC)
9. Issuance of certificate (Salao, Essentials
an integrated circuit, or such a
FIRST TO FILE RULE of Intellectual Property Law: A
three-dimensional disposition prepared 7. Anything which is Contrary to public
Guidebook on Republic Act No. 8293 and
for an integrated circuit intended for order or morality. (Sec. 22, IPC as
1. 2 or more persons have made the related goods Law., 2008)
manufacture. Registration is valid for amended by R.A. 9502)
invention separately and independently
10 years without renewal counted from of each other - the person who FILED DISCLOSURE AND DESCRIPTION OF THE
date of commencement of protection. PATENTABILITY OF COMPUTER for an application for such invention, INVENTION
PROGRAMS or
4. Utility model – A name given to 1. The application shall disclose the
2. 2 or more applications are filed for the
inventions in the mechanical field. GR: Computer programs are not patentable invention in a manner sufficiently clear
same invention - the applicant who has
but are copyrightable. and complete for it to be carried out by
THE QUALIFICATION OF AN INVENTION the EARLIEST filing date. (Sec. 29,
a person skilled in the art. (Sec. 35.1,
AS A UTILITY MODEL XPN: They can be patentable if they are part IPC)
IPC)
of a process (e.g. business process with a step CRESER PRECISION INC. VS CA, FLORO
If it is new and industrially applicable. A model involving the use of a computer program). INTERNATIONAL CORP. [G.R. No. 118708] 2. Where the application concerns a
of implement or tools of any industrial microbiological process or the product
OWNERSHIP OF A PATENT Creser Precision invents and manufactures
product even if not possessed of the quality of thereof and involves the use of a
invention but which is of practical utility. (Sec. “aerial fuze” and any other military micro-organism which cannot be
Persons entitled to a patent ammunition, however the Floro International
109.1, IPC) sufficiently disclosed in the application
1. Inventor, his heirs, or assigns subsequently created the same “aerial fuze” in such a way as to enable the
The term of a utility model and registered it with the BPTTT or Bureau of
2. Joint invention - jointly by the invention to be carried out by a person
inventors. (Sec. 28, IPC) Patent, Trademarks, and Technology Transfer skilled in the art, and such material is
7 years from date of filing of the application and suddenly Creser Precision claims that not available to the public, the
(Sec. 109.3, IPC). they are the actual and true inventory of the
 application shall be supplemented by a 2. If several independent inventions E.I. DUPONT DE NEMOURS AND CO. vs published application being identified
deposit of such material with an which do not form a single general DIR. FRANCISCO, DIR. VELASCO, AND in the saide notice by its serial number.
international depository institution. inventive concept are claimed in one THERAPHARMA, INC. [G.R. No. 174379]
Note: That the action may not be filed until
(Sec. 35.1, IPC) application, the Director may require
E.I. DuPont de Nemours and Co.'s patent after the grant of a patent on the published
that the application be restricted to a
3. The Regulations shall prescribe the application for Angiotensin II Receptor application and within four (4) years from the
single invention. A later application
contents of the description and the Blocking Imidazole (losartan) was abandoned, commission of the acts complained of (Sec.
filed for an invention divided out shall
order of presentation. (Sec. 14, R.A. No. and its petition for revival was denied for 46, IPC).
be considered as having been filed on
165a) the same day as the first application: being filed out of time; however, it argued that PATENT TAKE EFFECT
Provided, That the later application is its prior filing in the United States was
THE CLAIMS
filed within four (4) months after the protected from becoming part of the public Shall take effect on the date of the publication
requirement to divide becomes final or domain, which was then concluded by the of the grant of the patent in the IPO Gazette.
1. The application shall contain one (1) or within such additional time, not Supreme Court that the right of priority was (Sec. 50.3, IPC)
more claims which shall define the exceeding four (4) months, as may be not applicable in the case of revival of an
DURATION OF A PATENT, UTILITY
matter for which protection is sought. granted: Provided further, That each abandoned patent and only relevant if
MODEL, AND INDUSTRIAL DESIGN
Each claim shall be clear and concise, divisional application shall not go Therapharma, Inc. had a conflict with its
and shall be supported by the beyond the disclosure in the initial application for a patent with the Intellectual
description. (Sec. 36.1, IPC) application. (Sec. 38.2, IPC) Property Office.

CONDITIONS IN AVAILING OF PRIORITY Utility Industrial

2. The Regulations shall prescribe the 3. The fact that a patent has been granted Patent
DATE Model Design
manner of the presentation of claims. on an application that did not comply
(Sec. 36.2, IPC) with the requirement of unity of 20 years 7 years from 5 years from
invention shall not be a ground to a. The local application expressly claims
THE ABSTRACT from the date the date of the date of
cancel the patent. (Sec. 17, R.A. No. priority.
of filing of filing of the filing of the
165a) b. It is filed within twelve (12) months
the application application
1. The abstract shall consist of a concise from the date the earliest foreign
DIVISION APPLICATION application without without
summary of the disclosure of the application was filed.
without renewal renewal
invention as contained in the c. A certified copy of the foreign
renewal
description, claims and drawings in Any application referring to several goods or application together with an English
renewable
preferably not more than one hundred services, hereafter referred to as the "initial translation is filed within six (6)
for not more
fifty (150) words. (Sec. 37, IPC) application," may be divided by the applicant months from the date of filing in the
than two (2)
into two (2) or more applications, hereafter Philippines. (Sec. 31, IPC)
consecutive
2. It must be drafted in a way which referred to as the "divisional applications," by RIGHTS CONFERRED BY A PATENT periods of five
allows the clear understanding of the distributing among the latter the goods or APPLICATION AFTER PUBLICATION (5) years each
technical problem, the gist of the services referred to in the initial application.
solution of that problem through the The divisional applications shall preserve the
invention, and the principal use or uses filing date of the initial application or the Applicant shall have all rights of a patentee
of the invention. (Sec. 37, IPC) benefit of the right of priority. (Sec. 129, IPC) against any person who, without his GROUNDS FOR CANCELLATION OF A
authorization, exercised any of the rights PATENT (Sec. 61.2 & Sec. 82, IPC)
PRIORITY DATE conferred under Sec. 71 in relation to the
3. The abstract shall merely serve for
invention claimed in the published patent CIND
technical information. (n)
An application for patent filed by any person application, as if a patent had been granted a. The invention is Not new or patentable
UNITY OF INVENTION who has previously applied for the same for that invention, provided that the person b. The patent does not Disclose the
invention in another country which by treaty, had: invention clearly and completely for it
1. The application shall relate to one convention, or law affords similar privileges to 1. Actual Knowledge that the invention to be carried out by any person skilled
invention only or to a group of Filipino citizens, shall be considered as filed as that he was using was the subject in art; or
inventions forming a single general of the date of filing the foreign application. matter of published application; or c. Contrary to public order or morality
inventive concept. (Sec. 38.1, IPC) (Sec. 31, IPC) 2. Received written notice that the d. Patent is found Invalid in an action for
invention was the subject matter if a infringement.
Note: If the grounds for cancellation relate to b. The application for registration of the order or decision to
some of the claims or parts of the claim, layout-design was not Filed within two be the true and
b. Private acts performed on a
cancellation may be effected to such extent (2) years from its first commercial actual inventor. non-commercial scale or for
only. (Sec. 61.2, IPC) exploitation anywhere in the world. non-commercial purposes.

GROUNDS FOR CANCELLATION OF Note: Where the grounds for cancellation are RIGHTS CONFERRED TO A PATENT c. The invention may only be used
UTILITY MODELS (Sec. 104; IPC) established with respect only to a part of the experimentally for scientific or
layout-design, only the corresponding part of 1. Subject matter is a product - right to educational purposes.
FICQ the registration shall be cancelled. restrain, prohibit, and prevent any
a. The claimed invention does not unauthorized person or entity from d. Bolar Provision - In the case of
Qualify for registration as a utility REMEDY OF PERSON NOT HAVING THE making, using, offering of sale, selling drugs and medicines, the act
model and does not meet the RIGHT TO PATENT (SEC. 67.1) or importing the product. includes testing, using, making,
requirements of registrability. or selling the invention,
b. That the description and the claims do If a person other than the applicant is declared 2. Subject matter is a process - right to including any related data, solely
not Comply with the prescribed by final court order or decision as having the restrain, prohibit, and prevent any for the development of
requirements; right to a patent, he may within 3 months after unauthorized person or entity from information and issuance of
c. That any drawing which is necessary for such decision has become final: manufacturing, dealing in, using, approvals by government
the understanding of the invention has offering of sale, selling or importing any regulatory agencies required
not been Furnished; PRFS product obtained directly or indirectly under any law in the Philippines
d. That the owner of the utility model a. Prosecute the application as his own from such process. or another country that
registration is not the Inventor or his b. File the new patent application regulates the manufacture,
successor in title. c. Request the application to be refused; 3. Right to assign the patent, to transfer construction, use, or sale of any
GROUNDS FOR CANCELLATION OF or by succession, and to conclude product.
INDUSTRIAL DESIGN (Sec. 120, IPC) d. Seek cancellation of the patent. licensing contract.
REMEDY OF THE TRUE AND ACTUAL e. The act involves preparing
REN OWNER (Sec. 68) PHILIPPINE PHARMAWEALTH, INC. vs. medicine for individual cases in
a. The subject matter of the industrial PFIZER, INC. [G.R. No. 167715] a pharmacy or by a medical
design is not Registerable. If a person, who was deprived of the patent practitioner, based on a
b. The subject matter is Not new; or without his consent or through fraud is In a patent infringement case between Pfizer prescription.
c. The subject matter of the industrial declared by final court order or decision to be and Phil Pharmawealth, the Supreme Court
design Extends beyond the content of the true and actual inventor, ruled in favor of Phil Pharmawealth, stating f. When a ship, vessel, airplane, or
the application as originally filed. CCA that Pfizer's patent had already expired, land vehicle from another nation
rendering injunctive relief invalid, affirmed inadvertently or briefly enters
Note: If the grounds for cancellation relate to a. the Court shall order for his the CA's jurisdiction to review BLA-IPO's Philippine territory, tests using
some of the claims or parts of the claim, substitution as patentee, or orders, and found Pfizer guilty of forum the invention.
cancellation may be effected to such extent b. at the option of the true inventor, Cancel shopping, dismissing the case filed with the 2. Prior user
only. The restriction may be effected in the the patent, and Award actual damages RTC. Person other than the applicant, who in
form of an alteration of the effected features of in his favor if warranted by the LIMITATION OF PATENT RIGHTS good faith, started using the invention
the design. (Sec. 120.2, IPC) circumstances. in the Philippines, or undertaken
1. In general: serious preparations to use the same,
GROUNDS FOR CANCELLATION OF SECTION 67.1 vs. SECTION 68 a. GR: If the owner of the patent before the filing date or priority date of
LAYOUT- DESIGN OF INTEGRATED
puts it on the public market of the application shall have the right to
CIRCUITS (Sec. 120.3, IPC)
Section 67.1 Section 68 the Philippines, or if it is with continue the use thereof, but this right
PRF his/her consent. shall only be transferred or assigned
2 or more persons A person who was further with his enterprise or business.
have made the deprived of the XPN: Drugs and medications
a. The layout-design is not Protectable
invention separately patent without his may be introduced in the 3. Use by Government
under this Act;
and independently of consent through Philippines or anyplace in the
a. The Right holder is not entitled to A government agency or third person
each other. fraud and is declared world by the patent owner or authorized by the government may
protection under this Act; or
by the final court approved parties.
 exploit invention even without DOCTRINE OF EXHAUSTION necessary and sufficient to constitute Corporation. It differs from the patented
agreement of a patent owner where: equivalency that the same function can be substance in terms of structure and function.
a. Public interest, as determined by Doctrine of first sale performed in substantially the same way or Thus, it does not fall within the doctrine of
the appropriate agency of the manner, or by the same or substantially the equivalents’ scope.
government, so requires; or The owner of the patent loses control over any same, principle or mode of operation; but
b. A judicial or administrative body further sales or resales of a product once it where these tests are satisfied, mere DOCTRINE OF MECHANICAL
has determined that the manner has been sold in the domestic market for the differences of form or name are immaterial. EQUIVALENTS
of exploitation by the owner of a first time, either with or without the holder's
patent is anti‐competitive. consent (Sec 72.1, IPC) 2. Doctrine of Equivalents Patent infringement occurs if the substitute
Function-means-and-result test performs the same function and was well
4. Reverse reciprocity of foreign law GR: Patent rights are Exhausted by first sale in known at the date of the patent as a proper
States that any requirement, penalty, the Philippines (Domestic exhaustion) Occurs when a device appropriates a prior substitute for the omitted ingredient (Gsell v.
diminution, restriction, limitation, or invention by adopting its original idea and, Yap‐Jue, G.R. No. L‐4720, Jan. 19, 1909)
other similar burden imposed by a XPN: Except however on drugs and medicines: although with some modification and change,
foreign law on a Philippine national first sale in any jurisdiction exhausts. performs substantially the same function in Thus, a patent infringement occurs when the
seeking protection for intellectual (International exhaustion) substantially the same way to achieve alleged infringer has substituted in lieu of
property rights in that nation shall also substantially the same result. (Smith Kline some unessential part of the patented process,
be reciprocally enforceable against PATENT INFRINGEMENT Beckman Corp. v. CA, GR. No. 126627, August a well-known mechanical equivalent.
nationals of that nation within 14, 2003) EQUIVALENT DEVICE
Philippine jurisdiction. MOUSI
- Making, Using, Offering for sale, PASCUAL GODINES VS. COURT OF It is such that a mechanic of ordinary skill in
SMITH KLINE BECKMAN CORPORATION Selling, or Importing a patented APPEALS [G.R. No. 97343, ibid] construction of similar machinery, having the
VS. CA [G.R. No. 126627] product or a product obtained directly forms, specifications and machine before him,
or indirectly from a patented process, SV-agro enterprise bought a power tiller from could substitute in the place of the
Smith Kline Beckman Corp., with a Letters or Magdalena Villaruza. In a later date, the sale mechanism described without the exercise of
Patent for its invention which contains a - Use of a patented process without the of SV-Agro declined by 50% that’s why they the inventive faculty.
method utilizing a compound as an active authorization of the patentee. (Sec. held an investigation and found out that DOCTRINE OF THE FILE WRAPPER
ingredient in fighting infections caused by 76, IPC) Pascual Godines sold the same power tiller ESTOPPEL
gastrointestinal parasites and lungworms in TEST FOR PATENT INFRINGEMENT without authorization.
animals, sued Tryco Pharma Corp., which This doctrine balances the doctrine of
manufactures, distributes, and sells Impregon 1. Literal Infringement Test SMITH KLINE BECKMAN CORPORATION equivalents. Patentee is precluded from
for patent infringement and unfair Resort must be had, in the first instance, to VS. COURT OF APPEALS, [G.R. NO. 126627] claiming as part of patented product that
competition. Impregon contains Albendazole, words of the claim. If the accused matter which he had to excise or modify in order to
which is intended for combating worm or clearly falls within the claim, infringement is Tyco Pharma is sued by Smith Kline Beckman avoid patent office rejection, and he may omit
parasite infestations in animals. The Caloocan committed. for infringing a patent along with an allegation any additions that he was compelled to add by
City RTC and CA denied the case, hence the of unfair competition. Methyl patent office regulations.
petition. The Supreme Court ruled that Smith PASCUAL GODINES VS. COURT OF 5-propylthio-2-benzimidazolecarbamate has DOCTRINE OF CONTRIBUTORY
Kline has no rights over Albendazole since the APPEALS, G.R. No. 97343 been awarded a Philippines Patent Office’s INFRINGEMENT
Letters Patent granted to the entity fails to SV Agro Industries investigated their Letter Patent no. 14561; Albendazole was used
yield anything regarding the compound. Zamboanga Del Sur Branch after finding out in a drug called Impregon by Tyco Pharma that Anyone who actively induces the infringement
Therefore, Smith Kline does not have the right they are suffering a more than 50% decline on deals with veterinary products produced in the of a patent or provides the infringer with a
to sue Tryco Pharma Corp. for patent their sales. It was found out that Godines is country. Smith Kline’s complaint was component of a patented product or of a
infringement and unfair competition. producing power tillers substantially similar to dismissed and the said letter was revoked. The product produced because of a patented
PARALLEL IMPORTER the patent and produces substantially the decision was reversed by the Court of Appeals process knowing it to be especially adopted
same result when used. The Supreme Court who noted that Tyco Pharma could not be held for infringing the patented invention and not
One which imports, distributes, and sells used the Literal infringement test and ruled liable for featuring an Impregon tablet with suitable for substantial non-infringing use
genuine products in the market, that Godines committed patent infringement the same active ingredient. Tyco Pharma did shall be liable as a contributory infringer and
independently of an exclusive distributorship after careful examination between the two not commit patent infringement, according to shall be jointly and severally liable with the
or agency agreement with the manufacturer. power tillers and showed that they operate on The Supreme Court. Albendazole is a drug infringer. (Sec. 42, R.A. No. 165a)
the same fundamental principles. It is that was produced by Smith Klein
 REMEDIES OF THE OWNER OF THE WHO CAN FILE AN ACTION FOR LICENSING 5. If the patented invention is not being
PATENT AGAINST INFRINGEMENT INFRINGEMENT? worked in the Philippines on a
Modes of obtaining license to exploit commercial scale, although capable of
1. Civil action for infringement - The 1. The patentee or his successors-in- patent rights. being worked, without satisfactory
owner may bring a civil action with the interest may file an action for reason after the expiration of 4 years
appropriate Regional Trial Court to infringement. (Creser Precision 1. Voluntary licensing (Sec. 85, IPC) and from the date of filing of the
recover from infringer the damages Systems, Inc. v. CA, G.R. No. 118708, Feb. 2. Compulsory licensing (Sec. 93, IPC) application or 3 years from the date of
sustained by the former, plus attorney’s 2, 1998) the patent whichever is later. (Sec. 93 in
fees and other litigation expenses, and VOLUNTARY LICENSING relation to Sec. 94)
to secure an injunction for the 2. Any foreign national or juridical entity 6. Where the demand for patented drugs
protection of his rights. who meets the requirements of Sec. 3 The grant by the patent owner to a third and medicines is not being met to an
and not engaged in business in the person of the right to exploit a patented adequate extent and on reasonable
2. Criminal action for infringement - If Philippines, to which a patent has been invention. terms, as determined by the Secretary
the infringement is repeated, the granted or assigned, whether or not it is of the Department of Health (Sec. 10,
infringer shall be criminally liable and licensed to do business in the Rights of a licensor in voluntary R.A 9502)
upon conviction, shall suffer Philippines. (Sec. 77, IPC) licensing? GROUNDS FOR CANCELLATION OF THE
imprisonment of not less than six (6) COMPULSORY LICENSE
months but not more than three (3) DEFENSES IN AN ACTION FOR In the absence of any provision to the 1. Ground for the grant of the
years and/or a fine not less than INFRINGEMENT contrary in the technology transfer compulsory license no longer exists
P100,000.00 but not more than arrangement, the grant of a license shall and is unlikely to recur;
P300,000.00. 1. Invalidity of the patent; (Sec. 81, IPC); not prevent the licensor from granting 2. Licensee has neither begun to supply
2. Any of the grounds for cancellation of further licenses to third person nor from the domestic market nor made serious
3. Administrative remedy - Where the patents: exploiting the subject matter of the preparation therefore;
amount of damages claimed is not less a. That what is claimed as the technology transfer arrangement himself 3. Licensee has not complied with the
than P200,000.00, the patentee may invention is not new or (Sec. 89, IPC). prescribed terms of the license.
choose to file an administrative action patentable WHO CAN GRANT A COMPULSORY
against the infringer with the Bureau of LICENSE PRICE ET. AL VS. UNILAB [166 SCRA 133]
Legal Affairs (BLA). The BLA can issue b. That the patent does not
injunctions, direct infringer to pay disclose the invention in a 1. The Director of Legal Affairs Price et al. owns “aminoalkyl furan derivatives”
patentee damages, but unlike regular manner sufficiently clear and 2. R.A. 9502 (Universally Accessible which was granted by compulsory license to
courts, the BLA may not issue search complete for it to be carried out Cheaper and Quality Medicines Act of UNILAB by the Director General with a 2.5%
and seizure warrants or warrants of by any person skilled in the art; 2008) however amended Sec. 93 of net sales royalty fee which Price et al.
arrest. or GROUNDS FOR COMPULSORY petitioned with the thought that it is unfair
LIMITATION TO THE CIVIL/CRIMINAL LICENSING AND THE PERIOD FOR and should be lowered, however the decision
ACTION c. That the patent is contrary to FILING A PETITION of the CA reflects on Section 34 of the IPO
public order or morality. (Sec. 61, gazette which renders the royalty fee just.
IPC) Grounds for compulsory licensing and the ASSIGNMENTS AND TRANSMISSION OF
1. No damages can be recovered for acts of
period for filing a petition? RIGHTS
infringement committed more than
four (4) years before the filing of the ROSARIO MAGUAN vs. COURT OF 1. National emergency
action for infringement. (Sec. 79, IPC) APPEALS AND SUSANA LUCHAN, 2. Where the public interest, at any time Forms of Assignment
[G.R. L-45101] after the grant of the patent 1. Total – assignment of entire right, title
2. The criminal action prescribes in three 3. Where a judicial or administrative or interest in and to the patent and the
(3) years from the commission of the Rosario Maguan claims that the powder puffs body has determined that the manner invention covered thereby.
crime. (Sec. 84, IPC) Susana Luchan manufactures and sells are of exploitation by the owner of the 2. Partial
identical to her patented powder puffs patent or his licensee is a. Separate rights – assignment of a
resulting in issuance of preliminary injunction anti‐competitive at any time after the specific right
which was later on set aside by the CA on the grant of the patent b. Pro Indiviso – assignment of an
ground of lack of novelty upon judicial 4. In case of public non‐commercial use aliquot part which results in
examination of the invalidity of the patents. of the patent by the patentee, without co‐ownership
satisfactory reason at any time after the
grant of the patent
How is transfer of right affected? Functions of Trademarks ECOLE DE CUISINE MANILLE (CORDON Collective Mark
1. By inheritance or bequest 1. To point out distinctly the origin or BLEU OF THE PHILIPPINES), INC. vs.
2. License contract ownership of the articles to which it is RENAUS COINTREAU [G.R. NO. 185830] A "collective mark" or "collective trade name" is
affixed. a mark or trade name used by the members of
Effect of an assignment of a patent 2. To secure to him who has been Ecole De Cuisine Manille, Inc. (Ecole) a cooperative, an association or other
instrumental in bringing into market a opposed Cointreau's trademark application for collective group or organization. (Sec. 40, R.A.
The assignment works as an estoppels by superior article or merchandise the the mark "LE CORDON BLEU & DEVICE” for 166)
deed, preventing the assignor from denying fruit of his industry and skill. goods falling under "Nice Classification"
the novelty and utility of the patented 3. To prevent fraud and imposition. (subject mark) in the Philippines, claiming It is any visible sign designated as such in the
invention when sued y the assignee for (Etepha v. Director of Patents, G.R. No. they were the owner of the mark "LE application for registration and capable of
infringement. L‐20635, Mar. 31, 1966) CORDON BLEU, ECOLE DE CUISINE distinguishing the origin or any other
MANILLE" and had been using it since 1948. common characteristics, including the quality
Form of Assignment Cointreau, however, argued that they were the of goods or services of different enterprises
Trade Name
1. In writing true and lawful owner of the mark, as they had which use the sign under the control of the
A name or designation identifying or
2. Acknowledged and certified before a filed applications for the mark's registration in registered owner of the collective mark.
distinguishing an enterprise.
notary public or other officer various jurisdictions, including the
Salient Features of the Paris Convention
authorized to perform notarial acts Philippines, and had a worldwide acclaimed
Trademarks
3. Recorded in the IPO COFFEE PARTNERS vs SAN MIGUEL culinary school named Le Cordon Bleu since
COFFEE ROASTERY [G.R. No. 169504] 1895. 1. National Treatment Principle – foreign
Effect if the assignment was not recorded The Court’s decision was in favor of nationals are to be given the same
in the IPO Petitioner's opening of "SAN FRANCISCO Cointreau, stating that Cointreau had been treatment in each of the member
The assignment works as an estoppel by deed, COFFEE" in Libis, Quezon City resulted in using the subject mark in France since 1895, countries as that country makes
preventing the assignor from denying the confusion and a complaint from respondent to before Ecole's claimed first use in the available in its own citizens.
novelty and utility of the patented invention the BLA-IPO for infringement. Petitioner Philippines in 1948. Additionally, Ecole had no 2. Right of Priority – any person who has
when sued by the assignee for infringement. argues that without registration, an certificate of registration for the subject mark, duly filed registration for trademark
infringement suit is not viable, alleging declaring Cointreau as the true and lawful shall enjoy a right of priority of 6
Licensee Maintains a suit for infringement respondent's trade name abandonment due to owner of the subject mark and allowed its months (Rule 203, Trademark Rules)
expired registration in June 2000 and late registration in the Philippines 3. Protection against Unfair Competition
GR: Only the patentees, his heirs, assignee, renewal in 2001, while emphasizing the 4. Protection of Trade names – protected
grantee or personal representatives may bring likelihood of confusion among purchasers and DIFFERENCE OF TRADEMARK AND in all countries without obligation of
an action for infringement. the necessity of consent for trademark or trade TRADE NAME filing or registration.
name usage. TRADEMARK TRADE NAME 5. Protection of Well‐Known Marks
XPN: If the licensing agreement provides that
the licensee may bring an action for FREDCO MANUFACTURING Goods or services A natural or artificial ACQUISITION OF OWNERSHIP OF MARK
infringement or if he was authorized to do so CORPORATION VS PRESIDENT AND offered by a person who does
by the patentee through a special power of FELLOWS OF HARVARD COLLEGE [G.R No. proprietor or business and Marks are acquired solely through registration.
attorney. 185917, ibid] enterprise are produces or (Sec. 122, IPC)
TRADEMARKS designated by performs the goods
Fredco Manufacturing Corporation petitioned trademark (goods) or services Marks that may be registered
to cancel Harvard University's trademark or service marks designated by
MARKS, COLLECTIVE MARKS, AND Any word, name, symbol, emblem, device,
"Harvard Veritas Shield Symbol" (Registration (services). trademark or service
TRADE NAMES figure, sign, phrase, or any combination
No. 56561) in Classes 16, 18, 21, 25, and 28, mark. thereof except those enumerated under
alleging prior usage of the mark "Harvard" for
Trademarks Refers to business Section 123, IPC.
apparel items; however, the Court of Appeals Refers to the goods
affirmed Harvard's ownership of the mark and and its goodwill. Requirements for a mark to be registered
Any visible sign capable of distinguishing the invalidated Fredco's registration, citing
goods (trademark) or services (service mark) Harvard's global recognition and protection Acquired only by Need not be 1. A visible sign (not sounds or scents);
of an enterprise. registration. registered. and
under the Paris Convention, preventing
unauthorized usage of the "Harvard" name or 2. Capable of distinguishing one’s goods
It shall include a stamped or marked mark in the Philippines. and services from another.
container of goods
 DOCTRINE OF SECONDARY MEANING Laboratory was indeed invalid. The Court and alleged conflicts with local IP law, the Philippine Shoe Expo failed to file the required
found that the patent did not meet the Supreme Court dismissed the petition, 10th Year Declaration of Actual Use, resulting
This doctrine is to the effect that a word or requirements for novelty, inventive step, and affirming the compatibility of Madrid Protocol in the cancellation of their mark. Despite
phrase originally incapable of exclusive industrial applicability, as prescribed by procedures with the IP Code, emphasizing the initial rulings of the BLA of the IPO and the
appropriation with reference to an article on Philippine intellectual property laws. distinctiveness of IPOPHL's registration CA in favor of Philippine Shoe Expo, the
the market, because it is geographical or process, and highlighting the protocol's Birkenstock Orthopaedie GmbH is the
otherwise descriptive, may nevertheless be E.Y INDUSTRIAL SALES VS. SHEN DAR adherence to national law in trademark true and lawful owner of the mark
used exclusively by one producer with ELECTRICITY AND MACHINERY CO. [G.R. examination, leading to the dismissal of the “Birkenstock and Devices”. Under Section 12
reference to his article so long as in that trade No. 184850] petition and ordering the petitioner to cover of RA 166, the Supreme Court ruled in favor of
and to that branch of the purchasing public, legal expenses. Birkenstock, emphasizing that registration of
the word or phrase has come to mean that the Both companies claimed to have the right to
register the trademark "VESPA" for air the trademark, by itself, is not a mode of
article was his product. SUPERIOR COMMERCIAL ENTERPRISES,
compressors. Shen Dar filed a Petition for ownership, especially when requirements like
INC. VS KUNNA ENTERPRISES, INC. AND
FILING AN OPPOSITION TO A Cancellation of EYIS’ COR. Shen Dar primarily the 10th Year Declaration are not met.
SPORTS CONCEPT & DISTRIBUTOR [G.R.
TRADEMARK REGISTRATION argued that the issuance of the COR in favor 194307]
of EYIS violated Section 123.1 paragraphs (d), TAIWAN KOLIN CORPORATION, LTD. vs.
(e) and (f) of Republic Act No. (RA) 8293, Upon the appointment of Sports Concept & KOLIN ELECTRONICS CO., INC (G.R No.
Any person who believes that he would be Distribution as the new exclusive distributor 209843)
otherwise known as the IP Code, having first
damaged by the registration of a mark may, in the Philippines of Kunnan Enterprises LTD,
filed an application for the mark. E.Y.
upon payment of the required fee and within Superior Commercial Enterprise, Kunnan’s On February 29, 1996, Taiwan Kolin filed with
Industrial is the true owner of the mark.
30 days after the publication referred to in former distributor, filed a complaint of the Intellectual Property Office (IPO), a
Ownership should not be based merely on an
Subsection 133.2, file with the Office an trademark infringement and unfair trademark application, for the use of “KOLIN”
earlier filing date. The Court found that
opposition to the application. (Sec. 134, IPC) competition for the disputed trademarks however respondent Kolin Electronics Co., Inc.
continuous use of a trademark can outweigh
“Kennex” and “Pro Kennex'' against Kunnan (Kolin Electronics) opposed petitioner’s
the assumed ownership of the person who
and Sports Concept. On March 31, 1998, the application, As argued, the mark Taiwan Kolin
registered it and establishes the user as the
RTC hold KUNNAN liable for trademark seeks to register is identical, if not confusingly
ELIDAD C. KHO VS. COURT OF APPEALS, actual owner.
infringement and unfair competition. similar, with its “KOLIN” mark. Is Taiwan
ET. AL. [GR. No. 115758]
PRIBHDAS J. MIRPURI vs CA [G.R. No. KUNNAN and SPORTS CONCEPT appealed Kolin entitled to its trademark registration of
Elidad C. Kho owned and operated KEC 114508] the RTC’s decision to the CA. The CA reversed “KOLIN” over its specific goods? The Court
Cosmetics Laboratory, involved in the and set aside the RTC’s decision. It dismissed ruled that the products covered by the
Lolita Escobar filed a trademark application trademark sought to be registered by Taiwan
cosmetics industry, filed a complaint for SUPERIOR’s Complaint ruling that SUPERIOR
for "Barbizon" for brassieres and ladies' Kolin, on the one hand, and those covered by
injunction and damages with a prayer for the was a mere distributor and had no right to the
undergarments, opposed by the US-based the prior issued certificate of registration in
issuance of a writ of preliminary injunction, registration of the disputed trademarks since
Barbizon Corporation due to potential favor of Kolin Electronics, on the other, fall
against the Summerville General the right to register a trademark is based on
confusion with its own trademark; after the under the same categories in the NCL is not
Merchandising and Company (Summerville, ownership.
opposition was dismissed and the registration the sole and decisive factor in determining
for brevity). The complaint alleges that KHO,
granted to Escobar but later cancelled due to a possible violation of Kolin Electronics’
is the registered owner of the copyrights Chin BIRKENSTOCK ORTHOPAEDIE GMBH &
failure to file an affidavit of use, the Supreme intellectual property right should
Chun Su and Oval Facial Cream CO. KG. vs. PHILIPPINE SHOE EXPO
Court affirmed the decision, citing the Paris petitioner’s application be granted.
Container/Case, and has patent rights on MARKETING CORPORATION [G.R NO.
Convention, an international treaty protecting
medicated cream. Summerville in their 194307]
industrial property rights. ACQUISITION AND OWNERSHIP OF
defense claim that they’re the sole and
authorized importer, distributor of Chin Chun INTELLECTUAL PROPERTY ASSOCIATION Birkenstock, a German company, applied for TRADE NAME
Su products made by Taiwan's Shun Yi OF THE PHILIPPINES VS. PAQUITO trademark registrations “Birkenstock and
Factory; and gave Summerville permission to OCHOA [G.R No. 204605] Devices” with the IPO however their Trade names or business names are acquired
register Chin Chun Su Medicated Cream as its application were suspended due to an existing through adoption and use. Registration is not
The Madrid System, a centralized trademark registration by Shoe Town International required. (Sec. 165, IPC)
trade name with the Philippine Patent Office
registration system, allows for global Industrial Corporation, predecessor-in-interest NON-REGISTRABLE MARKS
and other relevant governmental agencies.
trademark protection through a single of the Philippine Shoe Expo Marketing
The Court dismissed the petition filed by and application and fee, governed by the Madrid Corporation who has been using the said trade 1. Consists of immoral, deceptive or
upheld the decision of the Court of Appeals, Agreement and Protocol; despite challenges mark for 16 years. Birkenstock filed a scandalous matter or falsely suggest a
ruling that the patent held by KEC Cosmetics by IPAP on the Philippines' ratification of the cancellation case, on the other hand
Madrid Protocol without Senate agreement
 connection with persons, institutions, 9. Consists exclusively of signs that have KENSONIC, INC., PETITIONER, VS. MATTEL, INC. VS. FRANCISCO, ET AL [G.R.
beliefs, or national symbols become customary or usual to UNI-LINE MULTI-RESOURCES, INC., NO. 166886]
designate the goods or services in (PHIL.), RESPONDENT [G.R. NO. 211820]
2. Consists of the flag or coat of arms or everyday language and established Mattel Inc, the trademark holder of “Barbie”
other insignia of the Philippines or any trade practice The application of Uni-Line Multi-Resources, doll products filed against Jimmy A. Uy's
of its political subdivisions, or of any Inc. to register the trademark "SAKURA" for a trademark application for the trademark
foreign nation 10. Consists exclusively that may serve in variety of appliances and electronics was "Barbie" confectionary products stating the
trade to designate the kind, quality, opposed by Kensonic Inc. Kensonic argued likelihood of confusion however, the Director
3. Consists of a name, portrait or quantity, intended purpose, value, that Uni-Line's use of the mark would confuse of the Bureau of Trademarks (BOT) had
signature identifying a particular living geographical origin, time or production customers because they had previously used already declared Uy’s trademark application
individual except by his written of the goods or rendering of the "SAKURA" for electronics. The court decided abandoned due to his failure to file the
consent, or the name, signature, or services, or other characteristics of the that although Kensonic and Uni-Line's required Declaration of Actual Use (DAU)
portrait of a deceased President of the goods or services products were sufficiently distinct to prevent within three years from filing date of
Philippines, during the life of his widow confusion, "SAKURA" may be trademarked application thus, the petition is dismissed for
except by written consent of the widow 11. Consists of shapes that may be since it was not generic for the goods. While being moot and academic with no
necessitated by technical factors or by Uni-Line's Class 9 items were replacement pronouncement as to costs.
4. Identical with a registered mark the nature of the goods themselves or components like voltage regulators, Kensonic's
belonging to a different proprietor or a factors that affect their intrinsic value electronics were primarily finished products TEST TO DETERMINE CONFUSING
mark with an earlier filing or priority like DVD players. SIMILARITY BETWEEN MARKS
date, in respect of: 12. Consists of color alone, unless defined PRIOR USE OF MARK AS A
REQUIREMENT 1. Dominancy test - infringement occurs
a. The same goods or services, or by a given form; or
if a competing trademark shares the
b. Closely related goods goods or
Actual prior use in commerce in the dominant features of another, leading
services, or 13. Is contrary to public order or morality.
Philippines has been abolished as a condition to confusion.
c. If it nearly resembles such a (Sec. 123)
markas to be likely to deceive or for the registration of a trademark. (RA 8293)
2. Totality or holistic test - confusing
cause confusion; SOCIETE DES PRODUITS, NESTLE, S.A. vs.
Exceptions: similarity is assessed based on visual,
PUREGOLD PRICE CLUB, INC. [G.R. No.
1. If caused by circumstances arising aural, and connotative comparisons,
5. Is identical with an internationally 217194]
independently of the will of the owner. along with overall impressions from
well-known mark, whether or not it is
encountering the marks in the
registered here, used for identical or Nestle filed an opposition against Puregold's
2. A use which does not alter its marketplace.
similar goods or service application for registration claiming that there
is a confusing similarity between Nestle's distinctive character though the use is
different from the form in which it is SOCIETE DES PRODUITS NESTLE, S.A. vs.
6. Is identical with an internationally "COFFEE-MATE" and Puregold's "COFFEE
registered. COURT OF APPEALS AND CFC
well-known mark which is registered in MATCH" trademark that would suggest that
CORPORATION [G.R. NO. 112012]
the Philippines with respect to they were associated and would probably
non‐similar goods or services. mislead the public into believing that the 3. Use of mark in connection with one or Nestle has a product called MASTER ROAST
Provided, that the interests of the mark originated from Nestle, which would more of the goods/services belonging to and MASTER BLEND, on the other hand, CFC
owner of the registered mark are likely incur damages if the application were the class in which the mark is corporation also registered its own "FLAVOR
to be damaged by such use approved. registered. MASTER," the court ruled that the trademark
"FLAVOR MASTER" for instant coffee was a
7. Is likely to mislead the public as to the The court denied the petition. It concluded 4. The use of a mark by a company-related colorable imitation of Nestle's trademarks
nature, quality, characteristics or that the word "COFFEE", a dominant feature goods to the applicant/registrant. "MASTER ROAST" and "MASTER BLEND,"
geographical origin of the goods or of both marks, is a generic or descriptive word using the dominancy test to determine
services that cannot be exclusively appropriated. 5. The use of a mark by a person confusing similarity because the word
However, with the marks between “-MATE" controlled by the registrant. (Section "MASTER" was prominently featured in
8. Consists exclusively of signs that are and "MATCH" they are not confusingly similar 152, IPC) Nestle's marks, emphasizing its significant
generic for the goods or services that and that there is no likelihood of confusion association with Nestle's good.
they seek to identify between the two marks.
MCDONALD’S CORPORATION vs.L.C BIG
MAK BURGER [G.R . NO. 143993]
McDonald's owns the "Big Mac" trademark in ornamental plants, with the same amount of IPO-BLA, IPO-DG, and CA believed that there but they filed for motion of cancellation on the
the US and the Philippines. L.C. Big Mak dosage and application manner. was no similarity between the mentioned grounds of non-use, despite the lack of physical
Burger, a domestic corporation operating marks. However, the Supreme Court ruled locations, the court maintained Starwood's
PHILIP MORRIS, INC vs. FORTUNE ownership of the "W" trademark in the
fast-food outlets, attempted to to register the otherwise, stating that the similarity was
TOBACCO CORPORATION G.R. No. 158589, Philippines, finding that the company's online
"Big Mak '' mark for their burgers, leading to proved through the application of the
JUNE 27, 2006 presence through registered domain names
objections from McDonald's due to its dominancy test. According to the Court, the
constituted legitimate commercial use of the mark.
similarity to their Big Mac mark. The Court conflicting marks have exactly the same
Philip Morris, Inc, is a foreign corporation.
ruled in favor of Mcdonalds and through using dominant element and have the potential to SERI SOMBOONSAKDIKUL vs. ORLANE
They didn’t secure their license in the
dominancy test and through the evidence deceive consumers into thinking that OK S.A., [G.R. No. 188996]
Philippines. It has a trademark “MARK VII,
presented, it showed that L.C. Big Mak Burger Hotdog Inasal is associated with Mang Inasal.
MARKTEN, AND LARK”. On the other hand,
used "Big Mak" on their sandwich packaging, Therefore, the court orders that the Seri Somboonsakdikul’s application for
Fortune Tobacco has a trademark “MARK”.
which closely resembled those used by application to register the mark be denied. registration of the mark LOLANE was rejected
Foreign Corporation saying that Fortune
McDonald's. by the Bureau of Legal Affairs (BLA) while
Tobacco committed Trademark Infringement
CITIGROUP, INC. vs. CITYSTATE SAVINGS respondent filed an opposition to the
MCDONALD’S CORPORATION vs. MACJOY by using “MARK”.
BANK, INC. [G.R. No. 205409] application claiming that the mark LOLANE
FAST FOOD CORPORATION [G.R. No. was similar to ORLANE in which the CA
166115] Note: The dominancy test focuses solely on
The trademark dispute between Citigroup, Inc. concluded that the two marks are confusingly
visual comparisons, while the totality or
and Citystate Savings Bank, Inc. involved the similar by using the dominancy test, that is
MacJoy Fastfood Corporation, a corporation holistic test considers visual, aural, and
similarity between their marks, "CITI" and reversed since the visual and aural aspects of
engaged in the sale of fast food products in connotative elements, as well as overall
"CITY," respectively, with Citigroup claiming the two marks showed that there is no
Cebu City, applied for the registration of the impressions between trademarks.
confusion, however, the Supreme Court ruled colorable imitation resulting to the petitioner’s
trademark "MACJOY & DEVICE" and in favor of Citystate, denying Citigroup's application of mark LOLANE being granted.
McDonald’s Corporation, a corporation under SKECHERS, USA vs INTER PACIFIC
petition, emphasizing the prevalent feature of
the laws of the State of Delaware, USA, filed a INDUSTRIAL CORP. [G.R No. 164321] VICTORIO DIAZ vs. PEOPLE OF THE
Citystate which is the golden lion's head
verified Notice of Opposition against MacJoy device and the limited similarity between the PHILIPPINES, [G.R. NO. 180677]
Skechers USA file an application for a search
Fastfood Corporation for having a resemblance marks, concluding that they were not
warrant at RTC Branch 24 of Manila against
for their logo, an identical or related goods, confusingly similar, especially in the context of Diaz was reportedly selling fake LEVI'S 501
outlets operated by Inter Pacific Industrial
and the trademark applied for would confuse ATM services. jeans in his tailoring shops and this
Corp, however the NBI confiscated 6,000 pairs
or deceive purchasers into believing that the information made Levi's Philippines employ a
of shoes with mark of stylized “S” which is
goods originate from the same source or private detective agency for confirmation. The
similar to the registered stylized “S” mark of
origin, which then, the IPO used the SOCIETE DES PRODUITS NESTLE, S.A. vs. NBI took away many fake LEVI'S 501 trousers
Skechers but Inter Pacific file a petition to
dominancy test in concluding that there was DY, M. [G.R. No. 172276] from the premises arguing that they were done
overturn the warrant as they claim that their
confusing similarity between the two (2) and traded without any authority from Levi's
shoes are not similar to what Skechers
trademarks in question as it took note of the Nestle complained about Martin Dy's and bore registered marks. They found Diaz’s
manufactures and RTC favors the Inter Pacific
appearance of the predominant features "M", unregistered trademark "NANNY" resembling use of his brand LS Jeans Tailoring as evidence
and directs NBI to return the confiscated
"Mc" and/or "Mac" in both the marks. their registered trademark "NAN," alleging against him saying he used Levi’s jeans as a
goods, nonetheless Skechers file for
potential public confusion, and the Court, reference point when designing. It was not
BERRIS AGRICULTURAL CO., INC. vs reconsideration and Supreme Court corrects
using the dominancy test, affirmed the RTC's necessary to use a linguistic point since it was
ABYADANG, N. [G.R. No. 183404] the decision of the RTC and CA with the use
first ruling that "NANNY" is confusingly general knowledge that Levi’s is always
of Holistic or Totality test, that the product of
similar to the prevalent feature of Nestle's different from any other brand. Similarly there
Berris Agricultural Co., Inc. filed a Verified both parties are significantly similar, therefore
"NAN" trademark and could cause public was no point in entering into classification
Notice of Opposition in contrast with the Supreme court declares that Inter Pacific was
confusion, particularly because they have the since there were two independent identifiers
trademark application filed by Norvy guilty for Trademark infringement.
same product classification, establishing according to judgment which were Diaz and
Abyadang for "NS D-10 PLUS," as it is
MANG INASAL PHILIPPINES, INC. VS IFP infringement. Levi’s..
confusingly similar to Berris' registered
MANUFACTURING CORP [G.R. No. 221717]
trademark "D-10 80 WP," which was affirmed W LAND HOLDINGS, INC. vs. STARWOOD
Mang Inasal Philippines Inc. opposed the UFC PHILIPPINES vs. FIESTA BARRIO
by the Supreme Court, applying the HOTELS AND RESORTS WORLDWIDE,
application to register the mark, OK Hotdog CORP. [GR No. 198889]
Dominancy Test and with the fact that both INC.[ G.R. NO. 222366]
Inasal Cheese Hotdog Flavor Mark, of IFP
have the same type of goods—fungicide (Class The “PAPA” mark by UFC contested Barrio
Manufacturing Corp., arguing that the OK
5) with 80% Mancozeb and are used for Starwood filed trademark ‘W’ which W Land Fiesta’s “PAPA BOY & DEVICE” claiming that it
Hotdog Inasal mark shares similar features to
similar groups of fruits, crops, vegetables, and holdings also registered ‘W’, which was rejected, could cause confusion seeing as their product
their registered Mang Inasal mark. The
is lechon sauce which might cause a possibility REVERSIBLE WAVE LINE" and "DOUBLE alternative products. If the public does not and La Campana for trademark infringement
to confuse customers who have an CURVE LINES." The Court emphasized the expect the plaintiff to create or sell the same and unfair competition claiming that Mighty
accumulated goodwill to “PAPA”, in line with importance of consistency in judicial decisions goods as the defendant, there is no and La Campana ride on the reputation and
this the IPO Director General used the and the need to protect the rights of trademark infringement. popularity of the Gallo trademark by using it
dominancy test while the CA used the holistic trademark owners. for their product in the Philippines, Gallo
test, however the ruling of the Supreme Court RULE OF IDEM SONANS Cigarettes. The Court determined that
is that the dominancy test must be used since EMERALD GARMENT MANUFACTURING petitioners cannot be held responsible for
the dominancy features of well-known “PAPA” CORPORATION V. H.D. LEE COMPANY, Two names are said to be “idem sonantes” if trademark infringement or unfair competition,
already established a good reputation and that INC., [G.R. No. 100098] the attentive ear finds difficulty in stated that Gallo cigarettes and Gallo wines are
“PAPA” is not a generic name for it is based on HD LEE Company, a foreign corporation distinguishing them when pronounced. not identical, similar or related goods for the
the name of the founder itself. behind the mark “LEE” filed a petition to (Martin v. State, 541 S.W 2d 605) reason alone that they were purportedly forms
BPTTT a cancellation of registration of of vice and emphasized the principle that the
DERMALINE, INC. vs. MYRA Emerald Garment Manufacturing Note: Similar sound suffices for confusion if mere use of an identical mark does not
PHAMACEUTICALS, INC. [G.R. No. 190065] Corporation’s “STYLISTIC MR. LEE” due to the used on similar goods. (Marvex Commercial v. automatically constitute trademark
word “Lee” on their trademark. Director of Director of Patent, G.R. No. L‐19297, Dec. 22, infringement. Furthermore, there is no
Dermaline, Inc. filed an application for BPTTT used the Test of dominancy and 1966) substantiated proof that the petitioners acted
registration of the trademark "DERMALINE holistic and erred that was confusingly similar. TYPES OF CONFUSION ARISE FROM THE with malice, bad faith, or fraud, nor did they
DERMALINE, INC." with the IPO. Myra The CA affirmed the decision of Director of USE OF SIMILAR OR COLORABLE have any intention to exploit the reputation of
Pharmaceuticals, Inc. filed a Verified BPTTT. However, Supreme Court ruled that it IMITATION MARKS the respondents' Gallo brand by using it for
is not confusingly similar since the requisite is their unrelated cigarette products.
Opposition, claiming that Dermaline's
Colorable Imitation. Although on its label the 1. Confusion of goods (product confusion)
trademark is likely to cause confusion with word "LEE" is prominent, the trademark 2. Confusion of business (source or origin SEHWANI, INCORPORATED AND/OR
their own trademark "DERMALIN" and argued should be considered as a whole and not confusion) BENITA’S FRITES, INC. vs. IN-N-OUT
that the marks are practically identical, with piecemeal COLORABLE IMITATION BURGER, INC. [G.R NO. 171053]
the first eight letters being the same and the RELATED GOODS PRINCIPLE
A close or ingenious imitation that deceives IN-N-OUT Burger, California, USA based
pronunciation being identical. The corporation, and not doing business in the
Goods are related goods when they; ordinary persons or an ordinary purchaser into
IPO-Bureau of Legal Affairs sustained Myra's Philippines filed an administrative complaint,
1. Belong or share identical descriptive mistaking it for the original.
opposition and rejected Dermaline's thereby demand for the cancellation of
properties
application.The Court applied the Dominancy 2. When they share identical physical INTERNATIONALLY WELL-KNOWN trademark registration and ceasing use of the
Test and the Holistic or Totality Test and held attributes or essential characteristics in MARKS mark with the BLA of the IPO against Sehwani
that the rejection of Dermaline's application form, composition, texture, or quality. Inc. for violation of Intellectual Property
Rights, for using the trade name and
was justified due to the likelihood of confusion 1. The Philippines' competent authority
MIGHTY CORP. AND LA CAMPANA vs. E. & trademarks duly owned by IN-N-OUT Burger
with Myra's previously registered trademark. considers a "well-known" mark as
J. GALLO WINERY AND ANDRESONS and registered in the United States as well in
belonging to someone other than the
GROUP, INC. [G.R. No. 154342] global since 1948 up to the present. The BLA
EMERALD GARMENT MANUFACTURING applicant or registrant, both
ruled in favor of IN-N-OUT and canceled the
CORPORATION V. H.D. LEE COMPANY, internationally and in the Philippines.
E. & J. Gallo sued Mighty Corporation for registration of Sehwani, hereby reversed the
INC., [G.R. No. 210693] 2. Need not be used or registered in the
trademark infringement and unfair decision of the CA whereby properly dismissed
Philippines
competition, when one of their employees saw as it was filed out of time. IN-N-OUT Burger,
The Supreme Court granted the petition and 3. Not required to be widely known, but
the Gallo cigarettes displayed together with Inc.'s trademarks are well-known
denied the registration of the trademark "LEE only by the pertinent segment of the
Gallo wines in a supermarket. Wines and internationally, and the Sehwani Inc. use
& OGIVE CURVE DESIGN" by H.D. Lee. The public.
cigarettes are neither identical or competitive of the mark "IN-N-OUT" misrepresents the
Supreme Court emphasized that the issues in source of the goods and services,
items, nor do they belong to the same class of MIGHTY CORPORATION AND LA
the present case were the same as those in the wherefore In-N-Out Burger, Inc. had the
goods. Wine and cigarette relatedness cannot CAMPANA FABRICA DE TABACO, INC. vs.
previous case, and that the previous decisions legal capacity to sue for the protection
be determined by product classification alone. E&J GALLO WINERY AND THE ANDERSON
had already established Emerald's rights over of its trademarks. The SC affirmed the
The focus should be on product similarities, GROUP, INC. [G.R NO. 154342]
the registration of their marks. The Court cancellation of Sehwani, Inc.'s trademark
upheld the rights of Emerald Garment not classification or broad description. If one
E&J Gallo Winery Company, a well known registration and the order to cease and desist
Manufacturing Corporation over their individual uses a trademark for their goods, it
foreign corporation, sued Mighty Corporation from using the mark 'IN-N-OUT'.
previously registered marks "DOUBLE does not restrict others from using it for
FREDCO MANUFACTURING regardless of whether the goods or THE EFFECT OF USE OF INDICATIONS (McDonald’s Corporation v. L.C. Big
CORPORATION vs. PRESIDENT AND services indicated in the application are BY THIRD PARTIES FOR PURPOSES Mak Burger, Inc., G.R. No. 143993, Aug
FELLOWS OF HARVARD COLLEGE [GR No. identical or similar to those of the OTHER THAN THOSE FOR WHICH THE 18, 2004)
185917] worldwide well-known mark. MARK IS USED NON-COMPETING GOODS
RIGHTS CONFERRED BY
Fredco claimed that Harvard University had
REGISTRATION Registration of the mark shall not confer on Goods though they’re not in actual
no right to register the mark in class 25, since
the registered owner the right to preclude competition, they are related to each other
its Philippine registration was based on a
A certificate of trademark registration has a third parties from using bona fide their that might reasonably be assumed that they
foreign registration. Thus, Harvard University
term of 10 years and can be renewed for an names, addresses, pseudonyms, a geographical originate from one manufacturer.
could not have been considered as a prior
additional 10 years. Renewal requests must be name, or exact indications concerning the
adopter and user of the mark in the May also be those which, being entirely
submitted within a period of 6 months before kind, quality, quantity, destination, value,
Philippines. Harvard University, on the other unrelated, could not reasonably be assumed to
or after the registration's expiration. place of origin, or time of production or of
hand claimed that the marks “Harvard” and have a common source.
supply, of their goods or services.
“Harvard Veritas Shield Symbol,” had been
BERRIS AGRICULTURAL CO., INC. VS. Infringement in relation to
used in commerce since 1872, and was TRADEMARK INFRINGEMENT
NORVY ABYADANG [G.R. No. 183404, ibid] non-competing goods
registered in more than 50 countries. Is there
trademark infringement? Under Article 8 of Infringement of a trademark occurs when There is no infringement in relation to
A trademark dispute arises between Berris
the Paris Convention, as well as Section 37 of someone uses someone else's mark or trade non-competing goods, except:
Agricultural Co., Inc. and Norvy Abyadang
R.A. No. 166, Harvard University is entitled to name in a way that could confuse or mislead
over the similarity of their fungicide marks, 1. If it prevents the natural expansion of
protection in the Philippines of its trade name consumers or others about where the goods or
with the Supreme Court ruling in favor of his business and,
“Harvard” even without registration of such services are coming from or who the business
Berris and reinstating the rejection of 2. by having his business reputation
trade name in the Philippines. This means that is without the owner's permission. This could
Abyadang's trademark application. confused with and put at the mercy of
no educational entity in the Philippines can include using someone else's mark or trade
There was a likelihood of confusion, and the second user.
use the trade name “Harvard” without the name on labels, signs, prints, packages,
Abyadang's mark could be mistaken as an
consent of Harvard University. There is no wrappers, receptacles, advertisements, or HICKOK MANUFACTURING vs. CA [G.R.
upgraded version of Berris' mark. Berris had
question then, and this Court so declares, that reproductions of other marks. No. L-44707]
established its ownership of the mark "D-10 80
"Harvard" is a well-known name and mark not
WP" through prior use and registration with The decision overturns the Court of Appeals'
only in the United States but also
the IPO. The protection of trademarks aims to dismissal of the petitioner's petition to cancel
internationally, including the Philippines. ASIA BREWERY, INC. vs THE HON. COURT
preserve the goodwill and reputation of the private respondent's "HICKOK" trademark
OF APPEALS AND SAN MIGUEL
LAW PROVIDE AS REGARDS businesses and safeguard the public against registration for Marikina shoes, clarifying that
CORPORATION [G.R. No. 103543]
INTERNATIONALLY‐WELL KNOWN confusion. The Court accorded great respect to while identical trademarks aren't mandated by
MARKS the findings of the IPO, as the administrative San Miguel Corporation filed a complaint law, the overall similarity in appearance on
agency with expertise in trademark matters. against Asia Brewery Inc. due to trademark respective labels concerning associated goods
GR: The restriction on subsequent registration Therefore, the Court reinstated the IPO's infringement of Beer Pale Pilsen or Beer na must be considered to determine
does not include services and goods of rejection of Abyadang's trademark application Beer from San Miguel Pale Pilsen, which was infringement.
different nature or kind. and upheld Berris' ownership of the mark proved wrong through the Dominancy Test,
"D-10 80 WP. FABERGE, INC vs. INTERMEDIATE
and that the words "pale pilsen" are generic
XPN: RIGHTS OF A REGISTERED MARK APPELLATE COURT AND CO BENG KAY
words descriptive of a type of beer originated
1. In the Philippines, the application for OWNER [G.R No. 71189]
from Pilsen City, Czechoslovakia, thus the
registration of a subsequent or similar ABI's petition for review was granted by the Faberge Inc. sought to register the trademark
mark may only be denied if the 1. Protection against reproduction, or Supreme Court. "BRUT 33 and DEVICE" for various products,
products or services mentioned in the imitation or unauthorized use of the while Co Beng Kay applied for "BRUTE"
application bear resemblance to those mark (infringement of mark) Elements to be established in Trademark specifically for briefs; despite Faberge's
of the internationally well-known mark, 2. To stop entry of imported merchandise Infringement objection based on similarity with their own
provided that the mark itself is not into the country containing a mark VPU trademark "BRUT," the Director of Patents
registered in the country. identical or similar to the registered 1. Validity of the Mark granted Co Beng Kay permission, a decision
2. The registration of a subsequent or mark. 2. Plaintiff's ownership of the Mark initially reversed by the court but later upheld
similar mark in the Philippines may be 3. To transfer or license out the mark. 3. Use of the mark or its colorable due to clear distinctions between the products,
denied if the internationally imitation by the alleged infringer result as emphasized by Justice Escolin's principle
well-known mark is already registered, in “likelihood of confusion” that using the same trademark for different
products is permissible, leading to the an administrative action against the while a cancellation request was pending. The passes off his goods or business or services for
dismissal of the petition without addressing infringer with the Bureau of Legal Affairs court decided that both lawsuits may proceed those of one who has already established
expense payments. independently. Shangri-La's challenge to the goodwill thereto. (IPC, Sec. 168.2)
COURT WHO HAS JURISDICTION OVER
registration did not hinder the Developers
CANON KABUSHIKI KAISHA vs. NSR VIOLATIONS OF INTELLECTUAL
Group from suing for infringement as long as It is passing off (or palming off) or attempting
RUBBER CORP. [GR. No. 120900] PROPERTY RIGHTS
the registration remained valid. to pass off the goods or business of one person
R.A. 8293 and R.A. 166 are special laws as the goods or business of another to deceive
On January 15, 1985, NSR Rubber Corporation LEVI STRAUSS & CO. AND LEVI STRAUSS
conferring jurisdiction over violations of the public. By imitating the good's appearance,
filed an application for registration of the (PHILS.) VS. CLINTON APPARELLE INC.
intellectual property rights to the Regional the defendant misleads purchasers into buying
mark CANON for sandals (class 25) in the [G.R NO. 138900]
Trial Court. The penalty therefore is his goods under the belief that they are
(BPTTT). a Japanese corporation, filed a
imprisonment of less than 6 years, or from 2 to purchasing his competitors'. Thus, the
Verified Notice of Opposition, arguing that The Court of Appeals held that the petitioner
5 years and a fine ranging from P50,000 to defendant disguises his goods as his
registration of the trademark CANON use in Levi Strauss & Co.’s trademark consists of two
P200,000. competitor's to deceive the public. (Republic
goods covering in class 2 (paints, chemical elements, "Dockers" and the wing-shaped Gas Corporation v. Petron Corporation, G. R.
products, toner, dyestuff) in NSR Rubber CONRAD AND COMPANY, INC. vs. COURT design, registered as a single unit while the No. 194062, June 17, 2013)
Corporation's name would cause damage to OF APPEALS [G.R No. 115115] respondent Clinton Apparelle’s “Paddocks”
their business. However, the court ruled uses only a portion of the registered trademark TRADEMARK INFRINGEMENT VS.
against the Japanese corporation, stating that Fitrite filed for the registration of the and not the entire registered mark thus is not UNFAIR COMPETITION
their use of the mark covered different product trademark "SUNSHINE" in the Bureau of proven as a substantial invasion of the owner's
classes, and thus the exclusive right to use the Patents, Trademarks and Technology Transfer right therefore, the injunctive relief sought by
trademark CANON is limited to the products (BPTTT) which was approved and authorized the petitioners was refused. TRADEMARK UNFAIR
covered by its certificate of registration, their Victoria Biscuits Co. to use the trademark on INFRINGEMENT COMPETITION
opposition was unmerited. its products. Later on, they discovered that LIMITATIONS ON THE ACTIONS FOR
REMEDIES OF THE OWNER OF THE INFRINGEMENT Unauthorized use of The passing off of
Conrad was using the trademark without their
TRADEMARK AGAINST INFRINGERS a trademark. one's goods as those
consent.
Under Intellectual Property Code, Section 159 of another.
The Supreme Court affirmed the preliminary 1. Right of prior user – registered mark
1. Civil- The owner of the registered mark Fraudulent intent is Fraudulent intent is
injunction against Conrad. Recognize the shall be without affect against any
may ask the court to issue a preliminary unnecessary. essential.
urgent necessity to protect Fitrite's rights to person who, in good faith, before filing
injunction to quickly prevent the infringer or priority date, was using the mark for
prevent further damage to their business. GR: Prior Registration is not
from causing damage to his business. The purposes of his business.
Costs against petitioner. A registered mark's registration of the necessary
court will then require the infringer to pay
validity and registrant's exclusive use rights trademark is a
damages to the owner of the mark 2. Relief against publisher – injunction
can be used for infringement actions, granting prerequisite to the
provided the defendant is shown to have against future printing against an
the registrant court protection and relief. action.
had notice of the registration of the mark innocent infringer who is engaged
and stop him permanently from using the XPN: Well-known
solely in the business of printing the marks
mark. SHANGRI-LA INTERNATIONAL HOTEL mark.
MANAGEMENT LTD., ET AL. vs. COURT OF
2. Criminal - the owner of the trademark APPEALS, 359 SCRA 273 (2001) [G.R. NO. 3. Relief against newspaper – NOTE: There can be unfair competition and
may ask the court to issue a search warrant 111580] injunction against the presentation of infringement at the same time
and in appropriate cases, remedies advertising matter in future issues of
available shall also include the seizure, The Shangri-La hotel chain and the CATERPILLAR INC vs. MANALO
Developers Group both claimed ownership of the newspaper, magazine or in
forfeiture, and destruction of the infringing electronic communications in case the P.SAMSON [G.R . 205972 and 164352]
goods and of any materials and the "Shangri-La'' trademark and logo in the
Philippines. Shangri-La tried to cancel the infringement complained of is
implements the predominant use of which contained in or is part of paid Caterpillar, Inc., a foreign company
has been in the commission of the offense. Developers Group's registration with the
Bureau of Patents, Trademarks, and advertisement in such materials. specializing in footwear, clothing, and related
Technology Transfer (BPTTT) and filed a goods, and Samson, who operates retail stores
3. Administrative - if the amount of UNFAIR COMPETITION
damages claimed is not less than lawsuit to claim ownership. Developers Group in the Philippines selling similar products
P200,000.00, the registrant may choose to counter-sued for trademark infringement. The under Caterpillar, Inc.'s trademark which led
question was whether a lawsuit may proceed Employing deception or any other means
seek redress against the infringer by filing contrary to good faith by which a person Caterpillar, Inc. to file an unfair competition
claim against Samson. The Supreme Court, in REPUBLIC GAS CORPORATION, et.al vs. GREENSTONE was registered at the time the competition, wherein the BLA, CA, and
G.R. No. 164352, sided with Caterpillar, Inc., PETRON CORPORATION, et. al. [G.R. NO. acts took place. Supreme Court all affirmed that there was
determining that the civil case for damages 194062] indeed unfair competition since it is evident
REPUBLIC GAS CORPORATION, et.al vs. enough that CDO imitated SMFCI marketing.
and trademark cancellation didn't pose a
REGASCO's appeal to the Court aimed to PETRON CORPORATION, et. al. [G.R. NO.
prejudicial question to halt the criminal counter Petron's accusations of trademark 194062, ibid] UNFAIR COMPETITION VIOLATES
proceedings for unfair competition. infringement and unfair competition PROPERTY RIGHTS
concerning LPG containers bearing the Shell and Petron are known to sell, refill, use,
DEL MONTE CORPORATION AND respondents' trademark but the Court denied and distribute LPG cylinders. On the other A person who has identified in the mind of the
PHILIPPINE PACKING CORPORATION vs. hand, REGASCO refills and sells LPG cylinders public the goods he manufactures or deals in, his
the appeal, highlighting that REGASCO had
COURT OF APPEALS [G.R. NO. L-78325] with the trademarks of the former without business or services from those of others, whether
engaged in infringement by refilling and or not a registered mark is employed, has a
selling LPG containers without the authorization. The former accusing of unfair
Del Monte Corporation granted Philpack the property right in the goodwill of the said goods,
respondents' consent, thereby, potentially competition business or services so identified, which will be
right to manufacture, distribute, and sell Del
deceiving the public into believing that protected in the same manner as other property
Monte products, including catsup, and the Del ABS-CBN PUBLISHING INC. VS DIRECTOR
"GASUL" and "SHELLANE" are products of rights. (IPC, Sec. 168.1)
Monte trademark and logo in the Philippines OF THE BUREAU OF TRADEMARKS [G.R.
REGASCO, when they are not.
while the Sunshine Sauce Manufacturing NO. 217916] PERSONS GUILTY OF UNFAIR
Industries used various bottles for its SHANG PROPERTIES REALTY COMPETITION
products, including the Del Monte bottle that CORPORATION AND SHANG PROPERTIES ABS-CBN applied to register the Trademark
she acquired from junk shops for recycling, INC. VS. ST FRANCIS DEVELOPMENT "METRO" for magazines with the IPO or 1. Any person who sells their products
however, the court recognizes the differences CORPORATION, [G.R. NO. 190706] Intellectual Property Office of the Philippines, and intentionally makes them look like
but it does not agree with the conclusion that however Examiner Arlene M. Icban, rejected the products of another manufacturer
there was no infringement or unfair St Francis Development Corporation sued the application as it has identical marks that or dealer, whether it be the actual
competition because the person who infringes Shang Properties Realty Corporation for already register which are "METRO" and goods themselves, the packaging, the
a trademark does not normally copy out but infringing their intellectual property rights. "METRO" (Logo) by Metro International and labels, or any other feature.
only makes colorable changes, employing ‘THE ST. FRANCIS TOWERS’ mark could not "Inquirer Metro" by Philippine Daily Inquirer
enough points of similarity to confuse the be registered in their names because of unfair even the subsequent appeal and 2. Any person who by any artifice, or
public with enough points of differences to competition and false declarations. The reconsideration are still rejected by Examiner device, or who employs any other
confuse the courts. allegation of unjust competition through use Icban and Director of the Bureau of Trademark means calculated to induce the false
of the trademark was dismissed. In the but ABS-CBN file an application for belief that such person is offering the
COCA-COLA BOTTLERS PHILIPPINES Philippines trademark code, one cannot reconsideration with the Office of the Director
INC., (CCBPI), NAGA PLANT VS. QUINTIN services of another who has identified
register a trademark containing the phrase ‘St.’ General, yet ODG still finds it appeals with no such services in the mind of the public;
GOMEZ, ET, AL. [G.R. NO. 154491] while it also ruled that the usage of ‘THE ST. merit, moreover petitioner files extensions of
FRANCIS TOWERS’ mark amounts to unfair time to file a petition for review with the Court 3. Any person who shall make any false
Coca-Cola applied for a search warrant against
competition if done by other people. The of Appeals, however ABS-CBN did not statement in the course of trade or who
Pepsi for hoarding Coke empty bottles, an act
petition is hereby granted, and the decision by accomplish the application as it fails to meet shall commit any other act contrary to
allegedly penalized as unfair competition
the Court of Appeals is therefore reversed. the deadline given, to conclude, the Court of good faith of a nature calculated to
under the IP Code. concludes that the
Appeals upheld the decision of rejection of the discredit the goods, business or services
“hoarding” – as defined and charged by the ROBERTO CO vs KENG HUAN JERRY registration of trademark by ABS-CBN of another. (IPC, Sec. 168.3)
petitioner – does not fall within the coverage YEUNG AND EMMA YEUNG, [G.R. No. Publishing Inc.
of the IP Code and of Section 168 in particular. 212705]
It does not relate to any patent, trademark, ASIA BREWERY, INC. VS. COURT OF
trade name or service mark that the Spouses Yeung filed a civil complaint for unfair APPEALS AND SAN MIGUEL
SAN MIGUEL PURE FOODS COMPANY,
respondents have invaded, intruded into or competition and trademark infringement CORPORATION [G.R. No. 103543], ibid
INC. VS. FOODSPHERE, INC. [G.R. No.
used without proper authority from the against Ling Na Lau, Pinky Lau and Roberto 217781]
petitioner. However, Pepsi, hoarding for Co for conspiring in the sale of counterfeit San Miguel Corp. filed a complaint against
purposes of destruction is liable to another Greenstone Medicated Oil products in which Foodsphere aka CDO imitates SMPFCI Asia Brewery, Inc. for trademark infringement
law, which is R.A. No. 623 covers. the CA upheld the RTC decision that the Laus “Purefoods Fiesta Ham” which was advertised and unfair competition on the SMC’s BEER
and Co have engaged in unfair competition on christmas by advertising their own which is PALE PILSEN or BEER NA BEER products. The
but are not liable for trademark infringement “PISTA” which strike an obvious resemblance RTC ruled in favor of Asia Brewery while the
since there is no evidence that the trademark and question whether there was unfair CA reversed the decision, and made ABI liable
for the claims of SMC. ABI brought the case to Universal Rubber Products, GR No. L‐27425, 1. The application shall designate the e. If the registered mark is being
the Supreme Court. The Court believed that L‐30505, April 28, 1980) mark as a collective mark. used by, or with the permission
ABI has neither infringed SMC's trademark of, the registrant so as to
nor committed unfair competition with the Change in the ownership of a trade name 2. Accompanied by a copy of the misrepresent the source of the
latter's SAN MIGUEL PALE PILSEN product. made agreement, if any, governing the use of goods or services on or in
According to the SC, the fact that BEER PALE the collective mark. (Sec. 167.2, IPC) connection with which the mark
PILSEN like SAN MIGUEL PALE PILSEN is It shall be made with the transfer of the GROUNDS FOR THE CANCELLATION OF is used;
bottled in amber-colored steinie bottles of 320 enterprise or part thereof identified by that COLLECTIVE MARKS f. Non‐use of the mark within the
ml. capacity and is also advertised in print, name. (Sec. 165.4, IPC) Philippines, without legitimate
broadcast, and television media, does not 1. The court shall cancel the registration reason, for an uninterrupted
necessarily constitute unfair competition. Limitations on the use of Tradenames or of a collective if the person requesting period of 3 years.
Also, the names of the competing products are Business names the cancellation proves that only the COPYRIGHTS
clearly different and their respective sources A person may not: registered owner uses the mark.
are prominently printed on the label and on 1. Use any name or designation contrary A right over literary and artistic works which
other parts of the bottle, mere similarity in the to public order or morals 2. Or that he uses or permits its use in are original intellectual creations in the
shape and size of the container and label, does 2. Use a name if it is liable to deceive contravention of the agreements literary and artistic domain protected from the
not constitute unfair competition. trade circles or the public as to the referred to in Subsection 166.2. moment of creation. (Sec. 171.1, IPC)
nature of the enterprise identified by BASIC PRINCIPLES
MCDONALD’S CORPORATION vs. L.C. BIG that name. (Sec. 165.1, IPC) 3. Or that he uses or permits its use in a
MAK BURGER, INC. [G.R. No. 143993, ibid] 3. Subsequently use a trade name likely to manner liable to deceive trade circles or Elements of copyrightability:
mislead the public as a third party. (Sec. the public as to the origin or any other
In a trademark dispute, McDonald's 165.2, b, IPC) common characteristics of the goods or 1. Originality – Must have been created
Corporation successfully sued L.C. Big Mak 4. Copy or simulate the name of any services concerned. (Sec 167.3) by the author’s own skill, labor, and
Burger for trademark infringement and unfair domestic product). (for imported judgment without directly copying or
competition, as the Supreme Court reinstated 5. Copy or simulate a mark registered in Note: The registration of a collective mark, or evasively imitating the work of another.
the RTC ruling, finding L.C. Big Mak Burger is accordance with the provisions of IPC an application therefore shall not be the (Ching Kian Chuan v. CA, G.R. No.
liable for using the "Big Mak" mark, similar to (for imported products). subject of a license contract. 130360, Aug. 15, 2001)
McDonald's "Big Mac," on hamburgers, 6. Use a mark or trade name calculated to CRIMINAL PENALTIES 2. Expression – Must be embodied in a
causing confusion among consumers and induce the public to believe that the medium sufficiently permanent or
engaging in unfair competition. article is manufactured in the A penalty of imprisonment from 2 years to stable to permit it to be perceived,
Philippines, or that it is manufactured 5and a fine ranging from P50,000 to P200,000 reproduced or communicated for a
ELEMENTS OF AN ACTION FOR UNFAIR in any foreign country or locality other (Sec. 170, IPC.) period more than a transitory duration.
COMPETITION than the country or locality where it is CANCELLATION OF TRADEMARK
in fact manufactured. REGISTRATION Elements of originality:
1. Confusing similarities in the general 1. It is independently created by the
appearance of the goods. Note: Items 4, 5 and 6 only apply to imported Any person who believes that he will be author, and
2. Intent to deceive the public and products and those imported articles shall not damaged by the registration of the mark: 2. It possesses some minimal degree of
defraud a competitor. be admitted to entry at any customhouse of the creativity.
(Superior Commercial Enterprises, Inc. vs. Philippines (Sec. 166, IPC). 1. Within 5 years, from the date of the
Kunnan Enterprises Ltd. And Sports Concept & COLLECTIVE MARK registration of the mark; or MANLY SPORTSWEAR, MFG., INC. VS.
Distributor, Inc., G.R. No. 169974, 20 April 2010) DADOTTE ENTERPRISES [G.R. NO. 165306]
TRADE NAMES A “collective mark” or “collective trade-name” 2. At any time;
is a mark or trade-name used by the members a. If the registered mark becomes Dadotte Enterprises was issued a search
Trade names or business names are any of a cooperative, an association or other the generic name for the goods warrant for allegedly possessing copyrighted
individual name or surname, firm name, collective group or organization. (Sec. 40, R.A. or services, or a portion thereof, items that were claimed to belong to Manly
device nor word used by manufacturers, 166) for which it is registered; Sportswear, therefore violating RA 8293. The
industrialists, merchants, and others to b. If the mark has been abandoned; court ruled that the petitioner is not eligible
identify their businesses, vocations or APPLICATION FOR REGISTRATION OF A c. If its registration was obtained for the protection offered by RA 8293, despite
occupants (Converse rubber Corp. vs. COLLECTIVE MARK d. Fraudulently or contrary to the being granted a copyright certificate of
provisions of the IPC; registration. The certificate serves solely as
prima facie evidence of the copyright's validity a. Books, pamphlets, articles and protection of the original works. (Sec. 173.2, 1. Idea, procedure, system, method or
and ownership. Therefore, if there is ample other writings IPC) operation, concept, principle, discovery
evidence suggesting that the copyrighted b. Lectures, sermons, addresses, or mere data as such
products are not original creations and can be dissertations prepared for Oral UNITED FEATURE SYNDICATE, INC. vs. 2. News of the day and other items of
readily found in the market under multiple delivery, whether or not reduced MUNSINGWEAR CREATION press information
brands, the presumption of validity and in writing or other material form MANUFACTURING COMPANY [G.R NO. 3. Any Official text of a legislative,
originality will not be established. c. Letters 76193] administrative or legal nature, as well as
COPYRIGHT VEST d. Dramatic, choreographic works any official translation thereof
e. Musical compositions United Feature Syndicate Inc. filed for 4. Pleadings
Works are protected from the time of their f. Works of Art cancellation of the registration of trademark 5. Decisions of courts and tribunals -
creation, irrespective of their mode or form of g. Periodicals and Newspapers “Charlie Brown” in the name of Munsingwear this refers to original decisions and not
expression, as well as of their content, quality h. Works relative to Geography, Creation Manufacturing Company. Alleged to annotated decisions such as the
and purpose. topography, architecture or that United Feature Syndicate Inc. is the SCRA or SCAD as these already fall
science exclusive owner of the copyright to the said under the classification of derivative
FERNANDO JUAN VS ROBERT JUAN [G.R i. Works of Applied art character since 1950 up to the present. The works, hence copyrightable
NO. 221372] j. Works of a Scientific or technical Director of the Philippine Patent Office ruled 6. Any work of the Government of the
character in favor of Munsingwear Creation Philippines
Robert Juan filed a complaint of copyright k. Photographic works Manufacturing Co. that a copyright
Note: Conditions imposed prior to the approval
infringement, unfair competition and l. Audiovisual works and registration may not provide a cause of action
of the government agency or office wherein the
cancellation of trademark against his brother, cinematographic works for the cancellation of a trademark
work is created shall be necessary for
Fernando Juan, for alleged fraudulent m. Pictorial illustrations and registration, and CA held that the decision of
exploitation of such work for profit. Such an
registration of the mark “Lavandera Ko”. After advertisements Philippine Patent Office is final and executory.
agency or office, may, among other things,
discovering Santiago S. Suarez as the true n. Computer programs; and United Feature Syndicate is the true owner
impose as condition the payment of royalties.
originator of the “Lavandera Ko” mark in a o. Other literary, scholarly, of the said trademark “Charlie Brown” and
1942 musical composition, the RTC dismissed scientific and artistic works. its pictorial representations were covered No prior approval or conditions shall be
the petition from both parties. Fernando (Sec. 172.1, IPC) by a copyright registration way back 1950. required for the use of any purpose of statutes,
elevated the case to the CA through a notice of The SC ruled under PD No. 49 in favor of rules and regulations, and speeches, lectures,
appeal contending that a mark is different 2. Derivative Works United Feature Syndicate due to its prior sermons, addresses, and dissertations,
from a copyright and not interchangeable. The a. Dramatizations, translations, registration with the Patent’s Office. pronounced, read, or rendered in courts of
Court ordered that no one of the herein adaptations, abridgements, justice, before administration agencies, in
parties has the right to use and enjoy arrangements, and other Collection of work vs. Collective work deliberative assemblies and in meetings of
"Lavandera Ko", considering that the herein alterations of literary or artistic public character. (Section 176, IPC)
parties had made misrepresentation before the works;
COLLECTION OF COLLECTIVE 7. TV programs, format of TV programs
court when they declared that they had b. Collections of literary, scholarly,
WORK WORK (Joaquin v. Drilon, G.R. No. 108946, Jan.
created the subject mark and name making it or artistic works and
clear that the parties could have not coined compilations of data and other 28, 1999)
It is not necessary There is an
and created the subject mark and work since materials which are original by 8. Systems of bookkeeping; and
that there is an agreement whereby
these parties were not yet born when the reason of the selection or 9. Statutes
agreement. the authors bound
subject mark and work had been created and coordination or arrangement of Individual themselves not to be Note: The copyright law enumerates the
used in 1942. The heirs of Mr. Santiago S. their contents. (Sec. 173) contribution is identified with the classes of work entitled to copyright
Suarez are the rightful owners of subject mark capable of copyright work. protection. Copyright, in the strict sense of the
and work- "Lavandera ko" Note: Derivative works are considered as protection. term, is purely a statutory right. It is a new or
independent creations and are thus protected independent right granted by the statute, and
COPYRIGHTABLE WORKS as new works. However, the protection of these not simply a pre‐existing right regulated by
new works does not impact the copyright of NON‐COPYRIGHTABLE WORKS the statute. Being a statutory grant, the rights
Works that are copyrightable the original works used in their creation. are only as the statute confers, and may be
Additionally, creating a derivative work does The Subjects that are not protected are: obtained and enjoyed only with respect to the
1. Literary and Artistic Works not imply any entitlement to use the original subjects and by the persons, and on terms and
BOLD‐MAN‐GAS‐PAP‐CO works or to prolong or enhance the copyright conditions specified in the statute.The
Intellectual Property Code mandates
originality as a prerequisite for copyright or science, to be properly classified as a Moral rights – For reasons of professionalism proceeds of the production. (Sec. 201,
protection. copyrightable class "I" work, what was and propriety, the author has the right: IPC)
copyrighted were their sketches/drawings only, COLUMBIA PICTURES, INC. VS. COURT OF
FRANCISCO JOAQUIN, JR., AND BJ
and not the actual hatch doors themselves. a. To require that the authorship of the APPEALS, 261 SCRA 144 (1996) [G.R. NO.
PRODUCTIONS, INC vs. FRANKLIN
works be attributed to him (attribution 110318]
DRILON, ET. AL. [G.R. NO. 108946]
PEARL & DEAN (PHILIPPINE), INC. VS. right)
Petitioner BJPI is the holder / grantee of SHOEMART, INC. [G.R. No. 148222, ibid] Sunshine Home Video was charged by many
Certificate of Copyright of Rhoda and Me, a b. To make any alterations of his work film companies for distributing illegal versions
dating game show. While IXL produced a Trademark, copyright and patents are different prior to, or to withhold it from of their productions. After obtaining a search
dating show named It's a Date. Petitioner intellectual property rights that cannot be publication warrant, the NBI raided Sunshine Home
wrote a letter informing Zosa that BJPI had a interchanged with one another. A trademark is Video, but Sunshine Home Video disputed the
copyright to Rhoda and Me and demanding any visible sign capable of distinguishing the c. To preserve integrity of work, object to warrant's legitimacy. The question was
that IXL discontinue airing It's a Date. Is the goods (trademark) or services (service mark) any distortion, mutilation or other whether there had been copyright violation.
format or mechanics of the petitioner's of an enterprise and shall include a stamped or modification which would be The court decided that there had been
television show entitled to copyright marked container of goods. In relation thereto, prejudicial to his honor or reputation; copyright violation. Copyright protection is in
protection? The Court ruled that the format of a trade name means the name or designation place from the time of invention, and filing a
the show is not copyrightable. Sec. 2 of PD No. identifying or distinguishing an enterprise. d. To restrain the use of his name with lawsuit for infringement does not need
49, otherwise known as the Decree on Meanwhile, the scope of a copyright is respect to any work not of his own registration. On the other hand, copyright
Intellectual Property, enumerates the classes confined to literary and artistic works which creation or in a distorted version of his proprietors who register can avoid fines for
of work entitled to copyright protection. The are original intellectual creations in the work. (IPC, Sec. 193) noncompliance and get full damages.
provision is substantially the same as Sec. 172 literary and artistic domain protected from the NATURE OF MORAL RIGHTS
of the Intellectual Property Code of the moment of their creation. Patentable Droit de suite or “art proceeds right” is the
inventions, on the other hand, refer to any artist’s resale right, which requires that a These are personal rights independent from
Philippines (RA 8293). The format or
technical solution of a problem in any field of percentage of the resale price of an artistic economic rights. Being a personal right, it can
mechanics of a television show is not included
human activity which is new, involves an work is paid to the author. only be given to a natural person. Hence, even
in the list of protected works in Sec. 2 of PD
inventive step and is industrially applicable. if he has licensed or assigned his economic
No. 49. For this reason, the protection afforded
RIGHTS OF A COPYRIGHT OWNER The right is exercisable even after the author’s rights, he continues to enjoy the
by the law cannot be extended to cover them.
death, provided the work is still in copyright. above‐mentioned moral rights. (Amador,
Economic rights – the exclusive right to carry (David Bainbridge, Intellectual Property, 3rd Intellectual Property Fundamentals, 2007)
SISON OLAÑO v. LIM ENG CO [G.R. No. out, authorize or prevent the following acts: Ed., p.220 1996, also cited in Copyright Law of
195835] Term of moral rights
the Philippines by D. Funa)
a. Reproduction of the work or substantial It shall last during the lifetime of the author
LEC was invited by the architects of the portion thereof In every sale or lease of an original work of
Manansala Project to submit design/drawings and for fifty (50) years after his death and shall
b. Carry-out derivative work painting or sculpture or of the original not be assignable or subject to license. (Sec.
and specifications for interior and exterior (dramatization, translation, adaptation, manuscript of a writer or composer.
hatch doors and Metrotech was also 198, IPC)
abridgment, arrangement or other Subsequent to the frist disposition thereof by
subcontracted to the Project. LEC demanded transformation of the work) the author, the author or his heirs shall have Note: The person/s to be charged with the
that Metrotech cease from infringing its c. First distribution of the original and an inalienable right to participate in the gross posthumous enforcement of moral rights shall
intellectual property rights, but Metrotech each copy of the work by sale or other proceeds of the sale or lease to the extent of be named in writing to be filed with the
argued that no copyright infringement was forms of transfer of ownership five percent (5%). (IPC, Sec. 200) National Library. In default of such a person or
committed. d. Rental right persons, such enforcement shall devolve upon
e. Public display Rights which are not covered under a either the author's heirs, and in default of the
The petition is hereby granted and reinstating f. Public performance “Droit de suite” heirs, the Director of the National Library.
the complaint against the petitioners. There is g. Other communications to the public 1. Print (ibid.)
no proof that the respondents reprinted the (IPC, Sec 177) 2. Etchings
copyrighted sketches/drawings of LEC's hatch 3. Engravings Exception to moral right
doors since the hatch doors cannot be Note: Assignment of rights must be in writing 4. Works of applied art
considered as either illustrations, maps, plans, to be valid 5. Similar works wherein the author A. Absent any special contract at the time
sketches, charts and three dimensional works primarily derives gain from the creator licenses/permits another to use
relative to geography, topography, architecture his work, the following are deemed not
 to contravene creator’s moral rights, b. Fixation of their unfixed compensation he or she received for the first APPLICABILITY OF NEIGHBORING
provided they are done in accordance performance communication or broadcast (#3 scope of RIGHTS
with reasonable customary standards or 2. Direct or indirect reproduction of their performance rights).
requisites of the medium: performances fixed in sound recordings, Provisions of Chapter VIII shall apply mutatis
a. Editing in any manner or form; Exception: Unless otherwise provided in the mutandis to the rights of the performers,
b. Arranging 3. First public distribution of the original contract producers of sounds recordings and
c. Adaptation and copies of their performance fixed in broadcasting organizations, as an exception to
d. Dramatization the sound recording through sale or SOUND PRODUCERS infringement and allow the following:
e. Mechanical and electric rental or other forms of transfer of 1. Exclusive use of a natural person for
Scope of Rights: exclusive rights (Sec 208)
reproduction ownership; own personal purposes
B. Complete destruction of work 4. Commercial rental to the public of the The right to authorize the: 2. Short excerpts for reporting current
unconditionally transferred by creators. original and copies of their events
(Sec. 197, IPC) performances fixed in sound recordings, 1. Direct or indirect reproduction of their 3. Sole use for the purpose of teaching or
MORAL RIGHTS CAN BE WAIVED even after distribution of them by, or sound recordings, in any manner or for scientific research
pursuant to the authorization by the form; the placing of these 4. Fair use of the broadcast (Sec. 212, IPC,
General Rule: performer; reproductions in the market and the as amended by R.A 10372)
Moral rights can be waived in writing, 5. Making available to the public of their right of rental or lending; TERMS OF PROTECTION
expressly stating such waiver. performances fixed in sound recordings, 2. First public distribution of the original
by wire or wireless means, in such a and copies of their sound recordings 1. For performances not incorporated in
Exceptions: way that members of the public may recordings, 50 years from the end of the
through sale or rental or other forms of
Even in writing, waiver is not valid if: access them from a place and time year in which the performance took
transferring ownership; and
individually chosen by them. 3. Commercial rental to the public of the place; and
1. Use the name of the author, title of his
original and copies of their sound 2. For sound or image and sound
work, or his reputation with respect to any Moral Rights of Performers: Sec 204 recordings, even after distribution by recordings and for performances
version/adaptation of his work, which
them by or pursuant to authorization incorporated therein, 50 years from the
because of alterations, substantially tend General Rule: Have the right to claim to be
by the producer end of the year in which the recording
to injure literary/artistic reputation of identified as the performer of his performances, took place.
another author. as regards his live aural performances or NOTE: Sec 184 Limitations and Sec 185 Fair 3. In case of broadcasts, the term shall be
performances fixed in sound recordings. Use of copyrights shall apply mutatis mutandis 20 years from the date the broadcast
2. Use name of author in a work that he did
not create. (with the necessary changes) to the producer took place. The extended term shall be
Exception: The omission is dictated by the
of sound recordings. applied only to old works with
manner of the use of the performance, and to
Neighboring Rights subsisting protection under the prior
object to any distortion, mutilation or other BROADCASTING ORGANIZATIONS law. (Sec. 215, IPC)
modification of his performances that would
These are the rights of performers, producers PERSON WGHOM THE NEIGHBORING
be prejudicial to his reputation. Scope of Rights: exclusive rights (Sec 211)
of sound recording and broadcasting RIGHTS ARE GRANTED
organizations. Limitation on Right - When Performance The right to carry out/authorize/prevent
RIGHTS OF PERFORMERS, PRODUCERS Rights are lost: Sec 205 the:
OF SOUND RECORDINGS AND 1. For Works
BROADCASTING ORGANIZATIONS Once the performer has authorized the 1. Rebroadcasting of their broadcasts; a. Works of authors who are
broadcasting or fixation of his performance 2. Recording in any manner, including the nationals of, or have their
PERFORMANCE RIGHTS making of films or the use of video habitual residence in, the
Note: Sec 184 Limitations and Sec 185 Fair Use tape, of their broadcasts for the Philippines;
Scope of Performance Rights: exclusive of copyrights shall apply mutatis mutandis b. Audio‐visual works the producer
purpose of communication to the
rights (Sec 203) (with the necessary changes) to performers of which has his headquarters
public of television broadcasts of the
same; and or habitual residence in the
The right of authorizing the: Additional Remuneration for Subsequent
3. Use of such records for fresh Philippines;
Communications or Broadcasts: Sec 206 c. Works of architecture erected in
1. (As to performances) transmissions or for fresh recording
a. Broadcasting & other the Philippines or other artistic
General Rule: Performer shall be entitled to
communication to the public of works incorporated in a building
an additional remuneration equivalent to at
their performance least five percent (5%) of the original
 or other structure located in the Philippines is a party. (Sec. 221.2 and 224.2,
GR : Publishers shall regularly‐assigned
Philippines; IPC
be deemed duties, unless there
d. Works first published in the
representatives of is an agreement,
Philippines; and RULES ON OWNERSHIP OF COPYRIGHT
the author in case of express or implied,
e. Works first published in another
anonymous and to the contrary. (Sec.
country but also published in pseudonymous 178.3, IPC)
the Philippines within thirty TYPE OF WORK OWNER works.
days, irrespective of the Anonymous and Writer – in respect of
nationality or residence of the Original literary Author of the work letters subject to
pseudonymous XPN : When the
authors. (Sec. 221, IPC) and artistic works (Sec 178.1, IPC) Letters the provisions of
works contrary appears or
where the Article 723, Civil
2. For Performers Co‐authors;
pseudonym or Code.
a. Performers who are nationals of in the absence of
adopted name (Sec. 178.6, IPC)
the Philippines; agreement, their
rights shall be leaves no doubt as to
b. Performers who are not the author’s
nationals of the Philippines but governed by the
rules on identity; or author COLLECTIVE WORK vs. JOINT WORK
whose performances:
co‐ownership discloses his identity.
i. Take place in the Philippines;
(Sec. 179, IPC) COLLECTIVE WORK vs. JOINT WORK
or
ii. Are incorporated in sound Joint Ownership NOTE: If work of COLLECTIVE JOINT WORK
The person who
recordings that are protected joint authorship WORK
commissioned the
under IPC; or consists of parts
work shall own the
iii. Which has not been fixed in that can be used Work created by 2 Work prepared by 2
work but the
sound recording but are carried separately, then the or more people at or more authors
Commissioned copyright thereto
by broadcast qualifying for author of each part the initiative and with the intention
work shall remain with
protection under IPC. (Sec. 222, shall be the original under the direction that their
the creator, unless
IPC) owner of the of another, with the contributions be
there is a written
3. Of sound Recordings copyright in the part understanding that merged into
stipulation to the
a. Sound recordings the producers that he has created. it will be disclosed inseparable or
contrary. (Sec. 178.4,
of which are nationals of the (Sec. 178.2, IPC) by the latter under independent parts of
IPC)
Philippines; his own name and the unitary whole.
GR : Producer, the that of the
b. Sound recordings that were first Contributor is
author of the contributions of
published in the Philippines. deemed to have
scenario, the others will not be
(Sec. 223, IPC) Collective Works waived his right
composer of the identified (Sec. 171.2,
unless he expressly
music, the film IPC)
4. For broadcast reserves it. (Sec. 196,
director, and the
a. Broadcasts of broadcasting IPC)
author of the work When an author Joint authors shall
organizations the headquarters
Audiovisual work so adapted – The employee, if not contributes to a be both entitled to
of which are situated in the
audiovisual work. a part of his regular collective work, his the acknowledgment
Philippines; and
In the course of duties even if the right to have his as authors of the
b. Broadcasts transmitted from
XPN : The employment employee uses the contribution work.
transmitters situated in the
producers shall time, facilities and attributed to him is
Philippines. (Sec. 224, IPC) If, however, a work
exercise the materials of the deemed waived
copyright to an employer. unless he expressly of joint authorship
NOTE: The provisions of IPC shall also apply consists of parts that
extent required for reserves it. (Sec. 196)
to works, performers, producers of sound can be used
the exhibition of the The employer, if the
recordings and broadcasting organizations separately and the
work in any manner. work is the result of
that are to be protected by virtue of and in author of each part
(Sec. 178.5, IPC) the performance of
accordance with any international convention can be identified,
or other international agreement to which the his
the author of each
 part shall be the political, social, economic, scientific or giving of professional advice by a legal
original owner of the Works of Applied 25 years from the date religious topic, lectures, addresses and practitioner.
copyright in the part art of making other works of the same nature
that he has created ABS-CBN BROADCASTING CORPORATION
(Sec. 178.2.) 50 years from 4. As part of reports of current events VS. PHILIPPINE MULTI-MEDIA SYSTEM,
publication of work. (e.g. music played or tunes on the INC., ET AL [G.R. NO. 175769-70]
Photographic ● If unpublished, occasion of a sporting event and such
works 50 years from The Philippine Multi-Media System, Inc.
AUTOMATIC PROTECTION PRINCIPLE tunes were picked up during a new
the date of coverage of the event). (PMSI)’s program line-up includes ABS-CBN
making. Channels 2 and 23 which ABS-CBN filed a
Works are protected by the sole fact of their 50 years from the date 5. For teaching purposes, provided that complaint for an infringement on its
creation irrespective of their content, quality, or Audio-visual of publication. the source and of the name of the broadcasting rights and copyright however,
purpose. works (including ● If unpublished, author, if appearing in the work, are PMSI is engaged in cable retransmission
those produced 50 years from mentioned. instead, which isn’t rebroadcasting or
Such rights are conferred from the moment of
creation.
by process the date of infringement, and isn’t under copyright
analogous to making. 6. Recording made in educational protection furthermore, the carriage of
TERM OF PROTECTION OF COPYRIGHT photography or ABS-CBN’s signals by virtue of the must-carry
institutions of a work included in a
any process for broadcast for the use of such rule in Memorandum Circular No. 04-08-88 is
making educational institutions, provided that under the direction and control of the
TYPE OF WORK DURATION audio-visual government though the NTC therefore, PMSI
such recording must be deleted within
recordings) a reasonable period after they were first is not engaged in rebroadcasting and thus
broadcast. cannot be considered to have infringed
Lifetime of the author
ABS-CBN’s broadcasting rights and copyright.
Single Creation and for 50 years after The term of protection subsequent to the
his death. death of the author provided in the preceding 7. The making of ephemeral recordings
OTHER LIMITATIONS ON COPYRIGHT
Section shall run from the date of his death or by a broadcasting organization by
of publication, but such terms shall always be means of its own facilities and for use
Works of Joint Life of the last 1. The fair use of a copyrighted work for
deemed to begin on the first day of January in its own broadcast.
Authorship/ surviving author and criticism, comment, news reporting,
of the year following the event which gave teaching including multiple copies for
Joint Creation for 50 years after his 8. The use made of a work by or under
rise to them. (Sec. 214, IPC) classroom use, scholarship, research,
death. the direction or control of the
and similar purposes is not an
LIMITATION ON COPYRIGHT government, by the National Library
infringement of copyright. (Sec. 185,
or by educational, scientific, or
50 years from the date IPC)
professional institutions where such
which the work was General Limitations on Copyright use is in the public interest and is
first lawfully published. 2. Copyright in a work of architecture
Anonymous or The following acts shall not constitute an compatible with fair use.
shall include the right to control the
Pseudonymous XPN: infringement of copyright: erection of any building which
Work ● If the author's 9. The public performance of a work, in
1. Performance of a work, once it has reproduces the whole or a substantial
identity is a place where no admission fee is
been lawfully made accessible to the part of the work either in its original
revealed or is no charged.
public, if done privately and free of form or in any form recognizably
longer in doubt derived from the original, provided,
charge or for a charitable or religious 10. Public display of the original or a copy
before the said that the copyright in any such work
institution or society. of the work not made by means of a
period, the first shall not include the right to control
two rules apply; film, slide, television image or
2. The making of quotations from a the reconstruction or rehabilitation in
or otherwise on screen or by means of any
published work if they are compatible the same style as the original of a
● If the work other device or process (e.g. public
with fair use and only to the extent building to which that copyright
remains display using posters mounted on walls
justified for the purpose. relates. (Sec. 186, IPC)
unpublished, and display boards).
copyright also 3. Individuals are permitted to privately
3. Communication to the public by 11. Any use made of a work for the purpose
lasts for 50 years. reproduce a published work in a single
mass media of articles on current of any judicial proceedings or for the
copy for research and private study
 without the copyright owner's program, provided, the copy or DOCTRINE OF FAIR USE Philippine Multimedia System, G.R. No. 175769‐
authorization, with certain exceptions: adaption is necessary for: 70, Jan. 19, 2009)
a. Architectural works in the form a. The use of the computer Fair use” permits a secondary use that “serves
of buildings or other program in conjunction with a the copyright objective of stimulating GMA NETWORK INC. VS. CENTRAL CATV
constructions. computer for the purpose, and productive thought and public instruction INC. [G.R No. 176694]
b. Entire books or substantial parts to the extent, for which the without excessively diminishing the incentives
In February 2000, the petitioner, alongside
thereof, or musical works in computer program has been for creativity”.
other organizations, filed a complaint with the
graphic form, through obtained; and NTC against the respondent, seeking to
reprographic means. b. Archival purposes, and, for the Fair Use of a Copyright Work
prevent the broadcasting of advertisements on
c. Compilations of data and other replacement of the lawfully its CATV system, citing Executive Order No.
The fair use of a copyrighted work for
materials. owned copy of the computer 205; however, the NTC and Court of Appeals
criticism, comment, news reporting, teaching
d. Computer programs, except as program in the event that the rulings permitting such advertisements were
including limited number of copies for the
provided in Section 189. lawfully obtained copy of the overturned by the Supreme Court, clarifying
classroom use, scholarship, researched and
e. Any work where reproduction computer program is lost, that Executive Order No. 436 does not
similar purposes is not an infringement of
would unreasonably conflict destroyed or rendered unusable. constitute a law and does not modify the
copyright.
with its normal exploitation or (Sec. 187, IPC) relevant regulations, thereby affirming the
unreasonably prejudice the 6. The importation of a copy of a work by Factors that should be considered in order respondent's right to broadcast commercials
legitimate interests of the an individual for his personal purposes to determine “fair use” on its CATV networks.
author. shall be permitted without the
4. Libraries or archives that operate on a authorization of the author of, or other 1. The purpose and character of the use, PUBLISHED WORKS
nonprofit basis are allowed to make a owner of copyright in, the work under including whether such use is of a
single copy of a work through the following circumstances: commercial nature or is for non‐profit Those works which, with the consent of the
reprographic reproduction without the a. When copies of the work are not educational purpose; authors, are made available to the public by
permission of the copyright owner available in the Philippines and: 2. The nature of the copyrighted work; wire or wireless means in such a way that
7.

under the following circumstances: I. Not more than one copy at one time is 3. The amount and substantiality of the members of the public may access these works
a. If the original work is too fragile imported for strictly individual use portion used in relation to the from a place and time individually chosen by
or rare to be lent out. only; or copyrighted work as a whole; and them: provided, that availability of such copies
b. When the work consists of II. The importation is by authority of and 4. The effect of the use upon the potential has been such, as to satisfy the reasonable
isolated articles from composite for the use of the Philippine market for or value of the copyrighted requirement of the public, having regard to
works or brief portions of other Government; or work. the nature of the work. (Sec. 171.7, IPC)
published works, and III. The importation, consisting of not
reproducing them is necessary more than three such copies or Note: The fact that a work is DIFFERENCE BETWEEN PUBLIC
for research or study purposes likenesses in any one invoice, is not for unpublished shall not by itself bar a PERFORMANCE AND COMMUNICATION
instead of lending out the entire sale but for the use only of any finding of fair use if such finding is TO THE PUBLIC OF A PERFORMANCE
volume. religious, charitable, or educational made upon consideration of all the
c. When making a copy is society or institution duly incorporated above factors. (Sec. 182.2, IPC)
necessary for preservation or registered, or is for the COMMUNICATION
purposes, such as replacing a MUST-CARRY RULE PUBLIC TO THE PUBLIC
encouragement of the fine arts, or for
lost, destroyed, or unusable any state school, college, university, or PERFORMANCE OF A
Must‐carry rule is another limitation on PERFORMANCE
copy, or adding to the free public library in the Philippines. copyright. It obligates operators to carry the
permanent collection of another
signals of local channels within their Performance at a The transmission to
similar library or archive. b. When such copies form parts
respective systems. This is to give the people place or at places the public, by any
of libraries and personal baggage
wider access to more sources of news, where persons medium, otherwise
5. The reproduction in one back-up copy belonging to persons or families
information, education, sports event and outside the normal than by broadcasting,
or adaptation of a computer program arriving from foreign countries
entertainment programs other than those circle of a family of sounds of a
shall be permitted, without and are not intended for sale,
provided for by mass media and afforded and that family’s performance or the
authorization of, or other owner of provided, that such copies do
television programs to attain a well informed, closest social representations of
copyright in a computer program, by not exceed three. (Sec. 190, IPC)
well‐versed and culturally refined citizenry acquaintances are sounds fixed in a
the lawful owner of that computer
and enhance their socio‐economic growth. or can be present. sound recording.
(ABS‐CBN Broadcasting Corporation v.
 LIMITATION REGARDING SUBMISSION PACITA HABANA, ET. AL. vs. FELICIDAD The Supreme Court ruled in favor of Tan and
OF A LITERARY, PHOTOGRAPHIC OR ROBLES AND GOODWILL TRADING CO., affirmed the decision of the lower court. The
It is performed at a The communication ARTISTIC WORK FOR PUBLICATION INC. [G.R. NO. 131522] Court held that Tan did not infringe upon the
specific time and can be accessed Copyright Law. While there were public
Unless a greater right is expressly granted, The petitioners are the authors and owners of
place. through wired or performances for profit, Tan cannot be held
such submission shall constitute only a license copyrighted books, College English for Today
wireless means at a liable for copyright infringement. The Court
to make a single publication. (Sec. 180.3, IPC) (CET). However, the respondents, Felicidad
time and place relied on Section 3(c) of the Copyright Law,
Note: If two or more persons jointly own a Robles, also published and sold a book called
convenient to the which grants the exclusive right to exhibit,
copyright or any part thereof, neither of the "Developing English Proficiency" (DEP) Books
viewer. perform, represent, produce, or reproduce
owners shall be entitled to grant licenses 1 and 2. The petitioners discovered striking
copyrighted works for profit or otherwise.Tan
without the prior written consent of the other parallels between their CET book and the
did not infringe upon the Copyright Law and
owner or owners. (Ibid.) respondents' DEP book while examining their
could not be held liable for copyright
MAY A COPYRIGHT BE own contributions.
infringement. Under the circumstances, it is
TRANSFERRED/ASSIGNED?
COPYRIGHT INFRINGEMENT These parallels included examples, drawings, clear that the musical compositions in
It may be assigned in whole or in part. Within and the substance as well as the presentation question had long become public property,
It is the doing by any person, without the style. The petitioners perceived plagiarism and and are therefore beyond the protection of the
the scope of the assignment, the assignee is
consent of the owner of the copyright, of copyright infringement when they discovered Copyright Law.
entitled to all the rights and remedies which
anything the sole right to do which is multiple pages in DEP that appeared to be
the assignor had with respect to the copyright. PLAGIARISM
conferred by statute on the owner of the straight copies of their own writing. Does
(Sec. 180.1, IPC)
copyright. The act of lifting from another’s Robles committed infringement in the
book substantial portions of discussions and production of DEP? YES, To constitute The practice of claiming or implying original
COPYRIGHT VS. MATERIAL OBJECT
examples and the failure to acknowledge the infringement, it is not necessary that the authorship of (or incorporating material from)
Copyright is distinct from the property in the same is an infringement of copyright. (Habana whole or even a large portion of the work shall someone else’s written or creative work, in
material object subject to it. Consequently, the v. Robles, G.R. No. 131522, July 19, 1999) have been copied. If so much is taken that the whole or in part, into one’s own without
transfer or assignment of the copyright shall value of the original is sensibly diminished, or adequate acknowledgment.
not itself constitute a transfer of the material COLUMBIA PICTURES, INC., ET. AL. vs. the labors of the original author are
object. Nor shall a transfer or assignment of COURT OF APPEALS, SUNSHINE HOME substantially and to an injurious extent
VIDEO INC. [G.R. No. 110318] DIFFERENCE BETWEEN COPYRIGHT
the sole copy or of one or several copies of the appropriated by another, that is sufficient in INFRINGEMENT AND PLAGIARISM
work imply transfer or assignment of the point of law to constitute piracy. The final
copyright. (Sec. 181, IPC) Columbia Pictures Inc. and other product of an author's toil is her book. To
complainants accused Sunshine Home Video allow another to copy the book without
Inc. of violating the Philippines' intellectual COPYRIGHT PLAGIARISM
REQUISITES FOR A TRANSFER OF appropriate acknowledgment is injury enough.
property laws by selling, leasing, and INFRINGEMENT
COPYRIGHT TO TAKE EFFECT
distributing copyrighted films without proper The unauthorized
1. If inter vivos, must be in writing; and permission. NBI conducted a search based on SUBSTANTIAL REPRODUCTION
use of copyrighted
2. Filed in National Library upon payment a warrant and found pirated video tapes, and material in a manner
of prescribed fees. (Sec. 182, IPC) equipment related to the unlawful activities. It is not necessarily required that the entire
that violates one of The use of another’s
copyrighted work, or even a large portion of it,
the copyright information,
FILING OF THE ASSIGNMENT OR The court’s decision was in favor of the be copied. If so much is taken that the value of
owner’s exclusive language, or writing,
LICENSE OF COPYRIGHT complainants, determining that there was the original work is substantially diminished,
rights, such as the when done without
indeed copyright infringement. The video there is an infringement of copyright and to an
right to reproduce or proper
Section 182 uses the permissive word “may” in tapes found in Sunshine Home Video Inc.'s injurious extent, the work is appropriated. In
perform the acknowledgment of
reference to the filing of the deed of possession were exact reproductions of cases of infringement, copying alone is not
copyrighted work, or the original source.
assignment or transfer of copyright, this filing copyrighted films owned by the complainants, what is prohibited. The copying must produce
to make derivative
should not be understood as mandatory for and they were distributed without proper an “injurious effect”.
works that build
validity and enforceability. The filing is entirely consent. The court upheld the validity of the upon it.
optional for the parties and may be useful only search warrant and the actions taken by the FILIPINO SOCIETY OF COMPOSERS,
for evidentiary and notification purposes. NBI in this case. AUTHORS, AND PUBLISHERS, INC. vs.
(Amador, Intellectual Property Fundamentals, BENJAMIN TAN[G.R. No. L- 36402] Copyright Plagiarism is specific
2007) infringement is a as it refers only to
 5. Moral and exemplary damages (Sec. GLOSSARY (REQUISITES) for an application for such invention,
very broad term that using someone else’s
216.1); or or
describes a variety of work without proper
6. Seizure and impounding of any article, Application for registration of a collective 2. 2 or more applications are filed for the
acts. It may be acknowledgement.
which may serve as evidence in the mark same invention - the applicant who has
duplication of a
court proceedings. (Sec. 216.2) 1. The application shall designate the the EARLIEST filing date.
work, rewriting a
piece, performing a mark as a collective mark.
CRIMINAL PENALTIES IN CASE OF Forms of Assignment
written work or 2. Accompanied by a copy of the
COPYRIGHT INFRINGEMENT 1. Total
doing anything that agreement, if any, governing the use of
2. Partial
is normally the collective mark.
Functions of Trademarks
considered to be 1. Imprisonment of one (1) year to three
1. To point out distinctly the origin or
the exclusive right of (3) years plus a fine ranging from Fifty Colorable Imitation mark
ownership of the articles to which it is
the copyright holder. thousand pesos (P50,000) to One 1. Confusion of goods (product confusion)
affixed.
hundred fifty thousand pesos 2. Confusion of business (source or origin
2. To secure to him who has been
(P150,000) for the first offense. confusion)
instrumental in bringing into market a
There is no Public documents 2. Imprisonment of three (3) years and Conditions for patentability
superior article or merchandise the
copyright can be plagiarized so one (1) day to six (6) years plus a fine
1. Novelty fruit of his industry and skill.
infringement on long as it is not ranging from One hundred fifty
2. Involves an inventive step 3. To prevent fraud and imposition.
public documents. acknowledged. thousand pesos to Five hundred
3. Industrially Applicable Grounds for cancellation of Collective
thousand (P500,000) for the second
Marks
offense. Copyrightable works
1. The court shall cancel the registration
3. Imprisonment of six (6) years and one 1. Literarcy and Artisic works
NBI-MICROSOFT CORPORATION vs. of a collective if the person requesting
day to nine (9) years plus a fine ranging 2. Deratives works
HWANG,J., et. al. [G.R. No. 147043 ] the cancellation proves that only the
from Five hundred thousand pesos Elements of an action for Unfair
registered owner uses the mark.
(P500,000) to P1,500,000 for the third Competition
Microsoft discovered Beltron's illegal activities 2. Or that he uses or permits its use in
offense. 1. Confusing similarities in the general
of copying and selling Microsoft software, contravention of the agreements
4. In all cases, subsidiary imprisonment in appearance of the goods.
prompting the NBI to seize numerous referred to in Subsection 166.2.
cases of insolvency. 2. Intent to deceive the public and
CD-ROMs containing unauthorized Microsoft 3. Or that he uses or permits its use in a
defraud a competitor.
software, which led to legal action for AFFIDAVIT EVIDENCE manner liable to deceive trade circles or
Elements to be established in Trademark
copyright infringement and unfair the public as to the origin or any other
Infringement
competition; consequently, the Court granted An affidavit made before the notary public in common characteristics of the goods or
VPU
the petition, affirming the copyright actions for infringement, reciting the facts services concerned. (Sec 167.3)
1. Validity of the Mark
infringement due to Beltron's unauthorized required to be stated under the IPC. (Sec. 2. Plaintiff's ownership of the Mark
actions and the deceptive similarity of the 216.1) Grounds for cancellation of Patent
3. Use of the mark or its colorable
CD's packaging to genuine Microsoft CIND
Note: As a prima facie proof, the affidavit imitation by the alleged infringer result
products. 1. The invention is Not new or patentable
shifts the burden of proof to the defendant, to in “likelihood of confusion”
2. The patent does not Disclose the
Remedies in case of copyright prove the ownership of the copyrighted work. Elements of copyrightability
invention clearly and completely for it
infringement 1. Originality
to be carried out by any person skilled
2. Expression
1. Injunction in art; or
Elements of originality
2. Damages, including legal costs and 3. Contrary to public order or morality
1. It is independently created by the
other expenses, as he may have 4. Patent is found Invalid in an action for
author, and
incurred due to the infringement as infringement.
2. It possesses some minimal degree of
well as the profits the infringer may Grounds for cancellation of Utilitiy Models
creativity.
have made due to such infringement
First to file rule FICQ
3. Impounding during the pendency of
the action sales invoices and other 1. 2 or more persons have made the 1. The claimed invention does not
documents evidencing sales invention separately and independently Qualify for registration as a utility
4. Destruction without any compensation of each other - the person who FILED model and does not meet the
all infringing copies requirements of registrability.
 2. That the description and the claims do patent or his licensee is Limitation on Copyright use is in the public interest and is
not Comply with the prescribed anti‐competitive at any time after the The following acts shall not constitute an compatible with fair use.
requirements; grant of the patent infringement of copyright:
3. That any drawing which is necessary for 4. In case of public non‐commercial use 9. The public performance of a work, in
1. Performance of a work, once it has
the understanding of the invention has of the patent by the patentee, without a place where no admission fee is
been lawfully made accessible to the
not been Furnished; satisfactory reason at any time after the charged.
public, if done privately and free of
4. That the owner of the utility model grant of the patent
charge or for a charitable or religious
registration is not the Inventor or his 5. If the patented invention is not being 10. Public display of the original or a copy
institution or society.
successor in title. worked in the Philippines on a of the work not made by means of a
Grounds for cancellation of Industrial commercial scale, although capable of film, slide, television image or
2. The making of quotations from a
Design being worked, without satisfactory otherwise on screen or by means of any
published work if they are compatible
REN reason after the expiration of 4 years other device or process (e.g. public
with fair use and only to the extent
1. The subject matter of the industrial from the date of filing of the display using posters mounted on walls
justified for the purpose.
design is not Registerable. application or 3 years from the date of and display boards).
2. The subject matter is Not new; or the patent whichever is later. (Sec. 93 in
3. Communication to the public by
3. The subject matter of the industrial relation to Sec. 94) 11. Any use made of a work for the purpose
mass media of articles on current
design Extends beyond the content of 6. Where the demand for patented drugs of any judicial proceedings or for the
political, social, economic, scientific or
the application as originally filed. and medicines is not being met to an giving of professional advice by a legal
religious topic, lectures, addresses and
adequate extent and on reasonable practitioner.
Grounds for cancellation of Layout-design other works of the same nature
terms, as determined by the Secretary
of integrated circuits Limitations on the use of Tradenames or
of the Department of Health (Sec. 10,
PRF 4. As part of reports of current events Business names
R.A 9502)
(e.g. music played or tunes on the A person may not:
Internationally well-known marks
1. The layout-design is not Protectable occasion of a sporting event and such 1. Use any name or designation contrary
1. The Philippines' competent authority
under this Act; tunes were picked up during a new to public order or morals
considers a "well-known" mark as
2. The Right holder is not entitled to coverage of the event). 2. Use a name if it is liable to deceive
belonging to someone other than the
protection under this Act; or trade circles or the public as to the
applicant or registrant, both
3. The application for registration of the 5. For teaching purposes, provided that nature of the enterprise identified by
internationally and in the Philippines.
layout-design was not Filed within two the source and of the name of the that name. (Sec. 165.1, IPC)
2. Need not be used or registered in the
(2) years from its first commercial author, if appearing in the work, are 3. Subsequently use a trade name likely to
Philippines
exploitation anywhere in the world. mentioned. mislead the public as a third party. (Sec.
3. Not required to be widely known, but
165.2, b, IPC)
Grounds for cancellation of the only by the pertinent segment of the
6. Recording made in educational 4. Copy or simulate the name of any
compulsory licensing public.
institutions of a work included in a domestic product). (for imported
1. Ground for the grant of the Limitations on the actions for
broadcast for the use of such 5. Copy or simulate a mark registered in
compulsory license no longer exists infringement
educational institutions, provided that accordance with the provisions of IPC
and is unlikely to recur; 1. Right of prior user
such recording must be deleted within (for imported products).
2. Licensee has neither begun to supply 2. Relief against publisher
a reasonable period after they were first 6. Use a mark or trade name calculated to
the domestic market nor made serious 3. Relief against newspaper
broadcast. induce the public to believe that the
preparation therefore; article is manufactured in the
3. Licensee has not complied with the Limitation to the civil/criminal action
7. The making of ephemeral recordings Philippines, or that it is manufactured
prescribed terms of the license. 1. No damages can be recovered for acts of
by a broadcasting organization by in any foreign country or locality other
infringement committed more than
means of its own facilities and for use than the country or locality where it is
Grounds for compulsory licensing and the four (4) years before the filing of the
in its own broadcast. in fact manufactured.
period for filing a petition action for infringement. (Sec. 79, IPC)
Note: Items 4, 5 and 6 only apply to imported
1. National emergency
8. The use made of a work by or under products and those imported articles shall not
2. Where the public interest, at any time 2. The criminal action prescribes in three
the direction or control of the be admitted to entry at any customhouse of the
after the grant of the patent (3) years from the commission of the
government, by the National Library Philippines (Sec. 166, IPC).
3. Where a judicial or administrative crime. (Sec. 84, IPC)
or by educational, scientific, or
body has determined that the manner
professional institutions where such Modes of obtaining license to exploit
of exploitation by the owner of the
patent rights
 1. Voluntary licensing 1. Indusrtial Design Rights of a copyright owner 6. Substantive examination
2. Compulsory licensing 2. Integrated circuit 7. Grant of patent
1. Economic right
Non-copyrightable works 3. Layout design/topography 8. Publication upon grant
2. Moral right
1. Idea, procedure, system, method or 9. Issuance of certificate
Patent Infringement
operation, concept, principle, discovery The right to authorize the (Broadcasting Test of Patent Infringement
or mere data as such MOUSI organization)
2. News of the day and other items of 1. Making 1. Literal Infringement Test
press information 2. Using 1. Direct or indirect reproduction 2. Doctrine of Equivalents
3. Any Official text of a legislative, 3. Offering for sale 2. First public distribution of the original Function-means-and-result test
administrative or legal nature, as well as 4. Selling or; and copies
any official translation thereof Transfer of Copyright to take effect
5. Importing a patented product or a 3. Commercial rental to the public of the
4. Pleadings product obtained directly or indirectly original and copies 1. If inter vivos, must be in writing; and
5. Decisions of courts and tribunals - from a patented process 2. Filed in the National Library upon
this refers to original decisions and not Remedies of the owner of the patent The right to carry out/authorize/prevent payment of prescribed fees. (Sec. 182,
to annotated decisions such as the against infringement the (Broadcasting organization) IPC)
SCRA or SCAD as these already fall
under the classification of derivative 1. Civil action for infringement 1. Rebroadcasting of their broadcasts; Transfer of right affected
works, hence copyrightable 2. Criminal action for infringement 2. Recording in any manner, including the
3. Administrative remedy 1. By inheritance or bequest
6. Any work of the Government of the making of films or the use of video
2. License contract
Philippines Remedy of person not having the right to tape, of their broadcasts for the
7. TV Programs patent purpose of communication to the Who can file an action for infringement
8. System of bookkeeping public of television broadcasts of the
PRFS 1. The patentee or his successors-in-
9. Statutes same; and
interest may file an action for
3. Use of such records for fresh
Non-patentable Inventions 1. Prosecute the application as his own infringement.
transmissions or for fresh recording
PAD‐SCAD 2. File the new patent application
1. Discoveries, scientific theories and 3. Request the application to be refused; Rights which are not covered under a 2. Any foreign national or juridical entity
mathematical methods or “Droit de suite” who meets the requirements of Sec. 3
2. In the case of Drugs and medicines, 4. Seek cancellation of the patent 1. Print and not engaged in business in the
mere discovery of a new form or new Remedy of the true and actual owner 2. Etchings Philippines, to which a patent has been
property of a known substance which 3. Engravings granted or assigned, whether or not it is
does not result in the enhancement of CCA licensed to do business in the
4. Works of applied art
the efficacy of that substance 5. Similar works wherein the author Philippines.
1. the Court shall order for his Who can grant a compulsory license
3. Schemes, rules and methods of primarily derives gain from the
substitution as patentee, or 1. The Director of Legal Affairs
performing mental acts, playing games proceeds of the production. (Sec. 201,
2. at the option of the true inventor, Cancel 2. R.A. 9502 (Universally Accessible
or doing business, and programs for IPC)
the patent, and Award actual damages Cheaper and Quality Medicines Act of
computers Salient Features of the Paris Convention
in his favor if warranted by the 2008) however amended Sec. 93
4. Methods for treatment of the human or Trademarks
circumstances.
Animal body
5. Plant varieties or animal breeds or 1. National treatment principle Related Goods Principle
Requirements for a mark to be registered 2. Right of priority
essentially biological process for the 1. Belong or share identical descriptive
production of plants or animals. This 1. A visible sign (not sounds or scents); 3. Protection against unfair competition
4. Protection of trade names properties
provision shall not apply to and
5. Protection of well-known marks 2. When they share identical physical
microorganisms and non‐biological 2. Capable of distinguishing one’s goods
attributes or essential characteristics in
and microbiological processes and services from another Steps in the registration of a Patent form, composition, texture, or quality.
6. Aesthetic creations Rights conferred to a Patent
7. Anything which is Contrary to public 1. Filing of the application Test to determine confusing similarity
order or morality. (Sec. 22, IPC as 1. Subject matter is a product 2. Accordance of the filing date between marks
amended by R.A. 9502) 2. Subject matter is a process 3. Formality examination
Other Forms of Patentable Inventions 3. Right to assign the patent 4. Classification and search 1. Dominancy test
5. Publication of application 2. Totality or holistic test
 GLOSSARY (DEFINITION OF TERMS) and that contributing natural persons will not shall be liable as a contributory infringer and Dominancy test - infringement occurs if a
be identified. (Sec. 171.2) shall be jointly and severally liable with the competing trademark shares the dominant
Abstract - A concise summary of the infringer. features of another, leading to confusion.
disclosure of the invention as contained in the Colorable imitation - a close or ingenious
description, claims and merely serves as imitation that deceives ordinary persons or an Doctrine of Equivalents - Occurs when a Equivalent Device - It is such that a mechanic
technical information. ordinary purchaser into mistaking it for the device appropriates a prior invention by of ordinary skill in construction of similar
original. adopting its original idea and, although with machinery, having the forms, specifications
Affidavit Evidence - an affidavit made before some modification and change, performs and machine before him, could substitute in
the notary public in actions for infringement, Communication to the public of a substantially the same function in the place of the mechanism described without
reciting the facts required to be stated under performance or a sound recording - the substantially the same way to achieve the exercise of the inventive faculty.
the IPC. (Sec. 216.1) transmission to the public, by any medium, substantially the same result.
otherwise than by broadcasting, of sounds of a Fixation -the embodiment of sounds, or of
Audiovisual work or fixation - work that performance or the representations of sounds Doctrine of Exhaustion - The owner of the the representations thereof, from which they
consists of a series of related images which fixed in a sound recording. This term includes patent loses control over any further sales or can be perceived, reproduced, or
impart the impression of motion, with or making the sounds or representations of resales of a product once it has been sold in communicated through a device.
without accompanying sounds, susceptible of sounds fixed in a sound recording audible to the domestic market for the first time, either
being made visible and, where accompanied the public. with or without the holder's consent. (Sec 72.1, Idem sonans - Similarity of sound is sufficient
by sounds, susceptible of being made audible. IPC) to rule that the two marks are confusingly
Copyrights- A right over literary and artistic similar when applied to merchandise of the
Automatic Protection Principle - Works are works which are original intellectual creations Doctrine of Fair Use - “Fair use” permits a same descriptive properties.
protected by the sole fact of their creation in the literary and artistic domain protected secondary use that “serves the copyright
irrespective of their content, quality, or purpose. from the moment of creation. (Sec. 171.1, IPC) objective of stimulating productive thought Industrial Design – any composition of lines
and public instruction without excessively or colors or any three-dimensional form,
Broadcasting organization -shall include a Copyright Infringement - It is the doing by diminishing the incentives for creativity”. whether or not associated with lines or colors.
natural person or a juridical entity duly any person, without the consent of the owner Provided that such composition or form gives
authorized to engage in broadcasting; and of the copyright, of anything the sole right to Doctrine of Mechanical Equivalents - a a special appearance to and can serve as
do which is conferred by statute on the owner patent infringement occurs when the alleged pattern for an industrial product or
Broadcasting - the transmission by wireless of the copyright. The act of lifting from infringer has substituted in lieu of some handicraft. (Sec. 112, IPL)
means for the public reception of sounds or of another’s book substantial portions of unessential part of the patented process, a
images or of representations thereof; such Integrated circuit – A product, in its final
discussions and examples and the failure to well-known mechanical equivalent.
transmission by satellite is also “broadcasting” form, or an intermediate form, in which the
acknowledge the same is an infringement of Doctrine of Secondary Meaning - a word or elements, at least one of which is an active
where the means for decrypting are provided copyright.
to the public by the broadcasting organization phrase originally incapable of exclusive element and some of all of the
or with its consent. appropriation with reference to an article on interconnections are integrally formed in and
Copyright Vest- Works are protected from the
the market, because it is geographical or or on a piece of material, and in which is
time of their creation, irrespective of their
Claim - Defines the matter for which otherwise descriptive, may nevertheless be intended to perform an electronic function.
mode or form of expression, as well as of their
protection is sought. Each claim shall be clear used exclusively by one producer with
content, quality and purpose. Joint Work - Work prepared by 2 or more
and concise, and shall be supported by the reference to his article so long as in that trade
authors with the intention that their
description. Criminal Penalties- A penalty of and to that branch of the purchasing public,
contributions be merged into inseparable or
imprisonment from 2 years to 5and a fine the word or phrase has come to mean that the
Collective Mark - is a mark or trade name independent parts of the unitary whole.
ranging from P50,000 to P200,000 (Sec. 170, article was his product.
used by the members of a cooperative, an IPC.) Layout design/topography – The
association or other collective group or Doctrine of the File Wrapper - This doctrine
three-dimensional disposition, however
organization. (Sec. 40, R.A. 166) balances the doctrine of equivalents. Patentee
Doctrine of Contributory Infringement - expressed, of the elements, at least one of
is precluded from claiming as part of patented
Anyone who actively induces the infringement which is an active element, and of some or all
Collective Work - is a work which has been product that which he had to excise or modify
of a patent or provides the infringer with a of the interconnections of an integrated
created by two (2) or more natural persons at in order to avoid patent office rejection, and
component of a patented product or of a circuit, or such a three-dimensional
the initiative and under the glossdirection of he may omit any additions that he was
product produced because of a patented disposition prepared for an integrated circuit
another with the understanding that it will be compelled to add by patent office regulations.
process knowing it to be especially adopted for intended for manufacture.
disclosed by the latter under his own name infringing the patented invention and not
suitable for substantial non-infringing use
Literal Infringement Test - Occurs if an first fixation of the sounds of a performance or Trademarks - Any visible sign capable of
accused item pertains directly within the other sounds, or the representation of sounds. distinguishing the goods (trademark) or
scope of the claims. services (service mark) of an enterprise.
Publication of a fixed performance or a
Must carry rule - Must‐carry rule is another sound recording - the offering of copies of Trade Name - a name or designation
limitation on copyright. It obligates operators the fixed performance or the sound recording identifying or distinguishing an enterprise.
to carry the signals of local channels within to the public, with the consent of the right
their respective systems. holder: Provided, That copies are offered to Unfair Competition - It is passing off (or
the public in reasonable quality. palming off) or attempting to pass off the
Mutatis Mutandis – aka 'all necessary goods or business of one person as the goods
changes having been made' or 'with the Public Performance - Performance at a place or business of another to deceive the public.
necessary changes’. It means making necessary or at places where persons outside the normal
alterations while not affecting the main point circle of a family and that family’s closest Unity of Invention - The application shall
at issue/the main point remains the same. social acquaintances are or can be present. It is relate to one invention only or to a group of
performed at a specific time and place. inventions forming a single general inventive
Non-Competing Goods - Goods though concept. (Sec. 38.1)
they’re not in actual competition, they are Published works - Those works which, with
related to each other assuming that they the consent of the authors, are made available Utility model – A name given to inventions in
originate from one manufacturer. to the public by wire or wireless means in such the mechanical field.
a way that members of the public may access
Patent Infringement - making, using, these works from a place and time individually
offering of sale, selling, or importing a chosen by them: provided, that availability of
patented product or a product obtained such copies has been such, as to satisfy the
directly or indirectly from a patented process, reasonable requirement of the public, having
or the use of a patented process without the regard to the nature of the work.
authorization of the patentee. (Sec. 76, IPC)
Sound recording - the fixation of the sounds
Performers - actors, singers, musicians, of a performance or of other sounds, or
dancers, and other persons who act, sing, representation of sound, other than in the
declaim, play in, interpret, or otherwise form of a fixation incorporated in a
perform literary and artistic work. cinematographic or other audiovisual work.

Plagiarism - the practice of claiming or Totality or holistic test - confusing similarity

implying original authorship of (or is assessed based on visual, aural, and
incorporating material from) someone else’s connotative comparisons, along with overall
written or creative work, in whole or in part, impressions from encountering the marks in
into one’s own without adequate the marketplace.
acknowledgment.

Prior user - Person other than the applicant, Trademark Infringement – It occurs when
who in good faith, started using the invention someone uses someone else's mark or
in the Philippines, or undertaken serious tradename in a way that could confuse or
preparations to use the same, before the filing mislead consumers or others about where the
date or priority date of the application shall goods or services are coming from or who the
have the right to continue the use thereof, but business is without the owner's permission.
this right shall only be transferred or assigned This could include using someone else's mark
further with his enterprise or business. or tradename on labels, signs, prints,
packages, wrappers, receptacles,
Producer of a sound recording - the person, advertisements, or reproductions of other
or the legal entity, who or which takes the marks.
initiative and has the responsibility for the