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TABLE OF CONTENTS

IV. TRANSPORTATION LAW ..................................................................................................................................8

A. GENERAL PRINCIPLES OF COMMON CARRIERS (CIVIL CODE, ART. 1732) ....................................................... 9
1. Common Carrier vs. Private Carrier............................................................................................................ 9
2. Diligence Required from a Common Carrier – Civil Code, art. 1733 ........................................................... 9
3. Vigilance over Goods – Civil Code, arts. 1744-1754 ................................................................................. 10
4. Safety of Passengers – Civil Code, arts. 1755-1763.................................................................................. 13
5. Sources of Liability ................................................................................................................................... 15
B. MONTREAL CONVENTION............................................................................................................................ 18
1. Applicability ............................................................................................................................................. 18
2. Extent of Liability of Air Carrier ................................................................................................................ 18
3. Liability for Delay ..................................................................................................................................... 19
V. BANKING ........................................................................................................................................................ 23
A. THE NEW CENTRAL BANK ACT ...................................................................................................................... 23
1. BANKS IN DISTRESS .................................................................................................................................. 23
2. REMEDY OF CLOSED BANKS ..................................................................................................................... 25
B. SECRECY OF BANK DEPOSITS ........................................................................................................................ 27
1. PROHIBITED ACTS .................................................................................................................................... 27
2. EXCEPTIONS FROM COVERAGE ................................................................................................................ 27
3. GARNISHMENT OF DEPOSITS ................................................................................................................... 29
C. GENERAL BANKING LAW OF 2000 ................................................................................................................ 30
1. NATURE OF BANK FUNDS AND BANK DEPOSITS ...................................................................................... 30
2. REQUIRED DILIGENCE OF BANKS; LIABILITY AS DRAWEE BANK ............................................................... 31
3. PROHIBITED TRANSACTIONS BY BANK DIRECTORS AND OFFICERS ......................................................... 31
D. ANTI-MONEY LAUNDERING ACT .................................................................................................................. 33
1. POLICY ...................................................................................................................................................... 33
2. COVERED INSTITUTIONS AND THEIR OBLIGATIONS ................................................................................. 33
3. COVERED TRANSACTIONS ........................................................................................................................ 34
4. SUSPICIOUS TRANSACTIONS .................................................................................................................... 35
5. SAFE HARBOR PROVISION ........................................................................................................................ 35
6. MONEY LAUNDERING .............................................................................................................................. 35
7. AUTHORITY TO INQUIRE; FREEZING AND FORFEITURE............................................................................ 37
VI. INTELLECTUAL PROPERTY .............................................................................................................................. 40
A. PATENTS ...................................................................................................................................................... 42
1. Patentable vs. Non-patentable Inventions – Section 22 .......................................................................... 42
2. Ownership of a Patent – Sections 28-30 .................................................................................................. 44
3. Rights and Limitations of Patent Owner – Sections 71-77 ....................................................................... 44
4. Patent Infringement – Sections 76-84 ...................................................................................................... 45
5. Remedies for Infringement – Sections 79-80 ........................................................................................... 47
6. Cancellation – Sections 61-66 .................................................................................................................. 47
7. Compulsory Licensing – Sections 93-102.................................................................................................. 47
8. Voluntary Licensing – Sections 85-92 ....................................................................................................... 48
B. TRADEMARKS .............................................................................................................................................. 50
1. Marks vs. Collective Marks vs. Trade Names – Section 121 ..................................................................... 50
2. Non-registrable Marks – Section 123 ....................................................................................................... 51
3. Ownership and Registration – Section 152 .............................................................................................. 52
4. Rights and Limitations of Trademark Owner – Section 147 ..................................................................... 53

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5. Trademark Infringement – Section 155.................................................................................................... 53

6. Unfair Competition – Section 168 ............................................................................................................ 56
7. Cancellation – Section 151 ....................................................................................................................... 57
C. COPYRIGHT .................................................................................................................................................. 58
BASIC PRINCIPLES ................................................................................................................................................ 58
1. Copyrightable Works – Sections 172-173 ................................................................................................ 58
2. Non-Copyrightable Works – Sections 175-176......................................................................................... 59
3. Rights Conferred by Copyright – Sections 177, 193-199 .......................................................................... 60
4. Ownership of a Copyright – Section 178 .................................................................................................. 61
5. Limitations on Copyright – Sections 184-185 ........................................................................................... 62
6. Copyright Infringement – Section 216...................................................................................................... 63
VII. DATA PRIVACY ACT OF 2000 (R.A. NO. 10173) .............................................................................................. 66
A. PERSONAL VS. SENSITIVE PERSONAL INFORMATION................................................................................... 66
B. SCOPE .......................................................................................................................................................... 66
C. PROCESSING OF PERSONAL AND SENSITIVE PERSONAL INFORMATION ...................................................... 68
D. GENERAL DATA PRIVACY PRINCIPLES ........................................................................................................... 68
E. RIGHTS OF DATA SUBJECT ............................................................................................................................ 69
VIII. SECURITIES REGULATION CODE (R.A. NO. 8799) .......................................................................................... 72
A. FRAMEWORK FOR REGULATING OF SECURITIES TRADING .......................................................................... 72
B. CONCEPT OF SECURITIES; HOWEY TEST ....................................................................................................... 72
C. REGISTRATION OF SECURITIES ..................................................................................................................... 73
1. EXEMPT SECURITIES ................................................................................................................................. 73
2. EXEMPT TRANSACTIONS .......................................................................................................................... 73
IX. ELECTRONIC COMMERCE ACT ........................................................................................................................ 77
A. LEGAL RECOGNITION OF ELECTRONIC DATA MESSAGES, DOCUMENTS, AND SIGNATURES ........................ 77
B. OBLIGATION OF CONFIDENTIALITY .............................................................................................................. 79
X. ACCESS DEVICES REGISTRATION ACT (R.A. NO. 8484) ..................................................................................... 81
A. ACCESS DEVICES........................................................................................................................................... 81
B. PROHIBITED ACTS ........................................................................................................................................ 81
C. FRUSTRATED AND ATTEMPTED ACCESS DEVICE FRAUD .............................................................................. 82
XI. PHILIPPINE COMPETITION ACT ...................................................................................................................... 84
A. ANTI-COMPETITIVE AGREEMENTS ............................................................................................................... 84
B. ABUSE OF DOMINANT POSITION (SEC. 15) ................................................................................................... 85
C. MERGERS AND ACQUISITIONS (SEC. 16-22) .................................................................................................. 86
XII. PUBLIC SERVICE ACT ..................................................................................................................................... 89
A. PUBLIC SERVICE AS PUBLIC UTILITY .............................................................................................................. 89
B. CRITICAL INFRASTRUCTURE ......................................................................................................................... 92
C. POWERS OF THE PRESIDENT TO SUSPEND OR PROHIBIT TRANSACTION OR IINVESTMENT ......................... 92
D. RECIPROCITY CLAUSE ................................................................................................................................... 92

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TOPIC SUBTOPICS/LEGAL BASIS

IV. TRANSPORTATION LAW Land Common Carriers - Civil Code
Sea Maritime Transportation - Code of
Commerce, COGSA
TOPIC OUTLINE UNDER THE SYLLABUS: Subtopics:
Maritime Contracts – Bills of
A. GENERAL PRINCIPLES OF COMMON Lading and Charter Parties
CARRIERS (CIVIL CODE, ART. 1732) Persons in Maritime Law –
1. Common Carrier vs. Private Carrier Shipowner, Ship agent, Captain,
2. Diligence Required – Civil Code, art. Sailing Mate, Supercargo
1733 Limited Liability rule
3. Vigilance over Goods – Civil Code, Maritime Accidents – General
arts. 1744-1754 Average, Arrivals under Stress,
4. Safety of Passengers – Civil Code, Collisions, Shipwreck, and
arts. 1755-1763 Salvage
5. Sources of Liability COGSA
Air Montreal Convention
B. THE MONTREAL CONVENTION Registered Extent of Liability
1. Applicability Owner Rule
2. Extent of Liability of Air Carrier
a. Passenger
b. Baggage
c. Limitations to Liability
3. Liability for Delay

NOTE: This portion may still be subject to

updates. A supplementary reviewer shall be
issued, if necessary.

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between a person or enterprise offering

A. GENERAL PRINCIPLES OF COMMON transportation services on a regular or scheduled
CARRIERS (CIVIL CODE, ART. 1732) basis and one offering such service on an
unscheduled basis. (De Guzman v. CA, 250 Phil.
613, 1988) It does not distinguish between a carrier
1. Common Carrier vs. Private Carrier offering its services to the general population and
Common Carrier one who offers its services only to a narrow segment
of the general population. (De Guzman v. CA, 250
Contract of Carriage Phil. 613, 1988) The Civil Code makes no distinction
A contract of carriage is a consensual and nominate as to the means of transportation as long as it is
contract perfected by the meeting of the minds done through land, water, or air. (First Philippine
between the carrier and passenger or shipper. It is Industrial Corp. v. CA, 360 Phil. 852, 1998)
a personal obligation or an obligation to do.
A carrier will also be considered a common carrier
Parties in a Contract of Transportation regardless of whether it owns the vehicle it used or
In the carriage of goods, the carrier and the shipper has to actually hire one as long as the entity holds
or consignee (the shipper and consignee may be the itself out to the public for the transport of goods as a
same person). In the carriage of passengers, it is the business. (Torres-Madrid Brokerage, Inc. v. FEB
carrier and the passenger. Mitsui Marine Insurance Co., 789 Phil. 413, 2016)

Common Carrier 2. Diligence Required from a Common

A common carrier is a person, corporation, firm, or Carrier – Civil Code, art. 1733
association engaged in the business of carrying or
transporting passengers or goods or both by land, Extraordinary diligence both over goods and
water, or air for compensation offering their services passengers, according to all the circumstances of
to the public. (Civil Code, Art. 1732) each case. (Civil Code, Art. 1733)

Test Used in Determining a Common Carrier Presumption of Fault or Negligence against

(a) It must be engaged in the business of Common Carriers
carrying goods for others as a public The common carrier is presumed to have been at
employment and must hold itself out as fault or to have acted negligently when the goods
ready to engage in the transportation of transported are lost, destroyed, or deteriorated, or
goods generally as a business and not as a when a passenger dies or is injured. This is not a
casual occupation; conclusive but disputable presumption, and it may
(b) It must undertake to carry goods of the kind be overcome by evidence to the contrary. (Civil
that to which its business is confined; Code, Art. 1735)
(c) It must undertake to carry by the method by
which its business is conducted, and over its Note: The common carrier is usually the defendant
established roads; in transportation cases.
(d) The transportation must be for hire. (First
Philippine Industrial Corp. v. CA, 360 Phil. Certificate of Public Convenience is Not
852, 1998) Required to be Considered a Common Carrier
A Certificate of Public Convenience is not a requisite
The “true test” is not the quantity or extent of the to incur liability under the Civil Code provisions
business actually transacted, or the number and governing common carriers. (De Guzman v. CA,
character of the conveyances used in the activity, 250 Phil. 613, 1988)
but whether the undertaking is part of an activity
engaged in by the carrier that it has held out to the When a Customs Broker may be Considered a
general public as its business or occupation. (Sps. Common Carrier
Pereña v. Sps. Zarate, 693 Phil. 373, 2012) A customs broker may be considered a common
carrier if the transportation of goods is integral to the
Broad Definition of a Common Carrier in nature of its business. (Calvo v. UCPB, G.R. No.
Jurisprudence (De Guzman case) 148496, 2002)
The Civil Code does not distinguish between one
whose principal activity is the carrying of goods and Oil Pipeline Operators are Considered Common
one who does such carrying of goods only as an Carriers
ancillary activity. (A.F. Sanchez Brokerage Inc. v. Oil pipeline operators are considered common
CA, 488 Phil. 430, 2004) It also does not distinguish carriers under the Petroleum Act of the Philippines

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(R.A. No. 387). (First Philippine Industrial Corp. v. one place to another either gratuitously or for hire.
CA, G.R. No. 125948, 1998) (Sps. Perena v. Sps. Zarate, 693 Phil. 373, 2012)

Operator of a Beach Resort is Considered a Distinction Between a "Common or Public

Common Carrier Carrier" and a "Private or Special Carrier"
The operator of a beach resort that accepts clients The distinction lies in the character of the business,
by virtue of a tour package that includes such that if the undertaking is an isolated
transportation to and from the resort is considered a transaction, not a part of the business or occupation,
common carrier. Its services are so intertwined with and the carrier does not hold itself out to carry the
its main business as to be properly considered goods for the general public or to a limited clientele,
ancillary thereto. (Cruz v. Sun Holidays, G.R. No. although involving the carriage of goods for a fee,
186312, 2010) the person or corporation providing such service
could very well be a private carrier. (Phil. American
When a Bus is Considered a Common Carrier General Insurance Co. v. PKS Shipping Co., G.R.
When this bus is principally used as a bus service No. 149038, 2003)
for school children and hired by a group of persons
although the owners are not engaged in the Law Governing a Private Carrier
business of public transportation as a common The law on obligations and contracts in the Civil
carrier. (Fabre, Jr. v. CA, G.R. No. 11127, 1996) Code (Oblicon). (Sps. Perena v. Sps. Zarate, 693
Phil. 373, 2012)
Extent of Liability of a Freight Forwarder
A freight forwarder’s liability is limited to damages Diligence Required from a Private Carrier
arising from its own negligence, including The diligence required from a private carrier is
negligence in choosing the carrier; however, where ordinary diligence, that is, diligence of a good father
the forwarder contracts to deliver goods to the point of the family. (Sps. Perena v. Sps. Zarate, 693 Phil.
of destination instead of merely arranging the 373, 2012)
transportation, the freight forwarder becomes liable
as a common carrier for loss or damage to the No Presumption of Fault or Negligence against
goods. (Unsworth Transport v. CA, G.R. No. Private Carriers
166250, 2010) The presumption of negligence only applies to
common carriers. The plaintiff needs to prove with
Travel Agency is Not a Common Carrier preponderance of evidence the fault or negligence
A travel agency is NOT a common carrier. Its of a private carrier.
covenant with its customers is simply to make travel
arrangements in their behalf. The relationship
3. Vigilance over Goods – Civil Code,
between the travel agency and the passenger is, at
most, one of agency. (Crisostomo v. CA, G.R. No. arts. 1744-1754
138334, 2003)
Defenses Available to the Common Carrier in
A Common Carrier is Not an Insurer
Carriage of Goods
A common carrier is not an insurer. It has been held
(a) Flood, earthquake, storm, lightning, or
that airline passengers must accept or assume risks
other natural disaster or calamity
incident to the mode of travel. In this regard,
(b) Act of the public enemy in war, whether
adverse weather conditions or extreme climatic
international or civil
changes are perils involved in air travel, the
(c) Act or omission of the shipper or owner of
consequences of which the passenger must
the goods
assume or expect. After all, a common carrier is not
(d) The character of the goods or defects in the
an insurer of all risks. (Japan Airlines v. CA, G.R.
packing or in the containers
No. 118664, 1998)
(e) Order or act of competent authority
Private Carrier
Requisites to Use Flood, Storm, Earthquake,
Lightning or Other Natural Disaster or Calamity
Private Carrier
(or fortuitous events) as a Defense
One who, without making the activity a vocation, or
(a) The natural disaster was the proximate and
without holding himself or itself out to the public as
only cause
ready to act for all who may desire his or its services,
(b) Exercise of diligence to prevent or minimize
undertakes, by special agreement in a particular
loss before, during and after the occurrence
instance only, to transport goods or persons from
of the natural disaster

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(c) The carrier is not in legal delay or default. (c) The carrier is not in legal delay or default.
(Civil Code, Art. 1740) (Eastern Shipping Lines v. IAC, G.R. No.
69044, 1987)
Requisites of Caso Fortuito
(a) The event must be independent of human Rules Regarding Act or Omission of the
will Shipper or Owner of the Goods
(b) The occurrence must render it impossible If the act or omission is the proximate cause, the
for the obligor (carrier) to fulfill the carrier of absolved of liability. However, if the carrier
obligation in a normal manner is guilty of contributory negligence, the amount of
(c) The obligor (carrier) must be free of damages will be mitigated.
participation in, or aggravation of, the injury
to the obligee, and When the private respondent did furnish the
(d) The event must have been impossible to common carrier with an inaccurate weight of the
foresee, or even if foreseen, must have payloader, the common carrier is nonetheless liable,
been inevitable or impossible to avoid. for the damage caused to the machinery could have
been avoided by the exercise of reasonable skill and
Fire as a Defense attention on its part in overseeing the unloading of
Fire is not a valid defense since it is usually caused such heavy equipment. It was the duty of its Chief
by an act of man. The exception is if it was caused Officer to determine the weight of heavy cargoes
by nature such as lightning or it was caused by a before accepting them. (Compania Maritima v. CA,
natural disaster or calamity such as a flood, storm, G.R. No. 31379, 1997)
earthquake or volcanic eruption. (Eastern Shipping
Lines v. IAC, G.R. No. 69044, 1987) Requisites of Character of the Goods or
Defects in the Packing or Containers
Heavy Seas and Rains are Not Caso Fortuito (a) Exercise of due diligence to forestall or
Heavy seas and rains are not caso fortuito since prevent loss
these are foreseeable and normal. These are (b) Immediate protest if there is a problem with
normal occurrences that an ocean-going vessel is the goods or in the packing or containers;
expected to encounter. (Eastern Shipping Lines v. otherwise, the carrier will be in estoppel
IAC, G.R. No. 69044, 1987)
If the improper packaging is known to the carrier or
Mechanical Defects are Not Caso Fortuito his/her/its employees or the improper packaging is
Mechanical defects are not force majeure if the apparent under ordinary observation but accepts it
same were discoverable by regular and adequate without protest, Art. 1734, paragraph 4 will not
inspections. (Necesito v. Paras, G.R. No. L-10605, relieve the carrier from any liability. (Calvo v. UCPB
1958) A tire blow-out is not considered a fortuitous General Insurance Co., Inc., 429 Phil. 244, 2002)
event (even if it is a brand new tire from a reputable
company) since there are human factors involved in Examples of Character of the Goods that may
the situation. (Yobido v. CA, G.R. No. 113003, 1997) be Used as a Defense by the Carrier
(a) The natural decay of perishable goods;
Highjacking as a Defense (b) Fermentation or evaporation of substances;
As a general rule, highjacking is not a valid defense. (c) Necessary and natural wear and tear of
However, as an exception, a common carrier is not goods while in transport;
liable for events which cannot be foreseen or are (d) Natural propensities of animals. (Belgian
inevitable, provided the carrier exercised Overseas Chartering and Shipping N.V. v.
extraordinary diligence. (De Guzman v. CA, G.R. Philippine First Insurance Co., Inc., 432
No. L-47822, 1988) Phil. 567, 2002)

Common Carrier cannot Use Fortuitous Event if Requisites of Order or Act of Competent Public
It is in Legal Delay or Default Authority
A common carrier cannot use fortuitous event as a (a) The public officer had authority to issue the
defense when it is already in legal delay or default. order. (Civil Code, Art. 1740)
(Civil Code, Art. 1740) (b) The order was legal or lawful. (Ganzon v.
CA, 244 Phil. 644, 1988)
Requisites of Act of the Public Enemy in War,
Whether International or Civil Rule on Contributory Negligence
(a) Act was the proximate and only cause If the carrier is guilty of fault or negligence, even if
(b) Exercise of diligence to prevent or minimize the proximate cause of the loss, destruction or
loss before, during and after the act deterioration of the goods was the shipper or owner,

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the carrier will still be liable but the amount of Prohibited Stipulations or Provisions in a
damages shall be equitably reduced. (Civil Code, Contract of Carriage [OLD FETU]
Art. 1741) Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to
Duration of Time when the Common Carrier is public policy:
Required to Exercise Extraordinary Diligence (a) the goods are transported at the risk of the
(a) From the time the goods are Owner or shipper;
unconditionally placed in the possession of (b) the common carrier will not be Liable for any
and received by carrier until the goods are loss, destruction, or deterioration of the
delivered, actually or constructively, to the goods;
consignee or to the person who has a right (c) the common carrier need not observe any
to receive them. (Civil Code, Art. 1736; Diligence in the custody of the goods;
Nedlloyd B.V. Rotterdam v. Glow Laks, (d) the common carrier shall exercise a degree
G.R. No. 156330, 2014) of diligence less than that of a good Father
(b) Even when the goods are temporarily of a family;
unloaded or stored in transit, unless an (e) the common carrier shall not be responsible
unpaid seller exercises the right of for the acts or omissions of Employees;
stoppage in transitu. (f) the common carrier's liability for acts
(c) Even during the time of storage in the committed by Thieves, or of robbers who do
warehouse of the carrier at the place of not act with grave or irresistible threat,
destination, until the consignee is advised violence, or force, is dispensed with or
of the arrival and has had opportunity to diminished;
remove or dispose of them. (Civil Code, Art. (g) the common carrier is not responsible for
1738) the loss, destruction, or deterioration of
goods on account of the defective condition
Effect of Partial Delivery on the Duty to of the car, vehicle, ship, airplane, or other
Exercise Extraordinary Diligence equipment Used in the contract of carriage.
The fact that only a portion of the goods had been (Civil Code, Art. 1745)
delivered to the carrier does not affect the contract
of carriage since the goods still remained in the Other Rules Regarding Stipulations Limiting
custody and control of the carrier. (Ganzon, 244 Liability
Phil. 664, 1988) (a) It may be annulled by the shipper/owner if
the carrier refused to carry the goods,
Actual Delivery unless the shipper/owner agreed. (Civil
When possession has been turned over to the Code, Art. 1746)
consignee or his duly authorized agent and a (b) It cannot be availed of if the carrier, without
reasonable time is given to him to remove the just cause, delays transportation of the
goods. (Westwind Shipping Corp. v. UCPB General goods or changes the stipulated or usual
Insurance Co., Inc., 722 Phil. 38, 2013) route. (Civil Code, Art. 1747)
(c) A stipulation excusing delay on account of
Constructive Delivery strikes or riots is valid. (Civil Code, Art.
Delivery of the bill of lading to the consignee or to 1748)
any person who has a right to receive the goods (d) A stipulation limiting liability to the value of
based on the bill of lading can be considered the goods appearing in the bill of lading,
constructive delivery. After all, a bill of lading is a unless the shipper/owner declares a higher
document of title or symbolic representation of the value and pays additional freight, is valid.
goods. (Saludo v. CA, G.R. No. 95536, 1992) (Civil Code, Art. 1749)
(e) The presumption of fault or negligence is
Requisites for a Valid Stipulation Limiting not affected by a stipulation limiting liability
Liability
(a) In writing, signed by the shipper or owner; Public Policy When the Carrier has Several or
(b) Supported by a valuable consideration Few Competitors Along the Same Line or Route
other than the service rendered by the If the carrier has a lot of competitors, a stipulation
carrier; and limiting liability with a lower amount will be fair and
(c) Reasonable, just, and not contrary to public not contrary to public policy (because the general
policy. (Civil Code, Art. 1744) public can choose from many suppliers or carriers).
(d) Fairly and freely agreed upon. (Civil Code, However, if the carrier has few competitors or has a
Art. 1750) monopoly, a stipulation limiting liability with a higher
amount will be fair and not contrary to public policy

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(because the general public has little or no choice of 4. Safety of Passengers – Civil Code,
suppliers or carriers). (Civil Code, Art. 1751) arts. 1755-1763
Law governing Liability in Case of International Diligence Required from Common Carrier in
Transportation of Goods Carriage of Passengers
The law of the country to which the goods are to be Extraordinary diligence. A common carrier is bound
transported. (Civil Code, Art. 1753) to carry the passengers safely as far as human care
and foresight can provide, using the utmost
Rules Regarding Hand-carried Baggage diligence of very cautious persons, with a due
The responsibility of the carrier for hand-carried regard for all the circumstances. (Civil Code, Art.
baggage is governed by the Civil Code provisions 1755)
on hotel-keepers and inn-keepers. Hand-carried
baggage are covered by the law on necessary Presumption of Fault or Negligence in Carriage
deposits. The carrier shall be treated as a depositary of Passengers
required to exercise only ordinary diligence. On the There is a presumption of fault or negligence in case
other hand, checked-in baggage are considered of death or injury. (Civil Code, Art. 1756) This
“goods” and the carrier is required to exercise applies only to common carriers. There is no
extraordinary diligence. presumption of fault or negligence if the carrier is a
private carrier.
Requisites for Liability in Law on Necessary
Deposits Defenses Available
(a) Notice was given to the common carrier, or (a) Fortuitous event
its employees, of the hand-carried baggage (b) Extraordinary diligence
brought by the passenger; and (c) Passenger is the proximate cause of death
(b) Passenger took precautions that the or injury
common carrier advised relative to the care (d) Employees could not have prevented by
and vigilance of the baggage. (Civil Code, ordinary diligence the willful act or
Art. 1998) negligence of other passengers or strangers
(e) If the contract of carriage is gratuitous and
Defenses Available to Carrier Regarding Hand- there is no willful act or negligence on the
carried Baggage part of the carrier, a stipulation limiting
(a) Fortuitous event or force majeure. (Civil liability is valid.
Code, Art. 2000)
(b) Loss was due to the act of the passenger or Validity of a Stipulation Limiting Liability in
his agents or loss is due to the character of Carriage of Passengers
the baggage (Civil Code, Art. 2000); and General rule: Not valid. The responsibility of a
(c) Acts of thieves or robbers who use arms or common carrier cannot be dispensed with or
irresistible force. (Civil Code, Art. 2001) lessened by stipulation, by posting of notices, or by
statements on tickets. Any stipulation to the contrary
Limits on Right of Carrier to Inspect Checked-in is void. This includes a reduced fare or a discounted
Baggage ticket.
The carrier may only inquire into the nature of the
passenger’s baggage, but not search nor inspect its Exception: If the carriage is gratuitous or for free, a
contents. An inquiry may be made as to the nature stipulation limiting liability is valid.
of the baggage, but beyond this, constitutional
boundaries are already in danger of being Exception to the Exception: The stipulation does
transgressed. (Nocum v. Laguna Tayabas, G.R. No. not cover willful acts or gross negligence of the
L-23733, 1969) carrier. (Civil Code, Arts. 1757-1759)

While there is no law that authorizes bus operators Not Considered Passengers
to open the luggage of their passengers, R.A. No. (a) One who has not yet boarded any part of a
6235 (Acts Inimical to Civil Aviation) gives airline vehicle regardless whether or not he has a
companies authority to open and investigate ticket;
packages and cargoes loaded on board. Should the (b) One who remains on a carrier for an
personnel of the airline fail to discover explosives, it unreasonable length of time after he has
could only be due to their failure to exercise the been afforded every safe opportunity to
utmost diligence of very cautious persons. alight;
(c) One who has boarded by fraud, stealth, or
deceit;

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(d) One who attempts to board a moving reasonable opportunity to leave the common
vehicle, although he has a ticket, unless he carrier’s premises. (Aboitiz Shipping Corporation v.
attempts to be with the knowledge and CA, 258-A Phil. 665)
consent of the carrier;
(e) One who has boarded a wrong vehicle and All persons who remain on the premises a
has been properly informed of such fact; or reasonable time after leaving the conveyance are
(f) One who rides any part of the vehicle which deemed passengers. What constitutes as a
is unsuitable or dangerous or he knows is “reasonable time” is to determine from all the
not designed or intended for passengers circumstances, which includes a reasonable time to
see after his/her baggage and prepare for his/her
Commencement of Duty to Exercise departure.
Extraordinary Diligence
A public vehicle, once it stops, is in effect making a For passengers of ships, the SC has ruled that a
continuous offer to prospective passengers. Hence, reasonable time to leave and pick up baggage is an
it becomes the duty of the drivers and conductors to hour after arrival. (Aboitiz Shipping v. CA, G.R. No.
do no act which would have the effect of increasing 84458, 1989).
the peril to a passenger while he/she was attempting
to board the vehicle. (Dangwa Transportation Co., Liability of Common Carrier for Acts of its
Inc. v. CA, 278 Phil. 629, 1991) Employees Done Beyond the Scope of
Authority or in Violation of Orders of Carrier
For buses, a bus slowing down means that it is A common carrier is liable for the death of or injuries
offering itself to prospective passengers as a to passengers through the negligence or willful acts
common carrier. A passenger who signals for a ride of its employees, although the employees acted
with his thumb signifies that he is offering himself as beyond the scope of authority or in violation of the
a passenger. (Dangwa Transportation Co., Inc. v. orders of the common carrier. (Civil Code, Art. 1759)
CA, 278 Phil. 629, 1991)
Note: The act of the employee must be done while
It is the duty of common carriers to stop he is at work or on duty. The act must not happen
conveyances at a reasonable length of time to afford when the employee is off-duty such as when the
the passengers an opportunity to board and enter. employee is taking a coffee break or going home
Carriers become liable for injuries suffered by after work.
boarding passengers resulting from the starting up
or jerking of the vehicle while boarding. (Dangwa The driver and the owner of the vehicle, regardless
Transportation Co., Inc. v. CA, 278 Phil. 629, 1991) of relationship, are solidarily liable for the injuries
caused to a victim of an accident involving the
vehicle owner and driven by two (2) different
Liberal View v. Strict View persons. (Dela Cruz v. Octaviano, G.R. No. 219649,
2017)
LIBERAL When the passenger places
VIEW himself in the care and control of Common Carrier Cannot Use the Defense of
the common carrier who accepts Diligence in Selection and Supervision of Its
him as a passenger (Philippine law Employees
adopts this view) The liability of a common carrier for the acts of its
STRICT When the passenger actually employees does not cease upon proof that it
VIEW boards or places a part of his body exercised all the diligence of a good father of a
inside the carrier family in the selection and supervision of its
employees. (Civil Code, Art. 1759)
Note: Do not confuse perfection of the contract of
carriage with the start or commencement of the duty Note: If the cause of action alleged by the plaintiff
to exercise extraordinary diligence. The contract of passenger in the complaint is based on culpa
carriage may be perfected in January but the duty to contractual or breach of contract, the defendant
exercise extraordinary diligence may only start or carrier may not use the defense of diligence in the
commence in April. selection or supervision of employees. However, if
the cause of action alleged by the plaintiff passenger
Termination of Duty to Exercise Extraordinary in the complaint is based on culpa aquiliana or tort
Diligence or quasi-delict, the defendant carrier may use the
The duty to exercise extraordinary diligence ends or defense of diligence in the selection or supervision
terminates when the passenger alights from the of employees.
vehicle at the place of destination and has

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Common Carrier Cannot have Stipulation 55300, 1990) a common carrier can be liable for
Stating that It will not be Liable for Acts of Its failing to prevent a hijacking by frisking passengers
Employees Done Beyond the Scope of and inspecting their pieces of baggage.”
Authority or in Violation of the Orders of the
Carrier 5. Sources of Liability
The common carrier’s responsibility for the acts of
its employees cannot be eliminated or limited by Sources of Obligation
stipulation, by the posting of notices, by statements Law; contracts; quasi-contracts; acts or omissions
on the tickets or otherwise. (Civil Code, Art. 1760) punishable by law (delicts or crimes); and quasi-
delicts. (Civil Code, Art. 1157)
Diligence Required of a Passenger
The passenger must observe the diligence of a good Vinculum Juris or Juridical Tie in Culpa
father of a family to avoid injury to himself. (Civil Contractual (Contractual Negligence)
Code, Art. 1761) The vinculum juris or juridical tie is the breach or
violation of the contract. (Hector S. De Leon &
Effect of Contributory Negligence of a Hector M. De Leon, Comments and Cases on
Passenger Obligations and Contracts 65-66, 2014)
The contributory negligence of a passenger does
not bar recovery of damages for his death or Vinculum Juris or Juridical Tie in Culpa
injuries, if the proximate cause thereof is the Aquiliana (Tort/Quasi-Delict/Culpa Extra
negligence of the common carrier, but the amount Contractual)
of damages shall be equitably reduced. (Civil Code, The vinculum juris or juridical tie is the act or
Art. 1762) Therefore, if the proximate cause is the omission of one person that caused damage to
fault or negligence of the passenger, the carrier will another person since there is, as a general rule, no
not be liable. contract between them. (Hector S. De Leon &
Hector M. De Leon, Comments and Cases on
Rules When Death or Injury is Due to Other Obligations and Contracts 65-66, 2014)
Passengers or of Strangers
A common carrier is responsible for injuries suffered Note: As an exception, there are some cases when
by a passenger on account of the willful acts or there is a pre-existing contract and the tort or quasi-
negligence of other passengers or of strangers, if delict itself is the reason why the contract was
the common carrier’s employees through the breached or violated. (Singson v. BPI, G.R. No. L-
exercise of the diligence of a good father of a family 24837, 1968) (citing Air France v. Carrascoso, G.R.
could have prevented or stopped the act or No. L-21438, 1966)
omission. (Civil Code, Art. 1763)
Difference If Cause of Action is Based on Culpa
Liability of Carrier When Hand-carried Baggage Contractual or Culpa Aquiliana in
of Passenger Injures Other Passengers Transportation Cases
The carrier is not liable when the hand-carried If the cause of action is based on culpa contractual
baggage of a passenger injures other passengers. (or breach of contract of carriage), there will be: (a)
It exercised extraordinary diligence. It is presumed presumption of fault or negligence; (b) duty to
that a passenger will not take with him anything exercise extraordinary diligence; and (c) prohibited
dangerous to the life and limbs of his co- stipulations limiting liability.
passengers, not to speak of his own. Not to be
considered lightly is the right to privacy to which If the cause of action is based on culpa aquiliana (or
each passenger is entitled. (Nocum v. Laguna tort or quasi-delict), there will be: (a) no presumption
Tayabas Bus Co., G.R. No. L-23733, 1969) of fault or negligence; (b) no duty to exercise
extraordinary diligence; and (c) stipulations or
Note: In Fortune Express v. CA. (Fortune Express agreements limiting liability will be based on the
v. CA, G.R. No. 119756, 1999) the Supreme Court autonomy of contracts (Obligation and Contracts).
ruled: “Under the circumstances, simple
precautionary measures to protect the safety of Note: A cause of action based on culpa contractual
passengers, such as frisking passengers and is better for the plaintiff. A cause of action based on
inspecting their pieces of baggage, preferably with culpa aquiliana is better for the defendant.
non-intrusive gadgets such as metal detectors,
before allowing them on board could have been
employed without violating the passenger’s
constitutional rights. In Gacal v. Philippine Air Lines,
Inc., (Gacal v. Philippine Air Lines, Inc., G.R. No. L-

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Applicability of Doctrine of Proximate Cause in For the third factor – necessary living expense,
Transportation Cases when there is no showing that the living expenses
The doctrine of proximate cause applies only if the constituted the smaller percentage of the gross
cause of action is based on tort or quasi-delict. It income, the living expenses are fixed at half of the
does not apply if the cause of action is based on gross income. (Cruz v. Sun Holidays, G.R. No.
breach of contract. (Sps. Guanio v. Makati Shangri- 186312, 2010)
La, G.R. No. 190601, 2011)
Attorney’s fees
Note: The doctrine of proximate cause applies in Attorney’s Fees are considered actual damages.
determining the exact amount of actual damages There are two kinds of attorney’s fees – one for the
because Art. 2201 states that, in breach of contract, plaintiff-client and one for the attorney. In
whether in good faith or bad faith, the plaintiff can transportation law, what is relevant is attorney’s fees
only recover damages that are proximately related for the plaintiff-client and not for the attorney.
to the breach complained of. (Orient Freight v.
Keihin Everett, G.R. No. 191937, 2017) Rules on Moral Damages If the Plaintiff’s Cause
of Action is Based on Breach of Contract of
Damages Recoverable by Plaintiff in Carriage
Transportation Cases General Rule: Moral damages are not recoverable.
1. Actual or Compensatory Damages
2. Moral Damages Exceptions: There is death (Civil Code, Art. 1764)
3. Exemplary Damages or there is fraud or bad faith. (Sps. Estrada v.
4. Nominal Damages Philippine Rabbit Bus Lines, G.R. No. 203902,
5. Temperate Damages 2017)
6. Liquidated Damages
Note: In case of death, only compulsory heirs can
Two (2) Kinds of Actual Damages claim moral damages. (Sulpicio Lines, Inc. v. Curso,
1. The loss of what a person already G.R. No. 157009, 2010)
possesses or damnum emergens;
2. The failure to receive as a benefit that Filing of a Criminal Case
would have pertained to him (also known as The criminal case, which will be based on culpa
unrealized profits) or lucrum cessans. criminal (criminal negligence), may be filed. The
This is income which would have been vinculum juris or juridical tie is the act or omission
earned were it not for the fault of the punishable by law (or the delict or crime). (Hector S.
defendant. De Leon & Hector M. De Leon, Comments and
Cases on Obligations and Contracts 65-66, 2014) In
Formula to Compute Lucrum Cessans transportation cases, the delict or crime is simple
The correct formula for computing compensation for negligence or reckless imprudence (or culpable
loss of earning capacity is: felonies) in the Revised Penal Code.

2/3 x (80 - age at time of death) x (gross annual Reckless Imprudence

income - reasonable and necessary living Article 365 of the Revised Penal Code (RPC)
expenses) (People v. Tambis, 560 SCRA 343, punishes the quasi-offenses of "imprudence" and
1999) "negligence." It defines reckless imprudence as
voluntarily, but without malice, doing or failing to do
The first factor, life expectancy, is computed by an act from which material damage results by
applying the formula (2/3 x [80 — age at death]) reason of inexcusable lack of precaution on the part
adopted in the American Expectancy Table of of the person performing or failing to perform such
Mortality or the Actuarial of Combined Experience act, taking into consideration his/her employment or
Table of Mortality. (Cruz v Sun Holidays, G.R. No. occupation, degree of intelligence, physical
186312, 2010) condition and other circumstances regarding
persons, time, and place. (Morales v. People, G.R.
The second factor is computed by multiplying the life No. 240337 (citing Revised Penal Code, Art. 365,
expectancy by the net earnings of the deceased, 1932)
i.e., the total earnings less expenses necessary in
the creation of such earnings or income and less Reckless Imprudence against Carrier that is
living and other incidental expenses. (Cruz v. Sun Juridical Person or Corporation
Holidays, G.R. No. 186312, 2010) A carrier cannot be charged with reckless
imprudence If a carrier is a juridical person or
corporation. A corporation is an artificial being

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created by law and does not have a physical or

corporeal existence. It will be the employee such as
the driver or pilot who will be criminally liable and
serve the sentence of imprisonment.

Requisites to Claim Subsidiary Civil Liability

against Carrier-Employer in Criminal Cases
(a) Employer-employee relationship (between
carrier-employer and accused-employee)
(b) The accused-employee is insolvent
(c) Final judgment of conviction. (L.G. Foods
Corp. v. Pagapong-Agraviador, G.R. No.
158995, 2006)

Good Defense against Reckless Imprudence

The exempting circumstance of accident. There is
no fault or negligence when an accident happens.

Filing of Administrative Case against Carrier

The administrative case will be suspension or
revocation of the franchise or license of the common
carrier to engage in the business of transportation.
(C.A. No. 146, Sec. 16 (n))

Land Transportation. - Land and Transportation

Franchising and Regulatory Board (LTFRB). (R.A.
No. 11659, Sec. 3)

Water Transportation. - Maritime Industry Authority

(MARINA). (R.A. No. 11659, Sec. 3)

Air Transportation. - Civil Aviation Authority of the

Philippines (CAAP). (R.A. No. 11659, Sec. 3; R.A.
No. 9497, Secs. 35 and 71)

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B. MONTREAL CONVENTION Commencement and Termination of

Responsibility over Checked-in Baggage
The carrier will be liable if the loss, destruction or
1. Applicability
damage took place on board the aircraft or during
Coverage of the Montreal Convention any period within which the checked baggage was
It applies to all “international carriage” of persons, in the charge of the carrier.
baggage, or cargo performed by aircraft regardless
whether for compensation or gratuitous. (Art. 1, par. Availability of Defenses to Carrier for Loss,
1) Destruction or Damage to Baggage
The carrier is not liable if the damage is due to the
Two (2) Kinds of “International Carriage” inherent defect, quality, or vice of the baggage.
(a) The place of departure and destination are
in two different countries that are both Liability of Carrier for Loss or Damage to
State-Parties to the Convention regardless Unchecked or Hand-carried Baggage
of any break or stop-over. In the case of unchecked baggage, including
(b) The place of departure and destination are personal items, the carrier is liable if the damage
both in one country that is a State-Party to resulted from its fault or that of its servants or
the Convention even if there is a break or agents.
stop-over in another country that is not a
State-Party to the Convention. When Passenger is Allowed to Complain for
Loss of Checked-in Baggage
Airwaybill or Cargo Receipt is Considered (a) After the carrier admits the loss of the
Prima Facie Evidence checked baggage
The air waybill or cargo receipt is prima facie (b) Twenty-one days after the date on which
evidence of the conclusion of the contract, of the the checked baggage ought to have arrived
acceptance of the cargo, and of the conditions of
carriage mentioned therein. (Art. 11, par. 1) Commencement and Termination of
Responsibility over Cargo
The carrier is liable for loss or damage to cargo if the
2. Extent of Liability of Air
loss or damage took place during the carriage by air.
Carrier
Note: The period of the carriage by air does not
Amount of Compensation Available to
extend to any carriage by land, by sea, or by inland
Passengers
waterway performed outside an airport. If, however,
For death or injury (Art. 21)
such carriage takes place in the performance of a
(a) Damages not exceeding 100 000 Special
contract for carriage by air, for the purpose of
Drawing Rights – The carrier is not allowed
loading, delivery, or transshipment, any damage is
to exclude or limit its liability.
presumed, subject to proof to the contrary, to have
(b) Damages exceeding 100 000 Special
been the result of an event which took place during
Drawing Rights – The carrier is liable unless
the carriage by air. If a carrier, without the consent
the carrier proves:
of the consignor, substitutes carriage by another
1. The damage was not due to the
mode of transport for the whole or part of a carriage
negligence or other wrongful act or
intended by the agreement between the parties to
omission of the carrier or its servants or
be carriage by air, such carriage by another mode
agents; or
of transport is deemed to be within the period of
2. The damage was solely due to the
carriage by air.
negligence or other wrongful act or
omission of a third party.
Availability of Defenses to Carrier for Loss,
Destruction or Damage to Cargo
Coverage of “Baggage”
(a) inherent defect, quality, or vice of cargo;
Baggage covers both checked baggage and
(b) defective packing performed by a person
unchecked baggage. (Art. 17, par. 4)
other than the carrier or its servants or
agents;
Commencement and Termination of
(c) act of war or armed conflict;
Responsibility over Passengers
(d) act of public authority carried out in
The carrier will be liable if death or injury takes place
connection with the entry, exit, or transit of
on board the aircraft or in the course of any of the
the cargo.
operations of embarking or disembarking.

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Limit of Liability in Case of Loss, Destruction, Stipulation of Lower Limit of Liability by Carrier
Damage or Delay of Checked Baggage The carrier may not stipulate a lower limit of liability.
General rule: 1,288 Special Drawing Rights for This will be null and void. (Art. 26)
each passenger. (Revised limit (SDRs International
Civil Aviation Organization (ICAO), 28 Dec. 2019) Note: Only the stipulation will be void. The contract
of carriage will remain valid.
Exception: At the time the checked baggage was
handed over to the carrier, the passenger declared Invocation of Limits of Liability by Employees
a higher value and paid additional freight. In that or Agents of Carrier
case, the carrier will not be liable to pay a sum more Employees or agents may be allowed to invoke the
than the declared value unless the carrier proves limits of liability. If an action is brought against a
that the value is greater than the passenger’s actual servant or agent of the carrier arising out of damage
interest in delivery at the destination. to which the Convention relates, such servant or
agent, if they prove they acted within the scope of
Limit of Liability in Case of Loss, Destruction, their employment, shall be entitled to avail
Damage or Delay of Cargo themselves of the conditions and limits of liability
General rule: 22 Special Drawing Rights per which the carrier itself is entitled to invoke under this
kilogram. (Revised limit (SDRs International Civil Convention.
Aviation Organization (ICAO), 28 Dec. 2019)
Independent Application of Limits of Liability to
Exception: At the time the cargo was handed over Carrier and Employees
to the carrier, the consignor declared a higher value The limits of liability will not apply to the carrier and
and paid additional freight. In that case, the carrier the employees independently. The aggregate of the
will not be liable to pay a sum more than the amounts recoverable from the carrier, its servants,
declared value, unless the carrier proves that the and agents, shall not exceed the limits. (Art. 30)
value is greater than the consignor’s actual interest
in delivery at the destination. Note: Save in respect of the carriage of cargo,
availability of limits and limits on aggregate amount
Determination of Weight of a Package in Case shall not apply if it is proved that the damage
of Loss, Destruction, Damage, or Delay of resulted from an act or omission of the servant or
Cargo agent done with intent to cause damage or
The weight shall be the total weight of the package recklessly and with the knowledge that damage
or packages. If other packages covered by the same would probably result.
air waybill or same receipt are involved, the total
weight of all packages shall be taken into 3. Liability for Delay
consideration in determining the limit of liability.
Liability of Carrier for Delay
Additional Compensation Under the The carrier is liable for delay whether the contract of
Convention carriage involves passengers, baggage or cargo.
Additional compensation can be granted under the However, it will not be liable if it proves that it and its
Convention. The limits shall not prevent the court servants and agents took all measures that could
from awarding, in accordance with its own law, reasonably be required to avoid the damage or that
expenses of litigation incurred by the plaintiff, it was impossible for it or them to take such
including interest. measures. (Art. 19)

The foregoing provision shall not apply if the amount Defenses Available to Carrier
of damages awarded, excluding court costs and If the carrier proves the following, the carrier shall be
other expenses of litigation, does not exceed the wholly or partly exonerated from its liability to the
sum which the carrier has offered in writing to the extent of damage contributed:
plaintiff within a period of six months from the date (a) If the carrier proves that the damage was
of the occurrence causing the damage, or before the caused or contributed to by the negligence
commencement of the action, if that is later. (Art. 22, or other wrongful act or omission of the
par. 6) person claiming compensation, or the
person from whom he or she derives his or
Stipulation of Higher Limit of Liability by her rights
Carrier (b) When by reason of death or injury of a
The carrier may stipulate a higher limit of liability or passenger compensation is claimed by a
to no limit of liability. (Art. 25) person other than the passenger. (Art. 20)

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Carrier is Allowed to Make Advance Payments (a) date of arrival at the destination, or
in Advance of a Final Judgment against It (b) date on which the aircraft ought to have
In case of death or injury, if required by national law, arrived, or
the carrier shall make advance payments without (c) date on which the carriage stopped.
delay to meet the immediate economic needs of a
passenger or his heirs. Applicable Law in Computing the Period
Domestic law. Lex fori (or law of the forum).
Plaintiff Cannot Use Advance Payments Made
by Carrier as Evidence of Liability or as Five (5) Places Where Complaint may be Filed
Admission of Guilt in Court
The advance payments shall not constitute a (a) Domicile of the carrier (place of
recognition of liability. (Art. 28) incorporation);
(b) Principal place of business of the carrier
Carrier Can Use Advance Payments to Reduce (headquarters or head office);
or Offset Any Liability for Damages If Court (c) Place where the contract was made or
Finds Carrier Guilty entered into (perfection of contract of
The advance payments may be offset against any carriage);
damages to be paid by the carrier. (Art. 28) (d) Place of destination (final or ultimate
destination); and
(e) In case of death or injury, the principal and
Rules Before Complaint may be Filed in Court permanent place of residence of the
passenger regardless of citizenship or
nationality.
RECEIPT Prima facie evidence that
WITHOUT the baggage or cargo was
Rules in Successive Carriage
COMPLAINT delivered in good condition.
Carriage performed by several successive carriers
This is based on estoppel.
is deemed to be one undivided carriage if it has
been regarded by the parties as a single operation,
DAMAGE Complain immediately after whether it had been agreed upon in a single contract
discovery of the damage. or a series of contracts. The carriage does not lose
7 days from receipt of its international character just because one contract
checked baggage. (One or a series of contracts are to be performed entirely
week) within the territory of one State. (Art. 1, par. 3)
14 days from receipt of
cargo. (Two weeks)

DELAY 21 days from the date on

which the baggage or cargo
has been placed at his or her
disposal. (Three weeks)

Complaint to the Carrier Cannot be Verbal or

Oral
Every complaint to the carrier must be in writing.
(Art. 31)

Effect of Non-compliance
If no written complaint is made to the carrier within
the applicable period, no action shall lie against the
carrier, unless there is fraud (by the carrier). The
written complaint to the carrier within the applicable
period is a condition precedent before a complaint is
filed in court.

Prescriptive Period to File a Complaint in Court

2 years.

Commencement of Two-Year Prescriptive

Period

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Liability of Carrier in Successive Carriage

GOODS PASSENGERS

1. passenger or General Rule:

consignor The passenger or any
(shipper) will have person entitled to
a right of action compensation in
against the first respect of him or her
carrier can take action only
2. The passenger or against the carrier
consignee entitled which performed the
to delivery will carriage during which
have a right of the accident or the
action against the delay occurred.
last carrier
3. Either may take Exception:
action against the By express agreement,
carrier which the first carrier has
performed the assumed liability for the
carriage during whole journey.
which the
destruction, loss,
damage, or delay
took place.

The carriers will be jointly

and severally liable to the
passenger to the
consignor or consignee.

Combined Carriage
Carriage that is performed partly by air and partly by
any other mode of carriage (by land or water).

Rule for Combined Carriage

The Convention shall, subject to paragraph 4 of
Article 18, apply only to carriage by air, provided the
carriage by air falls is considered “international
carriage”. (Art. 38)

-- end of topic --

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A. THE NEW CENTRAL BANK ACT

V. BANKING
1. BANKS IN DISTRESS
TOPIC OUTLINE UNDER THE SYLLABUS: Methods
a. Conservatorship
A. The New Central Bank Act (R.A. No. 7653, as b. Closure (placement under Receivership
amended by R.A. No. 11211) and Liquidation)
1. Banks in Distress – Sections 29-30
2. Remedy of Closed Banks – Section 30 CONSERVATORSHIP
B. Secrecy of Bank Deposits (R.A. No. 1405 and
R.A. No. 6426, as amended) A tool in restoring the viability of a bank or quasi-
1. Prohibited Acts bank through measures to address its state of
illiquidity. For this purpose, the Monetary Board may
2. Exceptions from Coverage
appoint a conservator. (NCBA, § 29)
3. Garnishment of Deposits
C. General Banking Law (R.A. No. 8791) Appointment of Conservator
1. Nature of Bank Funds and Bank Deposits A conservator is appointed based on a report
2. Required Diligence of Banks; Liability as submitted to the Monetary Board by the appropriate
Drawee Bank supervising or examining department showing that
3. Prohibited Transactions by Bank Directors the bank or quasi-bank is in a state of illiquidity
which is not adequate to protect the interest of
and Officers
depositors and creditors. (Id.)
D. Anti-Money Laundering Act (R.A. No. 9160,
as amended by R.A. Nos. 9194, 10167, Liquidity
10365, 10927, and 11521) Ability to pay off obligations when they fall due.
1. Policy – Section 2
2. Covered Institutions and their Obligations – An institution which fails to pay its matured
Section 3 obligations or meet the normal demands of
3. Covered Transactions – Section 3 withdrawals for deposits due to insufficient cash, or
resorts to intermittent/staggered payments or
4. Suspicious Transactions – Section 3
withdrawals may be considered as suffering from
5. Safe Harbor Provision – Section 9 liquidity problems.
6. Money Laundering
a. How Committed – Section 4 Status of the Bank
b. Predicate Crimes – Section 3 A bank placed under conservatorship remains open
7. Authority to Inquire; Freezing and but under the management and control of the
Forfeiture – Sections 10-12 conservator. On the other hand, when a bank is
ordered closed by the Monetary Board, it is taken
over by the PDIC as statutory “receiver”, and the
PDIC is directed to proceed with the liquidation.
(NCBA, § 30(d); New PDIC Charter, § 12)

Qualifications of a Conservator
The conservator should be competent and
knowledgeable in bank operations and
management. (Id.)

The Monetary Board has exclusive power to

designate the conservator. (Koruga v. Arcenas,
G.R. Nos. 168332, 2009)

Duration of Conservatorship
Shall not exceed 1 year (NCBA, § 29)

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When the Monetary Board determines that the

Powers of a Conservator: continuance in business of the institution would
1. To take charge of the assets, liabilities, and involve probable loss to its depositors or creditors,
the management thereof; in which case, proceedings for receivership and
2. Reorganize the management; liquidation shall be pursued. (Id.)
3. Collect all monies and debts due said
institution;
4. Exercise all powers necessary to restore its BANK CLOSURE (RECEIVERSHIP AND
viability; LIQUIDATION)
5. Report and be responsible to the Monetary
Board; and Whenever the Monetary Board finds the existence
6. Where necessary, overrule or revoke the of any of the grounds under Section 30 of The New
actions of the previous management and Central Bank Act, it may summarily and without
board of directors of the bank or quasi- need for prior hearing forbid the bank and quasi-
bank. (Id.) bank from further doing business in the Philippines,
and place the institution under receivership. The
A bank conservator appointed by the BSP has no same authority may also be exercised over non-
power to unilaterally rescind contracts entered into stock savings and loan associations based on the
by the previous management. The power to revoke same applicable grounds. The PDIC manages the
cannot extend to post-facto repudiation of perfected affairs of the closed bank and preserves its assets
transactions otherwise they would infringe against for the benefit of creditors. (New PDIC Charter, §
the non-impairment clause of the Constitution. The 10[b])
law merely gives the conservator the power to file
court actions to revoke contracts that are defective Note: Once the Monetary Board closes a bank, the
– void, voidable, unenforceable, or rescissible. PDIC as the statutory receiver shall immediately
(Producers Bank v. NLRC, G.R. No. 118069, 1998; proceed with the bank’s liquidation (NCBA, as
First Philippine International Bank v. CA, G.R. No. amended, § 30[d]). The terms “receiver” and
115849, 1996) “liquidator” may be used interchangeably for
purposes of bank closure and involuntary
Remuneration of a Conservator liquidation, and the same is also true for
General Rule: The conservator shall receive “receivership” and “liquidation”.
remuneration in an amount not to exceed 2/3 of the
salary of the president of the institution (i.e. the bank The appointment of a receiver operates to suspend
under conservatorship) in 1 year, payable in 12 the authority of the bank and of its directors and
equal monthly payments. officers over its property and effects. (Villanueva v.
CA, G.R. No. 114870, 1995)
Exception: A conservator connected with the BSP,
in which case said conservator shall not be entitled Requisites for Placement of a Bank under
to receive any remuneration or emolument. (NCBA, Receivership
§ 29) 1. Report of the head of the supervising
department involving the bank, it need not
Note: If at any time within one-year period, the be a report of examination (Rural Bank of
conservatorship is terminated on the ground that the San Miguel vs. MB, (516 S.C.R.A. 154);
institution can operate on its own, the conservator 2. Finding of the Monetary Board of the
shall receive the balance of the remuneration which existence of any of the grounds for
he would have received up to the end of the year; receivership;
but if the conservatorship is terminated on other 3. Decision of the Monetary Board to forbid
grounds, the conservator shall not be entitled to the institution from doing business which
such remaining balance. (Id.) decision may be done summarily and
without need of prior hearing; and
Expenses 4. Notice in writing to the Board of Directors
The expenses attendant to the conservatorship informing the institution of the Order of the
shall be borne by the bank or quasi-bank concerned. Monetary Board.
(Id.)

Termination of Conservatorship
When the Monetary Board is satisfied that the
institution can continue to operate on its own and the
conservatorship is no longer necessary;

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Grounds for Receivership LIQUIDATION

When the Monetary Board finds that a bank or
quasi-bank: The recovery and conversion of assets into cash for
1. Notified the BSP or publicly announced a distribution to all creditors in accordance with the
unilateral closure; (NCBA, § 30[a]) rules on concurrence and preference of credits.
2. Has been dormant for at least sixty (60) PDIC is the receiver and liquidator (AM No. 19-12-
days; (Id.) 02-SC, § 1 (m), Rule 2).
3. Suspended the payment of its deposit or
deposit substitute liabilities (NCBA, as
amended, § 30[a]) Types of Liquidation
4. Is unable to pay its liabilities as they a. Voluntary liquidation
become due in the ordinary course of In case of the voluntary liquidation of any bank
business. organized under the laws of the Philippines, or
of any branch or office in the Philippines of a
Exception: Inability to pay caused by extraordinary foreign bank, written notice of such liquidation
demands induced by financial panic in the banking shall be sent to the Monetary Board before such
community (bank run). (NCBA, § 30[a]) liquidation is undertaken, and the Monetary
5. Has insufficient realizable assets as Board shall have the right to intervene and take
determined by the BSP to meet its such steps as may be necessary to protect the
liabilities; (NCBA, § 30[b]) interests of creditors. (GBL, § 68)
6. Cannot continue business without involving
probable losses to its depositors and b. Involuntary Liquidation (NCBA, § 30)
creditors; (NCBA, § 30[c])
7. Has willfully violated a cease-and-desist Modes of Liquidation
order under NCBA, Sec. 37 (Administrative a. Conventional liquidation.
Sanctions) that has become final and b. Purchase of Assets and/or Assumption of
involves acts or transactions which amount Liabilities
to fraud or a dissipation of assets; (NCBA,
§ 30[d])
8. Persistence in conducting its business in an 2. REMEDY OF CLOSED
unsafe or unsound manner. (GBL, § 56) BANKS
Final and Executory. The action of the Monetary
Close Now-Hear Later Doctrine
Board in placing a bank under conservatorship or
The provision under Sec. 30 of the NCBA that the
placing it under receivership and liquidation shall be
Monetary Board may summarily and without need
for prior hearing forbid the institution from doing final and executory and, as a general rule, may not
be restrained or set aside by the court.
business in the Philippines is a statutory enactment
based on jurisprudence. Due process does not
necessarily require prior hearing; a hearing or an Nature of Action
A petition for certiorari on the ground that the action
opportunity to be heard may be subsequent to
taken was in excess of jurisdiction or with such
closure. One can just imagine the dire
consequences of a prior hearing; bank runs would grave abuse of discretion as to amount to lack or
be the order of the day, resulting in panic and excess of jurisdiction.
hysteria. In the process, fortunes may be wiped out
Petitioner and period to file
and disillusionment will run the gamut of the entire
Petition is filed by the stockholders of record
banking community. (Rural Bank of Buhi, Inc. vs.
CA, G.R. No. L-61689, 1988) representing the majority of the capital stock within
ten (10) days from receipt by the board of directors
of the institution of the order directing receivership,
The purpose is to prevent unwarranted dissipation
liquidation, or conservatorship. (NCBA, § 30)
of the bank’s assets and as a valid exercise of the
police power to protect the depositors, creditors,
Court of Appeals
stockholders, and the general public. (Central Bank
The petition for certiorari must be filed with the CA,
of the Philippines v. CA, G.R. No. 72200, 1993)
not the SC, in accordance with Rule 65, since the
Monetary Board is a quasi-judicial agency. (Vivas,
et al. v. Monetary Board, G.R. No. 191424, 2013)

Note: Other decisions of the Monetary Board acting

as a quasi-judicial body can be elevated to the Court

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of Appeals by way of a petition for review under Rule whatever (Miranda vs. PDIC, G.R. No. 169334,
43. 2006).

Involuntary dissolution and liquidation General Rule: All claims should be filed with
CORPORATION NCBA (MONETARY the liquidation court.
CODE (SEC) BOARD, PDIC) In a judicial liquidation of an insolvent bank, all
FILING OF COMPLAINT claims against the bank should be filed in the
Requires filing of a Monetary Board may liquidation proceeding. (In re: Petition for Assistance
verified complaint and summarily and without in the Liquidation of the Rural Bank of Bokod
proper notice and need for prior hearing, Benguet, Inc., PDIC v. BIR, G.R. No. 158261, 2006).
hearing forbid the bank from
doing business The liquidation court’s exclusive jurisdiction pertains
PRIOR TO DISSOLUTION to the adjudication of claims against the bank. It
does not cover the reverse situation where it is the
Requires a BIR Tax PDIC shall immediately bank that files a claim against another person or
Clearance; SEC shall gather and take charge legal entity. (Manalo vs. CA, G.R. No. 14129, 2001)
issue final order of of all its assets and
dissolution after liabilities
submission of tax Exceptions:
clearance a. When re-filing and re-litigating the case
AUTHORITY OF THE CORPORATION before the liquidation court would be an
IN THE DISSOLUTION exercise in futility in view of the number of
Corporation is allowed Bank is not given the years the case has been on trial and
to undertake its own option to undertake its additional expenses to the party who is
liquidation or at any own liquidation living in poverty. (Valenzuela v. CA, G.R.
time during 3 years No. L-56168, 1988)
after its dissolution b. When more inconveniences would be
(In re: Petition for Assistance in the Liquidation of caused to the parties, entailing waste of
the Rural Bank of Bokod Benguet, Inc., PDIC v. BIR, more money and precious time (Carandang
G.R. No. 158261, 2006) v. CA, G.R. No. L-44932, 1988)

Nature of the Proceedings in Petition for

Assistance in Liquidation Note: Even if the case falls within the exceptions,
A liquidation proceeding is a special proceeding, the claimant should still file the adjudicated claim
and a proceeding in rem. Jurisdiction over all with the liquidator or liquidation court for processing
persons affected by the proceedings shall be of claims to determine the proper concurrence and
considered acquired upon publication of the order preference of credit among the different creditors of
setting the Petition for Assistance in Liquidation for the bank. (Consolidated Bank and Trust Corporation
initial hearing (Rules on Liquidation of Closed v. CA, G.R. No. 169457, 2015 citing Banco Filipino
Banks, Rule 3, § 1, 2020). Savings and Mortgage Bank v. NLRC, G.R. No.
82135, 1990)
Exclusive Jurisdiction of the Liquidation Court
Liquidation court refers to the regional trial court Termination of the Proceedings
designated as Special Commercial Court where the The finality of the resolution approving the final
Petition for Assistance in the Liquidation of a closed Asset Distribution Plan shall usher in the winding up
bank is filed by the PDIC and given due course. It phase under the PDIC Charter and the termination
has exclusive jurisdiction to adjudicate disputed of the liquidation proceeding (Rules on Liquidation
claims against the closed bank, assist in the of Closed Banks, Rule 10, § 1, 2020).
enforcement of individual liabilities of the directors,
officers, and stockholders, and decide on all other
issues as may be material to implement the
distribution plan PDIC adopted for general
application to all closed banks (that is, the Master
Liquidation Plan). (Rules on Liquidation of Closed
Banks, Rule 3, § 1(c), 2020)

“Disputed claims” refer to all claims, whether they be

against the assets of the insolvent bank, for specific
performance, breach of contract, damages, or

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2. EXCEPTIONS FROM
B. SECRECY OF BANK DEPOSITS COVERAGE
Grounds to allow examination of a bank
1. PROHIBITED ACTS
account under Section 2 of R.A. No. 1405:
Peso Deposits a. Where the depositor consents in writing.
All deposits of whatever nature with the banks in the
Philippines, including investments in the Note: A waiver of rights (R.A. No. 1405)
government bonds are considered absolutely must be voluntary, knowingly, intelligently,
confidential and may not be examined, inquired, or and with sufficient awareness of the
looked into by any person except as allowed by law. relevant circumstances and likely
(R.A. No. 1405, § 2) consequences. There must be evidence to
show an actual intention to relinquish the
The following are liable under R.A. No. 1405: right. Mere silence on the part of the holder
a. Any person or government official who of the right should not be construed as a
examines, inquires, or looks into bank surrender thereof. (Doña Adela Export
deposits or government bond investments International, Inc. v. TIDCORP, G.R. No.
in any instance not allowed by law. 201931, 2015)
b. Any official or employee of the banking
institution who makes a disclosure Examples of waiver:
concerning bank deposits to another in any Waiver in case of DOSRI loans (NCBA, §
instance not allowed by law (R.A. No. 1405, 26) and waiver of a taxpayer in case of
§ 3); and compromise of tax liability. (NIRC, § 6[f])
c. Any person who commits a violation of any
provision of this law. (R.A. No. 1405, § 5) b. Impeachment Cases. It is necessary that
there be an order issued by the
Foreign Currency Deposits impeachment court or by its authorized
All foreign currency deposits are absolutely officer to allow examination.
confidential and cannot be examined, inquired, or
looked into by any person, government official, It is limited to Peso deposits, as it is not an
bureau, or office, whether judicial or administrative exemption to the absolute confidentiality of
or legislative, or any other private or public entity. foreign currency deposits under R.A. No.
(R.A. No. 6426, § 8) 6426. (Philippine Savings Bank v. Senate,
G.R. No. 200238, 2012)
The following are liable under R.A. No. 6426:
a. Any person or government official who c. By Court Order in cases of:
examines, inquires, or looks into foreign 1. Bribery
currency deposits without written 2. Dereliction of duty of public officials
permission of the depositor. (R.A. No.
6426, § 8) d. Money invested or deposited is subject
b. Anyone who shall attach, garnish, or of litigation (R.A. No. 1405, § 2).
subject the foreign currency deposit to any
other order or process of any court, Fishing for information as to the amount of damages
legislative body, or other administrative it can recover does not fall within the exception.
body. (Id.) Since the subject matter of the dispute is not the
c. Any official or employee of the banking money deposited in the drawer's account, it does
institution who makes a disclosure not, by itself, warrant the examination of the bank
concerning bank deposits to another in any deposits. (Union Bank vs. CA, G.R. No. 134699,
instance not allowed by law. (R.A. No. 1999)
6426, § 10)
d. Any person who commits a violation of any The subject matter of the action is to be determined
provision of this law as well as regulation of from the indictment that charges respondent with
the Monetary Board pursuant to this law. the offense, and not from the evidence sought. The
(Id.) information charges qualified theft. There was no
mention of the supposed bank account in which the
funds represented by the checks have allegedly
been kept to allow testimony on the bank account.
(BSB Group vs. Go, G.R. No. 168644, 2010)

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Inquiry into the whereabouts of the amount assets, and records in a bank or financial
converted necessarily extends to whatever is institution; (R.A. No. 9372, § 27) of the
concealed (being in the name of persons other than following:
the one responsible for the illegal acquisition) 1. A person charged with or suspected of
inasmuch as the case is aimed at recovering the the crime of terrorism or conspiracy to
amount converted. (Mellon Bank v. Magsino, G.R. commit terrorism;
No. 71479, 1990) 2. Any judicially declared and outlawed
terrorist organizations, associations, or
Additional exceptions to the Secrecy of Bank group of persons; or
Deposits Act 3. Any member of such organization,
a. Violations of Anti-Graft and Corrupt association, or group of persons in a
Practices Act. Section 8 of R.A. No. 3019 bank or financial institution and the
directs that bank deposits shall be taken gathering of any relevant information
into consideration in its enforcement, about the same from said bank or
notwithstanding any provision of the law to financial institution. (R.A. No. 9372, §
the contrary. (PNB v. Gancayco, G.R. No. 28)
L-18343, 1965)
f. Anti-Money Laundering Act (AMLA).
The Courts are authorized to examine bank Upon order of a competent court in cases
deposits of spouses and unmarried of violation of the AMLA where there is
children of government officials found to probable cause of money laundering,
have unexplained wealth under R.A. No. except that no court order is required in
3019 – Anti-Graft and Corrupt Practices cases of:
Act. (R.A. No. 3019, § 8) 1. Kidnapping for ransom
2. Drug trafficking
b. Commissioner of Internal Revenue 3. Hijacking, destructive arson, and
(CIR). The CIR can inquire into the bank murder including those perpetrated by
accounts of the following taxpayers: terrorists against non-combatants and
1. A decedent to determine his gross similar targets. (AMLA, § 11)
estate;
2. Any taxpayer who has filed an g. Plunder. Sec. 1(d) and 4 of the Plunder
application for compromise of his tax Law (R.A. No. 7080).
liability on the ground of financial
incapacity; and Plunder (R.A. 7080, § 2), which is amassing
3. A taxpayer, information on whose or accumulating ill-gotten wealth by series
account is requested by a foreign tax of overt or criminal acts, is also analogous
authority based on an international to bribery. Therefore, the exception to R.A.
convention or treaty. (NIRC, § 6(f)) No. 1405 applicable in cases of bribery
must also apply to cases of plunder.
c. Unclaimed balances. Disclosure to the (Ejercito v. Sandiganbayan, G.R. Nos.
Treasurer of the Philippines for dormant 157294-95, 2006)
deposits for at least 10 years. (Act No.
3936, § 2) h. Unsafe and unsound banking practices.
BSP and PDIC may inquire into bank
d. BSP periodic or special examination. To deposits (both Peso and Foreign Currency
ensure compliance of the covered Deposits) and all information related
institution with the Anti Money Laundering thereto if there is a finding of unsafe or
Act. (NCBA, § 25; AMLA, § 11) unsound banking practice. (New PDIC
Charter, § 9)
Annual testing solely limited to the
determination of the existence and true i. In-Camera Inspection. The Ombudsman
identity of the owners of the accounts. is granted the express powers to examine
(AMLA, § 9[a]) and have access to bank accounts and
records. (R.A. No. 6770 – Ombudsman Act,
e. Human Security Act (R.A. No. 9372). § 15)
After determining existence of probable
cause, the Court of Appeals may authorize Requisites:
examination of and gathering of information 1. Pending case before a court of
on deposits, placements, trust accounts, competent jurisdiction;

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2. Account must be clearly identified; b. Under Other Laws (as discussed)

3. The inspection is limited to the subject 1. CIR. (NIRC, § 6[f])
matter of the pending case; 2. AMLC – with or without a court
4. The bank personnel and the account order under the AMLA and
holder must be notified to be present Terrorism Financing Prevention
during the inspection, and such and Suppression Act. (AMLA, §
inspection may cover only the account 11; R.A No. 10168, § 10)
identified in the pending case. 3. BSP in limited examination to
(Marquez v. Desierto, G.R. No. ensure compliance of supervised
135882, 2001) institutions to AMLA. (AMLA, § 11)
4. PDIC and BSP if there is failure of
Note: An investigation by the Office of the PCA due to capital deficiency in
Ombudsman is not a pending litigation to banking resolution when there is
allow examination of a bank account. failure of PCA. (New PDIC
(Marquez v. Desierto, G.R. No. 135882, Charter, as amended by R.A. No.
2001) 11840 [2022], § 11)
5. BSP and PDIC when there is a
j. Terrorism Financing Prevention and finding of unsafe or unsound
Suppression Act (R.A. No. 10168). The banking practice. (New PDIC
Anti-Money Laundering Council (AMLC), Charter, as amended by R.A. No.
without a court order, is authorized to 11840 [2022], § 8)
inquire into or examine bank deposits and 6. COA and PCGG. (1987
investments with any banking institution or Constitution, Art. IX (D) § 2(1);
non-bank financial institution and their Sec. 3[e], E.O. No. 1, § 3[e])
subsidiaries and affiliates concerning:
1. Any property or funds that are in any c. Jurisprudence (equity). The following
way related to financing of terrorism or exceptions are provided on grounds of
acts of terrorism; or equity.
2. Any property or funds of any person or 1. Account of non-resident alien
persons in relation to whom there is found guilty of raping a minor was
probable cause to believe that such allowed on the basis of equity.
person or persons are committing or (Salvacion v. Central Bank of the
attempting or conspiring to commit or Philippines, G.R. No. 94723, 1997)
participating in or facilitating the 2. A co-payee of a check who filed a
financing of terrorism or acts of suit for recovery of a sum of money
terrorism. (R.A. No. 10168, § 10) was considered as a depositor
because of the distinctive
k. Failure of PCA. The PDIC and Bangko circumstances of the case. (China
Sentral may examine, inquire, or look into Banking Corporation v. Court of
the deposit records of a bank if there is a Appeals, G.R. No. 14068, 2006)
failure of Prompt Corrective Action as
declared by the Monetary Board due to 3. GARNISHMENT OF
capital deficiency (New PDIC Charter, as
amended by R.A. No. 11840 [2022], § 11) DEPOSITS
Peso deposits
l. Presidential Commission on Good R.A. No. 1405 does not preclude deposits from
Governance (PCGG). Investigation by the being garnished to ensure satisfaction of a
PCGG to recover ill-gotten wealth (E.O. No. judgment. There is no real inquiry in such a case,
1, § 3[e]) and if the existence of the deposit is disclosed, the
disclosure is purely incidental to the execution
m. Commission on Audit (COA). Audit on process. (China Bank v. Ortega, G.R. No. L-34964,
government deposits by the COA. (1987 1973)
Constitution, Art. IX (D), § 2[1])
Foreign currency deposits
Anyone who shall attach, garnish, or subject this to
Grounds for Disclosure of Foreign Currency order or process of any court, legislative body,
Deposits. government agency or other administrative body
a. Upon written permission of depositor shall be held liable. (R.A. No. 6426, § 8)

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Note: Jurisprudence created 2 exceptions on C. GENERAL BANKING LAW OF 2000

ground of equity as discussed earlier.
1. NATURE OF BANK FUNDS
AND BANK DEPOSITS
By the nature of its business, banks derive its funds
principally from its deposit taking or quasi-banking
operations. It also gets funds from the public when
it acts as a trust entity under Chapter IX of the GBL.

Nature of Bank Funds

The bank can make use as its own, the money
deposited. (Tan Tiong Tick v. American
Apothecaries, G.R. No. L-43682, 1938)

Nature of Bank Deposits

Bank deposits are in the nature of irregular deposits.
Fixed, savings, and current deposits of money in
banks and similar institutions shall be governed by
the provisions concerning simple loans. (Art. 1980,
NCC)

The fiduciary relationship does not "convert the

contract between the bank and its depositors from a
simple loan to a trust agreement, whether express
or implied." It simply means that the bank is obliged
to observe "high standards of integrity and
performance" in complying with its obligations under
the contract of simple loan. (Goyanko, Jr. v. UCPB,
G.R. No. 179096, 2013)

Bank Deposit as a simple loan

Bank acquires ownership of money deposited;
obligation to pay the amount, but no obligation to
return the same money. (Guingona, Jr. v. City Fiscal
of Manila, G.R. No. L-60033, 1984)

Payment to proper party-depositor (Fultron Iron

Works Co. v. China Banking Corp., G.R. No. 32576,
1930)

Deposits are not preferred credits. (Central Bank v.

Morfe, G.R. No. L-38427, 1975)

Bank has the right to set-off or compensation.

(Gullas v. Philippine National Bank, G.R. No. 4391,
1935)

Kinds of Deposits
a. Savings Deposits. They are interest
bearing deposits without a stated maturity.
b. Negotiable Order of Withdrawal (NOW).
They are interest bearing deposit accounts
that combine the payable on demand
feature and investment feature of savings
accounts.

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c. Time Deposits. They are issued for a Banking business is impressed with public interest,
specific period of time (MORB, § 216), and of paramount importance thereto is the trust and
generally cannot legally be withdrawn confidence of the public in general, the highest
before maturity or within a specified degree of diligence is expected, and high standards
number of days. (BPI Family Savings v. of integrity and performance are even required of it.
First Metro Investment, G.R. No. 132390, (Bank of the Philippine Islands v. Casa Montessori
2004) Internationale, G.R. No. 149454, 2004)
d. Demand Deposits. They are those
liabilities of the BSP and of other banks, Penalty for Violation
which are denominated in Philippine Unless otherwise provided, the violation of any of
currency and are subject to payment in the provisions of the General Banking Law shall be
legal tender upon demand by the subject to Sections 34, 35, 36 and 37 of the New
presentation of checks. Only banks duly Central Bank Act. If the offender is a director or
authorized by the BSP may issue demand officer of a bank, quasi-bank or trust entity, the
deposits. (NCBA, § 59) Monetary Board may also suspend or remove such
director or officer. If the violation is committed by a
Checks representing demand deposits do not have corporation, such corporation may be dissolved by
legal tender power and their acceptance in the quo warranto proceedings instituted by the Solicitor
payment of debts, both public and private, is at the General. (GBL, § 66)
option of the creditor. However, a check which has
been cleared and credited to the account of the Liability of Banks
creditor shall be equivalent to a delivery to the As a general rule, a bank is liable for the wrongful or
creditor of cash in an amount equal to the amount tortuous acts and declarations of its officers or
credited to his account. (NCBA, § 60) agents within the course and scope of their
employment. Due to the very nature of their
2. REQUIRED DILIGENCE OF business, banks are expected to exercise the
highest degree of diligence in the selection and
BANKS; LIABILITY AS
supervision of their employees. Jurisprudence has
DRAWEE BANK established that the lack of diligence of a servant is
imputed to the negligence of the employer, when the
Highest Degree of Diligence
negligent or wrongful act of the former proximately
The fiduciary nature of banking requires high
results in an injury to a third person; in this case, the
standards of integrity and performance. (GBL, § 2)
depositor. (Associated Bank v. Tan, G.R. No.
156940, 2004)
Fiduciary relationship
The bank’s obligation to observe high standards of
Liability of Drawee Banks
integrity and performance is deemed written into
The liability of the drawee bank is based on its
every deposit agreement between a bank and its
contract with the drawer and its duty to charge to the
depositor. (Philippine Banking Corp. v. CA, G.R. No.
latter's accounts only those payables authorized by
127469, 2004)
him. A drawee bank is under strict liability to pay the
check only to the payee or to the payee's order.
Banking is vested with public interest
When the drawee bank pays a person other than the
As a business affected with public interest and
payee named in the check, it does not comply with
because of the nature of its functions, the bank is the terms of the check and violates its duty to charge
under obligation to treat the accounts of its
the drawer's account only for properly payable
depositors with meticulous care, always having in
items. (The Real Bank (A Thrift Bank), Inc. v.
mind the fiduciary nature of their relationship.
Maningas, G.R. No. 211837, 2022)
(Simex International (Manila) Inc. v CA, G.R. No.
88013, 1990)
3. PROHIBITED
Banks are expected to exercise the highest degree TRANSACTIONS BY BANK
of diligence in the selection and supervision of their DIRECTORS AND OFFICERS
employees. By the very nature of their work, the
degree of responsibility, care and trustworthiness Principles
expected of their employees and officials is far The Monetary Board is granted the authority to
greater than those of ordinary clerks and regulate the amount of loans and credit
employees. (Philippine Commercial and accommodations extended to Directors, Officers,
International Bank v. CA, G.R. No. 121413, 2001) Stockholders and their Related Interest (DOSRI). (§
36)

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a. Written approval of the majority of all the

The prohibition on DOSRI loans is intended as a directors of the bank, excluding the director
protection against over-borrowing of bank funds by borrowing and recorded in the books of the
bank’s DOSRI, as such over-borrowings may lead bank. (GBL, § 36)
to bank failures. (Soriano v. BSP, G.R. No. 162336, b. The reportorial requirement where such
2010) Banks are not created for the benefit of their approval should be entered upon the
directors and officers, they cannot use the assets of records of the corporation, and a copy of
the bank for their benefit. (Go v. BSP, G.R. No. the entry be transmitted to the appropriate
178429, 2009) supervising department of the BSP. (Id.; Go
v. BSP, G.R. No. 178429, 2009)
General Prohibition: No director or officer of any c. Ceiling requirement. The limit on the
bank shall, directly or indirectly, for himself or as amount of loans and credit
the representative or agent of others: accommodations that can be extended to
a. Borrow from such bank; the bank’s DOSRI is equivalent to their
b. Become a guarantor, endorser, or surety respective unencumbered deposits and
for loans from such bank to others; or book value of their paid-in capital
c. Be an obligor or incur any contractual contribution in the bank, excluding the
liability to the bank. (GBL, § 36) following:
1. Secured by assets considered as
A stockholder to fall under this provision should non-risk by the Monetary Board;
own at least 1% of the subscribed capital of the 2. In the form of fringe benefits; or
bank. (MORB, Sec. 341[c]) 3. Extended by a cooperative bank to
its cooperative shareholders. (Id.)
For Rural Banks, the outstanding credit d. Terms. Not less favorable to the bank than
accommodations which a rural bank may extend to those offered to others. (Id.)
its stockholders owning 2% or more of the e. Waiver of Secrecy. DOSRI loans are also
subscribed capital stock, its directors, or officers subject to the waiver of secrecy of bank
shall be limited to an amount equivalent to the deposits. (NCBA, § 26)
respective outstanding deposits and book value of
the paid-in capital contributions in the bank. (R.A.
7353, § 5) Waiver of Secrecy of Bank Deposits
If the loan is a DOSRI loan, the lending bank shall
An indirect borrowing includes one that is made require the director, officer, or stockholder to waive
by a third party, but the DOSRI has a stake in the the secrecy or confidentiality of his deposits of
transaction; a case where the DOSRI acted for his whatever nature in all banks in the Philippines
own benefit, using the name of an unsuspecting (NCBA, § 26)
person and using dummies to circumvent the
requirements of the law. (Soriano v. BSP, G.R. No. Offenses
162336, 2010) Criminal. Failure to comply with each requirement
is already a violation of DOSRI Rules (prosecution
Related Interest is considered as indirect borrowing of 3 offenses), and violation of each requirement is
or the Directors, Officers and Stockholders. an offense in itself. (Go v. BSP, G.R. No. 178429,
a. Spouse or relative within the first degree 2009)
(including adoption)
b. Partnership where the spouse or relative is The violation consists in the failure to observe and
a general partner comply with procedural, reportorial, or ceiling
c. Co-ownership of the property mortgaged to requirements prescribed by law in the grant of a
secure the loan or other credit loan to a director, officer, stockholder and other
accommodations related interests in the bank. The elements of abuse
d. Interlocking directorship or officership of confidence, deceit, fraud or false pretenses, and
between the bank and the borrower damage, which are essential to the prosecution for
e. Corporation at least 20% of the capital estafa, are not elements of a DOSRI violation.
stock or equity is owned by DOS of the (Soriano vs BSP, G.R. Nos. 159517-18, 2009)
lending bank. (MORB, § 341[e])
Thus, a person be held liable both for estafa through
Exception: The director or officer may do so, falsification of commercial documents and violation
provided the following requirements are complied of Sec. 83 of the GBL (DOSRI) for a single
with: transaction.

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Administrative: removal. After due notice to the b. Mutual funds, close-end investment
board of directors of the bank, the office of any bank companies, common trust funds, and
director or officer who violates the provisions of this other similar persons; and
Section may be declared vacant. c. Other entities administering or
otherwise dealing in currency,
D. ANTI-MONEY LAUNDERING ACT commodities, or other financial
derivatives based thereon, valuable
objects, cash substitutes, and other
1. POLICY similar monetary instruments or
The law declares that it is the policy of the State to: property
1. Protect and preserve the integrity and
confidentiality of bank accounts; 4. Jewelry dealers who deal with precious
2. Ensure that the Philippines shall not be used as metals, and precious stones for transactions in
a money laundering site for the proceeds of any excess of One Million Pesos (P1,000,000.00);
unlawful activity; and
3. Extend cooperation in transnational 5. Company service providers which, as a
investigations and prosecutions of persons business, provide any of the following services
involved in money laundering acts wherever to third parties:
committed a. Acting as a formation agent of juridical
4. Implementation of targeted financial sanctions persons;
related to the financing of the proliferation of b. Acting as (or arranging for another
weapons of mass destruction, terrorism, and person to act as) a director or corporate
financing of terrorism, pursuant to the secretary of a company, a partner of a
resolutions of the United Nations Security partnership, or a similar position in
Council. (R.A. No. 9160 [AMLA], as amended relation to other juridical persons;
by R.A. No. 11521, effective 30 January 2021, c. Providing a registered office, business
§ 2) address or accommodation,
correspondence or administrative
address for a company, a partnership
2. COVERED INSTITUTIONS or any other legal person or
AND THEIR OBLIGATIONS arrangement; and
d. Acting as (or arranging for another
COVERED INSTITUTIONS person to act as) a nominee
shareholder for another person; and
1. Supervised or regulated by the Bangko
Sentral ng Pilipinas: Banks, non-banks, quasi- 6. Persons who provide for any of the
banks, trust entities, foreign exchange dealers, following services:
pawnshops, money changers, remittance, and a. Managing of client money, securities,
transfer companies and other similar entities or other assets;
and all other persons and their subsidiaries and b. Management of bank, savings, or
affiliates securities account;
c. Organization or contribution for the
2. Supervised or regulated by the Insurance creation, operation, or management of
Commission: Insurance companies, pre-need companies; and
companies, and all other person (e.g., d. Creation, operation or management of
insurance agents and brokers, professional juridical persons or arrangements, and
reinsurers, reinsurance brokers, holding buying and selling business entities.
companies and systems, mutual benefit (AMLA, as amended by R.A. No.
associations and their subsidiaries and 10365, § 3[a][7])
affiliates);
Lawyers and accountants are not
3. Supervised or regulated by the Securities considered as covered persons if they
and Exchange Commission render services under item 6 provided the
a. Securities dealers, brokers, salesmen, following requisites are present.
investment houses, and other similar
persons managing securities or
a. They are acting as independent legal
rendering services as investment professionals
agent, advisor, or consultant; b. Authorized to practice in the
Philippines; and

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c. They are subject to the provisions of b. Reporting of Covered and Suspicious

their respective codes of conduct Transactions
and/or professional responsibility or • Covered institutions and persons shall
any of its amendments. (AMLA, as report to the Anti-Money Laundering
amended by R.A. No. 10365, § 3[a]) Council (AMLC) all covered
transactions and suspicious
They shall be excluded from the coverage transactions within five (5) working
of the Anti-Money Laundering Act in days from occurrence thereof, unless
relation to information concerning their the AMLC prescribes a different period
clients or where the disclosure of not exceeding fifteen (15) working days
information would compromise client (AMLA, as amended by R.A. No.
confidences or the attorney-client 10365, § 9[c],);
relationship. • A transaction should be reported as a
suspicious transaction if the
7. Casinos, including internet and ship-based transaction in question is determined to
casinos with respect to their casino cash be both a covered and suspicious
transactions related to their gaming operations. transaction (AMLA, as amended by
(AMLA, as amended, § 3[a][8]) R.A. No. 9194, § 9 [c]);

8. Real estate developers and brokers (AMLA, Confidentiality and liability

as amended by R.A. No. 11521, § 3[a][9]); and When reporting covered or suspicious transactions,
covered institutions and persons are prohibited from
9. Supervised, accredited or regulated by communicating, directly or indirectly, in any manner
PAGCOR or any government agency: or by any other means, to any person or entity, or
Offshore gaming operators, as well as their the media, the fact that a covered or suspicious
service providers (AMLA, as amended by R.A. transaction report has been or about to be reported,
No. 11521, § 3[a][10]) the contents thereof, or any other information in
relation thereto. (AMLA, as amended by R.A. No.
OBLIGATIONS OF COVERED PERSONS 9194, § 9[c],)

Persons and institutions covered by the Anti-Money Neither may such reporting be published or aired in
Laundering Act are subject to the following any manner or form by the mass media, electronic
obligations: mail, or other similar devices. (Id.)

a. Customer Identification (“Know Your In case of violation, the concerned officer and
Client”) - covered and institutions shall: employee and media shall be held criminally liable.
• Establish and record the true identity of (Id.)
its clients based on official documents;
• Maintain a system of verifying the true c. Record Keeping
identity of their clients • Covered institutions and persons shall
• For corporate clients, require a system maintain and safely store all records of
of verifying their legal existence and transactions for five (5) years from the
organizational structure, as well as dates of transactions;
authority and identification of all • For closed accounts, covered
persons purporting to act on their institutions and persons shall preserve
behalf; and store the records on customer
• Absolutely prohibit anonymous identification, account files, and
accounts, accounts under fictitious business correspondence for at least
names, and all other similar accounts; five (5) years from the dates when they
• Allow peso and foreign currency non- were closed. (AMLA, § 9[b])
checking numbered accounts.
• The BSP may conduct annual testing 3. COVERED TRANSACTIONS
solely limited to the determination of
the existence and true identity of the “Transaction” Refers to any act establishing any
owners of such accounts. (AMLA, § right or obligation or giving rise to any contractual or
9[a]) legal relationship between the parties. It also
includes any movement of funds by any means with
a covered person.

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faith, whether or not such reporting results in any

“Covered Transactions” are transactions in cash or criminal prosecution under the Anti-Money
other equivalent monetary instrument involving a Laundering Act or any other law. (Revised IRR of
total amount in excess of Five Hundred Thousand R.A. No. 9194, Rule 9.c.5)
Pesos (P500,000.00) within one (1) banking day.
Exemption from Bank Secrecy Laws.
For covered persons under Section 3(a)(8), a single When reporting covered or suspicious transactions
casino cash transaction involving an amount in to the AMLC, covered persons and their officers and
excess of Five million pesos (P5,000,000.00) or its employees shall not be deemed to have violated
equivalent in any other currency. R.A. No. 1405 (Secrecy of Bank Deposits), as
amended, R.A. No. 6426 (Foreign Currency
For covered persons under Section 3(a)(9) (real Deposits Act) and R.A. No. 8791 (General Banking
estate developers and brokers) herein, a single cash Law), and other similar laws, provided that
transaction involving in excess of Seven Million Five confidentiality is observed. (AMLA, as amended, §
Hundred thousand pesos (7,500,000.00) or its 9[c])
equivalent in any other currency. (AMLA, as
amended by R.A. No. 9194, R.A. No. 10927 and 6. MONEY LAUNDERING
R.A. No. 11521, § 3[b])
a. How Committed
4. SUSPICIOUS
TRANSACTIONS Money Laundering is a crime whereby the proceeds
of an unlawful activity are transacted, thereby
“Suspicious Transactions” are transactions with making them appear to have originated from
covered institutions, regardless of the amount legitimate sources. (AMLA, § 4)
involved, where any of the following circumstances
exist: Persons liable for Money Laundering:
1. There is no underlying legal or trade 1. Any person; or
obligation, purpose or economic 2. Any person employed with a covered institution
justification;
2. The client is not properly identified; Elements:
3. The amount involved is not commensurate 1. The monetary instrument or property
with the business or financial capacity of represents, involves or relates to the proceeds
the client; of any unlawful activity;
4. Taking into account all known 2. Knowledge of the offender that the monetary
circumstances, it may be perceived that the instrument or property represents, involves or
client’s transaction is structured in order to relates to the proceeds of the unlawful activity;
avoid being the subject of reporting 3. The offender commits any of the following:
requirements under the Anti-Money a. Transacts said monetary instrument or
Laundering Act; property;
5. Any circumstance relating to the b. Converts, transfers, disposes of,
transaction which is observed to deviate moves, acquires, possesses or uses
from the profile of the client and/or the said monetary instrument or property;
client’s past transactions with the covered c. Conceals or disguises the true nature,
institution; source, location, disposition,
6. The transaction is in any way related to an movement, or ownership of or rights
unlawful activity or offense under the Anti- with respect to said monetary
Money Laundering Act that is about to be, instrument or property;
is being, or has been committed; or d. Attempts or conspires to commit
7. Any transaction that is similar or analogous money laundering offenses referred to
to any of the foregoing. (AMLA, as in paragraphs (a), (b), and (c);
amended by R.A. No. 9194, § 3[b-1]) e. Aids, abets, assists in or counsels the
commission of the money laundering
5. SAFE HARBOR PROVISION offenses referred to in paragraphs (a),
(b), and (c) above; and
No administrative, criminal, or civil proceedings shall f. Performs or fails to perform any act as
lie against any person for having made a covered a result of which he/she facilitates the
transaction report or suspicious transaction report in offense of money laundering referred
the regular performance of his/her duties in good to in paragraphs (a), (b), and (c) above.

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(AMLA, as amended by R.A. No. 9194 18. Forgeries and Counterfeiting;

and R.A. No. 10365, § 4) 19. Violations of the Anti-Trafficking in Persons Act;
20. Violations of the Revised Forestry Code of the
Failing to file a report as a Money Laundering Philippines;
Offense. 21. Violations of the Philippine Fisheries Code;
Any covered institution or person who, knowing that 22. Violations of the Philippine Mining Act;
a covered or suspicious transaction is required 23. Violations of the Wildlife Resources
under the Anti-Money Laundering Act to be reported Conservation and Protection Act;
to the Anti-Money Laundering Council, fails to do so. 24. Violations of the National Caves and Cave
(AMLA, as amended by R.A. No. 9194 and R.A. No. Resources Management Protection Act;
10365, § 4) 25. Violations of the Anti-Carnapping Act;
26. Violations of the Decree Codifying the Laws on
“Monetary Instrument” refers to proceeds of, or Illegal/Unlawful Possession, Manufacture,
instruments related to an unlawful activity. This may Dealing in, Acquisition or Disposition of
refer to any of the following: Firearms, Ammunition or Explosives;
1. Coins or currency of legal tender of the 27. Violations of the Anti-Fencing Law;
Philippines, or of any other country; 28. Violations of the Migrant and Overseas Workers
2. Drafts, checks, and notes; Filipinos Act;
3. Securities or negotiable instruments, 29. Violations of the Intellectual Property Code;
bonds, commercial papers, deposit 30. Violations of the Anti-Photo and Video
certificates, trust certificates, custodial Voyeurism Act;
receipts, or deposit substitute instruments, 31. Violations of the Anti-Child Pornography Act;
trading orders, transaction tickets and 32. Violations of the Special Protection of Children
confirmations of sale or investments and Against Abuse, Exploitation, and
money market instruments; and Discrimination;
4. Other similar instruments where title 33. Fraudulent practices and other violations of the
thereto passes to another by endorsement, Securities Regulation Code;
assignment, or delivery. (AMLA, § 3[c]) 34. Violation of Section 19 (a)(3) of the “Strategic
Management Act”, in relation to the proliferation
b. Predicate Crimes of weapons of mass destruction and its
financing pursuant to United Nations Security
Council Resolution Numbers 1718 of 2006 and
“Unlawful Activity” refers to any act, omission, or
2231 of 2015; (New provision under R.A.
series or combination thereof involving or having
11521)
any direct relation to the following:
35. Violation of Section 254 of Chapter II, Title X of
1. Kidnapping under ransom;
the NIRC, where the deficiency basic tax due in
2. Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16
the final assessment is in excess of Twenty-five
of the Comprehensive Dangerous Drugs Act;
3. Section 3, paragraphs B, C, E, G, H, and I of the million pesos (P25,000,000.00) per taxable
year, for each tax type covered and there has
Anti-Graft and Corrupt Practices Act;
been a finding of probable cause by the
4. Plunder;
5. Robbery and Extortion; competent authority: Provided, further That
6. Jueteng and Masiao punished as Illegal there must be a finding of fraud, willful
misrepresentation or malicious intent on the
Gambling;
part of the taxpayer: Provided, finally, That in no
7. Piracy on the high seas;
8. Qualified Theft; case shall the AMLC institute forfeiture
9. Swindling and Other Forms of Swindling; proceedings to recover monetary instruments,
10. Smuggling; property or proceeds representing, involving, or
relating to a tax crime, if the same has already
11. Violations of the Electronic Commerce Act;
been recovered or collected by the BIR in a
12. Hijacking and other violations of the Anti-
separate proceeding; and (New provision under
Hijacking Law and Destructive Arson and
Murder; R.A. 11521)
13. Terrorism and Conspiracy to Commit Terrorism 36. Felonies and offenses of a similar nature that
are punishable under the penal laws of other
14. Financing of Terrorism and offenses punishable
countries. (AMLA, as amended by R.A. No.
under the Terrorism Financing Prevention and
9194 and R.A. No. 10365, § 3[i])
Suppression Act;
15. Bribery and Corruption of Public Officers;
16. Frauds and Illegal Exactions and Transactions;
17. Malversation of Public Funds and Property;

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7. AUTHORITY TO INQUIRE;
FREEZING AND The AMLC and its Secretariat shall securely protect
information received or processed and shall not
FORFEITURE reveal, in any manner, any information known to
The Anti-Money Laundering Council may inquire them by reason of their office. This prohibition shall
into or examine any particular deposit or investment, apply even after their separation from the AMLC.
including related accounts, with any banking The AMLC shall formulate rules governing
institution or non-bank financial institution upon information exchange and dissemination, the
order of any competent court. (AMLA, as amended security and confidentiality of such information,
by R.A. No. 9194 and R.A. No. 10167, § 11) including procedures for handling, storage, and
protection of, as well as access to such information.
The term “related accounts” shall refer to accounts, (AMLA, as amended by R.A. No. 11521, § 8-A)
the funds and sources of which originated from
and/or materially linked to the monetary
instrument(s) or property(ies) subject of the freeze Freezing of Monetary Instrument or Property
order(s). (AMLA, as amended by R.A. No. 9194 and
R.A. No. 10167, § 11) Definition and Purpose.
A freeze order is an extra-ordinary and interim relief
The order of the competent court must be based on: issued by the Court of Appeals to prevent the
1. An ex parte application in cases of violations of dissipation, removal, or disposal of properties that
the Anti-Money Laundering Act; and are suspected to be the proceeds of, or related to,
2. Probable cause that the deposits or unlawful activities as defined in the AMLA. Its
investments, including related accounts primary purpose is to temporarily preserve monetary
involved, are related to an unlawful activity. instruments or money that are in any way related to
(AMLA, as amended by R.A. No. 9194 and R.A. an unlawful activity or money laundering, by
No. 10167, § 11) preventing the owner from using them during the
duration of the freeze order. The relief is
No court order shall be required in the following preemptive in character, meant to prevent the
cases: owner from disposing his property and thwarting the
1. Kidnapping for ransom; State’s effort in building its case and eventually filing
2. Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 civil forfeiture proceedings and/or prosecuting the
of the Comprehensive Dangerous Drugs Act; owner (Ret. Lt. Gen. Jacinto C. Ligot et. Al. vs.
3. Hijacking and other violations of the Anti- Republic of the Philippines, G.R. No. 176944, 2013).
Hijacking Law and Destructive Arson and
Murder; Exception.
4. Felonies similar to those previously mentioned The AMLC has authority to issue an ex parte freeze
which are punishable in other countries; order, either under its own initiative or of the Anti-
5. Terrorism and conspiracy to commit terrorism. Terrorism Council, property or funds related to
(AMLA, as amended by R.A. No. 9194 and R.A. financing of terrorism or terrorist acts or property or
No. 10167, § 11) funds of any person, terrorist organization or
association of group of persons. (Sec. 11, R.A. No.
The Court of Appeals shall act on the application to 10168 [2012], § 11)
inquire into or examine any depositor or investment
with any banking institution or non-bank financial Requisites
institution within twenty-four (24) hours from the 1. Upon a verified ex parte petition filed by the
filing of the application. (AMLA, as amended by R.A. AMLC with the CA; and
No. 9194 and R.A. No. 10167, § 11) 2. Determination that probable cause exists that
any monetary instrument or property is in any
To ensure compliance with the AMLA, the Bangko way related to an unlawful activity. (AMLA, as
Sentral ng Pilipinas may, in the course of a periodic amended by R.A. No. 9194, R.A. No. 10167,
or special examination, check the compliance of a and R.A. No. 10365, § 10).
covered institution with the requirements of the • Probable cause is the sufficiency of the
AMLA and its implementing rules and regulations. relation between the unlawful activity and
(AMLA, as amended by R.A. No. 9194 and R.A. No. the property or monetary instrument
10167, § 11) (Subido Law Offices vs. Court of Appeals,
G.R. No. 216914, 2016) It's different from
INFORMATION SECURITY AND the probable cause for the institution of
CONFIDENTIALITY criminal action.

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• No prior criminal charge, pendency of a a. Account numbers and/or description of the

case, or conviction for an unlawful activity monetary instruments, property or
is necessary for the commencement or the proceeds involved;
resolution of a petition for freeze order. b. Names of the account owners or holders;
(2018 AMLA IRR, Rule 10, § 1(2),) c. The value of the monetary instrument,
property, or related accounts as of the time
they were frozen;
Effectivity d. All relevant information as to the nature of
• The Freeze Order shall be the monetary instrument, property or
effective immediately for a period instruments;
of twenty (20) days. The CA shall e. Any information on the related accounts
conduct a summary hearing within pertaining to the monetary instrument or
the period to determine whether to property subject of the freeze order; and
modify, lift or extend the period. f. The date and the time when the freeze
The total period of the Freeze order was served.
Order shall not exceed six (6) 5. Freeze all related accounts upon the receipt
months. of the freeze orders and upon the verification of
• Once the six (6) months has the covered institution that these are accounts
lapsed, the freeze order is deemed related to the monetary instrument or property
ipso facto lifted. subject of the freeze order. (2018 AMLA IRR,
Rule 10, § 4).
Exceptions:
a. When a money laundering complaint has
already been filed against the person -- end of topic --
whose monetary instrument or property
was frozen, or
b. A petition for civil forfeiture against the
frozen monetary instrument or property
was filed (2018 AMLA IRR, Rule 10, §
2.10[a]).

If an asset preservation order is issued by

the RTC having jurisdiction over these
cases, the freeze order shall remain
effective until the money laundering case is
terminated or an asset preservation order is
issued, respectively. (AMLA as amended
by R.A. No. 9194, R.A. No. 10167, and R.A.
No. 10365, § 10)

Duties of covered institutions

In relation to Freeze Orders, the covered institutions
and persons have the following duties:
1. Implement freeze order. Upon receipt the
covered institution shall immediately freeze the
monetary instrument or property and desist
from and not allow any transaction, withdrawal,
transfer, removal, conversion, other movement,
or concealment thereof.
2. Freeze and report related accounts.
3. Furnish copy of freeze order to owner or
holder.
4. Submit the written detailed return. To the
Court of Appeals and AMLC, within twenty-four
(24) hours from receipt of the freeze order, a
detailed written return which shall include:

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INTELLECTUAL PROPERTY RIGHTS IN

VI. INTELLECTUAL PROPERTY GENERAL

1. Intellectual property Rights

TOPIC OUTLINE UNDER THE SYLLABUS
The State recognizes that an effective intellectual
and industrial property system is vital to the
A. PATENTS
development of domestic and creative activity,
1. Patentable vs. Non-patentable Inventions –
facilitates transfer of technology, attracts foreign
Section 22
investments, and ensures market access for our
2. Ownership of a Patent – Sections 28-30
products. The use of intellectual property bears a
3. Rights and Limitations of Patent Owner –
social function. To this end, the State shall promote
Sections 71-77
the diffusion of knowledge and information for the
4. Patent Infringement – Sections 76-84
promotion of national development and progress
5. Remedies for Infringement – Sections 79-
and the common good. (§ 2, IP Code)
80
6. Cancellation – Sections 61-66
All agreements concerning industrial property are
7. Compulsory Licensing – Sections 93-102
intimately connected with economic development.
8. Voluntary Licensing – Sections 85-92
Industrial property encourages investments in new
ideas and inventions and stimulates creative efforts
B. TRADEMARKS
for the satisfaction of human needs. They speed up
1. Marks vs. Collective Marks vs. Trade
transfer of technology and industrialization, and
Names – Section 121
thereby bring about social and economic progress.
2. Non-registrable Marks – Section 123
(Mirpuri v. Court of Appeals, G.R. No. 114508,
3. Ownership and Registration – Section 152
1999)
4. Rights and Limitations of Trademark Owner
– Section 147
Intellectual property protection is merely a means
5. Trademark Infringement – Section 155
towards the end of making society benefit from the
6. Unfair Competition – Section 168
creation of its men and women of talent and genius.
7. Cancellation – Section 151
This is the essence of intellectual property laws, and
it explains why certain products of ingenuity that are
C. COPYRIGHTS
concealed from the public are outside the pale of
1. Copyrightable Works – Sections 172-173
protection afforded by the law. It also explains why
2. Non-Copyrightable Works – Sections 175-
the author or the creator enjoys no more rights than
176
are consistent with public welfare. (ABS-CBN
3. Rights Conferred by Copyright – Sections
Broadcasting Corp. v. Philippine Multi-Media
177, 193-199
System, Inc., G.R. Nos. 175769-70, 2009)
4. Ownership of a Copyright – Section 178
5. Limitations on Copyright – Sections 184-
2. Differences between copyright, trademarks,
185
and patents
6. Copyright Infringement – Section 216
RATIONALE
1. To promote creativity
Copyright 2. To encourage creation of
works
1. To indicate origin or
ownership of the articles to
which they are attached
2. To guarantee that those
Trademarks
articles come up to a certain
standard of quality
3. To advertise the articles
which they symbolize
1. To foster and reward
invention;
Patents 2. To promote disclosures of
inventions to stimulate
further innovation

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3. To ensure that ideas in the

public domain remain there
for the free use of the public
SUBJECT MATTER
Original intellectual creations in
Copyright the literary and artistic domain
(literary and artistic works)
Any visible sign capable of
Trademarks
distinguishing the goods
A product, process or any
Patents improvement thereof which is a
technical solution of a problem
ELEMENTS
1. Literary or artistic work
2. Independently created
Copyright (originality)
3. Involves minimal or a
modicum of creativity
1. Visible sign
2. Capable of distinguishing
Trademarks
[distinctive] the goods or
services of an enterprise
1. Technical solution of a
problem in a field of human
activity
Patents 2. Must be new (novelty)
3. Involves an inventive step;
(non-obvious)
4. Industrially applicable
WHEN PROTECTION BEGINS
Upon creation (but registration
Copyright needed only to recover damages
in cases of infringement)
Upon grant of trademark
Trademarks
registration
Patents Upon grant of patent
TERM OF PROTECTION
Generally, during the life of the
Copyright author and for 50 years after his
death [life + 50]
10 years, renewable for periods
of 10 years after the expiration of
Trademarks
the original term (perpetual
protection as long as renewed)
Patents 20 years from grant

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5. Aesthetic
A. PATENTS creations; and
6. Anything contrary
to public order or
1. Patentable vs. Non-patentable
morality.
Inventions – Section 22 (§ 22, IP Code)
A patent is a grant issued by the Intellectual
Patentable invention
Property Office of the Philippines (IPOPHL).
Through the patent, a patent holder is given the Any technical solution of a problem in any field of
human activity which is (a) new, involves an (b)
exclusive right to exclude others from making, using,
inventive step and is (c) industrially applicable
importing, and selling the patented innovation for a
shall be patentable. It may be, or may relate to, a
limited period of time.
product, or process, or an improvement of any of the
The validity of the patent issued by the Philippines foregoing. (§ 21, IP Code)
Patent Office and the question over the
inventiveness, novelty, and usefulness of the c. Novelty
improved process therein specified and described An invention shall not be considered new if it forms
are matters which are better determined by the part of a prior art. (§ 23, IP Code). Novelty is an
Philippines Patent Office. The technical staff of the essential requisite of patentability of an invention or
Philippines Patent Office, composed of experts in discovery. An invention is not new if it has been
their field, have, by the issuance of the patent in disclosed or used in public, or sold in the market
question, accepted the thinness of the private before the patent application for the invention is
respondent's new tiles as a discovery. There is a filed. (Manzano v. Court of Appeals, G.R. No.
presumption that the Philippines Patent Office has 113388, 1997)
correctly determined the patentability of the
improvement by the private respondent of the Prior Art – It consists of:
process in question. (Aguas v. De Leon, G.R. No. L- a. Everything which has been made available to
32160, 1982) the public anywhere in the world, before the
filing date or the priority date of the application
PATENTABLE NON-PATENTABLE claiming the invention; and
INVENTIONS INVENTIONS b. The whole contents of an application for a
Any technical 1. Discoveries, patent, utility model, or industrial design
solution of a problem scientific theories registration, published in accordance with this
in any field of human and mathematical Act, filed or effective in the Philippines, with a
activity which is: methods. filing or priority date that is earlier than the filing
(a) new, involves 2. Schemes, rules or priority date of the application: Provided
an and methods of i. An application which has validly
(b) inventive performing mental claimed the filing date of an earlier
step and is acts, playing application shall be prior art with effect
(c) industrially games or doing as of the filing date of such earlier
applicable business and application;
shall be program for ii. The applicant or the inventor identified
patentable. computers. in both applications are not one and the
It may be, or may relate 3. Methods for human same. (§ 24, IP Code)
to: or animal treatment
(a) a product, or by surgery or d. Inventive Step
(b) process, or an therapy and An invention involves an inventive step if, having
(c) improvement diagnostic methods regard to prior art, it is not obvious to a person
of any of the practiced on the skilled in the art at the time of the filing date or
foregoing. (§ human or animal priority date of the application claiming the invention.
21, IP Code) body. (§ 26.1, IP Code)
4. Plant varieties or
animal breeds or Person Skilled in the Art (POSITA)
biological process A hypothetical person presumed to be an ordinary
for the production practitioner aware of what was common general
of plants or knowledge in the art at the relevant date. He or she
animals. is also presumed to have:

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1. knowledge of all references that are sufficiently b. Discovery of any new property or use of
related to one another and to the pertinent art; a known substance; and
2. knowledge of all arts reasonably pertinent to the c. Mere use of a known process UNLESS
particular problems with which the inventor was such process results in a new product that
involved; and employs at least one new reactant.
3. normal means and capacity for routine work and
experimentation at his or her disposal. 2. Schemes, rules and methods of performing
mental acts, playing games or doing business,
In the case of drugs and medicines, there is no and programs for computers;
inventive step if the invention results from:
1. the mere discovery of a new form or new General Rule: Computer programs are
property of a known substance which does not subjects of copyright.
result in the enhancement of the known efficacy Exceptions: The computer program is still
of that substance, subject of copyright protection; in addition, the
2. the mere discovery of any new property or new machine or article described below may be
use for a known substance, or patentable if the computer program:
3. the mere use of a known process unless such (1) is implemented by a particular machine in a
known process results in a new product that non-conventional and non-trivial manner,
employs at least one new reactant. (§ 26.2, IP or
Code) (2) transforms an article from one state to
another, then it may be patentable.
e. Industrial Applicability
An invention that can be produced and used in any 3. Methods for treatment of the human or animal
industry shall be industrially applicable. (§ 27, IP body by surgery or therapy and diagnostic
Code). Industrial applicability refers to an invention’s methods practiced on the human or animal
real-life benefit and practical use. body;

Non-Patentable Inventions NOTE: This prohibition, however, does not

The following shall be excluded from patent apply to products and compositions for use in
protection: any of these methods.

1. Discoveries, scientific theories and 4. Plant varieties or animal breeds or essentially

mathematical methods, and in the case of drugs biological process for the production of plants or
and medicines, the mere discovery of a new animals;
form or new property of a known substance
which does not result in the enhancement of the NOTE: This provision shall not apply to micro-
known efficacy of that substance, or the mere organisms and non-biological and
discovery of any new property or new use for a microbiological processes. Further, Congress
known substance, or the mere use of a known may enact a law providing sui generis protection
process unless such known process results in a of plant varieties and animal breeds and a
new product that employs at least one new system of community intellectual rights
reactant. protection.

For the purpose of this clause, salts, esters, NOTE: Congress has already enacted the Plan
ethers, polymorphs, metabolites, pure form, Variety Protection Act which grants a Certificate
particle size, isomers, mixtures of isomers, of Plant Variety Protection for varieties that are:
complexes, combinations, and other derivatives (a) new, (b) distinct, (c) uniform, and (d)
of a known substance shall be considered to be stable. (§ 4, Plant Variety Protection Act)
the same substance, unless they differ
significantly in properties with regard to efficacy; 5. Aesthetic creations; and

For drugs and medicines, the following are 6. Anything which is contrary to public order or
unpatentable: morality. (§ 22, IP Code)

a. Discovery of a new form or new property

of a known substance UNLESS it results in
the enhancement of the substance’s
efficacy;

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2. Ownership of a Patent – Sections within six (6) months from the date of filing
28-30 in the Philippines. (§ 31, IPC)

Term of Patent 3. Rights and Limitations of Patent

The term of a patent shall be 20 years from the filing
date of the application. (§ 54, IP Code)
Owner – Sections 71-77
RIGHTS CONFERRED BY A PATENT
a. Right to a Patent A patent shall confer on its owner the following
exclusive rights:
The right to a patent belongs to the inventor, his (1) Where the subject matter of a patent is a
heirs, or assigns. When two (2) or more persons product, to restrain, prohibit, and prevent
have jointly made an invention, the right to a patent any unauthorized person or entity from
shall belong to them jointly. (§ 28, IP Code) making, using, offering for sale, selling, or
importing that product.
b. First-to-File Rule (2) Where the subject matter of a patent is a
process, to restrain, prevent, or prohibit
If two (2) or more persons have made the invention any unauthorized person or entity from
separately and independently of each other, the using the process, and from manufacturing,
right to the patent shall belong to the person who dealing in, using, selling or offering for sale,
filed an application for such invention, or where two or importing any product obtained directly
or more applications are filed for the same invention, or indirectly from such process.
to the applicant who has the earliest filing date or the (3) Patent owners shall also have the right to
earliest priority date. (§ 29, IP Code) assign, or transfer by succession the
patent, and to conclude licensing contracts
c. Inventions Created Pursuant to for the same (§ 71, IPC)
a Commission
LIMITATIONS OF PATENT RIGHTS
The person who commissions the work shall own The patentee has no right to prevent third parties in
the patent, unless otherwise provided in the the following circumstances:
contract. (§ 30, IP Code) 1. Using a patented product which has been
put on the market in the Philippines by the
If an employee made the invention in the course of owner of the product, or with his express
his regular employment, the patent shall belong to: consent, insofar as such use is performed
1. The employee, the inventive activity is not after that product has been so put on the
part of his regular duties (even if the said market.
employee uses the time, facilities, and
materials of the employer); Note: With regard to drugs and medicines,
2. The employer, if the invention is the result the limitation on patent rights shall apply
of the performance of the employee’s after a drug or medicine has been
regular duties UNLESS there is an introduced in the Philippines or anywhere
agreement to the contrary. else in the world. The right to import the
drugs and medicines shall be available to
d. Right of Priority any government agency or any private third
party.
An application for patent filed by any person who
has previously applied for the same invention in 2. Where the act is done privately and on a
another country which by treaty, convention, or law non-commercial scale or for a non-
affords similar privileges to Filipino citizens, shall be commercial purpose, and the economic
considered as filed as of the date of filing the foreign interests of the patentee are not
application, provided that: significantly prejudiced;
1. The local application expressly claims 3. Where the act consists of making or using
priority; exclusively for experimental use of the
2. It is filed within twelve (12) months from the invention for scientific purposes or
date the earliest foreign application was educational purposes and such other
filed; and activities directly related to such scientific
3. A certified copy of the foreign application or educational experimental use;
together with an English translation is filed 4. In the case of drugs and medicines, where
the act includes testing, using, making or

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selling the invention including any data (4) In the case of drugs and medicines, there
related thereto, solely for purposes is a public non- commercial use of the
reasonably related to the development and patent by the patentee, without satisfactory
submission of information and issuance of reason; or
approvals by government regulatory (5) In the case of drugs and medicines, the
agencies required under any law of the demand for the patented article in the
Philippines or of another country that Philippines is not being met to an adequate
regulates the manufacture, construction, extent and on reasonable terms, as
use or sale of any product; determined by the Secretary of the
5. Where the act consists of the preparation Department of Health. (§ 74, IPC)
for individual cases, in a pharmacy or by a
medical professional, of a medicine in 4. Patent Infringement – Sections 76-
accordance with a medical prescription or
acts concerning the medicine so prepared; 84
and Civil Action For Infringement
6. Where the invention is used in any ship, Patent infringement consists of the following acts:
vessel, aircraft, or land vehicle of any other (1) making, using, offering for sale, selling, or
Philippines temporarily or accidentally. importing a patented product or a product
obtained directly or indirectly from a
Note: Such invention must be used patented process; or
exclusively for the needs of the ship, (2) use of a patented process without the
vessel, aircraft, or land vehicle and not authorization of the patentee constitutes
used for the manufacturing of anything to patent infringement.
be sold within the Philippines.
Any patentee, or anyone possessing any right, title,
e. Prior User or interest in and to the patented invention, whose
rights have been infringed, may bring a civil action
Any prior user, who, in good faith was using the before a court of competent jurisdiction, to recover
invention or has undertaken serious preparations to from the infringer such damages sustained thereby.
use the invention in his enterprise or business, (§ 76, IPC)
before the filing date or priority date of the
application on which a patent is granted, shall have Infringement action by a foreign national
the right to continue the use thereof within the Any foreign national or juridical entity who meets the
territory where the patent produces its effect. The requirements of Section 3 and not engaged in
right of prior user may only be transferred or business in the Philippines, to which a patent has
assigned together with enterprise or business, or been granted or assigned under this Act, may bring
with the part of his enterprise or business in which an action for infringement of patent, whether or not
use or preparations for use have been made. (§ 73, it is licensed to do business in the Philippines under
IPC) existing laws. (§ 77, IPC)

f. Use by Government Note: Section 3 of the IPC pertains to International

Conventions and Reciprocity.
A Government agency or third person authorized by
the Government may exploit the invention even No patent, no protection
without agreement of the patent owner where: To be able to effectively and legally preclude others
(1) The public interest, in particular, national from copying and profiting from the invention, a
security, nutrition, health or the patent is a primordial requirement. No patent, no
development of other sectors, as protection. (Pearl & Dean (Phil.) v. Shoemart, G.R.
determined by the appropriate agency of No. 148222, 2003)
the government, so require; or
(2) A judicial or administrative body has No patent, no infringement
determined that the manner of exploitation, There can be no infringement of a patent until a
by the owner of the patent or his licensee, patent has been issued, since whatever right one
is anti- competitive; or has to the invention covered by the patent arises
(3) In the case of drugs and medicines, there alone from the grant of patent. (Creser Precision
is a national emergency or other Systems, Inc. v. Court of Appeals, G.R. No. 118708,
circumstance of extreme urgency requiring 1998)
the use of the invention; or

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Exception:
The applicant shall have all the rights of a patentee Rationale: Such imitation would leave room for the
under Section 76 against any person who, without unscrupulous copyist to make unimportant and
his authorization, exercised any of the rights insubstantial changes and substitutions in the
conferred under Section 71 of this Act in relation to patent which, though adding nothing, would be
the invention claimed in the published patent enough to take the copied matter outside the claim,
application, as if a patent had been granted for that and hence outside the reach of the law. (Godines v.
invention. (§ 46, IP Code) Court of Appeals, G.R. No. 97343, 1993)

In order to infringe a patent, a machine or device Burden of Proof in Process Patents

must perform the same function, or accomplish the When the subject matter of a patent is a process for
same result by identical or substantially identical obtaining a product, any identical product shall be
means and the principle or mode of operation must presumed to have been obtained through the use of
be substantially the same. (Del Rosario v. Court of the patented process if:
Appeals, G.R. No. 115106, 1996) 1. the product is new; or
2. There is substantial likelihood that the
However: The exclusive right of a patentee to identical product was made by the process
make, use and sell a patented product, article or owner and the owner of the patent has
process exists only during the term of the patent. been unable to determine the process
(Phil Pharmawealth, Inc. v. Pfizer, Inc., G.R. No. actually used. (§ 78, IPC)
167715, 2010)

Tests in Patent Infringement Defenses in Action for Infringement

In an action for infringement, the defendant may
1. Literal Infringement show the invalidity of the patent, or any claim
Resort must be had to the words of the claim. If thereof, on any of the following grounds:
accused matter clearly falls within the claim, then a. That what is claimed as the invention is not
there is literal infringement. new or patentable;
b. That the patent does not disclose the
To determine whether the particular item falls within invention in a manner sufficiently clear
the literal meaning of the patent claims, the Court and complete for it to be carried out by any
a. Compares the claims of the patent and the person skilled in the art; or
accused product within the overall context c. That the patent is contrary to public order
of the claims and specifications, and or morality. (§ 81, IPC)
b. Determines whether there is exact identity
of all material elements. (Godines v. Court NOTE: These are the same grounds for the
of Appeals, G.R. No. 97343, 1993) cancellation of a patent.

2. Doctrine of Equivalents Patent Found Invalid May Be Cancelled

If during the action for infringement, the court finds
Infringement also occurs when a device that the patent or claim is invalid, it shall cancel the
appropriates a prior invention by incorporating its patent or claim. (§ 82, IPC)
innovative concept and, albeit with some Assessor in Infringement Action
modification and change, performs substantially the 1. Two or more assessors may be appointed
same function in substantially the same way to by the court. These assessors shall have
achieve substantially the same result. (Smith Kline the necessary scientific and technical
Beckman Corp. v. Court of Appeals, G.R. No. knowledge required by the subject matter in
126627, 2003) litigation
2. Each assessor will receive compensation in
Under the doctrine of equivalents, there is still patent an amount to be fixed by the court and
infringement when: advanced by the complaining party. (§ 83,
a. There is an appropriation of the inventive IPC)
step of a prior invention;
b. The subsequent invention has been
modified or changed; and
c. Despite such changes, the subsequent
invention performs substantially the same
function in substantially the same way to
achieve substantially the same result.

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5. Remedies for Infringement –

Sections 79-80 Cases with Highly Technical Issues
On motion of any party, the Director of Legal Affairs
Limitations in Action for Damages may order that the petition be heard and decided by
No damages can be recovered for acts of a committee composed of the Director of Legal
infringement committed more than four (4) years Affairs as chairman and two (2) members who have
before the institution of the action for infringement. experience or expertise in the field of technology to
(§ 79, IPC) which the patent sought to be cancelled relates. (§
64, IPC)
Requirement of Notice on Damages
Damages cannot be recovered for acts of Effect of Cancellation
infringement committed before the infringer had The rights conferred by the patent or any specified
known or had reasonable grounds to know of the claim or claims cancelled shall terminate. The notice
patent. of such cancellation shall be published in the IPO
Gazette. (§ 66, IPC)
It is presumed that the infringer had known of the
patent if on the patented product or container, there 7. Compulsory Licensing – Sections
is material relating to the product or process which
have “Philippine Patent” with the number of the
93-102
patent. (§ 80, IPC) The Director of Legal Affairs may grant license to
exploit patented invention, even without agreement
6. Cancellation – Sections 61-66 of patent owner, in favor of any person who has
shown his capability to exploit invention, under any
Any interested person may, upon payment of the of the following circumstances:
required fee, petition to cancel the patent or any 1. National emergency or other
claim thereof, or parts of the claim, on any of the circumstances of extreme urgency; or
following grounds: 2. Where public interest, in particular, national
1. That what is claimed as the invention is not security, nutrition, health or development of
new or patentable; other vital sectors of national economy as
2. That the patent does not disclose the determined by the appropriate agency of
invention in a manner sufficiently clear and the Government, so requires; or
complete for it to be carried out by any 3. Where a judicial or administrative body has
person skilled in the art; or determined that manner of exploitation by
3. That the patent is contrary to public order patent owner or his licensee is anti-
or morality. competitive; or
4. In case of public non-commercial use of
NOTE: Where the grounds for cancellation relate to patent by patentee, without satisfactory
some of the claims or parts of the claim, cancellation reason; or
may be effected to such extent only. (§ 61, IPC) 5. If patented invention is not being worked in
Philippines on commercial scale, although
Form of the Cancellation not capable of being worked, without
The petition for cancellation shall be satisfactory reason: Provided, that
1. In writing; importation of patented article shall
2. Verified by the petitioner or by any person constitute working or using the patent; or
in his behalf who knows the facts 6. Where the demand for patented drugs and
3. Specify the grounds upon which it is based medicines is not being met to an adequate
4. Include a statement of facts to be relied extent and on reasonable terms, as
upon and filed with the office. determined by the Secretary of the
Copies of printed publications or of patents of other Department of Health. (§ 96, IP Code)
countries, and other supporting documents
mentioned in the petition should be attached. (§ 62, Use of Invention by Government
IPC) A Government agency or third person authorized by
the Government may exploit the invention even
Notice of Hearing without agreement of the patent owner where:
Upon filing of the petition, notice shall be sent to the a. The public interest, in particular, national
patentee, and all persons having grants or licenses, security, nutrition, health or the
or any other right, title or interest in and to the patent development of other sectors, as
and the invention covered. (§ 63, IPC)

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determined by the appropriate agency of (1) Ground for grant of compulsory license no
the government, so requires; or longer exists and is unlikely to recur;
b. A judicial or administrative body has (2) Licensee has neither begun to supply
determined that the manner of exploitation, domestic market nor made serious
by the owner of the patent or his licensee is preparation therefore; or
anti-competitive; or (3) Licensee not complied with prescribed
c. In the case of drugs and medicines, there terms of license. (§ 101, IP Code)
is a national emergency or other
circumstance of extreme urgency requiring Licensee’s Exemption from Liability
the use of the invention; or Any person who works a patented product,
d. In the case of drugs and medicines, there substance and/or process under a compulsory
is public non-commercial use of the patent license, shall be free from any liability for
by the patentee, without satisfactory infringement. In case of voluntary licensing, it must
reason; or be proven that no collusion with licensor existed.
e. In the case of drugs and medicines, the This is without prejudice to rightful patent owner to
demand for the patented article in the recover from licensor whatever he may receive as
Philippines is not being met to an adequate royalties under the license. (§ 102, IP Code)
extent and on reasonable terms, as
determined by the Secretary of the 8. Voluntary Licensing – Sections 85-
Department of Health. (§ 74.1, IP Code)
92
Terms and Conditions of the Compulsory
To encourage the transfer and dissemination of
License
technology, prevent or control practices and
(1) The scope and duration of such license
conditions that may constitute an abuse of
shall be limited to the purpose for which
intellectual property rights having an adverse
it was authorized;
effect on competition and trade.
(2) The license shall be non-exclusive;
(3) The license shall be non-assignable,
All technology transfer arrangements must
except with that part of the enterprise or
comply with the provisions of the IP Code.
business with which the invention is
being exploited;
Prohibited Clauses
(4) Use of the subject matter of the license
The following provisions shall be deemed prima
shall be devoted predominantly for the
facie to have an adverse effect on competition
supply of the Philippine market;
and trade:
1. Those which impose upon the licensee
Note: This shall not apply where the grant of
the obligation to acquire from a specific
the license is based on the ground that the
source capital goods, intermediate
patentee’s manner of exploiting the patent is
products, raw materials, and other
determined by judicial or administrative
technologies, or of permanently
process to be anti-competitive.
employing personnel indicated by the
licensor;
(5) The license may be terminated upon proper
2. Those pursuant to which the licensee
showing that circumstances which led to its
grant have ceased to exist and are unlikely
reserves the right to fix the sale or resale
to recur; prices of the products manufactured on
(6) The patentee shall be paid adequate the basis of the license;
remuneration taking into account the 3. Those that contain restrictions regarding
economic value of the grant or the volume and structure of production;
authorization. (§ 100, IP Code) 4. Those that prohibit the use of competitive
technologies in a non-exclusive
Amendment, Cancellation, Surrender of technology transfer arrangement;
Compulsory License 5. Those that establish full or partial
Upon request of patentee, or licensee, Director of purchase option in favor of the licensor;
Legal Affairs may amend decision granting 6. Those that obligate the licensee to
compulsory license, upon proper showing of new transfer for free to the licensor the
facts or circumstances justifying such amendment; inventions or improvements that may be
or may cancel compulsory license if:

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obtained through the use of the licensed place where the licensee has its principal
technology; office;
7. Those that require payment of royalties 2. That continued access to improvements
to the owners of patents for patents which in techniques and processes related to
are not used; the technology shall be made available
8. Those that prohibit the licensee to export during the period of the technology
the licensed product unless justified for transfer arrangement;
the protection of the legitimate interest of 3. That, in the event the technology transfer
the licensor such as exports to countries arrangement shall provide for arbitration,
where exclusive licenses to manufacture the Procedure of Arbitration of the
and/or distribute the licensed product(s) Arbitration Law of the Philippines or the
have already been granted; Arbitration Law of the United Nations
9. Those which restrict the use of the Commission on International Trade Law
technology supplied after the expiration (UNCITRAL) or the Rules of Conciliation
of the technology transfer arrangement, and Arbitration of the International
except in cases of early termination of the Chamber of Commerce shall apply and
technology transfer arrangement due to the venue of arbitration shall be the
reason(s) attributable to the licensee; Philippines or any neutral country; and
10. Those which require payments for 4. That the Philippine taxes on all payments
patents and other industrial property relating to the technology transfer
rights after their expiration or termination arrangement shall be borne by the
of the technology transfer arrangement; licensor.
11. Those which require that the technology
recipient shall not contest the validity of Rights of Licensor
any of the patents of the technology Absent a contrary provision in technology transfer
supplier; arrangement, the grant of a license shall not prevent
12. Those which restrict the research and the licensor from granting further licenses to third
development activities of the licensee persons nor from exploiting the subject matter of the
designed to absorb and adapt the technology transfer arrangement himself.
transferred technology to local conditions
or to initiate research and development Rights of Licensee
programs in connection with new The licensee shall be entitled to exploit the subject
products, processes or equipment; matter of the technology transfer arrangement
during the whole term of the technology transfer
13. Those which prevent the licensee from
arrangement.
adapting the imported technology to local
conditions, or introducing innovation to it, Non-Registration
as long as it does not impair the Technology transfer arrangements that conform
standards prescribed by the licensor; and with the previous requirements need not be
14. Those which exempt the licensor from registered with the Documentation, Information and
liability for non-fulfillment of his Technology Transfer Bureau (DITTB). Non-
responsibilities under the technology conformance, however, shall automatically render
transfer arrangement and/or liability the technology transfer arrangement unenforceable,
arising from third party suits brought unless the technology transfer agreement is
about by the use of the licensed product considered as an exceptional case.
or the licensed technology.
15. Other clauses with equivalent effects. Exceptional Cases
Non-conformance with the requirements in a
voluntary licensing contract may be allowed
Mandatory Provisions where, after evaluation by the DITTB, substantial
The following provisions shall be included in all benefits will accrue to the economy such as in the
voluntary license contracts: following exceptional or meritorious cases:
1. That the laws of the Philippines shall 3. High technology content,
govern the interpretation of the 4. Increase in foreign exchange earnings,
agreement and in the event of litigation, 5. Employment generation,
the venue shall be the proper court in the 6. Regional dispersal of industries and/or,

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7. Substitution with or use of local raw

materials, or B. TRADEMARKS
8. Registered companies with pioneer
status. 1. Marks vs. Collective Marks vs.
Trade Names – Section 121
Mark Any visible sign capable of:
a. distinguishing the goods
(trademark) or services
(service mark) of an
enterprise and
b. shall include a stamped or
marked container of goods. (§
121.1, IP Code)
Collective Any visible sign designated as such
Mark in the application for registration
and capable of distinguishing the
origin or any other common
characteristic, including the quality
of goods or services of different
enterprises which use the sign
under the control of the registered
owner of the collective mark. (§
121.2, IP Code)
Trade Any name or designation
Name identifying or distinguishing an
enterprise (§ 121.3, IP Code)

A name or designation may not be used as a trade

name if, by its nature or the use to which such name
or designation may be put:
1. It is contrary to public order or morals;
2. It is liable to deceive trade circles or the
public as to the nature of the enterprise
identified by that name; or
3. It is similar to a mark or a trade name
owned by another person and its use would
likely mislead the public.

A trade name refers to the business and its goodwill;

a trademark refers to the goods. (Canon Kabushiki
Kaisha v. Court of Appeals, G.R. No. 120900, 2000)

Spectrum of Distinctiveness of Trademark

(Zantarain’s Inc. v. Old Grove Smokehouse, 698
F.2d 786, 1983) (from weakest to strongest)
1. Generic – refers to a particular genus or class
of which an individual article or service is a
member (e.g. escalator, cellophane, etc.)
a. It can never attain trademark
protection.
b. If a registered trademark becomes
generic as to a particular product or
service, the mark’s registration is
subject to cancellation.
2. Descriptive – identifies a characteristic or
quality of an article or service such as its color,
odor, function, dimensions, or ingredients

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applicant for registration, and used for

General Rule: It is not ordinarily protectable as identical or similar goods or services;
a trademark because, like a generic term, it
belongs to the public domain. (Ong Ai Gui v. NOTE: In determining whether a mark is
Director of Patents, G.R. No. L-6235, 1955) well-known, account shall be taken of the
knowledge of the relevant sector of the
Exception: When the doctrine of secondary public, rather than of the public at large,
meaning applies in such a way that it has including knowledge in the Philippines
acquired a secondary meaning in the minds of which has been obtained as a result of the
the consumers. (§ 123.2) promotion of the mark.

3. Suggestive – requires the consumer to f. Is identical with, or confusingly similar to, or

exercise the imagination in order to draw a constitutes a translation of a mark
conclusion as to the nature of the goods or considered well-known in accordance with
services the preceding paragraph, which is
4. Arbitrary or Fanciful – bear no relationship to registered in the Philippines with respect to
the products or services to which they are goods or services which are not similar to
applied; protectable without proof of secondary those with respect to which registration is
meaning (e.g. Adidas, Rolex, etc.) applied for.

2. Non-registrable Marks – Section NOTE: Under this provision, (i) the use of
the mark in relation to those goods or
123 services must indicate a connection
A mark cannot be registered if it: between those goods or services, and the
a. Consists of immoral, deceptive or owner of the registered mark; and (ii) the
scandalous matter, or matter which may interests of the owner of the registered
disparage or falsely suggest a connection mark are likely to be damaged by such use.
with persons, living or dead, institutions,
beliefs, or national symbols, or bring them g. Is likely to mislead the public, particularly as
into contempt or disrepute; to the nature, quality, characteristics or
b. Consists of the flag or coat of arms or other geographical origin of the goods or
insignia of the Philippines or any of its services;
political subdivisions, or of any foreign h. Consists exclusively of signs that are
nation, or any simulation thereof; generic for the goods or services that they
c. Consists of a name, portrait or signature seek to identify;
identifying a particular living individual i. Consists exclusively of signs or of
except by his written consent, or the name, indications that have become customary or
signature, or portrait of a deceased usual to designate the goods or services in
President of the Philippines, during the life everyday language or in bona fide and
of his widow, if any, except by written established trade practice;
consent of the widow; j. Consists exclusively of signs or of
d. Is identical with a registered mark indications that may serve in trade to
belonging to a different proprietor or a mark designate the kind, quality, quantity,
with an earlier filing or priority date, in intended purpose, value, geographical
respect of: origin, time or production of the goods or
i. The same goods or services, or rendering of the services, or other
ii. Closely related goods or services, characteristics of the goods or services;
or k. Consists of shapes that may be
iii. If it nearly resembles such a mark necessitated by technical factors or by the
as to be likely to deceive or cause nature of the goods themselves or factors
confusion; that affect their intrinsic value;
e. Is identical with, or confusingly similar to, or l. Consists of color alone, unless defined by
constitutes a translation of a mark which is a given form; or
considered by the competent authority of m. Is contrary to public order or morality. (§
the Philippines to be well-known 123.1, IP Code)
internationally and in the Philippines,
whether or not it is registered here, as being
already the mark of a person other than the

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3. Ownership and Registration – 1. The secondary meaning must have arisen

Section 152 as a result of substantial commercial use of
a mark in the Philippines; and
The rights in a mark shall be acquired through 2. Such use must result in the distinctiveness
registration made validly in accordance with the of the mark insofar as the goods or the
provisions of this law. (Zuneca Pharmaceutical v. products are concerned.
Natrapharm, Inc., G.R. No. 211850, 2020) NOTE: Proof of substantially exclusive and
continuous commercial use in the
NOTE: Any person who shall procure registration in Philippines for five (5) years before the date
the Office of a mark by a false or fraudulent on which the claim of distinctiveness is
declaration or representation, whether oral or in made is prima facie evidence of
writing, or by any false means, shall be liable in a distinctiveness. (§ 123.2, IP Code)
civil action by any person injured thereby for any
damages sustained in consequence thereof. (§ 162, Duration and Renewal
IP Code) A certificate of registration shall remain in force for
10 years: Provided, That the registrant shall file a
The registration of trademark under the law is declaration of actual use and evidence to that effect,
required to give notice to the entire world that a mark or shall show valid reasons based on the existence
has already been registered. The failure to give of obstacles to such use, as prescribed by the
notice of registration bars recovery of damages for Regulations, within 1 year from the fifth anniversary
trademark infringement, without prejudice to other of the date of the registration of the mark. Otherwise,
causes of action based on other laws. (Cagayan the mark shall be removed from the Register by the
Valley Enterprises, Inc. v. Court of Appeals, G.R. Office.
No. 78413, 1989)
A certificate of registration may be renewed for
The owner of the registered mark shall not be periods of 10 years at its expiration upon payment
entitled to recover profits or damages in any suit for of the prescribed fee and upon filing of a request.
infringement, unless the acts have been committed
with knowledge that such limitation is likely to cause ACQUISITION OF OWNERSHIP OF TRADE
confusion, to cause mistake, or to deceive. Such NAME
knowledge is presumed if the registrant gives notice Notwithstanding any laws or regulations providing
that his mark is registered by displaying with the for any obligation to register trade names, such
mark the words “Registered Mark” or the letter R names shall be protected, even prior to or without
within a circle or if the defendant had otherwise registration, against any unlawful act committed by
actual notice of the registration. (§ 158, IP Code) third parties. (§ 165.2.a, IP Code)

Doctrine of Secondary Meaning In particular, any subsequent use of the trade name
A word or phrase originally incapable of exclusive by a third party, whether as a trade name or a mark
appropriation with reference to an article in the or collective mark, or any such use of a similar trade
market (because it is geographically or otherwise name or mark, likely to mislead the public, shall be
descriptive) might nevertheless have been used for deemed unlawful. (§ 165.2.b, IP Code)
so long and so exclusively by one producer with
reference to his article that, in the trade and to that Doctrine of Secondary Meaning Applicable to
branch of the purchasing public, the word or phrase Trade Names
has come to mean that the article was his property. The doctrine’s application has been extended to
(Pearl & Dean (Phil.) v. Shoemart, G.R. No. 148222, corporate names since the right to use a corporate
2003) name to the exclusion of others is based upon the
same principle which underlies the right to use a
Secondary meaning is established when a particular trademark or tradename. (Lyceum of the
descriptive mark no longer causes the public to Philippines, Inc. v. Court of Appeals, G.R. No.
associate the goods with a particular place but to 101897, 1993)
associate the goods with a particular source. (Shang
Properties Realty Corp. v. St. Francis Development
Corp., G.R. No. 190706, 2014) Concept of Actual Use

Requirements for a Geographically-descriptive Declaration of Actual Use

Mark to Acquire Secondary Meaning Within 3 years from the filing date of the application,
the applicant or the registrant shall file a declaration
of actual use of the mark with evidence to that effect.

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Failure to do so shall result to a refusal of the 4. Rights and Limitations of

application or removal of the mark from the Register Trademark Owner – Section 147
by the Director. (§ 124.2, IP Code)
The owner of a registered mark shall have the
A certificate of registration shall remain in force for exclusive right:
ten (10) years. (§ 145, IP Code) 1. to prevent all third parties not having the
owner’s consent
Best Proof of Actual Use 2. from using in the course of trade identical
The most convincing proof of use of a mark in or similar signs or containers for goods or
commerce is testimony of such witnesses as services which are identical or similar to
customers, or the orders of buyers during a certain those in respect of which the trademark is
period. (Converse Rubber Corporation v. Universal registered
Rubber Products, 147 SCRA 154, 1987) 3. where such use would result in a likelihood
of confusion.
Abandonment of Mark
Once a trademark is considered abandoned, the NOTE: In case of the use of an identical sign for
protection accorded by the IPC, or in this case the identical goods or services, a likelihood of confusion
old Trademark Law, is also withdrawn. (ABS-CBN v. shall be presumed. (§ 147.1, IP Code)
Director of Bureau of Trademarks, GR. No. 217916,
2018) The exclusive right of the owner of a well-known
mark which is registered in the Philippines, shall
Internet Use of a Mark extend to goods and services which are not similar
Use of mark on the Internet must be shown to result to those in respect of which the mark is registered,
into a within-State sale, or at the very least, Provided:
discernibly intended to target customers that reside 1. That the use of that mark in relation to those
in that country. This being so, the use of the mark goods or services would indicate a
on an interactive website, for instance, may be said connection between those goods or
to target local customers when they contain specific services and the owner of the registered
details regarding or pertaining to the target State, mark; and
sufficiently showing an intent towards realizing a 2. That the interests of the owner of the
within-State commercial activity or interaction. (W registered mark are likely to be damaged by
Land Holding Inc. v. Starwood Hotels and Resorts such use. (§ 147.2, IP Code)
Worldwide Inc., G.R. No. 222366. 2017)
The ownership of a trademark or tradename is a
property right that the owner is entitled to protect.
Effect of Registration However, when a trademark is used by a party for a
product in which the other party does not deal, the
Administrative Confirmation use of the same trademark on the latter's product
cannot be validly objected to. (Canon Kabushiki
Registration is only an administrative confirmation of Kaisha v. Court of Appeals, G.R. No. 120900, 2000)
the existence of the right of ownership of the mark,
but does not perfect such right; actual use thereof is 5. Trademark Infringement – Section
the perfecting ingredient. The registration of a
trademark unaccompanied by actual use thereof in 155
the country accords the registrant only the standing A person shall be liable for trademark infringement
to sue for infringement in Philippine courts. (Philip if, without the consent of the owner of the registered
Morris v. Fortune Tobacco, G.R. No. 91332, 1993) mark, he:
A certificate of registration of a mark shall be prima i. Uses in commerce any reproduction or
facie evidence of the validity of the registration, the colorable imitation of a registered mark or
registrant’s ownership of the mark, and of the the same container or a dominant feature
registrant’s exclusive right to use the same in thereof in connection with the sale, offering
connection with the goods or services and those that for sale, distribution, advertising of any
are related thereto specified in the certificate. (§ goods or services which is likely to cause
138, IP Code) confusion, or to cause mistake, or to
deceive;

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NOTE: This includes other preparatory outlets and market segments. (Kolin Electronics Co
steps necessary to carry out the sale of any v. Kolin Philippines, G.R. No. 228165, 2021)
goods or services.
The holistic test has been categorically abandoned
ii. Reproduces or colorably imitates a by the Supreme Court. The dominancy test is now
registered mark or a dominant feature the only test used in determining likelihood of
thereof and applies such reproduction or confusion as it has been explicitly incorporated
colorable imitation to signs, packages, or into law in Section 155.1 of the Intellectual
advertisements intended to be used in Property Code which defines infringement as the
commerce upon or in connection with the "colorable imitation of a registered mark x x x or a
sale, offering for sale, distribution, or dominant feature thereof." (McDonald's Corporation
advertising of goods or services which v. L.C. Big Mak Burger, Inc., as cited in Kolin
likely to cause confusion, or to cause Electronics Co v. Kolin Philippines, G.R. No.
mistake, or to deceive. 228165, 2021)

NOTE: It is immaterial that there was no actual sale The phrase “colorable imitation” denotes such a
of goods or services using the infringing material as “close or ingenious imitation as to be calculated to
long as the acts mentioned were actually committed. deceive ordinary persons, or such a resemblance to
(§ 155, IP Code) the original as to deceive an ordinary purchaser
giving such attention as a purchaser usually gives,
The “likelihood of confusion” is the gravamen of and to cause him to purchase the one supposing it
trademark infringement. But likelihood of confusion to be the other”. (Etepha, A.G. v. Director of Patents,
is a relative concept, the particular, and sometimes G.R. No. L-20635, 1966)
peculiar, circumstances of each case being
determinative of its existence. Thus, in trademark Factors To Consider In Relatedness
infringement cases, more than in other kinds of Goods should be tested against several factors
litigation, precedents must be evaluated in the light before arriving at a sound conclusion on the
of each particular case. (Philip Morris, Inc. v. question of relatedness. Such as:
Fortune Tobacco Corp., G.R. No. 158589, 2006) (a) the business (and its location) to which the
goods belong;
Elements of Trademark Infringement (b) the class of product to which the goods
To establish trademark infringement, the following belong;
elements must be shown: (c) the product's quality, quantity, or size,
i. The validity of plaintiff’s mark; including the nature of the package,
ii. The plaintiff’s ownership of the mark; wrapper or container;
and (d) the nature and cost of the articles;
iii. The use of the mark or its colorable (e) the descriptive properties, physical
imitation by the alleged infringer results attributes or essential characteristics with
in “likelihood of confusion.” reference to their form, composition,
(McDonald's Corp. v. L.C. Big Mak texture or quality;
Burger, Inc., G.R. No. 143993, 2004) (f) the purpose of the goods;
(g) whether the article is bought for immediate
Test to Determine Likelihood And Confusion consumption, that is, day-to-day
Dominancy Test – Focuses on the similarities of the household items;
prevalent features of the competing trademarks that (h) the fields of manufacture;
might cause confusion of deception. (Mcdonald’s v. (i) the conditions under which the article is
Big Mak, G.R. No. 143993, 2004) usually purchased; and
(j) the channels of trade through which the
The dominancy test focuses on the dominant goods flow, how they are distributed,
features in the competing marks in determining marketed, displayed and sold. (Kolin v.
whether they are confusingly similar. Under the Kolin, G.R. No. 209843, 2015)
dominancy test, the courts give greater weight to the
similarity of the appearance of the product arising The use of an identical or colorable imitation of a
from the adoption of the dominant features of the registered trademark by a person for the same
registered mark, disregarding minor differences. goods or services or closely related goods or
Courts will consider more the aural and visual services of another party constitutes infringement. It
impressions created by the marks in the public mind, is a form of unfair competition because there is an
giving little weight to factors like prices, quality, sales attempt to get a free ride on the reputation and
selling power of another manufacturer by passing of

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one’s goods as identical or produced by the same business or with that part of his enterprise
manufacturer as those carrying the other mark or business in which the mark is used.
(brand). (Commissioner of Internal Revenue v. San
Miguel Corp., G.R. Nos. 205045 & 205723, 2017) NOTE: cf. (Zuneca v. Natrapharm, G.R.
No. 211850, 2020 - wherein the SC held
Side-by-side comparison is not the final test of that the first to file rule shall prevail against
similarity. Rather, it is whether there is general a user of a mark in good faith.)
confusion made by the article upon the eye of the
casual purchaser who is unsuspicious and off his 2. Where an infringer who is engaged solely
guard. The general impression of the ordinary in the business of printing the mark or other
purchaser buying under the normally prevalent infringing materials for others is an innocent
conditions in trade and giving the attention such infringer, the owner of the right infringed
purchasers usually give in buying that class of shall be entitled as against such infringer
goods, is the touchstone. (Del Monte Corp v. Court only to an injunction against future printing.
of Appeals, G.R. No. 78325, 1990) 3. Where the infringement complained of is
contained in or is part of paid advertisement
The Nice Classification is an administrative tool for in a periodical or in an electronic
classification and is not a factor in determining communication, the remedies of the owner
whether goods or services are “related” for of the right infringed as against the
trademark infringement purposes. Evidence of publisher or distributor of periodical or
“actual confusion” is better than evidence of electronic communication shall be limited to
“likelihood of confusion.” It is the Court's considered an injunction against the presentation of
view that evidence of actual confusion should be such advertising matter in future issues.
considered as strong evidence of likelihood of
confusion, especially when there are concurrent NOTE: This shall apply only to innocent
findings of resemblance of marks and/or infringers.
relatedness of the goods/services. If "likelihood of
confusion" is already abhorred by the infringement 4. There shall be no infringement of
provisions of the law and the evidence of likelihood trademarks or tradenames of imported or
of confusion already creates basis to prevent sold drugs and medicines as well as
another's use of its mark, it should logically follow imported or sold off-patent drugs and
that actual confusion should be given more weight medicines PROVIDED, the marks
because confusion among consumers is not only appearing thereon have been registered
speculated but has actually transpired. (Kolin marks that have not been tampered or
Electronics Co v. Kolin Philippines, G.R. No. unlawfully modified.
228165, 2021)
a. Damages
Right of Foreign Corporation to Sue in The owner of a registered mark may recover
Trademark or Service Mark Enforcement Action damages from any person who infringes his rights.
Any foreign national or juridical person who meets The measure of the damages suffered shall be
the requirements of Section 3 of the IP Code and either:
does not engage in business in the Philippines may 1. The reasonable profit which the
bring a civil or administrative action hereunder for complaining party would have made had
opposition, cancellation, infringement, unfair the defendant not infringed his rights, or
competition, or false designation of origin and false 2. The profit which the defendant actually
description, whether or not it is licensed to do made out of the infringement.
business in the Philippines under existing laws. (§
160, IP Code) If the measure of damages cannot be readily
ascertained with reasonable certainty, the court may
Limitations to Actions for Infringement award as damages a reasonable percentage based
1. A registered mark shall have no effect upon the amount of gross sales of the defendant or
against any person who, in good faith, the value of the services in connection with which
before the filing date or the priority date, the mark or trade name was used in the
was using the mark for the purposes of his infringement of the rights of the complaining party.
business or enterprise. (§ 156.1, IP Code)

NOTE: Such right may only be transferred NOTE: Where there was actual intent to mislead the
or assigned together with his enterprise or public or to defraud the complainant, the court may

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double the amount of damages to be awarded. (§ shall be guilty of unfair competition. (§ 168.2, IP
156.3, IP Code) Code)

On application of the complainant, the court may Any conduct the end and probable effect of which is
impound during the pendency of the action, sales to deceive the public or pass off the goods or
invoices and other documents evidencing sales. (§ business of a person as that for another constitutes
156.2, IP Code) actionable unfair competition. (Alhambra Cigar vs.
Mojica, G.R. No. L-8937, 1914)
b. Requirement of Notice
In any suit for infringement, the owner of the Essentially, what the law punishes is the act of
registered mark shall not be entitled to recover giving one’s goods the general appearance of the
profits or damages UNLESS the acts have been goods of another, which would likely mislead the
committed with knowledge that such imitation is buyer into believing that such goods belong to the
likely to cause confusion, or to cause mistake, or to latter. (Manuel C. Espiritu et. al. v. Petron Corp. et.
deceive. Such knowledge is presumed if: al., G.R. No. 170891, 2009)
1. The registrant gives notice that his mark is
registered by displaying with the mark the The “true test” of unfair competition is whether the
words “Registered Mark” or the letter R acts of the defendant have the intent of deceiving or
within a circle, or are calculated to deceive the ordinary buyer making
2. The defendant had otherwise actual notice his purchases under the ordinary conditions of the
of the registration. (§ 158, IP Code) particular trade to which the controversy relates.
One of the essential requisites in an action to
c. Penalties restrain unfair competition is proof of fraud; the
Independent of the civil and administrative intent to deceive, actual or probable must be shown
sanctions imposed by law, a criminal penalty of before the right to recover can exist. (Superior
imprisonment from 2 to 5 years and a fine ranging Commercial Enterprises v. Kunnan Enterprises Ltd.,
from P50,000 to P200,000 shall be imposed on any et. al., G.R. No. 169974, 2010)
person who is found guilty of committing any of the
acts of trademark infringement, unfair competition, Trademark Infringement vs. Unfair Competition
or false description or representation. (§ 170, IP The law on unfair competition is broader and more
Code) inclusive than the law on trademark infringement.
Trademark infringement is more limited, but it
Power of Court to Order Infringing Material recognizes a more exclusive right derived from the
Destroyed trademark adoption and registration by the person
In any action involving a violation of a right of the whose goods or business is first associated with it.
owner of the registered mark, the court may order The law on trademarks is a specialized subject
that goods found to be infringing be disposed of distinct from the law on unfair competition, although
outside the channels of commerce in such a manner the two subjects are entwined with each other and
as to avoid any harm caused to the right holder or are dealt with together in the IP Code.
destroyed without compensation of any sort. (§
157.1, IP Code) Hence, even if one fails to establish his exclusive
property right to a trademark, he may still obtain
6. Unfair Competition – Section 168 relief on the ground of his competitor's unfairness or
fraud. Conduct constitutes unfair competition if the
A person who has identified in the mind of the public effect is to pass off on the public the goods of one
the goods he manufactures or deals in, his business man as the goods of another. It is not necessary that
or services from those of others, whether or not a any particular means should be used to this end.
registered mark is employed, has a property right in (Mighty Corp. v. E. & J. Gallo Winery, G.R. No.
the goodwill of the said goods, business or services 154342, 2004)
so identified, which will be protected in the same
manner as other property rights. (§ 168.1, IP Code)

Any person who shall employ deception or any other

means contrary to good faith by which he shall pass
off the goods manufactured by him or in which he
deals, or his business, or services for those of the
one having established such goodwill, or who shall
commit any acts calculated to produce said result,

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Trademark Unfair during an uninterrupted period of 3

Infringement Competition years or longer. (§ 151.1, IP Code)
Passing off of
Unauthorized
one’s goods as
Essence use of a Court Has The Authority to Determine Right to
those of
trademark Registration
another
Fraudulent In any action involving a registered mark, the court
Unnecessary Essential may determine the right to registration, order the
Intent
Prior Prerequisite to cancellation of a registration, in whole or in part, and
Unnecessary otherwise rectify the register with respect to the
Registration the action
registration of any party to the action in the exercise
of this. Judgment and orders shall be certified by the
court to the Director, who shall make appropriate
7. Cancellation – Section 151 entry upon the records of the Bureau, and shall be
A petition to cancel a registration of a mark may be controlled thereby. (§ 161, IP Code)
filed with the Bureau of Legal Affairs by any person
who believes that he is or will be damaged by the Filing of a suit to enforce a mark v. petition to
registration of a mark under this act as follows: cancel a mark
1. Within 5 years from the date of registration The filing of a suit to enforce the registered mark
of the mark under; with the proper court or agency shall exclude any
2. at any time, if the registered mark becomes other court or agency from assuming jurisdiction
the over a subsequently filed petition to cancel the same
a. generic name for the goods or mark. On the other hand, the earlier filing of petition
services, or a portion thereof, for to cancel the mark with the Bureau of Legal Affairs
which it is registered; shall not constitute a prejudicial question that must
b. has been abandoned; be resolved before an action to enforce the rights to
c. registration was obtained through same registered mark may be decided. (§ 17, R.A.
fraud or contrary to the provisions No. 166a)
of the Act;

Registration through fraud or in

bad faith should be sufficiently
established. Otherwise, it is
considered to have acquired all the
rights of a trademark owner under
the IP Code.
(Zuneca Parmaceutical v
Natrapharm, G,R. 185917, 2011)

d. the mark is being used by, or with

the permission of, the registrant so
as to misrepresent the source of
the goods or services on or in
connection with which the mark is
used.
The primary significance of the registered
mark to the relevant public rather than
purchaser motivation shall be the test for
determining whether the registered mark
has become the generic name of goods or
services on or in connection with which it
has been used.
3. At any time, if the registered owner of the
mark without legitimate reason
a. Fails to use the mark within the
Philippines or
b. To cause it to be used in the
Philippines by virtue of a license

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C. COPYRIGHT and on terms and conditions specified in the statute.

(Joaquin, Jr. v. Drilon, G.R. No. 108946, 1999)
BASIC PRINCIPLES
Originality
Works are protected by the sole fact of their Originality is the sine qua non of copyright. If the
creation, irrespective of their mode or form of basic design reflected in a work or art does not owe
expression, as well as of their content, quality and its origin to the putative copyright holder, then that
purpose. (§ 172.2, IP Code) person must add something original to that design,
and then only the original addition may be
No protection shall extend to any: copyrighted. (Meshwerks, Inc. v. Toyota Motor
1. Idea, procedure, system, method or Sales U.S.A., 528 F.3d 1258, 2008)
operation, concept, principle, discovery or
mere data [IPSMOC-PDD]; Originality requires only that the author make the
2. News of the day and other miscellaneous selection or arrangement independently (i.e.,
facts having the character of mere items of without copying that selection or arrangement from
press information; or another work), and that it display some minimal level
Official text of a legislative, administrative or legal of creativity. (Feist Publications, Inc. v. Rural
nature, as well as any official translation thereof. (§ Telephone Service Co., Inc., 499 U.S. 340, 1991)
175, IP Code)
NOTE: The requisite level of creativity is extremely
Copyright and Material Object low; even a slight amount will suffice.
Copyright is distinct from the property in the material
object subject to it. The transfer or assignment of the Authorship
copyright does not by itself constitute a transfer of An author is “he to whom anything owes its origin;
the material object, and nor shall transfer or originator; maker; one who completes a work of
assignment of the sole copy or of one or several science or literature.” (Burrow-Giles Lithographic
copies of the work imply transfer or assignment of Company v. Sarony, 111 U.S. 53, 1884)
the copyright. (§ 181, IP Code)
NOTE: The author must be a natural person. (§
Copyright is not primarily about providing the 171.1, IP Code)
strongest possible protection for copyright owners
so that they have the highest possible incentive to 1. Copyrightable Works – Sections
create more works. The control given to copyright 172-173
owners is only a means to an end: the promotion of
knowledge and learning. The goal of copyright is to Original Literary or Artistic Works
promote creativity and encourage creation of works. These are original intellectual creations in the
(ABS-CBN Corp. v. Gozon, G.R. No. 195956, 2015) literary and artistic domain protected from the
moment of their creation and shall include in
The copyright for a work is acquired by an particular:
intellectual creator from the moment of creation a. Books, pamphlets, articles and other writings;
even in the absence of registration and deposit b. Periodicals and newspapers;
(Columbia Pictures v. CA, G.R. No. 110318, 1996) c. Lectures, sermons, addresses, dissertations
prepared for oral delivery, whether or not
The focus of copyright is the usefulness of the reduced in writing or other material form;
artistic design, and not its marketability. The central d. Letters;
inquiry is whether the article is a work of art. (Ching e. Dramatic or dramatico-musical compositions;
v. Salinas Sr., G.R. No. 161295, 2005) choreographic works or entertainment in dumb
shows;
Idea-Expression Dichotomy f. Musical compositions, with or without words;
Unlike a patent, a copyright gives no exclusive right g. Works of drawing, painting, architecture,
to the art disclosed; protection is given only to the sculpture, engraving, lithography or other works
expression of the idea — not the idea itself. (Mazer of art; models or designs for works of art;
v. Stein, 347 U.S. 201, 1954)
Work of Architecture
Purely Statutory Right Copyright in a work of architecture shall include
Copyright is purely a statutory right. Being a the right to control the erection of any building
statutory grant, the rights are only such as the which reproduces the whole or a substantial
statute confers, and may be obtained and enjoyed part of the work either in its original form or in
only with respect to the subjects and by the persons,

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any form recognizably derived from the original Derivative works shall be protected as new works,
provided however, that such new work:
NOTE: The copyright in any such work shall not a. Shall not affect the force of any subsisting
include the right to control the reconstruction or copyright upon the original works employed or
rehabilitation in the same style as the original of any part thereof, or
a building to which that copyright relates. (§ b. Shall not be construed to imply any right to such
186, IP Code) use of the original works, or
c. Shall not be construed to secure or extend
h. Original ornamental designs or models for copyright in such original works.
articles of manufacture, whether or not
registrable as an industrial design, and other Published Edition of Work
works of applied art; In addition to the right to publish granted by the
i. Illustrations, maps, plans, sketches, charts and author, his heirs, or assigns, the publisher shall have
three-dimensional works relative to geography, a copyright consisting merely of the right of
topography, architecture or science; reproduction of the typographical arrangement of
j. Drawings or plastic works of a scientific or the published edition of the work. (§ 174, IP Code)
technical character;
k. Photographic works including works produced 2. Non-Copyrightable Works –
by a process analogous to photography; lantern
slides; Sections 175-176
l. Audiovisual works and cinematographic works No protection shall extend to any:
and works produced by a process analogous to 1. Idea, procedure, system, method or
cinematography or any process for making operation, concept, principle, discovery or
audio-visual recordings; mere data [IPSMOC-PDD];
m. Pictorial illustrations and advertisements; 2. News of the day and other miscellaneous
n. Computer programs; and facts having the character of mere items of
press information; or
Computer 3. Official text of a legislative, administrative
An electronic or similar device having or legal nature, as well as any official
information-processing capabilities translation thereof. (§ 175, IP Code)
Computer Program The expression of an idea is protected by copyright,
A set of instructions expressed in words, codes, not the idea itself.
schemes or in any other form, which is capable It is axiomatic that copyright protection does not
when incorporated in a medium that the extend to news "events" or the facts or ideas which
computer can read, or causing the computer to are the subject of news reports. But it is equally well-
perform or achieve a particular task or result. settled that copyright protection does extend to the
reports themselves, as distinguished from the
o. Other literary, scholarly, scientific and artistic substance of the information contained in the
works. reports. Copyright protects the manner of
(§ 172.1, IP Code) expression of news reports, "the particular form or
collocation of words in which the writer has
NOTE: Works are protected by the sole fact of their communicated it." Such protection extends to
creation, irrespective of their mode or form of electronic news reports as well as written reports.
expression, as well as of their content, quality and
purpose. (§ 172.2, IP Code) The idea/expression dichotomy is a complex
matter if one is trying to determine whether a certain
Derivative Works material is a copy of another. This dichotomy would
The following derivative works shall be protected by be more relevant in determining, for instance,
copyright: whether a stage play was an infringement of an
1. Dramatizations, translations, adaptations, author’s book involving the same characters and
abridgments, arrangements, and other setting. In this case, however, respondents admitted
alterations of literary or artistic works; and that the material under review — which is the
2. Collections of literary, scholarly or artistic works, subject of the controversy — is an exact copy of the
and compilations of data and other materials original. Respondents did not subject ABS-CBN’s
which are original by reason of the selection or footage to any editing of their own. The news
coordination or arrangement of their contents. footage did not undergo any transformation where
(§ 173.1, IP Code) there is a need to track elements of the original.

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(ABS-CBN Corp. v. Gozon, G.R. No. 195956, 2015) permanent, in whole or in part, of a work or
a sound recording in any manner or form
Works of the Government 2. Dramatization, translation, adaptation,
A work of the Government is a work created by an abridgment, arrangement or other
officer or employee of the Philippine Government or transformation of the work;
any of its subdivisions and instrumentalities, 3. The first public distribution of the original
including government-owned or controlled and each copy of the work by sale or other
corporations as part of his regularly prescribed forms of transfer of ownership;
official duties. (§ 171.11, IP Code) 4. Rental of the original or a copy of an
audiovisual or cinematographic work, a
No copyright shall subsist in any work of the work embodied in a sound recording, a
Government of the Philippines. However, the computer program, a compilation of data
Government is not precluded from receiving and and other materials or a musical work in
holding copyrights transferred to it by assignment, graphic form, irrespective of the ownership
bequest or otherwise. of the original or the copy which is the
subject of the rental;
General Rule: Prior approval of the government
agency or office wherein the work is created shall be Rental
necessary for exploitation of such work for profit. Transfer of the possession of the original or
a copy of a work or a sound recording for a
Such agency or office may impose as a condition limited period of time, for profit-making
the payment of royalties. purposes

Exception: No prior approval or conditions shall be 5. Public display of the original or a copy of the
required for the use of any purpose of: work;
1. Statutes, rules and regulations, or 6. Public performance of the work; and
2. Speeches, lectures, sermons, addresses,
and dissertations, pronounced, read or Definitions of Public Performance
rendered in courts of justice, before a. For Non-audiovisual work – reciting,
administrative agencies, in deliberative playing, dancing, acting or otherwise
assemblies, and in meetings of public performing the work, either directly or
character. by means of any device or process
b. For Audiovisual work – showing of its
NOTE: The author of speeches, lectures, images in sequence and the making of
sermons, addresses, and dissertations the sounds accompanying it audible
mentioned in the preceding paragraphs c. For Sound recording – making the
shall have the exclusive right of making a recorded sounds audible at a place or
collection of his works. at places where persons outside the
normal circle of a family and that
Publication or republication by the government in a family’s closest social acquaintances
public document of any copyrighted work shall not are or can be present
be taken to cause any abridgment or annulment of
the copyright or to authorize any use or 7. Other communication to the public of the
appropriation of such work without the consent of work, e.g. online/Internet. (§ 177, IPC)
the copyright owner. (§ 176.3, IP Code)
Communication to the public
3. Rights Conferred by Copyright – Any communication to the public, including
broadcasting, rebroadcasting, retransmitting by
Sections 177, 193-199 cable, broadcasting, and retransmitting by
Copyright or Economic Rights satellite, and includes the making of a work
Copyright or economic rights shall consist of the available to the public by wire or wireless means
exclusive right to carry out, authorize or prevent the in such a way that members of the public may
following acts: access these works from a place and time
1. Reproduction of the work or substantial individually chosen by them
portion of the work;
MORAL RIGHTS
Reproduction The author shall, independently of the economic
Making of 1 or more copies, temporary or rights in Sec 177 or the grant of an assignment or
license with respect to such right, have the right:

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1. To require attribution Term of Moral Rights

2. To make alterations of his work prior to or The moral rights of an author shall last during his
to withhold publication; lifetime and for fifty (50) years after his death. (§ 198,
3. To object to distortion, mutilation or other IPC)
modification of or other derogatory action in
relation to, his work which would be Enforcement Remedies
prejudicial to his honor or reputation; Violation of any of the rights conferred by this
4. To restrain the use of his name with respect Chapter shall entitle those charged with their
to any work not of his own creation or in a enforcement to the same rights and remedies
distorted version of his work. (§ 193, IPC) available to a copyright owner. In addition, damages
which may be availed of under the Civil Code may
TERM OF MORAL RIGHTS also be recovered. Any damage recovered after the
• The author’s right in (1) lasts during his creator’s death shall be held in trust for and remitted
lifetime of the author and in perpetuity after to his heirs, and in default of the heirs, shall belong
his death to the government. (§ 199, IPC).
• As for (2), (3), and (4) shall be coterminous
with economic rights and said moral rights
shall not be assignable or subject to license
4. Ownership of a Copyright – Section
178
GENERAL RULE: The author may waive these
rights through a written instrument. Rules on Ownership
Copyright ownership shall be governed by the
EXCEPTION: No waiver shall be valid where its
effects it to permit: following rules:
1. Use of the name of the author or title of his TYPE OF
OWNERSHIP
work, or use his reputation with respect to WORK
any version or adaptation of the work that Original
Copyright belongs to the
would tend to injure the literary or artistic Literary and
author of the work.
reputation of another; or Artistic Works
2. Use the name of the author with respect to • Co-authors shall be the
a work he did not create. (§ 195, IPC) original owners of the
copyright.
• In the absence of
An author cannot be compelled to perform his agreement, rights shall be
contract to create a work or for the publication of his governed by the rules on
work already in existence. BUT he may be held co-ownership.
liable for damages for breach of such contract. (§ Joint
194, IPC) Authorship NOTE: If a work of joint
authorship consists of parts
When an author contributes to a collective work, his that can be used separately
right to have his contribution attributed to him is and the author of each part
deemed waived unless he expressly reserves it. (§ can be identified, the author of
196, IPC) each part shall be the original
owner of the copyright in the
When an author licenses or permits another to use part that he has created.
his work, the necessary editing, arranging, or Copyright shall belong to:
editing, arranging or adaptation of such work, for 1. Employee: creation of the
publication, broadcast, use in a motion picture, object of copyright is not a
dramatization, or mechanical or electrical part of his regular duties
reproduction in accordance with the reasonable and even if the employee uses
customary standards or requirements of the medium the time, facilities and
Employee’s
in which the work is to be used, shall not be materials of the employer.
Work
deemed to contravene the author’s rights 2. Employer: work is the
secured by this chapter, unless there is a result of the performance
stipulation to the contrary. (§ 197, IPC) of his regularly-assigned
duties, UNLESS there is
an agreement, express or
implied, to the contrary

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Ownership of the work belongs of works. Hence, commercial use of the

to the person other than the copyrighted work can be weighed against
employer who commissioned fair use.
Independent the work and who pays for it.
Contractor’s The “transformative test” is generally used
Work Copyright remains with the in reviewing the purpose and character of
creator, unless there is a the usage of the copyrighted work. Courts
written stipulation to the must look into whether the copy of the work
contrary. adds “new expression, meaning or
• Copyright belongs to the message” to transform it into something
producer, the author of the else. (ABS-CBN Corp. v. Gozon, G.R. No.
scenario, the composer of 195956, 2015)
the music, the film
director, and the author of 2. The nature of the copyrighted work;
the work so adapted.
• The producer shall If the nature of the work is more factual than
exercise the copyright to creative, then fair use will be weighed in
Audiovisual an extent required for the favor of the user. (ABS-CBN Corp. v.
Work exhibition of the work in Gozon, G.R. No. 195956, 2015)
any manner.
3. The amount and substantiality of the
Exception: Right to collect portion used in relation to the copyrighted
performing license fees for the work as a whole; and
performance of musical
compositions, with or without An exact reproduction of a copyrighted
words, which are incorporated work, compared to a small portion of it, can
into the work result in the conclusion that its use is not
Copyright belongs to the writer fair.
subject to the provisions of
Article 723 of the Civil Code However, there may also be cases where,
wherein it provides that the though the entirety of the copyrighted work
Letters is used without consent, its purpose
court may authorize their
publication or dissemination if determines that the usage is still fair. For
the public good or the interest example, a parody using a substantial
of justice so requires. amount of copyrighted work may be
permissible as fair use as opposed to a
copy of a work produced purely for
economic gain. (ABS-CBN Corp. v. Gozon,
5. Limitations on Copyright – Sections G.R. No. 195956, 2015)
184-185
4. The effect of the use upon the potential
Fair Use market for or value of the copyrighted work.
The fair use of a copyrighted work for criticism, (§ 185.1, IP Code)
comment, news reporting, teaching including limited
number of copies for classroom use, scholarship, If a court finds that the use had or will have
research, and similar purposes is not an a negative impact on the copyrighted
infringement of copyright. work's market, then the use is deemed
unfair. (ABS-CBN Corp. v. Gozon, G.R. No.
In determining whether the use made of a work in 195956, 2015)
any particular case is fair use, the factors to be
considered shall include: [PuCha-Nat-Su-E] NOTE: That a work is unpublished shall not by itself
1. The purpose and character of the use, bar a finding of fair use if such finding is made upon
including whether such use is of a consideration of all the above factors. (§ 185.2, IP
commercial nature or is for non-profit Code)
educational purposes;

The purpose and character requirement is

important in view of copyright’s goal to
promote creativity and encourage creation

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6. Copyright Infringement – Section By any person who shall use original literary or
216 artistic works, or derivative works, without the
copyright owner’s consent in such a manner as to
Any person infringes a right protected under the IP violate the foregoing copy and economic rights. For
Code when one: a claim of copyright infringement to prevail, the
a. Directly commits an infringement (direct evidence on record must demonstrate:
infringement); a. Ownership of a validly copyrighted material
b. Benefits from the infringing activity of by the complainant; and
another person who commits an b. Infringement of the copyright by the
infringement if the person benefiting has respondent. (Olano v. Eng Co, G.R. No.
been given notice of the infringing activity 195835, 2016)
and has the right and ability to control the
activities of the other person (vicarious The Intellectual Property Code is malum prohibitum
infringement); or and prescribes a strict liability for copyright
c. With knowledge of infringing activity, infringement. Good faith, lack of knowledge of the
induces, causes or materially contributes to copyright, or lack of intent to infringe is not a defense
the infringing conduct of another (direct against copyright infringement. (ABS-CBN Corp. v.
infringement). (§ 216, IP Code) Gozon, G.R. No. 195956, 2015)

Also includes the act of any person who at the time a. Remedies
when copyright subsists in a work has in his
possession an article which he knows, or ought to Any person infringing a right protected under the IP
know, to be an infringing copy of the work for the Code shall be liable:
purpose of: a. To an injunction restraining such infringement.
a. Selling, letting for hire, or by way of trade
offering or exposing for sale, or hire, the The court may also order the defendant to
article desist from an infringement to prevent the entry
b. Distributing the article for purpose of trade, into the channels of commerce of imported
or for any other purpose to an extent that goods that involve an infringement, immediately
will prejudice the rights of the copyright after customs clearance of such goods.
owner in the work; or
c. Trade exhibit of the article in public. (§ b. To pay to the copyright proprietor or his assigns
217.3, IP Code) or heirs such actual damages, including legal
costs and other expenses, as he may have
Copyright Infringement incurred due to the infringement as well as the
Infringement of a copyright is a trespass on a private profits the infringer may have made due to such
domain owned and occupied by the owner of the infringement.
copyright, and, therefore, protected by law, and
infringement of copyright, or piracy, which is a NOTE: In proving profits, the plaintiff shall be
synonymous term in this connection, consists in the required to prove sales only and the defendant
doing by any person, without the consent of the shall be required to prove every element of cost
owner of the copyright, of anything the sole right to which he claims or, in lieu of actual damages
do which is conferred by statute on the owner of the and profits, such damages which, to the court,
copyright. (Columbia Pictures, Inc. v. Court of shall appear to be just and shall not be regarded
Appeals, G.R. No. 110318, 1996) as penalty.

Gravamen of Copyright Infringement The amount of damages to be awarded shall be

The gravamen of copyright infringement is not doubled against any person who:
merely the unauthorized “manufacturing” of 1. Circumvents effective technological
intellectual works but rather the unauthorized measures; or
performance of any of the acts covered by Sec. 177 2. Having reasonable grounds to know that it
(economic rights). Hence, any person who performs will induce, enable, facilitate or conceal the
any of the acts thereunder without obtaining the infringement, remove or alter any electronic
copyright owner’s prior consent renders himself rights management information from a copy
civilly and criminally liable for copyright of a work
infringement. (NBI - Microsoft Corp. v. Hwang, G.R.
No. 147043, 2005) c. Deliver under oath, for impounding during the
pendency of the action, upon such terms and
When Committed conditions as the court may prescribe, sales

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invoices and other documents evidencing Penalties

sales, all articles and their packaging alleged to Imprisonment of between 1 to
infringe a copyright and implements for making First Offense 3 years and a fine of between
them. 50,000 to 150,000 pesos
d. Deliver under oath for destruction without any Imprisonment of 3 years and 1
compensation all infringing copies or devices, Second day to six years plus a fine of
as well as all plates, molds, or other means for Offense between 150,000 to 500,000
making such infringing copies as the court may pesos
order. Imprisonment of 6 years and 1
e. Such other terms and conditions, including the Third and
day to 9 years plus a fine
payment of moral and exemplary damages, Subsequent
ranging from 500,000 to
which the court may deem proper, wise and Offenses
1,500,000 pesos
equitable and the destruction of infringing
copies of the work even in the event of acquittal In all cases, subsidiary imprisonment in cases of
in a criminal case. insolvency. (§ 217.1, IP Code)

Statutory Damages In Determining Number of Years of

The copyright owner may elect, at any time before Imprisonment and Amount of Fine
final judgment is rendered, to recover instead of The court shall consider the value of the infringing
actual damages and profits, an award of statutory materials that the defendant has produced or
damages for all infringements involved in an action manufactured and the damage that the copyright
in a sum equivalent to the filing fee of the owner has suffered by reason of the infringement:
infringement action but not less than P50,000.00. Provided, That the respective maximum penalty
In awarding statutory damages, the court may stated in Section 217.1. (a), (b) and (c) herein for the
consider the following factors: first, second, third and subsequent offense, shall be
1. The nature and purpose of the infringing imposed when the infringement is committed by:
act; a. The circumvention of effective
2. The flagrancy of the infringement; technological measures;
3. Whether the defendant acted in bad faith; b. The removal or alteration of any electronic
4. The need for deterrence; rights management information from a copy
5. Any loss that the plaintiff has suffered or is of a work, sound recording, or fixation of a
likely to suffer by reason of the performance, by a person, knowingly and
infringement; and without authority; or
6. Any benefit shown to have accrued to the The distribution, importation for distribution,
defendant by reason of the infringement. (§ broadcast, or communication to the public of works
216.1, IP Code) or copies of works, by a person without authority,
knowing that electronic rights management
b. Criminal Penalties information has been removed or altered without
Where Filed authority. (§ 217.2, IP Code)
The copyright owner can file a criminal, civil or
administrative action for copyright infringement.
-- end of topic --
Place of Filing
Filed in the court situated in
Criminal Case the place where the violation
occurred
Filed at the Bureau of Legal
Administrative Affairs at the Intellectual
Case Property Office of the
Philippines
Filed in the appropriate court
located at the place where the
defendant resides/is located,
Civil Case
or where the plaintiff resides/is
located, at the option of the
plaintiff

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VII. DATA PRIVACY ACT OF 2000 (R.A. A. PERSONAL VS. SENSITIVE

No. 10173) PERSONAL INFORMATION

PERSONAL INFORMATION
TOPIC OUTLINE UNDER THE SYLLABUS refers to any information whether recorded in a
material form or not, from which the identity of an
A. PERSONAL VS. SENSITIVE PERSONAL individual is apparent or can be reasonably and
INFORMATION (SECTION 3) directly ascertained by the entity holding the
B. SCOPE (SECTION 4) information, or when put together with other
C. PROCESSING OF PERSONAL AND information would directly and certainly identify an
SENSITIVE PERSONAL INFORMATION; individual. (§ 3 (g), DPA)
LAWFUL BASIS (SECTIONS 12-13)
D. GENERAL DATA PRIVACY PRINCIPLES
SENSITIVE PERSONAL INFORMATION
(SECTION 11)
E. RIGHTS OF DATA SUBJECT (SECTION 16)
Refers to personal information:
1. About an individual’s race, ethnic origin,
marital status, age, color, and religious,
philosophical or political affiliations;
2. About an individual’s health, education,
genetic or sexual life of a person, or to any
proceeding for any offense committed or
alleged to have been committed by such
person, the disposal of such proceedings,
or the sentence of any court in such
proceedings;
3. Issued by government agencies peculiar to
an individual which includes, but not limited
to, social security numbers, previous or
current health records, licenses or its
denials, suspension or revocation, and tax
returns; and
4. Specifically established by an executive
order or an act of Congress to be kept
classified. (§ 3 (l), DPA)

B. SCOPE

DATA PRIVACY ACT APPLICATION

General Rule: DPA applies to the processing of all

types of personal information and to any natural
and juridical person involved in personal
information processing including those personal
information controllers and processors who,
although not found or established in the Philippines,
use equipment that are located in the Philippines, or
those who maintain an office, branch or agency in
the Philippines. (§ 4, DPA)

Limitations:
• The rule on privileged communications
• The DPA does not amend or repeal RA 53
which protects publishers, editors, or duly
accredited reporters of any newspaper,
magazine, or periodical of general
circulation from being compelled to reveal
the source of published news or information
obtained in confidence.

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e. Information necessary in order to carry out

Information Outside the Scope of the DPA the functions of public authority which
a. Information about any individual who is or includes the processing of personal data for
was an officer or employee of a government the performance by the independent,
institution that relates to the position or central monetary authority and law
functions of the individual, including: enforcement and regulatory agencies of
1. The fact that the individual is or their constitutionally and statutorily
was an officer or employee of the mandated functions.
government institution;
2. The title, business address and NOTE: The DPA shall not be construed as to
office telephone number of the have amended or repealed:
individual;
• Republic Act No. 1405, otherwise
3. The classification, salary range
known as the Secrecy of Bank
and responsibilities of the position
Deposits Act;
held by the individual; and
4. The name of the individual on a • Republic Act No. 6426, otherwise
document prepared by the known as the Foreign Currency
individual in the course of Deposit Act; and
employment with the government; • Republic Act No. 9510, otherwise
known as the Credit Information
System Act (CISA);
b. Information about an individual who is or
was performing service under contract for a
f. Information necessary for banks and other
government institution that relates to the
financial institutions under the jurisdiction of
services performed, including the terms of
the independent, central monetary
the contract, and the name of the individual
authority or Bangko Sentral ng Pilipinas to
given in the course of the performance of
comply with Republic Act No. 9510, and
those services;
Republic Act No. 9160, as amended,
otherwise known as the Anti-Money
c. Information relating to any discretionary Laundering Act and other applicable laws;
benefit of a financial nature such as the and
granting of a license or permit given by the
government to an individual, including the g. Personal information originally collected
name of the individual and the exact nature from residents of foreign jurisdictions in
of the benefit; accordance with the laws of those foreign
jurisdictions, including any applicable data
Provided, that they do not include benefits privacy laws, which is being processed in
given in the course of an ordinary the Philippines.
transaction or as a matter of right.
NOTE: IRR explains that the burden of proving the
NOTE: (a), (b), and (c) consider the right to law of the foreign jurisdiction falls on the person or
information on matters of public concern. body seeking exemption. In the absence of proof,
the applicable law shall be presumed to be the Act
d. Personal information processed for and these Rules.
journalistic, artistic, literary or research
purposes; PROCESSING OF PERSONAL AND SENSITIVE
PERSONAL INFORMATION; LAWFUL BASIS
NOTE: The IRR explains this exemption as limited
to that necessary in order to uphold freedom of Criteria for Lawful Processing of Personal
speech, of expression, or of the press, subject to Information
requirements of other applicable law or regulation. a. The data subject has given his or her
For research purpose, research is for a public consent;
benefit, where processing is subject to the
b. The processing of personal information is
requirements of applicable laws, regulations, or necessary and is related to the fulfillment of
ethical standards. a contract with the data subject or in order
to take steps at the request of the data
subject prior to entering into a contract;

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or physically able to express his or her

c. The processing is necessary for consent prior to the processing;
compliance with a legal obligation to which
the personal information controller is d. The processing is necessary to achieve the
subject; lawful and noncommercial objectives of
public organizations and their associations:
d. The processing is necessary to protect Provided, that:
vitally important interests of the data • Such processing is only confined and
subject, including life and health; related to the bona fide members of
these organizations or their
e. The processing is necessary in order to associations:
respond to national emergency, to comply • The sensitive personal information are
with the requirements of public order and not transferred to third parties:
safety, or to fulfill functions of public • Consent of the data subject was
authority which necessarily includes the obtained prior to processing;
processing of personal data for the
fulfillment of its mandate; or e. The processing is necessary for purposes
of medical treatment, is carried out by a
f. The processing is necessary for the medical practitioner or a medical treatment
purposes of the legitimate interests institution, and an adequate level of
pursued by the personal information protection of personal information is
controller or by a third party or parties to ensured; or
whom the data is disclosed, except where
such interests are overridden by f. The processing concerns such personal
fundamental rights and freedoms of the information as is necessary for the
data subject which require protection under protection of lawful rights and interests of
the Philippine Constitution. natural or legal persons in court
proceedings, or the establishment,
exercise or defense of legal claims, or when
C. PROCESSING OF PERSONAL AND provided to government or public authority.
SENSITIVE PERSONAL (Sec. 13, DPA)
INFORMATION

General Rule: Processing of sensitive personal D. GENERAL DATA PRIVACY

information and privileged information is prohibited. PRINCIPLES

Exceptions: Personal Information must be:

a. The data subject has given his or her a. Collected for specified and legitimate
consent, specific to the purpose prior to the purposes determined and declared before,
processing, or in the case of privileged or as soon as reasonably practicable after
information, all parties to the exchange collection, and later processed in a way
have given their consent prior to compatible with such declared, specified
processing; and legitimate purposes only;

b. The processing of the same is provided for b. Processed fairly and lawfully;
by existing laws and regulations: Provided,
That such regulatory enactments c. Accurate, relevant and, where necessary
guarantee the protection of the sensitive for purposes for which it is to be used the
personal information and the privileged processing of personal information, kept up
information: Provided, further, That the to date; inaccurate or incomplete data must
consent of the data subjects are not be rectified, supplemented, destroyed or
required by law or regulation permitting the their further processing restricted;
processing of the sensitive personal
information or the privileged information; d. Adequate and not excessive in relation to
the purposes for which they are collected
c. The processing is necessary to protect the and processed;
life and health of the data subject or another
person, and the data subject is not legally

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e. Retained only for as long as necessary for 8. The existence of their rights, i.e., to
the fulfillment of the purposes for which the access, correction, as well as the
data was obtained or for the establishment, right to lodge a complaint before
exercise or defense of legal claims, or for the Data Privacy Commission.
legitimate business purposes, or as
provided by law; and NOTE: Any information supplied or declaration
made to the data subject on these matters shall not
f. Kept in a form which permits identification be amended without prior notification of data
of data subjects for no longer than is subject.
necessary for the purposes for which the
data were collected and processed. c. Right to Access: Reasonable access to,
upon demand, the following:
Provided that: 1. Contents of his or her personal
• Personal information collected for information that were processed;
other purposes may lie processed 2. Sources from which personal
for historical, statistical or scientific information were obtained;
purposes, and in cases laid down 3. Names and addresses of recipients of
in law may be stored for longer the personal information;
periods: 4. Manner by which such data were
• Adequate safeguards are processed;
guaranteed by said laws 5. Reasons for the disclosure of the
authorizing their processing. personal information to recipients;
6. Information on automated processes
E. RIGHTS OF DATA SUBJECT where the data will or likely to be made
as the sole basis for any decision
The data subject is entitled to: significantly affecting or will affect the
a. Right to Information: Be informed data subject;
whether personal information pertaining to 7. Date when his or her personal
him or her shall be, are being or have been information concerning the data
processed; (§ 34 (a), IRR of DPA) subject were last accessed and
modified; and
8. The designation, or name or identity
and address of the personal
b. Right to Object: Be furnished the following information controller;
information before the entry of his or her
personal information into the processing d. Right to Correction/Rectification:
system of the personal information Dispute the inaccuracy or error in the
controller, or at the next practical personal information and have the personal
opportunity: information controller correct it immediately
1. Description of the personal and accordingly, unless the request is
information to be entered into the vexatious or otherwise unreasonable.
system;
2. Purposes for which they are being NOTE: If the personal information have
or are to be processed; been corrected, the personal information
3. Scope and method of the personal controller shall ensure the accessibility of
information processing; both the new and the retracted information
4. The recipients or classes of and the simultaneous receipt of the new
recipients to whom they are or may and the retracted information by recipients
be disclosed; thereof.
5. Methods utilized for automated
access, if the same is allowed by Provided, that the third parties who have
the data subject, and the extent to previously received such processed
which such access is authorized; personal information shall he informed of its
6. The identity and contact details of inaccuracy and its rectification upon
the personal information controller reasonable request of the data subject;
or its representative;
7. The period for which the
information will be stored; and

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controller a copy of such data in an

electronic or structured format that is
e. Right to Erasure/Blocking: Suspend, commonly used and allows for further use
withdraw or order the blocking, removal or by the data subject.
destruction of his or her personal
information from the personal information NOTE: The exercise of this right shall
controller’s filing system upon discovery primarily take into account the right of data
and substantial proof that the personal subject to have control over his or her
information are incomplete, outdated, false, personal data being processed based on
unlawfully obtained, used for unauthorized consent or contract, for commercial
purposes or are no longer necessary for the purpose, or through automated means. (§
purposes for which they were collected. 36, IRR)
In this case, the personal information -- end of topic –
controller may notify third parties who have
previously received such processed
personal information.

This right may be exercised upon discovery

and substantial proof of any of the
following:
• The personal data is incomplete,
outdated, false, or unlawfully
obtained;
• The personal data is being used
for purpose not authorized by the
data subject;
• The personal data is no longer
necessary for the purposes for
which they were collected;
• The data subject withdraws
consent or objects to the
processing, and there is no other
legal ground or overriding
legitimate interest for the
processing;
• The personal data concerns
private information that is
prejudicial to data subject, unless
justified by freedom of speech, of
expression, or of the press or
otherwise authorized;
• The processing is unlawful;
• The personal information
controller or personal information
processor violated the rights of the
data subject.

f. Right to Damages: Be indemnified for any

damages sustained due to such inaccurate,
incomplete, outdated, false, unlawfully
obtained or unauthorized use of personal
information. (§ 34(f), IRR)

g. Right to Data Portability. Where his or her

personal data is processed by electronic
means and in a structured and commonly
used format, the data subject shall have the
right to obtain from the personal information

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A. FRAMEWORK FOR REGULATING

VIII. SECURITIES REGULATION CODE OF SECURITIES TRADING
(R.A. No. 8799)
Registration Requirement
Securities shall not be sold or offered for sale or
TOPIC OUTLINE UNDER THE SYLLABUS distribution within the Philippines, without a
registration statement duly filed with and approved
A. FRAMEWORK FOR REGULATING OF by the SEC.
SECURITIES TRADING (SECTIONS 8-10)
B. CONCEPT OF SECURITIES; HOWEY TEST B. CONCEPT OF SECURITIES; HOWEY
(SECTION 3)
C. REGISTRATION OF SECURITIES (SECTION TEST
8)
1. EXEMPT SECURITIES - SECTION 9 Definition of Securities
2. EXEMPT TRANSACTIONS - SECTION 10 Securities are shares, participation or interests in a
corporation or in a commercial enterprise or profit-
making venture evidenced by a certificate, contract,
instrument, whether written or electronic in
character. The definition includes investment
contracts. (§ 3.1, SRC)

Kinds of Securities
a. “Per Se” Securities: those enumerated
specifically under Sec. 3 of the SRC to fall
within the definition of “securities”.
Examples of those named as securities are
shares of stock, bonds, fractional undivided
interests in oil/gas/other mineral rights,
derivatives like options and warrants,
proprietary or non-proprietary membership
certificates in corporations, etc.

b. “Investment Contracts: as defined under

the 2015 IRR of the SRC, An investment
contract means a contract, transaction or
scheme (collectively "contract") whereby a
person invests his money in a common
enterprise and is led to expect profits
primarily from the efforts of others. An
investment contract is presumed to exist
whenever a person seeks to use the money
or property of others on the promise of
profits.

c. Catch-all – Other instruments as SEC may

determine in the future.

NOTE: “Public offering” for purposes of registration,

means a random or indiscriminate offering of
securities in general to more than nineteen (19)
persons, whether solicited or unsolicited.

Howey Test as modified by the Turner Test

An investment contract as a contract, transaction or
scheme (collectively "contract") whereby a person
invests his money in a common enterprise and is led
to expect profits not solely but primarily from the
efforts of others. (Power Homes Unlimited
Corporation v. SEC, G.R. No. 164182)

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by any person controlled or supervised by,

Requisites for the Application of Howey Test and acting as an instrumentality of said
1. A contract, transaction, or scheme; Government.
2. An investment of money;
3. Investment is made in a common NOTE: The reason why the Government
enterprise; should not be required to furnish a bond is
4. Expectation of profits; and that the State is undoubtedly always
5. Profits arising primarily from the efforts of solvent. (Araneta v. Gatmaitan, G.R. Nos.
others. (Virata v. Ng Wee, G.R. No. L-8895, L-9191, 1957)
220926)
b. Any security issued or guaranteed by the
C. REGISTRATION OF SECURITIES government of any country with which the
Philippines maintains diplomatic relations,
Registration Requirement or by any state, province or political
General Rule: Securities are prohibited to be sold subdivision thereof on the basis of
or offered for sale or distribution within the reciprocity: Provided, That the Commission
Philippines (§ 8.1, SRC) may require compliance with the form and
a. Without registration statement duly filed content for disclosures the Commission
with and approved by SEC; and may prescribe.
b. Prior to such sale, information on the
securities, in such form and with such c. Certificates issued by a receiver or by a
substance as SEC may prescribe, must be trustee in bankruptcy duly approved by the
made available to each prospective proper adjudicatory body.
purchaser.
d. Any security or its derivatives the sale or
Exception: The following may be sold without need transfer of which, by law, is under the
of registration: supervision and regulation of the
a. Exempt securities (§ 9, SRC) a. Office of the Insurance
b. Exempt transactions (§ 10, SRC) Commission,
b. Housing and Land Use Rule
NOTE: Registration is required whenever Regulatory Board, or the;
securities are sold or offered to be sold to the c. Bureau of Internal Revenue.
public.
• At the end of the registration process, the e. e. Any security issued by a bank except its
registration statement will be rendered own shares of stock. (§ 9, SRC)
effective by the SEC and a permit to sell will
be issued. Registration allows the SEC to REMEMBER THIS: When a bank issues securities
ensure that there is full and fair disclosure other than its own shares of stock, common or
of all material information in connection preferred, it does not need to register the said
with the public offering. securities with the SEC as long as the BSP
• In approving the registration of the consents thereto. If, however, the security to be
securities, the SEC is not only concerned issued by a bank is a share of stock, then those
with the requirement that full disclosure of shares need to be registered with the SEC prior to
information is given to the public but the any public offering.
SEC is also concerned with the merit of the
securities themselves and the issuer. (PSE 2. EXEMPT TRANSACTIONS
v. Court of Appeals, G.R. No. 125469,
1997) The enumeration of transactions under Sec. 10 that
can qualify as exempt transactions are exclusive
and specific. Hence, the exemption is
1. EXEMPT SECURITIES transaction-specific, unlike the exempt securities
Exempt securities are those to which the under Sec. 9 which will always be exempt from
requirement of registration under Subsection 8.1 of registration regardless of the underlying transaction
the SRC generally does not apply. The following are or offering. For the upcoming bar exam, be familiar
exempt securities: or understand the rationale for the exemption of the
a. Any security issued or guaranteed by the transactions under Sec. 10 – either the SEC
Government of the Philippines, or by any approved the issuance (such as for increase in
political subdivision or agency thereof, or authorized capital stock), or the issuance is
approved by a court of law (such as judicial sale), or

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the issuance is pursuant to a contract (such as a. Surrendered has been registered

exercise of a right of conversion), or is a private under the SRC or was, exempt,
placement (less than 20 buyers) or a QIB offering when sold;
(qualified institutional buyers are those with b. Security issued and delivered in
sophistication, experience and knowledge sufficient exchange would, at the time of
to form judgment on whether to invest or not in a conversion, fall into the class
securities offering). entitled to registration;
a. Judicial sale of securities: Any judicial
sale, or sale by an executor, administrator, h. Broker’s transactions: Broker’s
guardian or receiver or trustee in transactions, executed upon customer’s
insolvency or bankruptcy orders, on any registered Exchange or
trading market;
NOTE: As distinguished from exempt
securities specially issued by the receiver i. Pre-incorporation subscription or
or trustee in a bankruptcy proceeding subscription to a capital increase:
mentioned above, the shares covered Subscriptions to shares of capital stock (1)
under exempt transactions are ordinary prior to incorporation or (2) pursuant to an
shares; however the owner of the shares is increase in authorized capital stock – both
bankrupt and so the shares are sold. to comply with the requirements of the law
for minimum subscription;
b. Sale of foreclosed securities: By or on
account of a pledge holder or mortgagee or j. Exchange of securities with existing
any other similar lien holder, selling or security holders: Exchange of securities
offering for sale or delivery in the ordinary by the issuer exclusively with its existing
course of business, not for the purpose of security holders exclusively, where no
avoiding the provisions of SRC, to liquidate commission or other remuneration is paid
a bona fide debt, a security pledged in good or given directly or indirectly for soliciting
faith as security for such debt; such exchange
• The difference between (h) and (j)
c. Isolated transaction: An isolated is that the exchange in (h) is for
transaction in which any security is sold, any other security of the issuer
offered for sale, subscription or delivery by while in (j), the exchange is
the owner thereof, or for his account, not between the issuer and its existing
being made in the course of repeated and security holders wherein the
successive transactions of a like character, securities exchanged are not from
and such owner or representative not being the same issuer;
the underwriter of such security;
k. Private placements: Sale of securities by
d. Stock dividends: Distribution by a an issuer to fewer than 20 persons during
corporation of securities to its stockholders any twelve-month period; and
or other security holders as stock dividend
or other distribution out of surplus; REMEMBER THIS: This exempt transaction which
requires as a precondition the offering to fewer than
e. Sale of shares to stockholders not twenty (20) persons over a twelve (12)-month period
underwritten: Sale of capital stock of a is the very essence of what constitutes an offering
corporation to its own stockholders that is not public. If, however, the offering is made to
exclusively – stock which has already been qualified institutional buyers or qualified individual
issued; buyers, the number of persons becomes irrelevant
as you can see in the subsequent exemption for
f. Issuance of bonds to a single qualified buyers.
purchaser: Issuance of bonds or notes
secured by mortgage upon real estate or l. Sale to qualified buyers: Sale of securities
tangible personal property; to any of the following qualified buyers:
i. Bank
g. Transaction pursuant to the right of ii. Registered investment house
conversion: Issuance and delivery of any iii. Insurance company
security in exchange for any other security iv. Pension fund or retirement plan
of the same issuer pursuant to a right of maintained by the government or
conversion, provided that the: managed by a bank or other

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persons authorized by the BSP to

engage in trust functions
v. Investment company
vi. Such other person at the
Commission may determine as
qualified.

REMEMBER THIS: The parties to the offering may

seek a confirmation of exempt transaction status
from the SEC, but this step is optional. Note that the
burden of proving entitlement to an exemption rests
with the claimant. Only a notice of exempt
transaction is required under the 2015 IRR of the
SRC.

Notes:
The SEC may exempt other transactions, if it finds
that the requirements of registration under the SRC
is not necessary in the public interest or for the
protection of the investors such as by the reason of
the small amount involved or the limited character of
the public offering. (§ 10.2, SRC)

An example of this provision is a stock option plan

or an employee stock purchase plan which is
commonly offered by publicly-listed companies to
their executives and employees.

Issuance from authorized but previously unissued

capital stock may be granted exemption. (Nestle
Philippines v. CA, G.R. No. 86738)

NON-EXEMPT TRANSACTIONS

All transactions involving securities which are

offered to the public, unless it is an exempt security
or an exempt transaction subject to the provisions of
the SRC, needs to be registered as such with the
Securities and Exchange Commission, unless
otherwise provided by law or the Rules, and as such
are non-exempt transactions.

Securities shall not be sold or offered for sale or

distribution within the Philippines, without a
registration statement duly filed with and approved
by the Securities and Exchange Commission. (§ 8,
SRC)

The Securities and Exchange Commission may

conditionally approve registration statements of
securities, subject under terms it may deem
necessary, and may specify the terms and
conditions under which a written communication,
including any summary prospectus, shall be
deemed not to constitute an offer for sale. (§§ 8.2
and 8.3, SRC)

-- end of topic --

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IX. ELECTRONIC COMMERCE ACT

A. LEGAL RECOGNITION OF
TOPIC OUTLINE UNDER THE SYLLABUS
ELECTRONIC DATA MESSAGES,
DOCUMENTS, AND SIGNATURES
A. LEGAL RECOGNITION OF ELECTRONIC
DATA MESSAGES, DOCUMENTS, AND Electronic Data Message
SIGNATURES Information generated, sent, received or stored by
electronic, optical or similar means. (§ 5(c), ECA)
B. OBLIGATION OF CONFIDENTIALITY
Information And Communication System
A system for generating, sending, receiving, storing
or otherwise processing electronic data messages
or electronic documents and includes the computer
system or other similar device by or in which data is
recorded or stored and any procedures related to
the recording or storage of electronic data message
or electronic document. (§ 5(d), ECA)

Electronic Signature
Any distinctive mark, characteristic and/or sound in
electronic form, representing the identity of a person
and attached to or logically associated with the
electronic data message or electronic document or
any methodology or procedures employed or
adopted by a person and executed or adopted by
such person with the intention of authenticating or
approving an electronic data message or electronic
document. (§ 5(e), ECA)

Electronic Document
Information or the representation of information,
data, figures, symbols or other modes of written
expression, described or however represented, by
which a right is established or an obligation
extinguished, or by which a fact may be proved and
affirmed, which is received, recorded, transmitted,
stored, processed, retrieved or produced
electronically. (§ 5(f), ECA)

NOTE: When an offer and a counter-offer is initiated

electronically, the requirement under Art. 1403, Civil
Code, on the Statute of Frauds is complied with.

LEGAL RECOGNITION OF ELECTRONIC DATA

MESSAGES AND ELECTRONIC DOCUMENTS
(§§ 6 & 7, ECA)

Information shall not be denied validity or

enforceability solely on the ground that it is in the
form of an electronic data message or electronic
document, purporting to give rise to such legal
effect. (§ 6, ECA; § 7, IRR of ECA)

Legal Effect, Validity or Enforceability

Electronic data messages or electronic documents
shall have the legal effect, validity or

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enforceability as any other document or legal contained in an electronic data message or

writing. (§ 7, IRR) In particular: electronic document but is merely incorporated by
1. A requirement under law that information is in reference therein. (§ 8, IRR of ECA)
writing is satisfied if the information is in the
form of an electronic data message or electronic Best Evidence
document. (§ 7(a), IRR of ECA)
2. A requirement under law for a person to An electronic data message or electronic document
provide information in writing to another meeting and complying with the requirements of
Sections 6 or 7 of ECA shall be the best evidence
person is satisfied by the provision of the
of the agreement and transaction contained
information in an electronic data message or therein. (§ 11, IRR of ECA)
electronic document. (§ 7(b), IRR of ECA)
3. A requirement under law for a person to Note: A person is not required to use or accept
provide information to another person in a information contained in electronic data messages,
specified non-electronic form is satisfied by electronic documents, or electronic signatures, but
the provision of the information in an electronic a person's consent to do so may be inferred from
data message or electronic document if the the person's conduct. (§ 9, IRR of ECA)
information is provided in the same or
substantially the same form. (§ 7(c), IRR of LEGAL RECOGNITION OF ELECTRONIC
SIGNATURES (§ 8, ECA)
ECA)
4. Nothing limits the operation of any requirement An electronic signature on the electronic document
under law for information to be posted or shall be equivalent to the signature of a person on a
displayed in specified manner, time or location; written document if the signature is an electronic
or for any information or document to be signature and proved by showing that a prescribed
communicated by a specified method unless procedure, not alterable by the parties interested in
and until a functional equivalent shall have been the electronic document, existed under which:
developed, installed, and implemented. (§ 7(d), [IRNA]
IRR of ECA)
1. A method is used to Identify the party sought
Document Required in Writing (§ 7, ECA, § 10, to be bound and to indicate said party's access
IRR of ECA) to the electronic document necessary for his
Where the law requires a document to be in writing, consent or approval through the electronic
or obliges the parties to conform to a writing, or signature;
provides consequences in the event information is 2. Said method is Reliable and appropriate for
not presented or retained in its original form, an the purpose for which the electronic document
electronic document or electronic data message will was generated or communicated, in the light of
be sufficient if the latter:
all circumstances, including any relevant
agreement;
1. Maintains its integrity and reliability; and
3. It is Necessary for the party sought to be
2. Can be authenticated so as to be usable for
bound, in order to proceed further with the
subsequent reference in that:
transaction, to have executed or provided the
a. It has remained complete and
electronic signature; and
unaltered, apart from the addition
4. The other party is Authorized and enabled to
of any endorsement and any
verify the electronic signature and to make
authorized change, or any change
the decision to proceed with the transaction
which arises in the normal course
authenticated by the same
of communication, storage and
display; and
PRESUMPTIONS RELATING TO ELECTRONIC
b. It is reliable in the light of the SIGNATURES (§ 9, ECA)
purpose for which it was generated
and in the light of all relevant 1. The electronic signature is the signature of the
circumstances. person to whom it correlates; and (Section 14
(a), IRR of ECA)
Incorporation by Reference
2. The electronic signature was affixed by that
Information shall not be denied validity or
person with the intention of signing or approving
enforceability solely on the ground that it is not

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the electronic document unless the person under ECA, shall not convey to or share the same
relying on the electronically signed electronic with any other person. (§ 32, ECA)
document knows or has notice of defects in or
unreliability of the signature or reliance on the -- end of topic --
electronic signature is not reasonable under the
circumstances. (§ 14(b), IRR of ECA)

Original Documents (§ 10, ECA; § 11, IRR of

ECA)

Where the law requires information to be presented

or retained in its original form, that requirement is
met by an electronic data message or electronic
document if:
1. There exists a reliable assurance as to the
integrity of the electronic document or
electronic data message from the time when it
was first generated in its final form and such
integrity is shown by evidence aliunde (that is,
evidence other than the electronic data
message itself) or otherwise; and (§ 11(a), IRR
of ECA)
2. The electronic document or electronic data
message is capable of being displayed to the
person to whom it is to be presented. (§ 11(b),
IRR of ECA)

In relation to the existence of a reliable assurance

as to the integrity of the electronic document or
electronic data message, as provided under Section
11(a) of the IRR:
1. The criteria for assessing integrity shall be
whether the information has remained complete
and unaltered, apart from the addition of any
endorsement and any change which arises in
the normal course of communication, storage
and display; and (§ 11(c)(i), IRR of ECA)
2. The standard of reliability required shall be
assessed in the light of the purpose for which
the information was generated and in the light
of all the relevant circumstances. (§ 11(c)(ii),
IRR of ECA)

Note: These requirements apply whether the

requirement therein is in the form of an obligation or
whether the law simply provides consequences for
the information not being presented or retained in its
original form. (§ 10, ECA)

B. OBLIGATION OF CONFIDENTIALITY

Except for the purposes authorized under ECA, any

person who obtained access to any electronic key,
electronic data message or electronic document,
book, register, correspondence, information, or
other material pursuant to any powers conferred

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A. ACCESS DEVICES
X. ACCESS DEVICES REGISTRATION
ACT (R.A. No. 8484) Definition of Access Devices
Any card, plate, code, account number, electronic
serial number, personal identification number, or
TOPIC OUTLINE UNDER THE SYLLABUS other telecommunications service, equipment, or
instrumental identifier, or other means of account
A. ACCESS DEVICES (SECTION 3) access that can be used to obtain money, good,
B. PROHIBITED ACTS (SECTION 9) services, or any other thing of value or to initiate a
C. FRUSTRATED AND ATTEMPTED ACCESS transfer of funds (other than a transfer originated
DEVICE FRAUD (SECTION 12) solely by paper instrument). (§ 3(a), R.A. No. 8484)

Counterfeit Access Device

Any access device that is counterfeit, fictitious,
altered, or forged, or an identifiable component of an
access device or counterfeit access device. (§ 3(b),
R.A. No. 8484)

Unauthorized Access Device

Any access device that is stolen, lost, expired,
revoked, canceled, suspended, or obtained with
intent to defraud; (§ 3(c), R.A. No. 8484)

Access Device Fraudulently Applied for

Any access device that was applied for or issued on
account of the use of falsified document, false
information, fictitious identities and addresses, or
any form of false pretense or misrepresentation; (§
3(d), R.A. No. 8484)

B. PROHIBITED ACTS

The following acts shall constitute access device

fraud and are hereby declared to be unlawful:
1. Producing, using, trafficking in one or more
counterfeit access devices;
2. Trafficking in one or more unauthorized
access devices or access devices
fraudulently applied for;
3. Using, with intent to defraud, an
unauthorized access device;
4. Using an access device fraudulently
applied for;
5. Possessing one or more counterfeit access
devices or access devices fraudulently
applied for;
6. Producing, trafficking in, having control or
custody of, or possessing device-making or
altering equipment without being in the
business or employment, which lawfully
deals with the manufacture, issuance, or
distribution of such equipment;
7. Inducing, enticing, permitting or in any
manner allowing another, for consideration
or otherwise to produce, use, traffic in

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counterfeit access devices, unauthorized 16. Without the authorization of the credit card
access devices or access devices system member or its agent, causing or
fraudulently applied for; arranging for another person to present to
8. Multiple imprinting on more than one the member or its agent, for payment, one
transaction record, sales slip or similar or more evidence or records of transactions
document, thereby making it appear that made by credit card. (§ 9, R.A. No.8484)
the device holder has entered into a
transaction other than those which said C. FRUSTRATED AND ATTEMPTED
device holder had lawfully contracted for, or ACCESS DEVICE FRAUD
submitting, without being an affiliated
merchant, an order to collect from the Frustrated Access Device Fraud
issuer of the access device, such extra Any person who performs all the acts of execution
sales slip through an affiliated merchant which would produce any of the unlawful acts
who connives therewith, or, under false enumerated in Section 9 of this Act, but which
pretenses of being an affiliated merchant, nevertheless does not produce it by reason of
causes independent of the will of said person,
present for collection such sales slips, and
shall be punished with two-thirds (2/3) of the fine
similar documents;
and imprisonment provided for the consummated
9. Disclosing any information imprinted on the offenses listed in said section. (§12, R.A. No. 8484)
access device, such as, but not limited to,
the account number or name or address of Attempted Access Device Fraud
the device holder, without the latter's Any person who commences the commission of any
authority or permission; of the unlawful acts enumerated in Section 9 of this
10. Obtaining money or anything of value Act directly by overt acts and does not perform all
through the use of an access device, with the acts of execution which would produce the
intent to defraud or with intent to gain and said acts by reason of some cause or accident
fleeing thereafter; other than said person's own spontaneous
desistance, shall be punished with one-half (1/2) of
11. Having in one's possession, without
the fine and imprisonment provided for the
authority from the owner of the access
consummated offenses listed in the said section.
device or the access device company, an (Id.)
access device, or any material, such as
slips, carbon paper, or any other medium,
on which the access device is written, -- end of topic --
printed, embossed, or otherwise indicated;
12. Writing or causing to be written on sales
slips, approval numbers from the issuer of
the access device of the fact of approval,
where in fact no such approval was given,
or where, if given, what is written is
deliberately different from the approval
actually given;
13. Making any alteration, without the access
device holder's authority, of any amount or
other information written on the sales slip;
14. Effecting transaction, with one or more
access devices issued to another person or
persons, to receive payment or any other
thing of value;
15. Without the authorization of the issuer of
the access device, soliciting a person for
the purpose of:
a. Offering an access device; or
b. Selling information regarding or an
application to obtain an access
device; or

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XI. PHILIPPINE COMPETITION ACT A. ANTI-COMPETITIVE

AGREEMENTS
TOPIC OUTLINE UNDER THE SYLLABUS
Anti-competitive agreements are those substantially
prevent, restrict, or lessen competition. The
A. ANTI-COMPETITIVE AGREEMENTS
agreement may be any type or form of contract,
(Sec. 14)
arrangement, or understanding between or among
businesses to fix prices or manipulate bids. It does
B. ABUSE OF DOMINANT POSITION
(Sec. 15) not matter if the said agreement is formal or
informal, explicit (i.e., written or announced) or tacit,
C. MERGERS AND ACQUISITIONS or in written or oral (i.e., verbal) form. It is illegal for
business rivals to act together in ways that can limit
(Secs. 16-22)
competition or hinder other businesses from
entering the market.

Agreements between or among competitors

that are per se prohibited

These agreements include: (REST-FIX)

1. Restricting competition as to price, or
components thereof, or other terms of
trade;
2. Fixing price at an auction or in any form of
bidding including cover bidding, bid
suppression, bid rotation and market
allocation and other analogous practices of
bid manipulation;
Agreements between or among competitors
which have the object or effect of substantially
preventing, restricting or lessening competition
shall be prohibited

These agreements include: (Set-Div)

1. Setting, Kmiting, or controlling production,
markets, technical development, or
investment;
2. Dividing or sharing the market, whether by
volume of sales or purchases, territory,
type of goods or services, buyers or sellers
or any other means;

Agreements other than those specified in (a) and (b)

of this section which have the object or effect of
substantially preventing, restricting or lessening
competition shall also be
prohibited: Provided, those which contribute to
improving the production or distribution of goods
and services or to promoting technical or economic
progress, while allowing consumers a fair share of
the resulting benefits, may not necessarily be
deemed a violation of this Act.
An entity that controls, is controlled by, or is under
common control with another entity or entities, have
common economic interests, and are not otherwise
able to decide or act independently of each other,
shall not be considered competitors for purposes of
this section. (PCA, R.A. No. 10667, §. 14)

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competitive price of payments,

B. ABUSE OF DOMINANT POSITION (Sec. 15) services or changes in the facilities
furnished by a competitor; and
In the conduct of their business, dominant d. Price changes in response to
companies – considering their size, scope, and changing market conditions,
position of economic strength – may have a marketability of goods or services,
disproportionately severe effect on the market. The or volume;
PCA defines abuse of dominant position as a 5. Imposing restrictions on the lease or
conduct of an entity, whether a company or an contract for sale or trade of goods or
individual, with dominant position that substantially services concerning where, to whom, or in
prevents, restricts, or lessens competition in the what forms goods or services may be sold
market. The following are acts of abuse of dominant or traded, such as fixing prices, giving
position: (S-Im-M-S-Re-S-Un-Sup-Li) preferential discounts or rebate upon such
price, or imposing conditions not to deal
1. Selling goods or services below cost with with competing entities, where the object or
the object of driving competition out of the effect of the restrictions is to prevent,
relevant market: Provided, that in the restrict or lessen competition
Commission’s evaluation of this fact, it shall substantially: Provided, that nothing
consider whether the entity or entities have contained in this Act shall prohibit or render
no such object and the price established unlawful:
was in good faith to meet or compete with a. Permissible franchising, licensing,
the lower price of a competitor in the same exclusive merchandising or
market selling the same or comparable exclusive distributorship
product or service of like quality; agreements such as those which
2. Imposing barriers to entry or committing give each party the right to
acts that prevent competitors from growing unilaterally terminate the
within the market in an anti-competitive agreement; or
manner except those that develop in the b. Agreements protecting intellectual
market as a result of or arising from a property rights, confidential
superior product or process, business information, or trade secrets;
acumen, or legal rights or laws 6. Making supply of particular goods or
3. Making a transaction subject to services dependent upon the purchase of
acceptance by the other parties of other other goods or services from the supplier
obligations which, by their nature or which have no direct connection with the
according to commercial usage, have no main goods or services to be supplied;
connection with the transaction; 7. Directly or indirectly imposing unfairly low
4. Setting prices or other terms or conditions purchase prices for the goods or services
that discriminate unreasonably between of, among others, marginalized agricultural
customers or sellers of the same goods or producers, fisherfolk, micro-, small-,
services, where such customers or sellers medium-scale enterprises, and other
are contemporaneously trading on similar marginalized service providers and
terms and conditions, where the effect may producers;
be to lessen competition 8. Directly or indirectly imposing unfair
substantially: Provided, That the following purchase or selling price on their
shall be considered permissible price competitors, customers, suppliers or
differentials consumers, provided that prices that
a. Socialized pricing for the less develop in the market as a result of or due
fortunate sector of the economy to a superior product or process, business
b. Price differential which reasonably acumen or legal rights or laws shall not be
or approximately reflect considered unfair prices; and
differences in the cost of 9. Limiting production, markets or technical
manufacture, sale, or delivery development to the prejudice of
resulting from differing methods, consumers, provided that limitations that
technical conditions, or quantities develop in the market as a result of or due
in which the goods or services are to a superior product or process, business
sold or delivered to the buyers or acumen or legal rights or laws shall not be
sellers; a violation of this Act (PCA, R.A. No. 10667,
c. Price differential or terms of sale §. 15)
offered in response to the

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period for review by the Commission of the subject

C. MERGERS AND ACQUISITIONS (Sec. 16-22) agreement exceed ninety (90) days from initial
notification by the parties.
Merger
A merger refers to the joining of two or more entities When the above periods have expired and no
into an existing entity or to form a new entity. decision has been promulgated for whatever
reason, the merger or acquisition shall be deemed
Acquisition approved and the parties may proceed to implement
Acquisition refers to the purchase of securities or or consummate it. (PCA, R.A. No. 10667, §. 17)
assets for the purpose of obtaining control of
another entity. Effect of Notification
If within the relevant periods stipulated in the
The Philippine Competition Commission (PCC) is preceding section, the Commission determines that
empowered to impose fines and penalties on such agreement is prohibited under Section 20 and
businesses whose conduct or activities violate the does not qualify for exemption under Section 21 of
PCA, those found to be in contempt, fail to comply this Chapter, the Commission may:
with orders, or supply misleading or false 1. Prohibit the implementation of the
information to the PCC. (PCA, R.A. No. 10667, §. agreement;
16) 2. Prohibit the implementation of the
agreement unless and until it is modified by
Compulsory Notification changes specified by the Commission.
Parties to the merger or acquisition agreement 3. Prohibit the implementation of the
referred to in the preceding section wherein the agreement unless and until the pertinent
value of the transaction exceeds Size of Party party or parties enter into legally
(SoP) of seven billion pesos (Php 7,000,000,000) enforceable agreements specified by the
and Size of Transaction (SoT) of two point nine Commission. (PCA, R.A. No. 10667, § 14)
billion pesos (Php 2,900,000,000) are prohibited
from consummating their agreement until thirty Threshold for Notification
(30) days after providing notification to the Commission shall, from time to time, adopt and
Commission in the form and containing the publish regulations stipulating:
information specified in the regulations issued 1. The transaction value threshold and such
by the Commission: Provided, That the other criteria subject to the notification
Commission shall promulgate other criteria, such as requirement of Section 17 of this Act;
increased market share in the relevant market in 2. The information that must be supplied for
excess of minimum thresholds, that may be applied notified merger or acquisition;
specifically to a sector, or across some or all 3. Exceptions or exemptions from the
sectors, in determining whether parties to a merger notification requirement; and
or acquisition shall notify the Commission under this 4. Other rules relating to the notification
Chapter. procedures. (PCA, R.A. No. 10667, §. 14)
• An agreement consummated in violation of
this requirement to notify the Commission Exemptions
shall be considered void and subject the Merger or Acquisition agreement may nonetheless
parties to an administrative fine of one by exempt from prohibition if the parties establish
percent (1%) to five percent (5%) of the the following:
value of the transaction 1. The concentration has brought about or is
likely to bring about gains in efficiencies
Prohibited mergers and acquisitions under Sec. that are greater than the effects of any
20 limitation on competition that result or likely
The parties to the proposed merger and acquisition to result from the merger or acquisition
may request further information that are reasonably agreement; or
necessary and directly relevant to the prohibition
under Section 20 hereof from the parties to the 2. A party to the merger or acquisition
agreement before the expiration of the thirty (30)- agreement is faced with actual or imminent
day period referred. The issuance of such a request financial failure, and the agreement
has the effect of extending the period within which represents the least anti-competitive
the agreement may not be consummated for an arrangement among the known alternative
additional sixty (60) days, beginning on the day after uses for the failing entity’s assets:
the request for information is received by the
parties: Provided, That, in no case shall the total

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Provided, that an entity shall not be prohibited from

continuing to own and hold the stock or other share
capital or assets of another corporation which it
acquired prior to the approval of this Act or
acquiring or maintaining its market share in a
relevant market through such means without
violating the provisions of this Act:

Provided, further, that the acquisition of the stock or

other share capital of one or more corporations
solely for investment and not used for voting or
exercising control and not to otherwise bring about,
or attempt to bring about the prevention, restriction,
or lessening of competition in the relevant market
shall not be prohibited. (PCA, R.A. No. 10667, §. 14)

Burden of Proof
Burden of proof under Section 21 lies with the
parties seeking the exemption. A party seeking to
rely on the exemption specified in Section 21(a)
must demonstrate that if the agreement were not
implemented, significant efficiency gains would not
be realized. (PCA, R.A. No. 10667, §. 22)

Finality of Rulings on Mergers and Acquisitions.

Merger or acquisition agreements that have
received a favorable ruling from the Commission,
except when such ruling was obtained on the basis
of fraud or false material information, may not be
challenged under this Act. (PCA, R.A. No. 10667, §.
14)

-- end of topic --

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XII. PUBLIC SERVICE ACT A. PUBLIC SERVICE AS PUBLIC

UTILITY
TOPIC OUTLINE UNDER THE SYLLABUS
Authority of Congress
A. PUBLIC SERVICE AS PUBLIC UTILITY Nothing in the PSA shall be interpreted to diminish,
limit, or restrict the authority of Congress from
B. CRITICAL INFRASTRUCTURE granting franchises to public services, including
public utilities, and other activities, as may be
C. POWERS OF THE PRESIDENT TO provided by law.
SUSPEND OR PROHIBIT
TRANSACTION OR INVESTMENT
GR: Any franchise or certificate necessary for the
operation of a public service shall be granted by
D. RECIPROCITY CLAUSE
Congress

Exception: previously delegated by law to the

relevant Administrative Agencies. (PSA, R.A. No.
11659, §. 4)

Public Utility

Public utility refers to a public service that operates,

manages or controls for public use any of the
following: (DTPe-WaSP)
1. Distribution of Electricity;
2. Transmission of Electricity;
3. Petroleum and Petroleum Products
Pipeline Transmission Systems;
4. Water Pipeline Distribution Systems and
Wastewater Pipeline Systems, including
sewerage pipeline systems
5. Seaports; and
6. Public Utility Vehicles. (PSA, R.A. No.
11659, §. 4)

PUBLIC UTILITY vs. PUBLIC

SERVICE
Public Service Public Utility
Public Service Public utility refers to
includes every a public service that
person that now operates, manages or
or hereafter may controls for public use
own, operate, any of the following:
manage, or (DTPe-WaSP)
control in the 1. Distribution
Philippines, for of Electricity;
hire or 2. Transmission
compensation, of Electricity;
with general or 3. Petroleum
limited clientele, and
whether Petroleum
permanent, Products
occasional or Pipeline
accidental, and Transmission
done for general Systems;
business 4. Water
purposes, any Pipeline

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common carrier, Distribution motor vehicle

railroad, street Systems and and uses it
railway, traction Wastewater personally
railway, sub- Pipeline and/or enters
way motor Systems, into a special
vehicle, either including contract
for freight or sewerage whereby said
passenger , or pipeline motor vehicle is
both with or systems offered for hire
without fixed 5. Seaports; or
route and and compensation
whether may be 6. Public Utility to a third party
its classification, Vehicles. or third parties
freight or carrier (PSA, R.A. engaged in
service of any No. 11659, §. agriculture, not
class, express 4) itself or
service, themselves a
steamboat or public service,
steamship line, for operation by
pontines, the latter for a
ferries, and limited time and
water craft, for a specific
engaged in the purpose directly
transportation of connected with
passengers or the cultivation of
freight or both, his or their farm,
shipyard, the
marine railways, transportation,
marine repair processing, and
shop, marketing of
[warehouse] agricultural
wharf or dock, products of such
ice plant, ice- third party or
refrigeration third parties
plant, canal, shall not be
irrigation considered as
system, gas, operating a
electric light, public service
heat and power for the purposes
water supply of this Act. (CA
and power, No. 146 as
petroleum, amended, § 13)
sewerage
system, wire or Note: Prior to the enactment of the PSA, the
wireless concepts of Public Service and Public Utility were
communications intertwined. Upon its passing, PSA has now
system, wire or distinctly differentiated Public Utility from Public
wireless Service. To summarize, all public utilities are public
broadcasting services, however not all public services are
stations and considered public utilities.
other similar
public services: Distribution of Electricity
Provided, Refers to the conveyance of electric power by a
however, That a distribution utility through its distribution system as
person engaged defined by Section 4 (n) of Republic Act No. 9136,
in agriculture, otherwise known as the "Electric Power Industry
not otherwise a Reform Act of 2001," as amended. (PSA, R.A. No.
public service, 11659, §. 2). This is to be differentiated from
who owns a Generation and Supply of electricity which are

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expressly excluded from the definition of public Note:

utility as provided under the EPIRA law. (EPIRA, • Transport vehicles accredited with and
R.A. 9136, §. 6 & 29) operating through transport network
corporations shall NOT be considered as
Transmission of Electricity public utility vehicles. (PSA, RA 11659, §.
Refers to the conveyance of electricity through the 2)
high voltage backbone system, as defined by • Generation of electricity shall not be
Section 4 (ccc) of Republic Act No. 9136, as considered a public utility operation. (Sec.
amended. (PSA, R.A. No. 11659, § 2) 1 Rule 5, Rules and Regulations
Implementing RA 9136, “Electric Power
Petroleum and Petroleum Products Pipeline Industry Reform Act of 2001”)
Transmission Systems • Supply of electricity shall not be considered
Refers to the operation and maintenance of pipeline public utility operation. (RA 9136, “Electric
transmission systems to ensure an uninterrupted Power Industry Reform Act of 2001”, § 29)
and adequate supply and transmission of petroleum • All concessionaires, joint ventures and
and petroleum products to the public; and other similar entities that wholly operate,
EXCLUDES petroleum pipeline systems manage or control for public use the sectors
• Operated exclusively for private or own use above are public utilities. (PSA, RA 11659,
or, §. 4)
• Incidental to the operations of a distinct • Legislative franchise is not the only mode
business (PSA, R.A. No. 11659, §. 2) of authorization to operate a public utility.
Nothing in Article XII, Section 11 of the
Water Pipeline Distribution Systems and Constitution implies that only the Congress
Wastewater Pipeline Systems, including has the authority to grant such
sewerage pipeline systems authorization. (Albano v. Reyes, G.R. No.
Refer to the operation and maintenance of water 83551, 11 July 1989)
pipeline distribution systems to ensure an • Manila Water and Maynilad are public
uninterrupted and adequate supply and distribution utilities. They are privately owned and
of potable water for domestic and other purposes operated business entities engaged in
and the operation and maintenance of wastewater regularly supplying water-the most basic of
pipeline systems, except desludging companies and all necessities or human survival. As
septic tanks, to ensure public health and safety provided in the Concession Agreements,
(PSA, R.A. No. 11659, § 2) they are to serve an indefinite public, at
least within their respective service areas.
Seaports o Manila Water and Maynilad
Refers to a place where ships may anchor or tie up contend that they are not public
for the purpose of shelter, repair, loading or utilities but rather they are mere
discharge of passengers or cargo, or for other such "contractors" and "agents" bases
activities connected with water-borne commerce, on the Concession Agreements
and including all the land and water areas and the with Metropolitan Waterworks and
structures, equipment and facilities related to these Sewerage System (MWSS), the
functions, as defined by the charters of relevant public utility and legislative
authorities or agencies, such as the Philippine Ports franchise holder. The Court held
Authority, Subic Bay Metropolitan Authority, that that the legislative franchise of
PHIVIDEC Industrial Estate Authority, Cebu Port MWSS did not prevent the
Authority, local government units, and other similar declaration of Manila Water and
agencies or government bodies. (PSA, R.A. No. Maynilad's status as public
11659, §. 2) utilities. (Maynilad Water Services,
Inc. v. National Water and
Public Utility Vehicles Resources Board, G.R. 181764,
Refer to internal combustion engine vehicles that 16 May 2023)
carry passengers and/or domestic cargo for a fee,
offering services to the public, namely trucks-for Note: Nothing in the PSA shall be interpreted as a
hire, UV express service, public utility buses requirement for legislative franchise where the law
(PUBs), public utility jeepneys (PUJs), tricycles, does not require any. No other person shall be
filcabs, and taxis. (PSA, R.A. No. 11659, § 2) deemed a public utility unless otherwise
subsequently provided by law. (PSA, RA 11659, §
4)

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National Security
Note: Nationality requirements shall not be imposed Refers to the requirements and conditions
by the relevant Administrative Agencies on any necessary to ensure the territorial integrity of the
public service not classified as a public utility. (PSA, country and the safety, security, and well-being of
R.A. No. 11659, §. 4) Filipino citizens. (§. 2, Rule I, Implementing Rules
and Regulations of R.A. No. 11659, amending C.A.
No. 146)]
B. CRITICAL INFRASTRUCTURE

Critical Infrastructure refers to any public service C. POWERS OF THE PRESIDENT TO

which owns, uses, or operates systems and assets, SUSPEND OR PROHIBIT
whether physical or virtual, so vital to the Republic TRANSACTION OR IINVESTMENT
of the Philippines that the incapacity or destruction
of such systems or assets would have a detrimental In the interest of national security, the President,
impact on national security, including after review, evaluation and recommendation of the
telecommunications and other such vital services relevant government department or Administrative
as may be declared by the President of the Agency, may, within sixty (60) days from the receipt
Philippines. (PSA, R.A. No. 11659, §. 2[e]) of such recommendation, suspend or prohibit any
proposed merger or acquisition transaction, or any
NOTE: A public service engaged in the provision of investment in a public service that effectively results
telecommunications services is critical infrastructure in the grant of control, whether direct or indirect, to
under the PSA. Up to date, no other system or asset a foreigner or a foreign corporation. (PSA, R.A. No.
is classified as critical infrastructure except for 11659, §. 23)
telecommunications.
The Philippine Competition Commission (PCC) may
No other public service shall be considered critical be consulted on all matters relating to mergers and
infrastructure unless declared by the President. (§ acquisitions.
32, Rule VIII, Implementing Rules and Regulations
of R.A. No. 11659, amending C.A. No. 146)
D. RECIPROCITY CLAUSE
Telecommunications
Refer to any process which enables a
Ownership of Capital Entities Engaged in
telecommunications entity to relay and receive
Operation and Management of Critical
voice, data, electronic messages, written or printed
Infrastructures
matter, fixed or moving pictures, words, music or
visible or audible signals or any control signals of
any design and for any purpose by wire, radio or GR: Foreign nationals shall not be allowed to own
other electromagnetic, spectral, optical or more than fifty percent (50%) of the capital entities
engaged in the operation and management of
technological means, as defined by Section 3 (a) of
Republic Act No. 7925, otherwise known as the critical infrastructures.
"Public Telecommunications Policy Act of the
Philippines," as amended, EXCEPT: XPN: If the country of such foreign national accords
a. passive telecommunications tower reciprocity to Philippine Nationals as may be
infrastructure and provided by foreign law, treaty or international
agreement. (PSA, R.A. No. 11659, §. 25)
b. components, such as, but not limited
to, poles, fiber ducts, dark fiber cables,
and passive telecommunications tower Reciprocity may be satisfied by according rights of
infrastructure, as defined by the similar value in other economic sectors.
Department of Information and
Communications Technology (DICT),
and value-added services, as defined
in Section 3 (h) of Republic Act No.
7925, as amended.

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Employment of Foreign National Capital Ownership

FOREIGN FOREIGN SOVEREIGN STATE FUNDS INDEPENDENT
GOVERNMENTS NATIONALS PENSION FUNDS
PUBLIC UTILITY FOREIGN OWNERSHIP FOREIGN
OWNERSHIP
Entities controlled by or No franchise, Allowable Investments. — Subject The term
acting on behalf of the certificate, or any other to strict compliance with the "Philippine
foreign government or form of authorization Investment and Risk Management national" shall
foreign state-owned for the operation of a Guidelines, the Board of Directors mean a citizen of
enterprises are public utility shall be of the MIC may engage in the the Philippines or a
prohibited from owning granted except to following investments: domestic
capital in any public citizens of the a. Cash, foreign partnership or
service classified as Philippines or to currencies, metals, association wholly
public utility or critical corporations or and other tradeable owned by citizens
infrastructure, provided associations organized commodities; of the Philippines;
that: under the laws of the b. Fixed income or a corporation
a. It shall apply Philippines, at least instruments issued by organized under
only to sixty per centum of sovereigns, quasi- the laws of the
investments whose capital is sovereigns and Philippines of
made after the owned by such supranationals; which at least sixty
effectivity of citizens; nor shall such c. Domestic and percent (60%) of
this Act franchise, certificate, or foreign corporate the capital stock
b. Foreign state- authorization be bonds; outstanding and
owned exclusive in character d. Listed or unlisted entitled to vote is
enterprises or for a longer period equities, whether owned and held by
owning capital than fifty (50) years. common, preferred, citizens of the
prior to the Neither shall any such or hybrids; Philippines; or a
effectivity are franchise or right be e. Islamic investments, trustee of funds
prohibited from granted except under such as Sukuk for pension or
investing the condition that it bonds; TIADCc other employee
additional shall be subject to f. Joint ventures or co- retirement or
capital amendment, alteration, investments, mergers separation
c. Sovereign or repeal by the and acquisitions; benefits, where the
wealth funds Congress when the g. Mutual and trustee is a
and common good so exchange-traded Philippine national
independent requires. The State funds invested in and at least sixty
pension funds shall encourage equity underlying assets; (60%) of the fund
of each state participation in public h. Real estate and will accrue to the
may utilities by the general infrastructure benefit of the
collectively public. The projects: Provided, Philippine
own up to thirty participation of foreign That investments in nationals:
percent (30%) investors in the infrastructure projects Provided, That
of the capital of governing body of any shall be directed where a
such public public utility enterprise towards the fulfillment corporation and its
services (PSA, shall be limited to their of national priorities non-Filipino
R.A. No. proportionate share in such as the national stockholders own
11659, § 24) its capital, and all the infrastructure stocks in a
executive and program of the Securities and
managing officers of Department of Public Exchange
such corporation or Works and Highways Commission (SEC)
association must be (DPWH) and other registered
citizens of the infrastructure enterprise, at least
Philippines. agencies, the sixty percent (60%)
inclusive innovation of the capital
(§. 11, Article XII, 1987 industry strategy of stocks outstanding
Constitution) the Department of and entitled to vote
Trade and Industry of both
(DTI), and the public corporations must
investment programs be owned and held

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of the National by citizens of the

Economic and Philippines and at
Development least sixty percent
Authority (NEDA); (60%) of the
i. Programs and members of the
projects on health, Board of Directors
education, research of both
and innovation, and corporations must
other such be citizens of the
investments that Philippines, in
contribute to order that the
sustainable corporations shall
development; be considered a
j. Loans and Philippine national;
guarantees to, or
participation into (FIA, R.A. NO.
joint ventures or 7492, Section, §. 3
consortiums with (a))
Filipino and foreign
investors, whether in
the majority or
minority position in
commercial,
industrial, mining,
agricultural, housing,
energy, and other
enterprises, which
may be necessary or
contributory to the
economic
development of the
country, or important
to the public interest;
and
k. Other investments
with sustainable and
developmental
impact aligned with
Section 17

With respect to items h) to k), the

investments in real estate,
including agro-industrial estates
and economic zones, estate
infrastructure and other
development projects, whether
alone or in partnership with other
corporate entities, shall be limited
to high-impact projects, those
contained in the Strategic
Investment Priority Plan (SIPP), as
well as other projects that are
approved by the appropriate
approving body to ensure that
these are in line with the
socioeconomic development
program of the government.

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ATENEO CENTRAL
BAR OPERATIONS 2024 COMMERCIAL LAW

The Board of Directors of the MIC

shall likewise ensure that all
allowable investments as provided
in this section are in accordance
with the principle of sustainability.

(R.A. No. 11954, § 14)

CRITICAL INFRASTRUCTURE
Entities controlled by or GR: May own capital
acting on behalf of the of entities engaged in -- end of topic -
foreign government or the operation and
foreign state-owned management of
enterprises are capital infrastructures
prohibited from owning amounting to not more
capital in any public than fifty percent
service classified as (50%)
public utility or critical
infrastructure provided XPN: Country of
that: foreign national
a. It shall apply accords reciprocity to
only to Philippine nationals
investments as provide by foreign
made after the law, treaty, or
effectivity of international
this Act agreements (PSA,
b. Foreign state- R.A. No. 11659, §. 25)
owned
enterprises
owning capital
prior to the
effectivity are
prohibited from
investing
additional
capital
c. Sovereign
wealth funds
and
independent
pension funds
of each state
may
collectively
own up to thirty
percent (30%)
of the capital of
such public
services

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