COMMERCIAL LAW REVIEWER

1. Application of the elements in determining whether a case is anintra-corporate dispute

An intra-corporate controversy is one which pertains to any of the following relationships:

(1) between the corporation, partnership or association and the public;

(2) between the corporation, partnership or association and the State in so far as its franchise, permit or license to operate is concerned;

(3) between the corporation, partnership or association and its stockholders, partners, members or officers; and

(4) among the stockholders, partners or associates themselves.

Initially, it applied the relationship test which states that if the conflict is between the corporation, partnership or association and any of the following the public; or its stockholders, partners, members or officers; or the State as far as its franchise, permit or license to operate is concerned; or among the stockholders, partners or associates themselves, the dispute is considered intra-corporate in character.

This test was broad enough to cover all kinds of controversies between stockholders and corporations, and the traditional interpretation was to the effect that the relationship test brooked no distinction, qualification or any exemption whatsoever.

The nature of the controversy test, which states that the incidents of (or circumstances behind) that relationship should be taken into consideration to ascertain whether the controversy itself is intra-corporate.

This means that the controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation.

If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists.

This point may be illustrated in this manner: A stockholder, in his private capacity as a businessman, sells goods to the company. The latter fails to pay for the goods on its due date. The stockholder files a collection case against the company.

Although there is an intra-corporate relationship between the stockholder and the company, the dispute cannot be considered intra-corporate because it arises from a contractual transaction between the two parties and does not involve the rights of the stockholder under the Corporation Code.2. Insider Trading and defense against insider trading

"Insider trading" is a term that broadly refers to unlawful trading in securities by persons who possess material nonpublic information about the company whose securities they buy or sell, or about the market for such securities.

It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public, unless (DEFENSES):

(a) The insider proves that the information was not gained from such relationship; or

(b) If the other party selling to or buying from the insider (or his agent) is identified, the insider proves:

(i) that he disclosed the information to the other party, or

(ii) that he had reason to believe that the other party otherwise is also in possession of the information.

A purchase or sale of a security of the issuer made by an insider defined in Subsection 3.8, or such insiders spouse or relatives by affinity or consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in possession of material non-public information if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for the market to absorb such information:Provided, however,That this presumption shall be rebutted upon a showing by the purchaser or seller that he was not aware of the material non-public information at the time of the purchase or sale.

For purposes of this Section, information is material non-public if:

(a) It has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information; or

(b) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security.

It shall be unlawful for any insider to communicate material non-public information about the issuer or the security to any person who, by virtue of the communication, becomes an insider as defined in Subsection 3.8, where the insider communicating the information knows or has reason to believe that such person will likely buy or sell a security of the issuer while in possession of such information.

3. Rule in setting interest rates

Generally, interest rates are prices. They are the price paid for the use of money for a period of time and are expressed as a percentage of the total outstanding balance that is either fixed or variable. There are two ways by which interest rates can be defined: first, from the point of view of a borrower, it is the cost of borrowing money (borrowing rate); and second, from a lenders point of view, it is the fee charged for lending money (lending rate).

The level of interest rates is determined by the interaction of the supply and demand for funds in the money market. Interest rates, prior to their full liberalization in 1983, were fixed by the Bangko Sentral ng Pilipinas (BSP). In 1981, the then Central Bank of the Philippines deregulated all bank rates except short-term lending rates. In 1983, the deregulation of bank rates was completed with the removal of the remaining ceilings on short-term lending rates.

Yes, by law, the BSP can effectively set interest rates. Under the Usury Law (Act No. 2655, as amended by P.D. 116), the Monetary Board can prescribe the maximum interest rates for loans made by banks, pawnshops, finance companies and similar credit institutions, and to change such rates whenever warranted by prevailing economic conditions. Moreover, the BSP charter (R.A. No. 7653) allows the Monetary Interest Rates December 2014 Department of Economic Research/Department of Economic Statistics 4 Board to take appropriate remedial measures whenever abnormal movements in monetary aggregates, in credit or in prices endanger the stability of the Philippine economy. Nevertheless, since 1983, the BSP has followed a market-oriented interest rate policy.

Interest rate movements in the Philippines are affected generally by the price level or inflation rate, fiscal policy stance, and intermediation cost which could impact the demand and supply for money. The BSPs policy direction to achieve its mandate of maintaining price stability has a marked influence on the interest rate level. When there is too much liquidity in the system, there is more pressure for inflation to rise. To curb inflationary pressures arising from excess liquidity in the system, the BSP will have to increase its key policy rates, i.e., overnight borrowing rate or reverse repurchase rate (RRP) and overnight lending rate or repurchase rate (RP). By increasing its key policy rates, the BSP is sending a signal to the market that the general level of interest rates will be on an uptrend. In mirroring the movement of the BSPs policy rates, the benchmark 91-day T-bill rate also sets the direction for other rates, specifically, bank lending rates. Fiscal policy stance. The fiscal policy stance may also influence the direction of interest rates. A government that incurs a fiscal deficit needs to finance its existing budgetary requirements by borrowing from the domestic market or from abroad. The higher is the fiscal deficit, the stronger the demand to borrow to finance the gap. This exerts upward pressure on domestic interest rates, particularly if the government borrows from a relatively less liquid domestic market. Intermediation cost. Financial institutions incur costs in extending their services. Interest rates will tend to be high when intermediation cost is high. Included in the intermediation costs are administrative costs and the BSPs reserve requirements. Other factors that could influence the interest rates include the maturity period of the financial instrument and the perception of risks associated with the instrument. Those with longer-term maturity and with higher probability of incurring loss carry higher interest rates. The lack of intermediation could also affect interest rate movement. For instance, with their larger holdings of non-performing assets (NPAs), banks are more cautious in their lending activities. This would tend to induce an increase in interest rates.4. Conservatorship in Banks

THREE LEVELS OF REHABILITATION

1. Conservatorship2. Receivership3. Liquidation

CONSERVATORSHIP: CONSERVATOR

With such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability.

The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.

WHO CAN BE A CONSERVATOR?

The conservator should be competent and knowledgeable in bank operations and management.

HOW LONG SHOULD THE CONSERVATORSHIP LAST?

The conservatorship shall not exceed one (1) year.

WOULD YOU WANT TO BE A CONSERVATOR? HOW IS A CONSERVATOR COMPENSATED?

The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve (12) equal monthly payments Provided, That, if at any time within one-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which case he shall not be entitled to receive any remuneration or emolument from the Bangko Sentral during the conservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.

WHEN CAN THE MONETARY BOARD TERMINATE THE CONSERVATORSHIP?

1. The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary.2. The conservatorship shall likewise be terminated should the Monetary Board, on the basis of the report of the conservator or of its own findings, determine that the continuance in business of the institution would involve probable loss to its depositors or creditors, in which case the provisions of Section 30 shall apply.

NEW CENTRAL BANK ACT

Section 67. Conservatorship. - The grounds and procedures for placing a bank under conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be governed by the provisions of Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act: Provided, That this Section shall also apply to conservatorship proceedings of quasi-banks. (n)

The last two paragraphs of Section 30 of the New Central Bank Act:

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the stockholders of record 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, liquidation or conservatorship.The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.

Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank. The conservator should be competent and knowledgeable in bank operations and management. The conservatorship shall not exceedone (1) year.The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within one-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected with the BangkoSentral, in which case he shall not be entitled to receive any remuneration or molument from the Bangko Sentral during the conservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.

The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary Board, on the basis of the report of the conservator or of its own findings, determine that the continuance in business of the institution would involve probable loss to its depositors or creditors, in which case the provisions of Section 30 shall apply.

5. DOSRI Rule

Directors, officers, stockholders and related interests

The Dosri rule limits the loans and guarantees that can be granted by a bank to a single director, officer, stockholder or related interest to an amount equivalent to his unencumbered deposits or the book value of his paid-in capital contribution to the bank.

The rule also states that, except with the prior approval of the BSPs Monetary Board, the combined outstanding Dosri loans and guarantees should not exceed 15 percent of the banks total loan portfolio or 100 percent of the banks net worth, whichever is lower.

Section 83. No director or officer of any banking institution shall, either directlyor indirectly, for himself or as the representative or agent of others, borrow any of the deposits of funds of such bank,nor shall he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor for moneys borrowed from the bank or loaned by it, except with the written approval of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the Superintendent of Banks. The office of any director or officer of a bank who violates the provisions of this section shall immediately become vacant and the director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand nor more than ten thousand pesos. x x x

The prohibition in Section 83 is broad enough to cover various modes of borrowing.It covers loans by a bank director or officer which are made either: (1) directly, (2)indirectly, (3) for himself, (4) or as the representative or agent of others. It applies even if the director or officer is a mere guarantor, indorser or surety for someone else's loanor is in any manner an obligor for money borrowed from the bank or loaned by it. The covered transactions are prohibited unless the approval, reportorial and ceiling requirements under Section 83 are complied with. The prohibition is intended to protect the public, especially the depositors,from the overborrowing of bank funds by bank officers, directors, stockholders and related interests, as such overborrowing may lead to bank failures.It has been said that "banking institutions are not created for the benefit of the directors [or officers] . While directors have great powers as directors, they have no special privileges as individuals. They cannot use the assets of the bank for their own benefit except as permitted by law. Stringent restrictions are placed about them so that when acting both for the bank and for one of themselves at the same time, they must keep within certain prescribed lines regarded by the legislature as essential to safety in the banking business".

A direct borrowing is obviously one that is made in the name of the DOSRI himself or where the DOSRI is a named party, while an indirect borrowing includes one that is made by a third party, but the DOSRI has a stake in the transaction.

Indirectly borrowing or securing a loan, knowing fully well that the same has been done by him without the written consent and approval of the majority of the board of directors, and which consent and approval the officer deliberately failed to obtain and enter the same upon the records of said banking institution and to transmit a copy thereof to the supervising department of the said bank by using the name of a third party, the latter having no knowledge of the said loan, and oncein possessionof the said amount, said officer converted the same to hisown personal use and benefit".

The broad interpretation of the prohibition in Section 83 is justified by the fact that it even expressly covers loans to third parties where the third parties are aware of the transaction (such as principals represented by the DOSRI), and where the DOSRI's interest does not appear to be beneficial but even burdensome (such as in cases when the DOSRI acts as a mere guarantor or surety). If the law finds it necessary to protect the bank and the banking system in such situations, it will surely be illogical for it to exclude a case like this where the DOSRI acted for his own benefit, using the name of an unsuspecting person. A contrary interpretation will effectively allow a DOSRI to use dummies to circumvent the requirements of the law.

6. When bank is under receivership; effects

Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or(c) cannot continue in business without involving probable losses to its depositors or creditors; or(d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need forprior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver.The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board.If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The receiver shall:(1) file ex parte with the proper Regional Trial Court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion bythe receiver after due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the institution.(2) convert the assets of the institutions to money, dispose of the same to creditors and other parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and preference of credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of,or defend any action against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the moment the institution was placed under such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution.The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the stockholders of record 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, liquidation or conservatorship.The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.

RECEIVERSHIP: RECEIVER

1. Unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;2. Has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or3. Cannot continue in business without involving probable losses to its depositors or creditors; or4. Has willfully violated a cease and desist order that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution.

*PDIC IS THE ONLY RECEIVER.(Philippine Deposit InsuranceCorporation)

DUTIES OF RECEIVER

1. Gather and take charge of all the assets and liabilities of the institution2. Administer the same for the benefit of its creditors

3. Exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments.4. The receiver shall determine as soon as possible, but not later than ninety (90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the generalpublic.

7. Secrecy of Bank Deposits and Foreign Currency Deposits Law

LAW ON SECRECY OF BANK DEPOSITS

Republic Act No. 1405 (the Law on Secrecy of Bank Deposits), which provided for a confidentiality rule for all types of bank deposits, regardless of currency.

Purposes:

1.to encourage people to deposit their money in banks

2.to discourage private hoarding so that the banks may lend out the money and assist in the economic development of the country

Prohibited Acts:

1. the EXAMINATION AND INQUIRY OR LOOKING into all deposits of whatever nature with banks or banking institutions in the Philippines (including investments in bonds issued by the Governments or its political subdivisions and instrumentalities) by

i. any person or

ii. any government official or

iii. any bureau or

iv. any office

2. the DISCLOSURE by

i. any OFFICIAL of any banking institution or

ii. any EMPLOYEE of any banking institution to ANY UNAUTHORIZED PERSON of any information concerning the said deposit.

SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

Foreign Currency Deposit Act of the Philippines (Republic Act No. 6426), specifically Section 8 (Secrecy of Foreign Currency Deposits).

All foreign currency deposits authorized under this Act are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositors, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or private.

An FCDU (Foreign currency deposit unit) is a banking unit authorized to transact in foreign exchange, such as accepting foreign-currency deposits and making foreign-currency loans.8. Patent Infringement

Patent infringementis the commission of a prohibited act with respect to apatented invention without permission from thepatentholder.

"Doctrine of equivalents"

Patent infringement is ordinarily understood to mean as the unauthorized replication or use of a patented invention or process. Technically, however, patent infringement is committed either literally or by equivalents. Literal infringement exists when every limitation recited in a patent claim is found in the infringing device (or process). Infringement by equivalents, on the other hand, happens when a device (or process) appropriates a prior invention by incorporating its innovative concept and, although with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result. This "function-way-result" equation lies at the heart of the doctrine of equivalents.The doctrine of equivalents is a common law concept borne out of American jurisprudence. It is an equitable measure to protect patentees against deliberate efforts of infringers to evade liability for infringement by making only insubstantial changes to a patented invention. In other words, it extends protection beyond the specific and literal claims of patents. In one of its recent decisions, the U.S Supreme Court restated the time-honored rationale behind the application of the doctrine of equivalents:The language in the patent claims may not capture every nuance of the invention or describe with complete precision the range of its novelty. If patents were always interpreted by their literal terms, their value would be greatly diminished. Unimportant and insubstantial substitutes for certain elements could defeat the patent, and its value to inventors could be destroyed by simple acts of copying. For this reason, the clearest rule of patent interpretation, literalism, may conserve judicial resources but is not necessarily the most efficient rule. The scope of a patent is not limited to its literal terms but instead embraces all equivalents to the claims described.

What are the types of patent enforcement action are available in Philippines?

a) Civil action for infringement;

b) Administrative case for infringement; and

c) Criminal action for repetition of infringement.

How can the patent owner most effectively make his point to stop an infringement?

Secure a search warrant to seize the infringing goods prior to filing a civil action or an administrative action for infringement.9. Doctrine of Equivalents

A means by which a patentee may raise a claim of infringement even though each and every element of the patented invention is not identically present in the allegedly infringing product. The purpose of the doctrine is to prevent an infringer from stealing the benefit of a patented invention by changing only minor or insubstantial details of the claimed invention while retaining the same functionality. The essential inquiry in determining equivalency is whether the accused product or process contains elements identical or equivalent to each claimed element of the patented invention.

In the Philippines, the doctrine of equivalents finds statutory basis in Section 75.2 of R.A. No. 8293, otherwise known as the Intellectual Property Code ("IP Code"), which states:For the purpose of determining the extent of protection conferred by the patent, due account shall be taken of elements which are equivalent to the elements expressed in the claims, so that a claim shall be considered to cover not only all the elements as expressed, but also equivalents.10. Trademark Infringement

The use without consent of the trademark owner of any a) reproduction, b) counterfeit, c) copy or d) colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable limitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services.

Remedies:

The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party11. Dominancy Test

Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of one trademark and of another. It has been consistently held that the question of infringement of a trademark is determined by the test of dominancy. Similarity in size, form and color, while relevant is not conclusive. If the competing mark contains the main or essential feature or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question at issue in cases of infringement of trademark is whether the use of the marks involved would be likely to cause confusion or mistake in the mind of the public or deceive purchasers.

12. Holistic Test (Totality Test)

Trademarks must be considered in their entirety as they appear in their respective labels. The trademarks in their entirety as they appear in the respective labels must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. The totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks.13. Unfair Competition

Unfair competition has two elements as previously stated, namely:

1) confusing similarity in the general appearance of the goods, and

2) intent to deceive the public and defraud a competitor.

While trademark infringement is a trespass on property right, unfair competition is a violation of anothers goodwill. The test of unfair competition is whether the acts of the defendant are such as are calculated to deceive the ordinary buyer in making his purchases under the ordinary conditions which prevail in the particular trade to which the controversy relates. The scope of unfair competition is broader than that of trademark infringement.

An unfair competitor need not copy the entire mark to accomplish his fraudulent purpose. It is enough if he takes the one feature which the average buyer is likely to remember.

While likelihood of confusion is the gravamen of trademark infringement, confusing similarity pertains to unfair competition when coupled with malice or intent to deceive. There is infringement when a trademark is used without authorization; there is unfair competition when ones goods are passed off as that of anothers.

There are two types of confusing similarity namely, confusion of goods and confusion of business or origin. Determination of confusion of goods necessitates the application of either the dominancy or the holistic test. The tests involved in determining likelihood of confusion of origin are separate and distinct from the tests in determining confusion of goods.

Infringement cases do not require actual imitation; only a colorable one, likely to confuse the public. Thus, it has been ruled that duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question at issue is whether the use of the marks involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers. It should also be noted that the law does not use the term actual confusion. Instead it uses confusingly similar, likely to be damaged, and likely to cause confusion, or to cause mistake or to deceive.

14. Copyright Infringement

Copyright infringementis the use ofworksprotected bycopyright lawwithout permission, infringing certainexclusive rightsgranted to the copyright holder, such as the right to reproduce, distribute, display or perform the protected work, or to makederivative works.

There are two types of copyright infringement liability direct and secondary.

An infringement takes place when the use of a protected work of a copyright owner goes beyond the limitations, to include fair use provisions that are outlined in the law.

Under the law, aninfringeris also anyone who benefits from the infringing activity of another person and if this person has been given notice of the infringing activity and has the right and ability to control the activities of the other person or if a person purposely and with the intent to enable or induce infringement by another person and materially contributes to it.

The complainant has the burden of proof to provide evidence that all the three elements are present. If a person is not aware of the infringement, he cannot be liable for infringement, even if he benefits from it or has control over the premises.

Remedies for Infringement. (RA 8293)

Any person infringing a right protected under this law shall be liable:

A. To an injunction restraining such infringement. The court may also order the defendant to desist from an infringement, among others, to prevent the entry into the channels of commerce of imported goods that involve an infringement, immediately after customs clearance of such goods.

B. Pay to the copyright proprietor or his assigns or heirs such actual damages, including legal costs and other expenses, as he may have incurred due to the infringement as well as the profits the infringer may have made due to such infringement, and in proving profits the plaintiff shall be required to prove sales only and the defendant shall be required to prove every element of cost which he claims, or, in lieu of actual damages and profits, such damages which to the court shall appear to be just and shall not be regarded as penalty.

C. Deliver under oath, for impounding during the pendency of the action, upon such terms and conditions as the court may prescribe, sales invoices and other documents evidencing sales, all articles and their packaging alleged to infringe a copyright and implements for making them.

D. Deliver under oath for destruction without any compensation all infringing copies or devices, as well as all plates, molds, or other means for making such infringing copies as the court may order.

E. Such other terms and conditions, including the payment of moral and exemplary damages, which the court may deem proper, wise and equitable and the destruction of infringing copies of the work even in the event of acquittal in a criminal case.

In an infringement action, the court shall also have the power to order the seizure and impounding of any article which may serve as evidence in the court proceedings.

15. Liability of Accommodation Party

Sec. 29. Liability of accommodation party. - An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party.

ACCOMMODATION PARTY: REQUISITES

One who has signed the instrument as maker, drawer, indorser, acceptor, without receiving any value therefore and for the purpose of lending his name to some other person Requisites:1. He must be a party to the instrument, signing as maker, acceptor, indorser, or drawer2. He must not receive any value therefore3. He must sign for the purpose of lending his name or credit

RIGHTS AND LEGAL POSITION OF AN ACCOMODATION PARTY

The accommodation party is generally regarded as a surety for the party accommodated When the accommodation parties make payment to the holder of the notes, they have the right to sue the accommodated party for reimbursement since the relation between them is in effect that of a principal and sureties, the accommodation parties being the sureties

ACCOMMODATED PARTY CANNOT RECOVER FROM ACCOMMODATING PARTY

Absence of consideration is a defense In fact as between them, the understanding is that the accommodated party either is to1. To reimburse the amount which the accommodation party may be obliged to pay2. To pay the instrument directly to the holder

LIABILITY OF THE ACCOMODATION PARTY

The accommodation party is liable on the instrument to a holder in value, notwithstanding such holder at any time of the taking of the instrument knew him to be only an accommodation party The accommodation party doesn't receive any valuable consideration for the instrument he signs but he is liable to a holder for value as if the contract wasn't for accommodationAdditional points:

CORPORATIONS ARE NOT LIABLE AS ACCOMODATION PARTIES EVEN TO HOLDERS FOR VALUEOFFICERS SIGNING FOR CORPORATION AS ACCOMODATION PARTY WITHOUT AUTHORITY TO DO SO FOR THEIR INDIVIDUAL DEBTS OR TRANSACTIONS ARE PERSONALLY LIABLE THEREONHOLDER MUST OTHERWISE BE A HOLDER IN DUE COURSEACCOMODATION PARTY MAY ACCOMODATE ONE WHO IS NOT A PARTY TO THE INSTRUMENTACCOMODATION PARTY CAN INTERPOSE DEFENSE OF WANT OFCONSIDERATION AGAINST ONE NOT HOLDER IN DUE COURSE.16. Section 1, Negotiable Instruments Law

Form of negotiable instruments:

An instrument to be negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.17. Section 14, Negotiable Instruments Law

Blanks; when may be filled:

Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.18. Section 15, Negotiable Instruments Law

Incomplete instrument not delivered:

Where an incomplete instrument has not been delivered, it will not, if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.19. Trust Fund Doctrine

The subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the creditors have the right to look up to satisfy their credits. Corporations may not dissipate this and the creditors may sue the stockholders directly for their unpaid subscriptions.

The capital stock of the corporation, especially its unpaid subscription, is a trust fund for the benefit of the general creditors of the corporation.20. Ultra Vires Act

Anactthat's doneultraviresis something that exceeds the legal powers granted to an entity

There is an ultra vires act on the part of the corporation when it performs acts which are not provide in its express, implied or incidental powers. There is ultra vires act on the part of the board of directors when it performs acts which are not delegated to it by the articles of incorporation or the bylaws. There is ultra vires act on the part of the corporate officers when they perform acts which are not authorized by the by- laws and the articles of incorporation or not delegated to them by the board of directors.

What are the effects of an ultra vires act?

Ultra vires acts entered into by the board of directors binds the corporation and the courts will not interfere unless terms are oppressive and unconscionable.

21. Effect of merger in a corporation

Sec. 76. Plan or merger of consolidation. - Two or more corporations may merge into a single corporation which shall be one of the constituent corporations or may consolidate into a new single corporation which shall be the consolidated corporation.

Merger - one corporation absorbs the other and remains in existence while the other is dissolved.Consolidation - a new corporation is created and the consolidating corporations are extinguished

22. Doctrine of Apparent Authority

Under the rule, the principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or which he holds to the agent out to the public as possessing. The question in every case is whether the principal has by his voluntary act placed the agent with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question.

Apparent authority is a concept used in agency law that refers to the situation that arises when a principal, such as a corporation, indicates to a third party that an officer or agent is authorized to act on its behalf and the third party relies in good faith upon such authority. It is used a defense when implied or espress actual authority does not exist. When the defense is successfully raised, the principal is estopped from denying the authority of the officer or agent.

This doctrine imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists.

Apparent authority refers to a situation where a reasonable person would understand that an agent had authority to act. This means a principal is bound by the agent's actions, even if the agent had noactualauthority, whether express or implied. It raises anestoppelbecause the third party is given an assurance, which he relies on and would be inequitable for the principal to deny the authority given. Apparent authority can legally be found, even if actually authority has not been given.

23. Requisites for determining whether a corporation is doingbusiness in the Philippines

1. What doing business means:

a. soliciting orders, purchases, service contracts;

b. opening offices whether called liaison offices or branches;

c. appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the country for a period totaling 180 days or more;

d. participating in the management or supervision or control of any domestic firm, entity or corporation in the Philippines;

1. e. any other act or acts that imply continuity in commercial dealings

When commissioned merchants/investors or commercial brokers act in their own name in selling foreign products, the foreign firm manufacturing these products is not doing business in the Philippines.

When a local corporation or person acts in the name of a foreign firm, the latter is doing business in the Philippines.

The following are NOT doing business:

a. mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business;

b. exercise of rights as such investor;

c. having a nominee director or officer to represent interests in such corporation;

d. appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own accounts.

1. Foreign Corporations

1. a. Doing Business continuity of commercial dealings incident to prosecution of purpose and object of the organization. Isolated, occasional or casual transactions do not amount to engaging in business. But where the isolated act is not incidental/casual but indicates the foreign corporations intention to do other business, said single act constitutes engaging in business in the Philippines

2. b. Instances when unlicensed foreign corporations can sue:

(1) isolated transactions

(2) action to protect good name, goodwill, and reputation of a foreign corporation

(3) contracts provide that Phil. Courts will be venue to controversies

(4) license subsequently granted enables foreign corporation to sue on contracts executed before the grant of the license

(5) recovery of misdelivered property

(6) where the unlicensed foreign corporation has a domestic corporation24. Derivative Suit

A derivative suit is an action brought by a stockholder onbehalf of the corporation to enforce corporate rights against the corporations directors, officers or other insiders. Under Sections 23 and 36 of the Corporation Code, the directors or officers, as provided under the by-laws, have the right to decide whether or not a corporation should sue. Since these directors or officers will never be willing to sue themselves, or impugn their wrongful or fraudulent decisions, stockholders are permittedby law to bring an action in the name of the corporation to hold these directors and officers accountable. In derivative suits, the real party in interest is the corporation, while the stockholder is a mere nominal party.25. Doctrine of Corporate Opportunity

A corporate opportunity refers to any business opportunity that may benefit a corporation. The corporate opportunity doctrine governs the legal responsibility of directors, officers and controlling shareholders in a corporation, under the duty of loyalty, not to take such opportunities for themselves without first disclosing the opportunity to the board of directors of the corporation and giving the board the opportunity to decline the opportunity on behalf of the corporation. If this procedure is violated, and a corporate fiduciary takes the corporate opportunity anyway, then the fiduciary has violated its duty of loyalty, and the corporation will be entitled to a constructive trust of all profits obtained from the wrongful transaction.

A corporate officer or director may not take a business opportunity for his own if:

(1) the corporation is financially able to exploit the opportunity;

(2) the opportunity is within the corporation's line of business;

(3) the corporation has an interest or expectancy in the opportunity; and

(4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimicable to his duties to the corporation. A director or officer may take a corporate opportunity if:

(1) the opportunity is presented to the director or officer in his individual and not his corporate capacity;

(2) the opportunity is not essential to the corporation;

(3) the corporation holds no interest or expectancy in the opportunity; and

(4) the director or officer has not wrongfully employed the resources of the corporation in pursuing or exploiting the opportunity.