Patents | INTELLECTUAL PROPERTY

MERCANTILE AND TAXATION LAWS

Mercantile and Taxation Laws: Intellectual Property - Patents in the Philippines

The field of intellectual property law in the Philippines is governed by the Intellectual Property Code of
the Philippines (Republic Act No. 8293, as amended). The law covers various aspects of intellectual
property, including patents, trademarks, copyrights, trade secrets, and other related rights. In the
context of patents, the following comprehensive outline presents the key aspects of patent law in the
Philippines:

1. Definition and Purpose of Patents

 Patent: A patent is an exclusive right granted for an invention, a product, or a process providing
a new and inventive solution to a problem.

 Purpose: Patents incentivize inventors by granting them temporary monopoly rights, fostering
innovation and technological progress in exchange for the public disclosure of the invention.

2. Patentable Inventions

 Under Section 21 of RA 8293, a patentable invention must satisfy three criteria:

1. Novelty: The invention must be new and not part of prior art.

2. Inventive Step: The invention must not be obvious to a person skilled in the art.

3. Industrial Applicability: The invention must be capable of being used in any industry.

 Non-Patentable Inventions (Section 22):

o Discoveries, scientific theories, and mathematical methods

o Schemes, rules, and methods for performing mental acts or playing games

o Methods for treatment of the human or animal body

o Plants and animals (except for microorganisms and non-biological processes)

o Aesthetic creations

o Inventions contrary to public order, morality, health, or welfare

3. Filing a Patent Application

  Requirements for Application (Sections 32–34):

o Who Can Apply: Any inventor or their assignee can file a patent application.

o Where to Apply: Application is submitted to the Intellectual Property Office of the

Philippines (IPOPHL).

o Content of Application: The application must contain a request for grant, a description,
claims, an abstract, and drawings (if necessary).

o Formal Examination: IPOPHL conducts a formal examination to check compliance with

formal requirements.

 Examination Process:

o Substantive Examination (Section 48): Ensures the invention meets patentability

requirements.

o Publication and Opposition (Sections 44–47): Upon acceptance, the application is

published, allowing third-party opposition within 6 months.

4. Grant and Term of Patent

 Grant of Patent: Once the examination is complete and requirements met, IPOPHL issues a
patent, conferring exclusive rights to the inventor.

 Duration: Patents are valid for 20 years from the filing date, subject to the payment of annual
fees.

 Extension: Patent term extension is generally not allowed, except under special conditions, such
as compensating for delays in granting the patent.

5. Rights Conferred by Patents

 The patentee has the exclusive right to prevent third parties from:

o Making, using, offering for sale, or importing the patented product.

o Using the patented process and dealing with products obtained directly from the
process.

 Exhaustion of Rights: Once the product is sold by or with the consent of the patentee, they
cannot control further sale or distribution of that product.

 Compulsory Licensing (Sections 93–102): In certain cases, such as national emergency or public
interest, the government can grant compulsory licenses to third parties to use the patent
without the owner’s consent.
6. Patent Infringement and Remedies

 Infringement:

o Unauthorized use, production, sale, or importation of a patented invention constitutes

infringement.

 Remedies for Infringement:

o Civil Remedies: The patentee can file a civil suit for damages and injunctive relief. Actual
and moral damages can be awarded, including attorney's fees and costs.

o Criminal Remedies: Under certain conditions, patent infringement can also be subject
to criminal penalties.

 Burden of Proof: The patentee generally has the burden to prove infringement, but certain
defenses are allowed, including:

o Prior use by another party before the patent application.

o Experimental use for scientific research without commercial purposes.

7. Taxation on Patents

 Income Tax: Income derived from patents, such as royalties or license fees, is generally subject
to income tax. The income tax rate will depend on whether the patentee is an individual or
corporation.

 Value-Added Tax (VAT): Licensing and royalty payments are subject to VAT if they qualify as a
sale of services.

 Donor’s and Estate Tax: Patents form part of a patent holder’s estate upon death and are
subject to estate tax. Transfers of patents via donation are also subject to donor’s tax.

8. Patent Licensing and Assignment

 Licensing:

o Patentees can grant licenses for others to use their invention while retaining ownership.

o Licenses can be exclusive (one licensee) or non-exclusive (multiple licensees).

o Licensing agreements must be registered with IPOPHL to be enforceable.

 Assignment:

o Patents are assignable property rights, and assignment (transfer of ownership) must be
registered with IPOPHL to be enforceable against third parties.
9. Patent Cooperation Treaty (PCT)

 The Philippines is a member of the PCT, allowing Filipino inventors to file international patent
applications with a streamlined process.

 Process:

o A PCT application filed in the Philippines acts as a placeholder for national filings in other
PCT member states, preserving the filing date.

o This enables Filipino inventors to secure patents internationally with reduced procedural
steps.

10. IPOPHL Services and Assistance

 Assistance Programs:

o IPOPHL offers patent drafting assistance and access to patent information databases to
help inventors and businesses.

 Patent Prosecution Highway (PPH):

o Through PPH agreements, IPOPHL expedites examination of patents that have already
been approved in certain foreign jurisdictions.

11. Notable Jurisprudence in Philippine Patent Law

 The Supreme Court has issued landmark decisions clarifying various aspects of patent law:

o Patentability Standards: Courts have defined standards for novelty and inventive step.

o Patent Infringement: Landmark cases address the interpretation of infringement and

defenses.

o Compulsory Licensing: Courts have clarified the grounds for and limitations of
compulsory licensing.

Rights and Limitations of Patent Owner | Patents | INTELLECTUAL PROPERTY

MERCANTILE AND TAXATION LAWS

Mercantile and Taxation Laws > Intellectual Property > Patents > Rights and Limitations of Patent
Owners

I. Introduction to Patent Ownership Rights in the Philippines

In the Philippines, patent rights are governed by the Intellectual Property Code (IPC), codified in
Republic Act No. 8293. The Philippine Intellectual Property Office (IPO) grants patents to inventors for
novel, inventive, and industrially applicable inventions. A patent owner is granted exclusive rights over
the patented invention, enabling them to prevent others from using, manufacturing, or selling the
patented invention without permission. However, these rights come with certain limitations and are
balanced by public interest considerations.

II. Rights of the Patent Owner

1. Exclusive Rights to Use and Exploit (Sec. 71, IPC)

o The patent owner holds the exclusive right to:

 Prevent unauthorized persons from producing, using, offering for sale, selling, or
importing the patented product.

 For process patents, they can prevent unauthorized use of the process, as well
as the importation, sale, or distribution of products obtained directly by the
patented process.

o This exclusive right enables the patent owner to commercialize the invention and
maintain a competitive advantage.

2. Right to License and Transfer (Sec. 103-105, IPC)

o The patent owner has the right to grant licenses to third parties, permitting them to use
the patent in exchange for royalties or other payments.

o The patent owner may assign or transfer ownership of the patent to another entity,
effectively transferring exclusive rights over the invention.

o Licensing can be voluntary, but it can also be subject to government-imposed

compulsory licenses under certain circumstances (discussed under Limitations).

3. Right to Remedies for Infringement (Sec. 76-77, IPC)

 o Patent owners may seek legal remedies for infringement, including injunctions,
damages, or accounts of profits.

o The patent owner may also request the seizure or destruction of infringing goods,
providing additional protection against unauthorized use.

4. Right to Importation

o Patent rights also cover imported products that embody the patented invention,
enabling the patent owner to control not just local manufacturing and sales but also the
entry of infringing imports into the country.

5. Right to Secrecy and Protection of Information

o During the application process, the applicant can request confidentiality regarding
sensitive information related to the patent. This helps maintain the confidentiality of
technical details until the patent is published.

III. Limitations on the Rights of the Patent Owner

1. Doctrine of Exhaustion

o Once a patented product is sold by or with the consent of the patent owner, the
owner’s control over that specific product is “exhausted.” Subsequent resale or use of
the product is not subject to the patent owner’s exclusive rights, limiting the owner's
power over previously sold products.

2. Compulsory Licensing (Sec. 93-100, IPC)

o The Philippine government may issue a compulsory license if:

 The invention is not available to the public at a reasonable cost.

 The invention is needed for public health, national security, or other critical
issues.

 Anti-competitive practices are suspected.

o This measure ensures public access to essential technologies, especially in cases like
pharmaceuticals or public utilities.

3. Parallel Importation

o Under specific conditions, a patented product legally sold in another jurisdiction may be
imported into the Philippines without the patent owner’s consent. This concept aligns
 with the doctrine of international exhaustion, promoting access to affordable products
and preventing monopolistic pricing.

4. Government Use (Sec. 74, IPC)

o The Philippine government has the right to use patented inventions without the patent
owner’s consent for non-commercial, governmental purposes. This is especially
applicable during emergencies or in the interest of public welfare.

o Compensation must be paid to the patent owner, but the government’s use bypasses
typical patent rights for a limited scope and duration.

5. Research and Experimental Use Exception (Sec. 72.4, IPC)

o This exception permits the use of a patented invention for research and experimental
purposes without infringing on the patent.

o Non-commercial use by researchers, educators, or scientists is permissible, provided it is

intended for knowledge advancement and not for direct profit.

6. Bolar Provision (Sec. 72.3, IPC)

o The Bolar Provision permits third parties to use a patented invention, without
infringement, for regulatory approval purposes. This is particularly relevant in the
pharmaceutical industry, where companies may develop generic versions of a drug
during the patent term to be ready for market release immediately after patent
expiration.

7. Use of the Invention in Foreign Vessels or Aircrafts Temporarily in the Philippines (Sec. 72.1,
IPC)

o Foreign vessels, aircraft, or vehicles entering Philippine jurisdiction temporarily may use
patented inventions without permission if these inventions are utilized as part of their
operations, provided such use is non-commercial and incidental.

8. Regulatory Approval Exception (Sec. 72.5, IPC)

o Inventions requiring regulatory approval, like pharmaceuticals or biotechnologies, may

be used for the purpose of securing government clearance without constituting patent
infringement.

9. Limitations Under Competition Law

o Philippine law restricts the use of patents to prevent anti-competitive practices. Abusive
licensing, monopolistic practices, or price manipulation by the patent owner may
subject them to legal action or mandatory licensing provisions.
 o Competition law ensures that patent rights do not unduly stifle market competition or
harm consumer welfare.

IV. Duration and Expiration of Patent Rights

1. Patent Term (Sec. 54, IPC)

o The standard duration of a patent in the Philippines is 20 years from the filing date.
Upon expiration, the invention enters the public domain, and anyone can use,
manufacture, or sell it without infringing on former patent rights.

2. Renewal and Maintenance Fees (Sec. 55, IPC)

o Patent owners are required to pay periodic maintenance fees to retain the
enforceability of their patent. Failure to pay these fees may result in the lapse of the
patent, placing the invention in the public domain before the 20-year term.

3. Revocation and Nullification of Patents (Sec. 61-66, IPC)

o A patent may be challenged on grounds of invalidity, such as lack of novelty,

inventiveness, or industrial applicability. Courts or the IPO may revoke patents that do
not meet statutory requirements, nullifying the patent owner’s rights.

How do I determine whether a patent is infringed?

There are three steps involved:

1. Discovering the details of the accused activity;

2. Studying the claims of the patent; and

3. Comparing the accused activity to the patent claims.

In some cases, the first step is easy. For example, to learn about a mechanical device being sold to the
public, you may simply purchase and examine it. In addition, useful information can also be found in
advertising materials, on web sites, and in patents owned by the suspected company.

In other cases, more investigation is required, such as when the patent covers a particular
manufacturing process that is used in secret to make a product.

Care must be taken when you are investigating a possible infringement, however, so as to not violate
any of the competitor’s rights. For example, you may not induce a competitor’s employees or its
customers to violate a confidentiality agreement.

Assessing whether an accused activity infringes requires the right expertise. In general terms, a patent’s
scope is defined by the limitations of its “claims,” which are listed at the end of the patent. If any one
claim is infringed, the patent as a whole is infringed. To literally infringe a claim, each and every
limitation of the claim must be met. The analysis proceeds word-by-word or clause-by-clause to see if
each is found in an accused device or process.

For a simple example, consider a patent that describes a typical four-legged dining room chair and has a
claim for:

a) a sitting device, comprising:

b) a substantially planar surface to support a person; and

c) at least three legs, each coupled to the surface, to support the surface.

You will note that this claim does not recite the back of the chair or four legs. Nonetheless, it still covers
a chair with a back and four legs. This is because of the use of the term “comprising” which means
“including but not limited to.” Therefore, a stool with three legs would likely infringe, even though its
appearance (no back, three legs) is different from that of a dining room chair which has a back and four
legs. The stool (a) is a sitting device, (b) has a flat top surface that can support a person and (c) has at
least three legs,

connected to the bottom of the flat top surface, to support it. A bean bag chair or a large cylinder,
however, likely would not be found to infringe—neither has “at least three legs.”

When a claim limitation is not met literally, a patent owner may have a second chance to prove
infringement (depending on the prosecution history of the patent) by asserting the “doctrine of
equivalents.” Here, the patent owner would argue that the accused product or process is so close to
meeting the literal language of a claim that it would be unreasonable to find no infringement. In other
words, the patent owner would assert that it performs substantially the same function in substantially
the same way to achieve substantially the same result.
In our example above, if a chair had three legs coupled to a post, or platform, which was coupled to the
sitting surface, it might be argued that such a chair infringes the hypothetical patent claim described
above under the doctrine of equivalents.

Patent Infringement | Patents | INTELLECTUAL PROPERTY

MERCANTILE AND TAXATION LAWS

Patent Infringement in Philippine Mercantile and Taxation Law

Introduction to Patent Infringement

Patent infringement in the Philippines is primarily governed by the Intellectual Property Code of the
Philippines (Republic Act No. 8293), which outlines the rights of patent holders, the nature of patent
infringement, and the remedies available. Patent infringement occurs when a third party, without
permission or authorization from the patent holder, makes, uses, sells, offers for sale, or imports a
patented invention within the Philippines. This infringement disrupts the patent holder’s exclusive rights
to their invention, potentially leading to legal recourse.

Key Elements of Patent Infringement

1. Patent Holder's Exclusive Rights: The patent holder has the right to exclude others from:

o Making the patented product,

o Using the patented process,

o Selling or offering for sale the patented invention,

o Importing the patented product or any product made using the patented process.

2. Acts Constituting Infringement: Infringement can occur through direct or indirect means:

o Direct Infringement: Occurs when an entity manufactures, uses, or sells the patented
invention without permission.

o Contributory Infringement: When a party knowingly provides components or materials

used to infringe on the patent, especially if the components have no substantial non-
infringing use.
 3. Territorial Limitation: Patent rights are territorial, meaning the protection is enforceable within
the Philippines. Importing infringing goods into the Philippines constitutes infringement, as it
infringes on the patent holder's rights within the country.

4. Types of Infringing Products or Processes:

o Literal Infringement: Direct and identical copying or usage of the patented claim.

o Doctrine of Equivalents: Extends to cases where a product or process performs

substantially the same function in substantially the same way to achieve substantially
the same result as the patented invention.

Defenses Against Patent Infringement

Certain defenses are available for those accused of patent infringement:

1. Invalidity of Patent: An accused infringer may challenge the validity of the patent by arguing
that it fails to meet patentability requirements (novelty, inventive step, industrial applicability).

2. Experimental Use Exception: Allows the use of patented inventions for experimental purposes
related to scientific research without infringing on the patent.

3. Prior Use: If a party can prove they were using or exploiting the invention prior to the filing date,
they may avoid infringement claims.

4. Non-Infringing Use: If the use falls outside the patented claims or does not utilize the patented
process, it may not constitute infringement.

Remedies for Patent Infringement

1. Injunctive Relief: The court may issue an injunction to prevent the infringing party from
continuing their infringing activities. This can include temporary restraining orders or permanent
injunctions.

2. Damages: Patent holders may be entitled to monetary damages, which can include:

o Actual Damages: Based on losses suffered by the patent holder due to infringement.

o Reasonable Royalty: When actual damages are difficult to quantify, the court may
award a reasonable royalty.

o Punitive Damages: In cases of willful infringement, the court may award damages to
deter future infringing behavior.

3. Seizure and Destruction of Infringing Goods: Courts can order the seizure and destruction of
infringing products and materials used in the production of infringing goods.
 4. Attorney's Fees and Costs: The infringer may be required to cover the patent holder’s legal fees,
particularly if the infringement is proven to be willful.

Jurisdiction and Enforcement in the Philippines

1. Intellectual Property Office (IPO): The Intellectual Property Office of the Philippines (IPO)
provides administrative recourse for patent holders, including mediation services and issuance
of cease-and-desist orders.

2. Regional Trial Courts (RTC): In cases of patent infringement, the RTC holds jurisdiction, and
decisions can be appealed to higher courts.

3. Border Enforcement: The IPO collaborates with the Bureau of Customs to prevent the
importation of infringing products into the country.

Procedural Requirements for Patent Infringement Cases

To initiate a patent infringement case, the complainant must:

1. Prove Ownership: Present a valid and enforceable patent registered with the IPO.

2. Provide Evidence of Infringement: Detailed proof of the alleged infringing acts, including
comparative analysis of the infringing product/process against the patent claims.

3. Notification: In some cases, particularly with contributory infringement, it may be necessary to

notify the infringer of the patent and demand they cease their infringing activities.

Penalties and Fines

The penalties for patent infringement can include civil liabilities (damages and injunctions) as well as
criminal penalties, especially in cases of willful or repeated infringement. Criminal sanctions may include
imprisonment and fines based on the value of the infringement, although civil remedies are generally
pursued.

Key Precedents and Interpretations

The Philippines aligns its patent laws with international treaties like the TRIPS Agreement (Trade-Related
Aspects of Intellectual Property Rights), affecting how local courts interpret patent infringement cases.
Recent jurisprudence in Philippine courts has highlighted several key aspects:

1. Interpretation of Claims: Courts prioritize the "claims" section of a patent when determining
infringement, applying either literal interpretation or the doctrine of equivalents based on
context.

2. Good Faith Defense: Some decisions have considered the infringer's good faith, though it does
not necessarily absolve liability; it may impact the severity of damages.
 3. Exhaustion Doctrine: Once a patented product is sold, the patent holder’s rights to control its
subsequent resale or use are "exhausted."

triple identity test or function-means-result test will only be satisfied if both processes perform
substantially the same functions and accomplish substantially the same result of curing tuna meat by
using substantially the same means. Here, the function and result of the processes are substantially the
same, but the means used by the parties to cure the tuna meat are different. Phillips' use of ambient
temperature filtered smoke is a substantial change because Patent I-31138 does not cover the use of
filtered smoke with a temperature above 5°C. As discussed, the use of reactants with higher
temperatures speeds up the rate of reaction, and eventually the curing process. More, no evidence was
presented to prove that the simultaneous cooling of the filtered smoke and meat will produce the same
high preservative and sterilizing effects as that of pre-cooling filtered smoke. The quality of the
preservative and sterilizing effects are relevant because Patent I-31138's innovative concept is to
achieve the maximum quality of filtered smoke by cooling it to between 0° and 5°C. Hence, the means
used in Phillip's process are not substantially the same as that in Patent I-31138.

insubstantial difference test on a patented process. Under the insubstantial difference test, there is
patent infringement when the infringer appropriates the patent but adopts insubstantial changes. The
change is insubstantial if a person skilled in the art is aware that the change is a mere substitute for the
replaced element.
Patents; Rights Over the Invention (1990)Cheche invented a device that can convert rainwater into
automobile fuel. She askedMacon, a lawyer, to assist in getting her invention patented. Macon
suggested that theyform a corporation with other friends and have the corporation apply for the
patent, 80%of the shares of stock thereof to be subscribed by Cheche and 5% by Macon.
Thecorporation was formed and the patent application was filed. However, Cheche died 3months
later of a heart attack.Franco, the estranged husband of Cheche, contested the application of the
corporationand filed his own patent application as the sole surviving heir of Cheche. Decide theissue
with reasons.SUGGESTED ANSWER:

The estranged husband of Checke cannot successfully contest the application. The right overinventions
accrue from the moment of creation and as a right it can lawfully be assigned. Oncethe title thereto is
vested in the transferee, the latter has the right to apply for its registration.The estranged husband of
Cheche, if not disqualified to inherit, merely would succeed to theinterest of Cheche.

Note: An examinee who answers on the basis of the issue of validity of the transfer of patent asa valid
consideration for subscription of the shares of stocks should be given due credit.

Patents; Infringement (1992)In an action for infringement of patent, the alleged infringer defended
himself by stating

1) that the patent issued by the Patent Office was not really an invention which waspatentable;2) that
he had no intent to infringe so that there was no actionable case for infringement;and3) that there
was no exact duplication of the patentee’s existing patent but only a minorimprovement. With those
defenses, would you exempt the alleged violator from liability?Why?SUGGESTED ANSWER:

I would not exempt the alleged violator from liability for the following reasons: 1) A patent onceissued
by the Patent Office raises a presumption that the article is patentable; it can, howeverbe shown
otherwise (Sec 45 RA 165). A mere statement or allegation is not enough to destroythat presumption.
(Aquas v de Leon 30 Jan 82 L- 32160)2) An intention to infringe is not necessary nor an element in a case
for infringement of a patent.3) There is no need of exact duplication of the patentee’s existing patent
such as when theimprovement made by another is merely minor (Frank vBenito, 51p713). To be
independently patentable, an improvement of an existing patentedinvention must be a major
improvement (Aquas v de Leon L-32160 30Jan82)
Patents: Infringement; Remedies & Defenses (1993)Ferdie is a patent owner of a certain invention. He
discovered that his invention is beinginfringed by Johann.

1) What are the remedies available to Ferdie against Johann?2) If you were the lawyer of Johann in
the infringement suit, what are the defenses thatyour client can assert?SUGGESTED ANSWER:

1) The following remedies are available to Ferdie against 2) These are the defenses that can beasserted
in an infringement suit:Patent is invalid (Sec 45 RA 165, as amended)Patent is not new or
patentableSpecification of the invention does not comply with Sec 14Patent was issued not to the true
and actual inventor, designer or author of the utility model orthe plaintiff did not derive his rights from
the true and actual inventor, designer or author of theutility model (Sec 28 RA 165 as amended)

2005 Bar Exam

PATENTS (2005)

Cesar works in a car manufacturing company owned by Joab. Cesar is quite innovativeand loves to
tinker with things. With the materials and parts of the car, he was able toinvent a gas-saving device
that will enable cars to consume less gas. Francis, a co-worker saw how Cesar created the device and
likewise came up with a similar gadget,also using scrap materials and spare parts of the company.
Thereafter, Francis anapplication for registration of his device with the Bureau of Patents. 18 months
later,Cesar filed his application for the registration of the device with the Bureau of Patentsa. Is the
gas-saving device patentable?b. Assuming that it is patentable, who is entitled to the patent? What if
any is the remedyof the losing partyc. Supposing Joab got wind of the inventions of his employees and
also laid a claim tothe patents. Asserting that cesar and francis where using materials and company
time inmaking the devices will his claim prevail over those of his employees?SUGGESTED ANSWERS:

a. It is patentable because it is new. It involves an inventive step and its industry applicable (Sec21
IPC)b. Francis is entitled to patent, because he has earlier filing date (sec 29 IPC). The remedy ofCesar is
to file a petition in court for the cancellation of the patent of Francis on the ground thathe is the true
and actual inventor and ask for substitution as patentee (sec 67-68 IPC)c. The claim of Joab will not
prevail over those of his employees, even if they used his materialsand company time in making the gas-
saving device. The invention of the gas-saving device isnot part of their regular duties as employees (sec
30.2(a) IPC)

2006 Bar Exam

PATENTS (2006)

Supposing Albert Einstein were alive today and he filed with the Intellectual PropertyOffice an
application for patent of his theory of relativity expressed in the formula E=mc

.The IPO disapproved Einstein application on the ground that his theory if relativity is notpatentableIs
the IPO action correct?SUGGESTED ANSWER:

Yes, the IPO's action is correct that the theory of relativity is not patentable. Under section 22.1of the
IPC.m " discoveries, scientific theories and mathematical methods" are not patentable.

PATENT: NON-PATENTABLE; METHOD OF DIAGNOSIS & TREATMENT (2010)

Dr. Nobel discovered a new method of treating Alzheimer’s involving a special method ofdiagnosing the
disease, treating it with a new medicine that has been discovered afterlong experimentation and field
testing, and novel mental isometric exercises. He comesto you for advice on how he can have his
discoveries protected. Can he legally protecthis new method of diagnosis, the new medicine, and the
new method of treatment? If no,why? If yes, how? (4%)SUGGESTED ANSWER:

Dr. Nobel can be protected by a patent for the new medicine as it falls within the scope of Sec.21 of the
Intellectual Property Code (Rep. Act No. 8293, as amended). But no protection can belegally extended to
him for the method of diagnosis and method of treatment which areexpressly non-patentable (Sec.22,
Intellectual Property Code).---

TRADEMARK; UNFAIR COMPETITION (2010)

For years, Y has been engaged in the parallel importation of famous brands, includingshoes carrying the
foreign brand MAGIC. Exclusive distributor X demands that Y ceaseimportation because of his
appointment as exclusive distributor of MAGIC shoes in thePhilippines. Y counters that the trademark
MAGIC is not registered with the IntellectualProperty Office as a trademark and therefore no one has
the right to prevent its parallelimportation.a. Who is correct? Why? (2%)SUGGESTED ANSWER:
X is correct. His rights under his exclusive distributorship agreement are property rights entitledto
protection. The importation and sale by Y of MAGIC shoes constitute unfair competition (Yuv.Court of
Appeals, 217 SCRA 328(1993)). Registration of the trademark is not necessary in caseof an action for
unfair competition (Del Monte Corporation v. Court of Appeals, 181SCRA 410(1990)).

ALTERNATIVE ANSWER:

Y is correct. The rights in a trademark are acquired through registration made validly inaccordance with
the Intellectual Property Code (Section 122of the Intellectual Property Code).

b. Suppose the shoes are covered by a Philippine patent issued to the owner, what wouldyour answer
be? Explain. (2%)SUGGESTED ANSWER:

A patent for a product confers upon its owner the exclusive right of importing the product(Subsection
71.1 of the Intellectual Property Code). The importation of a patented productwithout the authorization
of the owner of the patent constitutes infringement of the patent(Subsection 76.1 of the Intellectual
Property Code). X can prevent the parallel importation ofsuch shoes by Y without its authorization.

2011 Bar Exam – No LIP questions

2012 Bar Exam – No LIP questions