1.

to object
a. The object of trademark are goods
b. The object of copyright are original literary and artistic works
c. The object of patent is invention
2. As to term
a. The term of trademark is ten years
b. The term of copyright is generally 50 years
c. The term of patent is 20 years from application
3. As to how acquired
a. Trademark is acquired through registration and use
b. Copyright is acquired from the moment of creation
c. Patent is acquired through application with the IPO

Q: Can an article of commerce serve as a trademark and at the same time enjoy patent and copyright protection? Explain and
give an example. (2010 Bar)

A: A stamped or marked container of goods can be registered as a trademark. An original ornamental design or model
for articles of manufacturer can be copyrighted. An ornamental design cannot be patented, because aesthetic
creations cannot be patented. However, it can be registered as an industrial design. Thus, a container of goods which has
an original ornamental design can be registered as a trademark, can be copyrighted, and can be registered as an
industrial design.

PATENTS

Patentable Inventions

Q: X invented a method of improving the tenderness of meat by injecting an enzyme solution into the live animal shortly
before a slaughter. Is the invention patentable? (1989 Bar)

A: To be patentable, the invention must be new and should consist in a useful machine, manufactured product or
process. Among those that cannot be patented are processes which are not directed to making or improving a
commercial product. Viewed from the above light, X may lawfully patent his invention.

Q: Cezar works in a car manufacturing company owned by Joab. Cezar is quite innovative and loves to tinker with things. With
the materials and part of the car, he was able to invent a gas-saving device that will enable cars to consume less gas. Francis,
a co-worker, saw how
Cezar created the device and likewise, came up with a similar gadget, also using scrap materials and spare parts of the company.
Thereafter, Francis filed an application for registration of his device with the Bureau of Patent.

a. Is the gas-saving device patentable? Explain.

b. Assuming that it is patentable, who is entitled to the patent? What, if any, is the remedy of the losing party?
c. Supposing Joab got wind of the inventions of his employees and also laid claim to the patents, asserting that Cezar
and Francis were using his materials and company time in making the devices will his claim prevail over those of his
employees (2005 Bar)
A:

a. Yes, the gas-saving device is patentable. Sec. 21 of IPL provides that in order that a machine, product, process or
improvement of them may be patented it must be new, it must involve an inventive step and it must be
industrially applicable. The invention is new because it does not form part of prior art; involves an inventive step
and unquestionably industrially applicable for it can be produced as what Francis did though he used scrap
materials instead.
b. Cezar is entitled to the patent. Sec 28 of IPL provides that the right to a patent belongs to the inventor, his heirs,
or assigns. Further, in case the employee made the invention in the course of his employment contract, the patent
belongs to the employee, if the inventive activity is not a part of his regular duties even if he uses the time, facilities
and materials of the employer [Sec 30 (1)]. In this case, Cezar is the inventor. The inventive activity was not part of
Cezar’s regular duties despite the fact that he uses the time, facilities and materials of the employer. Francis
application, however, should be given priority under the “first to file” rule, subject to the right of Cezar to have the
application canceled within three months from the decision as the rightful inventor or to file an action to prove his
priority to the invention within one year from publication.
c. No. Sec. 30(1) explicitly provides that in case the employee made the invention in the course of employment, the
patent belongs to the employee, if the inventive activity is not part of his regular duties even if he uses the time,
facilities and materials of the employer. Joab’s assertion that Cezar and Francis used his materials and company’s
time to lay claim for patent cannot prevail over the clear provision of the law.

Q: Dr. Nobel discovered a new method of treating Alzheimer’s involving a special method of diagnosing the disease, treating
it with a new medicine that has been discovered after long experimentation and field testing, and novel mental isometric
exercises. He comes to you for advice on how he can have his discoveries protected. Can he legally protect his new method
of diagnosis, the new medicine, and the new method of treatment? If no, why? If yes, how? (2010 Bar)

A: 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. But no protection can be legally extended to him for the method of diagnosis and method of
treatment which are expressly non-patentable.

Non-Patentable Inventions
Q: X invented a bogus coin detector which can be used exclusively on self-operating gambling devices otherwise known as
one-armed bandits. Can X apply or a patent? (1989 Bar)

A: X may not apply for the patent since the gambling device mentioned in the problem itself is prohibited and against
public order. But if the machine is used in legalized gambling such as in cases of exclusive use of casinos established
by the government, such device can be patented.

Q: Supposing Albert Einstein were alive today and he filed with the Intellectual Property Office (IPO) an application
for patent for his theory of relativity expressed in the formula E=mc2. The IPO disapproved Einstein's application on the
ground that his theory of relativity is not patentable. Is the IPO's action correct? (2006 Bar)

A: Yes. Under the Intellectual Property Code, discoveries, scientific theories and mathematical methods, are classified to
be as "non-patentable inventions." Einstein's theory of relativity falls within the category of being a non-patentable
"scientific theory"(Sec. 22, IPC as amended by R.A. 9502).

Rights Conferred by a Patent

Q: For years, Y has been engaged in the parallel importation of famous brands, including shoes carrying the foreign brand
MAGIC. Exclusive distributor X demands that Y cease importation because of his appointment as exclusive distributor of
MAGIC shoes in the Philippines. Y countered that the trademark MAGIC is not registered with the Intellectual Property Office as a
trademark and therefore no one has the right to prevent its parallel importation. Suppose the shoes are covered by a
Philippine patent issued to the brand owner, what would your answer be? Explain. (2010 Bar)

A: A patent for a product confers upon its owner the exclusive right of importing the product. The importation of a
patented product without authorization of the owner of a patent constitutes infringement of the patent. X can prevent
the parallel importation of such shoes by Y without its authorization.

Patent Infringement

Q: What is the doctrine of equivalents? (2015 Bar)

A: Under the doctrine of equivalents, infringement of patent occurs when a device appropriates a prior invention by
incorporating its innovative concept and albeit with some modifications and change performs the same function in
substantially the same way to achieve the same result (Godines v. CA, 226 SCRA 338).

Q: 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 was patentable; (2) that he had no intent to infringe so that there
was no actionable case for infringement; and (3) that there was no exact duplication of the patentee’s existing patent
but only a minor improvement.

With those defenses, would you exempt the alleged violator from liability? Why? (1992 Bar)

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A: I would not exempt the alleged violator from liability for the following reasons:

1. A patent once issued by the Patent Office raises a presumption that the article is patentable; it can, however be
shown otherwise. A mere statement or allegation is not enough to destroy that presumption.
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 the improvement made by
another is merely minor. To be independently patentable, an improvement of an existing patented invention
must be a major improvement.

Q: Che-che invented a device that can convert rainwater to automobile fuel. She asked Macon, a lawyer, to assist in getting her
invention patented. Macon suggested that they form a corporation with other friends and have the corporation apply for a patent,
80% of the shares of stock thereof to be subscribed by Che-che and 5% by Macon. The corporation was formed and the patent
application was filed. However, Che-che died 3 months later of a heart attack.

Franco, the estranged husband of Che-che, contested the application of the corporation and filed his own patent application
as the sole surviving heir of Che-che. Decide the issue with reasons. (1990 Bar)

A: The estranged husband of Che-che cannot successfully contest the application. The right over inventions accrue
from the moment of creation and as a right it can lawfully be assigned. Once the title thereto is vested in the
transferee, the latter has the right to apply for its registration. The estranged husband of Che-che, if not disqualified
to inherit, merely would succeed to the interest of Che-che.

Q: Ferdie is a patent owner of a certain invention. He discovered that his invention is being infringed 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 that your client can assert? (1993
Bar)

A:

1. The following are the remedies available to Ferdie against Johann:

a. Seize and destroy

b. Injunction
c. Damages in such amount may have been obtained from the use of the invention if properly transacted which
can be more than what the infringer (Johann) received.
d. Attorney’s fees and costs.

2. These are the defenses that can be asserted in an infringement suit:

a. Patent is invalid
b. Patent is not new or patentable
c. Specification of the invention does not comply with Sec.14
d. Patent was issued not to the true and actual inventor, designer or author of the utility model or the plaintiff
did not derive his rights from the true

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 and actual inventor, designer or author of the utility model.

TRADEMARKS

Q: Jinggy went to Kluwer University (KU) in Germany for his doctorate degree (Ph.D.). He completed his degree with the
highest honors in the shortest time. When he came back, he decided to set-up his own graduate school in his hometown in
Zamboanga. After seeking free legal advice from his high-flying lawyer- friends, he learned that the Philippines follows
the territoriality principle in trademark law, i.e., trademark rights are acquired through valid registration in
accordance with the law. Forthwith, Jinggy named his school the Kluwer Graduate School of Business of Mindanao and
immediately secured registration with the Bureau of Trademarks. KU did not like the unauthorized use of its name by its top alumnus
no less. KU sought your help. What advice can you give KU? (2014 Bar)

A: I will advice KU to seek for the cancellation of the Kluwer Graduate School of Business of Mindanao with the Bureau
of Trademarks. Jinggy’s registration of the mark “Kluwer” should not have been allowed because the law prohibits the
registration of the mark “which may disparage or falsely suggests a connection with persons, living or dead,
institutions, beliefs”. Moreover, the Philippines is a signatory to the Paris Convention for the Protection of
Intellectual Property (Paris Convention), it is obligated to assure nationals of countries of the Paris Convention that
they are afforded an effective protection against violation of their intellectual property rights in the Philippines. Thus,
under the Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not
the trade name forms part of a trademark, is protected “without the obligation of filing or registration”.

Prior Use of Mark as a Requirement

Q: CHEN, Inc., a Taiwanese company, is a manufacturer of tires with the mark Light Year. From 2009 to 2014, Clark Enterprises,
a Philippine-registered corporation, imported tires from CHEN, Inc. under several sales contracts and sold them herein
the Philippines. In 2015, CHEN, Inc. filed a trademark application with the Intellectual Property Office (IPO) for the mark
Light Year to be used for tires. The IPO issued CHEN, Inc. a certificate of registration (COR) for said mark. Clark Enterprises
sought the cancellation of the COR and claimed it had a better right to register the mark Light Year. CHEN, Inc. asserted that
it was the owner of the mark and Clark Enterprises was a mere distributor. Clark Enterprises argued that there was no evidence
on record that the tires it imported from CHEN, Inc. bore the mark Light Year and Clark Enterprises was able to prove that it
was the first to use the mark here in the Philippines. Decide the case. (2015 Bar)

A: While RA 8293 removed the previous requirement of proof of actual use prior to the filing of an application for
registration of a mark, proof of prior and continuous use is necessary to establish ownership of trademark. Such
ownership of the trademark confers the right to register the trademark. Since Chen owns the trademark as evidenced by
its actual and continuous use prior to the Clark Enterprises, then it is the one entitled to the registration of the
trademark. The fact that Clark was the first one to use the mark here in the Philippines will not matter. Chen’s prior
actual use of the trademark even in another country bars

What will be your advice? (1990 Bar)

A: The application for registration by Turbo Corporation may be contested. The Trademark Law would not allow the
registration of a trademark which, when applied to or used in connection with his products, is merely descriptive or
deceptively misdescriptive of them. Confusion can result from the result from the use of “Axilon” as the generic
product itself.

Tests to Determine Confusing Similarity between Marks

Q: What is the “test of dominancy”? (1996 Bar)

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A: The test of dominancy requires that if the competing trademark contains the main or essential 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. Similarity in size, form and color, while
relevant, is not conclusive.

Q: Skechers Corporation sued Inter-Pacific for trademark infringement claiming that Inter-Pacific used Skechers’
registered “S” logo mark on Inter- Pacific’s shoe products without its consent. Skechers has registered the trademark
“SKECHERS” and the trademark “S” (with an oval design) with the Intellectual Property Office (IPO).

In its complaint, Skechers points out the following similarities: the color scheme of the blue, white and gray utilized
by Skechers. Even the design and “wave- like” pattern of the mid-sole and outer sole of Inter- Pacific’s shoes are very
similar to Skechers’ shoes, if not exact patterns thereof. On the side of Inter-Pacific’s shoes, near the upper part, appears
the stylized “S” placed in the exact location as that of the stylized “S” the Skechers shoes. On top of the “tongue” of both
shoes, appears the stylized “S” in practically the same location and size.

In its defense, Inter-Pacific claims that under the Holistic Test, the following dissimilarities are present: the mark “S”
found in Strong shoes is not enclosed in an “oval design”; the word “Strong” is conspicuously placed at the backside and
insoles; the hang tags labels

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attached to the shoes bear the word “Strong” for Inter- Pacific and Skeckers U.S.A.” for Skechers; and, Strong shoes modestly
priced compared to the cost of Skechers shoes.

Under the foregoing circumstances, which is the proper test to be applied—Holistic or Dominancy Test? Decide. (2014 Bar)

A: The proper test to be applied is the dominancy test. Applying the dominancy test, there is a confusing similarity
“Skechers” rubber shoes and “Strong” rubber shoes. The use of the stylized “S” by Inter-Pacific in its Strong Shoes
infringes on the trademark “Skechers” already registered by Skechers U.S.A. with the IPO. While it is undisputed that
Skechers U.S.A. stylized “S” is within an oval design, the dominant feature of the trademark is stylized “S” as it is
precisely the stylized “S” which catches the eye of the purchaser (Skechers, USA, Inc. v. Inter-Pacific Industrial
Trading, Nov. 30, 2006).

Well-Known Marks

Q: S Development Corporation sued Shangrila Corporation for using the “S” logo and the tradename “Shangrila.” The
former claims that it was the first to register the logo and the tradename in the Philippines and that it had been using the
same in its restaurant business.

Shangrila Corporation counters that it is an affiliate of an international organization which has been using such logo and
tradename “Shangrila” for over 20 years.

However, Shangrila Corporation registered the tradename and logo in the Philippines only after the suit was filed.

a. Which of the two corporations has a better right to use the logo and the tradename? Explain.
b. How does the international affiliation of Shangrila Corporation affect the outcome of the dispute? Explain. (2005 Baar)
A:

a. S Corporation. Sec. 122 of the IPC provides that the rights in a trademark are acquired through valid
registration. Actual prior use in commerce in the Philippines has been abolished as a condition for the
registration of a trademark (Record of the Senate, Vol. II, No. 29, 8 Oct.1996; Journal of the House of
Representatives, No. 35. 12 Nov. 1996, 34).
b. Shangrila’s international affiliation shall result in a decision favorable to it. The Paris Convention mandates that
protection should be afforded to internationally known marks as signatory to the Paris Convention, without
regard as to whether the foreign corporation is registered, licensed or doing business in the Philippines.
Shangrila’s separate personalities from their mother corporation cannot be an obstacle in the enforcement of
their rights as part of the Kuok Group of Companies and as official repository, manager and operator of the subject
mark and logo. Besides, R.A. No. 166 did not require the party seeking relief to be the owner of the mark but "any
person who believes that he is or will be damaged by the registration of a mark or trade name." (Shangri-la
International Hotel Management v. Developers Group of Companies, Inc. G.R. No. 159938).

Rights Conferred by Registration

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Q: For years, Y has been engaged in the parallel importation of famous brands, including shoes carrying the foreign brand
MAGIC. Exclusive distributor X demands that Y cease importation because of his appointment as exclusive distributor of
MAGIC shoes in the Philippines. Y countered that the trademark MAGIC is not registered with the Intellectual Property Office as a
trademark and therefore no one has the right to prevent its parallel importation. Who is correct? Why? (2010 Bar)

A: X is correct. His rights under his exclusive distributorship agreement are property rights entitled to protection. The
importation and sale by Y of MAGIC shoes constitutes unfair competition. Registration of the trademark is not necessary
in case of an action for unfair competition.

Q: Laberge, Inc. manufactures and markets after-shave lotion, shaving cream, deodorant, talcum powder and toilet soap, using
the trademark “PRUT”, which is registered with the Philippine Patent Office. Laberge does not manufacture briefs and
underwear and these items are not specified in the certificate of registration.

JG, who manufactures briefs and underwear, wants to know whether, under our laws, he can use and register the trademark “PRUTE”
for his merchandise. What is your advice? (1994 Bar)

A: Yes. The trademark registered in the name of Laberge, Inc. covers only after-shave lotion, shaving cream,
deodorant, talcum powder and toilet soap. It does not cover briefs and underwear.

The limit of the trademark is stated in the certificate issued to Laberge, Inc. It does include briefs and underwear which
are different products protected by Laberge’s trademark.

JG can register the trademark “PRUTE” to cover its briefs and underwear.

Infringement and Remedies

Q: SONY is a registered trademark for TV, stereo, radio, cameras, betamax and other electronic products. A local company,
Best Manufacturing, Inc., produced electric fans which it sold under the trademark’s SONY without the consent of SONY. SONY
sued Best Manufacturing for infringement. Decide the case. (1991 Bar)

A: In order that a case for infringement of trademark can prosper, the products on which the trademark is used must
be of the same kind. The electric fans produced by Best Manufacturing cannot be said to be similar to such products as
TV, stereo and radio sets or cameras or betamax products of SONY.

Q: While vacationing in Boracay, Valentino surreptitiously took photographs of his girlfriend Monaliza in her skimpy
bikini. 2 weeks later, her photograph appeared in the Internet and in a national celebrity magazine.

Monaliza found out that Valentino had sold the photograph to the magazine and, adding insult to injury, uploaded
them to his personal blog on the Internet.

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1. Monaliza filed a complaint against Valentino for damages based on, among other grounds, violation of her intellectual
property rights. Does she have any cause of action? Explain.

A: No. Monaliza cannot sue Valentino for violation of her intellectual property rights, because she was not the one
who took the pictures. She may sue Valentino instead for violation of her right to privacy. He surreptitiously took
photographs of her and then sold the photographs to a magazine and uploaded them to his personal blog in the
Internet.

2. Valentino’s friend Francesco stole the photographs and duplicated them and sold them to a magazine publication. Valentino
sued Francesco for infringement and damages. Does Valentino have any cause of action? Explain.

A: No. Valentino cannot sue Francesco for infringement, because he has already sold the photographs to a magazine.

3. Does Monaliza have any cause of action against Franceso? Explain. (2010 Bar)

A: Yes. Monaliza can also sue Francesco for violation of her right to privacy.

Q: In intellectual property cases, fraudulent intent is not an element of the cause of action except in cases involving:

a. Trademark infringement
b. Copyright infringement
c. Patent infringement
d. Unfair competition (201 4 Bar) A: a. Trademark infringement

Q: What is the distinction between trademark infringement and unfair competition? (1996, 2015 Bar)

A: The distinctions between infringement and unfair competition are the following:

1. Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off
of one's goods as those of another.
2. In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is
essential.
3. In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in
unfair competition registration is not necessary (Del Monte Corp. vs. CA, G.R. No. L-78325, January 25, 1990).

Q: K-9 Corporation, a foreign corporation alleging itself to be the registered owner of trademark “K-9” and logo “K”, filed
an Inter Partes case with the Intellectual Property Office against Kanin Corporation for the cancellation of the latter’s
mark “K-9” and logo “K.” During the pendency of the case before the IPO, Kanin Corporation brought suit against K-9
Corporation before the RTC for infringement and damages. Could the action before the RTC prosper? Why? (2003 Bar)

A: Yes, the action before the RTC can prosper. According to Sec. 151.2 of the IPC, the filing of a suit to enforce the
registered mark with the proper court or agency shall exclude any other court or agency from assuming jurisdiction
over a subsequently filed petition to cancel the

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same mark. On the other hand, the earlier filing of petition to cancel the mark with the Bureau of Legal Affairs shall not
constitute a prejudicial question that must be resolved before an action to enforce the rights to same registered mark
may be decided. The issues raised before the different the IPO and the RTC are different. The issue raised before the
IPO is whether or not the cancellation of the subsequent trademark is proper because of the prior ownership of the
disputed mark by K-9. While the issue raised before the RTC pertains to infringement. Furthermore, an action for
infringement or unfair competition, as well as the remedy of injunction and relief for damages, is explicitly and
unquestionably within the competence and jurisdiction of ordinary courts (Shangri-la International Hotel
Management v. Makati Shangri-la Hotel and Resort Inc., G.R. No. 111580. June 21, 2001).

Q: After disposing of his last opponent in only two rounds in Las Vegas, the renowned boxer Sonny Bachao arrived at the
NAIA met by thousands of hero- worshipping fans and hundreds of media photographers. The following day, a colored
photograph of Sonny wearing a black polo short embroidered with the 2-inch Lacoste crocodile logo appeared on the
front page of every Philippine newspaper.

Lacoste International, the French firm that manufactures Lacoste apparel and owns the Lacoste trademark, decided
to cash in on the universal popularity of the boxing icon. It reprinted the photographs, with the permission of
the newspaper publishers, and went on a world-wide blitz of print commercials in which Sonny is shown wearing a Lacoste
shirt alongside the phrase “Sonny Bachao just loves Lacoste”.

When Sonny sees the Lacoste advertisements, he hires you as a lawyer and asks you to sue Lacoste International before
a Philippine court:

a) For trademark infringement in the Philippines because Lacoste International used his image without his permission.

A: Sonny Bachao cannot sue for infringement of trademark. The photographs showing him wearing a Lacoste shirt were
not registered as a trademark.

b) For copyright infringement because of the unauthorized use of the published photographs.

A: Sonny Bachao cannot sue for infringement of copyright for the unauthorized use of the photographs showing him
wearing a Lacoste shirt. The copyright to the photographs belong to the newspaper which published them inasmuch
as the photographs were the result of the performance of the regular duties of the photographers. Moreover, the
newspaper publishers authorized the reproduction of the photographs.

c) For injunction in order to stop Lacoste International from featuring him in their commercials.
Will these actions prosper?

A: The complaint for injunction to stop Lacoste International from featuring him in its advertisements will prosper.
This is a violation of subsection 123.4(c) of the IPC and Art. 169 in relation to Article 170 of the RPC.

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d) Can Lacoste International validly invoke the defense that it is not a Philippine company and, therefore, Philippine
courts have no jurisdiction? Explain. (2009 Bar)

A: No. Philippine courts have jurisdiction over it, if it is doing business in the Philippines. Moreover, under Section 133
of the Corporation Code, while a foreign corporation doing business in the Philippines without license to do
business, cannot sue or intervene in any action, it may be sued or proceeded against before our courts or
administrative tribunal.

Unfair Competition

Q: In what ways would a case for infringement of trademark be different from a case for unfair competition? (2015
Bar)

A:

1. In infringement of trademark, prior registration of the trademark is a prerequisite to the action, whereas in
unfair competition, trademark registration is not necessary.
2. Trademark infringement is the unauthorized use of the registered trademark, while unfair competition is the
passing off of one’s goods as those of another.
3. In infringement of trademark, fraudulent intent is unnecessary, whereas in unfair competition, fraudulent intent is
essential.

Q: In what way is an infringement of a trademark similar to that which pertains to unfair competition? (2003 Bar)

A: The similarity lies in both their ability to disrupt fair competition amongst business enterprises and other
businesses. They can also create confusion, mistake, and deception as to the minds of the consumers with regard to
the source or identity of their products or services due to its similarity in appearance or packaging.

Q: N Corporation manufactures rubber shoes under the trademark “Jordann” which hit the Philippine Market in 1985, and registered
its trademark with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) in 1990. PK Company also manufactures
rubber shoes with the trademark “Javorski” which it registered with the BPTTT in 1978.

In 1992, PK Company adopted and copied the design of N Corporation’s “Jordann” rubber shoes, both as to shape and color,
but retained the trademark “Javorski” on its products.

May PK Company be held liable to N Corporation? Explain. (1996 Bar)

A: PK may be held liable for unfairly competing against N Corporation. By copying the design, shape and color of N’s
“Jordann” rubber shoes and using the same in its rubber shoes trademarked “Javorski”, PK is obviously trying to pass
off its shoes for those of N. It is of no moment that the trademark “Javorski” was registered ahead of the
trademark “Jordann”. Priority in registration is not material in an action for infringement of trademark. The basis of an
action for unfair competition is confusing and misleading similarly in general
Clark from applying for the registration of the same trademark. Also, a mere distributor does not own the trademark to the
goods he distributes and his right over the trademark cannot prevail over the owner (E.Y Industrial Sales v. Shien Dar Electricity
and Machinery, GR no. 184850, Oct. 20, 2010; Ecole de Cuisine Manille v. Renaud Cointreau, GR 185830, June 5, 2013).

Non-Registrable Marks

Q: In 1988, the FDA approved the labels submitted by Turbo Corporation for its new drug brand name, “Axilon”. Turbo
is now applying with the Bureau of Patents, Trademarks and Technology Transfer for the registration of said brand name.
It was subsequently confirmed that “Accilonne” is a generic term for a class of anti-fungal drugs and is used as such by
the medical professional and the pharmaceutical industry, and that it is used as generic chemical name in various scientific
and professional pubQ: BV agreed to sell to AC, a Ship and Merchandise Broker, 2500 cubic meters of logs at $27
per cubic meter FOB. After inspecting the logs, CD issued a purchase order.

On the arrangements made upon instruction of the consignee, H &T Corporation of LA, California, the SP Bank of LA issued
an irrevocable letter of credit available at sight in favor for the total purchase price of the logs. The letter of credit
was mailed to FE Bank with the instruction “to forward it to the beneficiary”. The letter of credit provided that the
draft to be drawn is on SP Bank and that it be accompanied by, among other things, a certification from AC, stating that
the logs have been approved prior shipment in accordance with the terms and conditions of the purchase order.

Before loading on the vessel chartered by AC, the logs were inspected by custom inspectors and representatives of
the Bureau of Forestry, who certified to the good condition and exportability of the logs. After loading was completed, the
Chief Mate of the vessel issued a mate receipt of the cargo which stated that the logs are in good condition. However, AC
refused to issue the required certification in the letter of credit. Because of the absence of certification, FE Bank
refused to advance payment on the letter of credit.

a. May FE Bank be held liable under the letter of credit? Explain.

b. Under the facts above, the seller, BV, argued that FE Bank, by accepting the obligation to notify him that the irrevocable
letter of credit has been transmitted to it on his behalf, has confirmed the letter of credit. Consequently, FE Bank
is liable under the letter of credit. Is the argument tenable? Explain. (1993 Bar)

A:

a. FE Bank cannot be held liable under the letter of credit since the certificate is not issued by BV. It is a settled rule
in commercial transactions involving letters of credit that the documents tendered must strictly conform to the
terms of the letter of credit. The tender of documents by the beneficiary (seller) must include all documents
required by the letter. A correspondent bank which departs from what has been stipulated under the letter of
credit, as when it accepts a faulty tender, acts on its own risks and it may not thereafter be able to recover from
the buyer or the issuing bank, as the case may be, the money thus paid to the beneficiary. Thus the rule of strict
compliance. (Feati Bank and Trust Company v. Court of Appeals, G.R. No. 94209, April 30, 1991)
b. The argument made by BV is untenable. The FE Bank in this case is only a notifying bank and not a confirming
bank. It is tasked only to notify and/or transmit the required documents and its obligation ends there. It is not
privy to the contract between the parties, its relationship is only with that of the issuing bank and not with the
beneficiary to whom he assumes no liability.

TRUST RECEIPTS
 LOAN/SECURITY FEATURE

RIGHTS OF THE ENTRUSTER

OBLIGATION AND LIABILITY OF THE ENTRUSTEE

REMEDIES AVAILABLE

WAREHOUSEMAN’S LIEN

Q: S stored hardware materials in the bonded warehouse of W, a licensed warehouseman under the General Bonded Warehouse
Law (Act 3893 as
amended). W issued the corresponding warehouse receipt in the form he ordinarily uses for such purpose in the course of his
business. All the essential terms required under Section 2 of the Warehouse Receipts Law (Act 2137 as amended) are embodied
in the form. In addition, the receipt issued to S contains a stipulation that W would not be responsible for the loss
of all or any portion of the hardware materials covered by the receipt even if such loss is caused by the negligence
of W or his representatives or employees. S endorsed and negotiated the warehouse receipt to B, who demanded delivery of
the goods. W could not deliver because the goods were nowhere to be found in his warehouse. He claims he is not liable because
of the free-from-liability clause stipulated in the receipt. Do you agree with W’s contention? Explain. (2000 Bar)

A: No. I do not agree with the contention of W. the stipulation that W would not be responsible for the loss of all or
any portion of the hardware materials covered by the receipt even if such loss is caused by the negligence of W or his
representative or employees is void. The law requires that a warehouseman should exercise due diligence in the care
and custody of the things deposited in his warehouse.

Q: A Warehouse Company received for safekeeping 1000 bags of rice from a merchant. To evidence the transaction, the
Warehouse Company issued a receipt expressly providing that the goods be delivered to the order of said merchant.

A month after, a creditor obtained judgment against the said merchant for a sum of money. The sheriff proceeded to levy
on the rice and directed the Warehouse Company to deliver to him the deposited rice.

a. What advice will you give the Warehouse Company? Explain your answer.
b. Assuming that a week prior to the levy, the receipt was sold to a rice mill on the basis of which it filed a claim with the
sheriff. Would the rice mill have better rights to the rice than the creditor? Explain your answer. (1999 Bar)

A:

a. The 1000 bags of rice were delivered to the Warehouse Company by a merchant, and a negotiable receipt was
issued therefore. The rice cannot thereafter, while in possession of the Warehouse Company, be attached by
garnishment or otherwise, or be levied upon under an execution unless the receipt be first surrendered to the
warehouseman, or its negotiation enjoined. The Warehouse Company cannot be compelled to deliver the actual
possession of the rice until the receipt is surrendered to it or impounded by the court.
b. Yes. The rice mill, as a holder for value of the receipt, has a better right to the rice than the creditor. It is rice mill
that can surrender the receipt which is in its possession and can comply with the other requirements which will
oblige the warehouseman to deliver the rice, namely, to sign a receipt for the delivery of the rice, and to pay the
warehouseman’s lien and fees and other charges.

Q: Luzon Warehouse Corporation received from Pedro 200 cavans of rice for deposit in its warehouse for which a negotiable
warehouse receipt was issued. While the goods were stored in the said warehouse, Cicero obtained a judgment against
Pedro for the

6
recovery of a sum of money. The sheriff proceeded to levy upon the goods on a writ of execution and directed the warehouseman
to deliver the goods. Is the warehouseman under obligation to comply with the sheriff’s order? (1998 Bar)

A: No. There was a valid negotiable receipt as there was a valid delivery of 200 cavans of rice for deposit. In such case,
the warehouseman (LWC) is not obliged to deliver the 200 cavans of rice deposited to any person, except to one who
can comply with Section 8 of the Warehouse Receipts law, namely: (1) surrender the receipt of which he is a holder;

(2) willing to sign a receipt for the delivery of the goods; and
(3) pays the warehouseman’s liens, that is, his fees and advances, if any.

The sheriff cannot comply with these requisites, especially the first, as he is not the holder of the receipt.

Q: A purchased from S 150 cavans of palay on credit. A deposited the palay in W’s warehouse. W issued to A a negotiable warehouse
receipt in the name of A. thereafter, A negotiated the receipt to B who purchased the said receipt for value and in good faith.

1. Who has a better right to the deposit, S, the unpaid vendor, or B, the purchaser of the receipt for value and in good faith?
Why?
2. When can the warehouseman be obliged to deliver the palay to A? (1993 Bar)

A:

1. B has a better right than S. The right of the unpaid seller, S, to the goods was defeated by the act of A in endorsing the
receipt to B.
2. The warehouseman can be obliged to deliver the palay to A if B negotiates back the receipt to A. In that case, A
becomes a holder again of the receipt, and A can comply with Sec. 8 of the Warehouse Receipts Law.

Q: To guarantee the payment of a loan obtained from a bank, Raoul pledged 500 bales of tobacco deposited in a warehouse to said
bank and endorsed in blank the warehouse receipt. Before Raoul could pay for the loan, the tobacco disappeared from the
warehouse.

Who should bear the loss—the pledgor or the bank? Why? (1992 Bar)

A: The pledgor should bear the loss. In the pledge of a warehouse receipt the ownership of the goods remain with
depositor or his transferee. Any contract of real security, among them a pledge, does not amount to or result in an
assumption of risk of loss by the creditor. The Warehouse Receipts Law did not deviate from this rule.

Q: When is a warehouseman bound to deliver the goods upon a demand made either by the holder of a receipt for the goods or by
the depositor? (1991 Bar)

A: The warehouseman is bound to deliver the goods upon demand made either by the holder of the receipt for the
goods or by the depositor if the demand is accompanied by

(a) an offer to satisfy the warehouseman’s lien, (b) an offer to surrender the receipt, if negotiable, with such
indorsements as would be necessary for the negotiation thereof, and (c) readiness and willingness to sign when the
goods are delivered if so requested by the warehouseman.
Q: Mr. Bakal deposited with a warehouseman 2 crates
of goods for which he received two warehouse receipts (one for each crate) – one being a negotiable warehouse receipt and the
other a non-negotiable warehouse receipt. Title to both warehouse receipts were transferred on December 1, 1985
to Mr. Tigas. The warehouseman was not notified of the transfer of the receipts. Meanwhile, Mr. Tapang, a judgment creditor
of Mr. Bakal, served a notice of levy over the goods on the warehouseman.

a. Between Mr. Tigas and Mr. Bakal, who would have preference over the goods covered by the negotiable warehouse
receipt? Reasons.
b. Who would have preference over the goods covered by the non-negotiable receipt? Reasons. (1988 Bar)
2. The promissory note is not negotiable since the same is payable to Reliable Motors merely and not “to order or to
bearer” or words of similar import.

Q: Discuss the negotiability or non-negotiability of the following notes:

1. Manila, September 1, 1993 P2, 500.00

I promise to pay Pedro San Juan or order the sum of P2, 500.00

(Sgd.) NOEL CASTRO

2. Manila, June 3, 1993

 A:

a. Mr. Tigas would have preference over the goods covered by the negotiable warehouse receipt (assuming that
there was proper negotiation to him). In negotiation, the transferee’s rights over the goods vests from the very
moment of transfer and the transferee thereupon acquires the direct obligation of the warehouseman to hold the
goods for him.
b. Mr. Tapang, in this case, would have preference over the goods since the transferee of a non-negotiable
warehouse receipt merely acquires (1) rights no better than those of the transferor and (2) the direct obligation of
the warehouseman only upon notice to him of the transfer.

NEGOTIABLE INSTRUMENTS LAW

Q: XXX Corporation (XXX) and its sister company, YYY Corporation (YYY), are both under judicial receivership. The receiver
has the option to sell all or substantially all of the properties of YYY to XXX, or simply merge the two corporations.
Under either option, the requirements under the Corporation Code have to be complied with.
The receiver seeks your advice on whether the Bulk Sales Law will apply to either, or both, options. What will your advice
be? (2009 Bar)

A: I will advice the receiver that the Bulk Sales Law does not apply to both options. Section 8 of the Bulk Sales Law
expressly provides that it will not apply to executors, administrators, receivers, and assignees in insolvency, or
public officers, acting under judicial process. In this case, the receiver is acting under judicial process.

Q: Due to growing financial difficulties, Z Bank was unable to finish construction of its 21-storey building on a prime
lot located in Makati City. Inevitably, the Bangko Sentral ordered the closure of Z Bank and consequently placed it under
receivership. In a bid to save the bank’s property investment, the President of Z Bank entered into a financing agreement with
a group of investors for the completion of the construction of the 21-storey building in exchange for a 10-year lease and
the exclusive option to purchase the building.

a. Is the act of the President valid? Why or why not?

b. Will a suit to enforce the exclusive right of the investors to purchase the property prosper? Reason briefly.
(2007 Bar)

A:

a. No, the bank president’s act is not valid. He had no authority to enter into the financing agreement. Z Bank was
ordered closed and placed under receivership. Control over the properties of Z Bank passed to the receiver. The
appointment of a receiver operates to suspend the authority of the bank and its officers over the bank’s assets
and properties, such authority being reposed in the receiver.
b. No, the exclusive option granted to the investors, having been entered into by one without authority to do so, is
unenforceable. The bank, therefore, cannot be compelled to sell the property. Under Section 30 of the
R.A. No. 7653, New Central Bank Act, the properties of Z Bank should be administered for the benefit of its
creditors. The property in question can be disposed of only for the purpose of paying the debts of Z Bank.

Legal Tender Power

Q: After many years of shopping in the Metro Manila area, housewife HW has developed the sound habit of making cash purchases
only, none on credit. In one shopping trip to Mega Mall, she got the shock of her shopping life for the first time, a store’s
smart salesgirl refused to accept her coins in payment for a purchase worth not more than P100. HW was paying P70 in 25- centavo
coins and P25 in 10-centavo coins. Strange as it may seem, the salesgirl told HW that her coins were not “legal tender”. Do you
agree with the salesgirl in respect of her understanding of “legal tender”? Explain. (2000 Bar)

A: No. The salesgirl’s understanding that coins are not legal tender is not correct. Coins are legal tender in amounts not
exceeding P50 for denominations from 25- centavos and above, and in amounts not exceeding P20 for
denominations 10-centavos and less.

LAW
90ON SECRECY OF BANK DEPOSITS (R.A. NO. 1405, AS AMENDED)
Purpose

Q: The law (RA No. 6832) creating a Commission to Conduct a Thorough Fact-Finding Investigation of the Failed Coup D’Etat
of December 1989, Recommended Measures to Prevent The Occurrence of Similar Attempts at a Violent Seizure of Power and
for Other Purposes, provides that the Commission may ask the Monetary Board to disclose information on and/or grant
authority to examine any bank deposits, trust or investment funds, or banking transactions in the name of and/or to grant
authority to examine any bank deposits, trust or investment funds, or banking transactions in the name of and/or
utilized by a person, natural or juridical, under investigation by the Commission, in any bank or banking institution
in the Philippines, when the Commission has reasonable ground to believe that said deposits, trust or investment
funds, or banking transactions have been used in support or in furtherance of the objectives of the said coup d’etat.

Does not the above provision violate the Law on Secrecy of Bank Deposits (RA No. 1405)? (1991 Bar)

A: The law on Secrecy of Bank Deposits is itself merely a statutory enactment, and it may, therefore, be modified, or
amended (such as by providing further exceptions therefrom), or even repealed, expressly or impliedly, by a
subsequent law. The Secrecy of Bank Deposits Act did not amount to a contract between the depositors and
depositary banks within the meaning of the non- impairment clause of the Constitution. Even if it did, the police
power of the State is superior to the non- impairment clause. RA No, 6832, creating a commission to conduct an
investigation of the failed 1989 coup d’etat and to recommend measures to prevent similar attempts to seize power is
a valid exercise of police power.

Q: Hi Yielding Corporation filed a complaint against five of its officers for violation of Section 31 of the Corporation
Code. The corporation claimed that the said officers were guilty of advancing their personal interests to the prejudice
of the corporation, and that they were grossly negligent in handling its affairs. Aside from documents and contracts, the
corporation also submitted in evidence records of the officers’ U.S. Dollar deposits in several banks overseas – Boston
Bank, Bank of Switzerland, and Bank of New York.

For their part, the officers filed a criminal complaint against the directors of Hi Yielding Corporation for violation
of Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines. The officers alleged that
their bank deposits were illegally disclosed for want of court order, and that such deposits were not even the subject of the
case against them.

a. Will the complaint filed against the directors of Hi Yielding Corporation prosper? Explain.
b. Was there a violation of Bank Secrecy Deposits Law (Republic Act No.1405)? Explain. (2014 Bar)

A:

a. No. Foreign Currency Deposits law applies to foreign currency deposit accounts constituted in the Philippines
and not when constituted abroad. In this instance, the foreign currency deposit was made abroad.
b. No. Sec. 2 of the Law on Secrecy of Bank Deposits provides that 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 instrumentalities, are hereby considered as an absolutely confidential
in nature and may not be examined, inquired or looked into by any person, government official, bureau or office.
It must be noted that Bank Secrecy Deposits Law only applies to deposits with banks in the Philippines and not
when deposited abroad as in the instant case.

Q: X, a government official, has a number of bank accounts in T Bank containing millions of pesos. He also opened several
trust accounts in the same bank which specifically covered the placement and/or investment of funds. X was later charged with
graft and corruption before the Sandiganbayan (SB) by the Ombudsman. The Special Prosecutor filed a motion praying for a court
order authorizing it to look into the savings and trust accounts of X in T Bank. X opposed the motion arguing that the trust
accounts are not “deposits” under the Law on Secrecy of Bank Deposits (Rep. Act. No. 1405). Is the contention of X correct?
Explain. (2016 Bar)

A: The contention of X is not correct. Deposits in the context of the Secrecy of Philippine currency deposits include
deposits of whatever nature and kind. They include funds deposited in the bank giving rise to creditor-debtor
relationship, as well as funds invested in the bank like trust accounts (Ejercito v. Sandiganbayan, G.R. Nos. 157294-95,
Nov. 30, 2006)

Exceptions

Q: A secured a judgment by default against B for a sum of money. To satisfy judgment, A sought the garnishment of the bank
deposit of B with China Bank. The Bank refused.

a. May a writ of garnishment be issued against the bank deposit of B? Reasons.

b. What are the exceptions to the prohibition against disclosure of bank deposits? (1988 Bar)

A:

a. Yes. A writ of garnishment may be issued against the bank deposit of B with China Bank. The Law on Secrecy of
Bank Deposits is merely against inquiry or disclosure of information relative to the funds or property in the
custody of the bank.
b. The exceptions to the prohibitions against disclosure of bank deposits include:
1. Upon the written permission of the depositor;
2. in cases of impeachment;
3. upon order of a competent court in cases of bribery or dereliction of duty or where money deposited or invested
is the subject matter of litigation;
4. in anti-graft and corruption cases; and
5. when authorized by the Monetary Board if it has reasonable ground to believe that such account is being
used or was used to commit a bank fraud.

Q: Socorro received $10, 000 from a foreign bank although she was entitled only to $1, 000. In an apparent plan
to conceal the erroneously sent amount, she opened a dollar account with her local bank, deposited the $10, 000 and
issued 4 checks in the amount of $2, 000 and 1 check for $1, 000 each payable
to different individuals who deposited the same in their respective dollar accounts with different local banks.

The sender bank then brought a civil suit before the RTC for the recovery of the erroneously sent amount. In the course of
the trial, the sender presented testimonies of the bank officials to show that the funds were, in fact, deposited in a bank
by Socorro and paid out to several persons, who participated in the concealment and dissipation of the amount that
Socorro had erroneously received.

Socorro moved to strike out said testimonies from the record invoking the law on secrecy of bank deposits.

If you were the Judge, would you issue an order to strike them out? Why? (1992 Bar)

A: No. I will not strike out the testimonies from the record. The testimonies of bank officials indicating where the
questioned dollar accounts were opened in depositing misappropriated sums must be considered as likewise
involved in litigation—one which is among the excepted cases under the Secrecy of Bank Deposits Act.

Q: Miguel, a Q: X, a dealer of low grade oil, to save on expenses, uses the containers of different companies. Before marketing
to the public his low grade oil, X totally obliterates and erases the brands or marks stenciled on the containers. Y brings
an action against X for unfair competition upon its discovery that its containers have been used by X for his low grade oil.

Is there unfair competition? State briefly your reasons. (1988 Bar)

A: There is no unfair competition, unfair competition is passing off of one’s goods as those of another and requires
fraudulent intent on the part of the user. These elements are not present in the problem.

COPYRIGHTS

Copyrightable Works

Q: What intellectual property rights are protected by the copyright? (1995 Bar)

A: Copyright protects copyright or economic rights which consist of the exclusive right to carry out, authorize, or
prevent the following:

a. reproduction of the work or substantial portion of the work;

b. dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;
c. the first public distribution of the original and each copy of the work by sale or other forms of transfer of
ownership;
d. rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound
recording, a computer program, a compilation of data and other materials or a musical work in graphic form,
irrespective of the ownership of the original or the copy which is the subject of the rental;
e. public display of the original or a copy of the work;
f. public performance of the work; and
g. other communication to the public of the work. (Sec. 177, Intellectual Property Code)

Rights of Copyright Owner

Q: Diana and Piolo are famous personalities in showbusiness who kept their love affair secret. They use a special
instant messaging service which allows them to see one another’s typing on their own screen as each letter key is pressed. When
Greg, the controller of the service facility, found out their identities, he kept a copy of all the messages Diana and Piolo sent
each other and published them. Is Greg liable for copyright infringement? Reason briefly. (2007 Bar)

A: Yes. The messages which Diana and Pablo sent each other fall under the category of letters as provided in Sec.

172.1.d which provides that literary and artistic works, hereinafter referred to as “works,” are original intellectual
creations in the literary and artistic domain protected from the moment of their creation and shall include in particular,
among others , letters. Infringement of such consist in the doing by any person, without the consent of the owner of
the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright.
Reproduction and first public distribution of the work are economic rights of the authors of the work. Such cannot be
done by the person not the author of the work. In this instance, Greg is not the owner of the messages. He merely
copied it without the consent of the authors thereof and subsequently published the same in violation of the latter’s
economic rights.

Rules on Ownership of Copyright

Q: Felix copyrighted the oil painting showing the oath taking of Pres. C. Aquino and Vice-President S. Laurel after the EDSA
revolution. Val engaged an artist to paint the same scene for use as picture postcards. Val then started sending the picture
postcards to his friends abroad. Is there a violation of Felix’s copyright? Reasons. (1989 Bar)

A: While Felix can have a copyright on his own painting which is expressive of his own artistic interpretation of the
event he has portrayed, the scene or the event itself however, is not susceptible to exclusive ownership. Accordingly,
there would be no violation of Felix’s copyright if another painter were to do the similar work.

Q: Solid Investment House commissioned Mon Blanco and his son Steve, both noted artists, to paint a mural for the Main Lobby
of the new building of Solid for a contract price of P2M.

a. Who owns the mural? Explain.

b. Who owns the copyright of the mural? Explain. (1995 Bar)

A:

a. The mural is owned by Solid. It commissioned the work and paid Mon and Steve Blanco P2M for the mural.
b. Even though Solid owns the mural, the copyright of the mural is jointly owned by Mon and Steve, unless there is a
written stipulation to the contrary (Sec. 178.4, IPC).

Q: BR and CT are noted artists whose paintings are highly prized by collectors. Dr. DL commissioned them to paint a mural
at the main lobby of his new hospital for children. Both agreed to collaborate on the project for a total fee of 2 million
Pesos to be equally divided between them. It was also agreed that Dr. DL had to provide all the materials for the painting
and pay for the wages of technicians and laborers needed for the work on the project.

Assume that the project is completed and both BR and CT are fully paid the amount of P2M as artists' fee by DL. Under the law on
intellectual property, who will own the mural? Who will own the copyright in the mural? Why? Explain. (2004 Bar)

A: According to Sec. 178.4 of the IPC, when the work is commissioned by a person other than an employer of the
author, the owner of the work shall be the one who commissioned the work, but the copyright of the work shall be
owned by the person who is responsible for its creation, unless there is a written stipulation to the contrary. Hence, DL
owns the mural while both BR and CT jointly own the copyright thereto. This is so because the mural was
commissioned by DL and a consideration was paid to BR and CT in exchange thereof.

Q: Eloise, an accomplished writer, was hired by Petong to write a bimonthly newspaper column for Diario de Manila, a
newly-established newspaper of which Petong was the Editor-in-chief. Eloise was to be paid P1,

000.00 for each column that was published. In the course of two months, Eloise submitted three columns
which, after some slight editing, were printed in the newspaper. However, Diario de Manila proved unprofitable and
closed only after two months. Due to the minimal amounts involved, Eloise chose not to pursue any claim for payment from
the newspaper, which was owned by New Media Enterprises,

Three years later, Eloise was planning to publish an anthology of her works, and wanted to include the three columns that
appeared in the Diario de Manila in her anthology. She asks for your legal advice:

a. Does Eloise have to secure authorization from New Media Enterprises to be able to publish Diario de Manila columns in
her own anthology? Explain fully.
b. Assume that New Media Enterprises plans to publish Eloise’s columns in its own anthology entitled, “The best
of Diario de Manila.” Eloise wants to prevent the publication of her columns in that anthology since she was never
paid by the newspaper. Name one irrefutable legal argument Eloise could cite to enjoin New Media Enterprises from including
her columns in its anthology. (2008 Bar)

A:

a. No. In the case of a work commissioned by a person other than an employer of the author and who pays for it and
the work is made in pursuance of the commission, the person who so commissioned the work shall have
ownership of work, but the copyright thereto shall remain with the creator, unless there is a written statement to
the contrary. (Sec 178.4, IPL) Thus, though Diario de Manila commissioned the work, it cannot be considered as
its owner because it did not pay Eloise. Ownership and copyright still belong to Eloise. Authorization is no
longer needed to publish Diario de Manila in her anthology because Eloise has moral and economic rights over
her works.
b. The fact that Eloise was not paid, ownership over her work, published in the newspaper, did not vest upon the
latter. She retains full moral and economic rights over it.

Q: In 1999, Mocha Warm, an American musician, had a hit rap single called Warm Warm Honey which he himself composed and
performed. The single was produced by a California record company, Galactic Records. Many noticed that some passages from
Warm Warm Honey sounded eerily similar to parts of Under Hassle, a 1978 hit song by the British rock band Majesty. A copyright
infringement suit was filed in the United States against Mocha Warm by Majesty. It was later settled out of court, with Majesty
receiving attribution as co-author of Warm Warm Honey as well as share in the royalties.

By 2002, Mocha Warm was nearing bankruptcy and he sold his economic rights over Warm Warm Honey to Galactic Records for $10,
000.

In 2008, Planet Films, a Filipino movie producing company, commissioned DJ Chef Jean, a Filipino musician, to produce
an original re-mix of Warm Warm Honey for use in one of its latest films, Astig!. DJ Chef Jean remixed Warm Warm Honey with a
salsa beat, and interspersed as well a recital of a poetic stanza by John Blake, a 17th century Scottish poet. DJ Chef Jean died
shortly after submitting the remixed Warm Warm
Honey to Planet Films.

Prior to the release of Astig!, Mocha Warm learns of the remixed Warm Warm Honey and demands that he be publicly identified as
the author of the remixed song in all the CD covers and publicity releases of Planet Films.

a. Who are the parties or entities entitled to be credited as author of the remixed Warm Warm Honey? Reason out
your answers.
b. Who are the particular parties or entities who exercise copyright over the remixed Warm Warm Honey? Explain. (2008
Bar)
A:

a. Mocha Warm, Majesty and Chef Jean are entitled to be credited as authors of the remixed Warm Warm Honey,
because it is their joint work. Mocha Warm retained his moral right to be credited as an author of the remixed
Warm Warm Honey despite the sale of his economic rights to Galactic Records, because his moral rights exist
independently of his economic rights. John Blake cannot be credited for the use of his work because copyright
extends only during the lifetime of the author and 50 years after his death.
b. The copyright over the remixed Warm Warm Honey belongs to Galactic records, Majesty, and Chef Jean. The
copyright of Mocha Warm belongs to Galactic Records, because he assigned it to Galactic Records. Majesty also has
a copyright, because it is a co- author. The copyright of Chef Jean belongs to him even if his work was
commissioned by Planet Firm, because the copyright remained with him.

Q: Rudy is a fine arts student in a university. He stays in a boarding house with Bernie as his roommate. During his free time,
Rudy would paint and leave his finished works lying around the boarding house. One day, Rudy saw one of his works - an abstract
painting entitled Manila Traffic Jam - on display at the university cafeteria. The cafeteria operator said he purchased
the painting from Bernie who represented himself as its painter and owner. Rudy and the cafeteria operator immediately
confronted Bernie. While admitting that he did not do the painting, Bernie claimed ownership of its copyright since he had
already registered it in his name with the National Library as provided in the Intellectual Property Code. Who owns the
copyright to the painting? Explain. (2013 Bar)

A: Rudy owns the copyright to the painting because he was one who actually created it (Sec. 178.1 of the IPC). His rights existed
from the moment of its creation (Sec. 172; Unilever Philippines (PRC) v. CA, 498 SCRA 334, 2006). The registration of the
painting by Bernie with the National Library did not confer copyright upon him. The registration is merely for the purpose of
completing the records of the National Library (Section 191).

Doctrine of Fair Use

Q: X copyrighted a scientific research paper consisting of 50 pages dealing with the Tasadays. Y wrote a 100- page review of
X’s paper criticizing X’s findings and dismissing X’s story as a hoax. Y’s review literally reproduced 90% of X’s
paper. Can X sue Y for infringement of his copyright? (1989 Bar)

A: The Copyright Law provides that to an extent compatible with fair practice and justified by scientific, critical,
informatory or educational purpose, it is permissible to
104
make quotations or excerpts from a work already made accessible to the public. Such quotations may be utilized in
their original form or in translation. Viewed from the foregoing, a review by another that “literally reproduced 90%”
of the research work done by X may no longer be considered as fair play, and X can sue Y for the violation of the
copyright.

Q: May a person have photocopies of some pages of the book of Professor Rosario made without violating the copyright law? (1998
Bar)

A: Yes, a person may photocopy some of pages of Professor Rosario’s book for as long as it is not for public use or
distribution and it does not copy the substantial text or “heart” of the book. It is considered as fair use of the
copyrighted work.

Q: In a written legal opinion for a client on the difference between apprenticeship and learnership, Liza quoted without
permission a labor law expert's comment appearing in his book entitled "Annotations on the Labor Code." Can the labor law expert
hold Liza liable for infringement of copyright for quoting a portion of his book without his permission? (2006 Bar)

A: No. One of the limitations on copyright is the making of quotations from a published work if they are compatible
with fair use, provided that the source and the name of the author, if appearing on the work, are mentioned. The legal
opinion made by Liza is consistent with fair use since the quoted part is merely used to explain a concept of law for
the benefit of the client and not to defeat the rights of the author over his copyright [Sec. 184.1 (b), IPC].

Copyright Infringement

Q: Miss Solis wrote a script for Regal Films for the movie “One Day—Isang Araw”. Ms. Badiday, while watching the movie in Ermita
Theatre, discovered that the story of the movie is exactly similar to an unpublished copyrighted autobiography which
she wrote. Ms. Badiday sued Miss Solis for infringement of copyright. It was however, conclusively proven that Miss Solis was
not aware that the autobiography of Ms. Badiday was protected by a copyright.

Is Miss Solis liable? State briefly your reasons. (1988 Bar)

A: Yes, Miss Solis may be held liable. Animus furandi or intention to pirate is not an element of infringement; hence, an
honest intention is no defense to an action for infringement.

Q: The Victoria Hotel chain reproduces videotapes, distributes the copies thereof to its hotels and makes them available
to hotel guests for viewing in the hotel guest rooms. It charges a separate nominal fee for the use of the videotape player.

a. Can the Victoria Hotel be enjoined for infringing copyrights and held liable for damages?
b. Would it make any difference if Victoria Hotel does not charge any fee for the use of the videotape? (1994 Bar)

A:SPECIAL LAWS

ANTI-MONEY LAUNDERING ACT(R.A. NO. 9160, AS AMENDED BY R.A.

NO. 9194)
Q: Rudy is jobless but is reputed to be a jueteng operator. He has never been charged or convicted of
any crime. He maintains several bank accounts and has purchased 5 houses and lots for his children from the Luansing Realty Inc.
Since he does not have any visible job, the company reported his purchases to the Anti- Money Laundering Council (AMLC).
Thereafter, AMLC charged him with violation of the Anti-Money Laundering Law. Upon request of the AMLC, the bank disclosed
to it Rudy's bank deposits amounting to P100 Million. Subsequently, he was charged in court for violation of the Anti-Money
Laundering Law.

a. Can Rudy move to dismiss the case on the ground that he has no criminal record?
b. To raise funds for his defense, Rudy sold the houses and lots to a friend. Can Luansing Realty, Inc. be compelled to transfer
to the buyer ownership of the houses and lots?
c. Indisclosing Rudy's bank accounts to the AMLC, did the bank violate any law?
d. Supposing the titles of the houses and lots are in possession of the Luansing Realty Inc., is it under obligation to deliver
the titles to Rudy? (2006 Bar)

A:

a. No. The contention of Rudy is not tenable because under AMLA, "money laundering crime" committed when the
proceeds of an "unlawful activity," like jueteng operations, are made to appear as having originated from
legitimate sources. Money laundering crime is separate from the unlawful activity of being a jueteng operator,
and requires no previous conviction for the unlawful activity. (Sec. 3, AMLA)
b. Yes. Rudy is still the owner of the house and lot in question and as such he may dispose the same as he pleases.
Absent any freeze order filed by the OSG on behalf of the AMLC, Rudy may dispose said properties and compel
Luansing Realty to transfer to the buyer ownership of the properties sold.
c. Yes. Under the Anti-money Laundering Law, as amended, the AMLC may look into bank accounts upon order of
any competent court based in ex parte application when it has been established that said accounts are related to
an unlawful activity. In the case at hand, the AMLC merely requested the disclosure of said accounts without
court order. The bank therefore violated the secrecy of bank account of Rudy when it allowed the AMLC to look
into said accounts without court order. (Sec. 11, Anti-money Laundering Law as amended)
d. Yes. The properties are validly sold in favor of Rudy and as such Luansing Realty is under the obligation to deliver
the titles to the buyer. This is without prejudice to the application of freeze order by the OSG on behalf of the
AMLC.

Unlawful Activities and Predicate Crimes

Q: Name at least 5 predicate crimes to money laundering. (2007 Bar)

A:

a. Kidnapping for ransom under Article 267 of Act no. 3815, otherwise known as the RPC, as amended;
b. Sections 3,4,5,7,8, and 9 of Article Two of R.A. No. 6425, as amended, otherwise known as the Dangerous Drugs Act
of 1972;
c. Section 3 paragraphs B,C,E,G,H, and I of R.A. No. 3019, as amended, otherwise known as the Anti-Graft and
Corrupt Practices Act;
d. Plunder under R.A. No. 7080, as amended;
e. Robbery and extortion under Articles 294, 295, 296, 300, 301, and 302 of the RPC, as amended;
f. Jueteng and Masiao punished as illegal gambling under PD No. 1602;
g. Piracy on the high seas under the RPC, as amended and PD No. 532;
h. Qualified theft under Article 310 of the RPC, as amended;
i. Swindling under Article 315 of the RPC, as amended;
j. Smuggling under R.A. Nos. 455 and 1937;
k. Violations under RA No. 8792, otherwise known as the Electronic Commerce Act of 2000;
l. Hijacking and other violations under RA No. 6235; destructive arson and murder, as defined under the RPC, as
amended, including those perpetrated by terrorists against non-combatant persons and similar targets;
m. Fraudulent practices and other violations under RA No. 8799, otherwise known as the SRC of 2000;
n. Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

Q: From his first term in 2007, Congressman Abner has been endorsing his pork barrel allocations to Twin Rivers in exchange
for a commission of 40% of the face value of the allocation. Twin Rivers is a non- governmental organization whose supporting
papers, after audit, were found by the Commission on Audit to be fictitious. Other than to prepare and submit falsified papers
to support the encashment of the pork barrel checks, Twin Rivers does not appear to have done anything on the endorsed
projects and Congressman Abner likewise does not appear to have bothered to monitor the progress of the projects he endorsed.
The congressman converted most of the commissions he generated into US dollars, and deposited these in a foreign currency
account with Banco de Plata (BDP).

Based on amply-supported tips given by a congressman from another political party, the Anti-Money Laundering Council sent
BDP an order: (1) to confirm Cong. Abner's deposits with the bank and to provide details of these deposits; and (2) to
hold all withdrawals and other transactions involving the congressman's bank accounts.

As counsel for BDP, would you advise the bank to comply with the order? (2013 Bar)

A: I shall advise Banco de Plata no to comply with the order of the Anti-Money Laundering Council. It cannot inquire
into the deposits of Congressman Abner, regardless of currency, without a bank inquiry order from a competent
court, because crimes involved are not kidnapping for ransom, violations of the Comprehensive Dangerous Drugs Act,
hijacking and other violations of Republic Act No. 6235, destructive arson, murder, and terrorism and conspiracy to
commit terrorism (Sec. 11 of Anti-Money Laundering Act).

The Anti-Money Laundering Council cannot order Banco de Plata to hold all withdrawals and other transactions involving the
accounts of Congressman Abner. It is the Court of Appeals which has the power to issue a freeze order over the accounts
upon petition of the Anti-Money Laundering Council (Anti-Money Laundering Act; Republic v. Carbini Green Ross, 489 SCRA 644,
2006).

Suspicious Transactions

Q: What is the distinction between a “covered transaction report” and a “suspicious transaction
report”? (2015 Bar)

A: A covered transaction report involves transaction/s in cash or other equivalent monetary instrument involving a
total amount in excess of 500k within one banking day while suspicious transaction report involves transactions
with covered institutions regardless of the amounts involved made under any of the suspicious circumstances
enumerated by law.

Q: Does the Anti-Money Laundering Council have the authority to freeze deposits? Explain. (2015 Bar)

A: No. The authority to freeze deposits is lodged with and based upon the order of the Court of Appeals (Section 10 of
RA 9160 as amended).

FOREIGN INVESTMENTS ACT (R.A. NO. 7042)

Q: A foreign company has a distributor in the Philippines. The latter acts in his own name and account. Will this
distributorship be considered as doing business by the foreign company in the Philippines? (2015 Bar)

A: The appointment of a distributor in the Philippines is not sufficient to constitute doing business unless it is under the full control
of the foreign corporation. If the distributor is an independent entity doing business for its own name and account, the latter
cannot be considered as doing business (Steel Case v. Design International Selection, GR No 171995, April 18, 2012).

FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 (R.A. NO.

10142) (FRIA)

Q: ON June 16, 1995, Vicente obtained a writ of preliminary attachment against Carlito. The levy on Carlito’s property
occurred on June 25, 1995. On July 29, 1995, another creditor filed a petition for involuntary insolvency against Carlito.
The insolvency court gave due course to the petition. In the meantime, the case filed by Vicente proceeded, and resulted in a
judgment award in favor of Vicente.

May the judgment obtained by Vicente be enforced independently of the insolvency proceedings? Explain. (1996 Bar)

A: The judgment obtained by Vicente can be enforced independently of the insolvency proceedings. Under Section 32 of
the Insolvency Law, the assignment to the assignee of all the real and personal property, estate and effects of the
debtor made by the clerk of court shall vacate and set aside any judgment entered in any action commenced within 30
days immediately prior to the commencement of insolvency proceedings. In this case, however, the action filed by
Vicente against Carlito was commenced by Vicente not later than June 16, 1995 (the facts on this point are not clear)
when Vicente obtained a writ of preliminary attachment against Carlito or more than 30 days before the petition for
involuntary insolvency was filed against Carlito by his other creditors.

Types of Rehabilitation Proceedings

Q: Aaron, a well-known architect, is suffering from financial reverses. He has 4 creditors with a total claim of P26M. Despite
his intention to pay these obligations, his current assets are insufficient to cover all of them.
His creditors are about to sue him. Consequently, he was constrained to file a petition for insolvency.

a) Since Aaron was merely forced by circumstances to petition the court to declare him insolvent, can the judge properly treat
the petition as one for insolvency? Explain.
b) If Aaron is declared an insolvent by the court, what would be the effect, if any, of such declaration on his creditors? Explain.
c) Assuming that Aaron has guarantors for his debts, are the guarantors released from their obligations once Aaron is discharged
from his debts? Explain.
d) What remedies are available to the guarantors in case they are made to pay the creditors? Explain. (2005 Bar)
A:

a) The petition cannot be treated as one of the involuntary insolvency, because it was filed by Aaron himself, the
debtor, and not by his creditors. To treat it as one of involuntary insolvency would unduly benefit Aaron as a
debtor, because he would not be subject to the limitation of time within which he is subject in the case of
voluntary insolvency for purposes of discharge.
b) Actions for unsecured claims cannot be filed, because the claims should be filed in the insolvency proceeding.
Actions for secured claims may be commenced with leave of the insolvency court.
c) The guarantors are not discharged, because the discharge is limited to Aaron only.
d) Their remedy is to prove in the insolvency proceeding that they paid the debt and that they substitute for the
creditors, if the creditors have not proven their claims.

Q: A debtor who has been adjudged insolvent is given his discharge by the court after his properties have been applied to
his debts. A year later, with those debts still not fully paid, he wins in the sweepstakes and comes into a large fortune.
His creditors sue him for the balance. (1988 Bar)

A: The suit will not prosper on debts that are properly discharged in insolvency. Those that are not discharged,
assuming that a discharge can be obtained, include:

1. Taxes and assessments due the government, national or local;

2. Obligation arising from embezzlement or fraud;
3. Obligations of any person liable to the insolvent debtor for the same debt;
4. Alimony or claim for support;
5. In general, debts that are not provable against the estate of the insolvent or not listed in the schedule submitted
by the insolvent debtor.

Rehabilitation Receiver

Q: Debtor Corporation and its principal stockholders filed with the SEC a petition for rehabilitation and declaration
of a state of suspension of payments under

P.D. 902-A. The objective was for SEC to take control of the corporation and all its assets and liabilities, earnings and
operations and rehabilitating the company for the benefit of investors and creditors.

Generally, the unsecured creditors had manifested willingness to cooperate with Debtor Corporation. The secured creditors,
however, expressed serious objections and reservations.
First Bank had already initiated judicial foreclosure proceedings on the mortgage constituted on the factory of Debtor
Corporation.

Second Bank had already initiated foreclosure proceedings on a third-party mortgage constituted on certain assets of
the principal stockholders.

Third Bank had already filed a suit against the principal stockholders who had held themselves liable jointly and severally
for the loans of Debtor Corporation with said Bank.

After hearing, the SEC directed the appointment of a rehabilitation receiver and ordered the suspension of all actions and
claims against the Debtor Corporation as well as against the principal stockholders.

a) Discuss the validity of the SEC order of suspension?

b) Discuss the effects of the SEC order of suspension on the judicial foreclosure proceedings initiated by First Bank.
c) Would the order of suspension have any legal effect on the foreclosure proceedings initiated by Second Bank? Explain.
d) Would the order of suspension have any effect on the suit filed by Third Bank? Explain.
e) What are the legal consequences of a rehabilitation receivership?
f) What measures may the receiver take to preserve the assets of Debtor Corporation? (1999 Bar)

A:

a) The SEC order of suspension of payment is valid with respect to the debtor corporation, but not with respect to
the principal stockholder. The SEC has jurisdiction to declare suspension of payments with respect to
corporations, partnership or associations, but not with respect to individuals.
b) The SEC order of suspension of payment suspended the judicial proceedings initiated by First Bank. According to
the Supreme Court in a line of cases, the suspension order applies to secured creditors and to the action to
enforce the security against the corporation regardless of the stage thereof.
c) The order of suspension of payments suspended the foreclosure proceedings initiated by the Second Bank. While
the foreclosure is against the property of a third party, it is in reality an action to collect the principal obligation
owed by the corporation. During the time that the payment of the principal obligation is suspended, the debtor
corporation is considered to be not in default and, therefore, even the right to enforce the security, whether
owned by the debtor-corporation or of a third party, has not yet arisen.
d) For the same reason as in (c), the order of suspension of payments suspended the suit filed by Third Bank
against the principal stockholders.
e) Under PD 902-A, the appointment of a rehabilitation receiver will suspend all actions for claims against the
corporation and the corporation will be placed under rehabilitation in accordance with a rehabilitation plan
approved by the Commission.

f) To preserve the assets of the Debtor Corporation, the receiver may take custody of, and control over, all the
existing assets and property of the corporation; evaluate existing assets and liabilities, earnings and operations
of the corporation; and determine the best way to salvage and protect the interest of the investors and creditors.
Management Committee

Q: Robert, Rey and Ben executed a joint venture agreement to form a close corporation under the Corporation Code
the outstanding capital stock of which the 3 of them would equally own. They also provided therein that any corporate
act would need the vote of 70% of the outstanding capital stock. The terms of the agreement were accordingly implemented and
the corresponding close corporation was incorporated. After 3 years, Robert, Rey and Ben could not agree on the business in
which to invest the funds of the corporation. Robert wants the deadlock broken.

1. What are the remedies available to Robert under the Corporation Code to break the deadlock? Explain.
2. Are there any remedies to prevent the paralyzation of the business available to Robert under PD 902-A while the petition
to break the deadlock is pending litigation? Explain. (1995 Bar)

A:

1. Robert can petition the SEC to arbitrate the dispute, with such powers as provided in the Corporation Code.
2. The SEC can appoint a rehabilitation receiver or a management committee.

Stay or Suspension Order

Q: DMP Corporation (DMP) obtained a loan of P20M from National Bank (NB) secured by a real estate mortgage over a
63,380-square meter land situated in Cabanatuan City. Due to the Asian Economic Crisis, DMP experienced liquidity problems
disenabling it from paying its loan on time. For that reason, NB sought the extrajudicial foreclosure of the said mortgage by
filing a petition for sale on June 30, 2003. On September 4, 2003, the mortgaged property was sold at public auction,
which was eventually awarded to NB as the highest bidder. That same day, the Sheriff executed a Certificate of Sale in favor
of NB.

On October 21, 2003, DMP filed a Petition for Rehabilitation before the RTC. Pursuant to this, a Stay Order was issued by
the RTC on October 27, 2003.

On the other hand, NB caused the recording of the Sheriff’s certificate of Sale on December 3, 2003 with the Register of
Deeds of Cabanatuan City. NB executed an Affidavit of Consolidation of Ownership and had the same annotated on the title of DMP.
Consequently, the Register of Deeds cancelled DMP’s title and issued a new title in the name of NB on December 10, 2003.

NB also filed on March 17, 2004 an Ex-Parte Petition for Issuance of Writ of Possession before the RTC of Cabanatuan City.
After hearing, the RTC issued on September 6, 2004 an Order directing the issuance of the Writ of Possession, which was issued
on October 4, 2004.

DMP claims that all subsequent actions pertaining to the Cabanatuan property should have been held in abeyance after
the Stay Order was issued by the rehabilitation court. Is DMP correct? (2015 Bar)

A: No. DMP is not correct. Since the foreclosure of the mortgage and the issuance of the certificate of sale in favor
a. Yes. Victoria Hotel may be held liable for infringing copyrights of the said videotapes because the
 reproduction and distribution thereof are not merely for private viewing. Instead, it was used as a means to gain
extra profit by making it as an extra amenity for its hotel services. However, if such performances contained in the
videotapes became available to the public even prior to its registration, then there is no copyright infringement
because the videotapes are already considered as public property.

b. No. Notwithstanding the non-charging of fee for the use of the videotapes, Victoria Hotel still uses the videotapes
for business purposes, serving as an attraction to prospective and current guests, unless the performances in the
videotapes had been long before available to the public prior to registration; hence, it is already public property
(Filipino Society of Composers, Authors, Publishers, Inc. v. Benjamin Tan, G.R. No. L- 36402, March 16, 1987).

Q: In an action for damages on account of an infringement of a copyright, the defendant (the alleged pirate) raised the
defense that he was unaware that what he had copied was a copyright material. Would this defense be valid? (1997 Bar)

A: No. In copyright infringement, intent is irrelevant. A person may consciously or unconsciously copy or infringe a
copyrighted material and still be held liable for such act.

Q: Juan Xavier wrote and published a story similar to an unpublished copyrighted story of Manoling Santiago. It was, however,
conclusively proven that Juan Xavier was not aware that the story of Manoling Santiago was protected by copyright. Manoling
Santiago sued Juan Xavier for infringement of copyright. Is Juan Xavier liable? (1998 Bar)

A: No. Although intent is irrelevant in cases of copyright infringement, Juan had no access to Manoling’s copyrighted
story because it is unpublished. Hence, he can put up independent creation as a defense being that he has no
reasonable access to the unpublished copyrighted story of Manoling.

Q: KK is from Bangkok, Thailand. She studies medicine in the Pontifical University of Santo Tomas (UST). She learned that the
same foreign books prescribed in UST are 40-50% cheaper in Bangkok. So she ordered 50 copies of each book for herself and
her classmates and sold the books at 20% less than the price in the Philippines. XX, the exclusive licensed publisher of
the books in the Philippines, sued KK for copyright infringement. Decide. (2014 Bar)

A: KK did not commit copyright infringement. Under the “first sale” doctrine, the owner of a particular copy or
phonorecord lawfully made is entitled, without the authority of the copyright owner, to sell or otherwise dispose of
the possession of that copy or phonorecord. Hence, there is no infringement by KK since the said doctrine permitted
importation and resale without the publisher’s further permission.

can comply with the order of garnishment without violating the Law on the Secrecy of Bank Deposits. Execution is
the goal of litigation as it is its fruit. Garnishment is part of the execution process. Upon service of the notice of
garnishment on the bank where the defendant deposited funds, such funds become part of the subject matter of
litigation.

Q: The Law on Secrecy of Bank Deposits provides that all deposits of whatever nature with banks or banking institutions are
absolutely confidential in nature and may not be examined, inquired or looked into by any person, government official, bureau
or office. However, the law provides exceptions in certain instances. Which of the following may not be among the exceptions:

1. In cases of impeachment.
2. In cases involving bribery
3. In cases involving BIR inquiry.
4. In cases of anti-graft and corrupt practices.
5. In cases where the money involved is the subject of litigation.

Explain your answer or choice briefly. (2004)

A: Under Section 6(F) of the National Internal Revenue Code, the Commissioner of Internal Revenue can inquire
into the deposits of a decedent for the purpose of determining the gross estate of such decedent. Apart from this case,
a BIR inquiry into bank deposits cannot be made. Thus, exception 3 may not always be applicable. Turning to exception
4, an inquiry into bank deposits is possible only in prosecutions for unexplained wealth under the Anti- Graft and
Corrupt Practices Act, according to the Supreme Court in the cases of Philippine National Bank v. Gancayco, 15 SCRA 91
and Banco Filipino Savings and Mortgage Bank

i. Purisima, 161 SCRA 576. However, all other cases of anti- graft and corrupt practices will not warrant an inquiry into
bank deposits. Thus, exception 4 may not always be applicable. Like any other exception, it must be interpreted
strictly. Exceptions 1, 2 and 5, on the other hand, are provided expressly in the Law on Secrecy of Bank Depositors.
They are available to depositors at all times.

Q: Under Republic Act No.1405 (The Bank Secrecy Law), bank deposits are considered absolutely confidential and may not be
examined, inquired or looked into by any person, government official, bureau or office. What are the exceptions? (2006 Bar)

A: The exceptions are as follows:

1. Upon written consent of the depositor. (Sec. 2)

2. In cases of impeachment. (Sec. 2)
3. Upon order of competent court in cases of bribery or dereliction of duty of public officials. (Sec. 2)
4. In cases where the money deposited or invested is the subject matter of the litigation. (Sec. 2)
5. Upon order of the Commissioner of Internal Revenue in respect of the bank deposits of a decedent for the purpose
of determining such decedent’s gross estate. (Sec. 6[F][1], NIRC)
6. Upon the order of the Commissioner of Internal Revenue in respect of bank deposits of a taxpayer who has filed
an application for compromise of his tax liability by reason of financial incapacity to pay is nothing in RA 1405
that places bank deposits beyond the reach of judgment creditor. And the disclosure of information on bank
deposits pursuant to the writ of garnishment is only incidental to the execution process (PCIB v. CA, 193 SCRA
452). The dollar deposits, however, are exempt from garnishment or court order under the Foreign Currency Act
(RA 6426). Thus, the bank should not comply with this part of the garnishment.
7. In case of dormant accounts/deposits for at least 10 years under the Unclaimed Balances Act. (Sec. 2, Act No. 3936).
8. When the examination is made by the BSP to insure compliance with the Anti-Money Laundering Law in the course
of a periodic or special examination
9. With court order: a. In cases of unexplained wealth under Sec. 8 of the Anti-Graft and Corrupt Practices Act (PNB
v. Gancayco, L-18343, Sept. 30, 1965); b. In cases filed by the Ombudsman and upon the latter’s authority to
examine and have access to bank accounts and records (Marquez v. Desierto, GR 138569, Sept. 11, 2003)
10. Without court order: If the AMLC determines that a
95
 particular deposit or investment with any banking institution is related to
the following: a. Hijacking, b. Kidnapping, c. Murder, d. Destructive,
Arson, and e. 4. Violation of the Dangerous Drugs Act.

Q: Rudy is jobless but is reputed to be a jueteng operator. He has never been

charged or convicted of any crime. He maintains several banks accounts and has
purchased 5 houses and lots for his children from the Luansing Realty, Inc. since
he does not have any visible job, the company reported his purchases to the AMLC.
Thereafter, AMLC charged him with violation of the Anti-Money Laundering Law. Upon
request of the AMLC, the bank disclosed to it Rudy’s bank deposits amounting to
P100M. Subsequently, he was charged in court for violation of the Anti-Money Laundering
Law.

1. Can Rudy move to dismiss the case on the ground that he has no criminal record?

A: No. As with any crime, the absence of a criminal record is not a defense against
a charge for violation of the Anti- Money Laundering Law. Moreover, having a
criminal record is not an element of Money Laundering Offense defined under
Section 4 of the Anti-Money Laundering Law.

2. To raise funds for his defense, Rudy sold the houses and lots to a friend. Can
Luansing Realty, Inc. be compelled to transfer to the buyer ownership of the
houses and lots?

A: Yes. In the absence of a freeze order on the subject houses and lots pending
criminal proceedings against Rudy, the ownership thereof may be validly
transferred to another, and Luansing Realty, Inc. can be compelled to
recognize the rights of the buyer as the new owner. Section 7(6) in relation to
Section 10 of the Anti-Money Laundering Law required an Order from the
Court of Appeals for the freezing of any money or property believed to be the
proceeds of any unlawful activity.

3. In disclosing Rudy’s bank accounts to the AMLC, did the bank violate any law?

A: Yes. The bank violated RA No. 1405 (Secrecy of Bank Deposits Act), which
considers all deposits of whatever nature with banks or banking institutions
as absolutely confidential and may not be examined, inquired or looked into
by any person, government officials, bureau or office except upon depositor’s
written permission; in cases of impeachment; upon order of a competent court
in cases of bribery of, or dereliction of duty by public official; and in cases
where the money deposited or invested is the subject matter of the litigation.
The disclosure was made before Rudy was charged in court for violation of the
Anti-Money Laundering Law. Hence, his deposits were technically not yet the
subject matter of litigation.
Moreover, under RA No. 9160, the AMLC may inquire into or examine any
particular deposit or investment with any banking institution upon order of
any competent court for violation of the said Act. In the case at bar, the AMLC
merely requested the disclosure; it did not secure the requisite court order.
The bank, therefore, was under no obligation to disclose Rudy’s deposits.

4. Supposing the titles of the houses and lots are in possession of the Luansing
Realty, Inc., is it under obligation to deliver the titles to Rudy? (2006 Bar)