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Table of Contents

Table of Contents 1

List of Cases Cited 2

Memorandum Proper 3

Prefatory Statement 3

Statement of the Case 3

Statement of the Facts for the Plaintiff 4

Issues 5

Arguments and Discussions 5

Prayer 10

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List of Cases Cited:

1. Air Philippines Corporation vs. Pennswell, Inc.


G.R. No. 172835, December 13, 2007

2. Arco Pulp and Paper Co., Inc. vs. Dan T. Lim


G.R. No. 206806, June 25, 2014

3. Jaime P. Adriano vs. Alberto Lasala


G.R. No. 197842, October 09, 2013

4. Spouses Luigi and Anna Guanio vs. Makati Shangri-La Hotel


G.R. No. 190601, February 07, 2011

5. RCPI vs. Alfonso Verchez, et al.


G.R. No. 164349, January 31, 2006

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MEMORANDUM PROPER

Republic of the Philippines


Regional Trial Court
Branch 15
City of Manila

ABC CORPORATION,
Plaintiff,
Civil Case No. 12532
-versus-
For: Breach of Contract
JADINE REYES,
Defendant.

x-----------------------------------------------------------------------------------------x
Plaintiff, through counsel, most respectfully alleges:

Prefatory Statement

Breach of contract is defined as the failure without legal reason


to comply with the terms of a contract. It is also defined as the failure,
without legal excuse, to perform any promise which forms the whole
or part of the contract. The mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a corresponding
right of relief.  The law, recognizing the obligatory force of contracts,
will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of
the tenor thereof.

Statement of the Case

This is an action for breach of contract filed by ABC


CORPORATION against their former employee, JADINE REYES, for
divulging confidential information only known to the employee, which
is plaintiff herein, to their rival network.

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Statement of the Facts for the Plaintiff

In order that this honorable court may be enlightened and


guided in the judicious disposition of the above-entitled case, cited
hereunder the material, relevant, and pertinent facts of the case to
wit:
Plaintiff ABC CORPORATION is the producer of the show,
LUCKY CHINATOWN TV, to whom the defendant was formerly
employed as Associate Producer/Segment Producer. It was on
January 01, 2013 that defendant JADINE REYES signed the contract
of employment which outlines the tasks, responsibilities, terms, and
conditions of her employment with plaintiff ABC CORPORATION. It
also has a Confidentiality Clause in paragraph F, which states that:
“Required Confidentiality. For so long as Employee shall
remain employed by Employer and for a period of one year after
termination of employment with Employment for any reason,
Employee shall not disclose or communicate any “Confidential
Information” of Employer to any person or entity other than
Employer nor use said “Confidential Information” for any
purpose or reason other than the benefit of the employer. For
purpose of the preceding sentence, “Confidential Information”
means (but is not limited to) any information regarding Employer’s
business methods, business policies, procedures, techniques,
research or development projects or results, sales information of any
kind, financial information of any kind, trade secrets or other
knowledge possessed by the Employer which is not generally
known by individuals outside the Employer (including Employer’s
employees, consultants, and advisors). Also, “Confidential
Information” shall additionally include, but not limited to, the following
information of Employer:
1. Customer lists or other customer information;
2. Sales strategy, tactics, or methods;
3. Information pertaining to products or services under
development;
4. Internal company reports of any kind;
5. All marketing strategies.” (EMPHASIS SUPPLIED)
Thereafter, defendant REYES performed her main task of
producing segments for the plaintiff, LUCKY CHINATOWN TV.
However, around last week of November, the defendant filed her
resignation letter with plaintiff effective December 15, 2013 citing her
health condition as her reason. Instead of leaving on the 15 th, she left

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on an earlier date, on the 5th of the month, as suggested by the
plaintiff.
Sometime in December 2013, plaintiff found out that the
defendant is already employed with their competitor and rival
television show, CHINA 168 NETWORK. Defendant occupies a
similar position as her previous role in LUCKY CHINATOWN TV. To
the plaintiff’s dismay, the marketing strategies of CHINA 168
NETWORK, as shown in the content of the episodes as well as its
Facebook posts, were strikingly similar to that of LUCKY
CHINATOWN TV. According to the plaintiff, these obvious similarities
include the following:
a. CHINA 168 NETWORK featured segments, which are
exactly similar to what defendant REYES produced for
plaintiff ABC Corporation such as Denise Yu, Daryl Joy
Soon, Pretty Looks, iHop, CPK, Hobbit Inc., among others;
b. CHINA 168 NETWORK did not have episodic plugs prior to
defendant REYES’ employment with them. This is a unique
marketing strategy of LUCKY CHINATOWN TV;
c. The format of CHINA 168 NETWORK’s episodic plug is
exactly the same as LUCKY CHINATOWN TV.
These are clear violations of the paragraph F stipulated in the
defendant’s contract of employment with the plaintiff. Hence, the
latter sent demand letters to the defendant to immediately cease and
desist from sharing confidential information of LUCKY CHINATOWN
TV to anyone, especially to her current employer, CHINA 168
NETWORK. Despite this action taken by the plaintiff, the defendant
allegedly continued to disclose such confidential information referred
to by the former. Thus, averring that the defendant blatantly
disregarded the provisions of her contract and repeatedly violated the
Confidentiality Clause by disclosing confidential information,
specifically their marketing strategies, to its direct competitor and rival
show, the plaintiff filed an instant case for breach of contract against
the defendant.
Hence, the filing of the instant memorandum.

Issues

During the pre-trial, the parties identified some issues, to wit:

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1. Whether or not information referred to as confidential in
nature has been revealed by the defendant to plaintiff’s rival
company.
2. Whether or not there is a breach of contract.
3. Whether or not defendant is liable.

Arguments and Discussions

1. Information referred to as confidential in nature has been


revealed by the defendant to plaintiff’s rival company.
Trade secrets, as defined by the Court in the case of Air
Philippines Corporation vs. Pennswell, Inc.:
A trade secret is defined as a plan or process, tool,
mechanism or compound known only to its owner and those of
his employees to whom it is necessary to confide it. The
definition also extends to a secret formula or process not
patented, but known only to certain individuals using it in
compounding some article of trade having a commercial
value. A trade secret may consist of any formula, pattern,
device, or compilation of information that: (1) is used in one's
business; and (2) gives the employer an opportunity to obtain
an advantage over competitors who do not possess the
information. Generally, a trade secret is a process or device
intended for continuous use in the operation of the business,
for example, a machine or formula, but can be a price list or
catalogue or specialized customer list. It is indubitable that
trade secrets constitute proprietary rights. The inventor,
discoverer, or possessor of a trade secret or similar innovation
has rights therein which may be treated as property, and
ordinarily an injunction will be granted to prevent the
disclosure of the trade secret by one who obtained the
information “in confidence” or through a “confidential
relationship.

In the case at bar, what was disclosed by the defendant to the


rival company were segments and episodic plugs. Under the
Confidentiality Clause of the contract between plaintiff and defendant,
this may be considered as a trade secret as no other shows featured
such as it is unique to plaintiff LUCKY CHINATOWN TV. To compel
its disclosure is to cripple plaintiff’s business, and place it at an undue
disadvantage. If such uniqueness is opened to public scrutiny, it will
stand to lose the backbone on which it is founded. This would result
in nothing less than the probable demise of plaintiff’s business.
Plaintiff’s proprietary interest over the plugs and the way the
segments are aired which it had developed and expended money and
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effort on is incontrovertible. Our conclusion is that the detailed work
copied by the rival network have a commercial value to the plaintiff.
Not only do we acknowledge the fact that the information grants it a
competitive advantage; we also find that there is clearly a glaring
intent on the part of the plaintiff to keep information confidential and
not available to the prying public.
Furthermore, the Revised Penal Code endows a cloak of
protection to trade secrets under the following articles:

Art. 291. Revealing secrets with abuse of office. The penalty


of arresto mayor and a fine not exceeding 500 pesos shall be
imposed upon any manager, employee or servant who, in
such capacity, shall learn the secrets of his principal or master
and shall reveal such secrets.
 
Art. 292. Revelation of industrial secrets. The penalty
of prision correccional in its minimum and medium periods and
a fine not exceeding 500 pesos shall be imposed upon the
person in charge, employee or workman of any manufacturing
or industrial establishment who, to the prejudice of the owner
thereof, shall reveal the secrets of the industry of 
the latter.

Similarly, Republic Act No. 8424, otherwise known as the


National Internal Revenue Code of 1997, has a restrictive provision
on trade secrets, penalizing the revelation thereof by internal revenue
officers or employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade


Secrets. - Any person who causes or procures an officer or
employee of the Bureau of Internal Revenue to divulge any
confidential information regarding the business, income or
inheritance of any taxpayer, knowledge of which was acquired
by him in the discharge of his official duties, and which it is
unlawful for him to reveal, and any person who publishes or
prints in any manner whatever, not provided by law, any
income, profit, loss or expenditure appearing in any income
tax return, shall be punished by a fine of not more than two
thousand pesos (P2,000), or suffer imprisonment of not less
than six (6) months nor more than five (5) years, or both.

As argued by the Court, still in the same jurisprudence:

Clearly, in accordance with our statutory laws, this Court


has declared that intellectual and industrial property rights
cases are not simple property cases. Without limiting such
industrial property rights to trademarks and trade names, this
Court has ruled that all agreements concerning intellectual

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property are intimately connected with economic
development. The protection of industrial property encourages
investments in new ideas and inventions and stimulates
creative efforts for the satisfaction of human needs. It speeds
up transfer of technology and industrialization, and thereby
bring about social and economic progress. Verily, the
protection of industrial secrets is inextricably linked to the
advancement of our economy and fosters healthy competition
in trade.

Jurisprudence has consistently acknowledged the


private character of trade secrets. There is a privilege not to
disclose one’s trade secrets. Foremost, this Court has
declared that trade secrets and banking transactions are
among the recognized restrictions to the right of the people to
information as embodied in the Constitution. We said that the
drafters of the Constitution also unequivocally affirmed that,
aside from national security matters and intelligence
information, trade or industrial secrets (pursuant to the
Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank
Deposits Act), are also exempted from compulsory disclosure.

2. There is a breach of contract.

It is expressly stated in the Confidentiality Clause in contract


between the employer and employee of ABC CORPORATION that
the latter must not divulge any confidential information (in this case:
the canny resemblance of both shows segments and the inclusion of
episodic plugs in the rival network’s television shows) to any person
or entity other than the employer.

Breach of contract was defined in the case of Spouses Guanio


vs. Makati Shangri-La Hotel, to wit:

Breach of contract is defined as the failure without legal


reason to comply with the terms of a contract. It is also defined
as the [f]ailure, without legal excuse, to perform any promise
which forms the whole or part of the contract.

The failure of the defendant to discharge such obligation


expressly provided for in the Confidentiality Clause constitutes to
breach of contract.

RCPI vs. Verchez et al. enlightens:

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In culpa contractual x x x the mere proof of the existence of
the contract and the failure of its compliance justify,  prima
facie, a corresponding right of relief.  The law, recognizing the
obligatory force of contracts, will not permit a party to be set
free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor
thereof.  A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been
lost or suffered.  x x x Indeed, agreements can accomplish
little, either for their makers or for society, unless they are
made the basis for action.  The effect of every infraction is to
create a new duty, that is, to make RECOMPENSE to the one
who has been injured by the failure of another to observe his
contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence  x
x x or of the attendance of fortuitous event, to excuse him
from his ensuing liability. (emphasis and underscoring in the
original; capitalization supplied)

The defendant committed the breach by her abrupt and


groundless infringement of the agreement stipulated in the contract.
She clearly complied with her part of the obligation at first but it
appears that not even a year has passed when she started using the
same techniques to the shows aired by the rival network. We are thus
reminding her of Article 19 of the New Civil Code, to wit:

Art. 19. Every person must, in the exercise of his rights and in


the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith.

3. Defendant is liable.

Concurrent with the second issue, defendant is liable. In the


case of Arco Pulp and Paper Co., Inc. vs. Dan T. Lim, the Court ruled
that moral damages may be awarded in case of breach of contract, to
wit:

Under Article 2200 of the Civil Code, moral damages


may be awarded in case of breach of contract where the
breach is due to fraud or bad faith:

Art. 2200. Willful injury of property may be a legal ground for


awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith. (Emphasis supplied)

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Moral damages are not awarded as a matter of right but
only after the party claiming it proved that the breach was due
to fraud or bad faith. As this court stated:

Moral damages are not recoverable simply because a


contract has been breached. They are recoverable only if the
party from whom it is claimed acted fraudulently or in bad faith
or in wanton disregard of his contractual obligations. The
breach must be wanton, reckless, malicious or in bad faith,
and oppressive or abusive.

Further, the following requisites must be proven for the


recovery of moral damages:

An award of moral damages would require certain conditions


to be met, to wit: (1) first, there must be an injury, whether
physical, mental, or psychological, clearly sustained by the
claimant; (2) second, there must be a culpable act or omission
factually established; (3) third, the wrongful act or omission of
the defendant is the proximate cause of the injury sustained
by the claimant; (4) fourth, the award of damages is
predicated on any of the cases stated in Article 2219 of the
Civil Code.

Breaches of contract done in bad faith, however, are not


specified within the enumeration of Article 2219. When a party
breaches a contract, he goes against Article 19 of the Civil Code.
Persons who have the right to enter into contractual relations must
exercise the right with honesty and good faith. Failure to do so results
in an abuse of that right, which may become the basis of an action for
damages.

Moral damages, however, are not recoverable on the mere


breach of contract. Article 2200 requires that the breach be done
fraudulently or in bad faith. In Jaime P. Adriano vs. Alberto Lasala:

To recover moral damages in an action for breach of


contract, the breach must be palpably wanton, reckless and
malicious, in bad faith, oppressive, or abusive. Hence, the
person claiming bad faith must prove its existence by clear
and convincing evidence for the law always presumes good
faith.

Bad faith does not simply connote bad judgment or


negligence. It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of known
duty through some motive or interest or ill will that partakes of
the nature of fraud. It is, therefore, a question of intention,

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which can be inferred from one’s conduct and/or
contemporaneous statements. (Emphasis supplied)

Defendant left the company, citing health condition as her


reason, however, seeing as how in the same month she resigned
was also the month she got employed in the rival company already
connotes she acted in bad faith. She even went as far as divulging
plaintiff’s confidential information and trade secrets. The injury she
caused? Placing plaintiff in an undue disadvantage over the rival
company, her wrongful act being the proximate cause of such injury.

Prayer

WHEREFORE, we respectfully pray to this Honorable Court


that judgment be rendered ordering the defendant to pay the
following:

Defendant should be made liable to pay plaintiff FIVE


HUNDRED THOUSAND PESOS (PHP 500 000.00) by way of
compensatory damages for using segments and episodic plugs
unique only to LUCKY CHINATOWN TV by the rival show CHINA
168 NETWORK.

As a consequence of the malicious copying of features unique


to their television program, which is attended by extreme bad faith,
lies, and deception, plaintiff suffered stress over their copied
segments which placed plaintiff to an undue disadvantage, defendant
should be made liable for moral damages amounting to FIVE
HUNDRED THOUSAND PESOS (PHP 500 000.00).

By way of example or correction for the public good for acting in


a wanton, fraudulent, reckless, and malevolent manner, defendant
should be made liable to pay plaintiff exemplary damages in the total
amount of FIVE HUNDRED THOUSAND PESOS (PHP 500 000.00).

As a further consequence, defendant should pay the services of


the plaintiff’s counsel for a legal fee of ONE HUNDRED THOUSAND
PESOS (PHP 100 000.00), plus FIVE THOUSAND PESOS (PHP 5
000.00) per court appearance, and to incur expenses of litigation for
which defendant should be made to pay.

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Plaintiff likewise prays for costs and for such other further relief
as this Honorable Court may deem just and equitable in the
premises.

Respectfully submitted.

Manila City, Philippines. December 20, 2017

Mendiola and Associates Law Offices


Counsel for the Plaintiff
4th Floor, Old Building
Quezon Avenue, Quezon City

By:

Atty. Reyzen Paul Unite Mendiola


IBP Lifetime No. 84444; 04/04/2004
PTR No. 44244; 02/20/2008
Roll of Attorney No. 2004-002044
MCLE Compliance No. IIII - 00844

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