Franchise

As a well-settled general rule, franchises are subject to the law of the

place that granted them.
The term franchise has numerous implications and as a result there
is misperception in its use. It does not matter what label the parties
put on a transaction or agreement: license, joint venture, consulting
and supply agreement, dealership; if an arrangement has all of the
elements of a franchise, it's a franchise.
Commonly, still, it is a special privilege conferred by the government
on an individual. When referring to government grants (other than
patents, trademarks, and copyrights), the term franchise is often used
to connote more substantial rights, the rights necessary for public
utility companies to carry on their operations are generally designated
as franchise rights.( Black's Law Dictionary (8th ed., p. 1944 2004 ) The
granting of franchises is a power that, unfortunately has not always
been exercised with proper caution. A franchise being a branch of the
sovereign prerogative subsisting in the subject by a grant from the
government, the delegation of such power should be primarily
beneficial to the sovereign public, then to the grantee. Hence, any
franchises granted by the Philippine Government are governed and
construed in accordance with its laws
It is also a privilege granted by a corporation and which does not
belong to citizens generally of common right, e.g., a right granted to
offer Cable Television service. With specific reference to corporations,
the term franchise may indicate either to the corporation itself (as an
franchise belonging to the shareholders of the corporation) or to the
different powers of a corporation (such as the franchise of the right of
the corporation to the issuance of a bank not by an incorporated bank
(People v Utica Ins. Co., 8 AM Dec. 243 ). Basically it is a privilege
granted or sold, such as to use a name or to sell products or services.
In its simplest terms, a franchise is a license from the owner of a
trademark or trade name permitting another to sell a product or
service under that name or mark.
Goodwill
The goodwill of a business, and taxation thereon, is governed by the
law of the place where the business is carried on.

Article 521 of the New Civil Code provides that goodwill of a business is
property and may be transferred together with the right to use the
name under which the business is conducted. Goodwill is defined as
the advantage acquired by any product or firm because of general
encouragement and patronage of the public. Its elements are: place,
name, and reputation. Although goodwill is contemplated as a property
and provided in Article 521 of the New Civil Code; it is not an
independent property which is separable from the firm or business
which owns it. Moreover,
goodwill is a legal right of property
associated with every business. It has concisely been described as
the attractive force which brings customs ( Per Lord Maenaghten in
Inland Revenue Commisioners vs Muller & Cos Margarine Ltd [1901]
A.C. 217, HL.) As a legal property, a goodwill may be created, owned ,
assigned and extinguished , and all of these operations are governed
by the system of law under which the goodwill exists.
Goodwill is further defined as a business's reputation and other
intangible assets that are considered when appraising the business,
esp. for purchase; the ability to earn income in excess of the income
that would be expected from the business viewed as a mere collection
of assets. Because an established business's trademark or service
mark is a symbol of goodwill, trademark infringement is a form of theft
of goodwill. Therefore, the goodwill of a business shall be governed by
and construed in accordance with the laws of the place where the
business is carried on. This includes any dispute arising out of or
relating to goodwill of a business and taxation and the transactions
contemplated.

Intellectual Properties
As a general rule, patents, copyrights, trademarks, and trade names
are, in the absence of a treaty are protected only by the state that
granted or recognized them. (Martin Wolff, Private International Law
1950)

Intellectual Properties consist of patents, trademarks and, copyrights.

PATENT
Patent refers to any technical solution to any problem in any field of
human activity. Its requisites are: A) Novelty, meaning that the
invention must be new. B) Inventive step,, meaning that the invention
must not be obivious to a person skilled in the art. And C) Utility,
meaning it must have an industrial applicability or a practical use in
any industry.
Conflicts of law issue in patents usually arises in the application
of the first to file rule and the right of priority rule. (Crescencio P.
Co Untian, Commercial Law Reviewer 2012).
The first to file rule dictates that a between two or more
inventors, the one who filed an application owns the patent thereto,
and if there be more than one application, the applicant with the
earliest filing date or priority date owns the patent. While, the right of
priority rule states that a patent application filed by one who has
previously applied for the same invention in another country that
affords similar privileges to Filipinos shall be considered filed as of the
date of filing application. (Crescencio P. Co Untian, Commercial Law
Reviewer 2012).
To illustrate:
For the same invention:
1) X filed his patent application before the IPO on March 15 2010 on
his invention completed on October 15 2009.
2) On the other hand, Y filed his patent application before the IPO
on April 20, 2010 on his invention that was also applied for
patent in France on July 1, 2009.
Ans: Between X and Y, Y application shall be preferred because it
was applied in France, a country which affords similar privileges
to Filipinos and is thus considered filed as of July 1, 2009 while X
application is considered filed only on March 15, 2010.
TRADEMARK
A Trademark is a symbol, sign, slogan or name used to mark a
product in order to distinguish it from other products. If used to
distinguish a service rendered from other sevices, it is a service mark.
And if used to distinguish an enterprise from other enterprise, it is a
tradename. (Crescencio P.
Co Untian, Commercial Law Reviewer

2012).
Similar with patents, trademarks need to be registered to enjoy
protection.
Problem arises when a domestic corporation has the same or
similar trademarks with a foreign corporation. In such cases, the
following rules are observed:
1)

In case of similar or identical goods, a trademark which

is identical with, or confusingly similar to or constitutes a
translation of, an internationally and locally well known
mark, whether or not registered in the Philippines are
generally refused registration. Subject to the defense
that in determining whether a mark is well-known,
account shall be taken of the knowledge of the relevant
sector of the public, rather than of the public at large.

Ex. There is no confusing similarity between fruit of the loom and

fruit of the eve both dealing with womens panties. (Fruit of the
loom, Inc vs IAC G.R. No. L-32747 November 29, 1984)
2)

In case of non-competing goods and services, two

requisites are required to constitute infringement, and
these are: 1) its use would indicate a connection
between the two marks and 2) the interest of the owner
of the registered mark are likely to be damaged by such
use.
Ex. There is no confusing similarities between Brut for
toilet articles and Brute for briefs, the two products
are so dissimilar that a purchaser of one would not be
mistaken into buying the other. (Faberge Inc. vs. IAC
G.R. No. 71189, Nov. 4, 1992
Intellectual Property )

It should be noted that under the Paris Convention, a foreign

national, even if not licensed to do or not actually doing business in the
Philippines may file an action for infringement, provided: a) Its mark is
registered in the Philippines, or in the case of a trade name, it has
continuously been used in commerce in the Philippines and b) Its
country extends reciprocal rights to nationals of the Philippines or is a
member of the Paris Convention. (Crescencio P. Co Untian, Commercial
Law Reviewer 2012).

COPYRIGHT
Copyright is the protection afforded by law to the author of an
original intellectual creation. They are protected from the moment of
creation.
Section 177 of the IPC enumerates the exclusive rights or
economic rights of the owner over his copyrighted works as follows: 1)
The right to reproduce, 2) the right to prepare derivative works, 3) the
right to distribute, 4) the right to display, 5) the right to perform. WIPO
treaty and TRIPS treaty further added 6) the right to transmit and 7)
the right of rental.
Copyright infringement is a criminal offense punishable by
imprisonment from 2 years to five years. Two acts are punished:
1)

Direct infringement is the commission is the commission

of a person himself of any of the acts that would violate
the rights of the copyright owner in relation to his work.
Two requisite must concur: 1) valid copyright of the work
infringed and 2) copying of protected elements of the
work.
2) Contributory infringement, committed by a person who
materially contributes to the infringement committed by another with
knowledge of the infringing act.
Alike other choses in action, intellectual property is without a definite
situs and must consequently follow the place of its registration or
protection. Lex loci protection is, also known as the "territorial
principle", is a choice of law rule applied to cases concerning the
infringement of intellectual property (IP) rights, such as copyrights or
patents. It stipulates that the law applied to such cases is the law of
the locus protectionis, that is, the law of the country for which legal
protection for the intellectual property is claimed The reason for this is
that intellectual property rights arise, though creation or registration,
in each country for which a work seeks protection; infringements are
governed by the laws of the countries where the alleged infringing acts
take place.
In intellectual property, cross-border acts may best be localized, for
reasons of settling conflicts of laws, by reflecting on the consequences
for judicial remedies. This has inclined to mean that the medium, as
the place of registration or of infringement, will apply its own
substantive intellectual property laws. Depicting from the point that

this principle has been adopted by both the Berne Convention for the
Protection of Literary and Artistic Works of 1886 as well as the Paris
Convention for the Protection of Industrial Property of 1883, it can be
confirmed that the rights held in each country are independent.
Although in copyright cases, the courts apply the law of the country
where the violation is committed, the counterfeiting of an industrial
property right is governed by the law of the country in which the
patent is issued or the trademark or model is registered. Hence, in
whichever case, the general rule as provided by Martin Wolff is that A
state will protect only such patents, designs, trade marks, trade
names, and copyrights as it has itself granted either by particular act
or general statute. No state applies foreign laws to questions of
patents, copyrights, and the like or recognizes rights of this class
created under foreign law. Thus, if an inventor would like his creation
be protected by a patent in States A and B, then he has to have
patents granted by both states.
Under the Intellectual Property Code of the Philippines, a patent has a
term of protection of twenty years from the date of application;; for
trade mark, ten years; for layout designs, ten years; for copyrights, it
shall endure during the lifetime of the creator and fifty years
thereafter, in case of works of join creation, the period of fifty (50)
years shall be counted from the death of the last surviving co-creator;
for new plant varieties, twenty-five years from the date of granting of
certificate of registration for trees and vines, and twenty years for all
other types of plants. After the expiration of the forgoing terms of
protection, the intellectual property becomes a public property.
As intellectual property becomes an increasingly valuable commodity
in international transactions, the choice-of-law rules that determine the
substantive law governing the transactions will become very
important. Uncertainty in this area will lead not only to unnecessary
costs and uncertainty whenever worldwide rights and transactions are
involved, but also to unjust results that would be contrary to the
expectations of the interested parties. Hence in any case, the
prevailing conflicts rule in most jurisdictions is that expressed by
Martin Wolff A State will protect only such patents designs,
trademarks, trade names, and copyrights as it has itself granted either
by a particular act or general statue. No State apples foreign laws to
questions of patents, copyrights and the like or recognized of this class
created under foreign law
On January 1 1995, the Philippines became a member of World Trade
Organization . As a member of the said organization, the Philippines
has agreed to ensure the conformity of its laws, regulations and
administrative procedures with tis obligations as provided and abides

by the principles of national treatment. Under this principle, as

provided in Article 3, Agreement on TRIPS, Each member shall accord
to the nationals of other members no less favorable than that it
accords to its own nationals with regard to the protection of intellectual
property

Bibliography
Article 521 of the New Civil Code
Ginsburg, Jane C. Conflicts of Law and Intellectual Property, Columbia
University
School
of
Law
at
http://www.aals.org/profdev/international/ginsburg.html.
Co Untian Jr., Crescencio P. Commercial Law Reviewer, 2012.
Wolff, Martin, Private International Law, 1950.
Black's Law Dictionary (8th ed., p. 1944 [2004])
THE LAW ON INTELLECTUAL PROPERTY (A PRIMER), Office of the Press
Secretary, Bureau of Communication Services, Manila.