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COMMERCE – branch of human activity; purpose is to bring products to the consumer through
operations habitually and with intent of gain
COMMERCIAL LAW – branch of private law which regulates the juridical relations arising from
commercial acts
CHARACTERISTICS OF COMMERCIAL LAW:
1. 1. universal
2. 2. uniform
3. 3. equitable
4. 4. customary
5. 5. progressive
what needs to be proven in order value of property upon loss no need for proof of value of
to be able to claim property upon loss
determining value of loss value of property is to be value of property upon loss is
ascertained upon loss conclusively stipulated to a
specified amount
• Period for commencing an action against the policy: Within 1 year from the time the cause of
action accrues, i.e., from the time of rejection of the claim by the insurer. Any condition,
stipulation, or agreement limiting the time to less than 1 year is void.
• Grounds for Cancellation of a Policy by the Insurer:
For Policies Other than Life:
(1) prior notice of the cancellation to insured
(2) notice must be based on the ff. occurrences after effective date of the policy
(a) non-payment of premiums
(b) conviction of a crime arising out of acts increasing the hazard insured against
(c) discovery of fraud or material misrepresentation
(d) discovery of willful or reckless acts or omissions increasing the hazard insured against
(e) physical changes in the property insured which results in the property becoming uninsurable
(f) determination by the Commissioner that the continuation of the policy would violate or would
place the insurer in violation of the Insurance Code
(3) notice must be in writing
(4) it must be mailed or delivered to the insured at the address shown in the policy
(5) notice must state the ground relied upon and that upon written request of the insured, the insurer
will furnish facts on which the cancellation is based
• Renewal of the Policies Other than Life:
Insurer must mail or deliver to the insured notice of its intention not to renew the policy or to condition
its renewal upon reduction of limits or elimination of coverages within 45 days before the policy ends.
Otherwise, insured entitled to renew the policy upon payment of the premium due on the effective date
of the renewal.
1. 19. Premium
• General Rule: No policy is binding until the premium thereof has been paid.
• Exceptions: (a) in case of life or industrial life policy, whenever the grace period applies
(b) in case of estoppel
• Insurer is entitled to payment of premiums as soon as the thing insured is exposed to the perils
insured against.
• When insurer entitled to Return of Premiums
1. a. when the contract is voidable on account of fraud or misrepresentation of the insurer;
2. b. when on account of facts, the existence of which the insured was ignorant without his
fault
3. c. when by any default of the insured other than actual fraud, the insurer never incurred any
liability under the policy
4. d. when the insured has become a public enemy and the policy automatically canceled (on
the ground of equity)
5. e. in case of over-insurance by several insurers (ratable return of premiums, proportioned to
the amount by which the aggregate sum insured in all policies exceed the insurable value of the
thing at risk)
1. 20. Loss
• When Insurer is Liable:
1. a. where the peril insured against was the proximate cause, although a peril not
contemplated by the contract may have been the remote cause or even the immediate cause of
the loss
2. b. where the thing insured is rescued from the peril insured against that would otherwise
have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured
against, which permanently deprives the insured of its possession in whole or in part
3. c. where loss is caused by efforts to rescue the thing insured from a peril insured against
4. d. insurer is not exonerated by a loss caused by simple negligence of the insured if the
proximate cause of the loss is a peril insured against
5. e. loss, the immediate cause of which is a peril insured against except when the proximate
cause is an excepted peril
• When Insurer Not Liable:
1. a. where the peril insured against was only a remote cause
2. b. where the peril is specifically excepted, a loss which would not have occurred but for
such peril is thereby excepted
3. c. loss caused by the connivance of the insured
4. d. loss caused by the willful act of insured
5. e. loss caused by insured’s negligence, if it amounts to bad faith
• General Rule: The insurer is not liable for a loss caused by the willful act of the insured.
• Exception: Suicide Clause in Life Insurance: Insurer liable in case insured committed suicide
after the policy has been in force for a period of 2 years from the date of its issue or last
reinstatement. If insured kills himself within a period of 2 years, insurer is not liable.
• Exception to Exception: If suicide is committed in a state of insanity, regardless of the time of
commission, the insurer is liable.
1. 21. Double Insurance – exists where the same person is insured by several insurers separately
in respect to the same subject and interest
• Requisites: a. person insured must be the same
1. b. existence of several insurers
2. c. subject matter insured must be the same
3. d. interest the same
4. e. risk insured against also the same
Over Insurance Double Insurance
1. 23. Marine Insurance: insures against perils of the sea, not of the ship
Perils of the Sea Perils of the Ship
Prior to notification of the warehouseman by the The goods cannot be attached or levied under an
transferor or transferee, the warehouseman is not execution unless the receipt be first surrendered
bound to the transferee whose right may be to the warehouseman or its negotiation enjoined.
defeated by a levy of an attachment or execution
upon the goods by the creditor of the transferor
or by a notification to such warehouseman of the
subsequent sale of the goods.
• Rights of a person to whom a negotiable receipt has been transferred, not indorsed:
1. a. the right to the goods as against the transferor
2. b. the right to compel the transferor to indorse the receipt. But if the intention of the parties
is that the receipt should merely be transferred, the transferee has no right to require the
transferor to indorse the receipt.
Note: Negotiation takes effect as of the time when the indorsement is actually made.
• Warranties of a person negotiating or transferring a receipt:
1. a. the receipt is genuine
2. b. he has a legal right to negotiate or transfer it
3. c. he has knowledge that would impair the validity or worth of the receipt and
4. d. he has a right to transfer the title to the goods and that the goods are merchantable
• A holder for security of a receipt (mortgagee or pledgee) who in good faith accepts payment of
the debt from a person does not warrant the genuineness of the receipt not the quality or
quantity of the goods therein described.
• It is the duty of the purchaser, mortgagee or pledgee of goods for which a negotiable receipt has
been issued to require the negotiation of the receipt to him, otherwise his failure will have the
same effect as an express authorization on his part to the seller, mortgagor, or pledgor in
possession of such receipt to make any subsequent negotiation. The subsequent purchaser must
have taken the receipt in good faith and for value.
• A bona fide purchaser of a negotiable warehouse receipt acquires title to the goods where he
purchases from the owner’s agent within the actual or apparent scope of his authority. In sum,
negotiation is valid despite having been made in breach of trust.
• Distinctions between a negotiable instrument and a negotiable warehouse receipt:
Negotiable Instrument Negotiable Warehouse Receipt
crew of salvaging ship is entitled to salvage, and crew of the towing ship does not have any
can look to the salvaged vessel for its share interest or rights with the remuneration pursuant
to the contract
salvor takes possession and may retain tower has no possessory lien; only an action for
possession until he is paid recovery of sum of money
court has power to reduce the amount of court has no power to change amount in towage
remuneration if unconscionable even if unconscionable
Carriage of Goods by Sea Act
1. 1. When Applicable:
1. a. contracts for the carriage of goods
2. b. by sea
3. c. to and from Philippine ports
4. d. in foreign trade
1. 2. Notice of Loss or damage must be given in writing to the carrier or his agent at the port of
discharge or at the time of the removal of the goods into the custody of the person entitled to
delivery. If the loss or damage is not apparent, the notice must be given within 3 days of
delivery. However, the carrier shall be discharged from all liability in respect of loss or damage
of goods unless suit is brought within 1 year after delivery of the goods or the date when the
goods should have been delivered. Notice of loss, if not given, that fact shall not affect or
prejudice the right of the shipper to bring suit within the 1 year prescriptive period.
Warsaw Convention
1. 1. When Applicable:
1. a. international transport by air
2. b. transport of persons, baggage, or goods
1. 2. Liabilities under the Convention:
1. a. damage sustained in the event of the death or wounding of a passenger taking
place on board the aircraft or in the course of any of the operations of embarking or
disembarking
2. b. loss or damage to any check baggage or goods sustained during the transport by
air
3. c. delay in the transport by air of passengers, baggage, or goods
• Enumeration of causes of action as above stated is not an exclusive list. (Northwest Airlines vs.
Cancer)
1. 3. Meaning of Transport by Air – period during which the baggage or goods are in charge of
the carrier, whether in an airport or on board an aircraft, or in the case of landing outside an
airport, in any place whatsoever
1. 4. Action for damages must be brought at the option of the plaintiff, either:
1. a. before the court of the domicile of the carrier;
2. b. court of principal place of business of carrier;
3. c. court where he has a place of business through which the contract has been made;
4. d. before the court at the place of destination
1. 5. Convention provides for a limitation of liability:
1. a. for each passenger – limited to 125,000 francs
2. b. for goods and checked in baggage – limited to 250 francs per kilogram
3. c. for hand carry – limited to 5,000 francs per passenger
• When can you not avail of this limitation?
(1) willful misconduct
(2) default amounting to willful misconduct
(3) accepting passengers without ticket
(4) accepting goods without airway bill or baggage without baggage chec
1. 6. The right to damages shall be extinguished if an action is not brought within 2 years from
the date of arrival at the destination, or from the date on which the aircraft ought to have
arrived, or from the date on which the transportation stopped.
1. 7. Notice requirement: damage to baggage : within 3 days from receipt
damage to goods: within 7 days from receipt
delay: within 21 days from receipt
• Failure to file written notice, no action shall lie against the carrier, save in the case of fraud on
his part.
1. 8. Notice Requirements:
COGSA Code of Commerce Warsaw Convention
any authorization to operate a public service issued by the appropriate government agency to
issued by the appropriate government agency a public service to which any political
subdivision has granted a franchise
an authorization issued by the proper government an authorization issued by the proper government
agency for the operation of public services for agency for the operation of public services for
which no franchise, either municipal or which a franchise is required by law
legislative is required by law
1. 6. Requirements of CPC and franchise:
1. a. Filipino citizenship
2. b. financial capacity
3. c. public convenience
Corporation Law
1. 1. Doctrine of Corporate Opportunity – a director is made to account to his corporation,
gains and profits from transactions entered into by him/another competing corporation in which
he has substantial interest, which should have been a transaction undertaken by the corporation.
This s a breach of fiduciary relationship.
1. 2. Doctrine of Piercing the Veil of Corporate Entity – it is to disregard for justifiable reasons
by the state the fiction of juridical personality of the corporation separate and distinct from the
persons composing it
1. 3. De Jure Corporation – corporation formed with all the requirements of law
1. 4. De Facto Corporation – corporation defectively formed from a bona fide attempt to
incorporate under the existing law and exercises corporate powers
1. 5. Corporation by Estoppel – a group of persons which holds itself out as a corporation and
enters into a contract with 3rd persons on the strength of such appearance cannot be permitted to
deny its existence in an action under said contract
1. 6. Corporation by Prescription – body not lawfully organized as a corporation but has been
recognized by immemorial usage as a corporation with rights and duties maintainable by law
(ex. Roman Catholic)
1. 7. Trust Fund Doctrine – the subscribed capital stock of the corporation is a trust fund for
the payment of debts of the corporation which the creditors have the right to look up to satisfy
their credits. Corporations may not dissipate this and the creditors may sue the stockholders
directly for their unpaid subscriptions
1. 8. Voting Shares
1. a. Founders Shares – given rights and privileges not enjoyed by owners of other
stocks; right to vote/be voted in the election of directors shall not exceed 5 years
Non-Voting Shares
1. a. Preferred Shares – issued only with par value; given preference in distribution of assets in
liquidation and in payment of dividends and other preferences stated in the articles of
incorporation
2. b. Redeemable Shares – expressly provided in articles; have to be purchased/taken up upon
expiration of period of said shares purchased whether or not there is unrestricted retained
earnings
3. c. Treasury Stocks – stocks previously issued and fully paid for and reacquired by the
corporation through lawful means (purchase, donation, etc.)
1. 9. Exceptions where holders of non-voting shares may vote:
1. a. amendments of articles of incorporation
2. b. adoption/amendment of by-laws
3. c. increase/decrease of bonded indebtedness
4. d. increase/decrease of capital stock
5. e. sale/disposition of all/substantially all corporate property
6. f. merger/consolidation of corporation
7. g. investment of funds in another corporation/another business purpose
8. h. corporate dissolution
1. 10. Preferred Cumulative Participating Share of Stock – share entitling its holder to preference
in the payment of dividends ahead of common stockholders and to be paid the dividends ahead
of common stockholders and to be paid the dividends due for prior years and to participate
further with common stockholders in dividend declarations
1. 11. Promotion Stock for Services Rendered Prior to Incorporation Escrow Stock – stock
deposited with a 3rd person to be delivered to stockholder/assignor after complying with certain
conditions – usually payment of full subscription price
1. 12. Over-issued Stock – stock issued in excess of authorized capital stock; null and void
1. 13. Watered Stock – stock issued gratuitously, money/property less than par value, services
less than par value, dividends where no surplus profits exist
1. 14. Certificate of Stock – written acknowledgment by the corporation of the stockholder’s
interest in the corporation. It is the personal property and may be mortgaged/pledged. Transfer
binds the corporation when it is recorded in the corporate books. A stockholder who does not
pay his subscription is not entitled to the issue of a stock certificate. The total par value of the
stocks subscribed by him should first be paid.
1. 15. Chattel mortgage of shares registered with the Registrar of Deeds need not be registered in
corporate books to bind third parties because corporate books only cover absolute transfers. But
the pledgee/mortgagee may not have voting rights unless stated in the contract and registered in
the corporate name.
1. 16. Methods of Collection of Unpaid Subscription
1. a. call, delinquency and sale at public auction of delinquent shares
2. b. ordinary civil action
3. c. collection from cash dividends and other amounts due to stockholders if allowed
by by-laws/agreed to by him
1. 17. A corporation can reacquire stocks in the following cases:
1. a. eliminate fractional shares
2. b. corporate indebtedness arising from unpaid subscriptions
3. c. purchase delinquent shares
4. d. exercise of appraisal right
1. 18. Right of Appraisal
1. a. amending articles, changing, restricting, enlarging stockholder’s rights/extending,
shortening corporate life
2. b. sale/disposition of all/substantially all of corporate assets
3. c. merger and consolidation
4. d. investment of funds in another corporation/for a different purpose
1. 19. Grounds for Rejection of Registration
1. a. not in prescribed form
2. b. purpose illegal, inimical
3. c. treasurer’s affidavit false
4. d. non-compliance with required Filipino stock ownership
1. 20. Corporation must organize within 2 years from issuance of certificate of incorporation.
How to organize?
1. a. adoption of by-laws
2. b. election of Board of Directors
3. c. election of officers
But from issuance of certificate, it acquires juridical personality
1. 21. Merger – one corporation absorbs the other and remains in existence while the other is
dissolved
1. 22. Consolidation – a new corporation is created and the consolidating corporations are
extinguished
1. 23. Theory of General Capacity – a corporation is said to hold such powers as are not
prohibited/withheld from it by general law
1. 24. Theory of Special Capacity – the corporation cannot exercise powers except those
expressly/impliedly given
1. 25. Concession Theory – a group of persons wanting to create a corporation will have to
execute documents and comply with requirements set by the state before being given corporate
personality; merely a privilege; state may provide causes for which the privilege may be
withdrawn
1. 26. Acts requiring majority vote of stockholder:
1. a. filing of issue value of no par value share
2. b. adoption, amendment, repeal of by-laws
3. c. compensation and other per diems for directors
1. 27. Where similar acts have been approved by the directors as a matter of general practice,
custom and policy, the general manager may bind the company even without formal
authorization of the board of directors
1. 28. Powers of stockholders:
1. a. a direct participation in management – where his vote is needed to approve certain
corporate actions
2. b. indirect participation in management to vote or remove directors
3. c. proprietary rights
4. d. remedial rights
1. 29. Voting Trust Agreement – an agreement between a group of stockholders and trustee for a
term not exceeding 5 years in which control over the stocks is lodged in the trustee. The
purpose is for controlling the voting.
1. a. in writing, notarized and filed with the SEC and the corporation
2. b. period not exceeding 5 years
3. c. cannot be entered into to circumvent the laws against monopolies, illegal
combinations in restraint of trade in fraud
1. 30. Cumulative Voting – the number of votes that a shareholder’s number of shares multiplied
by the number of directors may give all said votes to one candidate or he may distribute them as
he may deem fit. Cumulative voting is a matter of right in a stock corporation. In a non-stock
corporation, it cannot be utilized unless allowed by the by-laws/articles
1. 31. The power of removal of directors that may be exercised with or without cause cannot
apply to the director representing the minority shareholders. He may only be removed with
cause.
1. 32. General Rule: If surplus profits exceed the requirements the corporation shall declare
dividends. This is compulsory if the surplus is equal/or more than the paid-up capital.
Exceptions:
1. a. justified by approved expansion projects
2. b. prohibited by creditor to declare dividends
3. c. retention is necessary under existing circumstances
1. 33. Business Judgment Rule – decisions made by a corporation’s management body shall not
be interfered with even by the courts unless such acts are oppressive/unconscionable as to
violate the rights of the minority
1. 34. Individual Suit – one brought to assert a right of a stockholder peculiar to himself
1. 35. Representative Suit – brought by the stockholder in his own behalf and in behalf of other
stockholders similarly situated, having common cause against the corporation
1. 36. Derivative Suit – brought by a stockholder for and in behalf of the corporation to
protect/vindicate corporate rights after he has exhausted intra-corporate remedies
Requisites:
1. a. cause of action in favor of the corporation
2. b. refusal of corporation to sue
3. c. injury to the corporation
• Although corporations dissolved have 3 years to wind up, they can convey their properties to a
trustee who can continue the suit beyond the 3 year period. The lawyer who handled the case in
the trial court may be considered as trustee for the dissolved corporation with respect to the
matter in litigation only even if no appointment was extended to him. (Selano vs. CA)
• In a case filed before dissolution, it may continue even beyond the 3 year period until final
determination of litigation. Otherwise, the corporation in liquidation would lose what justly
belongs to them/be exempt from payment of obligations because of a technicality.
1. 37. Foreign Corporations
1. a. Doing Business – continuity of commercial dealings incident to prosecution of
purpose and object of the organization. Isolated, occasional or casual transactions do not
amount to engaging in business. But where the isolated act is not incidental/casual but
indicates the foreign corporation’s intention to do other business, said single act
constitutes engaging in business in the Philippines
2. b. Instances when unlicensed foreign corporations can sue:
(1) isolated transactions
(2) action to protect good name, goodwill, and reputation of a foreign corporation
(3) contracts provide that Phil. Courts will be venue to controversies
(4) license subsequently granted enables foreign corporation to sue on contracts executed before the
grant of the license
(5) recovery of misdelivered property
(6) where the unlicensed foreign corporation has a domestic corporation
1. 38. Religious Corporations
1. a. Corporation Sole – special form of corporation; associated with the clergy and
consists of 1 person only and his successors; incorporated by law giving them legal
capacity and advantage
2. b. Close Corporations – one whose articles provide that its shares shall not be held
by more than 20 persons; its issued stock shall be subject to one or more restrictions on
transfer and shall not be listed in any stock exchange/make public offering
3. c. Non-stock Corporation – one where no part of its income is distributable to its
members and shall be used in furtherance of the purpose of which it was organized
1. 39. SEC Jurisdiction
1. a. original and exclusive jurisdiction
(1) fraudulent devices and schemes employed by directors detrimental to public interest
(2) intra-corporate disputes and with the state in relation to their franchise and right to exist as such
(3) controversies in the election, appointment of directors, trustees, etc.
(4) petition to be declared in a state of suspension of payments
1. b. Grounds for Suspension/Revocation of Certificate of Registration
(1) fraud in procuring registration
(2) serious misrepresentation as to objectives of corporation
(3) refusal to comply with lawful order of SEC
(4) continuous inoperation for at least 5 years
(5) failure to file by-laws within the required period
(6) failure to file reports
(7) other similar grounds
Revised Securities Act
(Material on the Securities Regulation Code of 2000 to follow)
1. 1. General Rule: All securities before being offered for sale/actual sale to the public must
first be registered and have the proper permit.
Exception:
1. a. exempt securities
2. b. securities emanating from exempt transactions
1. 2. Exempt Securities
1. a. issued by the government subdivisions/instrumentalities
2. b. issued by foreign government which the Philippines has diplomatic relations
3. c. issued by receiver/trustee of an insolvent approved by the court
4. d. issued by building and loan association
5. e. issued by receiver/trustee of an insolvent approved by the court
6. f. policy of insurance issued by insurance corporation supervised by the insurance
commission
7. g. security/right/interest in real property including subdivision lot/condominium
supervised by the Ministry of Human Settlements
8. h. pension plans regulated by BIR/Insurance Commission
1. 3. Exempt Transactions
1. a. judicial sale by execution, etc. in insolvency
2. b. sale of pledged property/foreclosed property to liquidate an obligation
3. c. isolated transactions on securities done by owner/agent
4. d. stock transfers emanating from mergers and consolidations
5. e. pre-incorporation subscription
6. f. securities issued by public service operator to broaden equity base
1. 4. Grounds for Rejection of Registration
1. a. application incomplete/untruthful/omits to state a material fact
2. b. issuer/registrant insolvent, violated code/ SEC rules, engages in fraudulent
transactions
3. c. issuer’s business not sound
4. d. officer, director, stockholders of issuers is disqualified
5. e. issue would prejudice the public
1. 5. Grounds for Revocation
1. a. issuer insolvent
2. b. violated of Code/SEC rules
3. c. fraudulent transaction
4. d. dishonesty by issuer/misrepresented prospectus
5. e. does not conduct business in accordance with law
1. 6. Acts Prohibited
1. a. manipulation of security prices
2. b. manipulation of deceptive devices
3. c. artificial measures of price control
4. d. fraudulent transactions
5. e. insider trading
6. f. false prospectus, communications, reports
Secrecy if Back Deposits
1. 1. Deposits in banks, including government banks, may not be inquired into by any person,
except:
1. a. if depositor agrees in writing
2. b. impeachment cases
3. c. by court order in cases of bribery and dereliction of duty against public officials
4. d. deposit is subject of litigation
5. e. anti-graft cases
6. f. general and special examination of bank order of the Monetary Board of bank
fraud or serious irregularity
7. g. re-examination made by an independent auditor hired by a bank to conduct its
regular trust
Laws on Intellectual Creation
Copyright
1. 1. What Works are not Protected:
1. a. any idea, procedure, system, method or operation, concept, principle, discovery, or
mere data as such, even if they are expressed, explained, illustrated or embodied in a
work; news of the day or other miscellaneous facts, having the character of mere items
of press information, or any official text of a legislative, administrative or legal nature as
well as any official translation thereof
2. b. works of the government
3. c. statutes, rules, and regulations of government agencies and offices
4. d. speeches, lectures, sermons, addresses and dissertations, pronounced or rendered
in courts of justices or nay administrative agencies in deliberative assemblies and
meetings of public character
1. 2. Fair Use of a Copyrighted Work is not Infringement
1. a. for criticism, comment, news reporting, teaching, research, scholarship, and
similar purposes
2. b. decompilation: the reproduction of the code and translation of the forms of the
computer program with other programs
1. 3. Factors to Consider in Determining Fair Use:
1. a. purpose and character of the use, including whether such use is of a commercial
nature or for no profit or educational purposes
2. b. nature of the copyrighted work
3. c. amount and substantiality of the portion used in relation to the copyrighted work
as a whole
4. d. effect of use upon the potential market for a value of the copyrighted work
1. 4. Terms of the Protection
1. a. copyrighted work: lifetime of creator plus 50 years after death (to be computed on
st
the 1 day of January of the year following the death)
2. b. performances not incorporated in recordings: 50 years from end of year in which
the performance took place
3. c. sound or image and sound recordings and performances incorporated therein: 50
years from end of the year in which the recording took place
4. d. broadcasts: 20 years from the date the broadcast took place
1. 5. Remedies for Infringement
1. a. injunction
2. b. actual damages, including legal costs and other expenses, as he may have incurred
due to the infringement as well as the profits the infringer may have made due to such
infringement
3. c. impounding of articles during pendency of the action
4. d. destruction of all infringing copies and/or devices
5. e. moral and exemplary damages
1. 6. Criminal Penalties
1. a. imprisonment of 1 to 3 years plus fine of P50,000 to P150,000 for the first offense
2. b. imprisonment of 3 years and 1 day to 6 years plus fine ranging from P150,000 to
P500,000 for the 2nd offense
3. c. imprisonment of 6 years and 1 day to 9 years plus fine of P500,000 to P1,000,000
for the 3rd/subsequent offenses
IN ALL CASES, subsidiary imprisonment in cases of insolvency
1. 7. Presumptions:
1. a. Presumption of copyright in the work of other subject matter to which the action
related
2. b. Plaintiff is presumed to be the owner of the copyright
3. c. The natural person whose name is indicated on a work in the usual manner as the
author shall, in the absence of proof to the contrary, be presumed to be the author of the
work. This is applicable even if the name is a pseudonym, where the pseudonym leaves
no doubt as to the identity of the author.
1. 8. Prescription: No damages may be recovered after 4 years from time the cause of action
arose.
Patents
1. 1. Patentable Inventions – any technical solution of a problem in any field o human activity
that is new, involve an inventive step and is industrially applicable shall be patentable. It may
be or may relate to as product, or process or an improvement of any of the foregoing.
1. 2. Non-Patentable Inventions
1. a. discoveries, scientific theories and mathematical methods
2. b. schemes, rules and methods of performing mental acts, playing games or doing
business, and programs for computers
3. c. methods for treatment of the human or animal body by surgery or therapy and
diagnostic methods practiced on the human or animal body
Exception: products and composition for use in any of these methods
1. d. plant varieties or animal breeds or essentially biological process for the production of
plants and animals
Exception: micro-organisms and non-biological and micro-biological processes
1. e. aesthetic creations
2. f. contrary to public order or morality
1. 3. Requisites of Patentability
1. a. new, novelty
2. b. involves an inventive step;
3. c. is industrially applicable
1. 4. Novelty
The novelty requirement in the Code is absolute. Thus, an invention is not considered new if it forms
part of a prior art. A prior art consists of:
1. a. anything which has been made available to the public anywhere in the world before the
filing date or the priority date of the application, or
2. b. the whole contents of an application for a patent, utility model, or industrial design
registration, published in the IPO gazette, filed or effective in the Philippines, with a filing or
priority date that is earlier than the filing or priority date of the application, provided that the
application which has validly claimed the filing date of an earlier application (priority date) is
prior art with effect as of the filing date of such earlier application, and provided further, that the
applicant and the inventor identified in both applications are not one and the same
1. 5. Inventive Step – an invention involves an inventive step, if having regard to the prior art,
it is not obvious to a person skilled in the art at the time of the filing date of priority date of the
application claiming the invention
1. 6. Industrial Applicability – an invention is considered industrially applicable if it can be
produced and used in the industry
1. 7. The First-to-File System – if 2 or more persons have made the invention separately and
independently of each other, the right to the patent belongs to the person who filed an
application for such invention, or where 2 or more applications are filed for the same invention,
the right of the patent belongs to the person who has the earliest filing date or the earliest
priority date
Under this system, the patent is granted to the inventor who filed his patent application earlier than
others thus simplifying the determination of who is entitled to own the patent.
The First-to-File System increases the rights of the inventor by:
1. a. guaranteeing the confidentiality of the application prior to its publication
2. b. giving the inventor inchoate rights against an infringer after the publication of the
application and before the grant of the patent and
3. c. expanding the rights of the inventor to institute cancellation proceedings for the duration
of the term of the patent. Cancellation proceedings may be filed at any time during the term of
the patent.
Under this system, the applicant declared by final court order as having the right to the patent may:
1. a. prosecute the application as his own application in place of the original applicant
2. b. file a new patent application in respect of the same invention
3. c. request that the application be refused or
4. d. seek the cancellation of the patent, if one has already been issued
1. 8. What is the difference between novelty in patents and originality in copyright?
Novelty in Patents – even if you do not know of any previous creation, as long as a patent on the same
creation has already been published anywhere in the world, you cannot claim novelty. No access tot he
other creation is no defense.
Originality in Copyright – even if there is same creation, as long as you do not copy your own creation,
it is still considered an original creation. No access to the previous creation is a defense.
1. 9. Non-Prejudicial Disclosure
The disclosure of information contained in the application during the 12 months preceding the filing
date or the priority date of the application shall not prejudice the applicant on the ground of lack of
novelty if such disclosure was made by (a) inventor; (b) a patent office and the information was
contained
1. 10. Term of Patent – 20 years from the filing date of the application
1. 11. Grounds for Compulsory Licensing:
1. a. national emergency or other circumstances of extreme urgency
2. b. where public interest, national security, health or the development of other vital
sectors of the national economy as determined by the appropriate agency of the
government so requires
3. c. where a judicial or administrative body has determined that the manner of
exploitation by the owner of the patent or his licensee is anti-competitive
4. d. in case of public non-commercial use of the patent by the patentee, without
satisfactory reason
5. e. if not being worked in the Philippines on a commercial scale
1. 12. In case of Compulsory Licensing of Patents involving Semi-conductor Technology, the
license may be granted only in case of public non-commercial use or to remedy a practice
determined after judicial or administrative process to be anti-competitive
1. 13. Utility Models – an invention qualifies for registration as a utility model if it is new and
industrially applicable
– no inventive step required for registration
– no search and examination required
1. 14. Term Protection – 7 years after the filing date of application without possibility of renewal
1. 15. Industrial Design – any composition of lines or colors or any 3 dimensional form, whether
or not associated with lines or colors
Industrial Designs essentially dictated by technical or functional considerations to obtain a technical
result or those that are contrary to public order, health or morals shall not be protected
1. 16. Term of Protection – 5 years from filing date of application, renewable for not more than 2
consecutive periods of 5 years each
Insolvency Law
1. 1. Distinguish Suspension of Payment and Insolvency
Suspension of Payment Insolvency
debtor has enough assets to meet liabilities but debtor has more liabilities than assets
cannot meet them as they fall due
always initiated by debtor initiated by creditors/other persons if involuntary;
initiated by debtor if voluntary
1. 2. Fraudulent Preference – any act of insolvent which gives rise/has tendency to give
preference to a creditor to the assets of the insolvent prejudicial to the right of other creditors of
said insolvent
1. 3. Effect on Actions Upon Adjudication of Insolvency
1. a. suits pending in court
(1) secured obligations suspended until assignee appointed
(2) unsecured obligations terminated except to fix amount of obligation
(3) foreclosure suits pending continue
1. b. suit not yet filed – cannot be filed anymore, but claims may be presented to assignee
1. 4. Debts and Obligations not Affected by Discharge of Insolvent
1. a. assessments due to national and local government
2. b. debts due to fraud/embezzlement
3. c. debts in which he is bound solidarily
4. d. alimony
5. e. corporate debts
6. f. debts not included in the schedule submitted by debtor
Chattel Mortgage Law
1. 1. The law primarily governs chattel mortgage. Provisions on pledge of NCC in so far as
not in conflict with CML also govern chattel mortgages.
1. 2. Chattel Mortgage may be rescinded for being in fraud of creditors.
1. 3. Growing fruits are covered by chattel mortgage but they may not be pledged.
1. 4. Machinery placed on plant or building owned by another can be the object of chattel
mortgage.
1. 5. General Rule: Chattel Mortgage cannot cover debts subsequently contracted.
1. 6. Rules: Chattel Mortgage cannot cover debts subsequently contracted
1. a. registered in place where mortgagor resides and where property (chattel) is
located. If mortgagor resides abroad, register in place where property is located.
2. b. Motor Vehicles: register also in Land Transportation Office
3. c. Shares of Stock: place of domicile of corporation and shareholder. No need for
notation in books of corporation
4. d. Vessels: Phil. Coastguard
1. 7. To be valid against 3rdpersons:
1. a. affidavit of good faith
2. b. contract must be registered
1. 8. General Rule: In Chattel Mortgage, there is recovery of deficiency judgment.
Exception: when Recto Law applies
1. 9. Requisites of CML:
1. a. constituted to secure the fulfillment of principal obligation
2. b. mortgagor is absolute owner of the thing mortgaged
3. c. persons constituting the mortgage have the free disposal of the property and in the
absence thereof, they be legally authorized for the purpose
4. d. recorded to bind 3rd persons
1. 10. Formal Requisites of CM:
1. a. substantial compliance with form in Sec. 5 of CML
2. b. signed by at least 2 witnesses
3. c. must contain an affidavit of good faith
4. d. certificate of oath (notarial acknowledgment)
1. 11. Affidavit of Good Faith – where the parties severally swear that the mortgage is made for
the purpose of securing the obligation specified and for no other purpose and that the same is a
just and valid obligation and not one entered into for fraud
– property given in CM must be described to enable the parties or any other person after reasonable
inquiry and investigation to identify it
1. 12. Future property may not be covered by CM but when such property is a:
1. a. renewal of, or in substitution for goods on hand when the mortgage was executed,
or
2. b. purchased with proceeds (not of your own money) of said goods, said property
may be covered by CM
1. 13. Criminal Acts – removal of chattel to another city or province without written consent of
mortgagee, selling property already pledged, or mortgaged without written consent of
mortgagee
1. 14. A chattel mortgage may be foreclosed judicially or extra-judicially, in the latter case,
before a notary or sheriff, or creditor or mortgagee when stipulated, even without need of notice
(when mortgagee forecloses)
15. Pactum Commissorium applies to Chattel Mortgage.