Updates on Intellectual Property Law (Part IV)

By Atty. Juris Bernadette M. Tomboc

This contribution contains updates on topics in Intellectual Property Law in a question and answer format. The author is grateful to Fr. Ranhilio C. Aquino, Ph.D., J.D., Dean of the San Beda Graduate School of Law, for providing the questions for discussion.

1. What are the differences between the Rules of Criminal Procedure on Arrests and Searches and the Rule on Search and Seizure in intellectual property cases? What are the implications of the differences?

ANSWER: (a) Section 5 of the Rule on Search and Seizure in intellectual property cases (the “Rule”) is more stringent in the sense that it specifies a time period (twenty-four hours) for the examination of an applicant for a writ. There is no requirement for the judge to act on the application for search warrant within twenty-four hours under Section 4 of Rule 126 of the Rules of Criminal Procedure.

(b) Section 6 of the Rule is more stringent in the sense that it specifies the grounds for the issuance of a writ. Section 3 of Rule 126 of the Rules of Criminal Procedure only requires that the search warrant be issued upon probable cause. Per Defense Department Order No. 740, the question as to whether or not probable cause exists depends upon the judgment and discretion of the judge issuing the warrant or upon the evaluation of the officer recommending the issuance of the search and seizure order.

(c) Section 8 of the Rule requires the person being subject to search to disclose the location of the documents or articles with a warning that violation thereof constitutes contempt of court. However, the requirement may pose a problem should the property seized be used in connection with a criminal prosecution. Sections 1 and 12(2), respectively, of Article III of the 1987 Philippine Constitution guarantees individuals’ right to due process and against self-incrimination. There is no similar requirement under Rule 126 of the Rules of Criminal Procedure.

(d) Section 9 of the Rule requires the posting of a bond, or other security, in favor of the adverse party, prior to the issuance of a writ. Rule 126 of the Rules of Criminal Procedure does require a similar posting of bond or other security.

(e) Section 12 of the Rule requires the appointment by the court of an independent commissioner to supervise the enforcement of the writ. Rule 126 Rules of Criminal Procedure does not require the appointment of an independent commissioner.

(f) Section 13 of the Rule may allow the writ to be served at any time on any day but only if there are compelling reasons for the same. Section 8 of Rule 126 of the Rules of Criminal Procedure, on the other hand, may allow the service of a warrant at any time on any day as long as the applicant in his affidavit asserts that the property is on the person or in the place to be searched.

(g) Section 13 of the Rule is less restrictive than Section 10 of Rule 126 of the Rules of Criminal Procedure in the sense that it allows the writ to be enforced not only in the presence of the person against whom the writ is served, his representative, or two persons of sufficient age or discretion residing in the same locality but also in their absence as long as there are at least two persons of sufficient age or discretion residing in the nearest locality to witness the writ’s enforcement.

(h) Section 14 of the Rule requires the submission of a copy of the seized documents and articles to the Commissioner. Section 14 of the Rule also requires the delivery of the seized items to a bonded, or a government, warehouse for safekeeping. Section 11 of Rule 126 of the Rules of Criminal Procedure only requires delivery of the property seized with a verified inventory to the court that issued the writ.

(i) Section 18 of the Rule provides additional protection for the rights of the person against whom the writ is served by specifying grounds for the discharge of the writ.

(j) Section 17 of the Rule promotes transparency by requiring the sheriff to prepare the verified return within three days of enforcement. It likewise expressly requires the judge to determine whether provisions of the Rule have been complied with on the basis of the return. Section 19 of the Rule requires the judge to summon the sheriff to request for an explanation within five days from the issuance of a writ if the writ was not enforced or if no return was filed.

(k) Section 21 of the Rule provides additional protection to the rights of the person against whom the writ is served by specifying the instances when compensation is due to the latter, viz.: (a) when the court orders the discharge of the writ, the person against whom the writ was served has a prima facie claim to compensation; (b) when damage has been suffered by the person against whom the writ was issued because of its wrongful execution; and (c) when the court finds that there has been no infringement and that the seized items are not infringing. Section 126 of the Rules of Criminal Procedure does not contain a similar provision.

The Rule contains more protection than Rule 126 of the Rules of Criminal Procedure for the rights of the person against whom the writ is issued. However, since the provisions of Rule 126 of the Rules of Criminal Procedure impose fewer requirements, there could arise a tendency for a litigant to initially pursue a criminal case in order to be able to apply for the issuance of a writ under the Rules of Criminal Procedure even if the litigant’s real intention was to merely to collect damages.

The remedy therefore is to require litigants in civil cases for infringement to strictly comply with the provisions of the Rule in applying for a writ and to disallow in such civil cases the use of evidence collected pursuant to criminal cases.

Further, since the Rule provides more protection for the rights of the person against whom the writ is issued, it will be more beneficial to them if the Rule would also be made to apply to criminal cases involving infringement. Application of the Rule to criminal cases will also discourage the filing of groundless suits.

References:

Administrative Matter No. 02-1-06-SC (effective February 15, 2002). Rule on Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights

Revised Rules of Criminal Procedure (December 1, 2000).

2. What has been the attitude of the Philippine Supreme Court with respect to rights guaranteed by international covenants on treaties on intellectual property vis-à-vis claims made before Philippine courts?

ANSWER: In Converse Rubber Corporation v. Jacinto Rubber & Plastics Co. [GR L-27425 & L-30505, April 28, 1980], the Supreme Court had occasion to apply the Paris Convention for the Protection of Industrial Property that citizens of a union member state may file, on a reciprocal basis, actions for unfair competition and infringement of trademarks, patents, etc. in any of the union member states. Sections 1126 (b) and (h) of Public Law 489 of the United States allow corporations organized in the Philippines to file actions for unfair competition in the United States, whether or not they are licensed to do business therein.

In Kabushi Kaisha Isetan v. IAC [GR 75420, Nov. 15, 1991], the Court affirmed that since the Philippines must honor its obligation under the Paris Convention for the Protection of Industrial Property on matters concerning internationally known or well known marks.

In La Chemise Lacoste, S.A. vs. Fernandez [G.R. Nos. 63796-97. May 21, 1984], the Court upheld the right of the petitioner, a foreign corporation, to maintain suit before Philippine courts for unfair competition or infringement of trademarks recognizing the duties and rights of foreign states under the Paris Convention. The Court explained that it simply interpreted and enforced the multilateral treaty entered into by the Philippines because it is in the country’s interest to do so.

In Mirpuri v. Court of Appeals [G.R. 114508, November 19, 1999], the Court directly addressed the issue of whether or not the Paris Convention to which the Philippines is a signatory can support a cause of action. The Court held that by Senate concurrence, the Philippines became obligated to enforce the provisions of the Convention.

The Court reiterated the foregoing rulings in Canon Kabushiki Kaisha v. Court of Appeals and NSR Rubber Corporation [GR 120900, July 20, 2000] and confirmed the Philippine’s adherence to the Paris Convention, specifically Section A (2) of Article 5 thereof, in Smith Kline & French Laboratories, Ltd. v. Court of Appeals [GR 121867, July 24, 1997].

In case of conflict between international treaty provisions and municipal law, which should prevail? In the recent case of Lim v. Hon. Executive Secretary [G.R. 151445, April 11, 2002], the Court discussed the issue, viz.:

“A rather recent formulation of the relation of international law vis-à-vis municipal law was expressed in Philip Morris, Inc. v. Court of Appeals [224 SCRA 576, 593 (1993)], to wit:

“… Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislation.””

“This is not exactly helpful in solving the problem at hand since in trying to find a middle ground, it favors neither one law nor the other, which only leaves the hapless seeker with an unsolved dilemma. Other more traditional approaches may offer valuable insights.”

“From the perspective of public international law, a treaty is favored over municipal law pursuant to the principle of pacta sunt servanda. Hence, "[e]very treaty in force is binding upon the parties to it and must be performed by them in good faith" (Article 26, Vienna Convention on the Law of Treaties). Further, a party to a treaty is not allowed to "invoke the provisions of its internal law as justification for its failure to perform a treaty" (Article 27, Vienna Convention)

“Our Constitution espouses the opposing view. Witness our jurisdiction as stated in section 5 of Article VIII:

“The Supreme Court shall have the following powers: xxx

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and order of lower courts in:

(A) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question. xxx””

“In Ichong v. Hernandez [101 Phil. 1155, 1191 (1957)], we ruled that the provisions of a treaty are always subject to qualification or amendment by a subsequent law, or that it is subject to the police power of the State. In Gonzales v. Hechanova 9 SCRA 230, 242 (1963):

“… As regards the question whether an international agreement may be invalidated by our courts, suffice it to say that the Constitution of the Philippines has clearly settled it in the affirmative, by providing, in Section 2 of Article VIII thereof, that the Supreme Court may not be deprived "of its jurisdiction to review, revise, reverse, modify, or affirm on appeal, certiorari, or writ of error as the law or the rules of court may provide, final judgments and decrees of inferior courts in — (1) All cases in which the constitutionality or validity of any treaty, law, ordinance, or executive order or regulation is in question." In other words, our Constitution authorizes the nullification of a treaty, not only when it conflicts with the fundamental law, but, also, when it runs counter to an act of Congress.””

Thus, in Mighty Corporation v. La Campana Fabrica de Tabaco, Inc. (G.R. 154342, July 15, 2004), the Supreme Court reiterated its earlier rulings in Emerald Garment Manufacturing Corporation vs. Court of Appeals (251 SCRA 600, 619 [1995]), Pagasa Industrial Corporation vs. Court of Appeals (118 SCRA 526 [1982]), Converse Rubber Corporation vs. Universal Rubber Products, Inc. (147 SCRA 154 [1987]), Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]), Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), and Philip Morris vs. Court of Appeals (224 SCRA 576 [1993]), giving utmost importance to the actual commercial use of a trademark in the Philippines prior to its registration pursuant to the provisions of Republic Act No. 166, otherwise known as the Philippine Trademark Law, notwithstanding the provisions of the Paris Convention.

The Philippine Trademark Law was superseded by Republic Act No. 8293, or the Intellectual Property Law, which contains a similar requirement on actual use of a trademark three years prior to the filing date of the application for its registration.

Thus:

“In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark.”

“Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (Republic Act No. 166) xxx”

“The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]):

“Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx” (Emphasis supplied.)

“In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using the trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx”” (Emphasis supplied)

Cases:

Canon Kabushiki Kaisha v. Court of Appeals and NSR Rubber Corporation [GR 120900, July 20, 2000]

Converse Rubber Corporation v. Jacinto Rubber & Plastics Co. [GR L-27425 & L-30505, April 28, 1980]

Converse Rubber Corporation vs. Universal Rubber Products, Inc. (147 SCRA 154 [1987])

Emerald Garment Manufacturing Corporation vs. Court of Appeals (251 SCRA 600, 619 [1995])

Gonzales v. Hechanova 9 SCRA 230, 242 (1963)

Ichong v. Hernandez [101 Phil. 1155, 1191 (1957)]

Kabushi Kaisha Isetan v. IAC [GR 75420, Nov. 15, 1991]

La Chemise Lacoste, S.A. vs. Fernandez [G.R. Nos. 63796-97. May 21, 1984]

Lim v. Hon. Executive Secretary [G.R. 151445, April 11, 2002]

Mighty Corporation v. La Campana Fabrica de Tabaco, Inc. (G.R. 154342, July 15, 2004)

Mirpuri v. Court of Appeals [G.R. 114508, November 19, 1999]

Pagasa Industrial Corporation vs. Court of Appeals (118 SCRA 526 [1982])

Philip Morris, Inc. v. Court of Appeals [224 SCRA 576, 593 (1993)]

Smith Kline & French Laboratories, Ltd. v. Court of Appeals [GR 121867, July 24, 1997]

Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969])

3. Discuss the problem of the unauthorized disclosure of trade secrets or undisclosed information under domestic law as well as under international covenants and treaties. How would Philippine courts dispose of cases where the plaintiff complains that the defendant disclosed a trade secret or revealed undisclosed information?

ANSWER: Article 39, 2 of the World Trade Organization Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) provides protection for undisclosed information. The requisite conditions are: (a) The information is not in its details known or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) The information has commercial value; and (c) The same has been subject to steps by the owner or holder of the secret to keep it secret. The third requisite is necessary so that it can be established that the holder or owner of the information intended to keep it secret. Formal filing of trade secrets and undisclosed information is not required in the Philippines.

In seeking protection of a trade secret or undisclosed information, it is necessary for an employer to establish by competent evidence: (a) Company policy prohibiting disclosure and (b) The confidential nature of its technology. Otherwise, “disobedience” or “loss of trust and confidence” due to unauthorized disclosure of a trade secret may not be successfully invoked as grounds for the dismissal of an employee.

In Cocoland Development Corporation v. National Labor Relations Commission [G.R. No. 98458. July 17, 1996] the issues were: (a) Whether an employer's determination of a certain "technology" as trade secret is binding and conclusive upon the National Labor Relations Commission; and (b) Whether the alleged violation of confidentiality of the employer's "technology" constitutes a just cause for termination of employment. The Court addressed these issues, viz.:

“The first ground relied upon by petitioner essentially involves determining whether or not there existed a valid company policy prohibiting disclosure by employees of company technology and trade secrets to "outsiders", and whether or not private respondent's actions amounted to a violation of such policy sufficient to warrant dismissal.

The record fully supports the findings and conclusions of the arbiter that petitioner "failed to demonstrate with clear and convincing evidence the alleged company policy which it claimed was violated by the complainant (private respondent)", and that in any event, even assuming that there was such company policy prohibiting its employees from transferring technological knowledge to third parties, the so-called technology was hardly a 'trade secret' since private respondent had established convincingly via competent evidence that the various propagation techniques claimed by petitioner as its trade secret were readily available to the public. xxx (Emphasis supplied)

Who determines what is trade secret?

Petitioner's naked contention that its own determination of what constitutes a trade secret should be binding and conclusive upon public respondent is erroneous and dangerous, and deserves the barest consideration. As prudently observed by the Solicitor General, such a stand is contrary to the State's policy of affording protection to labor. Sustaining such contention would permit an employer to label almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an employee on the pre-text that the latter somehow disclosed a trade secret, even if in fact there be none at all to speak of. Any determination by management as to the confidential nature of technologies, processes, formulae or other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny. This is but an ineludible corollary of the time-tested principle that "(t)he rules, instructions or commands in order to be a ground for discharge on the score of disobedience, must be reasonable and lawful, must be known to the employee, and must pertain to the duties which the employees have been engaged to discharge." A fictitious or non-existent "secret" (or a publicly known one as in the instant case) can in no wise be the basis of a reasonable and lawful rule or company policy regarding confidentiality. (Emphasis supplied)

Had petitioner successfully established by competent evidence the existence of such company policy as well as the confidential nature of its technology, perhaps things might have turned out differently. But inasmuch as petitioner failed utterly on both counts, it follows that there was no basis at all for private respondent's dismissal on the ground of either disobedience or loss of trust and confidence. The petitioner's failure to prove violation of the policy necessarily means that private respondent's dismissal was not justified. It is doctrinal that in an unlawful dismissal case, the employer has the burden of proving the lawful cause for the employee's dismissal. To warrant dismissal for loss of trust and confidence there should naturally be some basis therefor. Unsupported by sufficient proof, "loss of confidence" is without basis and may not be successfully invoked as a ground for dismissal.” (Emphasis supplied)

American jurisprudence treats the wrongful appropriation of a trade secret as unfair competition. A trade secret has been defined as “any formula, pattern, device or compilation of information which is used in a person’s business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it” (Aquino, Handbook on Intellectual Property citing 61 Cal Jur 3d, “Unfair Competition”, § 15).

The elements of a cause of action for unfair competition through misappropriation of a trade secret are: (a) the existence of a trade secret or secret manufacturing process; (b) the value and importance of the trade secret to the employer in the conduct of his business; (c) the employer’s right by reason of discovery or ownership to the use and enjoyment of the secret; and (d) the communication of the secret to the employee while he was employed in a position of trust and confidence and under circumstances making it inequitable and unjust for him to disclose it to others or to use it himself to the employer’s prejudice (Aquino, Handbook on Intellectual Property citing 55 Am Jur 2d, “Monopolies, Restraints of Trade and Unfair Trade Practices”, § 704).

The list of what may be considered as acts constituting unfair competition under Section 168.3 of Republic Act No. 8293 is not exclusive. The introductory paragraph of Section 168.3 allows flexibility in determining whether unfair competition exists, viz.: “… without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition…”

Thus, although unauthorized disclosure of trade secrets and undisclosed information is not enumerated among the instances of unfair competition under Section 168.3 of Republic Act No. 8293, it may still however be considered as constituting unfair competition under Philippine law.

Section 168.4 of Republic Act No. 8293 provides that the remedies that apply to infringement of trademarks, service marks and trade names under Sections 156, 157 and 161 shall likewise apply to cases of unfair competition. Section 156.1 on damages that may be collected in connection with infringement provides that:

“… the measure of damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages as reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the […] was used …”

Section 156.4 allows the grant of an injunction, upon proper showing by the complainant. Section 157 gives the court the power to order the destruction of infringing material. Further, Administrative Matter No. 02-1-06-SC, otherwise known as the “Rule on Search and Seizure in Civil Action for Infringements of Intellectual Property Rights”, effective February 15, 2002, applies to all searches and seizures pursuant to civil actions for infringement under Republic Act No. 8293.

Finally, Section 170 of Republic Act No. 8293 provides a penalty of imprisonment (two to five years) and a fine (P50,000.00 to P200,000.00) on any person who may be found guilty of unfair competition under Section 168.

References:

Aquino, R., Handbook on Intellectual Property.

Cocoland Development Corporation v. National Labor Relations Commission [G.R. No. 98458. July 17, 1996]

Republic Act No. 8293 (1997). Intellectual Property Law.

World Trade Organization Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS)