Legal Updates

We feature some of the latest laws, rules and regulations, and jurisprudence that may affect you, your family, your business or community.

Criminal Law

UNFAIR COMPETITION: A transitory or continuing offense and cannot be considered as delito continuado or continued crime.

In the case of Petron Corporation and People of the Philippines vs. William Yao, Sr., et al, (G.R. No. 243328, 18 March 2021), the Supreme Court ruled that “Unfair Competition” under Section 168 of Republic Act No. 8293 or the “Intellectual Property Code of the Philippines”, is a transitory or continuing offense and cannot be considered as delito continuado or continued crime. The High Court gave the following reasoning in support of its ruling, and the proper venue for filing such criminal action.

1. The accused allegedly refilled the gasul tanks owned by the private complainant in one city and sold them therein. Thus, the crime of unfair competition was already consummated in the city were the gasul tanks were refilled and sold. There is a continuing violation of the law when the accused continued to pass off the private complainant’s gasul tanks as their own by subsequently selling them in another city. The sale made in two (2) different cities cannot be considered as separate offense of unfair competition as they merely constitute the ingredients of the crime.

2. “Unfair competition”, under Section 168 of the Intellectual Propertty Code of the Philippines, is characterized as a continuing offense because of the very nature of the crime. The said provision of law describes the acts constituting the offense of unfair competition as follows:

“SECTION 168. Unfair Competition, Rights, Regulation and Remedies. – 168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.

168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and given them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely to influence purchasers to believe that the goods offered are those o a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;”

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business or another with the end and probable effect of deceiving the public (Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd., et al, 632 Phil. 546, 571 [2010]). Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors (Republic Gas Corp., et al. vs. Petron Corp., et al., 711 Phil. 348, 361 [2013]). Thus, the main element of unfair competition is passing off and one way of committing the crime is by sale.

3. For a crime to be considered as delito continuado (continued or continuous crime), there must be plurality of acts committed by the actor against different parties on the same occasion with the same criminal intent or purpose of violating the same penal provision. A delito continuado is a continuous, unlawful act or series of acts set on foot by a single impulse and operated by an unintermittent force, however, long a time it may occupy (People vs. de Leon, 608 Phil. 701, 722 [2009]). Accused did not commit on the same occasion several acts of passing off their gas tanks as that of the private complainant or other parties. Rather, accused only continued or repeated the singular crime in one city and all the way to another city. Thus, unfair competition does not fall under the criterion of a delito continuado.

4. The contention that since several consumers had been deceived into believing that they were buying private complainant’s gasul tanks, justifies the filing of separate and distinct complaints for the crime of unfair competition is bereft of merit. It is only the owners of the trademark who can file a case for unfair competition for deceptive trade practices. The rule which protects against unfair competition is primarily for the protection of the party against whom such competition is directed, and only incidentally for the protection of the public (US vs. Kyburz, 28 Phil. 475 [1914]).

5. In transitory or continuing offenses, such as unfair competition, in which some acts material and essential to the crime and requisite to its consummation occur in one place and some in another, the court of either place has jurisdiction to try the case for unfair competition filed by the private complainant. However, in cases of concurrent jurisdiction, the court first acquiring jurisdiction excludes the other courts (See Lee vs. Presiding Judge, MTC Legaspi City, 229 Phil. 405, 414 [1986], citing Laquian vs. Baltazar, 142 Phil. 531, 536 [1980]).

Labor Law

SEAFARER’S CLAIM FOR TOTAL AND PERMANENT DISABILITY BENEFITS: Importance of a final and definitive medical assessment within 120/240 days from medical repatriation.

In the recent case of Kennedy R. Quines vs. United Philippines Lines, Inc., et al. (G.R. No. 248774, 12 May 2021), the Supreme Court, in resolving a seafarer’s claim for total and permanent disability by reason of Coronary Heart Disease or Ischemic Heart Disease, held that:

1. Compensability of an illness or injury does not depend on whether the injury or disease was pre-existing at the time of employment, but rather on whether the injury or illness is “work-related” or “has aggravated the seafarer’s condition”. Although a Pre-Employment Medical Examination (PEME) is not expected to be an in-depth examination of a seafarer’s health, nevertheless, it must fulfill its purpose of ascertaining a prospective seafarer’s capacity for safely performing tasks at sea. If the PEME concludes that a seafarer, even one with an existing medical condition, is “fit for sea duty”, it must on its face be taken to mean that the seafarer is well in a position to engage in employment aboard a sea vessel without danger to his health.

2. A final and definitive disability assessment is necessary in order to truly reflect the true extent of the sickness or injuries of the seafarer and his or her capacity to resume work as such. The responsibility of the company-designated physician to arrive at a definite assessment within the prescribed periods necessitates that the perceived disability rating has been properly established and inscribed in a valid and timely medical report.

3. The following medical reports are not complete and final, and are inconclusive as to the seafarer’s health status:

a. A medical report indicating that:
i. There is no absolute cardiovascular indication to seafarer’s resumption of seafaring duties;
ii. Seafarer still has episodes of dizziness and chest pain; and
iii. Seafarer was recommended for psychiatric evaluation and management as well as the evaluation of possible disability grading for his current symptoms.

b. A medical report that merely stated seafarer was not permanently unfit for sea duties because it may improve over time and provided that he overcome his anxiety symptoms.

4. Without a valid final and definitive assessments from the company-designated doctors within the 120/240-day period from medical repatriation, the law already steps in to consider a seafarer’s disability as total and permanent. By operation of law, the seafarer is already deemed to be totally and permanently disabled, and is considered entitled to total and permanent disability benefits.

Family Law

GRATUITOUS DISPOSITION OF PROPERTY ACQUIRED DURING A VOID MARRIAGE

In the recent case of Nicxon L. Perez, Jr. vs. Avegail Perez-Senerpida, et al. (G.R. No. 233365, 24 March 2021), the Supreme Court laid down the rules on the gratuitous disposition of property acquired during a void marriage in the following manner:

1. The property acquired during a void marriage is governed by the rule on “special co-ownership” under Article 147 of the Family Code, as follows:

“When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the former’s efforts consisted in the care and maintenance of the family and of the household.

Neither party can encumber of dispose by acts inter vivos of his or her share in the property acquired during cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership shall be forfeited in favor of their common children. In case of fault of or waiver by any or all of the common children or their descendants, each vacant shall belong to the respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation.”

2. Article 147 expressly prohibits a party to a cohabitation to encumber or alienate by act inter vivos even his or her share in the property acquired during cohabitation and owned in common, without the consent of the other party until after the termination of the cohabitation. The rules on ordinary co-ownership under Article 493 of the Civil Code, i.e.,

“Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.”

cannot supersede, and must yield to, Article 147 of the Family Code.

3. Donation, made prior to the termination of cohabitation, of any property acquired during cohabitation by one party, without the consent of the other, is therefore void. The rule applies even to the share of the donor in the property acquired during cohabitation.

Corporate and Business Law

SALIENT FEATURES OF THE REVISED CORPORATION CODE

The Revised Corporation Code of the Philippines (Republic Act No. 11232) became effective on 23 February 2019, replacing Batas Pambansa Bilang 68. The following are some of the key provisions of the law.

1. NUMBER OF INCORPORATORS. A minimum of one (1) person up to a maximum of fifteen (5) persons, may organize a corporation for any lawful purpose or purposes. A corporation with a single stockholder is considered a One Person Corporation. (Section 10).

2. PERPETUAL CORPORATE TERM. A corporation shall have perpetual existence, unless its Articles of Incorporation provides otherwise. Corporations incorporated prior to the effectivity of the law shall automatically have perpetual existence, unless, the stockholders representing a majority of the shares of stock vote otherwise.(Section 11)

3. MINIMUM CAPITALIZATION REQUIRED. Stock corporation shall not be required to have minimum capital stock, except as otherwise specifically provided by special law.(Section 12)

4. PARTICIPATION VIA REMOTE COMMUNICATION, IN ABSENTIA. A Director or Trustee who cannot physically attend or vote at board meetings can participate and vote through remote communication such as videoconferencing, teleconferencing, or other alternative modes of communication that allow them reasonable opportunity to participate (Article 52). A stockholder or member who participates in a meeting through remote communication or in absentia, shall be deemed present for purposes of a quorum (Article 57).

5. EMERGENCY BOARD. When the vacancy in the Board, prevents the remaining directors or trustees from constituting a quorum and emergency action is required to prevent grave, substantial and irreparable loss or damage to the corporation, the vacancy may be temporarily filled from among the officers of the corporation by unanimous vote of the remaining directors or trustees. However, the action of the designated director or trustee shall be limited to the emergency action necessary, and the term shall cease within a reasonable time from the termination of the emergency or upon election of the replacement director or trustee, whichever comes first (Section 28).

6. ELECTRONIC FILING AND MONITORING SYSTEM. The Securities and Exchange Commission is now mandate to develop and implement an electronic and filing system (Section 180).

Real Estate

HUMAN SETTLEMENTS ADJUDICATION COMMISSION: Cases falling within its jurisdiction

Effective 01 January 2020, the Housing and Land Use Regulatory Board (HLURB) and the Housing and Urban Development Coordinating Council have been reconstituted into the newly created Department of Human Settlements and Urban Development (DHSUD) by virtue of Republic Act No. 11201. Section 12 of the said law, expressly provided that the HLURB was reconstituted as and its adjudicatory functions transferred to, the Human Settlements Adjudication Commission (HSAD).

The HSAD, under Section 15 of the law, has exclusive appellate jurisdiction over:

1. All cases decided by the Regional Adjudicators; and
2. Appeal from decisions of local and regional planning and zoning bodies.

On the other hand, under Section 16 of the same statute, the Regional Adjudicators of HSAD, shall have original and exclusive jurisdiction to hear and decide cases involving the following:

1. Cases involving subdivisions, condominiums, memorial parks and similar real estate developments;
a. Actions concerning unsound real estate business practices filed by buyers or homeowners against the project owner or developer, which cause prejudice to the buyers or committed with bad faith and disregard of the buyers’ rights;
b. Claims for refund and other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman. Provided, That when the cause of action arises from the buyer’s rights under Section 23 of Presidential Decree No. 957 and the purchase price of the property is paid through a housing loan from a bank or other financing institutions, the latter shall be impleaded as a necessary party;
c. Cases involving specific performance or contractual and statutory obligations arising from the sale of the sale of the lot or unit and development of the subdivision or condominium project.
d. Disputes involving open spaces or common areas and their use filed by the project owner or developer or the duly registered Homeowners’ Association (HOA), including the eviction of informal settlers therein, in accordance with the requirements of law, and the rules and regulations promulgated by duly constituted authorities;
e. Suits to declare subdivision, condominium or other real estate developments within the regulatory jurisdiction of the DHSUD as abandoned, as defined under Section 3 of R.A. No. 11201 for the purpose of Section 35 of Presidential Decree No. 957, otherwise known as “The Subdivision and Condominium Buyers Protective Decree”;
f. Disputes involving easements within or among subdivision projects; and
g. Actions to annul mortgages executed in violation of Section 18 of Presidential Decree No. 957 filed by a subdivision lot or condominium unit buyer against the project owner and/or developer and the mortgagee.

2. Cases involving Homeowners Association (HOA):
a. Controversies involving the registration and regulation of HOAs;
b. Intra-association disputes or controversies arising out of the relations between and among members of HOAs, between any or all of them and the HOA of which they are members;
c. Inter-association disputes or controversies arising out of the relations between and among two (2) or more HOAs, between and among federations and other umbrella organizations, on matters pertaining to the exercise of their rights, duties and functions; and
d. Disputes between such HOA and the State, insofar as it concerns their individual franchise or right to exist and those which are intrinsically connected with the regulation of HOAs or dealing with the internal affairs of such entity.

3. Disputes involving the implementation of Section 18 of Republic Act No. 7279, otherwise known as the “Urban and Development Act of 1992”, as amended, and its Implementing Rules and Regulations.

4. Disputes and controversies involving laws and regulations being implemented by the DHSUD, except those cases falling within the jurisdiction of other judicial or quasi-judicial body.

Intellectual Property Rights

TRADEMARK: Acquisition of Ownership of a Mark, and Protection of Prior Users in Good Faith of a Mark, under the IP Code.

In the recent case of Zuneca Pharmaceutical, et al. vs. Natrapharm Inc. (G.R. No. 211850, 08 September 2020), decided by the Supreme Court En Banc, the following issues were discussed: a) acquisition of ownership of a mark under the Intellectual Property (IP) Code; and b) protection, if any, of prior users in good of a mark under the IP Code.

How is ownership over trademark acquired?

The Supreme Court resolved the issue of acquisition of ownership of a mark in the following manner:

1. The language of the Intellectual Property Code provisions clearly conveys the rule that ownership of a mark is acquired through registration. Section 122 of the said Code expressly provides that, “rights in a mark shall be acquired through registration made validly in accordance with the provisions of this law”. The “first to file rule” expressed in Section 123 of the said Code, prioritizes the first filer of the trademark application and operates to prevent any subsequent applicants from registering “identical marks” as described in Section 123.1.(d).;

2. The intention of the lawmakers was to abandon the rule that the ownership of a mark is acquired through use. The current rule under the Intellectual Property Code is in stark contrast to the rule on acquisition of ownership under the Trademark Law (R. A. No. 166, as amended by R. A. No. 638), that one acquired ownership over a mark by actual use; and prior use and non-abandonment of a mark by one person barred the future registration of an identical or a confusingly similar mark by a different proprietor when confusion or deception was likely. Upon the effectivity of the IP Code, the previous general rule on ownership was changed and repealed. Furthermore, the term “owner” is used under the present Code, in relation to registration At present, prior use no longer determines the acquisition of ownership of a mark, since ownership is now acquired through registration. The IP Code provisions requiring actual use of the registered owner of the mark is only for the purpose of maintaining his ownership. Thus, even if a mark was previously used and not abandoned by another person, a good faith applicant may still register the same and become the owner thereof, and the prior user cannot ask for the cancellation of the latter’s registration. The prima facie nature of a Certificate of Registration under Section 138 of the IP Code is not indicative of the fact that prior use is still a recognized mode of acquiring ownership of a mark. It is meant to recognize the instances when the certificate of registration is not reflective of ownership of the holder thereof, such as when: a) the first registrant has acquired ownership of the mark through registration but subsequently lost the same due to non-use or abandonment (e.g. failure to file the Declaration of Actual Use); b) the registration was done in bad faith; c) the mark itself becomes generic; d) the mark was registered contrary to the provisions of the IP Code (e.g., when a generic mark was successfully registered for some reason); or e) the registered mark is being used by, or with permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used.; and

3. The rule on ownership used in Berries Agricultural Co., Inc. vs. Abyadang (647 Phil. 517 [2010]) and E. Y. Industrial Sales, Inc., et al. vs. Shen Dar Electricity and Machinery Co., Ltd., (648 Phil. 572 [2010]), is inconsistent with the Intellectual Property Code regime of acquiring ownership through registration.

a. In Berris, although the question of ownership of the mark was decided consistent with the rule on ownership under the IP Code, the Court mistakenly gave weight to the fact of prior use when it stated, “ownership of a trademark is acquired by its registration and its actual use”. Any pronouncement in Berris that is inconsistent with the IP Code’s regime of acquisition of ownership through registration must be harmonized accordingly.
b. In E. Y. Industrial Sales, Inc., the ponencia cited Section 123.1.(d), the first-to-file rule adopted by the IP Code, but also included the discussion in Shangri-la International Hotel Management, Ltd. vs. Developers Group of Companies, Inc. (520 Phil. 935 [2006]), in concluding that the prior user was the owner of the mark. Shangri-la, although decided after the effectivity of the IP Code, show that he applicable law of the case was the Trademark Law, as amended. Moreover, in E. Y. Industrial Sales Inc., one party applied and registered the mark under the IP Code, while the other party had applied for the mark under the Trademark Law, as amended, and its registration was obtained after the effectivity of the IP Code. The rule used to resolve the ownership issue in E. Y. Industrial Sales Inc. and Shangri-la should not be made to apply in a situation involving marks which are both used and/or registered after the effectivity of the IP Code. For marks used and/or registered after the effectivity of the IP Code, prior use is no longer required for acquisition of ownership, since the adoption of the first-to-file rule and the rule that ownership of a mark is acquired through registration.

What protection, if any, does a prior user in good faith of a mark has under the IP Code?

In resolving the question, the High Court ruled that:

1. While the first-to-file registrant in good faith acquires all the rights in a mark, nevertheless, Section159.1 of the IP Code also protects prior users in good faith in the sense that they will not be made liable for trademark infringement even if they are using a mark that was subsequently registered by another person. While Section 159.1. contemplates that a prior user in good faith may continue to use its mark even after the registration of the mark by the first-to-file registrant in good faith, the IP Code also respect the rights of the registered owner of the mark by preventing any future use by the transferee or assignee that is not in conformity with the said provision of the law. The application of Section 159.1. results in at least two entities – the unregistered prior user in good faith or their assignee or transferee; and the first-to-file registrant in good faith – concurrently using the identical or confusingly similar marks in the market, even if there is likelihood of confusion. A not so ideal situation brought about by the application of Section 159.1. of the IP Code.

2. Section 147.1 of the same Code, which provides that the owner of a registered mark shall have the exclusive right to prevent third party’s use of identical or similar marks resulting in the likelihood of confusion, must be interpreted in harmony with Section 159.1. The lawmakers intended for the rights of the owners of a registered mark in Section 147.1 to be subject to the rights of a prior user in good faith contemplated in Section 159.1. In other words, Section 159.1 is an exception to the rights of trademark owner in Section 147.1.

3. Even without Section 159.1, a third party’s prior use of an unregistered mark, if said mark is subsequently registered by a first-to-file registrant in good faith, could not be considered as trademark infringement because there was no trademark registration – a requirement for a trademark infringement action to prosper – when the third party was using its mark.