MERC REV 2 Intellectual Property Law Transportation Law Public Service Act 1

4A- Study Circle Mercantile Law Review II
A.Y. 2020-2021 Dean Nilo T. Divina
MERCANTILE LAW REVIEW II appearance to and can serve as a pattern for an

industrial product or handicraft.
FEBRUARY 15, 2021 e. Patents – any technical solution to a problem in any
Kield of human activity which is new, involves and
inventive step and is industrially applicable.
f. Lay-out designs – synonymous with topography and it
IP RIGHTS IN GENERAL means the three-dimensional disposition, however
expressed, of the elements, at least one of which is an
DISCUSSION: active element and of some or all of the
What are Intellectual Property Rights? interconnections of an integrated circuit, or such a
three-dimensional disposition prepared for an
Intellectual Property Rights (IPR) are rights given to persons integrated circuit intended for manufacture. (Section
over the creation of their minds. It has two categories: 112.3, IPC)
g. Integrated circuit – a product, in its Kinal form or an
a. Industrial Property which includes inventions intermediate form, in which the elements are integrally
(patents), trademarks, industrial design, and formed in and/or on a piece of material and which is
geographic indications of source; and, intended to perform an electronic function.
b. Copyright and related (neighboring) rights. h. Protection of undisclosed information – means
Copyright includes literary and artistic works. protection of information lawfully held from being
Rights related to copyright include those of disclosed to, acquired by, or used by others without
performing artists in their performances, producers their consent in a manner contrary to honest
of phonograms in their recordings, and those of commercial practices so long as such information:
broadcasters in their radio and television programs. i. i) is secret in the sense in that it is not, as a body or in
the precise conKiguration and assembly of its
components, generally known among or readily
What are the kinds of intellectual property rights under accessible to persons within the circles that normally
the Intellectual Property Code of the Philippines (IPC)? deal with the kind of information in question;
ii) has commercial value because it is a secret; and
Under the IPC, the term intellectual property rights consist iii) has been subject to reasonable steps under the
of: circumstances, by the person lawfully in control of
the information, to keep it secret.
a. Copyright and related rights – exist over original Examples of Undisclosed Information Protected
and derivative intellectual creations in the literary under the IPC: Trade Secrets
and artistic domain protected from the moment of
creation.
b. Trademark and service marks – any visible sign
capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall Describe intellectual property as a right.
include a stamped or marked container of goods. Intellectual property right is statutory in nature. The rights
c. Geographic indications – indications which identify conferred on intellectual property must be provided by law
a good as originating from a given territory, a region and can only be enjoyed on the terms speciKied by statute.
or locality where a given quality, reputation or other
characteristic of the good is essentially attributable It is also an incorporeal right which exists separate and
to its geographic indication. Examples: Bourdeaux distinct from the material object to which it is attached.
(for wine), Grasse (for perfume) and Tuscany (for Thus, ownership in one does not necessarily vest ownership
olive oil). in the other. The transfer of assignment of the intellectual
d. Industrial designs – any composition of line or property will not constitute a conveyance of the thing it
colors or any three-dimensional form, whether or covers, nor would a conveyance of the latter imply the
not associated with lines or colors; Provided that transfer of the intellectual property right. Distillera
such composition or form gives a special Washington, Inc v. Court of Appeals, GR No. 120961, 1996.
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NOTE: Words in red-font-color are Dean NTD’s additional
comments, questions, and explanations made during the class.
Dean Divina: barrels, or other similar containers so marked or stamped,

for the purpose of sale, or to sell, dispose of, buy, or trafKic in,
The mural at the lobby of the FCL is a commissioned work or wantonly destroy the same, whether Killed or not, or to
belonging to the one who commissioned it, Dean Divina, but use the same for drinking vessels or glasses or for any other
the copyright belongs to the artist. The copyright of the purpose than that registered by the manufacturer, bottler or
autobiography of Steve Jobs belongs to the author Isaacson seller. Coca-Cola Bottlers Philippines, Inc. (CCBPI), Naga Plant
but the book belongs to Steve Jobs, who engaged the v. Quintin Gomez, et, al., G.R. No. 154491, November 14, 2008
services of Isaacson.
It is a private right and as such, when it comes to

Are trade secrets protected under the IPC?
enforcement there is a need from the rights holder or the
owner of the intellectual property to participate or IPC protects trade secrets in the sense that the law covers
cooperate in any and all investigations and prosecutions protection of undisclosed information. In Air Philippines v.
involving violations of intellectual property rights for Pennswell, the Supreme Court ruled that trade and industrial
purposes of establishing ownership of intellectual property secrets pursuant to the IPC and other related laws are
and determining the lack of consent or authority in the exempted from compulsory disclosure.
commission of any act that is deemed an infringement.
In this case, Pennswell, a corporation engaged in the
The right is also not absolute. It is subject to certain business of manufacturing and selling industrial chemicals,
limitations and exceptions as may be provided by law solvents and special lubricants, Kiled an action for collection
depending on the kind of intellectual property rights against Air Philippines. In its Answer, Air Philippines
involved. contended that its refusal to pay was due to the fraud that
Pennswell committed for its previous sale of certain items
which were accordingly misrepresented as belonging to a
Is hoarding or collection of empty bottles so that they new line, but were in truth and in fact, identical with
can be withdrawn from circulation and thus impede the products Air Philippines had previously purchased from
circulation of the bottled products, a violation of IPR Pennswell and that the latter merely altered the names and
under the IPC? (BAR) labels of such goods.
It is not a violation of the IPC. While it is contrary to good During the pendency of the trial, Air Philippines Kiled a
faith, hoarding does not constitute an act within the motion to compel Pennswell to give a detailed list of the
contemplation of the IPC. It does not relate to any patent, ingredients and chemical components of its products for
trademark, trade name or service mark that may have been comparison. The RTC initially granted the motion but
invaded, intruded into or used without proper authority reversed itself on motion for reconsideration. The Court of
from the registered owner of the bottles. Neither does it Appeals afKirmed the RTC. The Supreme Court eventually
amount to unfair competition or pertain to mean held that a trade secret is deKined as a plan or process, tool,
fraudulently “passing off” products or services as those of mechanism or compound known only to its owner and those
a n o t h e r o r u n d e r t a k i n g a ny re p re s e n t a t i o n o r of his employees to whom it is necessary to conKide it. The
misrepresentation that would confuse or tend to confuse the deKinition also extends to a secret formula or process not
goods of one with those of another, or vice versa. patented but known only to certain individuals using it in
Dean Divina: compounding some article of trade having a commercial
value.
In this case, there is unfair competition in the context of Sec.
28 of the the New Civil Code but there is no unfair A trade secret may consist of any formula, pattern, device, or
competition in the context of the IPC. compilation of information that: (1) is used in one's
business; and (2) gives the employer an opportunity to
In this light, hoarding for purposes of destruction is closer to obtain an advantage over competitors who do not possess
what another law [R.A. No. 623] covers. The latter makes it the information. Generally, a trade secret is a process or
unlawful for any person, without the written consent of the device intended for continuous use in the operation of the
manufacturer, bottler or seller who has successfully business, for example, a machine or formula, but can be a
registered the marks of ownership in accordance with price list or catalogue or specialized customer list. It is
Section 1 of the said law, to Kill such bottles, boxes, kegs, indubitable that trade secrets constitute proprietary rights.
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The inventor, discoverer, or possessor of a trade secret or

similar innovation has rights therein which may be treated
as property, and ordinarily an injunction will be granted to Distinguish: trademark, trade name, patent, and
prevent the disclosure of the trade secret by one who copyright from one another.
obtained the information “in conKidence” or through a DeKinition
“conKidential relationship.”
- A trademark is any visible sign capable of distinguishing
The chemical composition, formulation, and ingredients of the goods (trademark) or services (service mark) of an
Pennswell’s special lubricants are trade secrets within the enterprise and shall include a stamp ed or marked
contemplation of the law. In the creation of its lubricants, container of goods [Section 121.1, IPC]. In relation
Pennswell expended efforts, skills, research, and resources. thereto, a trade name means the name or designation
What it had achieved by virtue of its investments may not be identifying or distinguishing an enterprise (Section
wrested on the mere pretext that it is necessary for Air 121.3, IPC).
Philippines’ defense against a collection for a sum of money.
To compel its disclosure is to cripple its business, and to Dean Divina:
place it at an undue disadvantage. If the chemical
composition of its lubricants is opened to public scrutiny, it Tradename can be on a stand-alone basis (not part of a
will stand to lose the backbone on which its business is trademark). A tradename need not be registered with the
founded. IPO. A trademark must be registered with the IPO. But a
tradename which is part of a trademark must be registered
with the IPO, otherwise you cannot sue for trademark
Republic Gas Corporation (REGASCO) v. Petron infringement.
Corporation, GR No 194062, 2013
Petron owns the trademark “Gasul” while Shell owns the - A patent is an exclusive right granted to an inventor over
trademark “Shellane”. Regasco re]ills the empty LPG an invention or a utility model or industrial design to
tanks of Shell and Petron with his own gas and sells to sell, use, and make the same for commerce and industry.
their customers. Is the act of re]illing empty LPG tanks - A copyright is an incorporeal right given by statute to
that bear registered trademark by itself a trademark the originator or creator of certain literary and artistic
infringement? works whereby he is invested for a limited period of
time the right to use, publish, reproduce and
The SC thru Justice Peralta said the mere unauthorized use of
communicate to the public such works to the exclusion
an LPG tank that bears a registered trademark in connection
of others (Section 172, IPC).
to the sale of goods is by itself trademark infringement.
Why? Because the law on trademarks extend to stamped or
marked container of goods. This also amounts to unfair
competition because Regaso passes of these LPG products as Dean Divina’s De]inition of Copyright
that of Shell and Petron when in fact it is his own. So, there
are two offenses in the act of reKilling these LPG tanks and The rights granted by copyright are however not limited to
causing their sale to the public. multiplying copies of the literary or artistic work, publishing
and selling but also include any form of communication to
the public, as well as right of attribution, right to carry out
derivative work and other moral rights . Copyright is
likewise not conKined to literary and artistic work but also
BAR: There is an empty LPG tank that bears a trademark of
extend to scientiKic and scholarly works similar to those
another. Now the TM was scraped off. And LPG is put into
works enumerated in Section 172.1 of the IPC.
the tank and sold to a customer. Is there TM infringement in
this case? None because the TM is scraped off. Is there unfair An intangible intellectual property granted by statute to the
competition? No, because there is no attempt to pass off the originator or creator of certain literary and artistic works,
gas as owned by another. What crime is committed? vesting for a certain period of time certain economic and
Violation of RA 623. moral rights on the terms speciKied by statute
Dean Divina:
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To me, this is a better deKinition because it captures the - Copyright is acquired from the moment of creation.
changes on the law on copyright and underscores that the
rights grated to the creator or author are not limited to
economic but include moral rights as well. Dean Divina:
How do you acquire trademark?
Scope or object Trademark is acquired through registration and good faith.

In my previous note it has been use and registration. This
has been changed because of the SC decision of Zuneca vs
- Trademark attaches to goods or services of an Natrapharm where the SC abandoned the previous rulings
enterprise and stamped or marked containers. that trademark is acquired through prior use. Therefore the
- Copyright is conKined to literary and artistic works Kirst one to register defeats the right of a prior user as long
which are original intellectual creations in the as the registration is done in good faith.
literary and artistic domain protected from the
moment of their creation.
- On the other hand, patentable inventions refer to
any technical solution of a problem in any Kield of Are trademark, copyright, and patent
human activity which is new, involves an inventive interchangeable?
step and is industrially applicable. (Pearl & Dean
(Phil.), Inc. v. Shoemart, Inc., G.R. No. 148222, August
15, 2003) Trademark, copyright and patents are different intellectual
property rights that cannot be interchanged with another.
Term of protection These three legal rights are completely distinct and
separate from one another and the protection afforded by
one cannot be used interchangeably to cover items or
- A patent is valid for 20 years from Kiling of the
works that exclusively pertain to the others. Thus, the
application for the grant of patent.
Supreme Court ruled that the name and container of a
- Copyright is generally valid for 50 years. beauty cream product are proper subjects of a trademark
- For trademarks, a certiKicate of registration shall inasmuch as the same falls squarely within its deKinition. In
remain in force for ten (10) years: Provided, That the order to be entitled to exclusively use the same in the sale of
registrant shall Kile a declaration of actual use and the beauty cream product, the user must sufKiciently prove
evidence to that effect, or shall show valid reasons that she registered or used it before anybody else did. The
based on the existence of obstacles to such use, owner’s copyright and patent registration of the name and
within one (1) year from the Kifth anniversary of the container would not guarantee her the right to the
date of the registration of the mark. Otherwise, the exclusive use of the same for the reason that they are not
mark shall be removed from the Register by the appropriate subjects of the said intellectual rights. Elidad
OfKice (Section 145, IPC). Kho v. Court of Appeals, G. R. No., 115758, March 19, 2002
Dean Divina: Dean Divina:

What is important by the way in a term? In Kho vs CA, you have a container of a beauty cream
The rights granted by law can only be exercised with the product. Pampaputi ng face, noh. The container is
term or period of the IP right involved. Thereafter, the IP appropriate for trademark.
right becomes public dominion. The owner obtains a certiKicate of copyright registration.
Supposing a person sells the beauty cream product inside

Modes of acquiring the various rights the same container, will there be infringement of copyright?
- Trademark is acquired through registration and use. NONE. Because this is not a proper subject of copyright.
- Patent is likewise acquired through application with Now, can there be trademark infringement?
and grant by the IPO.
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NO also, because you did not register this as a trademark. The poster inside the lightbox but not the lightbox itself.
So this is what the SC said that the IP rights are not Can Pearl and dean sue for patent infringement?
interchangeable.
NO. No patent, NO protection.
In another case, eye leaf bushing is a useful article but it has

no artistic value. Even though it was covered by a certiKicate A distinctive-tasting pastillas is well-known throughout
of registration of copyright coupled with notice of deposit the country as having been developed within a close-
with the National Library, no copyright is obtained. There knit women's group in Barangay San Ysmael which is
can be no copyright infringement despite sale by another of located along a very busy national highway. Its
the same product. The owner should have obtained instead popularity has encouraged the setting up of several
a patent for utility model. Jessie G. Ching v. William Salinas, shops selling similar delicacies, with the most famous
Sr. et al., G.R. No. 161295, June 29, 2005 product being the pastillas of “Barangay San Ysmael.”
Eventually, the pastillas of Aling Voling under the brand
Dean Divina: name “Ysmaellas” began to attract national distinction.
Eye leaf bushing is a plastic cup that you suck into a metal to Aling Voling therefore registered it as a copyright with
prevent corrosion. Eye leaf bushing is of practical utility, and the National Library. Her neighbor, Aling Yasmin,
therefore appropriate for utility model. But instead the realizing the commercial value of the brand, started
owner a certiKicate of copyright in the national library. using the term “Ysmaellas” for her pastillas but used
different colors. Aling Yasmin registered the brand
Is Salinas liable for copyright infringement? name “Ysmaellas” with the Intellectual Property Of]ice
(IPO).
NO. because it is not copyrightable. There is nothing literary
or artistic about eye leaf bushing. Can Aling Voling successfully obtain court relief to
prohibit Aling Yasmin from using the brand name
Had Ching obtained a patent for utility model then he could “Ysmaellas” in her products on the basis of her (Aling
have sued Salinas for patent infringement. But as you now Yoling’s) copyright? What is the difference between
the rule in patent, No patent, No protection. registration as a copyright and registration as a trade or
brand name? (2018 Bar)
It was also held that light boxes, which utilize specially Aling Yoling cannot successfully obtain court relief to
printed posters sandwiched between plastic sheets and prohibit Aling Yasmien from using the brand name
illuminated with backlights, are not literary or artistic pieces “Ysmaellas” in her product on the basis of Aling Yoling’s
with could be copyrighted. What is copyrightable is the Copyright. The brand name “Ysmaellas” is proper subject of
pictorial or drawing contained in the light boxes. The light trademark, not copyright. They cannot be interchanged. The
boxes would have been appropriate for patent, but because, copyright on a trade name does not guarantee her the right
copyright and not patent was obtained, then, the Kirst to the exclusive use of the same for the reason that it is not a
manufacturer of the light box could not sue another proper subject of said intellectual right. (Kho vs. Court of
manufacturer for patent infringement. Peal & Dean Phil. V. Appeals, GR NO. 115758, March 19, 2002). Copyright is an
Shoemart, Inc. G.R. No. 148222, August 15, 2003 intangible, incorporeal right granted by statute to the author
or originator of certain literary and artistic works, whereby
Dean Divina: he is invested, for a limited period of time, with the sole and
exclusive privilege of multiplying copies of the same and
Are lightboxes copyrightable? publishing and selling them. Trade name, on the other hand,
is any designation which is adopted and used by any person
No. there is nothing literary or artistic about light boxes. to denominate goods which he markets, or services which
he renders, or business which he conducts, or has come to
What is copyrightable here? be used by other , and through its association with such
goods, services of business, has acquired a special
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signiKicant as the name thereof (Juan vs. Juan, GR No. who has the ultimate right to use the said trade name by
221372, August 23, 2017) ruling that neither of them has the right or a cause of action
since “Lavandera Ko” is protected by a copyright. The case
Dean Divina: was remanded to the RTC to determine who between
Roberto and Fernando has a better right over “Lavandera
Another interesting question here is whether or not Ko.” (Juan v. Juan, G.R. No. 221732, August 23, 2017)
Ysmaellas can be considered as a well known mark?
No, because it is not an international mark but only

nationally known mark. So the doctrine of well known mark Dean Divina:
only applies to international trademark.
Just because it is a part of a musical composition doesn’t
mean that it cannot be used as a trademark. A part of a song
Roberto has been using the name and mark “Lavandera can be used as a trademark if that is used as a visible sign to
Ko” in his laundry business since 1994. He has a distinguish goods or enterprise.
certi]icate of copyright over said name and mark. Over
the years, his business expanded with numerous
franchise outlets in the Philippines. Roberto then Can an article of commerce serve as a trademark and at
formed a corporation to handle the said business. He the same time enjoy patent and copyright protection?
called it Laundromatic Corporation (Laundromatic) and Explain and give an example.
it was incorporated in 1997, while “Lavandera Ko” was
registered as a business name in 1998 with the A stamped or marked container of goods can be registered
Department of Trade and Industry (DTI). Later on, as a trademark. An original ornamental design or model for
Roberto discovered that his brother, Fernando, was able articles of manufacture can be copyrighted if the design can
to register the name and mark “Lavandera Ko” with the be separated from the utilitarian aspect of the product. An
Intellectual Property Of]ice (IPO) in 2010, the ornamental design cannot be patented, because aesthetic
registration of which was ]iled in 1995. He also creations cannot be patented. However, it can be registered
discovered that Fernando had been selling Roberto’s as an industrial design. Thus, a container of goods which has
franchises. Thus, Roberto ]iled a petition for injunction, an original ornamental design on it can be registered as a
unfair competition, infringement of copyright, trademark, copyrighted, and registered as an industrial
cancellation of trademark and name before the RTC. The design.
RTC dismissed the action, ]inding that neither party was
the originator of the subject mark. The judged ruled Dean Divina:
that the mark was created by a certain Santiago Suarez
in 1942 in his musical composition “Lavandera Ko.” Is You remember the Denicola Test?
the RTC correct? If the design can be detached from the usefulness of the
product, that design itself is copyrightable.
No. The RTC’s ruling is erroneous as it confused trade or
business name with copyright. “Lavandera Ko,” the mark in So lets say you have a coffee mug which have an embossed
question in this case is being used as a trade name or design. That design can be detached from the usefulness of
speciKically, a service name since the business in which it the article, therefore that design is copyrightable.
pertains involves the rendering of laundry services. As such,
the basic contention of the parties is, who between them has At the same time, that design can be registered as industrial
the better right to use “Lavandera Ko” as a service name, design because it can be used as a pattern for handicraft.
given that the law guarantees the protection of trade names So you have 3 possible IP right: Trademark, copyright and
and business names prior to or even without registration, patent over industrial design.
against any unlawful act committed by third parties. A cause
of action arises when the subsequent use of any third party
of such trade name or business name would likely mislead
the public as such act is considered unlawful. Hence, the RTC RECITATION:
erred in denying the parties the proper determination as to
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Q: Juan Dela Cruz came up with an invention that

satis]ies the elements of novelty, inventive step and Injunction is a remedy available only to the patentee or the
industrial applicability. He sold this product to the patent holder.
market. After six months, he decided to apply for a
patent. Does the application for patent still satisfy the Q: What then is his remedy?
novelty? A: There are two remedies, one without fraud and one with
A: Yes, applying the doctrine of non-prejudicial disclosure fraud. Secs. 67 & 68
applicable. Q: What is the distinction between the two?
Q: Is the doctrine of non-prejudicial disclosure A:
applicable?
Q: Can he ]ile a petition for cancellation of patent?
A: Yes
A: No. If you take a look at the grounds for cancellation of a
Q: What do you understand by the Doctrine of Non- patent, issuance of a patent not to the true and actual
prejudicial disclosure? inventor is not one of them.
A: The publication of the patent to the public will not That is why the remedy is judicial, not administrative.
prejudice the application for patent if the disclosure was It is correct to say that he has to Kile an action in court to be
done within 12 months prior to the application and the the one declared entitled to the patent, not a petition for
publication was done by the inventor himself. cancellation with the IPO.
In this case, despite the sale of the model by the inventor, it Q: If there is fraud, does he have to wait from ]inality to
does not prejudice him from Kiling an application for patent. take certain steps to further protect his interest?
The element of novelty is still satisKied because he was the
one who disclosed the invention and the one who applied A: If there is fraud, there is no need to wait for 3 months. If
with the IPO. there is no fraud, there is a need to wait for 3 months to
lapse from the Kinality of the judgement to ask the IPO to
Q: What if another person (not the inventor) applied for cancel the patent.
the patent? Should the IPO grant?
Q: Is the IPO bound by the decision of the RTC?
A: No. This is because the element of novelty is no longer
present. A: Yes.
Q: What if the IPO granted the patent? Can the inventor Q: What if the IPO was not impleaded? Will it bind the
sue for patent infringement? IPO?
A: No. Only a patent holder can sue for patent infringement A: YES. There is a provision in the IP Code that the IPO is
bound by the judgment rendered by the RTC.
Q: What if he ]iled injunction?
BUT for a good measure, in practice, implead the IPO, as a
A: In the case of Creser Precision Systems, Inc. v. Court of nominal party so that there will be no doubt whatsoever
Appeals, that is exactly what the inventor did. that he is bound by the decision that the court will render.
He (It) Kiled an action for injunction to stop the patentee While the IP Code provides that the RTC is bound, in
from selling the product. He did not Kile an action for practice, there may be a difKiculty.
infringement. He only Kiled an action for injunction to stop
the sale of the aerial fuse in this (that) case, a patentable We experienced that in one case … BUT of course for BAR
product). EXAM*, your answer is: The IPO is bound even though it is
not impleaded as a party judgment because of the provision
The SC said that not being the patentee, then he cannot Kile of the IP Code.
an action for injunction to stop the patentee from selling the
product.
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So, if it is patented, what are the rights granted by law to the

DISCUSSION: patentee?
Patents
As we said, MUSOI. So any act that amounts a violation of
these rights is patent infringement.
What is a patent?
So, what will be the remedy available in case somebody else
It is an exclusive right granted by statute to an inventor makes or uses the patent without the consent of the
over an invention or a utility model or industrial design patentee?
to sell, use, and make the same for commerce and
Liable for damages. If [inaudible], reasonable royalty.
industry.
(2) In what sense?
What are the various types of patents? You all know that when you apply for a patent, you have to
disclose how the invention can be carried by a person skilled
The following are the types of patents: in the art - to stimulate and promote further invention.
a) patentable inventions; Improvement on a product or a process is patentable. So not
b) industrial designs; and just a product or a process but improvement is, by itself,
c) utility models. patentable.
If the applicant will not disclose how the invention can be

carried out, the application will be denied by the IPO.
What is the purpose of the patent law?
(3) Why exhaustive application?
The patent law has a three-fold purpose:
Because when a patent is issued, the patentee acquire
1. First, it seeks to foster and reward invention; exclusivity to the use of the patent product.
2. Second, it promotes disclosure of inventions to So it is only fair that there be stringent requirements.
stimulate further innovation and to permit the public
to practice the invention once the patent expires; and
3. Third, the stringent requirements for patent
protection seek to ensure that ideas in the public What is a utility model?
domain remain there for the free use of the public
and it is only after an exhaustive examination by the It is any model of implements or tools or any industrial
patent ofKice that patent is issued. product, or of part of the same which is of practical utility
by reason of its form, conKiguration, or composition. An
Dean Divina: invention qualiKies for registration as a utility model if it
is new and industrially applicable. The same rules on
(1) In what sense does patent foster and reward invention?
patentable inventions apply to registration of utility
There are certain rights granted by the Law on Patent to the model except the requirement of inventive step. A utility
inventor once he obtains the patent. These are the rights to model cannot be renewed. It can only be registered for a
make, use, sell, offer to sell and to import the product. period of seven years after date of the Kiling of the
[MUSOI} application, withoutany possibility of renewal.
Any unauthorised act that amounts to a violation of these The law expressly acknowledges that any new model of
rights is basically patent infringement. implements or tools of any industrial product even if not
possessed of the quality of invention but which is of
So, if you are to be asked, what is infringement in general, it
practical utility is entitled to a patent for utility model.
is basically the performance of an act that violates the rights
(Roberto Del Rosario v. Court of Appeals and Janito
granted to the IP holder-owner.
8
Corporation) and is industrially applicable. It may be, or may relate to,

a product, or process, or an improvement of any of the
Dean Divina: foregoing (Section 21, IPC).
Basically, a utility model is any industrial product or part of In Aguas vs. De Leon, the Supreme Court ruled that the
the same which has a practical utility by reason of its form, patent holder has no exclusive right to introduce
conKiguration, or composition. improvement to the patented process. This is unlike
This kind of patent cannot be renewed. It can only registered Copyright where the author of the original work has the
for a seven-year period after the date of the Kiling without right to carry out or prevent, authorize carrying out
any possibility of renewal. derivative work.
Just like a patent of invention is likewise non-renewable. Dean Divina:
We say that there are kinds of patentable inventions.
(1) Patent over invention; (2) Patent over utility model; (3)
Cite examples of a utility model.
Patent over industrial design.
1. Being plain automotive spare parts that must conform (1) Patent over invention - good for 20 twenty years from
to the original structural design of the components Kiling of the application of the grant of patent
they seek to replace, the Leaf Spring Eye Bushing and
Vehicle Bearing Cushion are not ornamental; they (2) Patent over utility model - 7 seven years
lack the decorative quality or value that must (3) Patent over industrial design - 5 years
characterize authentic works of applied art and in
actuality, they are utility models, useful articles,
albeit with no artistic design or value. (Jessie Ching v.
William Salinas, et. al., G.R. No. 161295, June 29, Now, which of this type of patent can be renewed or
2005) extended?
2. Audio equipment or commonly known as the sing Only one. It is the patent for utility model. It can be extended
along system or karaoke. (Rosario v. Court of Appeals) twice but not more than twice. So total or aggregate term or
period for patent of industrial design is 15 years.
Dean Divina:
What element of patentability of invention is not present in

patent over utility model? How do you deKine patent over an invention?
The element of inventive step. Sec. 21 of the IP Code gives us the deKinition.
Another example, wheel barrow or hand-tiller is another
example of utility based on jurisprudence.
In Aguas vs. De Leon, the Supreme Court ruled that the
Also, karaoke sing-a-long another example given by the patent holder has no exclusive right to introduce
Supreme Court. improvement to the patented process.
This is very much UNLIKE copyright where the author of the

original work has the right to carry out, prevent, or
authorize the carrying out of a derivative work.
Patentable Inventions
So, if you wrote a book, you can translate that into English,
What are patentable inventions? Kilipino or other dialect. You alone has that exclusive right to
carry out derivative work on your work for copyright.
It is any technical solution of a problem in any Kield of
human activity which is new, involves an inventive step But for PATENT, one CANNOT claim exclusivity over
9
improvement of the product. So while you may have the proKits which the defendant earned because of infringement.
patent over the product or process, you cannot deny others (5) If no. (4) cannot be ascertained, reasonable royalty.
from introducing improvement on that product or process
and that improvement is by itself patentable. Q: Anymore money item that can be recovered in case of
infringement of patent?
A: (1) Actual damages; (2) Costs of the suit; and (3)

Attorney’s fees
FEBRUARY 16, 2021
Q: Can there be other damages that may recovered in
case of infringement of patent on top the actual
RECITATION: damages suffered by the patentee?
REMEDIES AVAILABLE TO THE PATENTEE IN CASE OF A: Treble damages
INFRINGEMENT
This should not three times the amount of actual damages
Q: What are the remedies available to the patentee in
case of patent infringement? Q: What do you call this kind of damage?
A: File Civil Action for Infringement A: Other damages, as long as this does not exceed three
times the amount of actual damages.
Q: … And pray in that action for infringement the
following items. So what can be prayed for or claimed in The law does not give it any name, but simply other
the action for infringement? damages.
A: Actual damages Q: Done with the money claim. What else do you pray for
when you ]ile the Action for Infringement on behalf of
Q: … And actual damages is based on what? your patentee client?
A: The proKits that the patentee will have earned had there A: Provisional reliefs
been infringement or the proKits which the patentee could
have earned had there been no infringement Q: These provisional reliefs include?
Q: If the above cannot be ascertained, what takes the A: First: Preliminary Injunction to stop the acts the acts of
place of actual damages? infringement while the case is pending.
A: Reasonable royalty Second: Search and seizure order to conKiscate or impound
or even destroy infringing materials.
Q: What else?
Q: Regarding the order prayed for in the court coupled
A: with the prayer for preliminary injunction. So basically
a search and seizure order that will allow you to
Q: Enumerate the remedies available to the patentee in impound, con]iscate and even destroy the infringing
case of infringement. materials, is the order of destruction executory?
A: (1) Civil Action for Infringement; (2) Damages; (3) A: No
Seizure of the Tools used in the Infringement;
Q: Basis?
*added by Dean*
A:
(4) Recovery of the proKit loss because of infringement or
10
Q: What about the order of condemnation, the order of

seizure. Is this executory? It is ONLY when the act is declared by the court as
amounting to infringement and those acts are REPEATED
A: that you can Kile a criminal complaint for patent
infringement.
Q: Is it not that any order issued by the court, a special
commercial court for IP cases, is it not that it is always So, the REPEATED ACTS of infringement after Kinding by the
executory? court that there is infringement will amount to criminal
liability. BUT the FIRST ACT ALONE will not give rise to a
A: Yes. Under the 2020 Rules on Intellectual Property (Rules criminal liability.
to enforce IP Rights on IP Cases), any order issued by the
court is executory. Basically, when the ACTS are REPEATED, you now have TWO
CAUSE OF ACTION: (1) Criminal Action for Infringement;
This includes order to seize, condemn. and (2) another Civil Action for Infringement, because those
repeated acts are INDEPENDENT and DIFFERENT from the
Q: What about order of destruction? main acts, the Kirst acts, of infringement committed by the
infringer.
A: It is also executory UNLESS a Motion for Reconsideration
is Kiled. (That’s what the Rules provide)
REMEDIES AVAILABLE TO THE DEFENDANT
If there is a MR, then the order is not executory because
obviously you have to wait for Kinality of the judgment Q: What are the remedies available to the defendant if
declaring that there is infringement before you can destroy sued for an action for infringement?
the materials.
A: The remedy is to Kile an answer to the complaint for
So, destruction ASSUMES that there is indeed infringement infringement and in that answer, invoke as defenses the
as found by the court. same grounds to cancel a patent.
BUT under the Rules, without a MR, that Order of BUT the remedy IS NOT to Kile a petition for cancellation
Destruction becomes executory. with the IPO. Otherwise, you will be declared in default by
the Court.
So, if you are the defendant, you have to Kile a MR so that the
order of destruction cannot be implemented by the Q: What are these grounds?
patentee.
A: The patent is: (1) Invalid; (2) Not New or Not Novel; (3)
Q: What are the other remedies other than the acts of the Disclosure is not speciKic or clear ; (4) Contrary to Order
infringement, claim for damages, provisional reliefs. or Public Morals.
What else?
A: So basically the lack of the elements of patent and the
limitations on patent.
Q: Is an act of infringement ripe for the ]iling of criminal
information for infringement of patent? Is one act of Clari]ication for the third: if there was not disclosure made
infringement enough to warrant the ]iling of a criminal by the person skilled in the art.
complaint for patent infringement?
A: No. This is one thing PECULIAR about patent

infringement compared to other infringement. Q: What else other than the lack of the elements of
patent and the limitations on patent?
So one act of (patent) infringement DOES NOT give rise to
criminal liability. A: Prescription
11
Q: Let’s say that there is action for infringement of There are two cases in the outline that says that this is not a
patent ]iled by the patentee and then the defendant ]iles valid defense for the reason that there is a presumption of
the answer, citing as defense the grounds that would regularity in the performance of the duties of the IPO.
warrant cancellation of patent. So, lacking novelty,
newness, so forth and so on. So don’t say the IPO made a mistake. INSTEAD say that the
elements of the patent are not present. (You’re not attacking
Can the court hearing the action for infringement the IPO. But in effect, you’re attacking the IPO because why
declare the patent as invalid? Does the RTC have the would IPO grant the IPO when the elements are not present.
power to declare the patent invalid in action for patent Lol)
infringement?
So you have to couch your defense appropriately - invalid,
A: There is a provision in the IP Code. lacking novelty, so forth and so on.
When you Kile an action for infringement of patent, you LAY Q: The accused’s product introduced modi]ications on
OPEN the issue of validity of the patent. That’s why the the patented product. So this is a different product from
courts may declare the patent as invalid, by express the patented product because the defense that
provision of law. introduced modi]ications on the patented product. Is
that a valid defense?
Q: Is the IPO bound by the judgment of the RTC that the
patent is invalid? A: It depends on the modiKications introduced by the
defendant.
A: Yes
Q: What happens to your Doctrine of Primary If it is only a slight modiKication and that modiKication
Jurisdiction that says that issue about patents should be appropriates the innovative concept and performs the same
left to a specialized agency or with the competence and function, performs the same way to accomplish the same
knowledge dwell or deal on these issues? result as the patented product, then the Doctrine of
Equivalents applies, in which case, it is not a valid defense.
A: This will not apply since it will fall under the exceptions.
But if the modiKications introduced is substantial, such that
So the court may declare that the patent to be invalid and it performs differently, difference process from the patented
the IPO is BOUND to CANCEL the patent of the patentee. product, then modiKications become a defense. So there
would be no infringement if the modiKication is substantial
Q: On what condition? What should be presented to the because as we have seen (stated), improvement of a process
IPO so that there will be a basis to cancel the patent is, in itself, patentable.
granted to the patentee?
A: Decree of Finality
DISCUSSION:
Q: What about a lack of intent to infringe a patent, is
Cite examples of recently patented inventions.
that a defense?
The drone, the iPhone, locomotion assisting device, 3d
A: No. printer, retinal prosthesis (or bionic eye), global position
system, CRISPR Gene Editing, Brain Implant, peer to peer
Q: What about the IPO made a mistake in granting the information exchange for mobile communication (or
patent? Bluetooth), self-driving car, apparatus for utilizing solar
radiant energy (or solar panel), third generation wireless
A: No, because the IPO is assumed to have performed his mobile communications and virtual reality generator.
duties regularly. (Patents that changed the world: Jay Bennett, April 27
2018)
Dean Divina:
12
… Anyway, the point is patents improve our lives. But for PATENT, one CANNOT claim exclusivity over
improvement of the product. So while you may have the
patent over the product or process, you cannot deny others
from introducing improvement on that product or process
Cite examples of a patent involving the improvement of and that improvement is by itself patentable.
a process.
In Aguas vs. De Leon, the Supreme Court ruled that an

improvement of the old process of mosaic tile making is What are the requisites for the patentability of an
patentable. In this case, De Leon had been granted and invention?
issued a patent for his invention of certain new and
useful improvements in the process of making mosaic The requisites are derived from the deKinition of a
precast tiles. He Kiled a complaint for patent infringement patentable invention itself. They are:
against Aguas who claimed in his answer that the patent
of De Leon was secured through misrepresentation as a) novelty or newness;
the latter’s invention is neither inventive nor new and
b) an inventive step; and
hence, not patentable. It was ruled that the patent of De
Leon was legally issued. His process is an improvement c) industrial applicability. (2019 Bar)
of the old process of tile-making. The tiles produced from
De Leon’s process are suitable for construction and
ornamentation, which previously had not been achieved De]ine novelty as an element of patentability.
by tiles made out of the old process of tile-making. De
Leon’s invention has therefore brought about a new and It is best deKined in the negative: an invention shall not
useful kind of tile. The old type of tiles was usually be considered new if it forms part of a prior art [Section
intended for Kloors although there is nothing to prevent 23, IPC]. Prior art, on the other hand, shall consist of:
one from using them for walling purposes. These tiles are a) Everything which has been made available to the
neither artistic nor ornamental. They are heavy and public anywhere in the world, before the Kiling date
massive. The improvement is indeed inventive and goes or the priority date of the application claiming the
beyond the exercise of mechanical skill. De Leon has invention; and,
improved the old method of making tiles and precast b) The whole contents of a published application for a
articles which were not satisfactory because of an patent, utility model, or industrial design
intolerable number of breakages, especially if deep registration, Kiled or effective in the Philippines, with
engravings are made on the tile. He has overcome the a Kiling or priority date that is earlier than the Kiling
problem of producing decorative tiles with deep or priority date of the application.
engraving, but with sufKicient durability. The Court also
found Aguas liable for patent infringement. G.R. No. Thus, if the inventor makes his invention available to the
L-32160, January 30, 1982 public but without obtaining a patent, he cannot restrain
others from using his invention. The use of the invention
Dean Divina: does not constitute patent infringement. The rule is, no
patent no protection. Neither can anyone, however, from
In Aguas vs. De Leon, the Supreme Court ruled that the the public apply for and obtain a patent over same
patent holder has no exclusive right to introduce invention because the application for patent will no
improvement to the patented process. longer satisfy the element of novelty.
This is very much UNLIKE copyright where the author of the
original work has the right to carry out, prevent, or While the patent has not been granted yet, the applicant
authorize the carrying out of a derivative work. whose application has already been published has the
right to restrain the making, use, sale, offering the sale
So, if you wrote a book, you can translate that into English, and importing of the product or process but he cannot
Kilipino or other dialect. You alone has that exclusive right to sue for patent infringement unless the patent is actually
carry out derivative work on your work for copyright. issued.
13
What is the doctrine of non-prejudicial disclosure? X Pharmaceuticals, Inc. has been manufacturing the
antibiotic ointment Marvelopis, which is covered by a
Under the doctrine of non-prejudicial disclosure, the patent expiring in the year 2020. In January 2019,
disclosure of information contained in the application the company ]iled an application for a new patent for
during the 12 months preceding the Kiling date or Disilopis, which although constituting the same
priority date of the application shall not prejudice the substance as Marvelopis, is no longer treated as an
applicant on the ground of lack of novelty if such antibiotic but is targeted andmarketed for a new use,
disclosure was made by the inventor himself (Section 25, i.e., skin whitening.
IPC).
Should X Pharmaceuticals, Inc.!s patent application
for Disilopis be granted? Explain.BAR 2019
Yosha was able to put together a mechanical water
pump in his garage consisting of suction systems No, the patent application for Disilopis should not be
capable of drawing water from the earth using less granted. The use of the existing patent although for a
human effort thanwhat was then required by existing different purpose will not satisfy the elements of novelty
models. The water pump system provides for a new and inventive step.
system which has the elements of novelty and
inventive steps. Yosha, while preparing to have his Moreover, under Section 22 of the Intellectual Property
invention registered with the IPO, had several models Code, as amended, discoveries, scientiKic theories and
of his newsystem fabricated and sold in his province. mathematical methods, and in the case of drugs and
medicines, the mere discovery of a new form or new
Is Yosha!s invention no longer patentable by virtue of property of a known substance which does not result in
the enhancement of the known efKicacy of that substance,
the fact that he had sold several models to the public
or the mere discovery of any new property or new use
before the formal application for registration of
for a known substance, or the mere use of a known
patent was ]iledwith the IPO? (2018 Bar)
process unless such known process results in a new
product that employs at least one new reactant, are non-
Yosha’s invention is still patentable despite the fact he
patentable inventions.
had sold several models to the public before the formal
application for registration of the patent was Kiled with
Dean Divina:
the IPO as long Yosha Kiles his application for patent
within 12 months from the time he sold several models The use of the existing patent although for a different
to the public. purpose will not satisfy the elements of novelty and
inventive step.
Under the doctrine of non-prejudicial disclosure, the
disclosure of information contained in the application Mere discovery of any new property or new use for a known
during the 12 months preceding the Kiling date or substance, or the mere use of a known process unless such
priority date of the application shall not prejudice the known process results in a new product that employs at
applicant on the ground of lack of novelty if such least one new reactant, are non-patentable inventions.
disclosure was made by the inventor himself ( Section 25,
IPC ).
No one, other than Yosha can apply for a patent because What is "inventive step” as an element of patentability?
such applicant would not satisfy the element of novelty.
An invention shall not be considered new if it forms part An invention involves an inventive step if, having regard
of a prior art. Prior art shall consist of everything which to prior art, it is not obvious to a person skilled in the art
has been made available to the public anywhere in the at the time of the Kiling date or priority date of the
world, before the Kiling date or the priority date of the application claiming the invention (Section 26.1, IPC).
application claiming the invention.
14
The phrase “skilled in the art” means the criterion is only Now we said also if the animal is tendered before it is
limited to a person with an average level of skill in the slaughtered PREPARATORY to sale to consumers, then it
concerned Kield. It excludes the best expert available. becomes industrially applicable.
In the case of drugs and medicines, there is no inventive

step if the invention results from the mere discovery of a
new form or new property of a known substance which Cezar works in a car manufacturing company owned
does not result in the enhancement of the known efKicacy by Joab. Cezar is quite innovative and loves to tinker
of that substance, or the mere discovery of any new with things. With the materials and parts of the car,
property or new use for a known substance, or the mere he was able to invent a gas-saving device that will
use of a known process unless such known process enable cars to consume less gas. Francis, a co-
results in a new product that employs at least one new worker, saw how Cezar created the device and
reactant.” (26.2, IPC) likewise came up with a similar gadget, also using
scrap materials and spare parts of the company.
Dean Divina: Thereafter, Francis ]iled an application for
registration of his device with the Bureau of Patents.
So only prior art made available to the public before Kiling Eighteen months later, Cezar ]iled his application for
date is considered … [inaudible] the registration of his device with the Bureau of
Patents. Is the gas-saving device patentable? Explain.
So subsequent development in technology in technologies or
inventions cannot be used to discard the element of Yes, it is patentable because it is new, it involves an
inventive step. inventive step and it is industrially applicable. (BAR
Take note of the phrase: “skilled in the art”. It means that the 2005)
criterion is limited only to persons with average level of skill
in the concerned Kield. It excludes the opinion of the best Dean Divina:
expert available. There are actually three questions based on the facts.
In the case of DRUGS AND MEDICINES, there is no inventive
step if the invention is sourced with a mere discovery of new
form or new property of a known substance that does not Non-patentable inventions
result in the enhancement of the known efKicacy of that
substance. Example: from capsule to liquid or vice-versa OR These are inventions that are excluded from patent
mere discovery of any property or new use for a known protection, to wit:
substance or mere use of a known process UNLESS such
known process results in a new product that employs at a. Discoveries, scientiKic theories and mathematical
least one new reactant. methods, and in the case of drugs and medicines, the
mere discovery of a new form or new property of a
What is industrial applicability as an element of known substance which does not result in the
patentability? enhancement of the known efKicacy of that
An invention that can be produced and used in any substance, or the mere discovery of any new
industry shall be industriallyapplicable (Section 27, IPC). property or new use for a known substance, or the
mere use of a known process unless such known
Dean Divina: process results in a new product that employs at
least one new reactant;
It has to be produced and used in any industry to be
industrially applicable. Example: Enzyme solution that if b. Schemes, rules and methods of performing mental
applied to an animal makes the animal tender before it is acts, playing games or doing business, and programs
slaughtered. So, it is not patentable because it is not for computers;
industrially applicable. It does not to be used for any c. Methods for treatment of the human or animal body
industry, at least in that BAR EXAM* question. by surgery or therapy and diagnostic methods
practiced on the human or animal body;
d. Plant varieties or animal breeds or essentially
15
biological process for the production of plants or But of course, as we will see on Copyright that if that lecture
animals; is put into a book, then that book, not the lecture on
e. Aesthetic creations; and discovery, is COPYRIGHTABLE.
f. Anything which is contrary to public order or morality.
So we are clear, therefore, that discovery is non-patentable
(Section 22, IPC).
and likewise non-copyrightable.
Dean Divina:
For c, that is why acupuncture is not patentable.

X invented a bogus coin detector which can be used
For d, what about non-biological process? It can be BUT for exclusively on self-operating gambling devices
biological process it is not patentable because you cannot otherwise known as one-armed bandits. Can X apply
appropriate nature. You cannot claim exclusivity to what for a patent? Reasons.
nature has ordained.
No. X may not apply for a patent since the gambling
For e, because it is copyrightable not patentable. device mentioned in the problem is itself prohibited and
against public order. But if the machine is used in
legalized gambling, such device can be patented. (BAR
1989)
Supposing Albert Einstein were alive today and he
]iled with the Intellectual Property Of]ice (IPO) an
application for patent for his theory of relativity
Dr. Nobel discovered a new method of treating
2
expressed in the formula E=mc . The IPO Alzheimer!s involving a special method of diagnosing
disapproved Einstein!s application on the ground the disease, treating it with a new medicine that has
been discovered after long experimentation and ]ield
that his theory of relativity is not patentable. Is the
testing, and novel mental isometric exercises. He
IPO!s action correct?
comes to you for advice on how he can have his
discoveries protected. Can he legally protect his new
Yes. The IPO’s action is correct because the theory of method of diagnosis, the new medicine, and the new
relativity is not patentable. Under Section 22.1 of the IPC, method of treatment? If no, why? If yes, how?
“Discoveries, scientiKic theories and mathematical
methods” are non-patentable. (BAR 2006) Dr. Nobel can be protected by a patent for the new
medicine. But no protection can be legally extended to
Dean Divina: him for the method of diagnosis and method of treatment
What about copyrightable. Is it copyrightable? Let’s which are expressly included among the non-patentable
correlate patent with copyright. inventions under Section 22 of the same Code. (BAR
2010)
So discovery, theory non-patentable. Likewise, non-
copyrightable, even if expressed in any form. Dean Divina:
We will see this in copyright: If somebody, for example, The medicine can be patented but the method and the
discovers through the use of a high-powered telescope a process are non-patentable.
planet further than Pluto, assuming, and then he makes a
lecture on that discovery and his lecture appears in a Journal
on astronomy. Can he sue for patent infringement?
Obviously, no. Ownership to a patent

Who has a right to a patent?
Can he sue for copyright infringement?
The right to a patent belongs to the inventor, his heirs, or
Likewise no. assigns (“IHA”). When two (2) or more persons have
jointly made an invention, the right to a patent shall
16
belong to them jointly. What happens if the inventor never secured a patent on
a patentable product, but a copyright was secured
instead?
Che-che invented a device that can convert rainwater
In one case, a corporation was engaged in the manufacture
to automobile fuel. She asked Macon, a lawyer, to
of advertising display units simply referred to as light boxes.
assist in getting her invention patented. Macon
These units utilize specially printed posters sandwiched
suggested that they form a corporation with other
between plastic sheets and illumined by back lights. The
friends and have the corporation apply for a patent,
manufacturer was able to secure a certiKicate of copyright
80% of the shares of stock thereof to be subscribed
registration over these illuminated display units. On the
by Che-Che and 5% by Macon. The corporation was
issue of whether there is a patent infringement if another
formed and the patent application was ]iled.
person manufactures the same light boxes, it was held that,
However, Che-che died 3 months later of a heart
assuming these light boxes are patentable, when an inventor
attack. Franco, the estranged husband of Che-che,
never secured a patent for the light boxes, it therefore
contested the application of the corporation and ]iled
acquired no patent rights which could have protected its
his own patent application as the sole surviving heir
invention. The ultimate goal of a patent system is to bring
of Che-che. Decide the issue with reasons.
new designs and technologies into the public through
disclosure; hence, ideas, once disclosed to the public without
The estranged husband can successfully contest the
protection of a valid patent, are subject to appropriation
application. There is really no assignment here but
without signiKicant restraint.
subscription to shares of stock of the corporation with
the patent as the consideration. Patent can only be issued And so, in that case, the Court ruled that the copyright
to the inventor, heirs, or assigns. There being no protection extended only to the technical drawings and not
assignment in accordance with the provisions of the IPC, to the light box itself as the latter does not fall under the
the husband, as heir, is entitled to the patent. category of “prints, pictorial illustrations, advertising copies,
labels, tags and box wraps.” The light box was not a literary
Dean Divina: or artistic piece which could be copyrighted under the
copyright law; and no less clearly, neither could the lack of
It’s not the corporation but the heir, husband? Why?
statutory authority to make the light box copyrightable be
Because the law says: inventor, heirs, successors or assigns. remedied by the simplistic act of entitling the copyright
certiKicate issued by the National Library as Advertising
Now, ASSIGNED means assignment in the context of the IP Display Units.
Code.
SUBSCRIPTION, as we have seen in corpo, is NOT THE SAME

as assignment. First-to-]ile rule
So, there is really no assignment in this case of subscription What is the “First to File Rule” under the law on patent?
to shares of stock of the corporation with the patent is
consideration. If two (2) or more persons have made the invention
separately and independently of each other, the right to the
So patent can only be issued to the inventor, heirs, patent shall belong to the person who Kiled an application
successors or assigns. for such invention, or where two or more applications are
There ought to be assignment in accordance with the Kiled for the same invention, it shall belong to the applicant
provisions of the IPC. So therefore the husband is entitled to who has the earliest Kiling date or the earliest priority date.
the patent. Dean Divina:
The POINT is: they should have complied with the The IPO in terms of processing of application will not
formalities for assignment before the corporation can be the conduct an extensive search on who is the Kirst inventor. To
one to Kile the application for patent. simplify the procedure, the law allows the IPO to grant the
patent to the Kirst one to apply or one who has the priority
date. So, it may happen that the Kirst Kiler is not the true and
17
actual inventor. But that is not the concern of the IPO. It’s up d. X and the employer of X will jointly have the rights
to the actual inventor to pursue his remedies under the law. over the patent.
Invention created pursuant to a commission Cezar works in a car manufacturing company owned by
Joab. Cezar is quite innovative and loves to tinker with
Who owns inventions created pursuant to a commission things. With the materials and parts of the car, he was
but not under an employer- employee relationship? able to invent a gas-saving device that will enable cars to
The person who commissions the work shall own the consume less gas. Francis, a co- worker, saw how Cezar
patent, unless otherwise provided in the contract. This is created the device and likewise came up with a similar
different from copyright where the work is owned by the gadget, also using scrap materials and spare parts of the
one who commissioned it but the copyright belongs to the company. Thereafter, Francis ]iled an application for
author or creator. registration of his device with the Bureau of Patents.
Eighteen months later, Cezar ]iled his application for the
registration of his device with the Bureau of Patents.
Assuming that it is patentable, who is entitled to the
How about those inventions created by an employee? patent? What, if any, is the remedy of the losing party?
In case the employee made the invention in the course of his Francis is entitled to the Patent, because he had the earlier
employment contract, the patent shall belong to: a) The Kiling date under the “First to File Rule” (Section 29, IPC).
employee, if the inventive activity is not a part of his regular
The remedy of Cezar, the losing party, is to Kile a petition in
duties even if the employee uses the time, facilities, and
court for the cancellation of the patent of Francis on the
materials of the employer; b) The employer, if the invention
ground that he is the true and actual inventor, and ask for his
is the result of the performance of his regularly-assigned
substitution as patentee (Sections 67 and 68, IPC).
duties, unless there is an agreement, express or implied, to
the contrary. Dean Divina:
Dean Divina: The remedy of infringement is exclusive to the patentee.
The key consideration is the inventive activity. Is it part of
his regular duties? If it is not part of his regular duties, it
belongs to the employee even if he uses the time, facilities,
material of the employer. Supposing in the same question above, Joab got wind of
the inventions of his employees and also laid claim to
the patents, asserting that Cezar and Francis were using
his materials and company time in making the devices,
X works as a research computer engineer with the will his claim prevail over those of his employees?
Institute of Computer Technology, a government agency. Explain.
When not busy with his work, but during of]ice hours,
he developed a software program for law ]irms that will No. The claim of Joab will not prevail over those of his
allow ef]icient monitoring of the cases, which software employees, even if they used his materials and company
program is not at all related to his work. Assuming the time in making the gas-saving device. The invention of the
program is patentable, who has the right over the gas- saving device is not part of their regular duties as
patent? employees of a car manufacturing company. (Section 30.2,
IPC).
a. X;
b. Institute of Computer Technology; Right of priority

c. Neither X nor the Institute Computer Technology What is right of priority?
can claim patent right over the invention;
18
An application for patent Kiled by any person who has There was a patent application in the US but he did not
previously applied for the same invention in another pursue it. He abandoned it. He lost his priority. Thereafter,
country which by treaty, convention or law affords similar another application was Kiled. And the second applicant
privileges to Filipino citizens, shall be considered as Kiled as complied with all the requirements for a patent and
of the date of the Kiling of the foreign application; Provided, eventually got the patent. Can the one who Kiled the patent
That: a) the local application expressly claims priority; b) it application in the US claim a better right? No. J. Leonen said
is Kiled within twelve months from the date the earliest the priority right only gives the priority but you still have to
foreign application was Kiled; and c) certiKied copy of the comply with all other requirements.
foreign application together with an English translation is
Kiled within six months from the date of Kiling in the
Philippines.
The right of priority given to a patent applicant is only Grounds for cancellation of patents
relevant when there are two or more conKlicting patent
The following are the grounds for the cancellation of a
applications on the same invention. This is because a right of
patent:
priority does not automatically grant letters patent to an
applicant. The possession of a right of priority does not a. the invention is not new or patentable;
confer any property rights on the applicant in the absence of
an actual patent. b. the patent does not disclose the invention in a
manner sufKiciently clear and complete for it to be
A patent applicant with the right of priority is given carried out by any person skilled in the art; or
preference in the grant of a patent when there are two or
more applicants for the same invention. Since both the c. the patent is contrary to public order or morality, or
United States and the Philippines are signatories to the Paris granted when the product or the process is non-
Convention for the Protection of Industrial Property, an patentable.
applicant who has Kiled a patent application in the United
Once cancelled, the rights conferred by the patent shall
States may have a right of priority over the same invention
terminate.
in a patent application in the Philippines. However, this right
of priority does not immediately entitle a patent applicant That the patent is granted not in favor of the true and actual
the grant of a patent. A right of priority is not equivalent to a inventor is not a ground for cancellation of patent.
patent. Otherwise, a patent holder of any member-state of
the Paris Convention need not apply for patents in other Dean Divina:
countries where it wishes to exercise its patent. It was,
The remedy of the true inventor in case the patent is granted
therefore, inaccurate for petitioner to argue that its prior
to someone is not Cancellation of Patent with the IPO. The
patent application in the United States removed the
remedy is judicial: go to court and ask that you be declared
invention from the public domain in the Philippines. It
the one entitled to patent.
should have complied with the other requirements of the
actual grant of the patent. In this case, the application for
patent was declared abandoned by the Intellectual Property Remedy of the true and actual inventor
OfKice for failure to comply with strict procedural rules. The
right of priority of the patent applicant was therefore lost. What are the remedies of a person declared by ]inal
court order as having the right to the patent?
Dean Divina:
If a person referred to in Section 29 [First to File Rule] other
Justice Leonen wrote a decision on Right of Priority, that is than the applicant, is declared by Kinal court order or
why we need to focus on this one. Take note: right of priority decision as having the right to the patent, such person may,
is given to the patent applicant. It is only relevant when within three (3) months after the decision has become Kinal:
there are two or more patent application for the same a) Prosecute the application as his own application in place
invention. Right of priority DOES NOT AUTOMATICALLY of the applicant; b) File a new patent application in respect
translate to a grant of patent. Possession of this right DOES of the same invention; c) Request that the application be
NOT CONFER ANY PROPERTY RIGHT to the applicant, in the refused; or d) Seek cancellation of the patent, if one has
absence of actual patent. already been issued.
19
Dean Divina: bought one gadget, dismantled and studied it, and in
due time was himself manufacturing an identical device.
If we have two patent applicants, and the IPO grants the Before offering it for sale, “J” secured a patent for his
patent to the second applicant, the remedy of the Kirst device which he called “Gasopid.” “I” learns of the patent
applicant is to go to court and ask the court to declare him and desires to secure his own patent but fearing that he
as the one entitled to the patent. Once the decision becomes might be sued for infringement of patents, seeks your
Kinal, he can pursue the application as his own. That’s what legal advice. How can you help him? Explain brie]ly.
the law says. But that is in theory. In practice, this will never (BAR)
happen because court proceedings take time. So by the time
that judgment becomes Kinal, the patent would have then be I, being the Kirst true and actual, may Kile an action in court
issued to the 2nd applicant. So, the remedy is to have it to be declared as the one entitled to the patent, and upon
cancelled. But for bar exam purposes, the remedy is to Kinality of the favorable judgment, ask the IPO to have the
pursue the application as his own in place of the applicant, patent granted to “J” cancelled and “I” be issued the patent.
or Kile a new patent application with respect to the same “I” may also ask for actual and other damages as may be
invention, request that the application be refused, or have it warranted under the circumstances.
cancelled if it had already been issued.
Rights conferred by a patent

What are the remedies of the true and actual inventor
deprived of the patent? A patent shall confer on its owner the following exclusive
rights: a) Where the subject matter of a patent is a product,
If a person, who was deprived of the patent without his to restrain, prohibit and prevent any unauthorized person or
consent or through fraud, is declared by Kinal court order or entity from Making, Using, Selling, Offering for sale, or
decision to be the true and actual inventor, the court shall Importing that product (“MUSOI”); b) Where the subject
order for his substitution as patentee, or at the option of the matter of a patent is a process, to restrain, prevent or
true inventor, cancel the patent, and award actual and other prohibit any unauthorized person or entity from using the
damages in his favor if warranted by the circumstances. process, and from manufacturing, dealing in, using, selling or
offering for sale, or importing any product obtained directly
Even the true and actual inventor, who is not a patent holder, or indirectly from such process. (Section 71.1, IPC).
cannot Kile an action for patent infringement. Such remedy is
available only to the patentee or his successors-in- interest. Patent owners shall also have the right to assign, or transfer
by succession the patent, and to conclude licensing contracts
The remedy available to the inventor who is not issued the for the same.
patent is not to Kile a petition for cancellation of patent with
the IPO but institute the appropriate court action to be For years, Y has been engaged in the parallel
declared the patentee and only after he has obtained importation of famous brands, including shoes carrying
judgment that he can ask the IPO to cancel the patent of the the foreign brand MAGIC. Exclusive distributor X
holder. If the inventor was deprived of patent through fraud demands that Y cease importation because of his
or without his consent, he can ask for the cancellation of appointment as exclusive distributor of MAGIC shoes in
patent of the holder upon Winality of the favorable court the Philippines.
decision; whereas, if the patent is issued not to the Wirst Wiler
but no fraud attended the patent issuance, the inventor must Y countered that the trademark MAGIC is not registered
wait for three months from Winality of the favorable court with the IPO as a trademark and therefore no one has
decision before he can seek for the cancellation of patent. the right to prevent its parallel importation. Suppose
the shoes are covered by a Philippine patent issued to
the brand owner, what would your answer be? Explain.
“I” has invented a certain device, which when attached
A patent for a product confers upon its owner the exclusive
to the engine of a motor vehicle would cut the
right of importing the product. The importation of a
consumption of gasoline by 50%. Without securing a
patented product without authorization of the owner of a
patent therefor, he started manufacturing the gadget in
patent constitutes infringement of the patent. X can prevent
large quantities and promoted its sales. An ingenious
20
the parallel importation of such shoes by Y without its Cheaper and Accessible medicine Act, one a
authorization. drug is introduced in the Philippine or
anywhere in the world, the act of importing
that drug would no longer amount to patent
What is the term of patent? infringement.
The term of a patent shall be twenty (20) years from the Yosha was able to put together a
Kiling date of the application. The term is not subject to mechanical water pump in his garage
extension. consisting of suction systems capable of
drawing water from the earth using less
human effort than what was then required
by existing models. The water pump
system provides for a new system which
What is the signi]icance of the term of patent? has the elements of novelty and inventive
steps. Yosha, while preparing to have his
A patentee shall have the exclusive right to make, use and
invention registered with the IPO, had
sell the patented machine, article or product, and to use the
several models of his new system
patented process for the purpose of industry or commerce,
fabricated and sold in his province. If
throughout the territory of the Philippines for the term of
Yosha is able to properly register his
the patent; and such making, using, or selling by any person
patent with the IPO, can he prevent anyone
without the authorization of the patentee constitutes
who has possession of the earlier models
infringement of the patent. The patentee’s exclusive rights
from using them?
exist only during the term of the patent, hence, after the cut-
off date, the exclusive rights no longer exist. Yosha can no longer prevent anyone who has
possession of the earlier models from using
them even if Yosha is able to properly register
Limitations of patent rights the patent with the IPO. One of the limitations
- The owner of a patent has no right to prevent third of patent rights is the use of the patented
parties from performing without his authorization the product which has been put on the market in
acts of making, using, offering to sell, selling and the Philippines by the owner of the product
importing the patented product or process, in the insofar as such use is performed after the
following circumstances: product has been so put on the said market
(Section 72 of the IP Code)
o Using a patented product which has been put
on the market in the Philippines by the owner o Where the act is done privately and on a non-
of the product, or with his express consent, commercial scale or for a non- commercial
insofar as such use is performed after that purpose: Provided, That it does not signiKicantly
product has been so put on the said market: prejudice the economic interests of the owner
Provided, That, with regard to drugs and of the patent;
medicines, the limitation on patent rights o Where the act consists of making or using
should NOT apply after a drug or medicine has exclusively for experimental use of the
been introduced in the Philippines or anywhere invention for scientiKic purposes or educational
else in the world by the patent owner, or by any purposes and such other activities directly
party authorized to use the invention: Provided, related to such scientiKic or educational
further, That the right to import the drugs and experimental use;
medicines contemplated in this section shall be
available to any government agency or any o In the case of drugs and medicines, where the
private third party. act includes testing, using, making or selling the
invention including any data related thereto,
Dean Divina: solely for purposes reasonably related to the
development and submission of information
and issuance of approvals by government
21
regulatory agencies required under any law of patent, Y, also an inventor, invented a similar device
the Philippines or of another country that which he used in his cellphone business in Manila. But X
regulates the manufacture, construction, use or ]iles an injunctive suit against Y to stop him from using
sale of any product: Provided, That, in order to the device on the ground of patent infringement. Will
protect the data submitted by the original the suit prosper? (Bar 2011)
patent holder from unfair commercial use
provided in Article 39.3 of the Agreement on a) No, since the correct remedy for X is a civil action for
Trade-Related Aspects of Intellectual Property damages;
Rights (TRIPS Agreement), the Intellectual b) No, since Y is a prior user in good faith;
Property OfKice, in consultation with the
appropriate government agencies, shall issue c) Yes, since X is the Kirst to register his device for patent
the appropriate rules and regulations necessary registration;
therein not later than one hundred twenty
(120) days after the enactment of this law; d) Yes, since Y unwittingly used X’s patented invention.
o Where the act consists of the preparation for - A government agency or third person authorized by the
individual cases, in a pharmacy or by a medical Government may exploit the invention even without
professional, of a medicine in accordance with a agreement of the patent owner where:
medical prescription or act concerning the o The public interest, in particular, national
medicine so prepared; security, nutrition, health, or the development
o Where the invention is used in any ship, vessel, of other sectors, as determined by the
aircraft, or land vehicle of any other country appropriate agency of the government, so
entering the territory of the Philippines requires; or mere determination of an
temporarily or accidentally, provided, that such appropriate government agency on the
invention is used exclusively for the needs of existence of a ground based on public interest
the ship, vessel, aircraft or land vehicle and not would sufKice for the exploitation of the
used for the manufacturing of anything to be invention. This is different from the situation of
sold in the Philippines. national emergency or extreme urgency where
the determination is made by the President of
- Any prior user, who, in good faith, was using the the Philippines.
invention or has undertaken serious preparations to use
the invention in his enterprise or business, before the o A judicial or administrative body has
Kiling date or priority date of the application on which a determined that the manner of exploitation, by
patent is granted, shall have the right to continue the the owner of the patent or his licensee, is anti-
use thereof as envisaged in such preparations within the competitive; or
territory where the patent produces its effect. o In the case of drugs and medicines, there is a
Dean Divina: national emergency or other circumstance of
extreme urgency requiring the use of the
If there is a prior use, how can the IPO grant the invention; or
application of the patent to the Kiler? This assumes that
there had been no public disclosure of the invention. o In the case of drugs and medicines, there is a
Because if the prior user had already disclosed the public non-commercial use of the patent by the
invention to the public, then the element of novelty is patentee, without satisfactory reason;
no longer present, in which case the IPO shall not The common thread of all of these is that “public
grant the patent. This assumes that he is using the interest so requires.”
invention only for his personal use or his business.
Dean Divina:
X invented a device which, through the use of noise, can
recharge a cellphone battery. He applied for and was The common trend to all of this is that public interest so
granted a patent on his device, effective within the requires.
Philippines. As it turns out, a year before the grant of X’s
22
Under what conditions can the government, or third There can be no infringement of a patent until a patent has
person authorized by the government, exploit the been issued, since whatever right one has to the invention
invention? covered by the patent arises only from the grant of patent.
The use by the Government, or third person authorized by A patent gives the inventor the right to exclude all others
the Government shall be subject, mutatis mutandis, to the from making, using, or selling his invention.
conditions speciKied in Sections 95 to 97 and 100 to 102 of
the IPC. In particular –
When will importation of the patented product not
1. The scope and duration of the such use shall be limited to amount to patent infringement?
the purpose for which it was authorized;
Generally, importation of the patented product without the
2. Such use should be non-exclusive; patentee’s authorization amounts to infringement. However,
with regard to drugs and medicines, the law allows
3. The right holder shall be informed promptly whenever importation by the government or any private third party
any of the foregoing circumstances occurs; once the drug or medicine has been introduced in the
Philippines or anywhere else in the world by the patent
4. The right holder shall be paid adequate remuneration in owner, or by any party authorized to use the invention in the
the circumstances of each case, taking into account the Philippines.
economic value of the authorization.
Who may ]ile an action for infringement?

Patent infringement
Any patentee, or anyone possessing any right, title or
What constitutes civil action for patent infringement? interest in and to the patented invention, whose rights have
been infringed, may bring an action for patent infringement
Intellectual property infringement basically means before a court of competent jurisdiction.
performing any act in violation of the rights granted by law
to the owner or holder of the intellectual property right. Only the patent holder can Kile an action for infringement.
The inventor, who was not issued the patent, cannot Kile such
The making, using, offering for sale, selling, or importing a action nor even enjoin the use or making or sale of the
patented product or a product obtained directly or indirectly patented product.
from a patented process, or the use of a patented process
without the authorization of the patentee constitutes patent Dean Divina:
infringement: Provided, That, this shall not apply to
In Precision vs CA, the Kirst inventor did not secure the
instances covered by Sections 72.1 and 72.4 (Limitations of
patent somebody else did, the Kirst inventor cannot sue for
Patent Rights); Section 74 (Use of Invention by
infringement. But can he Kile not an action for infringement
Government); Section 93.6 (Compulsory Licensing); and
but just an injunction to restrain the patentee from selling
Section 93-A (Procedures on Issuance of a Special
the patented product?
Compulsory License under the TRIPS Agreement) of this
Code.
The SC said that whatever remedies that are available in
case of infringement can only be pursued by the patentee.
In the case of Aguas, the Court ruled that the tiles produced
Therefore that remedy is exclusive to the patentee.
from the inventor’s process are suitable for construction and
ornamentation, which previously had not been achieved by
tiles made out of the old process of tile making; therefore,
the said invention having brought about a new and useful The Supreme Court further ruled that the phrase “anyone
kind of tile, the patent is legally issued. With this, the act of possessing any right, title, or interest in and to the patented
making, using and selling tiles embodying said patented invention, whose rights have been infringed” may bring an
invention constitute infringement.
23
action for infringement does not refer to the inventor not Under the doctrine of equivalents, the manufacturer of a
issued the patent but to the hand tiller which is similar to a patented hand tiller in form,
patentee’s successors-in-interest and assignee. conKiguration, design and appearance, has virtually the same
parts, and operates in the same manner as the patented
Dean Divina: article, is guilty of infringement of patent.
What do you mean by that phrase, anyone possessing any In applying this test in another case, the Supreme Court
right, title, or interest in and to the patented invention does ruled that while both compounds have the effect of
this phrase include the true and the actual inventor? neutralizing parasites in animals, identity of result does not
amount to infringement of patent unless the accused
The SC said that it does not apply to the true and actual product operates in substantially the same way or by
inventor. It applies to the heirs, successors or assigns of the substantially the same means as the patented compound,
patentee. even though it performs the same function and achieves the
same result. In other words, the principle or mode of
operation must be the same or substantially the same. The
The remedy of the inventor but who was deprived of the doctrine of equivalents thus requires satisfaction of the
patent is to Kile an action in court that he be declared the function-means-and result test. In the case at bar, apart from
patentee and not to Kile an action for infringement. the fact the Albendozole is an anthelmintic agent like
methyl15 propylthio-2- benzimidazole-carbamate, nothing
is more asserted regarding the method or means by which
What are the tests to determine infringement of patent? Albendozole weeds out parasites in animals, thus giving no
information on whether that method is substantially the
The tests to determine infringement of patent are: same as the manner by which the accused’s compound
works.
a) literal infringement; and
b) the doctrine of equivalents. Dean Divina:
In one case, the SC said that identity of result does not

warrant a Kinding of infringement of patent. Those 3
How is the literal infringement test used vis-a-vis the
sameness must concur – same function – same way – same
doctrine of equivalents?
In Del Rosario v. Court of Appeals, a case involving patent for
In using literal infringement as a test, the Court must
utility model covering an audio equipment commonly
juxtapose the claims of the patent and the accused product
known as the sing along system or karaoke, the Supreme
within the context of the claims and speciKications to
Court, in ruling that there was patent infringement under
determine whether there is exact identity of all material
the doctrine of equivalents, observed:
elements. Under the doctrine of equivalents, infringement
also occurs when a device appropriates a prior invention by
a. both are used by a singer to sing and amplify his voice;
incorporating its innovative concept and albeit with some
modiKications and change, performs substantially the same
b. both are used to sing with a minus-one or multiplex tapes,
function in substantially the same way to achieve
or that both are used to play minus-one or standard cassette
substantially the same result.
tapes for singing or for listening to;
The doctrine of equivalents provides that an infringement
c. both are used to sing a minus-one tape and multiplex tape
takes place when a device appropriates a prior invention by
and to record the singing and the accompaniment;
incorporating its innovative concept and, although with
some modiKication and change, performs substantially the
d. both are used to sing with live accompaniment;
same function in substantially the same way to achieve
e. both are used to sing with live accompaniment and to
substantially the same result; it requires satisfaction of the
record the same;
function-means-and-result test.
24
f. both are used to enhance the voice of the singer using echo
effect, treble, bass and other controls; The court may, according to the circumstances of the case,
award damages in a sum above the amount found as actual
g. both are equipped with cassette tape decks which are damages sustained: Provided, That the award does not
installed with one being used for playback and the other, for exceed three (3) times the amount of such actual damages.
recording the singer and the accompaniment, and both may
also be used to record a speaker’s voice or instrumental Anyone who actively induces the infringement of a patent or
playing, like the guitar and other instruments; provides the infringer with a component of a patented
product or of a product produced because of a patented
h. both are encased in a box-like cabinets; and process knowing it to be especially adopted for infringing
the patented invention and not suitable for substantial non-
i. both can be used with one or more microphones. infringing use shall be liable as a contributory infringer and
shall be jointly and severally liable with the infringer.
Clearly, therefore, both models involve substantially the (Section 76, IPC)
same modes of operation and produce substantially the
same if not identical results when used. b. Criminal action
If infringement is repeated by the infringer or by anyone in

connivance with him after Kinality of the judgment of the
What’s the rationale of the doctrine of equivalents?
court against the infringer, the offender shall, without
prejudice to the institution of a civil action for damages, be
Under the doctrine of equivalents, there is infringement if
criminally liable.
two devices do the same work in substantially the same way,
and accomplish substantially the same result, even though
Unlike trademark and copyright infringement, the Kirst act of
they differ in name, form, or shape. The reason for the
patent infringement does not give rise to criminal liability. A
doctrine of equivalents is that to permit the imitation of a
person can only be held criminally liable if he repeats the
patented invention which does not copy any literal detail
commission of the same infringing acts after Kinality of the
would be to convert the protection of the patent grant into a
court judgment (in a civil action for infringement) against
hollow and useless thing.
him. The repeated acts of infringement will then give rise to
both criminal and civil liabilities.
Civil and criminal action c. Provisional remedies
What are the remedies of the patent owner in case of The patent holder may secure a preliminary injunction to
patent infringement? restrain acts of infringement during the pendency of the
action for patent infringement. Relevantly, under the 2020
The remedies of the patentee in case of patent infringement Rules of Procedure for Intellectual Property Cases, at any
are as follows: time after the Kiling of the complaint, a motion for the
disposal and/or destruction of the seized infringing goods,
a. Civil action or materials and implements predominantly used in the
infringement, may be Kiled by the right-holder before the
Any patentee, or anyone possessing any right, title or court.
interest in and to the patented invention, whose rights have
been infringed, may bring a civil action before a court of There is destruction when the infringing goods are
competent jurisdiction, to recover from the infringer such completely destroyed and are put beyond further use. There
damages sustained thereby, plus attorney’s fees and other is disposal when the infringing goods are effectively
expenses of litigation, and to secure an injunction for the prohibited from re-entry into the channels of commerce but
protection of his rights. may be reused for some other lawful purpose.
If the damages are inadequate or cannot be readily The court may, in its discretion, order that the infringing
ascertained with reasonable certainty, the court may award goods, materials, and
by way of damages a sum equivalent to reasonable royalty.
25
implements predominantly used in the infringement be warrant, I will also ask for other damages but not to exceed
disposed of outside the channels of commerce or destroyed, three times (3x) the amount of actual damages.
without compensation. In the same civil action, I will also pray for attorney’s fees,
costs of suit, and the issuance of writ of preliminary
Generally, unless restrained by the Supreme Court or the injunction to restrain further acts of infringement during the
Court of Appeals, any order issued by the court in cases pendency of the case. An order to seize and impound tools,
involving intellectual property rights is immediately equipment, and paraphernalia used in connection with the
executory except, among others, an order of destruction infringement may also be prayed for.
where a motion for reconsideration is Kiled.
If after a Kinal judgment is rendered by the Court against the
Dean Divina: infringer, he repeated the infringement, I will again institute
a civil action for damages with the same above stated
The search and seizure, the impounding of the infringed provisional remedies, as well as criminal action for the
materials and goods, all of these are executory while repetition of infringement.
destruction is NOT as long as you Kile a motion for
reconsideration. After Kinality of the court judgment, the preliminary
injunction shall be converted into a Kinal injunction and the
seized tools, equipment and paraphernalia used to commit
Nestor Dionisio invented a space age revolutionary mini the acts of infringement may be destroyed and declared
room air-conditioner and was able to secure the outside channels of commerce.
registration patent and issuance of patent certi]icate for
said invention by the Philippines’ Patent Of]ice. He If the infringer commits the same acts of infringement, I will
immediately went into commercial production and sale Kile criminal and civil actions for the repeated acts of
of his invention. infringement.
Later, Carlos Asistio, who used to be Nestor’s plant

manager, organized his own company, and engaged in Prescriptive period
the manufacture of exactly the same mini-room air-
conditioners for his own out]it and which he sold for his What is the prescriptive period of a patent infringement
own bene]it. suit?
As counsel of Dionisio, what legal steps would you take No damages can be recovered for acts of infringement
to protect his rights and committed more than four (4) years before the institution of
interests? Discuss. the action for infringement.
Dean Divina: Damages; Requirement of Notice.

This question will entail the application of remedy in case of
infringement, so not the remedy of the true and actual Damages cannot be recovered for acts of infringement
inventor. So be careful with the facts when you apply the committed before the infringer had known, or had
remedies of the patentee and the true and actual inventor. reasonable grounds to know of the patent. It is presumed
that the infringer had known of the patent if on the patented
As counsel for Dionisio, I will take the following legal steps: product, or on the container or package in which the article
Within 4 years from the commission of acts of infringement, is supplied to the public, or on the advertising material
I will bring a civil action for infringement of patent before relating to the patented product or process, are placed the
the proper court to recover from the infringer damages words “Philippine Patent” with the number of the patent.
sustained by reason of the infringement. The amount of
damages is based on the proKits which he would have made Dean Divina:
without the infringement and if the same cannot be Philippine patent or P with a circle.
determined, reasonable royalty. If the circumstances
26
Defenses in action for infringement In an action for infringement of patent, the alleged
infringer defended himself by stating (1) that the patent
What are the defenses that can be asserted in a patent issued by the Patent Of]ice was not really an invention
infringement suit? which was patentable; (2) that he had no intent to
infringe so that there was no actionable case for
The following are defenses that can be asserted in a patent infringement; and (3) that there was no exact
infringement suit: duplication of the patentee’s existing patent but only a
minor improvement.
a. the patent or any claim thereof is invalid;
With those defenses, would you exempt the alleged
b. any of the grounds on which petition for cancellation can violator from liability? Why?
be brought;
I would not exempt the alleged violator from liability for the
c. the patent is not new or patentable; following reasons:
d. speciKication of the invention does not comply with the a. A patent once issued by the Patent OfKice raises a
law; presumption that the article is patentable. The validity of the
patent and the question over the inventiveness, novelty and
e. he patent was issued not to the true and actual inventor, usefulness of the product are matters which are better
or the plaintiff did not derive his rights from the true and determined by the Patent OfKice. There is a presumption that
actual inventor; and the Philippine Patent OfKice has correctly determined the
patentability of the model and such action must not be
f. prescription. interfered with in the absence of competent evidence to the
contrary. (Manzano v. Court of Appeals,
In one case, when a patent is sought to be enforced, the G.R. No. 113388, September 5, 1997). A mere statement or
questions of invention, novelty, or prior use, and each of allegation is not enough to destroy that presumption;
them, are open to judicial examination; in cases of
infringement of patent, no preliminary injunction will be b. An intention to infringe is not necessary nor an element in
granted unless the patent is valid and infringed beyond a case for infringement of a patent; and
question and the record conclusively proves the defense is
sham. In other words, the competent court has jurisdiction c. There is no need of exact duplication of the patentee’s
to declare a patent invalid. Upon certiKication that the existing patent such as when the improvement made by
judgment has become Kinal, it is the ministerial duty of the another is merely minor. Under the doctrine of equivalents,
Patent OfKice (now the IPO) to execute the judgment. infringement is committed if the accused product
introduced only minor innovations or improvement but
In fact, under the IPC, in an action for infringement, if the performs the same function in the same way to accomplish
court shall Kind the patent or any claim to be invalid, it shall the same result. Exact duplication of the patentee’s existing
cancel the same, and the Director of Legal Affairs, upon patent is not necessary for infringement to lie.
receipt of the Kinal judgment of cancellation by the court,
shall record that fact in the register of the OfKice and shall
publish a notice to that effect in the IPO Gazette. Licensing
Dean Divina: What are the kinds of licensing agreements?

The competent court has jurisdiction to declare the patent
a. Voluntary Licensing
invalid and once there is certiKication that the judgment
b. Compulsory Licensing
becomes Kinal it is now the duty of the IPO to execute the
judgment and cancel the patent accordingly.
What is voluntary license in patent?
A voluntary license is an authorization given by the patent

holder to another person allowing it to produce the patented
27
article. The license usually Kixes the amount of royalties, sets e. Those that prohibit the licensee to export the licensed
quality requirements, and deKines the markets in which the product unless justiKied for the protection of the legitimate
licensee can sell the product. interest of the licensor such as exports to countries where
exclusive licenses to manufacture and/or distribute the
The licensee shall be entitled to exploit the subject matter of licensed product(s) have already been granted;
the technology transfer arrangement during the whole term
of the technology transfer arrangement. f. Those which restrict the use of the technology supplied
after the expiration of the technology transfer arrangement,
To encourage the transfer and dissemination of technology, except in cases of early termination of the
prevent or control practices and conditions that may in technology transfer arrangement due to reason(s)
particular cases constitute an abuse of intellectual property attributable to the licensee;
rights having an adverse effect on competition and trade, all
technology transfer arrangements shall comply with the g. Those which require payments for patents and other
provisions of voluntary licensing under the IPC. industrial property rights after their expiration, termination
arrangement;
h. Those which require that the technology recipient shall

Enumerate 3 stipulations that are prohibited in not contest the validity of any of the patents of the
technology transfer agreements. technology supplier;
The following stipulations are prohibited in technology i. Those which restrict the research and development
transfer agreements: activities of the licensee designed to absorb and adapt the
transferred technology to local conditions or to initiate
a. Those which impose upon the licensee the obligation to research and development programs in connection with
acquire from a speciKic source capital goods, intermediate new products, processes or equipment;
products, raw materials, and other technologies, or of
permanently employing personnel indicated by the licensor; j. Those which prevent the licensee from adapting the
imported technology to local conditions, or introducing
b. Those pursuant to which the licensor reserves the right to innovation to it, as long as it does not impair the quality
Kix the sale or resale prices of the products manufactured on standards prescribed by the licensor;
the basis of the license; and
k. Those which exempt the licensor for liability for non-
c. Those that contain restrictions regarding the volume and fulKilment of his responsibilities under the technology
structure of production. transfer arrangement and/or liability arising from third
party suits brought about by the use of the licensed product
Other prohibited clauses are as follows: or the licensed technology; and
a. Those that prohibit the use of competitive technologies in l. Other clauses with equivalent effects.
a non-exclusive technology transfer agreement;
b. Those that establish a full or partial purchase option in What contractual stipulations are required in all
favor of the licensor; technology transfer agreements?
c. Those that obligate the licensee to transfer for free to the The following stipulations are required in all technology
licensor the inventions or improvements that may be transfer agreements:
obtained through the use of the licensed technology;
a. The laws of the Philippines shall govern its interpretation
d. Those that require payment of royalties to the owners of and in the event of litigation, the venue shall be the proper
patents for patents which are not used; court in the place where the licensee has its principal place
of business;
28
b. Continued access to improvements in techniques and e. If the patented invention is not being worked in the
processes related to the Philippines on a commercial scale, although capable of being
technology shall be made available during the period of the worked, without satisfactory reason: Provided, That the
technology transfer arrangement; importation of the patented article shall constitute working
or using the patent; (Secs. 34, 34-A, 34-B, R.A. No. 165a); and
c. In case it shall provide for arbitration, the Procedure of
Arbitration of the Arbitration Law of the Philippines or the f. Where the demand for patented drugs and medicines is
Arbitration Rules of the International Chamber of Commerce not being met to an adequate extent and on reasonable
(ICC) shall apply and the venue of arbitration shall be the terms, as determined by the Secretary of the Department of
Philippines or any neutral country; Health.
d. The Philippine taxes on all payments relating to the A compulsory license shall also be available for the
technology transfer agreement shall be borne by the manufacture and export of drugs and medicines to any
licensor. country having insufKicient or no manufacturing capacity in
the pharmaceutical sector to address public health
problems: Provided, That, a compulsory license has been
What is compulsory licensing? granted by such country or such country has, by notiKication
or otherwise, allowed importation into its jurisdiction of the
Compulsory licensing is when the government allows patented drugs and medicines from the Philippines in
another person to produce the patented product or process compliance with the TRIPS Agreement.
without the consent of the patent owner or plans to use the
patented invention itself. Dean Divina:
Basically, Health, public interest, national interest, anti-

competitive practice, not being worked out in a full
What are the grounds for compulsory licensing of a commercial scale.
patent?
The Director General of the Intellectual Property OfKice may

Compulsory Licensing of Inventions which are duly
grant a license to exploit a patented invention, even without
patented may be dispensed with or will be allowed
the agreement of the patent owner, in favor of any person
exploitation even without agreement of the patent
who has shown his capability to exploit the invention, under
owner under certain circumstances, like national
any of the following circumstances :
emergency, for reason of public interest, like national
security, etc. The person who can grant such authority is
a. National emergency or other circumstances of extreme
—
urgency;
a. The Director General of the Intellectual Property OfKice;
b. Where the public interest, in particular, national security,
nutrition, health or the development of other vital sectors of
b. The Director of Legal Affairs of the Intellectual
the national economy as determined by the appropriate
Property Of]ice;
agency of the Government, so requires; or
c. The owner of the Patent right;
c. Where a judicial or administrative body has determined
that the manner of
d. Any agent of the owner of the Patent right.
exploitation by the owner of the patent or his licensee is
anti-competitive; or
d. In case of public non-commercial use of the patent by the

patentee, without Super Biology Corporation (Super Biology) invented and
satisfactory reason; patented a miracle medicine for the cure of AIDS. Being
the sole manufacturer, Super Biology sold the medicine
at an exorbitant price. Because of the sudden prevalence
29
of AIDS cases in Metro Manila and other urban areas,

the Department of Health (DOH) asked Super Biology
for a license to produce and sell the AIDS medicine to What are the terms and conditions of compulsory
the public at a substantially lower price. Super Biology, license?
citing the huge costs and expenses incurred for research
and development, refused. Assuming you are asked your The basic terms and conditions including the rate of
opinion as the legal consultant of DOH, discuss how you royalties of a compulsory license shall be Kixed by the
will resolve the matter. Director of Legal Affairs subject to the following conditions:
DOH may Kile a petition for compulsory license with the a. The scope and duration of such license shall be limited to
Director of Legal Affairs of the Intellectual Property OfKice to the purpose for which it was authorized;
exploit the patented medicine even without the agreement
of the patent owner on the ground of public interest, in b. The license shall be non-exclusive;
particular, health (Section 193 of RA 8293, as amended).
Once granted, the DOH may then produce and sell the AIDS c. The license shall be non-assignable, except with that part
medicines for a cheaper price subject to payment of of the enterprise or business with which the invention is
reasonable royalties to Super Biology. (BAR 2017) being exploited;
What is the period to ]ile a petition for compulsory d. Use of the subject matter of the license shall be devoted
license? predominantly for the supply of the Philippine market:
Provided, That this limitation shall not apply where the
A compulsory license may not be applied for before the grant of the license is based on the ground that the
expiration of a period of four (4) years from the date of Kiling patentee’s manner of exploiting the patent is determined by
of the application or three (3) years from the date of the judicial or administrative process, to be anti-competitive.
patent whichever period expires last.
e. The license may be terminated upon proper showing that
Compulsory license may be applied for at any time after the circumstances which led to its grant have ceased to exist and
grant of the patent in the following cases: are unlikely to recur: Provided, That adequate protection
shall be afforded to the legitimate interest of the licensee;
a. Where the public interest, in particular, national security, and
nutrition, health, or the development of other vital sectors of
the national economy as determined by the appropriate f. The patentee shall be paid adequate remuneration taking
agency of the Government, so requires; or into account the economic value of the grant or
authorization, except that in cases where the license was
b. Where a judicial or administrative body has determined granted to remedy a practice which was determined after
that the manner of judicial or administrative process, to be anti-competitive, the
exploitation by the owner of the patent or his licensee is need to correct the anti-competitive practice may be taken
anti-competitive; or into account in Kixing the amount of remuneration.
c. In case of public non-commercial use of the patent by the Relevantly, in Price v. United Laboratories, the Supreme
patentee, without Court held that a compulsory license may be granted over
satisfactory reason; and the entire patented invention for there is no law requiring
that the license be limited to a speciKic embodiment of the
d. If the invention protected by a patent, hereafter referred invention or to a particular claim.
to as the “second patent,” within the country cannot be
worked without infringing another patent, hereafter Dean Divina:
referred to as the “Kirst patent,” granted on a prior
application or beneKiting from an earlier priority, a The only case on compulsory license is Price vs Unilab.
compulsory license may be granted to the owner of the There are 2 basic issues:
second patent to the extent necessary for the working of his
invention.
30
1. Can the compulsory license be granted over the entire

invention or just a portion of it? – the SC said that it can be Dean Divina:
granted over the entire invention.
You remember the Bar Exam Q we saw a while ago?
2. Does it not violate due process when you exploit the Subscription is not the same as assignment. There are
invention of another? – No because you are acknowledging formalities that must be complied with to be considered as
that the inventor is so and so and you need to pay him assignment under the IP code.
royalties.
The fact that there is an acknowledgement and payment of

royalties negates violation of due process.. FEBRUARY 23, 2021
TRADEMARKS
Does compulsory licensing amount to deprivation of the
property right of the patent holder without due process What is a trademark?
of law?
A “trademark” is any word, name, symbol, emblem, sign, or
That’s what I said.. next.. device or any combination thereof adopted and used by a
manufacturer or merchant to identify his goods and
distinguish them from those manufactured, sold, or dealt
Assignment and transmission of rights in by others; it is any visible sign capable of distinguishing
goods.
Inventions and any right, title, or interest in and to patents
and inventions covered
thereby, may be assigned or transmitted by inheritance or What is a collective mark?
bequest or may be the subject of a license contract.
“Collective mark” means any visible sign designated as
such in the application for registration and capable of
What are the formalities prescribed by the IPC for the distinguishing the origin or any other common
assignment of rights over a patent? characteristic, including the quality of goods or services of
different enterprises which use the sign under the control
The law prescribes the following formalities for the of the registered owner of the collective mark.
assignment of rights over a patent and the invention to
which the patent relates:
Differentiate a trademark from a service mark.
a. The assignment must be in writing, acknowledged before
a notary public or other ofKicer authorized to administer
“Mark” means any visible sign capable of distinguishing
oath or perform notarial acts, and certiKied under the hand
the goods (trademark) or services (service mark) of an
and ofKicial seal of the notary or such other ofKicer.
enterprise and shall include a stamped or marked
container of goods.
b. The IPO shall record assignments, licenses, and other
instruments relating to the transmission of any right, title, or
Thus, the name and container of a beauty cream product
interest in and to inventions, and patents or application for
and LPG cylinder tank bearing a stamp or mark are proper
patents or inventions to which they relate.
subjects of a trademark.
c. Such instruments shall be void as against any subsequent
purchaser or mortgagee for valuable consideration and A trade name means the name or designation identifying or
without notice, unless, it is so recorded in the OfKice, within distinguishing an enterprise.
three (3) months from the date of said instrument, or prior
to the subsequent purchase or mortgage. A name or designation may not be used as a trade name if
by its nature or the use to which such name or designation
31
may be put, it is contrary to public order or morals and if, owner of an infringing trademark. The IPC eliminated such
in particular, it is liable to deceive trade circles or the requirement. (Coffee Partners v. San Francisco Coffee and
public as to the nature of the enterprise identiKied by that Roastery, Inc., G.R. No. 169504, March 3, 2010)
name.
In one case, it was ruled that while “San Francisco” is just a What is the objective of the law in protecting
proper name referring to the famous city in California and trademarks?
that “coffee” is simply a generic term, the respondent in
that case has acquired an exclusive right to the use of the The purpose of the law in protecting trademarks has a
trade name “SAN FRANCISCO COFFEE & ROASTERY, INC.” two-folded objective: to protect the owner of his property
since the registration of the business name with the and to protect the public from being deceived by reason of
Department of Trade and Industry. Thus, respondent’s use a misleading claim (63 C.J. Sec. 5). (BAR 1982)
of its trade name from then on must be free from any
infringement by similarity. (Coffee Partners v. San Trademarks have several functions: the indicate the origin
Francisco Coffee and Roastery, Inc., G.R. No. 169504, March or ownership of the articles or services in which they are
3, 2010) used; they guarantee that the articles or services comes up
to a certain standard of quality; and they advertise the
Dean Divina: articles and services they symbolize.
Trade name is different from trademark. Trade name is a

name to designate an enterprise. Trademark is a sign to
distinguish goods as manufactured by certain manufacturer What are the territorial limits of a trademark?
Trade name need not be registered with the IPO. Trademark Trademarks acknowledge no territorial boundaries of
acquired through registration. Tradename acquired through states or nations, but extend to every market where the
the use. Use in trade or commerce. trader’s goods have become known and identiKied by his
use of the mark (63 C.J. Sec. 12). (BAR 1982)
If there is dispute as to who is the owner of the tradename,
then it is a question of evidence. It is evidenced usually by Dean Divina:
registration with the DTI or the SEC for corporation.
That’s the reason why you have the doctrine of well known
Tradename need not be registered with the IPO, can the mark. The trademark may be registered only in USA but
owner of the trade name sue for infringement if the same is the protection extends to the place where the trademark
used without his consent? Yes, this is the ruling of SC in may be used. That’s why a well known mark may not be
Coffee Partners. registered here in the Philippines by a person other than
the owner of the well known mark.
You know, San Francisco, it is a famous city in California that
is supposed to be geographically descriptive and as we
would see later, not registrable. Does the owner of a trademark have a right of
property to prevent others from manufacturing,
Coffee is generic and likewise not registrable but in this case producing, or selling the same article to which it is
if you combine Geographic name or mark with a generic attached?
mark, it can be appropriated and acquired either as a
tradename or trademark. No. The owner of a trademark has no right of property to
prevent others from
Is registration with the IPO a prerequisite in an manufacturing, producing or selling the same article to
infringement suit of a trade name? which it is attached. In other words, the trademark confers
no exclusive rights in the goods to which the marks has
No. A trade name previously used in trade or commerce in been applied (63 J.C. Sec. 12). The owner of the trademark
the Philippines need not be registered with the IPO before can have it registered with the IPO and after registration,
an infringement suit may be Kiled by its owner against the
32
preclude others from adopting the same trademark for court found no bad faith on the part of Natrapharm either
same and similar goods. (BAR 1982) since Zuneca failed to prove that Natrapharm actually
knew the existence of Zuneca’s “ZYNAPS.” The Court of
Appeals afKirmed this decision.
How are trademarks acquired?
The Supreme Court partly afKirmed the lower courts’
decision. It deKinitively ruled that the only mode of
The rights in a mark shall be acquired through registration
acquiring ownership of a trademark is through
made validly in accordance with the provisions of the law.
registration (and not use). According to the Supreme Court
The applicant or the registrant shall Kile a declaration of
: “(i) the language of the IP Code provisions clearly conveys
actual use of the mark with evidence to that effect, within
the rule that ownership of a mark is acquired through
three (3) years from the Kiling date of the application.
registration; (ii) the intention of the lawmakers was to
Otherwise, the application shall be refused or the mark
abandon the rule that ownership of a mark is acquired
shall be removed from the Register by the Director unless
through use; and (iii) the rule on ownership used in Berris
non-use is caused by circumstances arising independently
and EY. Industrial Sales, Inc. [cases] is inconsistent with
of the will of the trademark owner. Lack of funds shall not
the IP Code regime of acquiring ownership though
excuse non-use of a mark (Section 152.1, IPC).
registration.”
In Zuneca Pharmaceutical v. Natrapharm, Inc., the
Supreme Court abandoned its previous rulings that Indeed, Section 122 of the IP Code states “[t]he rights in a
registration does not confer ownership of the trademark mark shall be acquired through registration made validly
and that the Kirst user in good faith defeats the right of the in accordance with the provisions of this law.”
Kirst Kiler in good faith. Trademarks are acquired solely
through registration. In short, the Supreme Court held that Natrapharm’s
“ZYNAPSE” must prevail over Zuneca’s “ZYNAPS” since the
In this case, the two competing marks involved were former was Kirst registered. The Supreme Court, however,
“ZYNAPS” and “ZYNAPSE”. They were admitted by both absolved Zuneca from being liable for trademark
parties to be confusingly similar with each other. “ZYNAPS” infringement because it found Zuneca to be a prior user
(without an e) is owned by Zuneca. It is a drug for the in good faith Accordingly, the IP Code contemplates that a
treatment of seizures like epilepsy. On the other hand, prior user in good faith may continue to use its mark even
Natrapharm owns “ZYNAPSE” (with an e), which also a after the registration of the mark by the Kirst to Kile
medicine, but for stroke. registrant in good faith.
Dean Divina:
Zuneca never registered its trademark “ZYNAPS” with the
Intellectual Property (IP) OfKice, but it has been using it
since 2004. Meanwhile, Natrapharm has registered its Trademarks are acquired solely through registration.
trademark “ZYNAPSE” on September 24, 2007.
The previous ruling of the SC before Zuneca were consistent
With that, Natrapharm sued Zuneca for trademark and what are those rulings? registration does not confer
infringement for using a confusingly similar trademark in ownership over the trademark. Instead, ownership is one
the same Kield of drugs or medicine. Zuneca counter-sued that confers the right to register. And, how is ownership
and alleged that Natrapharm was the one in bad faith since acquired over a trademark that entitles registration? Prior
it (Natrapharm) knows Zuneca’s usage of “ZYNAPS” as a use.
mark since 2004 considering that they both presented
their products in the same pharmaceutical convention That’s why the rulings then were to the effect that the Kirst
years prior. user in good faith defeats the right of the Kirst Kiler in good
faith. The Kirst user is presumed to be the owner and
therefore, the Kirst user alone should register the trademark
The trial court found Zuneca liable for trademark with the IPO.
infringement, essentially saying that Natrapharm was the
Kirst one to register the trademark in good faith. The trial
Not anymore.. Trademarks are acquired through registration
33
as long as registration is done in good faith. So in other that actual use is the recognized mode of acquisition of
words, the Kirst Kiler defeats the right of the Kirst user as long ownership. Rather, it must be understood as provision
as registration is done in good faith. requiring actual use of the mark in order for the registered
owner of a mark to maintain his ownership.
What will make it in good faith? If the registrant is not aware
of the prior use of the trademark by somebody else. It is a Dean Divina:
question of evidence whether the registrant is in good faith.
This is my take on the matter. What about the fact that the
What about Zuneca, is it liable for infringement? No, because law says that within 3 years from the Kiling date, you have to
of doctrine of prior user in trademark. declare actual use. It is possible by that time that the
trademark is not registered yet with the IPO. So you cannot
say that DAU is conditioned for the ownership of the
Did the Supreme Court abandon the ]irst to ]ile rule? trademark because at that time there is no trademark
registered yet in favor of the applicant.
By ruling that trademark is acquired solely through
registration, the Supreme Court did not, nevertheless, The applicant or the registrant shall Kile a declaration of
abandon the Kirst the Kile rule. While it is the fact of actual use of the mark with evidence to that effect within
registration which confers ownership of the mark and three (3) years from the Kiling date of the application.
enables the owner thereof to exercise the rights expressed Otherwise, the application shall be refused or the mark
in the IP Code, the Kirst to Kile rule nevertheless prioritizes shall be removed from the Register by the Director.
the Kirst Kiler of the trademark application and operates to
prevent any subsequent applicant from registering the So that assumes that there may have been no registration
mark. yet of the trademark.
So whats my conclusion? It should be the Kirst one to use

Is the registrant still required to declare actual use of that should have te right to register. Its more equitable.
the trademark?
Yes, the applicant or registrant must declare actual use of What is the signi]icance of the certi]icate of registration
the trademark. The applicant or the registrant shall Kile a of a trademark?
declaration of actual use of the mark with evidence to that
effect within three (3) years from the Kiling date of the
application. Otherwise, the application shall be refused or A certiKicate of registration of a mark shall be prima facie
the mark shall be removed from the Register by the evidence of the validity of the registration, the registrant’s
Director. ownership of the mark, and of the registrant’s exclusive
right to use the same in connection with the goods or
In Mattel v. Francisco, it was held that an admission in a services and those that are related thereto speciKied in the
pleading (Comment and Memorandum ) that the party has certiKicate (Section 138, IPC).
not Kiled declaration of actual use within three years from
application may be construed as an abandonment or The rule on the prima facie validity of a certiKicate of
withdrawal of any right or interest in his trademark. registration is merely meant to recognize the instances
when such certiKicate is not reKlective of ownership such as
The registrant is also required to Kile a declaration of when the registration was done contrary to the IP Code.
actual use and evidence to that effect within one year from
the Kifth anniversary of the date of the registration of the Dean Divina:
mark.
Prior to Zuneca, whats the importance of certiKicate? It
The Supreme Court, however, held that while the says its only a prima facie of the validity of the registration,
registrant should declare actual use, this does not imply the registrant’s ownership of the mark, and of the
registrant’s exclusive right to use the same in connection
34
with the goods or services and those that are related What are the so-called “unregistrable marks”?
thereto.
A mark cannot be registered if it:
So codally, certiKicate of registration gives you three rights.
First, a prima facie evidence that the registration is valid. a. Consists of immoral, deceptive or scandalous
Second, prima facie evidence that the owner is the matter, or matter which may disparage or falsely
registrant. Third, the right to use the trademark for the suggest a connection with persons, living or dead,
goods speciKied in a certiKicate related thereto. institutions, beliefs, or national symbols, or bring
them into contempt or disrepute
Why is that important? Because the protection only
extends to the trademark for the use of the goods related b. Consists of the Klag or coat of arms or other
thereto. The trademark is not protected for the goods insignia of the Philippines or any of its political
unrelated thereto. subdivisions, or of any foreign nation, or any
simulation thereof
Given that the SC said that registration is the mode of
acquiring ownership of the trademark, how do you now c. Consists of a name, portrait or signature
reconcile the prima facie nature of the certiKicate of identifying a particular living individual except by
registration? his written consent, or the name, signature, or
portrait of a deceased President of the Philippines,
This is what the SC said. The rule on the prima facie during the life of his widow, if any, except by
validity of a certiKicate of registration is merely meant to written consent of the widow
recognize the instances when such certiKicate is not
reKlective of ownership such as when the registration was d. Is identical with a registered mark belonging to a
done contrary to the IP Code. different proprietor or a mark with an earlier Kiling
or priority date, in respect of:
So if there were violations of the Code, then the certicate i) The same goods or services;
can be nulliKied because only prima facie as far as the ii) Closely related goods or services; or
certiKicate is concerned. iii) If it nearly resembles such a mark as to be
likely to deceive or cause confusion
(confusing similarity)
Acquisition of ownership of trade name
e. Is identical with, or confusingly similar to, or
Trade name is acquired by use. constitutes a translation of a mark which is
considered by the competent authority of the
Notwithstanding any laws or regulations providing for any Philippines to be well-known internationally and
obligation to register trade names, such names shall be in the Philippines, whether or not it is registered
protected, even prior to or without registration, against here, as being already the mark of a person other
any unlawful act committed by third parties. In particular, than the applicant for registration, and used for
any subsequent use of the trade name by a third party, identical or similar goods or services: Provided,
whether as a trade name or a mark or collective mark, or That in determining whether a mark is well-
any such use of a similar trade name or mark, likely to known, account shall be taken of the knowledge of
mislead the public, shall be deemed unlawful. the relevant sector of the public, rather than of
the public at large, including knowledge in the
The remedies provided for infringement of trademark in Philippines which has been obtained as a result of
shall apply mutatis mutandis in case of tradename the promotion of the mark
infringement.
f.Is identical with, or confusingly similar to, or
constitutes a translation of a mark considered well-
Non-registrable marks known in accordance with the preceding paragraph,
which is registered in the Philippines with respect
35
to goods or services which are not similar to those

with respect to which registration is applied for: Fredco alleged that Registration No. 56561 was issued
Provided, That use of the mark in relation to those to Harvard University for the mark “Harvard Veritas
goods or services would indicate a connection Shield Symbol” for decals, tote bags, serving trays,
between those goods or services, and the owner of sweatshirts, t-shirts, hats and ]lying discs under
the registered mark: Provided, further, That the Classes 16, 18, 21, 25 and 28 of the Nice International
interests of the owner of the registered mark are Classi]ication of Goods and Services. Fredco alleged
likely to be damaged by such use that the mark “Harvard” for t-shirts, polo shirts,
sandos, briefs, jackets, and slacks was ]irst used in the
g. Is likely to mislead the public, particularly as to Philippines by New York Garments Manufacturing &
the nature, quality, characteristics or geographical Export Co., Inc. (New York Garments), Fredco’s
origin of the goods or services predecessor-in-interest. Harvard University, on the
other hand, alleged that it is the lawful owner of the
h. Consists exclusively of signs that are generic for name and mark “Harvard” in numerous countries
the goods or services that they seek to identify worldwide, including the Philippines.
i. Consists exclusively of signs or of indications that Fredco made use of the mark “Harvard” for jeans
have become customary or usual to designate the coupled with a claim that it originated in Cambridge.
goods or services in everyday language or in bona Was Fredco’s registration of such mark valid?
Kide and established trade practice
No. Fredco’s registration of the mark “Harvard” should
j. Consists exclusively of signs or of indications that not have been allowed because the law prohibits the
may serve in trade to designate the kind, quality, registration of a mark “which may disparage or falsely
quantity, intended purpose, value, geographical suggest a connection with persons, living or dead,
origin, time or production of the goods or institutions, beliefs.” Fredco’s use of the mark “Harvard,”
rendering of the services, or other characteristics coupled with its claimed origin in Cambridge,
of the goods or services Massachusetts, obviously suggests a false connection
with Harvard University. On this ground alone, Fredco’s
k. Consists of shapes that may be necessitated by registration of the mark “Harvard” should have been
technical factors or by the nature of the goods disallowed.
themselves or factors that affect their intrinsic
value Moreover, the Philippines and the United States of
America are both signatories to the Paris Convention for
l. Consists of color alone, unless deKined by a given form the Protection of Intellectual Property (Paris
Convention). The Philippines is obligated to assure
m. Is contrary to public order or morality. (Section 123.1, nationals of countries of the Paris Convention that they
IPC) are afforded an effective protection against violation of
their intellectual property rights in the Philippines in the
same way that their own countries are obligated to
accord similar protection to Philippine nationals. Thus,
Immoral, deceptive, scandalous matter or falsely
under Philippine law, a trade name of a national of a State
suggesting a connection with person, belief, institution
that is a party to the Paris Convention, whether or not
or symbol
the trade name forms part of a trademark, is protected
“without the obligation of Kiling or registration.”
Fredco Manufacturing Corporation (Fredco), ]iled a
Petition for Cancellation of Registration No. 56561 Dean Divina:
before the Bureau of Legal Affairs of the Intellectual
Property Of]ice (IPO) against President and Fellows of 2 reasons for the Supreme Court ruling:
Harvard College (Harvard University), a corporation
- It suggest a connection with Harvard university,
o r g a n i z e d a n d e x i s t i n g u n d e r t h e l aw s o f
based on its advertisement; and
Massachusetts, United States of America.
36
- It is a well-known mark and is entitled to

protection in the PH. Under the First to File Rule in trademarks, a mark
that nearly resembles a previously registered mark,
such that it is likely to deceive or cause confusion,
Name, portrait, signature of living individual cannot be registered. How may confusion arise?
There are two types of confusion arising from the use of
Can the name of spouses of deceased Presidents be similar or colorable imitation marks, namely, confusion
registered as a trademark? of goods (product confusion) and confusion of business
(source of origin confusion). Thus, while there is
confusion of goods when the products are competing,
Yes. What the law prohibits is the registration of marks
confusion of business exists when the products are non-
that consist of a name, portrait or signature identifying a
competing but related enough to produce confusion of
particular living individual except by his written consent,
afKiliation.
or the name, signature, or portrait of a deceased
President of the Philippines, during the life of his widow,
Thus, while there is confusion of goods when the
if any, except by written consent of the widow (Section
products are competing, confusion of business exists
123.1 (c), IPC).
when the products are non-competing but related
enough to produce confusion of afKiliation.
Dean Divina:
There is no prohibition for the use of the name of the In one case, the Supreme Court held that confusion of
deceased spouses of former Presidents. Example: Doñ a business or source may also include confusion of
Virginia, Doñ a Trinidad, etc. reputation. Thus: “similarity in the general appearance of
respondent’s trademark and that of petitioner would
evidently create a likelihood of confusion among the
purchasing public. But even assuming, arguendo, that the
trademark sought to be registered by respondent is
Identical mark
distinctively dissimilar from those of the petitioner, the
likelihood of confusion would still subsist, not on the
What is the ]irst to ]ile rule in trademarks?
purchaser’s perception of the goods but on the origins
thereof. By appropriating the word “CONVERSE,”
The Kirst to Kile rule in trademarks means that the Kiling of respondent’s products are likely to be mistaken as having
the application for registration of trademark in good faith been produced by petitioner. The risk of damage is not
precludes registration of the same trademark for the limited to a possible confusion of goods but also includes
same goods or services or closely related goods and confusion of reputation if the public could reasonably
services. assume that the goods of the parties originated from the
same source.”
Dean Divina:
Dean Divina:
Of all the favorite, this is the most favorite BAR EXAM*
question. There are THREE kinds of confusion. The Kirst two by law,
codally. The third one by Supreme Court decision.
It means that the Kiling of the application for registration of
trademark in good faith precludes registration of the same Product Confusion & Source of Origin Confusion
trademark for the same goods and services for related goods
or services (1) Confusion of Goods - when the products are
competing
… with emphasis “in good faith” because of the Zuneca
Pharmaceutical vs Natrapharm, Inc ruling: The Kirst one to (2) Confusion of Business - when the product are
register in good faith should enjoin others from registering non-competing but it is related enough to produce confusion
the same trademark for the same related goods or services. of afKiliation.
37
Thus, while there is confusion of goods when the products the IP Code, BUT the Supreme Court also applied Holistic
are competing, there is confusion of business when the test in various case.
products are non- competing but related enough to produce
confusion of afKiliation. Therefore, as to what test should be applied: it DEPENDS on
the set of facts availing in each case.
And the we have the case of Converse:
That is why in trademark cases, precedents should be
(3) Confusion as to Reputation - Actually it is applied only to a case in point. Also for BAR EXAM purposes,
subsumed by Confusion of Business or Source of Origin. you have to know, as we will know, the cases because we will
apply/make the correct answer depending on the similarity
Thus, similarity in the general appearance of respondent’s of the facts on a particular jurisprudence.
trademark and that of petitioner would evidently create a
likelihood of confusion among the purchasing public. But
even assuming, … (read above)
DOMINANCY TEST
This is VERY IMPORTANT. As will be seen later, there are
cases where the Supreme Court applied the Doctrine of
Normal Expansion of Business and Doctrine of Unrelated The test of dominancy focuses on the similarity of the
Goods. prevalent features of the competing trademarks which
might cause confusion or deception. It is explicitly
You may ask yourself, how come for this case the Supreme incorporated into law under Section 155.1 of the IPC
Court applied the Doctrine of Normal Expansion of Business which deKines infringement as the “colorable imitation of
and in another case applied the Doctrine of Unrelated a registered mark or the same container or a dominant
Goods. We will see those cases later on as to when you apply feature thereof.” Under the dominancy test, if the
the Doctrine of Normal Expansion of Business and Doctrine competing trademark contains the main or essential or
of Unrelated Goods. dominant features of another, and confusion and
deception is likely to result, infringement takes place. As
the Supreme Court asserted time and again, actual
confusion is not required.
Tests to determine confusing similarity between
marks Duplication or imitation is not necessary; nor is it
necessary that the infringing label should suggest an
What are the tests in determining likelihood of effort to imitate. Similarity in size, form and color, while
confusion? relevant, is not conclusive. Only likelihood of confusion
on the part of the buying public is necessary so as to
Likelihood of confusion is the gravamen of the offense of render two marks confusingly similar so as to deny the
trademark infringement. In determining likelihood of registration of the junior mark. (Ufc Philippines, Inc.,
confusion, jurisprudence has developed two tests, the Now Merged with Nutri-Asia, Inc. as the Surviving Entity,
dominancy test and the holistic test. As to what test v. Fiesta Barrio Manufacturing Corporation, G.R. No.
should be applied depends entirely on the set of facts 198889, January 20, 2016.) (1996 Bar)
availing in each case. That is the reason why in
trademark cases, jurisprudential precedents should be Dean Divina:
applied only to a case if they are speciKically in point. In
determining likelihood of confusion, jurisprudence has By deKining infringement as “imitation of a trademark or
developed two tests, the dominancy test and the holistic dominant feature thereof”, it seems to imply that it should
test. be dominancy test that should be adopted in determining
infringement of trademark.
Dean Divina: BUT as said, not so. It depends on facts of each case.
TWO TEST: Dominancy tests and the Holistic tests.
As you will see in the next slide, even though the IPC seems
to have adopted the dominancy test, under Section 155.1 of The "test of dominancy” in the Law on Trademarks, is
38
a way to determine whetherthere exists an For Dominancy Test:

infringement of a trademark by— (BAR 2012) - McDonald!s Corporation v. L.C. Big Mak Burger,
Inc.;
a. Determining if the use of the mark has been dominant - McDonald!s Corporation v. Macjoy Fastfood
in the market Corporation;
b. Focusing on the similarity of the prevalent features - UFC Philippines, Inc. v. Barrio Fiesta
of the competing marks which might create Manufacturing Corporation;
confusion - Berris Agricultural Co., Inc. v. Abyadang; and
c. Looking at the mark whether they are similar in size, - Skechers USA v. Inter PaciKic Industrial Trading
form or color Corporation
d. Looking at the mark whether there is one speciKic
feature that is dominant Q: What is the Dominant trademark for Skechers?
A: S
HOLISTIC TEST
(Given Examples by Student)
The Holistic Test entails a consideration of the entirety of
the marks as applied to the products, including labels For Holistic Test:
and packaging, in determining confusing similarity. The - Diaz v. People of the Philippines and Levi Strauss
scrutinizing eye of the observer must focus not only on (Phil.);
the predominant words but also on the other features
appearing in both labels so that a conclusion may be Q: What are the trademarks?
drawn as to whether one is confusingly similar to the
other. A: LSJ Jeans and and Levi Strauss Jeans
- Emerald Garment Manufacturing Corporation v.

Dean Divina:
Court of Appeals (The precursor case of Diaz vs.
The operative word for Dominancy test is the “dominant People) ( Lee and Stylistic Lee);
feature of the trademarks” as likely to cause confusion.
- Asia Brewery, Inc. v. Court of Appeals and San
For Holistic test, the operative word is the “entirety of the Miguel Corporation;
mark as applied to the products” including labels and
packaging determining confusing similarity. - Great White Shark Enterprise vs. Caralde; and
- Amigo Manufacturing, Inc. v. Cluett Peabody Co.

RECITATION:
Q: What about “ORLANE” and “LOLANE”, is that
Dominancy or Holistic?
Q: I only have ONE QUESTION.
A: Holistic
Since we are about to start our discussion on
Dominancy test and Holistic Test, can you cite ]ive cases
Q: So is there similarity between "ORLANE” and
where the Supreme Court applied the Dominancy Test
and ]ive cases where the Supreme Court applied the "LOLANE”?
Holistic Test with your eyes closed.
A: None. (Seri Somboonsakdikulv. Orlane S.A)
A: (See Syllabus)
Q: What about “DERMALIN” and “DERMALINE”?
(Given Examples by Student)
A: There is. (Dermaline Inc. v. Myra Pharmaceuticals)
39
Q: So tell me, how come in "DERMALIN” and A: If it had been used nationwide, it would have then
"DERMALINE” there is confusing similarity but in acquired secondary meaning. But in this case, it was
conKined only to one locality; hence it did not acquire
"ORLANE” and "LOLANE” there is none?
secondary meaning.
A: I am not the Supreme Court, Dean. Q: Can Coffee Match be registered for coffee products
even though there is a registered trademark in favor of
Q: What about cases, there is just two, where the Nestle for Coffee-Mate?
Supreme Court applied both Dominancy and Holistic in
one case? A: YES. The word coffee is generic. No one can appropriate
the word “Coffee” hence you cannot stop others from using
A: (1) Societe Des Produits Nestle, SA v. Dy; (2) Amigo Coffee as part of their trademark for coffee products.
Manufacturing, Inc. v. Cluett Peabody Co., Inc.
Q: What about “Beer” and “Pale Pilsen” combined? Can it
be appropriated?
Q: Can “Lasalle” be registered as a name for a school?
A: NO, they cannot be appropriated as they are all generic
A: YES. Lasalle translates as “classroom”. Lasalle is arbitrary
words belonging to the public domain, as held in Asia
and suggestive and requires the use of imagination to
Brewery v. Court of Appeals. However, in Coffee Partners v.
associate it with a school.
San Francisco Coffee, the SC held that if you combine two
Q: How about Lyceum, can it be registered? generic words “San Francisco” and “Coffee”, they can be
appropriated. In ALL other cases, even if you combine these
A: NO. Lyceum is a generic term for a school. generic words, they still cannot be appropriated. So, it
depends therefore on how similar the facts of the question
Q: How about Papa? Is it generic, suggestive, arbitrary?
are to the applicable jurisprudence.
A: YES. It can be registered as it is an arbitrary mark.
Q: How about master? DISCUSSION:
A: YES. It can be registered as it is a suggestive mark. Cite jurisprudence where the Supreme Court applied
the dominancy test.
Q: What about St. Francis Tower? Can that be registered
given it has been used for 10 years by St. Francis The Supreme Court applied the dominancy test in the
Corporation? following cases:
A: NO. It cannot be registered because it is a geographical a. “Philippine Planters Cordial Peanuts” brand as
indicator which generally cannot be registered. opposed to “Planters Cocktail Peanuts,” confusingly
similar with respect to their dominant word “Planters”
Q: But can it possible acquire secondary meaning?
b. The Sunshine Tomato catsup label was a colorable
A: Yes. imitation of the Del Monte trademark due to
Q: What are the factors do we need to take into account prominent similarities in their general design although
to determine if it had acquired secondary meaning? there are some differences. It is not difKicult to see that
the Sunshine label is a colorable imitation of the Del
A: Use of the mark for 5 years at the minimum. Monte trademark; the predominant colors used in the
Del Monte label are green and red-orange, the same
Q: Is that enough to warrant the conclusion that that with Sunshine; the word “catsup” in both bottles is
mark has acquired a secondary meaning? printed in white and the style of the print/letter is the
A: NO. The case of St. Francis Towers v. Shangrila. Even same; and although the logo of Sunshine is not a
though used for more than 9 years, it has not yet acquired a tomato, the Kigure nevertheless approximates that of a
secondary meaning. tomato. (Del Monte Corporation and Philippine
Packing Corporation v. Court of Appeals, G.R. No.
Q: What is the other indicator that it has acquired L-78325, January 25, 1990)
secondary meaning, other than the use of 5 years?
40
c. “Universal Converse and Device” and “Converse Chuck public. Verily, the word “MACJOY” attracts attention
Taylor” and “All Star Device” where Converse was held the same way as did “McDonalds,” “MacFries,”
to be the dominant word “McSpaghetti,” “McDo,” “Big Mac” and the rest of the
MCDONALD’S marks which all use the preKixes Mc
d. CFC’s FLAVOR MASTER and Nestlé ’s MASTER ROAST and/or Mac. Besides and most importantly, both
and MASTER BLEND (Societe Des Produits Nestle, S.A. trademarks are used in the sale of fast-food products.
and Nestle Philippines v. Court of Appeals, G.R. No.
112012, FIRST DIVISION, April 4, 2001356 SCRA 207 g. Dermaline and Dermalin (Dermaline Inc. v. Myra
[2001]) where the word “Master” was held to be the Pharmaceuticals, GR No. 190065, August 1, 2010)
dominant feature of the competing marks
Dermaline’s insistence that its applied trademark
e. “Big Mak” mark for hamburger of LC Big Mak Burger, “DERMALINE DERMALINE, INC.” had differences “too
Inc. is confusingly similar with the registered “Big striking to be mistaken” from Myra’s “DERMALIN”
Mac” mark for the same food product of Mcdonald’s cannot be sustained. While it is true that the two
Corporation (McDonalds’ Corporation v. LC Big Mak marks are presented differently — Dermaline’s mark
Burger, G.R. No. 143993, August 18, 2004) is written with the Kirst "DERMALINE" in script going
diagonally upwards from left to right, with an upper
Applying the dominancy test, the Court Kinds that case “D” followed by the rest of the letters in lower
respondents’ use of the “Big Mak” mark results in case, and the portion “DERMALINE, INC.” is written in
likelihood of confusion. First, “Big Mak” sounds exactly upper case letters, below and smaller than the long-
the same as “Big Mac.” Second, the Kirst word in “Big hand portion; while Myra’s mark “DERMALIN” is
Mak” is exactly the same as the Kirst word in “Big Mac.” written in an upright font, with a capital “D” and
Third, the Kirst two letters in “Mak” are the same as the followed by lower case letters — the likelihood of
Kirst two letters in “Mac.” Fourth, the last letter in confusion is still apparent. This is because they are
“Mak” while a “k” sounds the same as “c” when the almost spelled in the same way, except for Dermaline’s
word “Mak” is pronounced. Fifth, in Filipino, the letter mark which ends with the letter “E,” and they are
“k” replaces “c” in spelling, thus “Caloocan” is spelled pronounced practically in the same manner in three
“Kalookan. (3) syllables, with the ending letter “E” in Dermaline’s
The Court also noted that respondents have adopted in mark pronounced silently. Thus, when an ordinary
“Big Mak” not only the dominant but also almost all purchaser, for example, hears an advertisement of
the features of “Big Mac.” Applied to the same food Dermaline’s applied trademark over the radio, chances
product of hamburgers, with both marks aurally and are he will associate it with Myra’s registered mark.
visually the same, it will likely result in confusion in h. “NANNY” is confusingly similar to “NAN.” (Societe Des
the public. Produits Nestle, SA v. Dy, GR No. 172276, August 8,
f. “ M C D O NA L D ’ S ” a n d “ M AC J OY ” ( M c D o n a l d ’ s 2010)
Corporation v. MacJoy Fastfood Corporation, G.R. No. Applying the dominancy test in the present case, the
166115, February 2, 2007) Court Kinds that “NANNY” is confusingly similar to
Applying the dominancy test, the Court Kinds that “NAN.” “NAN” is the prevalent feature of Nestle’s line of
herein petitioner’s “MCDONALD’S” and respondent’s infant powdered milk products. It is written in bold
“MACJOY” marks are confusingly similar with each letters and used in all products. The line consists of
other such that an ordinary purchaser can conclude an PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly,
association or relation between the marks. To begin “NANNY” contains the prevalent feature “NAN.” The
with, both marks use the corporate “M” design logo Kirst three letters of “NANNY” are exactly the same as
and the preKixes “Mc” and/or “Mac” as dominant the letters of “NAN.” When “NAN” and “NANNY” are
features. The Kirst letter “M” in both marks puts pronounced, the aural effect is confusingly similar.
emphasis on the preKixes “Mc” and/or “Mac” by the i. The use of the stylized “S” in Strong Rubber shoes
similar way in which they are depicted i.e., in an arch- infringes on the mark already registered by Sketchers.
like, capitalized and stylized manner. For sure, it is the While it is undisputed that Sketcher’s stylized ”S” is
preKix “Mc,” an abbreviation of “Mac,” which visually with an oval design and the other party did not use the
and aurally catches the attention of the consuming oval design, the dominant feature of the trademark is
41
the stylized “S“ as it is the one that catches the eye of latter mark is somehow linked or associated with the
the purchaser. (Sketchers USA Inc. v. Inter PaciKic former mark.
Industrial Trading, GR No. 164321, March 23, 2011;
2014 Bar) m. PHILIPS v PHILITES for Kluorescent bulb, incandescent
light, starter, and ballast. Dy v. Koninklijke Philips
j. Pcynogenol v. PCO-GENOLS (Prosource International v. Electronics, N.V., G.R. No. 186088, March 22, 2017)
Horphag Research, G.R. No. 180073, November 25, Applying both the dominancy and holistic test, the
2009) Supreme Court ruled that the consuming public does
not have the luxury of time to ruminate the phonetic
Both the word[s] PYCNOGENOL and PCO-GENOLS sounds of the trademarks, to Kind out which one has a
have the same sufKix “GENOL” which on evidence, short or long vowel sound. At bottom, the letters
appears to be merely descriptive and furnish no “PHILI” visually catch the attention of the consuming
indication of the origin of the article and hence, open public and the use of respondent’s trademark will
for trademark registration by the plaintiff thru likely deceive or cause confusion. Most importantly,
combination with another word or phrase such as both trademarks are used in the sale of the same
PYCNOGENOL, Exhibits “A” to “A- 3.” Furthermore, goods, which are light bulbs. A comparison between
although the letters “Y” between P and C, “N” between petitioner's registered trademark “PHILIPS” as used in
O and C, and “S” after L are missing in the [petitioner’s] the wrapper or packaging of its light bulbs and that of
mark PCO-GENOLS, nevertheless, when the two words respondent’s applied for trademark “PHILITES” as
are pronounced, the sound effects are confusingly depicted in the container or actual wrapper/packaging
similar, not to mention that they are both described by of the latter's light bulbs will readily show that there is
their manufacturers as a food supplement and thus, a strong similitude and likeness between the two
identiKied as such by their public consumers. trademarks that will likely cause deception or
k. Gold Toe v. Gold Top (Amigo Manufacturing, Inc. v. confusion to the purchasing public. The fact that the
Cluett Peabody Co., Inc., G.R. No. 139300, March 14, parties’ wrapper or packaging reKlects negligible
2001) differences considering the use of a slightly different
font and hue of the yellow is of no moment because
It was held that a resort to either the Dominancy Test taken in their entirety, respondent’s trademark
or the Holistic Test shows that colorable imitation “PHILITES” will likely cause confusion or deception to
exists between respondent’s “Gold Toe” and the ordinary purchaser with a modicum of
petitioner’s “Gold Top.” A glance at petitioner’s mark intelligence.
shows that it deKinitely has a lot of similarities and in
fact looks like a combination of the trademark and n. The word “Metro” for magazine publication. (ABS-CBN
devices that respondent has already registered; v. Director of the Bureau of Trademarks, G. R. No.
namely, “Gold Toe,” the representation of a sock with a 217916, June 20, 2018)
magnifying glass, the “Gold Toe” representation and It was held that the dominant feature of the applicant
linenized. mark is the word “METRO” which is identical, both
l. OK Hotdog Inasal Cheese Hotdog Flavor Mark for curl visually and aurally, to the cited marks already
snack product is a colorable imitation of the Mang registered with the IPO. Even if the second cited mark
Inasal mark for marinated chicken. (Mang Inasal owned by Metro International contains an
Philippines, Inc. v. IFP Manufacturing Corporation, G.R. accompanying device, and the third cited mark
No. 221717, June 19, 2017) contains the terms “Philippine Daily Inquirer,” (sic) the
dominant feature of the subject and cited marks is still
It is undisputed that the OK Hotdog Inasal mark copied clearly the word “Metro” (sic) spelled and pronounced
and adopted as one of its dominant features the in exactly the same way. The identity between the
“INASAL” element of the Mang Inasal mark. Given that marks would indubitably result in confusion of origin
the “INASAL” element is, at the same time, the as well as goods.
dominant and most distinctive feature of the Mang
Inasal mark, the said element’s incorporation in the o. “CITY CASH WITH GOLDEN LION’S HEAD” for Bank
OK Hotdog Inasal mark, thus, has the potential to ATM service and “CITI” marks for various banking
project the deceptive and false impression that the
42
services. (CITIGROUP, Inc. v. CITYSTATE SAVINGS 1. When it comes to pants/jeans, the Supreme Court has
BANK, Inc., G. R. No. 205409, June 13, 2018) consistently applied the holistic test. Thus, it was held
that the trademark “Stylistic Mr. Lee” for maong pants
The Supreme Court said that applying the dominancy cannot be deemed confusingly similar with the
test, the prevalent feature of CITYSTATE SAVING’S trademark “Lee.” The test of fraudulent simulation is to
BANK’s mark, the golden lion’s head device, is not be found in the likelihood of the deception of some
present at all in any of CITIGROUP’s marks. The only persons in some measure acquainted with an
similar feature between respondent’s mark and established design and desirous of purchasing the
petitioner’s collection of marks is the word “CITY” in commodity with which that design has been
the former, and the “CITI” preKix found in the latter. associated. When the casual buyer is predisposed to be
The Court concluded that this similarity alone is not more cautious in his purchase, as in this case where
enough to create a likelihood of confusion. the products concerned are not inexpensive, the
likelihood of confusion is absent. Further, maong pants
and jeans are not inexpensive and as the casual buyer
is predisposed to be more cautious and discriminating
X’s “MINI-ME” burgers are bestsellers in the country. Its in and would prefer to mull over his/her purchase,
“MINI-ME” logo, which bears the color blue, is a confusion and deception is less likely. (Emerald
registered mark and has been so since the year 2010. Y, Garment Manufacturing Corporation v. Court of
a competitor of X, has her own burger which she named Appeals, G.R. No. 100098, December 29, 1995)
“ME-TOO” and her logo thereon is printed in bluish-
Dean Divina:
green. When X sued Y for trademark infringement, the
trial court ruled in favor of the plaintiff by applying the Here we see the distinction between the “ordinary
Holistic Test. The court held that Y infringed on X’s mark purchaser rule” and the “discerning purchaser rule”.
since the dissimilarities between the two marks are too The SC adopted the discerning purchaser rule with the
tri]ling and frivolous such that Y’s “ME-TOO,” when holistic test. When it comes to jeans, the ruling of the
compared to X’s “MINI-ME,” will likely cause confusion SC is consistent: use the holistic test. So, for jeans,
among consumers. Is the application of the Holistic Test although the names sound the same, there is less
correct? likelihood of confusion because there are not products
you buy “off the rack”. There are products that require
The application of the Holistic Test is not correct. In cases
“mulling things over” before you make a purchase.
involving burger products, the Supreme Court has
consistently applied the dominancy test. Under the 2. The Court also ruled that the jeans trademarks of
dominancy test, the focus is on the dominant feature of the Levi’s Philippines and Diaz’s “made-to-order” ones
competing trademarks. Big Mak has been held to be must be considered as a whole in determining the
confusingly similar with Big Mac and so with McDo and likelihood of confusion between them. The consuming
Mcjoy both under the dominancy test. Accordingly, MINI-ME public could easily discern if the jeans were original or
trademark is confusingly similar with the ME- TOO mark. fake or were manufactured by other brands of jeans.
(McDonald’s Corporation vs LC Big Mak Burger, Inc, GR No. Confusion and deception were remote since maong
143993, August 18, 2004) jeans are expensive and the casual buyer is
predisposed to be more cautious and discriminating in
Dean Divina:
and would prefer to mull over his purchase. Further,
When it comes to hamburger products, the SC has applied Diaz used the trademark “LS JEANS TAILORING” for
the dominancy test. Therefore, we adopt the same test in the jeans he produced and sold. His trademark was
answering this question. visually and aurally different from the trademark
“LEVI STRAUSS & CO” appearing on the patch of
original jeans. Diaz also aptly noted that the design
used by LEVI’S was an image of two horses but the
evidence will show that there was no such design in
Cite jurisprudence where the Supreme Court applied the seized jeans, instead, what is shown is a “buffalo
the holistic test. design.”. (Diaz v. People of the Philippines and Levi
Strauss (Phil.), GR No. 180677, February 18, 2013)
43
3. The trademarks FRUIT OF THE LOOM and FRUIT OF of the physical discrepancies in the trademarks of the
THE EVE (for hang tags) do not resemble each other as products in order to exercise his choice. When it
to confuse or deceive an ordinary purchaser, who must comes to products that require discernment or mulling
be thought of as having, and credited with, at least a things over, like jeans, the Supreme Court has applied
modicum of intelligence to be able to see the obvious the holistic test. The Philip Morris case is a rare
differences between the two trademarks in question. exception.
(Fruit of the Loom, Inc. v. Court of Appeals, G.R. No.
L-32747, November 29, 1984) Dean Divina:
4. Based on the distinct visual and aural differences This is the only case where the SC has applied the
between LOLANE and ORLANE, there is no confusing holistic test for off the rack products (cigarettes).
similarity between the two marks. The sufKix LANE is 6. Great White Shark Enterprise vs. Caralde
not the dominant feature of petitioner’s mark. Neither
can it be considered as the dominant feature of
ORLANE which would make the two marks
confusingly similar. First, an examination of the
appearance of the marks would show that there are Idem Sonans
noticeable differences in the way they are written or
What is the idem sonans rule in trademark?
printed. There are visual differences between LOLANE
and ORLANE since the mark ORLANE is in plain block The rule on idem sonans is also a test to resolve the
upper case letters while the mark LOLANE was confusing similarity of trademarks. A mark with a different
rendered in stylized word with the second letter L and spelling but is similar in sound with a registered trademark
the letter A co-joined. Second, as to the aural aspect of when read may be ruled as being confusingly similar with
the marks, LOLANE and ORLANE do not sound alike. the said registered mark.
Appeals to the ear in pronouncing ORLANE and
LOLANE are dissimilar. The Kirst syllables of each Dean Divina:
mark, i.e., OR and LO do not sound alike, while the
E.G. Dermalin and Dermaline, there is likelihood of
proper pronunciation of the last syllable LANE —
confusion. In Orlane and Lolane, no likelihood of confusion.
“LEYN” for LOLANE and “LAN” for ORLANE, being of
French origin, also differ. (Seri Somboonsakdikulv.
Orlane S.A., G.R. No. 188996, February 1, 2017)
5. Although the perceived offending word “MARK” is Is there a clear-cut rule in the use of both dominancy
itself prominent in petitioner’s trademarks “MARK VII” and holistic tests?
and “MARK TEN,” the entire marking system should be
considered as a whole and not dissected, because a None. There is no objective test for determining whether the
discerning eye would focus not only on the confusion is likely. Likelihood of confusion must be
predominant word but also on the other features determined according to the particular circumstances of
appearing in the labels; only then would such each case. In the history of trademark cases in the
discerning observer draw his conclusion whether one Philippines, there are no hard and fast rules in ascertaining
mark would be confusingly similar to the other and whether one trademark is confusingly similar to or is a
whether or not sufKicient differences existed between colorable imitation of another. While Section 155.1 of the
the marks. (Philip Morris, Inc. v. Fortune Tobacco IPC explicitly refers to the dominancy test in determining
Corporation, G.R. No. 158589, June 27, 2006) trademark infringement, still, each case must be decided on
its own merits. In fact, in certain cases, the Supreme Court
It should be noted that the Supreme Court has often applied both dominancy and holistic tests to determine
applied the dominancy test when it comes to likelihood of confusion. The ultimate question in cases of
“inexpensive and common” household items bought trademark infringement is “whether the use of the marks
off the shelf by “undiscerningly rash” purchasers. As involved would be likely to cause confusion or mistakes in
such, if the ordinary purchaser is “undiscerningly the mind of the public or deceive purchasers,” regardless of
rash,” then he would not have the time nor the whether the dominancy or the holistic test is applied. The
inclination to make a keen and perceptive examination
44
universal test has been said to be whether the public is likely that the registered trademark owner enjoys protection in
to be deceived. product and market areas that are the normal potential
expansion of his business. (Sketchers USA Inc. v. Inter PaciKic
Dean Divina: Industrial Trading, GR No. 164321, March 23, 2011; Societe
What is the ultimate question? Whether or not the use of the Des Produits Nestle, SA v. Dy, GR No. 172276, August 8,
mark would likely cause confusion to the public. 2010)
In another case, the Court also prevented the registration of Dean Divina:
a trademark based on similarity of sound, explaining that Don’t forget that rule: protection extends not only against
both the words PYCNOGENOL and PCO-GENOLS have the infringement but also to normal expansion of business of the
same sufKix “GENOL” which appears to be merely descriptive registrant. This means that the registered owner has the
and furnish no indication of the origin of the article and right to use his mark on the same or similar products in
hence, open for trademark registration by the plaintiff thru different segments of the market.
combination with another word or phrase such as
PYCNOGENOL. Although there were dissimilarities in the In Sketchers, the argument of Strong Shoes is that it caters to
trademark due to the type of letters used as well as the size, lower segment of the mark so the public cannot be deceived.
color, and design employed on their individual packages/ But the SC said that no, “you are taking away from Sketchers
bottles, still the close relationship of the competing the right to penetrate a lower segment of the market” or the
products’ name in sounds as they were pronounced, clearly right to introduce other product offerings for a cheaper
indicates that purchasers could be misled into believing that price. Same as in Nan and Nanny.
they are the same and/or originates from a common source
and manufacturer. (Prosource International, Inc. v. Horphag
Research Management SA, G.R. No. 180073, November 25,
2009)
In Societe Des Produits Nestle, S.A. v. Martin Dy, Jr., the
Similary, the Court also used the aural effect of a trademark Supreme Court held that while there are differences
when it ruled that “NANNY’ is confusingly similar to “NAN,” between NAN and NANNY: (1) NAN is intended for infants
the prevalent feature of Nestle’s line of infant powdered milk while NANNY is intended for children past their infancy and
products which is written in bold letters and used in all for adults; and (2) NAN is more expensive than NANNY, the
products. The Kirst three letters of “NANNY” are exactly the registered owner of the “NAN” mark, Nestle, should be free
same as the letters of “NAN” and when “NAN” and “NANNY” to use its mark on similar products, in different segments of
are pronounced, the aural effect is confusingly similar. the market, and at different price levels.
(Soceite Des Produits Nestle, S.A. v. Dy, Jr, G.R. No. 172276,
August 8, 2010)
The same principle was applied in Sketchers, U.S.A., Inc. v.

Inter PaciKic Industrial Trading Corporation. The use of the
What is the scope of protection afforded to registered stylized “S” by the manufacturer of its Strong rubber shoes
trademark owners? infringes on the mark of Sketchers. It is no defense that the
Strong rubber shoes are cheaper and cater to different
The scope of protection afforded to registered trademark market segments. Sketchers should be free to expand its
owners is not limited to protection from infringers with product offering in different segments of the market.
identical goods. It also extends to protection from infringers
with related goods, and to market areas that are the normal
expansion of business of the registered trademark owners.
This means that the registered trademark owner may use In a relevant case, it was held that “PAPA BOY & DEVICE” is
his mark on the same or similar products, in different confusingly similar with the previously registered mark
segments of the market, and at different price levels “PAPA” even though they refer to different products. PAPA
depending on variations of the products for speciKic BOY is for lechon sauce while PAPA is for catsup. The
segments of the market. The Supreme Court has recognized Supreme Court stated that since petitioner’s product, catsup,
45
is also a household product found on the same grocery aisle, It was also held that the prohibition under Section 123 of
in similar packaging, the public could think that petitioner the Intellectual Property Code extends to goods that are
had expanded its product mix to include lechon sauce, and related to the registered goods, not to goods that the
that the “PAPA BOY” lechon sauce is now part of the “PAPA” registrant may produce in the future. To allow the expansion
family of sauces. Thus, if allowed registration, confusion of of coverage is to prevent future registrants of goods from
business may set in, and petitioner’s hard-earned goodwill securing a trademark on the basis of mere possibilities and
may be associated to the newer product introduced by conjectures that may or may not occur at all. Surely, the right
respondent. (UFC Philippines, Inc., Now Merged with Nutri- to a trademark should not be made to depend on mere
Asia, Inc. as the Surviving Entity v. Fiesta Barrio possibilities and conjectures.
Manufacturing Corporation. G.R. No. 198889, January 20,
2016.)
Cite jurisprudence where the Supreme Court applied

the doctrine of unrelated goods.
In Mang Inasal Philippines v. IFP Manufacturing
Corporation, the Supreme Court held that the mark “Ok d.The registered owner of the trademark “Brut” for
Hotdog Inasal Cheese Flavor” for curl snack product is toilet articles cannot oppose the registration of the
confusingly similar with the mark “Mang Inasal” for trademark “Brute” for briefs, since the two products
marinated chicken. The Supreme Court also conclude that are unrelated, even if the former has a pending
average buyer who comes across the curls marketed under application for the registration. A purchaser who is
the OK Hotdog Inasal mark is likely to be confused as to the out in the market for the purposes of buying Brute
true source of such curls. To our mind, it is not unlikely that brief would deKinitely be not mistaken or misled
such buyer would be led into the assumption that the curls into buying BRUT after shave lotion or deodorant
are of petitioner and that the latter has ventured into snack (Faberge, Inc. v. Intermediate Appellate Court, 215
manufacturing or, if not, that the petitioner has supplied the SCRA 316 [1992]) (1994 Bar)
Klavorings for respondent’s product. Either way, the e.The owner of the registered trademark “Hickok” for its
reputation of petitioner would be taken advantage of and diverse articles of men’s wear such as wallets, belts,
placed at the mercy of respondent. (Mang Inasal Philippines, and men’s briefs which are all manufactured here in
Inc. v. IFP Manufacturing Corporation, G.R. No. 221717, June the Philippines by a licensee Quality House, Inc. but
19, 2017) are so labelled as to give the misimpression that the
said goods are of foreign (stateside) manufacture
cannot preclude the registration of the same
trademark exclusively for shoes. (Hickok
What is the doctrine of unrelated goods? Manufacturing, Co., Inc. v. Court of Appeals, G.R. No.
L-44707, August 31, 1982)
One who has adopted, used, and registered a trademark on
his goods cannot prevent the adoption, use, and registration f. There is no infringement when the trademark
of the same trademark by others on unrelated articles of a “CANON” is used for paints, chemical products,
different kind. toner, and dyestuff while it is used by another for
footwear (sandals). (Canon Kabushiki Kaisha v.
Court of Appeals, G.R. No. 120900, July 20, 2004)
g.The trademark registration of LOTUS for soy sauce

What is the basis of the doctrine? was granted and upheld, although the trademark
LOTUS is already registered in favor of another for
The certiKicate of registration entitles the registrant to use its product, edible oil. (Acoje Mining Co., Inc. v.
the trademark only for the goods speciKied in the certiKicate Director of Patents, 38 SCRA 480) (BAR 1978)
or goods related thereto. Therefore, the registrant cannot
preclude others from adopting and registering the h.The GALLO trademark registration certiKicates in the
trademark for totally unrelated goods. Philippines and in other countries expressly state
that they cover wines only, without any evidence or
46
indication that registrant Gallo Winery expanded or - the descriptive properties, physical attributes, or
intended to expand its business to cigarettes. Thus, essential characteristics with reference to their form,
Gallo Winery, as registered owner of the trademark composition, texture or quality;
GALLO, cannot prevent the registration of the
trademark GALLO for tobacco products. (Mighty - the purpose of the goods;
Corporation vs. E & J Gallo Winery, GR No. 154342, - whether the article is bought for immediate
July 14, 2004) consumption, that is, day-to-day household items;
i. Kolin Electronics, the registered owner of the mark - the Kields of manufacture;
“Kolin” for goods falling under Class 9 of the Nice
ClassiKication, such as ampliKier, booster, converter, - the conditions under which the article is usually
voltage regulator, and similar electronic products, purchased; and
cannot preclude the adoption, use, and registration
of the trademark “Kolin” on a combination of goods, - the channels of trade through which the goods Klow, how
including colored televisions, refrigerators, they are distributed, marketed, displayed, and sold. (G.R.
window-type and split-type air conditioners, No. 154342, July 14, 2004)
electric fans, and water dispensers with Taiwan The Supreme Court then gave credence to the arguments of
Kolin even though they belong to the same Class 9, Taiwan Kolin that:
because they are unrelated products. The Supreme
Court held that whether or not the products a) Taiwan Kolin’s goods are classiKied as home appliances
covered by the trademark sought to be registered as opposed to Kolin Electronics’ goods which are
by Taiwan Kolin, on the one hand, and those power supply and audio equipment accessories;
covered by the prior issued certiKicate of
registration in favor of Kolin Electronics, on the b) Taiwan Kolin’s television sets and DVD players
other, fall under the same categories in the NCL is perform distinct function and purpose from Kolin
not the sole and decisive factor in determining a Electronics’ power supply and audio equipment; and
possible violation of Kolin Electronics’ intellectual c) Taiwan Kolin sells and distributes its various home
property right should Taiwan Kolin’s application be appliance products on wholesale and to accredited
granted. It is hornbook doctrine that emphasis dealers, whereas Kolin Electronics’ goods are sold and
should be on the similarity of the products involved Klow through electrical and hardware stores.
and not on the arbitrary classiKication or general
description of their properties or characteristics. Dean Divina:
Dean Divina: In determining whether goods are similar or related,

consider these factors: purpose, lifespan, channels of
How come ketchup and lechon did not adopt the doctrine of commerce, prices.
unrelated goods? There is no hard and fast rule. It can be
argued one way or the other. It depends on the ruling of SC.
g. Television sets, stereo components, DVD and VCD

Reiterating the doctrine in Mighty Corporation v. E & J Gallo players as against voltage regulators, portable
Winery, the Supreme Court ruled that the goods should be generators, switch breakers, and fuses because the
tested against several factors before arriving at a sound latter’s registration only covered electronic audio-
conclusion on the question of relatedness. Among these are: video products, not electrical home appliances. The
two classiKication of goods are unrelated. For one,
- the business (and its location) to which the goods the Kirst pertained to goods which belong to the
belong; information technology and audiovisual equipment
- the class of product to which the goods belong; sub- class while the latter pertained to the
apparatus and devices for controlling the
- the product’s quality, quantity, or size, including the distribution of electricity sub-class. Also, the goods
nature of the package, wrapper, or container; of the Kirst registrant were Kinal products but the
latter’s products were spare parts.
- the nature and cost of the articles;
47
Provided further, That the interests of the owner of the

registered mark are likely to be damaged by such use. If the
well-known mark is not registered in the Philippines, the
“Eagleson Re]illers, Co.,” a ]irm that sells water to the scope of protection only extends to marks used for identical
public, opposes the trade name application of “Eagleson goods or services.
Laundry, Co.” on the ground that such trade name tends
to deceive trade circles or confuse the public with Dean Divina:
respect to the water ]irm’s registered trade name. Will
Well-known mark is not the same as a famous mark. A mark
the opposition prosper? (2011 Bar)
can be famous without being well known.
1. Yes, since such use is likely to deceive or confuse the
public.
2. Yes, since both companies use water in conducting

their business. What are the remedies of the owner of a well-known
mark that is not registered in the Philippines?
3. No, since the companies are not engaged in the same
line of business. Without prejudice to other remedies under the law, the
owner of the well-known mark
4. No, since the root word “Eagle” is a generic name not
subject to registration. may:
1. oppose the application for registration of a mark

which is identical with or confusingly similar or
Author’s note. When does one apply the doctrine of constitutes a translation of such well- known mark;
unrelated goods and doctrine of normal or potential
expansion of business? For sure, jurisprudence which 2. petition for cancellation of the registration, if one has
applied the doctrine of unrelated goods could have been been granted; and
arguably ruled as falling under the opposite doctrine of 3. unfair competition if the goods are being passed off by
normal expansion of business, and vice-versa. For academic another as the goods of the owner of the well-known
discussion, your answer to any such bar question will mark
depend on the similarity of facts to the foregoing
jurisprudence.
T is the registered trademark owner of “CROCOS,” a well-

known mark, which he uses on his ready-to-wear
Well-known Marks clothes. Banking on the popularity of T’s trademark, B
A well-known mark is a mark which is considered by the came up with his own “CROCOS” mark, which he then
competent authority of the Philippines to be well-known used for his “CROCOS” burgers. T now sues B for
internationally and in the Philippines, whether or not it is trademark infringement but B argues that his product is
registered here, as being already the mark of a person other a burger, hence, there is no infringement. Is B correct?
than the applicant for registration. (BAR 2011)
If the well-known mark is registered in the Philippines, any a) No, since the owner of a well-known mark registered
mark identical with, confusingly similar to, or constitutes a in the Philippines has rights that
translation of such well-known mark, cannot be used for extends even to dissimilar kinds of goods.
identical goods or services or be registered in the
Philippines with respect to goods or services which are not b) Yes, since the right of the owner of a well-known mark
similar to those with respect to which registration is applied registered in the Philippines does not extend to goods
for: Provided, That use of the mark in relation to those goods which are not of the same kind.
or services would indicate a connection between those
goods or services, and the owner of the registered mark; c) Yes, as B was in bad faith in coming up with his own
“CROCOS” mark.
48
d) No, since unlike T, he did not register his own Sasot and Allandale R. Sasot v. People of the Philippines, G.R.
“CROCOS” mark for his product. No. 143193, June 29, 2005)
Is the knowledge of the general public of the mark taken Does the protection afforded by the Paris Convention
into account in determining whether it is a well-known extend to trade names?
mark?
Yes. The Philippines is obligated to assure nationals of
No, in determining whether a mark is well-known, account countries of the Paris Convention that they are afforded an
shall be taken of the knowledge of the relevant sector of the effective protection against violation of their intellectual
public, rather than of the public at large, including property rights in the Philippines in the same way that their
knowledge in the Philippines which has been obtained as a own countries are obligated to accord similar protection to
result of the promotion of the mark. Philippine nationals. Thus, under Philippine law, a trade
name of a national of a State that is a party to the Paris
The power to determine whether a trademark is well-known Convention, whether or not the trade name forms part of a
lies in the “competent authority of the country of trademark, is protected “without the obligation of Kiling or
registration or use.” This competent authority would be registration.” (Fredco Manufacturing Corporation v.
either the registering authority if it has the power to decide President and Fellows of Harvard College, GR No. 185917,
this, or the courts of the country in question if the issue June 1, 2011)
comes before a court.
This ruling is reiterated by the Court in a later case,
explaining that under the Paris Convention to which the
Philippines is a signatory, a trade name of a national of a
State that is a party to the Paris Convention, whether or not
What is the role of the Paris Convention on the
the trade name forms part of a trademark, is protected
protection of trademarks?
without the obligation of Kiling or registration. (Ecole De
Any foreign national or juridical person has the legal Cuisine Manille (Cordon Bleu of the Philippines), Inc. v.
capacity to sue for the protection of its trademarks, albeit it Renaus Cointreau & Cie and Le Cordon Bleu Int’l, BV., G.R.
is not doing business in the Philippines under the IPC and No. 185830, June 5, 2013)
the Paris Convention. Article 6 of the Paris Convention which
governs the protection of well- known trademarks, is a self-
executing provision and does not require legislative
enactment to give it effect in the member country. It may be Cite examples of cases involving well-known marks.
applied directly by the tribunals and ofKicials of each
member country by the mere publication or proclamation of a) The word “Barbizon” cannot be registered as a
the Convention, after its ratiKication according to the public trademark for ladies’ underwear, since it is an
law of each state and the order for its execution. The internationally well-known trademark for lingerie.
essential requirement under this Article is that the (Pribhdas J. Mirpuri v. Court of Appeals, G.R. No.
trademark to be protected must be “well-known” in the 114508, November 19, 1999)
country where protection is sought. (Sehwani Incorporated
v. In-N-Out Burger, Inc. 536 SCRA 227 [2007]) b) In the case of Sehwani v. In-N-Out Burger, the Supreme
Court held that “In-N-Out Burger” is a well-known
Applying this principle in one case, the Court ruled that in mark, given its registration in various countries
upholding the right of the petitioner to maintain a suit for around the world and comprehensive advertisements.
unfair competition or infringement of trademarks of a As such, the mark is entitled to protection even though
foreign corporation before the Philippine courts, the duties there is no actual use of such mark in the Philippines.
and rights of foreign states under the Paris Convention for
the Protection of Industrial Property to which the c) “Harvard” is the trade name of the world-famous
Philippines and France are parties are upheld. (Melbarose R. Harvard University, and it is also a trademark of
Harvard University. Under the Paris Convention,
Harvard University is entitled to protection in the
49
Philippines of its trade name “Harvard” even without immediate idea of the ingredients, qualities or
registration of such trade name in the Philippines. This characteristics of the goods," or if it clearly denotes what
means that no educational entity in the Philippines can goods or services are provided in such a way that the
use the trade name “Harvard” without the consent of consumer does not have to exercise powers of perception or
Harvard University. “Harvard” is a well-known name imagination.
and mark not only in the United States but also
internationally, including the Philippines. It is Under the IPC, these are marks that consist exclusively of
internationally known as one of the leading signs or of indications that may serve in trade to designate
educational institutions in the world. As such, even the kind, quality, quantity, intended purpose, value,
before Harvard University applied for registration of geographical origin, time or production of the goods or
the mark “Harvard” in the Philippines, the mark was rendering of the services, or other characteristics of the
already protected under the Paris Convention. (Fredco goods or services (Section 123.1 (j), IPC).
Manufacturing Corporation v. President and Fellows of
Harvard College, GR No. 185917, June 1, 2011) Under the IPC, descriptive marks are those that consist
exclusively of signs or of indications that may serve in trade
to designate the kind, quality, quantity, intended purpose,
value, geographical origin, time or production of the goods
or rendering of the services, or other characteristics of the
What are the remedies of the owner of a well-known
goods or services (Section 123.1 (j), IPC).
mark that is not registered in the Philippines?
Without prejudice to other remedies under the law, he/she Without prejudice to other remedies under the law, he/she
may: may:
a) oppose the application for registration;
a. oppose the application for registration
b) petition for cancellation of the registration, if one
b. petition for cancellation of the registration, if one has been granted
has been granted
c) unfair competition
c. unfair competition
Q: Can you cite examples of cases discussing both the
Paris convention and well-known marks?
A: Yes. ln one case, the Court ruled that the Paris Convention
for the Protection of Industrial Property does not
FEBRUARY 24, 2021
automatically exclude all countries of the world which have
signed it from using a tradename which happens to be used
Q: What are the remedies of the owner of a well-known in one country. ”GALLO” cannot be considered a ”well-
mark that is not registered in the Philippines? known" mark within the contemplation and protection of
Without prejudice to other remedies under the law, he/she the Paris Convention in this case since GALLO wines and
a) oppose the application for registration; GALLO cigarettes are neither the same, identical, similar nor
related goods. (Mighty Corporation and La Campana Fabrica
b) petition for cancellation of the registration, if one
De Tabaco, Inc. vs. E. & J. Gallo Winery and the Andresons
has been granted
Group, lnc., G.R. No. 154342, July 14, 2004)
c) unfair competition
In a later case, the Court ruled that the scope of protection
Q: What is a descriptive mark? under Article 6 of the Paris Convention, wherein both the
United States and the Philippines are signatories, extends to
A term is descriptive and therefore invalid as a trademark if, a well-known mark, which should be protected in a country
as understood in its normal and natural sense, it "forthwith even if the mark is neither registered nor used in that
conveys the characteristics, functions, qualities or country. Respondent, the owner of a well-known mark, has
ingredients of a product to one who has never seen it and the legal capacity to sue petitioners for the latter’s use of the
does not know what it is," or "if it forthwith conveys an IN-N-OUT Burger trademark for the name of their
50
restaurant and for the identical or confusingly similar mark Generic marks are those which constitute "the common
for their hamburger wrappers and french-fries receptacles, descriptive name of an article or substance,“ or comprise the
which effectively misrepresent the source of the goods and "genus of which the particular product is a species," or are
services. (Sehwani, Inc. v. In-N-Out Burger, lnc., G.R. No. "commonly used as the name or description of a kind of
171053, October 15, 2007) goods," or "imply reference to every member of a genus and
the exclusion of individuating characters," or "refer to the
Again, as illustrated at length above, the Court in the ” basic nature of the wares or services provided rather than to
Harvard case” that the essential requirement under the Paris the more idiosyncratic characteristics of a particular
Convention (and the Intellectual Property Code) is that the product," and are ndt legally protectable. (Societe Des
trademark to be protected must be ”well-known" in the Produits v. Court of Appeals, April 4, 2001 citing Federal
country where protection is sought and the power to Unfair Competition: Lanham Act s 43 ( a ), p. 3-22.1; See De
determine whether a trademark is well-known lies in the La Salle Montessori International of Malolos v De La Salle
competent authority of the country of registration or use. Brothers, et al.,, G. R No. 205548, February 7, 2018)
"Harvard" is a well-known name and mark not only in the
United States but also internationally, including the Q: Is generic mark prohibited?
Philippines; as such, even before Harvard University applied
for registration of the mark "Harvard" in the Philippines, the Section 123(h) of the Intellectual Property Code prohibits
mark was already protected under the Paris Convention. the registration of a trademark that consists exclusively of
(Fredco Manufacturing Corporation v. President and Fellows signs that are generic for the goods or services that they
of Harvard College, GR No. 185917, June 1, 2011) seek to identify. It is clear from the law itself, therefore, that
what is prohibited is not having a generic mark but having
Q: What is the theory of dilution? such generic mark being identiKiable to the good or service.
In one case, it was held that although SAKURA refers to the
Trademark dilution is the lessening of the capacity of a Japanese Klowering cherry and is, therefore, of a generic
famous mark to identify and distinguish goods or services, nature, the manufacturer's DVD or VCD players and other
regardless of the presence or absence of competition products could not be identiKied with cherry blossoms.
between the owner of the famous mark and other parties; or Hence, the mark can be appropriated. (Kensonic, Inc v. Uni-
likelihood of confusion, mistake or deception. Subject to the Line Multi- Resources, Inc, G. R Nos. 211820-21
principles of equity, the owner of a famous mark is entitled &211834-35, June 6, 2018)
to injunction against another person's commercial use in
commerce of a mark or tradename, if such use begins after Q: What is a descriptive mark?
the mark has become famous and causes dilution of the
distinctive quality of the mark. This is intended to protect A: A term is descriptive and therefore invalid as a trademark
fa m o u s m a rks f ro m s u b s e q u e n t u s e s t h a t b l u r if, as understood in its normal and natural sense, it
distinctiveness of the mark or tarnish or disparage it. "forthwith conveys the characteristics, functions, qualities or
Dockers and Design has not acquired a strong degree of ingredients of a product to one who has never seen it and
distinctiveness yet to be able to get an injunction against the does not know what it is," or "if it forthwith conveys an
use of the trademark Paddocks and Design. (Levi Strauss & immediate idea of the ingredients, qualities or
Co vs Clinton Apparelle, GR No. 138900 September 20, characteristics of the goods," or if it clearly denotes what
2005) goods or services are provided in such a way that the
consumer does not have to exercise powers of perception or
Q: What are generic marks? imagination. Under the IPC, these are marks that consist
exclusively of signs or of indications that may serve in trade
These are marks that consist exclusively of signs that are to designate the kind, quality, quantity, intended purpose,
generic for the goods or services that they seek to identify value, geographical origin, time or production of the goods
(Section 123.1 (h), IPC). or rendering of the services, or other characteristics of the
goods or services (Section 123.1 (j), IPC).
Q: ls the mark "master" generic or descriptive, hence,
non-registrable? Q: Are the following terms generic or descriptive and as
such, non-registrable?
51
a) Lyceum (for school ) registered was not the word "Papa" as deKined in the
A: The word "Lyceum" generally refers to a school or an dictionary, but the word "Papa" as the last name of the
institution of learning. While the Latin word "lyceum" has original owner of the brand. In fact, being part of several of
been incorporated into the English language, the word is petitioner's marks, there is no question that the IPO has
also found in Spanish (liceo) and in French (lycee). "Lyceum" found "PAPA" to be a registrable mark. (UFC Philippines vs
is in fact as generic in character as the word "university.". Fiesta Barrio Manufacturing Corporation, GR NO 198889,
Since "Lyceum" or "Liceo" denotes a school or institution of January 20, 2016)
learning, it is not unnatural to use this word to designate an
entity which is organized and operating as an educational e) La Salle (for educational institution)
institution. Lyceum of the Philippines vs. Court of Appeals, A: The word salle only means "room" in French. The word Ia,
G.R. No. 101897. THIRD DIVISION, March 5, 1993 on the other hand, is a deKinite article ("the") used to modify
salle. Thus, since sol/e is nothing more than a room, the use
b) Master ( for coffee ) of the term is actually suggestive. A suggestive mark is
A: The word MASTER is neither generic nor descriptive and therefore a word, picture, or other symbol that suggests, but
as such, it cannot be invalidated as a trademark. lt is instead does not directly describe something about the goods or
a suggestive term brought about by the advertising scheme services in connection with which it is used as a mark and
of Nestle. Suggestive terms are those which, in the gives a hint as to the quality or nature of the product.
phraseology of one court, require "imagination, thought and Suggestive trademarks therefore can be distinctive and are
perception to reach a conclusion as to the nature of the registrable. The appropriation of the term "la salle" to
goods." Such terms, "which subtly connote something about associate the words with the lofty ideals of education and
the product," are eligible for protection in the absence of learning is in fact suggestive because roughly translated, the
secondary meaning. While suggestive marks are capable of words only mean “the room." Thus, the room could be
shedding "some light" upon certain characteristics of the anything - a room in a house, a room in a building, or a room
goods or services in dispute, they nevertheless involve "an in an ofKice.
element of incongruity," "Kigurativeness," or " imaginative
effort on the part of the observer.” This is evident from the In fact, the appropriation by the De La Salle Brothers is
advertising scheme adopted by Nestle in promoting its fanciful, whimsical and arbitrary because there is no
coffee products. In this case, Nestle has, over time, promoted inherent connection between the words la so/le and
its products as "coffee perfection worthy of masters. Societe education, and it is through their painstaking efforts that the
Des Produits. Nestle, S.A. v. Court of Appeals and CFC term has become associated with one of the top educational
Corporation, G.R. No. 112012, April 4, 2001) institutions in the country. Even assuming arguendo that la
salle means "classroom" in French, imagination is required
c) Marlboro (for cigarette ) in order to associate the term with an educational
A: The trademark ”Marlboro" is not only valid for being institution and its particular brand of service. The phrase
neither generic nor descriptive, but because it is also owned "De La Salle" is not merely a generic term. De La Salle
exclusively by PMPI as evidenced by the certiKicate of Brothers’ use of the phrase being suggestive and may
registration issued by the IPO. It was held that the properly be regarded as fanciful, arbitrary and whimsical, it
counterfeit cigarettes seized from petitioner's possession is entitled to legal protection.
were intended to confuse and deceive the public as to the
origin of the cigarettes intended to be sold, as they not only f) San Francisco Coffee (for coffee products )
bore PMP|'s mark, but they were also packaged almost A: In one case, the petitioner's argument that "San
exactly as PMPl’s products. (Ong v. People of the Philippines Francisco" is just a proper name referring to the famous city
G.R. 169440, November 23, 2011) in California and that "coffee" is simply a generic term was
held by the Court to be untenable. The respondent has
d) Papa (for catsup) acquired an exclusive right to the use of the trade name
A: It is not a generic mark. The Merriam-Webster dictionary "SAN FRANCISCO COFFEE & ROASTERY, |NC.” since the
deKines "Papa" simply as "a person's father." True, a person's registration of the business name with the DTI in 1995.
father has no logical connection with catsup products, and Thus, respondent’s use of its trade name from then on must
that precisely makes "PAPA" as an arbitrary mark capable of be free from any infringement by similarity. Of course, this
being registered, as it is distinctive, coming from a family does not mean that the respondent has exclusive use of the
name that started the brand several decades ago. What was geographic word ”San Francisco" or the generic word
52
“coffee.” Geographic or generic words are not, per se, subject h) PALE PILSEN (for beer)
to exclusive appropriation. It is only the combination of the A: The words pale pilsen as part of Asia Brewery’s ( ABI )
words "SAN FRANCISCO COFFEE," which is respondent's trademark does not constitute an infringement of San
trade name in its coffee business, that is protected against Miguel Corporation's (SMC ) trademark: SAN MIGUEL PALE
infringement on matters related to the coffee business to PILSEN, for "pale pilsen" are generic words descriptive of
avoid confusing or deceiving the public. (Coffee Partners Inc. the color ("pale"), of a type of beer ("pilsen"), which is a light
San Francisco Cofiee and Roastery GR N0. 169504, March 3, bohemian beer with a strong hops Klavor that originated in
2010) the City of Pilsen in Czechoslovakia and became famous in
the Middle Ages. Moreover, ABl's use of the steinie bottle,
g) COFFEE-MATE (for coffee) similar but not identical to the SAN MIGUEL PALE PILSEN
Puregold ]iled an application for the registration of the bottle, is not unlawful as SMC did not invent but merely
trademark "COFFEE MATCH" for use on coffee, tea, borrowed the steinie bottle from abroad and it has not
cocoa, sugar, arti]icial coffee, ]lour and preparations claimed neither patent nor trademark protection for that
made from cereals, bread, pastry and confectionery, and bottle shape and design. (Asia Brewery, Inc. v. Court of
honey. However, Nestle opposed the same alleging that it Appeals and San Miguel Corporation, G.R. No. 103543, July 5,
is the exclusive owner of the "COFFEE-MATE" trademark 1993)
and that there is confusing similarity between its
"COFFEE-MATE" trademark and Puregold's "COFFEE Author's note: In the case of Coffee Partners, the Supreme
MATCH" application. Nestle alleged that "COFFEE-MATE" Court held that while generic and descriptive terms are not
has been declared an internationally well-known mark registrable, a combination of such terms to refer to a
and Puregold's use of "COFFEE MATCH" would indicate product is registrable. Yet, the Supreme Court ruled
an connection with the goods covered in Nestle's differently in the Puregold and Asia Brewery/ San Miguel
"COFFEE-MATE" mark because of its distinct similarity. Corporation cases. Indeed, there is no hard and fast rule in
ls there confusing similarity between COFFEE MATCH trademark cases.
and COFFEE-MATE?
i) Sakura (for cherry ]lowers)
A: No. The word "COFFEE" is the common dominant feature A: Sakura is the generic term for Japanese cherry blossom
between Nestle's mark "COFFEE-MATE" and Puregold's Klowers and as such, cannot be registered as a trademark for
mark "COFFEE MATCH." However, following the IPC’s Klowers but it can be registered as a trademark for electronic
prohibition of registration of generic marks, the word appliances.
"COFFEE" cannot be exclusively appropriated by either
Nestle or Puregold since it is generic or descriptive of the Q: What are genericidal marks?
goods they seek to identify. The distinctive features of both A: These are marks that consist exclusively of signs or of
marks are sufKicient to warn the purchasing public which are indications that have become customary or usual to
Nestle's products and which are Puregold's products. While designate the goods or services in everyday language or in
both "-MATE" and "MATCH" contain the same Kirst three bona Kide and established trade practice (Section 123.1 (i),
letters, the last two letters in Puregold's mark, "C" and "H," IPC)
rendered a visual and aural character that made it easily
distinguishable from Nestle's mark. Also, the distinctiveness Q: What is a descriptively misleading mark?
of Puregold's mark with two separate words with capital A: It is a mark that is likely to mislead the public, particularly
letters "C" and "M" made it distinguishable from Nestle's as to the nature, quality, characteristics or geographical
mark which is one word with a hyphenated small letter "-m" origin of the goods or services (Section 123.1 (g), IPC).
in its mark. In addition, there is a phonetic difference in
pronunciation between Nestle's "—l\/IATE" and Puregold's Q: In 1988, the FDA approved the labels submitted by
"MATCH." As a result, the eyes and ears of the consumer Turbo Corporation for its new drug brand name, ”
would not mistake Nestle's product for Puregold's product. Axilon". Turbo is now applying with the Bureau of
Hence, likelihood of confusion between Nestle's product and Patents, Trademarks and Technology Transfer for the
Puregold's product does not exist (Societe Des Produits, registration of said brand name. It was subsequently
Nestle, S.A. v. Puregold Price Club, lnc., G.R. No. 217194, con]irmed that ”Accilonne" is a generic term for a class
September 6, 2017) of anti-fungal drugs and is used as such by the medical
professional and the pharmaceutical industry, and that
53
it is used as generic chemical name in various scienti]ic Thus, a generic or descriptive term which has acquired a
and professional publications. A competing drug secondary meaning may be appropriated and registered as a
manufacturer asks you to contest the registration of the trademark. For instance, Ang Tibay is a descriptive mark. It
brand name ”Axilon" by Turbo. means durable in English. But, Ang Tibay had been used so
What will be your advice? long and the public had associated the mark with the
manufacturer of combat shoes. Thus, it was held that the
A: These are marks that consist exclusively of signs or of descriptive mark can be registered as trademark for shoes.
indications that have become customary or usual to However, in another case, the Court considered "Lyceum" as
designate the goods or services in everyday language or in a generic name but the number alone of institutions using
bona Kide and established trade practice (Section 123.1 (i), "Lyceum" as part of their school name suggests strongly that
IPC) the use of the word "Lyceum" has not been attended with
exclusivity for applicability of the doctrine of secondary
Q: What is a descriptively misleading mark? meaning (Lyceum of the Philippines v. Court of Appeals, 219
A: It is a mark that is likely to mislead the public, particularly SCRA 610 [1993]).
as to the nature, quality, characteristics or geographical
origin of the goods or services (Section 123.1 (g), IPC). Q: What is the basis of the doctrine of secondary
meaning?
Q: In 1988, the FDA approved the labels submitted by A: Section 123.2 of the IPC. It provides that nothing shall
Turbo Corporation for its new drug brand name, ” prevent the registration of a device (such as color, shape,
Axilon”. Turbo is ow applying with the Bureau of signs, generic marks) which has become distinctive in
Patents, Trademarks and Technology Transfer for the relation to the goods for which registration is requested as a
registration of said brand name. It was subsequently result of the use that have been made of it in commerce in
con]irmed that "Accilonne" is a generic term for a class the Philippines. The OfKice may accept as prima facie
of anti-fungal drugs and is used as such by the medical evidence that the mark has become distinctive, as used in
professional and the pharmaceutical industry, and that connection with the applicant's goods or services in
it is used as generic chemical name in various scienti]ic commerce, proof of substantially exclusive and continuous
and professional publications. A competing drug use thereof by the applicant in commerce in the Philippines
manufacturer asks you to contest the registration of the for Kive (5) years before the date on which the claim of
brand name ”Axilon" by Turbo. What will be your distinctiveness is made.
advice?
A: The application for registration by Turbo Corporation Q: St. Francis Development Corporation (SFDC), a
may be contested. The Trademark Law would not allow the domestic corporation engaged in the real estate
registration of a trademark which, when applied to or used business and the developer of St. Francis Square
in connection with his products, is merely descriptive or Commercial Center in Ortigas Center, filed complaint for
deceptively misdescriptive of them. Confusion can result trademark infringement against Shang Properties
from the result from the use of ”Axilon" as the generic Realty Corporation (Shang) before the IPO - Bureau of
product itself. (BAR 1990) Legal Affairs due to Shang’s use and filing of
applications for the registration of the marks "THE ST.
Q: What is the doctrine of secondary meaning? FRANCIS TOWER" and "THE ST. FRANCIS SHANGRILA
A: Under the doctrine of secondary meaning, a word or PLACE" for use relative to Shang’s business, particularly
phrase originally incapable of exclusive appropriation with the construction of permanent buildings or structures
reference to an article in the market, because it is for residential and of]ice purposes. SFDC alleged that
geographical or otherwise descriptive, might nevertheless (1) it used "ST. FRANCIS: to identify numerous property
have been used so long and so exclusively by one producer development projects in Ortigas Center and (2) as a use
with reference to his article that, in the trade and to that of its continuous projects in Ortigas Center and real
branch of the purchasing public, the word or phrase has estate business, it has gained substantial goodwill with
come to mean that the article was his produce (Ana Ang v. the public that consumers and traders closely identify
Toribio Teodoro, 74 Phil. 56, as cited in Lyceum of the the mark with its property development projects.
Philippines v. Court of Appeals, 219 SCRA 610 [1993])
On the other hand, Shang contended that the mark with
its property cannot be exclusively owned by SFDC since
54
the mark is geographically descriptive of the goods or A: The rights conferred by trademark registration end upon
services for which it is intended to be used. Has SFDC cancellation of the certiKicate of registration by the IPO in
acquired a secondary meaning —and, thereby, an the cases allowed by law.
exclusive right— to the ST. FRANCIS mark ?
Q: When may the IPO cancel the certi]icate of trademark
A: While it is true that SFDC had been using the mark ”ST. registration?
FRANCIS" since 1992, its use thereof has been merely A: The certiKicate of registration may be cancelled in the
conKined to its realty projects within the Ortigas Center. As following cases:
its use of the mark is clearly limited to a certain locality, it a) Failure to Kile declaration of actual use within one
cannot be said that there was substantial commercial use of year from the Kifth anniversary of the trademark
the same recognized all throughout the country. Neither is registration;
there any showing of a mental recognition in buyers’ and
potential buyers’ minds that products connected with the b) Failure to Kile declaration of actual use within three
mark "ST. FRANCIS" are associated with the same source — years from Kiling of the application for trademark
that is, the enterprise of SFDC. Thus, absent any showing registration;
that there exists a clear goods/service-association between A petition to cancel a registration of a mark may also be Kiled
the realty projects located in the aforesaid area and SFDC as with the Bureau of Legal Affairs of the IPO by any person
the developer thereof, the latter cannot be said to have who believes that he is or will be damaged by the
acquired a secondary meaning as to its use of the "ST. registration of a mark under the IPC as follows:
FRANClS" mark. (Shang Properties Realty Corporation v. St. a) Within Kive (5) years from the date of the
Francis Development Corporation, G.R. No. 190706, July 21, registration of the mark;
2014)
b) At any time, if the registered mark becomes the
generic name for the goods or services, or a portion
Recit question: thereof, for which it is registered, or has been
Q: What rights are conferred by the registration of abandoned, or its registration was obtained
trademark? fraudulently or contrary to the provisions of the IPC,
or if the registered mark is being used by, or with
A: Except in cases of importation of drugs and medicines the permission of, the registrant so as to
which has been introduced in the Philippines or anywhere misrepresent the source of the goods or services on
else in the world by the patent owner, or by any party or in connection with which the mark is used.
authorized to use the invention and of off-patent drugs and
c) At any time, if the registered owner of the mark
medicines, the owner of a registered mark shall have the
without legitimate reason fails to use the mark
exclusive right to prevent all third parties not having the
within the Philippines, or to cause it to be used in
owner's consent from using in the course of trade identical
the Philippines by virtue of a license during an
or similar signs or containers for goods or services which
uninterrupted period of three (3) years or longer.
are identical or similar to those in respect of which the
(Section 151.1, IPC).
trademark is registered where such use would result in a
likelihood of confusion. In case of the use of an identical sign Q: In 2005, W Hotels, Inc., a multinational corporation
for identical goods or services, a likelihood of confusion engaged in the hospitality business, applied for and was
shall be presumed. able to register its trademark ”W” with the Intellectual
Property Of]ice of the Philippines (IPO) in connection
There shall be no infringement of trademarks or tradenames with its hotels found in different parts of the world. In
of imported or sold patented drugs and medicines allowed 2009, a Filipino corporation, RST Corp., ]iled before the
under the IPC, as well as imported or sold off-patent drugs IPO a Petition for cancellation of W Hotels, lnc.'s "W"
and medicines: Provided, That, said drugs and medicines trademark on the ground of non-use, claiming that W
bear the registered marks that have not been tampered, Hotels, Inc. failed to use its mark in the Philippines
unlawfully modiKied, or infringed upon. because it is not operating any hotel in the country
which bears the "W" trademark.
Q: When do these right terminate?
55
In its defense, W Hotels, Inc. maintained that it has used A: In this case, Starwood has proven that it owns Philippine
its "W" trademark in the Philippine commerce, pointing registered domain names, provides a phone number for
out that while it did not have any hotel establishment in P h i l i p p i n e c o n s u m e r s , t h e p r i c e s fo r i t s h o te l
the Philippines, it should still be considered as accommodations and/or services can be converted into the
conducting its business herein because its hotel local currency or the Philippine Peso, among others. Taken
reservation services, albeit for its hotels abroad, are together, these facts and circumstances show that
made accessible to Philippine residents through its Starwood‘s use of its "W" mark through its interactive
interactive websites prominently displaying the "W" website is intended to produce a discernable commercial
trademark. W Hotels, Inc also presented proof of actual effect or activity within the Philippines, or at the very least,
booking transactions made by the Philippine residents seeks to establish commercial interaction with local
through such websites. Is W Hotels, lnc.'s defense consumers. Accordingly, Starwood‘s use of the "W" mark in
against the petition for cancellation of trademark its reservation services through its website constitutes use
tenable? Explain. (2019 Bar) of the mark sufKicient to keep its registration in forcle.
The defense of W Hotel is tenable. Having a hotel Finally, it deserves pointing out that Starwood submitted in
establishment in the Philippines with the trademark W is 2008 its DAU with evidence of use which the IPO, through its
not the only way to prove actual use of the trademark. In one Director of Trademarks and later by the IPO DG in the
case, the Supreme Court ruled that the use of the mark on an January 10, 2014 Decision, had accepted and recognized as
interactive website sufKiciently showing an intent towards valid. The Court Kinds no reason to disturb this recognition.
realizing a within-State commercial activity or interaction is (W Land Holdings, Inc. V. Starwood Hotels And Resorts
considered actual use to keep the trademark registration in Worldwide, lnc., G.R. No. 222366, December 4, 2017, Second
force. That W Hotel was able to present proof of actual Division, Perlas-Bernabe, J.)
booking transactions made by the Philippine residents
though such website proves that the use of its "W" mark
through its interactive website is intended to produce a Q: What is and when is there trademark infringement?
discernible commercial effect or activity within the
Philippines, or at the very least, seeks to establish “Any person who shall, without the consent of the owner of
commercial interaction with local consumers. This is enough the registered mark [Section 155, IPC]: Use in commerce any
to keep it trademark registration in force. (W Land Holdings, reproduction, counterfeit, copy, or colorable imitation of a
Inc. V. Starwood Hotels and Resorts Worldwide, lnc., G.R. No. registered mark or the same container or a dominant
222366, December 4, 2017) feature thereof in connection with the sale, offering for sale,
distribution, advertising of any goods or services including
Q: In the W Land Holdings case, Starwood filed before other preparatory steps necessary to carry out the sale of
the IPO an application for registration of the trademark any goods or services on or in connection with which such
"W" for use in its hotel business which was eventually use is likely to cause confusion, or to cause mistake, or to
granted. However, W Land applied for the registration of deceive. [ibid, Section 155.1];
its own "W" mark whichthereby prompted Starwood to
oppose the same. The BLA ruled that W Land's "W" There are Kive elements, two wit:
mark is confusingly similar with Starwood's mark, 1. The trademark being infringed is registered in the
which had an earlier ]iling date. Unperturbed, on May Intellectual Property OfKice;
29, 2009, W Land ]iled a Petition for Cancellation of
Starwood's mark for non-use under Section 151.1 of the 2. The trademark is reproduced, counterfeited, copied,
Intellectual Property Code of the Philippines claiming or colorably imitated by the infringer;
that Starwood has failed to use its mark in the
3. The infringing mark is used in connection with the
Philippines because it has no hotel or establishment in
sale, offering for sale, or advertising of any goods,
the Philippines rendering the services covered by its
business or services; or the infringing mark is
registration.
applied to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used
In ruling against the cancellation of Starwood's "W"
upon or in connection with such goods, business or
mark, the Supreme Court held:
services;
56
4. The use or application of the infringing mark is preliminary injunction to restrain acts of infringement while
likely to cause confusion or mistake or to deceive the action is pending
purchasers or others as to the goods or services
themselves or as to the source or origin of such He may also ask the the court to issue an order that goods
goods or services or the identity of such business; found to be infringing be without compensation of any sort,
and disposed of outside the channels of commerce in such a
manner as to avoid any harm caused to the right holder, or
5. The use or application of the infringing mark is destroyed; and all labels, signs, prints, packages, wrappers,
without the consent of the trademark owner or the receptacles and advertisements in the possession of the
assignee thereof. (Diaz v. People of the Philippines defendant, bearing the registered mark or trade name or any
and Levi Strauss (Phil.), GR No. 180677, February reproduction, counterfeit, copy or colorable imitation
18, 2013) thereof, all plates, molds, matrices and other means of
In the case of Pearl & Dean, it was held that assuming making the same, shall be delivered up and destroyed
arguendo that "Poster Ads" cgaduld validly qualify as a (Section 157.1)
trademark, the failure of Pearl & Dean to secure a tr emark
registration for speciKic use on the light boxes meant that He may also Kile a criminal action for trademark
there could not have been any trademark infringement since infringement.
registration was an essential element thereof. (Pearl & Dean
(Phil.), Inc. v. Shoemart, lnc., G.R. No. 148222, August 15, Q: Is the issuance of an order granting provisional
2003) reliefs to the complainant in a trademark infringement
suit immediately executory?
A: Under the 2020 Revised Rules of Procedure for
REMEDIES Intellectual Property Rights Cases, unless restrained by the
Supreme Court or the Court of Appeals, as the case may be,
RECIT QUESTION: any order issued by the court under said Rules is
immediately executory, except in the following:
Q: What are the remedies of the owner of the registered a) Order of destruction where a motion for
trademark if his rights to the trademark are infringed? reconsideration is filed; and
A: He may Kile a civil action for trademark infringement to b) Order of release of seized goods where a search
recover damages from any person who infringes his rights, warrant is quashed.
and the measure of the damages suffered shall be either the
reasonable proKit which the complaining party would have Q: What rules govern the issuance of a search and
made, had the defendant not infringed his rights, or the seizure order in cases of trademark or trade name
proKit which the defendant actually made out of the infringement?
infringement, or in the event such measure of damages Court Administrative Matter A.M. O2-1-O6-SC (The Rule on
cannot be readily ascertained with reasonable certainty, Search and Seizure in Civil Actions for Infringement of
then the court may award as damages a reasonable Intellectual Property Rights) governs the issuance of a writ
percentage based upon the amount of gross sales of the of search and seizure in a civil action for infringement filed
defendant or the value of the services in connection with by an intellectual property right owner against the supposed
which the mark or trade name was used in the infringement infringer of his trademark or name.
of the rights of the complaining party (Section 156.1, /PC).
In cases where actual intent to mislead the public or to The Rules on the Issuance of the Search and Seizure in Civil
defraud the complainant is shown, in the discretion of the Actions for Infringement of Intellectual Property Rights are
court, the damages may be doubled (Section 156.3, IPC). He not applicable in a case where the search warrants were
may also recover attorney's fees and the costs of suit. applied in anticipation of criminal actions for violation of
intellectual property rights under R.A. 8293. Rule 126 of the
The civil action for trademark infringement may include an Revised Rules of Court would apply and a warrant shall be
application with the court for the issuance of an order to validly issued upon Kinding the existence of probable cause.
impound during the pendency of the action, sales invoices (Century Chinese Medicine Co., et. al. v. People of the
and other documents evidencing sales and to grant a Philippines, G.R. No. 188526, November 11, 2013)
57
RECIT QUESTION trademark infringement will have no more legal stand on.
The cancellation of registration of a trademark has the effect
Q: What is the remedy of the owner of the goods in case of depriving the registrant of protection from infringement
of wrongful and illegal seizure of goods and materials? from the moment the judgment or order of cancellation has
A: The owner may recover damages. The claim for damages become Kinal.
should be Kiled with the same court that issued the writ of
search and seizure. However, if the goods were seized The Kirst trademark registrant may however Kile maintain an
pursuant to a search and seizure warrant under the Rules on action for trademark infringement independently of any
Criminal Procedure, in anticipation of a criminal offense, the application for the administrative cancellation of the
owner has the right to seek damages, if the circumstances trademark of the second registrant. (Superior Commercial
warranted, by a separate civil action for the wrong inKlicted Enterprises, Inc. v. Kunnan Enterprises Ltd. and Sports
on them by an improperly obtained or enforced search Concept & Distributor, lnc., G.R. No. 169974, April 20, 2010)
warrant. The proceeding under Rule 126, a limited criminal
one, does not provide for the Kiling of counterclaims for Q: May the defendant in an action for trademark
damages against those who may have improperly sought the infringement ]ile a petition for administrative
issuance of the search warrant. (Del Rosario, et al. v. Doanto, cancellation of the registrant's trademark?
Jr. et al., G.R. No. 180595, March 4, 2010)
A: No, his remedy is to Kile an answer and invoke as a
Q: What are the other remedies available the owner of defense that the plaintiff is not entitled to the trademark
the registered mark to protect his rights to the registration. This is consistent with Section 151.2 of the IPC
trademark? that the court or the administrative agency vested with
jurisdiction to hear and adjudicate any action to enforce the
A: He may oppose any other application for registration of rights to a registered mark shall likewise exercise
the same trademark, or a dominant feature thereof, for the jurisdiction to determine whether the registration of said
same goods and services or good and services related mark may be cancelled in accordance with this Act. The
thereto. Kiling of a suit to enforce the registered mark with the proper
In case of issuance of a certiKicate of trademark registration court or agency shall exclude any other court or agency from
in favor of another, he may Kile a petition for cancellation of assuming jurisdiction over a subsequently Kiled petition to
trademark with the IPO. cancel the same mark. On the other hand, the earlier Kiling of
petition to cancel the mark with the Bureau of Legal Affairs
Q: Does the application for administrative cancellation shall not constitute a prejudicial question that must be
of a registered trademark preclude the registrant from resolved before an action to enforce the rights to same
]iling an action for trademark infringement? registered mark may be decided.
A: The application for administrative cancellation of a Q: What are the limitations to action for infringement?
registered trademark does not preclude the Kirst registrant A:
from Kiling an action for trademark infringement. Such a) The owner shall not be entitled to recover proKits or
application cannot per se have the effect of restraining or damages unless the acts were committed with
preventing the courts from the exercise of their lawfully knowledge that such imitation is likely to cause
conferred jurisdiction. A contrary rule would unduly expand confusion. Knowledge is presumed when the
the doctrine of primary jurisdiction which, simply registrant gives notice that his mark is registered by
expressed, would merely behoove regular courts, in displaying with the mark the word registered mark"
controversies involving specialized disputes, to defer to the or the letter R with a circle. Note that good faith is
Kindings of resolutions of administrative tribunals on certain not a defense in a criminal suit for trademark
technical matters. Conrad and Company v. Court of Appeals, infringement;
G.R. No. 115115, July 10, 1995; Shangri-La International
Hotel Management v. Court of Appeals, G. R. No. 111580, b) The registered mark shall have no effect against any
June 21, 2001 person who, in good faith before Kiling or priority
date, was using the mark for the purpose of his
However, if the IPO cancels the registered trademark and business;
such resolution has attained Kinality, the action for
58
c) Where the infringer who is engaged solely in the a) Any person, who is selling his goods and gives them
business of printing the mark or other infringing the general appearance of goods of another
materials for others is an innocent infringer, the manufacturer or dealer, either as to the goods
owner of the right infringed shall only be entitled to themselves or in the wrapping of the packages in
injunction against future printing; which they are contained, or the devices or words
thereon, or in any other feature of their appearance,
d) Where the infringement is part of a paid which would be likely to inKluence purchasers to
advertisement in a newspaper or magazine or believe that the goods offered are those of a
similar periodical or in an electronic manufacturer or dealer, other than the actual
communication, the remedy of the owner of the manufacturer or dealer, or who otherwise clothes
right infringed as against the publishers or the goods with such appearance as shall deceive the
distributor shall be limited to injunction against the public and defraud another of his legitimate trade,
presentation of such advertising matter in future or any subsequent vendor of such goods or any
issues of such papers. Such injunctive relief is not agent of any vendor engaged in selling such goods
available where restraining the dissemination with a like purpose;
would delay the delivery of such issue or
transmission of such electronic communication, if
customarily conduced in accordance with sound
business practice. (Section 159, IPC) b) Any person who by any artiKice, or device, or who
employs any other means calculated to induce the
false belief that such person is offering the services
UNFAIR COMPETITION
of another who has identiKied such services in the
mind of the public; or
Unfair competition has been deKined as the passing off (or
palming off) or attempting to pass off upon the public of the c) Any person who shall make any false statement in
goods or business of one person as the goods or business of the course of trade or who shall commit any other
another with the end and probable effect of deceiving the act contrary to good faith of a nature calculated to
public. Passing off (or palming off) takes place where the discredit the goods, business or services of another.
defendant, by imitative devices on the general appearance of
the goods, misleads prospective purchasers into buying his lt was held that unfair competition is a transitory or
merchandise under the impression that they are buying that continuing offense. Search warrant may be applied in any
of his competitors. Thus, the defendant gives his goods the court where any element of the alleged offense was
general appearance of the goods of his competitor with the committed. (Sony Computer Entertainment, lnc., v.
intention of deceiving the public that the goods are those of Supergreen, lnc., 518 SCRA 750, 2007)
his competitor. (Republic Gas Corporation v. Petron
Corporation. G.R. No. 194062, 17 June 2013); 2019 bar Q: MS Brewery Corporation (MS) is a manufacturer and
distributor of the popular beer "MS Lite." lt faces stiff
Q: When is a person liable for unfair competition? competition from BA Brewery Corporation (BA) whose
Any person who shall employ deception or any other means sales of its own beer product, "BA Lighter," has soared to
contrary to good faith by which he shall pass off the goods new heights. Meanwhile, sales of the "MS Lite"
manufactured by him or in which he deals, or his business, decreased considerably. The distribution and marketing
or services for those of the one having established such personnel of MS later discovered that BA has stored
goodwill, or who shall commit any acts calculated to thousands of empty bottles of "MS Lite" manufactured
produce said result, shall be guilty of unfair competition, and by MS in one of its warehouses.
shall be subject to an action therefor.
MS ]iled a suit for unfair competition against BA before
In particular, and without in any way limiting the scope of the Regional Trial Court (RTC). Finding a connection
protection against unfair competition, the following shall be between the dwindling sales of MS and the increased
deemed guilty of unfair competition: sales of BA, the RTC ruled that BA resorted to acts of
unfair competition to the detriment of MS. ls the RTC
correct? Explain. (2016 Bar)
59
A: There is no unfair competition. Unfair competition is

A: The RTC is not correct. Hoarding, or the act of passing off of one's goods as those of another and requires
accumulating empty bottles to impede circulation of the fraudulent intent on the part of the user. These elements are
bottled product, does not amount to unfair competition in not present in the problem. (BAR 1988)
the context of the Intellectual Property Code. BA did not
fraudulently ”pass off" its product as that of MS Lite. There Q: N Corporation manufactures rubber shoes under the
was no representation or misrepresentation on the part of trademark "Jordann" which hit the Philippine Market in
BA that would confuse or tend to confuse its goods with 1985, and registered its trademark with the Bureau of
those of MS Lite. (Coca Cola Bottlers Philippines v Gomez, Patents, Trademarks and Technology Transfer (BPTIT)
GR No. 154491, November 14, 2008) in 1990. PK Company also manufactures rubber shoes
with the trademark ”Javorski" which it registered with
Q: St. Francis Development Corporation (SFDC), a the BPTTT in 1978. In 1992, PK Company adopted and
domestic corporation engaged in the real estate copied the design of N Corporation's "Jordann" rubber
business and the developer of St. Francis Square shoes, both as to shape and color, but retained the
Commercial Center in Ortigas Center, ]iled complaint for trademark ”Javorski" on its products. May PK Company
unfair competition against Shang Properties Realty be held liable to N Corporation? Explain.
Corporation (Shang) before the IPO - Bureau of Legal
Affairs due to Shang's use and ]iling of applications for A: PK may be held liable for unfairly competing against N
the registration of the marks ”THE ST. FRANCIS TOWER" Corporation. By copying the design, shape and color of N's ”
and ”THE ST. FRANCIS SHANGRILA PLACE" for use Jordann" rubber shoes and using the same in its rubber
relative to Shang's business, particularly the shoes trademarked ”Javorski", PK is obviously trying to
construction of permanent buildings or structures for
residential and of]ice purposes. ls Shang Properties is pass off its shoes for those of N. it is of no moment that the
guilty of unfair competition ? trademark ”Javorski" was registered ahead of the
trademark ”Jordann". Priority in registration is not material.
A: Shang Properties is not guilty of unfair competition in The basis of an action for unfair competition is confusing
using the marks ”THE ST. FRANCIS TOWERS" and "THE ST. and misleading similarly in the general appearance, not
FRANCIS SHANGRI-LA PLACE.” The ”true test" of unfair similarity, of trademarks.(BAR 1996)
competition has thus been "whether the acts of the
defendant have the intent of deceiving or are calculated to
deceive the ordinary buyer making his purchases under the Q: What are the essential elements of unfair
ordinary conditions of the particular trade to which the competition?
controversy re|ates." It is therefore essential to prove the A: The essential elements of unfair competition are:
existence of fraud, or the intent to deceive, act al or a) Confusing similarity in the general appearance of
probable, determined through a judicious scrutiny of the the goods; and
factual circumstances attendant to a particular case. Here,
the element of fraud is wanting; hence, there can be no b) Intent to deceive the public and defraud a creditor.
unfair competition. (Shang Properties Realty Corporation v. (Superior Commercial Enterprises, Inc. v. Kunnan
St. Francis Development Corporation, G.R. No. 190706, July Enterprises Ltd. And Sports Concept & Distributor, |
21, 2014) nc., G.R. No. 169974, 20 April 2010)
Q: X, a dealer of low grade oil, to save on expenses, uses

the containers of different companies. Before marketing The "confusing similarity" may or may not result from
to the public his low grade oil, X totally obliterates and similarity in the marks, but may result from other external
erases the brands or marks stenciled on the containers. factors in the packaging or presentation of the goods. In the
Y brings an action against X for unfair competition upon ‘burgers’ case mentioned supra, the intent to deceive and
its discovery that its containers have been used by X for defraud may be inferred from the fact that there was
his low grade oil. ls there unfair competition? State actually no notice (on their plastic wrappers) to the public
brie]ly your reasons. that the ”Big Mak” hamburgers are products of ”L.C. Big Mak
Burger, lnc." (McDonald's Corporation v. L.C. Big Mak Burger,
lnc., G.R. No. 143993, August 18, 2004)
60
illegally reKilled. The public will then be led to believe that

It was held that mere similarity in the shape and size of the petitioners are authorized reKillers and distributors of
container and label does not constitute unfair competition. respondents’ LPG products, considering that they are
ln one case, the Court ruled that SMC cannot claim unfair accepting empty containers of respondents and reKilling
competition arising from the fact that ABI's BEER PALE them for resale.
PILSEN is sold, like SMC‘s SAN MIGUEL PALE PILSEN in
amber steinie bottles absent any showing that the BEER Unfair competition has been deKined as the passing off (or
PALE PILSEN is being passed off as SAN MIGUEL PALE palming off) or attempting to pass off upon the public of the
PILSEN. (Asia Brewery, Inc. v. Court of Appeals and San goods or business of one person as the goods or business of
Miguel Corporation, G.R. No. 103543, July 5, 1993) another with the end and probable effect of deceiving the
public. Passing off (or palming off) takes place where the
Q: Distinguish trademark infringement from unfair defendant, by imitative devices on the general appearance of
competition. the goods, misleads prospective purchasers into buying his
A: There are three basic distinctions, as follows: merchandise under the impression that they are buying that
a) Infringement of trademark is the unauthorized use of his competitors. Thus, the defendant gives his goods the
of a trademark whereas unfair competition is the general appearance of the goods of his competitor with the
passing off one's goods as those of another; intention of deceiving the public that the goods are those of
his competitor. In the present case, respondents pertinently
b) In infringement of trademark, fraudulent intent in observed that by reKilling and selling LPG cylinders bearing
unnecessary, whereas in unfair competition their registered marks, petitioners are selling goods by
fraudulent intent is essential; giving them the general appearance of goods of another
c) In infringement of trademark, prior registration of manufacturer. Obviously, the mere use of those LPG
the trademark is a prerequisite to the action cylinders bearing the trademarks "GASUL" and "SHELLANE"
whereas in unfair competition, registration is not will give the LPGs sold by REGASCO the general appearance
necessary. (Del Monte Corporation v. Court of of the products of the petitioners. (Republic Gas Corporation
Appeals, 181 SCRA 410 (1990); BAR 1996; BAR vs. Petron Corporation. G.R. No. 194062, June 17, 2013)
2015)
In another case, it has been established that the parties
conspired in the sale/distribution of counterfeit Greenstone
products to the public, which were even packaged in bottles
Q: Does the act of re]illing empty LPG gas cylinder tank identical to that of the original, thereby giving rise to the
bearing a registered trademark amount to infringement presumption of fraudulent intent. Although there is unfair
or unfair competition or BOTH? competition, there can be no trademark infringement
considering that the registration of the trademark
The act of reKilling empty LPG gas cylinder tank bearing a "Greenstone" — essential as it is in a trademark
registered trademark amounts to both trademark infringement case — was not proven to have existed during
infringement and unfair competition. The mere the time the acts complained of were committed. (Roberto
unauthorized use of a container bearing a registered Co v. KengHuan Jerry Yeung and Emma Yeung G.R. N0.
trademark in connection with the sale, distribution or 212705, September 10, 2014)
advertising of goods or services which is likely to cause
confusion, mistake or deception among the buyers or Note that in another case, the sale of counterfeit Fundador
consumers can be considered as trademark infringement. products had been held to constitute trademark
The petitioners in this case actually committed trademark infringement (Juno Batistis v. People of the Philippines, G.R.
infringement when they reKilled, without the respondents’ No. 181571, December 16, 2009)
consent, the LPG containers bearing the registered marks of
the respondents. There is likewise unfair competition. Q: Is an action for cancellation of trademark a
prejudicial action in a criminal action for unfair
Petitioners’ acts will inevitably confuse the consuming competition?
public, since they have no way of knowing that the gas A: It is not. An action for the cancellation of trademark is a
contained in the LPG tanks bearing respondents’ marks is in remedy available to aperson who believes that he is or will
reality not the latter's LPG product after the same had been be damaged by the registration of a mark. On the other
61
hand, the criminal actions for unfair competition involved 1997, the DFA determined that the Madrid Protocol was
the determination of whether or not the respondent had an executive agreement.
given his goods the general appearance of the goods of the
petitioner, with the intent to deceive the public or defraud President Benigno C. Aquino III rati]ied the Madrid
the petitioner as his competitor. In the suit for the Protocol through an instrument of accession. The
cancellation of trademark, the issue of lawful registration Madrid Protocol entered into force in the Philippines on
should necessarily be determined, but registration is not a July 25, 2012. The Intellectual Property Association of
consideration necessary in unfair competition. Indeed, the Philippines (IPAP ) ]iled a special civil action for
unfair competition is committed if the effect of the act is to certiorari and prohibition to challenge the validity of
pass off to the public the goods of one man as the goods of the President's accession to the Madrid Protocol
another; it is independent of registration. Onemay be without the concurrence of the Senate. Furthermore, the
declared an unfair competitor even if his competing IPAP argued that the implementation of the Madrid
trademark is registered. (Caterpillar, Inc. v. Manolo P. Protocol ; speci]ically the processing of foreign
Samson, G.R. No. 205972 and G.R. No. 164352, November 9, trademark applications, conflicts with the IP Code
2016) considering that Article 2 of the Madrid Protocol means
that foreign trademark applicants may ]ile their
applications through the International Bureau or the
REGISTRATION OF MARKS UNDER THE MADRID
WIPO, and their applications will be automatically
PROTOCOL
granted trademark protection without the need for
designating their resident agents in the country.
Q: What is the Madrid Protocol?
It is treaty that allows natural or juridical persons of Was the President's rati]ication of the Madrid Protocol
member countries to Kile international registrations through is valid and constitutional?
their respective trademark ofKices (as ofKice of origin) A: President's ratiKication is valid and constitutional because
designating other member countries to be covered by the the Madrid Protocol, being an executive agreement as
international registration. The Madrid System for the determined by the Department of Foreign Affairs, does not
international Registration of Marks (Madrid System), which require the concurrence of the Senate.
is the centralized system providing a one-stop solution for
registering and managing marks worldwide, allows the Q: ls the Madrid Protocol is in con]lict with the IPC?
trademark owner to Kile one application in one language, A: There is no conflict between the Madrid Protocol and the
and to pay one set of fees to protect his mark in the IP Code. The IPAP also rests its challenge on the supposed
territories of up to 97 member—states. The Madrid System conKlict between the Madrid Protocol and the lP Code,
is governed by the Madrid Agreement, concluded in 1891, contending that the Madrid Protocol does away with the
and the Madrid Protocol, concluded in 1989. requirement of a resident agent under Section 125 of the IP
Code; and that the Madrid Protocol is unconstitutional for
The Madrid Protocol, which was adopted in order to remove being in conKlict with the local law, which it cannot modify.
the challenges deterring some countries from acceding to The lPAP's contentions stand on a faulty premise. The
the Madrid Agreement, has two objectives, namely: (1) to method of registration through the IPOPHL, as laid down by
facilitate securing protection for marks; and (2) to make the the lP Code, is distinct and separate from the method of
management of the registered marks easier in different registration through the WIPO, as set in the Madrid Protocol.
countries.
Comparing the two methods of registration despite their
Q: The Intellectual Property Of]ice of the Philippines being governed by two separate systems of registration is
(IPOPHL) recommended to the Department of Foreign thus misplaced. In arguing that the Madrid Protocol conKlicts
Affairs (DFA) that the Philippines should accede to the with Section 125 of the IP Code, the IPAP highlights the
Madrid Protocol. After its own review, the DFA endorsed importance of the requirement for the designation of a
to the President the country's accession to the Madrid resident agent, It underscores that the requirement is
Protocol. Conformably with its express authority under intended to ensure that non-resident entities seeking
Section 9 of Executive Order No. 459 (Providing for the protection or privileges under Philippine Intellectual
Guidelines in the Negotiation of International Property Laws will be subjected to the country's
Agreements and its Rati]ication) dated November 25, jurisdiction. lt submits that without such resident agent,
62
there will be a need to resort to costly, time consuming and A: Lightbox itself – no. Yes for the drawing of lightbox
cumbersome extra—territorial service of writs and Q: How about the movie poster inside the lightbox?
processes. A: Yes. Artistic work
Q: Hatch door?
ln arguing that the Madrid Protocol conflicts with Section A: No
125 of the IP Code, the IPAP highlights the importance of the
requirement for the designation of a resident agent, It
underscores that the requirement is intended to ensure that RECITATION 2: Copyright infringement or not?
non-resident entities seeking protection or privileges under Q: Photocopying 1/10 of a book?
Philippine Intellectual Property Laws will be subjected to A: Can be allowed as long as the photocopied part is not
the country's jurisdiction. It submits that without such substantial
resident agent, there will be a need to resort to costly, time Q: “Substantial”
consuming and cumbersome extra-territorial service of A: It is not dependent on the number of pages but on the
writs and processes. extent that the work is diminished
Q: If you were to lift 5% of the work, what can you do so
The IPAP misapprehends the procedure for examination that there would be no copyright infringement?
under the Madrid Protocol. The difKiculty, which the lPAP A: It must be attributed to the original author so that it
illustrates, is minimal, if not altogether inexistent. The would be compatible with fair use defense
IPOPHL actually requires the designation of the resident Q: Can you reproduce a whole copy of the book for
agent when it refuses the registration of a mark. Local private use only for discussion purposes?
representation is further required in the submission of the A: No.
Declaration of Actual Use, as well as in the submission of the Q: Can you photocopy a book you purchased and share it
license contract.I38] The Madrid Protocol accords with the with your classmates?
intent and spirit of the IP Code, particularly on the subject of A: Depends – if it is a substantial part of the book, can be
the registration of trademarks. The Madrid Protocol does held liable for copyright infringement
not amend or modify the Q: Buy a book and then sell again your purchased book?
A: Allowed – ]irst sale doctrine.
IP Code on the acquisition of trademark rights considering Q: Imported books, then sell them without permission
that the applications under the Madrid Protocol are still of author? Does the ]irst sale doctrine apply to imported
examined according to the relevant national law. In that items?
regard, the IPOPHL will only grant protection to a mark that A: No. Should be for personal use only
meets the local registration requirements. Q: Is there a limit to the number of books you can
import?
MARCH 1, 2021 A: No longer, should be compatible with fair use
RECITATION 1: Copyrightable or not? An application for international registration (international

Q: Collection of books whose authors died 50 years ago? application) may be Kiled only by a natural person or legal
A: Copyrightable as derivative works. entity having a connection — through establishment,
Q: A badly written love letter? domicile or nationality — with a Contracting Party to the
A: Yes, even if it is awfully written, regardless of quality of Madrid Agreement or the Protocol.
the work, regardless of manner of expression
Q: A lamp that has the design of a Chinese emperor? A mark may be the subject of an international application
A: If design element can be detached from usefulness, yes. only if it has already been registered with the trademark
Q: Sound of water coming out of faucet? ofKice of the Contracting Party with which the applicant has
A: Copyrightable the necessary connections (referred to as the ofKice of
Q: Map? origin).
A: Yes However, where all the designations are effected under the
Q: Recipe? Protocol (see below), the international application may be
A: No based simply on an application for registration Kiled with the
Q: Lightbox ofKice of origin. An international application must be
63
presented to th e International Bureau of WIPO through the International applications can be Kiled in English, French or
intermediary of the ofKice of origin. Spanish, irrespective of which treaty or treaties govern the
application, unless the ofKice of origin restricts that choice to
Q: What are the rights conferred upon international one or two of these languages.
registration of trademark under the Madrid Protocol?
An action should be Wiled in each Contracting Party concerned Once the International Bureau receives an international
A: From the date of the international registration (or, in the application, it carries out an examination for compliance
case of a Contracting Party designated subsequently, from with the requirements of the Protocol and its Regulations.
the date of that designation), the protection of the mark in This examination is restricted to formalities, including the
each of the designated Contracting Parties is the same as if classiKication and comprehensibility of the list of goods and/
the mark had been the subject of an application for or services. If there are no irregularities in the application,
registration Kiled directly with the OfKice of that Contracting the International Bureau records the mark in the
Party. If no provisional refusal is notiKied to the International International Register, publishes the international
Bureau within the relevant time limit, or if any such refusal registration in the WIPO Gazette of International Marks and
is subsequently withdrawn, the protection of the mark in notiKies it to each designated Contracting Party. Any matter
each designated Contracting Party is the same as if it had of substance, such as whether the mark qualiKies for
been registered by the OfKice of that Contracting Party. protection or whether it is in conKlict with a mark registered
previously in a particular Contracting Party, is determined
An international registration is therefore equivalent to a by that Contracting Party's trademark ofKice under the
bundle of national registrations. Although it is a single applicable domestic legislation.
registration, protection may be refused by some of the
designated Contracting Parties, or the protection may be The ofKice of each designated Contracting Party shall issue a
limited or renounced with respect to only some of the statement of grant of protection under the pertinent
designated Contracting Parties. Regulations. (If there is no refusal)
Likewise an international registration may be transferred to However, when designated Contracting Parties examine the
a new owner with respect to only some of the designated international registration for compliance with their
Contracting Parties. An international registration may also domestic legislation, and if some substantive provisions are
be invalidated (for example, for non-use) with respect to one not complied with, they have the right to refuse protection
or more of the designated Contracting Parties. Moreover, any in their territory. Any such refusal, including an indication of
action for infringement of an international registration must the grounds on which it is based, must be communicated to
be brought separately in each of the Contracting Parties the International Bureau, normally within 12 months from
concerned. the date of notification. However, a Contracting Party to the
Protocol may declare that, when it is designated under the
Q: What are the requirements for registration under the Protocol, this time limit is extended to 18 months. That
Madrid Protocol? Contracting Party may also declare that a refusal based on
An application for international registration must designate an opposition may be communicated to the International
one or more Contracting Parties in which protection is Bureau even after the 18—month time limit.
sought. (Indicate the party concerned) Further designations
can be effected subsequently. A Contracting Party may be If there is no response within 12 months, it is deemed
designated only if it is party to the same treaty as the admitted.
Contracting Party whose ofKice is the ofKice of origin. The
latter cannot itself be designated in the international Q: What is the term of protection of international
application. registration under the Madrid Protocol?
A: An international registration is effective for 10 years. It
The designation of a given Contracting Party is made either may be renewed for further periods of 10 years on payment
under the Agreement or the Protocol, depending on which of the prescribed fees.
treaty is common to the Contracting Parties concerned. If
both Contracting Parties are party to the Agreement and the
Protocol, the designation will be governed by the Protocol.
COPYRIGHT
64
National Library, no copyright is obtained. There can be no

A: What is a copyright? infringement of copyright likewise despite sale by others of
A: It is an intangible, incorporeal right granted by statute to such article (Jessie G. Ching v. William M. Salinas, Sr., Et Al.,
the author or originator of certain literary or artistic G.R. No. 161295, 29 June 2005).
productions, whereby he or she is invested, for a speciKic
period, with the sole and exclusive privilege of multiplying Other examples of items were there is no copyright:
copies of the same and publishing and selling them. a) Light boxes. They are not in the nature of pictorials
(Kensonic v. Uni-Line Multi Resources, lnc., supra and or drawings. Light boxes—units which utilize
Fernando Juan v Roberto Juan, G.R. No. 221372, August 23, specially printed posters sandwiched between
2017 both citing Black's Law Dictionary, Centennial Edition. plastic sheets and illuminated with backlights—are
6th ed. West Group, St. Paul Minnesota, USA, 1990, p. 336) not literary or artistic pieces which could be
The rights granted by copyright are, however, not limited to copyrighted under the copyright law. (Pearl & Dean
multiplying copies of the literary or artistic work, publishing Phil. v. Shoemart, 409 SCRA 231 2003),"
and selling but also include any form of communication to
the public, as well as right of attribution, right to carry out b) Medical creams and the name and container of a
derivative work and other moral rights. Copyright is likewise beauty cream product (KEC Cosmetics Laboratory v.
not conKined to literary and artistic work but also extend to Court of Appeals, Summerville General
scientiKic and scholarly works similar to those works Merchandising and Company, and Ang Tiam Chay,
enumerated in Section 172.1 of the IPC. GR. No. 115758, March 19 2002) even if there is a
The complete deKinition is: certiWicate from the National Library
c) There is no copyright on goods because they are not

Copyright should therefore be deKined then as an intellectual creations. They should be covered by
incorporeal and intangible property granted by law to the trademark instead (Manly Sportwear
originator or creator of certain literary, artistic, scientiKic Manufacturing, Inc., v. Dadodette Enterprises and/
and scholarly works whereby he or she is invested for a or Hermes Sports Center, G.R. N0. 165306, 20
speciKic period of time a collection of economic and moral September 2005).
rights on the terms speciKied by statute.
Q: When is the starting point of protection of a
Q: What are the characteristics of a copyright? copyright?
A: A: Works are protected by the sole fact of their creation,
1. It is granted to the creator or originator of the irrespective of their mode or form of expression, as well as
copyrightable work. But being a right, copyright can of their content, quality and purpose (Section 172.2, IPC)
be assigned;
2. The object is original intellectual creation in the

Q: What are the classi]ications of protected works?
literary, artistic and scientiKic domains;
A: There are two:
3. It is not indeKinite. The economic and moral rights a) Original and literary works; and
are exclusive to the creator or originator of the
b) Derivative works.
work during the term speciKied by law, except for
the moral right of attribution which is in perpetuity. Q: What are considered original literary and artistic
works?
4. Being a statutory grant, the rights derived from
Literary and artistic works are original intellectual creations
such grant may only be obtained and enjoyed with
in the literary and artistic domain protected from the
respect to the works and on the terms and
moment of their creation and shall include in particular:
conditions, speciKied in the statute. The ”works"
a) Books, pamphlets, articles and other writings;
must fall within the statutory enumeration or
description. b) Periodicals and newspapers;
For example, eye bushing is a useful article but it has no c) Lectures, sermons, addresses, dissertations
artistic value. Even though it was covered by a certiKicate of prepared for oral delivery, whether or not reduced
registration and there was notice of deposit with the in writing or other material form;
65
d) Letters; fall under ” other literary, artistic, scientiKic and scholarly

works ”. They are therefore protected from the moment of
e) Dramatic or dramatico - musical compositions; creation (Section 172.1, IPC; Columbia Pictures, Inc. v. Court
choreographic works or entertainment in dumb of Appeals, 261 SCRA 144, 1996). The publication of the
shows; messages without the consent of their writers constitutes
f) Musical compositions, with or without words; infringement of copyright. (Bar 2007)
g) Works of drawing, painting, architecture If it is “love u”, “miss u” and/or similar words and phrases, not
copyrightable. Should portray feelings and emotions, akin of a
h) Original ornamental designs or models for articles letter
of manufacture, whether or not registrable as an Alternative answer: No, not listed as copyrightable work.
industrial design, and other works of applied art;
(remember Denicola test) Q: Is the name ”Charlie Brown" and its pictorial
i) Illustrations, maps, plans, sketches, charts and representation copyrightable?
three-dimensional works relative to geography, A: Yes, as provided for under Section 172.1 of the IPC. Since
topography, architecture or science; copyright was obtained thereon, the owner can prevent its
use as trademark by somebody else. (United Features v.
j) Drawings or plastic works of a scientiKic or technical Munsingwear Creation, 179 SCRA 260 [1989])
character;
Q: Is a hatch door, which is de]ined as a small door, small
k) Photographic works including works produced by a gate or an opening that resembles a window equipped
process analogous to photography; with an escape for use in case of ]ire or emergency,
l) lantern slides; copyrightable?
A: Hatch door is not copyrightable. lt is by nature, functional
m) Audiovisual works and cinematographic works and and utilitarian serving as egress access during emergency. lt
works produced by a process analogous to is not primarily an artistic creation but rather an object of
cinematography or any process for making audio- utility designed to have aesthetic appeal. It is intrinsically a
visual recordings; useful article, which, as a whole, is not eligible for copyright.
Thus, the Kirst fabricator of the hatch door can not sue for
n) Pictorial illustrations and advertisements; copyright infringement all other fabricators of the same
o) Computer programs; and article. What is copyrightable is the drawing or the sketch of
the hatch door itself. Reproduction of the drawing or sketch
p) Other literary, scholarly, scientific and artistic without the consent of the creator constitutes copyright
works. (Section 172.1, IPC) infringement. Sison Olafio, et. al, v. Lim Eng Co. G.R. No.
195835, March 14, 2016
Q: Diana and Piolo are famous personalities in show
business who kept their love affair secret. They use a There is also no copyright infringement even if the hatch
special instant messaging service which allows them to door is fabricated based on the copyrighted drawing or
see one another's typing on their own screen as each sketch. Unlike a patent, a copyright gives no exclusive right
letter key is pressed. When Greg, the controller of the to the art disclosed; protection is given only to the
service facility, found out their identities, he kept a copy expression of the idea — not the idea itself.
of all the messages Diana and Piolo sent each other and
published them. Q: Is a useful article copyrightable?
A: A "useful article" deKined as an article "having an intrinsic
ls Greg liable for copyright infringement? Reason brie]ly. utilitarian function that is not merely to portray the
Are SMS copyrightable? appearance of the article or to convey information" is
excluded from copyright eligibility.
A: Yes, Greg is liable for copyright infringement. Under the
law, text messages are not expressly enumerated as among The only instance when a useful article may be the subject of
the copyrightable works. In the context of the problem, copyright protection is when it incorporates a design
however, these messages are akin to letters or may at least element that is physically or conceptually separable from
66
the underlying product. This means that the utilitarian A: The following are considered derivative works and shall
article can function without the design element. In such an also be protected by copyright:
instance, the design element is eligible for copyright a) Dramatizations, translations, adaptations,
protection. abridgments, arrangements, and other alterations
of literary or artistic works; and
The design of a useful article shall be considered a pictorial,
graphic, or sculptural work only if, and only to the extent b) Collections of literary, scholarly or artistic works,
that, such design incorporates pictorial, graphic, or and compilations of data and other materials which
sculptural features that can be identiKied separately from, are original by reason of the selection or
and are capable of existing independently of, the utilitarian coordination or arrangement of their contents.
aspects of the article. (Section 173.1, IPC)
Q: What is the treatment over derivative works?

A belt, being an object utility with the function of preventing A: They shall be protected as new works: Provided however,
one‘s pants from falling down, is in itself not copyrightable. that such new work shall not affect the force of any
However, an ornately designed belt buckle which is subsisting copyright upon the original works employed or
irrelevant to or did not enhance the belt's function hence, any part thereof, or be construed to imply any right to such
conceptually separable from the belt, is eligible for use of the original works, or to secure or extend copyright in
copyright. It is copyrightable as a sculptural work with such original works. (Section 173.2, IPC).
independent aesthetic value, and not as an integral element
of the belt‘s functionality. One of the economic rights of the author is to carry out,
prevent or authorize derivative work. Thus, no one carry out
A table lamp is not copyrightable because it is a functional a work derived from the original work except the author or
object intended for the purpose of providing illumination in without his authorization.
a room. The general shape of a table lamp is likewise not
copyrightable because it contributes to the lamp‘s ability to Q: Does a publisher have a right over the published
illuminate the reaches of a room. But, a lamp base in the edition of the copyrighted work?
form of a statue of male and female dancing Kigures made of
semi vitreous china is copyrightable as a work of art because A: Yes. ln addition to the right to publish granted by the
it is unrelated to the lamp's utilitarian function as a device author, his heirs, or assigns, the publisher shall have a
used to combat darkness. copyright consisting merely of the right of reproduction of
the typographical arrangement of the published edition of
Q: True or False – The Denicola Test in intellectual the work (Section 174, IPC).
property law states that if design elements of an article
re]lect a merger of aesthetic and functional Typographical arrangement covers the layout, composition,
considerations, the artistic aspects of the work cannot style and general appearance of a page of a published work.
be conceptually separable from the utilitarian aspects; In other words, the visual appearance of the printed page is
thus, the article cannot be copyrighted. independently copyrightable from the contents of the
published work. (ex: design of a book)
A: True. Applying the Denicola Test in Brandir International,
Inc. v. Cascade PaciKic Lumber Co. (834 F.2d 1142, 1988 Q: What are considered as unprotected subject matter
Copr.L.Dec. p. 26), the United State Court of Appeals for the or non-copyrightable work?
Second Circuit held that if there is any aesthetic element A:
which can be separated from the utilitarian elements, then a) Idea, procedure, system, method or operation,
the aesthetic element may be copyrighted. (Bar 2009) concept, principle, discovery or mere data as such,
Based on this test, hatch doors may become copyrightable if even if they are expressed, explained, illustrated or
they bear design elements that are physically and embodied in a work;
conceptually separable, independent and distinguishable
from the hatch door itself. b) News of the day and other miscellaneous facts
having the character of mere items of press
information;
Q: What are derivative works?
67
c) Any ofKicial text of a legislative, administrative or the Philippines. To his dismay, he later read an article in
legal nature, as well as any ofKicial translation a science journal written by Y, a professional
thereof (Section 175, IPC). astronomer, repeating exactl y what X discovered
without any attribution to him. Has Y infringed on X's
d) Any work of the Government of the Philippines. copyright, if any? (Bar 2011)
However, prior approval of the government agency a) No, since X did not reduce his lecture in writing or
or ofKice wherein the work is created shall be other material form;
necessary for exploitation of such work for proKit.
Such agency or ofKice may, among other things, b) Yes, since the lecture is considered X's original
impose as a condition the payment of royalties. (Ex: work;
SCRA)
c) No, since no protection extends to any discovery,
e) Statutes, rules and regulations, and speeches, even if expressed, explained, illustrated, or
lectures, sermons, addresses, and dissertations, embodied in a work;
pronounced, read or rendered in courts of justice,
before administrative agencies, in deliberative d) Yes, since Y's article failed to make any attribution
assemblies and in meetings of public character to X.
(Section 176.1, IPC). A lecture is copyrightable except lecture on discoveries
However, the author of speeches, lectures, sermons, Q: X came up with a new way of presenting a telephone
addresses, and dissertations of these works shall have the directory in a mobile phone, which he dubbed as the ”
exclusive right of making a collection of his works (Section iTel" and which uses lesser time for locating names and
176.2, IPC). telephone numbers. May X have his ”iTel" copyrighted in
his name? (Bar 2011)
a) No, because it is a mere system or method;
a. Idea, procedure, system, method or operation, b) Yes, because it is an original creation;
concept, principle, discovery or mere data as such, even
if they are expressed, explained, illustrated or embodied c) Yes, because it entailed the application of X's
in such work intellect;
d) No, because it did not entail any applitation of X's

The format or mechanics of a television show is not included
intellect.
in the list of protected works in Sec. 2 of P.D. No. 49, which is
substantially the same as Sec. 172 of the Intellectual
Property Code (R.A. No, 8293). The subject of copyright
refers to Kinished works and not to concepts. For this reason, b. News of the day
the protection afforded by the law cannot be extended to
cover format or mechanics of a television show. The audio— Q: Overseas Filipino worker Angelo dela Cruz was
visua| recording of the show, however, is copyrightable. kidnapped by Iraqi militants and as a condition for his
(Francisco Joaquin, Jr. v. Franklin Drilon, et. al., GR. No. release, a demand was made for the withdrawal of
108946, January 28, 1999) Filipino troops in Iraq. After negotiations, he was
released by his captors and was scheduled to return to
While an idea is not copyrightable, the expression of an idea the country. Occasioned by said homecoming and the
is protected by copyright. Thus, there can be a copyright of a public interest it generated, both GMA Network, Inc and
book which expounded on a new accounting system the ABS CBN made their respective broadcasts and coverage
author had developed but the system itself is not of the live event. ABS—CBN "conducted live audio—
copyrightable. video coverage of and broadcasted the event. ABS—CBN
allowed Reuters Television Service (Reuters) to air the
Q: An amateur astronomer, stumbled upon what footages it had taken earlier under a special embargo
appeared to be massive volcanic eruption in Jupiter agreement.
while peering at the planet through his telescope. The
following week, X, without notes, presented a lecture on
his ]indings before the Association of Astronomers of
68
ABS-CBN alleged that under the special embargo registration of the work but do not confer any right or title
agreement, no other Philippine subscriber of Reuters upon the registered copyright owner or automatically put
would be allowed to use ABS—CBN footage without the his work under the protective mantle of the copyright law; it
latter's consent." GMA—7 subscribes to Reuters. It is not a conclusive proof of copyright ownership. Hence, it
received a live video feed of the coverage of Angelo dela was held that when there is sufKicient proof that the
Cruz's arrival from Reuters. GMA—7 immediately copyrighted products are not original creations but are
carried the live newsfeed in its program "Flash Report," readily available in the market under various brands, as in
together with its live broadcast. Allegedly, GMA—7 did one case, validity and originality will not be presumed.
not receive any notice or was not aware that Reuters (Manly Sportwear Manufacturing, Inc. v. Dadodette
was airing footages of ABS-CBN. . ABS—CBN filed the Enterprises and/or Hermes Sports Center, GR. No. 165306,
Complaint for copyright infringement under Sections September 20, 2005)
177 and 211 of the Intellectual Property Code against
Felipe Gozon and other officers of GMA 7. It was held that the Intellectual Property Code does not
ls the news footage of ABS CBN copyrightable ? require registration of the work to fully recover in an
infringement suit.
A: The event itself is not copyrightable because that is the
newsworthy event. However, any footage created from the A copyright certiKicate nevertheless creates a presumption
event itself is an intellectual creation which is copyrightable. of the validity and ownership of the copyright and as such, is
While news of the day and other miscellaneous facts having useful in support of the claim of infringement. This
the character of mere items of press information" are presumption, however, is rebuttable and it cannot be
considered unprotected subject matter. However, the Code sustained where other evidence in the record casts doubt on
does not state that expression of the news of the day, the question of ownership.
particularly when it underwent a creative process, is not
entitled to protection. (ABS-CBN Corporation v. Felipe Moreover, [t]he presumption of validity to a certiKicate of
Gozon, et al., G.R. No. 195956, March 11, 2015) copyright registration merely orders the burden of proof.
The applicant should not ordinarily be forced, in the Kirst
Stated otherwise, copyright protection does not extend to instance, to prove all the multiple facts that underline the
news "events" or the facts or ideas which are the subject of validity of the copyright unless the respondent, effectively
news reports. But it is equally well—settled that copyright challenging them, shifts the burden of doing so to the
protection does extend to the reports themselves, as applicant.
distinguished from the substance of the information
contained in the reports. Copyright protects the manner of Q: Rudy is a ]ine arts student in a university. He stays in
expression of news reports, "the particular form or a boarding house with Bernie as his roommate. During
collocation of words in which the writer has communicated his free time, Rudy would paint and leave his ]inished
it. works lying around the boarding house. One day, Rudy
saw one of his works—an abstract painting entitled
Manila Traf]ic Jam—on display at the university
Q: What is the scope of protection of a copyright? cafeteria. The cafeteria operator said he purchased the
A: It is immediate. The aforementioned literary and artistic painting from Bernie who represented himself as its
works are protected from the moment of their creation. painter and owner. Rudy and the cafeteria operator
Works are protected by the sole fact of their creation, immediately confronted Bernie. While admitting that he
irrespective of their mode or form of expression, as well as did not do the painting, Bernie claimed ownership of its
of their content, quality and purpose. [SECTION 172.1, IPC] copyright since he had already registered it in his name
with the National Library as provided in the Intellectual
Ownership of copyrighted material is shown by proof of Property Code. Who owns the copyright to the painting?
originality and copyrightability. Explain.
Q: What then is the effect of registration and deposit A: Rudy owns the copyright to the painting because he was
with the National Library? the one who actually created it. His rights existed from the
The certiKicates of registration and deposit issued by the moment of its creation. The registration of the painting by
National Library serve merely as a notice of recording and Bernie with the National Library did not confer copyright
69
upon him. The registration is merely for the purpose of b) Dramatization, translation, adaptation, abridgment,
completing the records of the National Library. (Bar 2013) arrangement or other transformation of the work;
Q: Juan Xavier wrote and published a story similar to an c) The Kirst public distribution of the original and each
unpublished copyrighted story of Manoling Santiago. It copy of the work by sale or other forms of transfer
was, however, conclusively proven that Juan Xavier was of ownership;
not aware that the story of Manoling Santiago was d) Rental of the original or a copy of an (i) audiovisual
protected by copyright. Manoling Santiago sued Juan or (ii) cinematographic work, (m) a work embodied
Xavier for infringement of copyright. in a sound recording, (iv) a computer program, (v) a
ls Juan Xavier liable? compilation of data and other materials or (vi) a
A: Yes. Juan is liable for infringement of copyright. It is not musical work in graphic form, irrespective of the
necessary that Juan is aware that the story of Manoling was ownership of the original or the copy which is the
protected by copyright. The work of Manoling is protected subject of the rental;
from the time of its creation. (BAR 1998)
e) Public display of the original or a copy of the work;
Q: X's painting of Madonna and Child was used by her
mother to print some personalized gift wrapper. As part f) Public performance of the work; and
of her mother's efforts to raise funds for Bantay Bata, g) Other communication to the public of the work.
the mother of X sold the wrapper to friends. Y, an
entrepreneur, liked the painting in the wrapper and
made many copies and sold the same through National
Bookstore. Which statement is most accurate? (BAR Reproduction
2012) Q: What is the test of substantiality?
A: A: To constitute infringement, it is not necessary that the
a) Y can use the painting for his use because this is not whole or even a large portion of the work shall have been
a copyrightable material; copied. If so much is taken that the value of the original is
sensibly diminished, or the labors of the original author are
b) X can sue Y for infringement because artistic works
substantially and to an injurious extent appropriated by
are protected from the moment of creation;
another, that is sufKicient in point of law to constitute piracy.
c) Works of art need to be copyrighted also to get In cases of infringement, copying alone is not what is
protection under the law; prohibited. The copying must produce an injurious effect.
(Pacita Habana, et. al. v. Felicidad Robles and Goodwill
d) Y can use the drawing even though not copyrighted Trading Co., lnc., G.R. No. 131522, July 19, 1999)
because it is already a public property having been The law does not deWine “substantiality” by quality.
published already.
Q: What are the instances when reproduction of the
work is legally permissible?
A:
Q: What rights are derived from a copyright? a) Quotations from a published work if they are
A: There are two classifications of rights derived from a compatible with fair use and only to the extent
copyright: justiKied for the purpose, including quotations from
a) Economic rights; and newspaper articles and periodicals in the form of
b) Moral rights. press summaries: Provided, That the source and the
name of the author, if appearing on the work, are
Q: What are economic rights? mentioned;
A: Copyright or economic rights shall consist of the exclusive
right to carry out, authorize or prevent the following acts b) The reproduction or communication to the public
(Section 177, IPC): by mass media of (i) articles on current political,
a) Reproduction of the work or substantial portion of social, economic, scientiKic or religious topic, (ii)
the work; lectures, addresses and other works of the same
nature, which are delivered in public if such use is
70
for information purposes and has not been lost, destroyed or rendered unusable and
expressly reserved: Provided, That the source is copies are not available with the publisher.
clearly indicated;
f) Every library which, by law, is entitled to receive
c) The reproduction and communication to the public copies of a printed work, shall be entitled, when
of literary, scientiKic or artistic works as part of special reasons so require, to reproduce a copy of a
reports of current events by means of photography, published work which is considered necessary for
cinematography or broadcasting to the extent the collection of the library but which is out of
necessary for the purpose; stock. (Sec. 13, P.D. 49a)
d) The private reproduction of a published work in a g) The reproduction in one (1) back-up copy or
single copy, where the reproduction is made by a adaptation of a computer program shall be
natural person exclusively for research and private permitted, without the authorization of the author
study, shall be permitted, without the authorization of, or other owner of copyright in, a computer
of the owner of copyright in the work. The program, by the lawful owner of that computer
permission granted under this section shall not program: Provided, That the copy or adaptation is
extend to the reproduction of: (ex: Thesis) necessary for:
i. A work of architecture in the form of a. The use of the computer program in

building or other construction; conjunction with a computer for the
purpose, and to the extent, for which the
ii. An entire book, or a substantial part computer program has been obtained; and
thereof, or of a musical work in graphic
form by reprographic means; b. Archival purposes, and, for the replacement
of the lawfully owned copy of the computer
iii. A compilation of data and other materials; program in the event that the lawfully
iv. A computer program; obtained copy of the computer program is
lost, destroyed or rendered unusable.
e) Any library or archive whose activities are not for
profit may, without the authorization of the author
of copyright owner, make a single copy of the work
by reprographic reproduction: Derivative right
a. Where the work by reason of its fragile Q: How many works are protected if the author, or
character or rarity cannot be lent to user in another person with the consent of the author, makes a
its original form; transformation of the original work?
A: There are two works protected and covered by copyright,
b. Where the works are isolated articles
the original and the derivative work. However, if the
contained in composite works or brief
transformation of the original work was done after the term
portions of other published works and the
of the copyright, then, only one copyright subsists- that of
reproduction is necessary to supply them,
the derivative work.
when this is considered expedient, to
persons requesting their loan for purposes
Q: Who can carry out derivative work on the original
of research or study instead of lending the
work of the author?
volumes or booklets which contain them;
A: The author has the exclusive privilege to carry out
and
derivative work of his original work. During the term of the
c. Where the making of such a copy is in order copyright, the author may authorize person to carry out the
to preserve and, if necessary in the event derivative work.
that it is lost, destroyed or rendered
unusable, replace a copy, or to replace, in
the permanent collection of another similar Q: What is the ]irst sale doctrine?
library or archive, a copy which has been
71
A: The Kirst sale doctrine provides that an individual who A: No, the purchaser may only distribute the work, without
knowingly purchases a copy of a copyrighted work from the incurring liability, but can not reproduce or carry out
copyright holder receives the right to sell, display or derivative work out of it. The rights of reproduction and
otherwise dispose of that particular copy, notwithstanding transformation are distinct from the right of Kirst public
the interests of the copyright owner. distribution.
The copyright holder's right to control the distribution of his Rental Right
work goes away after the "Kirst sale" of the work. The "First Q: May the buyer or assignee of an audiovisual or
Sale Doctrine" is codiKied in U.S. copyright law at 17 U.S.C. cinematographic work, work embodied in a sound
Section 109. The doctrine is mirrored in our own copyright recording, a computer program or musical work lease
laws. or rent such work without the consent of its creator
following the ]irst sale doctrine?
This principle is also called the "exhaustion" principle. It
also applies to patent. A: No, the above-enumerated works can not be rented out to
others without the consent of the copyright holder. The right
Q: KK is from Bangkok, Thailand. She studies medicine of rental is a distinct economic right which is not covered by
in the Ponti]ical University of Santo Tomas (UST). She the Kirst sale doctrine.
learned that the same foreign books prescribed in UST
are 40-50% cheaper in Bangkok. So she ordered 50 However, works, not covered by the foregoing enumeration,
copies of each book for herself and her classmates and like books, may be leased out for proKit by the buyer, without
sold the books at 20% less than the price in the the consent of the copyright owner.
Philippines. XX, the exclusive licensed publisher of the
books in the Philippines, sued KK for copyright
infringement. Decide. Right of public display
A: KK did not commit copyright infringement. Under the Q: Raphael is an internationally well-known and award-
"Kirst sale" doctrine, the economic rights of the author winning painter. Alvaro is the President of world-wide
relevant to the question extend only to the Kirst public organization devoted to works of charity and the spread
distribution of each original copy. After the Kirst sale of the of the norms of hope, fortitude and serenity in the face
original copies, the owner may use and re-sell the same. of a global pandemic that has brought desolation to
Hence, there is no infringement by KK since the said humanity. Alvaro commissioned Raphael to do a
doctrine permitted resale without the publisher's further painting with a theme of inspiring mankind to be ]illed
permission. (BAR 2014; Kirtsaeng v. John Wiley & Sons, Inc. with faith and hope amid dif]iculties. After eight
568 U.S 319, 213 WL 1104736 ( U.S Mar. 19, 2013 ), cited in months, he ]inished the work of art. Despite the
Gepty, ibid. p. 179) painstaking effort that went with it, he is not proud of
Alternative answer: From the point of view of importation, it his opus. He showed it to his friends, Javier, Gabriel and
violates. Michael who were all in tremendous awe and
considered it a magnum opus-comparable to, if not
better than, the works of the Masters. May Alvaro
Q: What is the right of Droite de Suite? organize an open for all exhibit to display the great
A: Droite de Suite means right to follow. This means that in work of Raphael? (Commissioned work)
every sale or lease of an original work of painting or
sculpture or of the original manuscript of a writer or A: Under Section 178.4 of the IPC, the person who
composer, subsequent to the Kirst disposition thereof by the commissioned the work shall have ownership of the work
author, the author or his heirs shall have an inalienable right but the copyright thereto pertains to the creator unless
to participate in the gross proceeds of the sale or lease to the there is stipulation to the contrary. Therefore, while Alvaro
extent of Kive percent (5%). This right shall exist during the owns the painting, the copyright belongs to Raphael. The
lifetime of the author and for Kifty (50) years after his death. right to display is one of the economic rights of the creator.
Thus, unless Raphael allows it, Alvaro can not publicly
Q: May the purchaser of a copyrighted book reproduce it display the painting of Raphael.
or create a derivative work out of it?
72
Q: If Raphael did not transfer the copyright to Alvaro, A: There is one case, exactly what happened. The SC ruled
may Alvaro organize an exhibit among his close friends that there is no grave abuse of discretion on the part of the
and display the painting of Raphael? DOJ in not recommending the Kiling of the complaint. BUT
FOR BAR EXAM PURPOSES, we all know that good faith is
A: Yes, Alvaro may display the painting to his close friends. not a defense. It does not matter that he is not aware
What is prohibited is the public display of the copyrighted that he is copying an infringed copy. Because any act
work. that violates the economic rights of the author or
A public display is generally accepted to mean a display at a creator is tantamount to infringement.
place open to the public or where a substantial number of
persons outside of a normal circle of family or its social Q: Circumvention of effective technological measures or
acquaintances is gathered. alteration of right management information?
A: It is not infringement but only an aggravating
circumstance that may lead to the doubling of the award of
Q: Right of public performance – What is a public damages
performance?
A: "Public performance”, in the case of a work other than an Q: Cover songs?
audiovisual work, is the recitation, playing, dancing, acting A: No infringement.
or otherwise performing the work, either directly or by
means of any device or process; in the case of an audiovisual Q: What if you hit 100,000 subscribers as a result
work, the showing of its images in sequence and the making YouTube paid you royalty, is cover song still not
of the sounds accompanying it audible; and, in the case of a constituting infringement? What is the test for cover
sound recording, making the recorded sounds audible at a song not to constitute copyright?
place or at places where persons outside the normal circle of A: If there is modiKication, there is no doubt about it that it is
a family and that family's closest social acquaintances are or infringement. Because one of the moral rights of the author
can be present, irrespective of whether they are or can be is the right of integrity to the work he created. So, we are
present at the same place and at the same time, or at talking about the modiKication or transformation of the song.
different places and/or at different times, and where the So, a cover song is one where there is a rendition of a
performance can be perceived without the need for popular song by another artist.
communication within the meaning of Subsection 171.3 of
the Intellectual Property Code. Q: What are the criteria so that it will amount to
limitation of copyright therefore not constituting
infringement?
A: The following are the criteria:
MARCH 02, 2021 1. Lawfully made accessible to the public; and
2. Done privately and free of charge (so, the moment
there is pro]it, it is not done privately. Hence,
RECITATION you now have to get the consent of the composer
of those songs. So make sure you don’t hit
Q: Tell me if there is infringement in the following cases: 100,000 subscribers, so you won’t get a revenue
Pirating a pirated copy of a DVD or CD? share, if you have, then you must get the consent
A: Yes because mere possession of anything that is infringed of the composer otherwise there is
is already considered as infringement. infringement.)
Q: What if he does not know it is an infringed copy? Q: Use of layout of a book without the consent of the
A: It is not a defense. author?
A: There is infringement insofar as the copyright of the
Q: How about buying fake Sanrio product by a purchaser publisher is concerned but not insofar as the author is
who believed in good faith that it is not fake because he concerned. It should be the consent of the publisher of the
purchased it from a legitimate or credible store or seller book that should be obtained so that there will be no
of Sanrio products? infringement. We made a distinction between the layout and
73
the contents of the book. The layout belongs to the publisher photographer assigned the copyright to the one who
and the contents belong to the author. commissioned the work. In that case the consent of the
subject will be required, otherwise there is copyright
Q: Use of an ornamental design that is embossed on a infringement.
mug as a design of a t-shirt, 25 years after it was made
but during the lifetime of the creator. So that design in
the mug is copyrightable since we have said that if the RIGHT TO PUBLIC PERFORMANCE
design can be detached from the usefulness of the
article, based on Denicola test, the design is Q: What is public performance?
copyrightable. Is there infringement?
A: There is no infringement because with respect to works “Public performance” , in the case of a work other than an
of applied art the term of protection last only for 25 years audiovisual work, is the recitation, playing, dancing,
after the making and it is not within the lifetime of the acting or otherwise performing the work, either directly
creator. Unlike books which lasts within the lifetime of the or by means of any device or process; in the case of an
author and 50 years after his death. For works of applied art audiovisual work, the showing of its images in sequence
the term is only 25 years, after 25 years all the rights and the making of the sounds accompanying it audible;
granted by law to the copyright owner cease to be exclusive. and, in the case of a sound recording, making the
recorded sounds audible at a place or at places where
Q: Quotation from a book in a pleading but without the persons outside the normal circle of a family and that
consent of the author. Is there infringement? family's closest social acquaintances are or can be
A: There is no infringement. present, irrespective of whether they are or can be
present at the same place and at the same time, or at
Q: What about professional advice? You gave an opinion different places and/or at different times, and where the
for your client and lifted from a book without performance can be perceived without the need for
attribution. Can you be charged of infringement? communication within the meaning of Subsection 171.3
A: No infringement. You are not required to make
attribution when you give advice as a professional in the Do you remember our last discussion on public display. If
course of judicial proceedings. you limit it to family, friends, or relatives, it is not public
in the context of the IP code. Based on this deKinition it has
Q: But can you be charged of another offense? For sure it to be done in a place outside of the normal circle of family
is an act of bad faith since it is done without proper and family’s closest social acquaintances as the case may be.
attribution.
A: He may be liable for plagiarism. If he pass off to the public
that that is his own view or opinion. It is broader than RIGHT OF COMMUNICATION TO THE PUBLIC
infringement.
Q: What does communication to the public, as an
Q: What about public display of a painting after its economic right, mean?
purchase from the painter?
"Communication to the public" or "communicate to the
A: No infringement. It is a limitation of copyright.
public" means the making of a work available to the
public by wire or wireless means in such a way that
Q: Reproduction of a photograph by the owner without
members of the public may access these works from a
the consent of the subject of the photograph.
place and time individually chosen by them.
A: There is no infringement. Because the copyright belongs
to the photographer and not to the subject of the
photograph.
MORAL RIGHTS OF A COPYRIGHT HOLDER
Q: Is there an exception for there to be an infringement
of copyright in that case even if done without the Q: What are the so-called moral rights of a copyright
consent of the subject of the photograph? holder?
A: If it is a commissioned work. If the subject of the
photograph commissioned the photographer and the
74
Section 193. Scope of Moral Rights. - The author of a SJ, a computer genius, commissioned WI, former
work shall, independently of the economic rights in managing editor of the largest publishing company in
Section 177 or the grant of an assignment or license the world, to write SJ’s autobiography. SJ, preoccupied
with respect to such right, have the right: by his overwhelming ambition to grow his company
to be able to offer technological products that will
193.1. To require that the authorship of the works be
bene]it mankind, did not get to spend much time with
attributed to him, in particular, the right that his name, as
h i s c h i l d r e n . H i s i n t e n t i o n i n h av i n g t h e
far as practicable, be indicated in a prominent way on the
autobiography is for his children to get to know the
copies, and in connection with the public use of his work;
real SJ-his virtues and frailties. WI accepted the
(RIGHT OF ATTRIBUTION)
engagement on one condition – it will be a no holds
193.2. To make any alterations of his work prior to, or to barred account of SJ’s life. SJ agreed. But after the
withhold it from publication; ]inishing of the book, WI is not happy with it and
193.3. To object to any distortion, mutilation or other refuse to publish it.
modiKication of, or other derogatory action in relation to, May SJ compel WI to publish the book?
his work which would be prejudicial to his honor or
The copyright belongs to WI unless otherwise stipulated.
reputation; (RIGHT OF INTEGRITY) and
Therefore, it is within his moral rights to withhold the
193.4. To restrain the use of his name with respect to any book from publication.
work not of his own creation or in a distorted version of
Also, an author cannot be compelled to perform his
his work. (RIGHT AGAINST FALSE ATTRIBUTION)
contract to create a work or for the publication of his
work already in existence. However, he may be held liable
MNEMONICS: A.W.O.R. for damages for breach of such contract.
RIGHT OF ATTRIBUTION – the keyword here is attribution
in a prominent way. The use of Kine print will not be
Q: May the moral rights to a copyright be waived?
consistent with the requirement imposed by law.
Section 195. Waiver of Moral Rights. - An author may
RIGHT OF INTEGRITY – remember there was a time when waive his rights mentioned in Section 193 by a written
Martin Nievera changed the tempo of the national anthem to instrument, but no such waiver shall be valid where its
one which is more foxy, and there is a law against that. Of effects is to permit another:
course, he was criticized until he decided to put it out.
195.1. To use the name of the author, or the title of his
work, or otherwise to make use of his reputation with
RIGHT AGAINST FALSE ATTRIBUTION – let us say you
respect to any version or adaptation of his work which,
want to right a book, you know it will not sell, so, you tag
because of alterations therein, would substantially tend
along the name of a famous author just to make your work
to injure the literary or artistic reputation of another
saleable without the consent of the author whose name you
author; or
tagged along. Obviously, you will violate the moral right of
the author against false attribution. 195.2. To use the name of the author with respect to a
work he did not create.
Also, when an author contributes to a collective work, his
right to have his contribution attributed to him is deemed
waived unless he expressly reserves it.
Q: What is the term of moral right?

All moral rights shall be coterminous with the economic
rights of the author or creator of the work, except the
right of attribution which is in perpetuity.
75
As you all know there is an amendment to the IP code on What if there is no assignment of copyright? So, the UST law
copyright, it refers to right of attribution being in perpetuity. journals have different articles written by various authors.
In that case we will have different copyrights belonging to
the authors of the articles.
RULES ON OWNERSHIP OF COPYRIGHT
Q: What about work created in the course of the
Q: What rules govern copyright ownership? employment? What are the keywords here?
A: If creation of the object of copyright is part of the regular
Section 178. Rules on Copyright Ownership. - Copyright
duties of the employee then it belongs to the employer. If
ownership shall be governed by the following rules:
not, it belongs to the employer even though he uses the time,
178.1 Subject to the provisions of this section, in the case facilities, and resources of the employer. Just like in patent,
of original literary and artistic works, copyright shall without prejudice to the Kiring of the employee for doing
belong to the author of the work; something not related to his work. For patent, it is the
178.2. In the case of works of joint authorship, the co- inventive step. For copyright it is the object of the
authors shall be the original owners of the copyright and copyright whether part or not part of the regular duties
in the absence of agreement, their rights shall be of the employee.
governed by the rules on co-ownership. If, however, a
work of joint authorship consists of parts that can be So, if an employee of Jollibee for example, while serving
used separately and the author of each part can be sarap langhap hamburger able to compose a song so that
identiKied, the author of each part shall be the original composition belongs to him. The copyright belongs to him
owner of the copyright in the part that he has created; since it is not in relation to his work as a waiter.
178.3. In the case of work created by an author during What about the employees of _____________ . Did you know
and in the course of his employment, the copyright shall that they are required to prepare or write short stories and
belong to: then their publishers will choose which one will probably
(a) The employee, if the creation of the object of appreciated by their clients or patrons. The copyright
copyright is not a part of his regular duties even belongs to the publisher because it is part of the regular
if the employee uses the time, facilities and duties of the employees of the publishing company.
materials of the employer.
(b) The employer, if the work is the result of the 178.4. In the case of a work commissioned by a person
performance of his regularly-assigned duties, other than an employer of the author and who pays for it
unless there is an agreement, express or implied, and the work is made in pursuance of the commission,
to the contrary. the person who so commissioned the work shall have
ownership of the work, but the copyright thereto shall
remain with the creator, unless there is a written
Exception to the rule on joint ownership that it will be
stipulation to the contrary;
governed by the rules on co-ownership is when joint
authorship consists of parts that can be used separately 178.5. In the case of audiovisual work, the copyright shall
and the author of each part can be identi]ied then the belong to the producer, the author of the scenario, the
author of each part shall be the original owner of the composer of the music, the Kilm director, and the author
copyright in the part that he has created. of the work so adapted. However, subject to contrary or
other stipulations among the creators, the producer shall
Example, you have a law journal. Our UST Law Journal, when exercise the copyright to an extent required for the
you submit an article, if you still require the author to assign exhibition of the work in any manner, except for the right
the copyright to the law journal or do you have something in to collect performing license fees for the performance of
writing that allows you to re-publish the article. Better be musical compositions, with or without words, which are
careful, make sure that the copyright is assigned to UST or incorporated into the work; and
you are allowed to re-publish it. So that there will be no
possible charge of infringement. THIS IS THE MOST FAVORITE TOPIC IN THE BAR: This
commissioned work.
76
Eloise, an accomplished writer, was hired by Petong

We all know in commissioned work the one who to write a bimonthly newspaper column for Diario de
commissioned the work owns the work, but the copyright Manila, a newly-established newspaper of which
belongs to the author unless otherwise stipulated. Here, you Petong was the editor-in-chief. Eloise was to be paid
can have contrary stipulation that the copyright belongs P1,000 for each column that was published. In the
to the one who commissioned the work. But if it is silent, course of two months, Eloise submitted three
the one who commissioned the work owns the work and columns which, after some slight editing, were
the copyright belongs to the author or creator. printed in the newspaper. However, Diario de Manila
proved unpro]itable and closed only after two
As you all know in audiovisual work you can have months. Due to the minimal amounts involved, eloise
combination, or you have different copyrights. Because chose not to pursue any claim for payment from the
you can have composition, you have the ]ilm, the newspaper, which was owned by New Media
screenplay, the scene. Each of them has copyright to the Enterprises.
respective material or work. But with respect to
exhibition, it is the producers who will exercise the Three years later, Eloise was planning to publish an
copyright. So, the composer cannot restrain the anthology of her works, and wanted to include the
producer from exhibiting the work. They cannot three columns that appeared in the Diario de Manila
withhold their consent. Basically they have assigned in her anthology. She asks for your legal advice:
their to the producer to exhibit the work. a. Does Eloise have to secure authorization from
New Media Enterprises to be able to publish
In respect of letters, the copyright shall belong to the her Diario de Manila columns in her own
writer subject to the provisions of Article 723 of the Civil anthology? Explain fully. (4%)
Code. b. Assume that New Media Enterprises plans to
The publishers shall be deemed to represent the authors publish Eloise's columns in its own anthology
of articles and other writings published without the entitled, "The Best of Diaro de Manila:. Eloise
names of the authors or under pseudonyms, unless the wants to prevent the publication of her
contrary appears, or the pseudonyms or adopted name columns in that anthology since she was
leaves no doubt as to the author's identity, or if the never paid by the newspaper. Name one
author of the anonymous works discloses his identity. irrefutable legal arguments Eloise could cite
to enjoin New Media Enterprises from
including her columns in its anthology. (2%)
The copyright belongs to the composer and the letter
belongs to the recipient. a. Eloise does not have to secure the authorization
of New Media, because as the author, she owns
Q: What about works under pseudonym? the copyright to her columns.
A: The publisher unless the identity of the author is known b. Eloise could invoke that under the IPC, as the
in that case the copyright belongs to him. owner of the copyright to the columns, she can
either “authorize or prevent” reproduction of the
BAR EXAM QUESTION: work, including the public distribution of the
original and each of the work “by sale or other
forms of transfer of ownership”. While the
anthology as a derivative work is protected as a
new work, it does not affect the force of the
copyright of Elise upon her columns and does
not imply any right to New Media to use the
columns without the consent of Eloise. (Bar
2008)
77
Q: What about the anthology which would include the Monaliza cannot sue because the copyright belongs to the
column of Eloise? It is a derivative work, but who has the photographer. The exception to this is if it is a commissioned
right to carry out derivative work? work. If Monaliza commissioned her boyfriend to take her
A: The author of the original work. The force of the original photo and the copyright is assigned to Monaliza.
work is not lost by the derivative work. Meaning the while
the derivative work is protected as new work it will not
T, an associate attorney in XYZ Law Of]ice, wrote a
affect the copyright that Eloise has in the columns that she
newspaper publisher a letter disputing a columnist’s
wrote. Therefore, consent must be obtained.
claim about an incident in the attorney’s family. T
used the law ]irm’s letterhead and its computer in
W h i l e v a c a t i o n i n g i n B o r a c a y, Va l e n t i n o preparing the letter. T also requested the ]irm’s
surreptitiously took photographs of his girlfriend messenger to deliver the letter to the publisher. Who
Monaliza in her skimpy bikini. Two weeks later, her owns the copyright to the letter? (BAR 2011)
photographs appeared in the Internet and in a (A) T, since he is the original creator of the
national celebrity magazine. contents of the letter.
Monaliza found out that Valentino had sold the
photographs to the magazine and, adding insult to (B) Both T and the publisher, one wrote the letter
injury, uploaded them to his personal blog on the to the other who has possession of it.
Internet. (C) The law ofKice since T was an employee and
he wrote it on the Kirm’s letterhead.
A. Monaliza ]iled a complaint against Valentino for (D) The publisher to whom the letter was sent.
damages based on, among other grounds, violation of
her intellectual property rights. Does she have any
cause of action? Explain. (2%) In this case it is not part of his duties, to write something to
dispute the claim of a columnist about an incident in his
family. Because it is not related to his duties as an employee
B. Valentino’s friend Francesco stole the photographs of the Kirm. The copyright belongs to the employee, even
and duplicated them and sold them to a magazine though he may have used the time, facilities, and resources
p u b l i c a t i o n . Va l e n t i n o s u e d Fra n c e s c o f o r of the law Kirm as his employer.
infringement and damages. Does Valentino have any
cause of action? Explain. (2%)
C. Does Monaliza have any cause of action against

Francesco? Explain. (2%)
a. NO. Monaliza cannot sue Valentino for violation

of her intellectual property rights, because she
was not the one who took the pictures. She may
sue Valentino instead for violation of her right to
privacy. He surreptitiously took photographs of
her and then sold the photographs to a magazine
and uploaded them to his personal blog in the
internet.
b. NO. Valentino cannot sue Francesco for
infringement, because he has already sold the
photographs to a magazine.
c. YES. Monaliza can also sue Francesco for
violation of her right to privacy. (Bar 2010)
78
A: Yes. The widow owns the work. As the owner, she can sell
BR and CT are noted artists whose paintings are
it as his own property.
highly prized by collectors. Dr. DL commissioned
them to paint a mural at the main lobby of his new
Q: What is the general term of copyright protection?
hospital for children. Both agreed to collaborate on
the project for a total fee of two million pesos to be Section 213. Term of Protection. - 213.1. Subject to the
equally divided between them. It was also agreed that provisions of Subsections 213.2 to 213.5, the copyright
Dr. DL had to provide all the materials for the of both original and derivative works shall be
painting and pay for the wages of technicians and protected during the life of the author and for Kifty (50)
laborers needed for the work on the project. Assume years after his death. This rule also applies to
that the project is completed and both BR and CT are posthumous works.
fully paid the amount of P2M as artists’ fee by DL.
Under the law on Intellectual Property, who will own Q: How about in cases of joint authorship?
the mural? Who will own the copyright in the mural?
Why? Explain. 213.2. In case of works of joint authorship, the economic
rights shall be protected during the life of the last
Under Sec. 178.4 of the IPC, in case of commissioned surviving author and for Kifty (50) years after his death.
work, the creator (in the absence of a written stipulation
to the contrary) owns the copyright, but the work itself
belongs to the person who commissioned its creation. If today a person is granted a copyright for a book, for
Accordingly, the mural belongs to DL. However, BR and how long will the copyright be valid? If said person
CT own the copyright, since there is no stipulation to the uses a pseudonym, how would this affect the length of
contrary. (BAR 2004) the copyright?
A copyright endures during the lifetime of the creator and
The widow of a former President commissioned 50 years after his death. In case he uses a pseudonym, the
Matalino to write a biography for her late husband copyright shall last until the end of 50 years following the
for a fee. Upon completion of the work, the widow date of the Kirst publication of the work unless the author
paid Matalino the agreed price. The biography was is identiKied, in which case, the copyright subsists during
copyrighted. The widow, however, changed her mind his lifetime and for 50 years after his death. (1975 BAR)
upon reading the book and decided not to have it
published. Q: Are there other kinds of works with different terms of
Can the President’s widow sell the property without protection?
the consent of Matalino? Explain.
The President’s widow can sell the property without the
consent of Mtalino. The widow was the owner of the
work that was done by Matalino pursuant to their
agreement. (BAR 1986)
Can the President’s widow transfer the copyright
without the consent of Matalino?
NO. Under the law, in case of commissioned work, the
work belongs to the one who commissioned it but the
copyright belongs to the author, unless otherwise
stipulated. Thus, unless otherwise stipulated, the
President’s widow cannot transfer the copyright since it
belongs to the author.
Q: Can the one who commissioned the work, sell the

output, without the consent of the creator?
79
YES. 213.4. In case of works of applied art (ornamental Section 184. Limitations on Copyright. - 184.1.
designs) the protection shall be for a period of twenty- Notwithstanding the provisions of Chapter V, the
Kive (25) years from the date of making. following acts shall not constitute infringement of
copyright:
213.5. In case of photographic works, the protection
shall be for Kifty (50) years from publication of the work (a) The recitation or performance of a work,
and, if unpublished, Kifty (50) years from the making. once it has been lawfully made accessible to the
public, if done privately and free of charge or if
213.6. In case of audio-visual works including those
made strictly for a charitable or religious
produced by process analogous to photography or any
institution or society; (Sec. 10(1), P.D. No. 49)
process for making audio-visual recordings, the term
shall be Kifty (50) years from date of publication and, if (b) The making of quotations from a published
unpublished, from the date of making. work if they are compatible with fair use and
only to the extent justiJied for the purpose,
Section 215. Term of Protection for Performers, Producers
including quotations from newspaper articles
and Broadcasting Organizations. - 215.1. The rights
and periodicals in the form of press summaries:
granted to performers and producers of sound
Provided, That the source and the name of the
recordings under this law shall expire:
author, if appearing on the work, are mentioned;
(a) For performances not incorporated in (Sec. 11, third par., P.D. No. 49)
recordings, (walang video) Kifty (50) years from
(c) The reproduction or communication to the
the end of the year in which the performance
public by mass media of articles on current
took place; and
political, social, economic, scientiKic or religious
(b) For sound or image and sound recordings topic, lectures, addresses and other works of the
and for performances incorporated therein, same nature, which are delivered in public if
Kifty (50) years from the end of the year in which such use is for information purposes and has
the recording took place. not been expressly reserved: Provided, That the
215.2. In case of broadcasts, the term shall be twenty source is clearly indicated; (Sec. 11, P.D. No. 49)
(20) years from the date the broadcast took place. The (d) The reproduction and communication to the
extended term shall be applied only to old works with public of literary, scientiKic or artistic works as
subsisting protection under the prior law. part of reports of current events by means of
photography, cinematography or broadcasting to
Q: Is there a special rule on the calculation of the term? the extent necessary for the purpose; (Sec. 12,
P.D. No. 49)
YES. Section 214. Calculation of Term. - The term of
(e) The inclusion of a work in a publication,
protection subsequent to the death of the author
broadcast, or other communication to the public,
provided in the preceding Section shall run from the date
sound recording or Kilm, if such inclusion is made
of his death or of publication, but such terms shall always
by way of illustration for teaching purposes
be deemed to begin on the Kirst day of January of the year
and is compatible with fair use: Provided, That
following the event which gave rise to them.
the source and of the name of the author, if
appearing in the work, are mentioned;
As you know, there is a special way in calculating the term of
(f) The recording made in schools, universities,
the copyright. It is subsequent to the death of the author. As
or educational institutions of a work included in
stated in the rules. So, 50 years from January, following
a broadcast for the use of such schools,
his death. Let us say he died October 2021, you count it
universities or educational institutions:
January of the following year.
Provided, That such recording must be deleted
within a reasonable period after they were Kirst
LIMITATIONS ON COPYRIGHT broadcast: Provided, further, That such recording
may not be made from audiovisual works which
are part of the general cinema repertoire of
feature Kilms except for brief excerpts of the
work;
80
For i. –
MNEMONIC DEVICE: Pregnant Queen IRIS PAGE Jumping Q: So, how do we reconcile this (i) with the ]irst one (a)?
in Fun A: The Kirst one (a) is lawfully made accessible to the public
if done privately and free of charge. This one (i) allows
All other rights enumerated a while ago will not constitute public performance or the communication to the public of
infringement because these are limitations on copyright. the work, this (i) is allowed subject to the following
conditions:
For a. – take note of the keywords here. First, lawfully 1. In a place where no admission fee is charged in
made accessible to the public. When you sing songs to respect of the public performance;
your professors, you can do so since the song has been made 2. By a club or institution for charitable or
lawfully accessible to the public by the composer. You do it educational purpose and not for pro]it.
privately, free of charge, right?
Q: Can you invite for example, the artist for the ]irst time
For b. – sing songs composed, or not yet available to the public
but being sang for the ]irst time?
For c. – the keyword here is for information purposes A: YES. As long as there is no admission fee and done not for
only and the right has not been reserved. That is why proKit but for charitable and educational purpose.
newspaper companies can print the entire lecture of the
President, politicians. Because only for information For j. – So, as long as the original has been sold. Once you
purposes and of course no reservation on the part of the are the owner you can do whatever you want with it. The
author. only thing you cannot do is to make an impression that
you are the one who created it.
For d. – the keywords here are part of the reports of
current events. Let us say, there is a gallery exhibit. You can For l. – So, it is not for the deaf. It is for the blind, visually
take photo of the paintings part of the gallery and as long as and reading impaired persons.
you do it as part of the report of current events there is no
infringement of copyright.
RECITATION
For e. – the keywords are illustration for teaching
purposes only. A professor of architecture for example can Q: *Sorry hindi po narecord ung question.
do a summary and include the paintings by the masters A: The CIVIL case for copyright infringement can be Kiled
depending on the years or centuries they were made. against both Pedro and the recording company. In the civil
action for infringement, she can ask for the court to issue an
For f. – That’s why, UST can show to the students the UAAP injunction against the infringing act. He can ask for the
games. It was made by the school for its use. In the case of payment of actual damages. Actual damages include the
cheer dance competition. We can record it and make it costs for the legal proceedings as well as the proKits the
available f or showing to the students. infringer made. In determining the proKits the infringer
made, Pedro is only required to prove the gross sales.
Q: What about a ]ilm? Let us say UST would like to Further, he could ask for the impounding and/or destruction
generate funds. It would like to share to the students a of the infringing material as well as the materials or tools
]ilm that is not available to the public? used for the infringement, the impounding of the sales
A: That cannot be done, because even though it is made by invoice and other evidence that will support the claim for
the school for its use. It will not apply by express provision infringement. Before Kinal judgement is rendered, in lieu of
of law to audiovisual work part of general cinema records of actual damages, he could ask for statutory damages which is
feature Kilms, except brief excerpts of the work. equivalent to the Kiling fee but not less than 50K. (DEAN:
That is cheap, no one does that [pertaining to the last
For g. – keywords here are ephemeral recording. So, remedy given])
ephemeral means temporary. But only broadcast
organization can do ephemeral recordings and it uses its He can also ask for other terms and conditions including the
own facilities and used in its own broadcast. payment of moral damages.
81
Q: How about exemplary damages? We recall the conditions: lawfully made accessible to the
A: He can also ask exemplary damages. This is only the kind public, done privately or free of charged or in simple words,
of IP right where in case of infringement you can ask for private performance of a work.
actual, moral and exemplary damages. You cannot pray for
those when it comes to infringement of patents or
trademarks.
Q: What else?
A: He has the right to Kile an independent action for
injunction or accounting as the case may be. He could Kile a
criminal action for infringement against Juan.
Q: What about a criminal action against the recording

company?
A: NO.
Q: When may a corporation be charged with copyright

infringement? Who will be the responsible parties if the
offender is a corporation? This is different from
bene]iting from the acts of infringement. Because this is
the act of infringement itself. The recording,
distributing, displaying that song composed by
somebody else, without his consent amounts to
infringement of copyright. So those rights belong to Juan
Dela Cruz. The recording company published, recorded,
distributed that work to the public therefore infringing
the rights of Juan Dela Cruz.
A: ABS-CBN v. Gozon. J. Leonen made a distinction on who
can be held criminally liable at least for purposes of
determining probable cause. In that case, it was ruled that
there was no basis for Gozon to be held liable.
Q: When may the of]icers of a corporation be held liable

criminally?
A: If they have direct participation. If they are the efKicient
actors, they are responsible for the violation. Those who
cause the recording and distribution are liable criminally.
But not the directors of the corporation without any speciKic
act or participation in the recording, publication, or
performance of the copyrighted work.
There is no law which says that in case of infringement

of copyright the corporation through the directors
should be liable. The basis to hold them liable is if they
are the ef]icient actors.
PRVIATE PERFORMANCE OF A WORK
82
When this case was decided, there was a requirement of

The Filipino Society of composers (FCT) is a non-
registration of deposit to acquire copyright. THAT
pro]it association of authors, composers and
REQUIREMENT IS ELIMINATED UNDER PD 49 THE
publishers said association is the owner of certain
COPYRIGHT LAW.
musical compositions among which are the songs
entitled: “Dahil Sa Iyo,” “Sapagkat Ikaw Ay Akin,”
SO, here, it is not a private performance. HENCE, there is
“Sapagkat Kami Ay Tao Lamang” and “The Nearness
infringement of copyright.
Of You”. BT is the operator of a restaurant known as
“Alex Soda Foundation and Restaurant” where a
combo with professional singers, hired to play and MAKING OF QUOTATIONS
sing musical compositions to entertain and amuse
customers therein, were playing and singing the
Q: What are the criteria to be observed such that making
above-mentioned compositions without any license
quotation from a published work does not amount to
or permission from FCT to play or sing the same. It is
copyright infringement?
admitted that the patrons of the restaurant in
question pay only for the food and drinks and The criteria are as follows:
apparently not for listening to the music. a) IT IS COMPATIBLE WITH FAIR USE;
b) THE EXTENT OF THE USE IS JUSTIFIABLE FOR THE
Was the playing and singing of the musical PURPOSE INTENDED; AND,
compositions of FCT inside the establishment of BT c) T HE SOURCE AND AUTHOR OF THE WORK ARE
constitute a public performance for pro]it within the MENTIONED (THERE IS PROPER ATTRIBUTION).
meaning and contemplation of the Copyright Law?
The music provided is for the purpose of entertaining and

amusing the customers in order to make the
establishment more attractive and desirable (Record on
Appeal, p. 21). It will be noted that for the playing and
singing the musical compositions involved, the combo
was paid as independent contractors by the appellant
(Record on Appeal, p. 24). It is therefore obvious that the
expenses entailed thereby are added to the overhead of
the restaurant which are either eventually charged in the
price of the food and drinks or to the overall total of
additional income produced by the bigger volume of
business which the entertainment was programmed to
attract. Consequently, it is beyond question that the
playing and singing of the combo in defendant-appellee's
restaurant constituted performance for proKit
contemplated by the Copyright Law. (Filipino Society of
Composers, Authors and Publishers, Inc. v. Tan, G.R. No.
L-36402, [March 16, 1987], 232 PHIL 426-434)
Incidentally, in a similar case, it was ruled that “The

performance in a restaurant or hotel dining room, by
persons employed by the proprietor, of a copyrighted
musical composition, for the entertainment of patrons,
without charge for admission to hear it, infringes the
exclusive right of the owner of the copyright.”
83
Johnny Cruz is a staunch conservative and a loyal The lifting of substantial portions of a book by the author
member of the Republican Party. He is pro-life, constitutes infringement of the copyright of the authors
believes in the ]irst amendment and advocates of the Kirst book. If so much is taken that the value of the
former POTUS Trump’s basic philosophy- America original work is substantially diminished, there is an
First, He wrote an 88 page thought provoking article infringement of copyright and to an injurious extent, the
about the second impeachment of Trump. Echoing work is appropriated. (Habana v. Robles, G.R. No.
many legal scholars, he argued that the impeachment 131522, [July 19, 1999], 369 PHIL 764-798)
is unconstitutional because the impeachment process
only applies to a sitting President; the objective of
In cases of infringement, copying alone is not what is
impeachment is to remove an incumbent President
prohibited. The copying must produce injurious effect. In
and since Trump has left the POTUS of]ice, the
the Habana case, the Supreme Court held that the injury
impeachment has no legal leg to stand on. He
consists in that the second author lifted from the Kirst
concluded that the impeachment is nothing but a
author’s book materials that were the result of the latter’s
hoax and part of the continuing prosecution of Trump
research work and compilation and misrepresented them
by the left and the media mob.
as her own. The infringer circulated the book for
commercial use and did not acknowledge the Kirst author
Pearl Ivory is an avid fan of the Democratic Party. She as her source. It should be noted that in the Habana case,
believes in all its liberal ideas and progressive the number of pages copied did not even account for
policies. Anti-abortion for her is really not against life more than 50% of the book. It seems that had the second
but simply means pro-choice. She gushes with author made the proper attribution, there would have
admiration on the prominent Democrats – Bill been no infringement.
Clinton, Barack Obama and the likes. She wrote a
critique on the work of Johnny Cruz which literally
copied 90% of the Johnny’s article but made the INFORMATION PURPOSES
proper attribution. 10% of the article is in support of
her conclusion that Trump is a threat to the sociery
Cite example of “addresses and other works of the same
and democracy and should be permanently barred
nature” which can be reproduced to the public by mass
from seeking elective of]ice.
media without infringement
In Rappler, Inc. v. Andres Bautista, it was held that
Is Pearl Ivory liable for copyright infringement?
presidential and vice-presidential debates fall under
“addresses and other works of the same nature”. Thus,
Yes, Pearl Ivory is liable for copyright infringement. the copyright conditions for the debates are: (1) the
Making quotation from a published work is permissible. reproduction or communication to the public by mass
However, to constitute as a valid limitation on copyright, media of the debates is for information purposes; (2) the
the quotation must be compatible with fair use. One of debates have not been expressly reserved by the
the factors to be considered in determining whether the copyright holders; and (3) the source is clearly indicated.
use made of a work in any particular case is fair use is the
amount and substantiality of the portion used in relation
The Supreme Court allowed the debates to be shown or
to the copyrighted work as a whole. Copying 90% of the
live streamed unaltered on Rappler’s and other websites
wok even though with proper attribution is not
subject to the foregoing copyright conditions.
compatible with fair use.
So, even if the contract is only between GMA 7, ABS CBN

Q: Does the lifting of a portion of a book by another
with COMELEC, the SC allowed Rappler to live stream those
author constitute copyright infringement?
debates on its website and other similar websites. Subject to
those conditions.
84
UNDER THE DIRECTION AND CONTROL OF THE The must-carry rule is a regulation of the National
GOVERNMENT Telecommunications Commission which obligates cable
TV networks to carry the signals of local TV stations and
show in full the free-local TV programs.
Q: What do you understand by the MUST-CARRY RULE?
The improved broadcast signals that CATV offers may

infringe or encroach upon the audience or viewer market
of the free-signal TV. This is so because the latter's signal
may not reach the remote areas or reach them with poor
signal quality. To foreclose this possibility and protect the
free-TV market (audience market), the must-carry rule
was adopted to level the playing Kield. With the must-
carry rule in place, the CATV networks are required to
carry and show in full the free-local TV's programs,
including advertisements, without alteration or deletion.
This, in turn, beneKits the public who would have a wide-
range of choices of programs or broadcast to watch. This
also beneKits the free-TV signal as their broadcasts are
carried under the CATV's much-improved broadcast
signals thus expanding their viewer's share. (GMA
Network, Inc. v. Central CATV, Inc., G.R. No. 176694,
[July 18, 2014])
Hence, it was ruled that the carriage by cable TV

providers of ABSCBN’s signals and the showing in full of
the local TV programs do not constitute infringement.
(ABS-CBN Broadcasting Corp. v. Philippine Multi-Media
System, Inc., G.R. Nos. 175769-70, [January 19, 2009],
596 PHIL 283-314)
This is based on SEC. 184.1 (h) of the IPC, the use made of
a work by or under the direction or control of the
Government, by the National library or by educational,
scientiKic or professional institutions where such use is in
the public interest and is compatible with fair use will not
constitute copyright infringement.
It was further held that while the Memorandum Circular

of the NTC on the must-carry rule refers to cable
television, it should be understood as to include direct-to-
home via satellite TV (DTH) which provides essentially
the same services.
In GMA Network v. Central CATV, the Supreme Court

further ruled that under the must-carry rule, the cable TV
networks are required to carry and show in full the free-
local TV’s programs, including advertisements, without
alteration or deletion. The act of showing advertisements
does not constitute an infringement of the “television and
85
In a written legal opinion for a client on the

A cable TV provider is required to include the programs of difference between apprenticeship and learnership,
ABSCBN, GMA, all of those free-local tv program. Liza quoted without permission a Labor Law expert's
comment appearing in his book "Annotations On
The issue in this case is whether or not that will infringe on Labor Code"
the copyright and broadcast right of GMA 7, ABSCBN and
others. Can the Labor Law expert hold Liza liable for
infringement of copyright for quoting a portion of his
In the ABSCBN case, the issue is whether or not the cable book without his permission?
provider will infringe on the copyright of local TV station if
they carry its programs. The SC said, no because pursuant to No, the Labor Law expert cannot hold Liza liable for
the must-carry rule. infringement of copyright. Under Sec 184.1(k) of the IPC.
"Any use made of a work for the purpose of any judicial
In GMA Network v. Central CATV, the issue is whether or not proceedings or for the giving of professional advice by a
the cable orovider can also include the advertisements part legal practitioner" shall not constitute infringement of
of the free-local TV programs. So, parang naki-free ride ka. copyright. (BAR 2006)
The SC said, it is part of the must-carry rule.
Q: Is carrying the signals of the local TV station as form The use made of a work for the purpose of giving
of re-broadcasting? professional advice is a limitation on copyright and does
not require the consent of the author.
No, the cable TV provider is not the origin nor does it
claim to be the origin of the programs broadcasted by the
ABS-CBN; the former did not make and transmit on its The use made of a work for the purpose of giving
own but merely carried the existing signals of the latter professional advice is a limitation on copyright and does not
and when the cable provider subscribers view ABSCBN’s require the consent of the author nor attribution.
programs in Channels 2 and 23, they know that the origin
thereof was the latter. (ABS-CBN Broadcasting Corp. v. Q: May Liza be held criminally liable if she did not
Philippine Multi-Media System, Inc., G.R. Nos. attribute the portion of the work she quoted in her
175769-70, [January 19, 2009], 596 PHIL 283-314) opinion to the labor law author?
The law does not require attribution when it comes to the
use of the work for judicial proceeding or giving
JUDICIAL PROCEEDINGS OR PROFESSIONAL ADVICE professional advice and as such, Liza cannot be sued for
copyright infringement despite lack of attribution.
Q: May a person have photocopies of some pages of the However, Liza may be held liable for plagiarism which is
book of Professor Rosario made without violating the broader in scope than copyright. To plagiarize means to
Copyright law? steal and pass off the ideas or words of another as one’s
own. It is basically literary theft.
No, the private reproduction of a published work in a
single copy, where the reproduction is made by a natural
person exclusively for research and private study, is DOCTRINE OF FAIR USE
permitted, without the authorization of the owner of the
copyright in the work does not apply to a book.
Reproduction of a book is covered by a separate Q: What is fair use?
provision. If the pages copied amount to a substantial
portion, there is infringement of copyright.
BAR EXAM QUESTION:
86
Fair use as “a privilege to use the copyrighted material in First, the purpose and character of the use of the
a reasonable manner without the consent of the copyrighted material must fall under those listed in
copyright owner or as copying the theme or ideas rather Section 185, thus: "criticism, comment, news reporting,
than their expression. Fair use is an exception to the teaching including multiple copies for classroom use,
copyright owner’s monopoly of the use of the work to scholarship, research, and similar purposes." The purpose
avoid sifKling “the very creativity which the law is and character requirement is important in view of
designed to foster” copyright's goal to promote creativity and encourage
creation of works. Hence, commercial use of the
copyrighted work can be weighed against fair use.
Under this doctrine, the fair use of a copyrighted work for
(1) criticism, comment, (2) news reporting, (3) teaching
including multiple copies for classroom use, (4) The "transformative test" is generally used in reviewing
scholarship, research, and similar purposes is not an the purpose and character of the usage of the copyrighted
infringement of copyright. work. This court must look into whether the copy of the
work adds "new expression, meaning or message" to
transform it into something else. "Meta-use" can also
Q: What are the factors to be considered in determining
occur without necessarily transforming the copyrighted
fair use?
work used.
Determining fair use requires application of the four-
factor test. Section 185 of the IPC lists four factors to
Second, the nature of the copyrighted work is signiKicant
determine if there was fair use of a copyrighted work:
in deciding whether its use was fair. If the nature of the
work is more factual than creative, then fair use will be
(a) The purpose and character of the use, including weighed in favor of the user.
whether such use is of a commercial nature or is for non-
proKit educational purposes;
Third, the amount and substantiality of the portion used
is important to determine whether usage falls under fair
(b) The nature of the copyrighted work; use. An exact reproduction of a copyrighted work,
compared to a small portion of it, can result in the
conclusion that its use is not fair. There may also be cases
(c) The amount and substantiality of the portion used
where, though the entirety of the copyrighted work is
in relation to the copyrighted work as a whole; and
used without consent, its purpose determines that the
usage is still fair. 121 For example, a parody using a
(d) The effect of the use upon the potential market for or substantial amount of copyrighted work may be
value of the copyrighted work. permissible as fair use as opposed to a copy of a work
produced purely for economic gain.
CODE: PNAsE
Lastly, the effect of the use on the copyrighted work's
market is also weighed for or against the user. If this
court Kinds that the use had or will have a negative impact
on the copyrighted work's market, then the use is
deemed unfair. (ABS-CBN Corp. v. Gozon, G.R. No.
195956 , [March 11, 2015], 755 PHIL 709-782)
Interestingly, in the ABSCBN case, the respondents GMA 7

invoked as of one of their defenses the doctrine of fair use
since the footage was only aired by Kive seconds. It was
held that whether the alleged Kive-second footage may be
considered fair use is a matter of defense as the case
involves determination of probable cause at the
preliminary investigation stage only.
87
KLM Printers, Inc. operated a small outlet located at

The defense of fair use cannot be raised during preliminary the ground ]loor of a university building in Quezon
investigation but should be raised during the trial. City. It possessed soft copies of certain textbooks on
]ile, and would print "book-alikes" of these textbooks
BAR EXAM QUESTION: (or in other words, reproduced the entire textbooks)
Virtucio was a composer of Ilocano songs who has upon order and for a fee. It would even display
been quite popular in the Ilocos Region. Pascuala is a samples of such "book-alikes" in its stall for sale to
professor of music in a local university with special the public.
focus on indigenous music. When she heard the
musical works of Virtucio, she purchased a CD of his Upon learning of KLM Printers, Inc.'s activities, the
works. She copied thte CD and sent the second copy to authors of the textbooks ]iled a suit against it for
her Music class with instructions for the class to copyright infringement. In its defense, KLM Printers,
listen to the CD and analyze the works of Virtucio. Inc. invoked the doctrine of fair use, contending that
the "book-alikes" are being used for educational
Did Pascuala thereby infringe Virtucio’s copyright? purposes by those who avail of them.
Explain your answer.
(a) What is the doctrine of fair use? (2%)
Pascual did not infringe on the rights of Virtucio. The fair (b) Is KLM Printers, Inc.'s invocation of the doctrine
use of a copyrighted work for criticism, comment, news of fair use proper in this case? Explain.
reporting, teaching including limited number of copies
for classroom use, scholarship, research and similar
purposes is not an infringement of copyright. (Section a. Under this doctrine, the fair use of a copyrighted
185, IPC) In this case, VIrtucio’s reproduction of the work for (1) criticism, comment, (2) news
limited number of CD was for classroom use and reporting, (3) teaching including multiple copies
educational purposes thus negating copyright for classroom use, (4) scholarship, research, and
infringement. (BAR 2017) similar purposes is not an infringement of
copyright.
b. In determining whether the use made of a work
Q: What if Pascual copied the CD and he gave it to 50 in any particular case is fair use, the factors to be
students? considered shall include: (a) The purpose and
A: In that case, it is no longer consistent with fair use, given character of the use, including whether such use
the amount and substantiality of the portion of the work is of a commercial nature or is for non-proKit
used or copied. educational purposes; (b) The nature of the
copyrighted work; (c) The amount and
substantiality of the portion used in relation to
the copyrighted work as a whole; and (d) The
effect of the use upon the potential market for or
value of the copyrighted work
COPYRIGHT INFRINGEMENT
Q: What is copyright infringement?
88
Infringement of a copyright is a trespass on a private Copyright infringement is committed by any person who
domain owned and occupied by the owner of the shall use original literary or artistic works, or derivative
copyright, and, therefore, protected by law, and works, without the copyright owner’s consent in such a
infringement of copyright, or piracy, which is a manner as to violate the foregoing economic and moral
synonymous term in this connection, consists in the rights of the author.
doing by any person, without the consent of the owner of
the copyright, of anything the sole right to do which is
A person infringes a right protected under the IPC
conferred by statute on the owner of the copyright.
when one:
a) Directly commits an infringement; (principal by
The gravamen of copyright infringement is not merely the direct participation)
unauthorized "manufacturing" of intellectual works but
b) BeneKits from the infringing activity of another
rather the unauthorized performance of any of the rights
person who commits an infringement if the
exclusively granted to the copyright owner. Hence, any
person beneKiting has been given notice of the
person who performs any of such acts without obtaining
infringing activity and has the right and ability to
the copyright owner's prior consent renders himself
control the activities of the other person;
civilly 40 and criminally liable for copyright infringement.
It was held that the copying of the genuine Microsoft c) With knowledge of infringing activity, induces,
software to produce Computer system har disk or Read causes or materially contributes to the infringing
only Memory (CD-ROMs) containing fake Microsoft conduct of another.
software and their distribution are illegal even if the
copier or distributer is a Microsoft licensee. (NBI - On bene]iting, if you notice from this mode of infringement,
Microsoft Corp. v. Hwang, G.R. No. 147043, [June 21, there are various conditions so that you will fall within this
2005], 499 PHIL 423-444) infringement. First, there is beneKit from the acts of
infringement. Second, the one who beneKited had been given
In this case of NBI – Microsoft, not yet asked in the BAR. notice of the infringing activity. So, if he is not aware, he
The question is whether or not the copying of a genuine cannot be charged under this section. Third, he has the
Microsoft software to produce a hard disk or CD-ROM ability to control the activities but did not ______.
containing fake Microsoft software and distributing the
same being illegal even if the copier or distributer is a Q: May the author or creator of the work sue for
Microsoft licensee. The licensee here copied the genuine copyright infringement if he fails to deposit a copy of his
software to produce its own system hard disk. The SC work to the National Library (or the IPO as deputized by
said, there is probable cause to charge infringement of the National Library)?
copyright.
Absolute similarity of the purported pirated works to the

copyrighted works is not required. The essence of a
copyright infringement is the similarity or at least
substantial similarity of the purported pirated works to
the copyrighted work. (Joaquin, Jr. v. Drilon, G.R. No.
108946, [January 28, 1999], 361 PHIL 900-916)
Q: When is copyright infringement committed?
89
persons claiming to be the owner of the copyright. The one

Ye s , h e m ay s u e fo r c o py r i g h t i n f r i n g e m e n t
with the certiKicate of registration is presumed to be the
notwithstanding the lack of deposit and registration with
owner of the copyrighted work. It is only prima facie and can
the National Library. Artistic and Literary works are now
be overcome by evidence to the contrary, but at least you
protected by its mere creation under the new Copyright
have that evidence in your favor.
law.
Q: What if there is a certi]icate issued to either of them?
Under PD 49, failure to comply with registration and A: It is a matter of evidence as to who composed or created
deposit does not deprive the copyright owner of the right that work Kirst.
to sue for infringement but merely limits the remedies
available to him because the copyright for a work is Q: May corporate of]icers be held liable for copyright
granted from the moment of creation. This means that infringement?
the author whose work was infringed can only secure an
injunction against infringement but cannot sue for
damages. (Columbia Pictures, Inc. v. Court of Appeals,
G.R. No. 110318, [August 28, 1996], 329 PHIL 875-932)
However, under the IPC, the copyright owner may not

only obtain an injunction but mat also ask for damages
and exercise other remedies provided by the law eve
though his work is not deposited and registered with the
IPO.
As you all know the IPO may be deputized by the National

Library to receive deposit of the manuscript.
(This is a bar question that was answered based on PD

49.) That time, it limits the remedy to injunction, BUT
UNDER THE PRESENT CODE, the copyright owner may
not only obtain an injunction but may also ask for
actual, moral, or exemplary damages and exercise all
other remedies provided by law. Even though the work
is not deposited or registered with the IPO.
Q: What are the elements of copyright infringement?

For a claim of copyright infringement to prevail, the
evidence on record must demonstrate:
a. Ownership of a validly copyrighted material by
the complainant; and
b. Infringement of the copyright by the respondent.
(Ching v. Salinas Sr., G.R. No. 161295, [June 29,
2005], 500 PHIL 628-651)
Even though the certiKicate of registration is not required to

acquire copyright over copyrightable work, and it does not
convert a work if it is not copyrightable in the Kirst place. It
serves a purpose because of the prima facie evidence of
ownership of the copyrighted material. So, if you have 2
90
Based on those two, the SC said there is no basis to hold

Section 217 of the Intellectual Property Code states that
the chairman of GMA for trial.
"any person" may be found guilty of infringement. It also
imposes the penalty of both imprisonment and Kine.
Q: In an action for damages on account of an
infringement of a copyright, the defendant (the alleged
It has been ruled that corporate ofKicers and/or agents pirate) raised the defense that he was unaware that
may be held individually liable for a crime committed what he had copied was a copyrighted material. Would
under the Intellectual Property Code. this defense be valid?
No. AN intention to pirate is not an element of
The existence of the corporate entity does not shield from infringement. Infringement under the Intellectual
prosecution the corporate agent who knowingly and Property Code is malum prohibitum. The Intellectual
intentionally cause the corporation to commit a crime. A Property Code is a special law. Copyright is a statutory
corporate ofKicer cannot protect himself behind a creation: Malice or criminal intent completely immaterial.
corporation where he is the actual, present and efKicient Hence, an honest intention is no defense to an action for
actor. However, the criminal liability of a corporation’s infringement. (BAR 1997, 1988)
ofKicers or employees stems from their active
participation in the commission of the wrongful act.
A copy of a piracy is an infringement of the original, and it
is no defense that the pirate, in such cases did not know
The principle applies whether or not the crime requires whether or not he was infringing any copyright; he at
the consciousness of wrongdoing. It applies to those least knew that what he was copying was not his, and he
corporate agents who themselves commit the crime and copied at his peril.
to those, who, by virtue of their managerial positions or
other similar relation to the corporation, could be
Thus, unless clearly provided in the law, offenses
deemed responsible for its commission, if by virtue of
involving infringement of copyright protections should be
their relationship to the corporation, they had the power
considered malum prohibitum. It is the act of
to prevent the act.
infringement, not the intent, which causes the damage. To
require or assume the need to prove intent defeats the
An accused's participation in criminal acts involving purpose of intellectual property protection.
violations of intellectual property rights is the subject of
allegation and proof. The showing that the accused did
Nevertheless, proof beyond reasonable doubt is still the
the acts or contributed in a meaningful way in the
standard for criminal prosecutions under the IP Code.
commission of the infringements is certainly different
from the argument of lack of intent or good faith. Active
participation requires a showing of overt physical acts or In one case, however, the Supreme Court found no grave
intention to commit such acts. Intent or good faith, on the abuse of discretion on the part of the Department of
other hand, are inferences from acts proven to have been Justice when it dismissed the complaint against the
or not been committed. It was held in the ABS CBN case respondent who had possession of a product after
that the Department of Justice committed grave abuse of purchase from legitimate sources but which turns out to
discretion when it resolved to Kile the Information against be a counterfeit, without the knowledge of the
respondents despite lack of proof of their actual purchaser/possessor. (Sanrio Co. Ltd. v. Lim, G.R. No.
participation in the alleged crime. 168662, [February 19, 2008], 569 PHIL 630-641)
Here, J. Leonen made a distinction between lack of intent The case of Sanrio is for practitioners and not bar
and not contributing in a meaningful way in the commission examinees. For bar purposes, lack of criminal intent is
of the infringement. not a valid defense in an action for copyright
infringement.
So, what are the keywords: Actual participation or
failure to prevent the commission of the unlawful act.
MARCH 08, 2021
91
COPYRIGHT (Continuation) Can be part of the complaint of the copyright infringement

RECITATION or motion for the issuance of a search and seizure order if he
Q: What are the defenses of the defendant in a suit of forgot to include the same in his complaint.
copyright infringement? (3) Order of Destruction
A: Different from the search and seizure order. It is executory.
1. The use of the work falls within the limitations of Examples:
the copyright: (a) Sale of illicit copies of software programs: There is
copyright infringement.
(a) Private performance of the work (b) Importation of DVDs and CDs: No copyright
infringement.
(b) Quotations compatible with fair use (c) Public display of paintings: There is copyright
infringement.
(c) Information purposes only
(d) Reproduction of thesis: No copyright infringement.
(d) Report (e) Use of layout: No copyright infringement.
(f ) Use of ornamental design: There is copyright
(e) Illustration infringement.
(g) Removing restrictions or jail breaking: No copyright
(f) For the use of school infringement.
(h) Receipt of rentals: It depends if all the conditions are
(g) Government
present.
(h) Judicial Proceedings (i) Composer of a music assigned his right:
(j) Purchase of book: No copyright infringement.
(i) Fair Use (k) Buyer of copyrighted work reproduced in its entirety:
There is copyright infringement.
If the use falls under any of these, there is (l) Commercial reproduction for the use of the blind: There
no infringement. is copyright infringement.
2. The work is not copyrightable; (m) Cover song: No copyright infringement.
(n) CD burning: There is copyright infringement.
3. The term of the copyright has expired;
(o) (wasn’t able to get the example): There is copyright
4. Prescription; infringement.
(p) (wasn’t able to get the example): No copyright
5. Did not participate in the commission of any of the infringement.
infringing acts; (q) Reproduction of classical books: There is copyright
infringement.
6. Lack of beneKits, lack of notice of infringing activity, (r) (wasn’t able to get the example): There is copyright
and lack of ability to control it; infringement.
(s) Rebroadcast of radio program: No copyright
7. Lack of evidence to support the complaint for infringement.
infringement. (t) Reproduction of photograph: No copyright infringement.
Circumvention of technological measures and alteration of
the rights are basically aggravating circumstances, not acts DISCUSSION
of infringement.
Do not forget to claim moral and exemplary damages. Do not
pray for the same in trademarks and patents, only for
copyright infringement.
Provisional Reliefs:
(1) Preliminary Injunction;
(2) Search and Seizure Order
92
Q: What are the remedies of the copyright The amount of damages to be awarded shall be
owner against an infringer? doubled against any person who:
A: The copyright owner may exercise the (i) C i rc u mve n t s e f fe c t ive te c h n o l o g y
following remedies in case of infringement: measures; or
(1) He may Kile a civil action for copyright (ii) Having reasonable grounds to know that
infringement to obtain any or all of the it will induce, enable, facilitate or conceal
following reliefs: the infringement, remove, or alter any
electronic rights management
(a) Damages. – The court can order
information from a copy of a work, sound
the defendant to pay to the
recording, or Kixation of a performance, or
copyright proprietor or his assigns
distribute, import for distribution,
or heirs such actual damages,
broadcast, or communicate to the public
including legal costs and other
works or copies of works without
ex p e n s e s , a s h e m ay h ave
authority, knowing that electronic rights
incurred due to the infringement
management information has been
as well as the pro]its the
removed or altered without authority.
infringer may have made due to
such infringement, and in proving Technological measure means any technology,
proKits the plaintiff shall be device, or component that, in the normal course
required to prove sales only and of its operation, restricts acts in respect of a
the defendant shall be required to work, performance or sound recording, which
prove every element of cost which are not authorized by the authors, performers,
he claims, or in lieu of actual or producers of sound recordings concerned or
damages and proKits, such damages permitted by law.
which to the court shall appear to
be just and shall not be regarded as
Damages may be doubled if there has been circumvention of
penalty.
an effective technological measure.
For copyright, actual damages mean the cost, expenses, and Example: Jailbreaking. If a smartphone is good only for
other damages incurred by the plaintiff in prosecuting the Globe, then you open line. That is a circumvention of
claim. technological measure.
Sales, unlike in trademark, percentage of the sales. For The other one that would result in the doubling of actual
copyright, sales only minus element of cost which the damages, alteration of rights management information. This
defendant claims. indicates the owner of the work. If you do anything that will
conceal, remove, destroy, or vindication of the ownership of
the work, it will result in double the amount of actual
damages.
Circumvention of technological measure and alteration of

rights management information are not copyright
infringement. They will only result in doubling the amount
of actual damages. They are basically aggravating
circumstances not acts of infringement.
171.13. Rights management information means information

which identiKies the work, sound recording or performance;
the author of the work, producer of the sound recording or
93
performer of the performance; the owner of any right in the the amount of damages to be awarded shall be doubled
work, sound recording or performance; or information against any person who:
about the terms and conditions of the use of the work, sound (i) Circumvents effective technological measures; or
recording or performance; and any number or code that (ii) Having reasonable grounds to know that it will induce,
represent such information, when any of these items is enable, facilitate, or conceal the infringement, remove, or
attached to a copy of the work, sound recording or Kixation alter any electronic rights management information from a
of performance or appears in conjunction with the copy of a work, sound recording, or Kixation of a
communication to the public of a work, sound recording or performance, or distribute, import for distribution,
performance. broadcast, or communicate to the public works or copies of
Moral and exemplary damages may likewise be awarded as works without authority, knowing that electronic rights
court may deem proper, wise, and equitable (Section 216.1, management information has been removed or altered
IPC). without authority.
However, no damages may be recovered after the lapse of
Do not forget to include when it comes to copyright four years from the time the cause of action arose.
infringement, a claim for moral and exemplary damages. You
do not pray for moral and exemplary damages in patent. (1) He may Kile a civil action for copyright infringement to
Only that the actual damages can be tripled, but no basis to obtain any or all of the following reliefs (cont):
pray for moral and exemplary damages in trademark and
patent. It is only for copyright infringement. (b) Preliminary Injunction. – The court may also
order the defendant to desist from committing any
The copyright owner may elect, at any time before Kinal infringement and/or to prevent the entry into the
judgment is rendered, to recover instead of actual damages channels of commerce of imported goods that
and proKits, an award of statutory damages for all involve an infringement, immediately after customs
infringement involved in an action in a sum equivalent to the clearance of such goods.
Kiling fee of the infringement action but not less than
Php50,000.00. In awarding statutory damages, the court (c) Search and seizure order. – This may include the
may consider the following factors: seizure and impounding of sales invoices and other
(1) The nature and purpose of the infringing act; documents evidencing sales, all articles, and their
packaging alleged to infringe a copyright and
(2) The Klagrancy of the infringement; implements for making them which may serve as
(3) Whether the defendant acted in bad faith; evidence in court proceedings in accordance with
the rules on search and seizure involving violations
(4) The need for deterrence; of intellectual property rights issued by the
Supreme Court.
(5) Any loss that the plaintiff has suffered or is likely to
suffer by reason of the infringement; and The search and seizure order can be part of the complaint
for copyright infringement, or it can be, subsequently, by
(6) Any beneKit shown to have accrued to the defendant by
motion. Although it is advisable to include the application in
reason of the infringement.
the complaint itself, but nothing precludes the plaintiff from
Kiling a motion for the application or grant or issuance of a
There is this concept of statutory damages as stated above.
search and seizure order if at the Kiling of the complaint, he
Although these are remedies accorded by law, why would
failed to include the same.
you resort to it? they are limited to the amount equivalent to
the Kiling fee. Obviously, you can recover more if you think
there is copyright infringement.
In case the infringer was not aware and had no reason to

believe that his acts constitute an infringement of copyright,
the court in its discretion may reduce the award of statutory
damages to a sum not more than P10,000.00: Provided, that
94
(d) Destruction. – The court can also order the made due to such infringement, and in proving proKits the
destruction without any compensation all plaintiff shall be required to prove sales only and the
infringing copies or devices, as well as all plates, defendant shall be required to prove every element of cost
molds, or other means for making such infringing which he claims, or in lieu of actual damages and proKits,
copies as the court may order. such damages which to the court shall appear to be just and
shall not be regarded as penalty. He may also recover moral
The destruction of infringing copies of the work may be and exemplary damages, which the court may deem proper,
ordered even in the event of acquittal in a criminal case wise, and equitable.
(Section 216.1, IPC). Under the IP Code, as amended, injunction is not the only
The order of destruction is however not executory if remedy available to the plaintiff. The whole remedies we
defendant Kiles a motion for reconsideration. discussed awhile ago can be pursued and exercised by the
copyright owner.
(2) He may Kile a criminal action for copyright Q: Is there copyright infringement in the following
infringement. cases?
Let’s repeat the defenses that can be raised in a complaint
The order destruction is distinct and independent from the for infringement:
search and seizure order. The order of destruction is
likewise executory like the search and seizure order, (1) Use of the works within any of the limitations.
unless the defendant timely ]iles a motion for (2) Work is non-copyrightable.
reconsideration. The issuance of a certiKicate of copyright registration by the
You should also include attorney’s fees and costs of suit then National Library does not make the work copyrightable if by
Kile a criminal action for copyright infringement. its nature and law, it is not copyrightable.
(3) The term has expired. The rights may be exercised
within the term of the copyright, once the term has expired,
Q: Jose Santos has written many poems, some of which
it becomes public dominion.
have been published in Panorama Magazine but never
(4) Prescription.
registered with Copyright Of]ice. Among his published
The prescriptive period to claim an action for damages in
works was the poem entitled “In a Rose Garden.” About a
copyright infringement is 4 years from the commission of
year from its publication, Jose was surprised to hear
the act just like trademark and patent.
over the radio a song whose lyrics were copies from his
poem. It appears that music sheets of the song have
If the charge against you is participating or directly
been published and sold under the name of the
committing infringement, the defense is: you did not
composer, without any acknowledgment in favor of Jose.
participate in the commission of the infringement.
Jose wants to know what his rights are and whether he
If the charge against you is bene]itting from
can secure an injunction against the composer and/or
infringement, the defense is: lack of beneKits, or even
the publisher, perhaps with damages. How will you
though he had received beneKits, he had no notice of the
advise him? Explain.
criminal activity or lack of ability to control the acts of
A: I would tell Santos that he has a right to Kile injunction
infringement.
proceedings to restrain the composer and/or his publisher
If you are charged as an of]icer of the corporation, these
from further committing any act of infringement of his
are your defenses:
copyright. Under the present law, copyright is acquired from
(1) Lack of participation in the commission of the unlawful
the moment of creation of the work. Registration and
act.
deposit of the work are no longer necessary for its
(2) There is no law making you liable for copyright
acquisition. The moment Santos wrote his poem, he
infringement.
acquired the right to restrain any infringement on his
(3) No power to prevent the commission of the act.
copyright as well as the right to have the infringing copies
(4) Lack of evidence for the complaint of infringement.
and devices impounded.
He may recover actual damages, including legal costs and (a) Sale of illicit copies of software programs
other expenses, as he may have incurred due to the constitute copyright infringement.
infringement as well as the proKits the infringer may have
95
Yes. The mere sale of illicit copies of software (g) Removing restrictions on what and how apps
programs is enough by itself to show the existence content can be stored and used or “jail
of probable cause for copyright infringement. breaking.”
(Microsoft Corporation vs. Manansala, G.R. No.
166391, October 21, 2015) No. Circumvention of technological measure does
not amount to copyright infringement but is only an
(b) Importation of DVDs and CDs of music, movies, aggravating circumstance which may cause the
and foreign books into the Philippines by an imposition of the maximum penalty or doubling the
individual for personal purpose. award of damages.
(h) Receipt of rentals by the owner of a mall or
No. There is no infringement as long as the lessor of an establishment where the lessee
foregoing items are not pirated and the number of commits acts of infringement.
copies is compatible with fair use. The economic
rights of the author do not include the right to The owner of the mall or lessor of the establishment
prevent importation or exportation of the is liable for infringement if he has been given notice
copyrighted work. R.A. No. 10372 removed the of infringing activity but did not stop the
limitation on the number of copies that may be infringement. BeneKiting from the infringing activity
imported into the Philippines by an individual but is a form of copyright infringement.
this should not mean without any limit. Q: If a person buys a fake DVD or CD from a mall,
who are liable?
Q: What does it mean that there is no limit on A:
items to be imported to the Philippines by an (1) The buyer of the fake DVD or CD.
individual? (2) The lessee.
A: Therefore, the test is one of fair use. (3) The lessor is liable if the conditions/
(c) Public display of a painting after its purchase requirements are present.
from the artist. (i) Composer of a music assigned his right. Fifty
years after the composer’s death, the assignee
Yes. This is one of the limitations on copyright. changed the tempo from ballad to rock and
(d) Reproduction of the entire copy of a thesis by a claimed to be the owner of the musical
person other than the author. composition.
No. There is no infringement provided that the By claiming to be the owner of the original
reproduction is only for a single copy, made by a composition, the assignee violated the moral right
natural person exclusively for research and private of attribution of the original composer and
study. therefore infringed copyright. The right of
(e) Use of layout or appearance of book without the attribution of an author shall last during his lifetime
consent of the author. and in perpetuity after his death.
The original author has the moral right of
No. There is no infringement as long as the use is attribution. The assignee cannot claim to be the
with the permission of the publisher. The copyright owner. As assignee, he can do everything except
to the layout belongs to the publisher and not to the claim that he is the composer of the music.
author. (j) Purchase of a book and then selling it for a price
(f) Use of an ornamental design embossed in a higher than cost of acquisition.
coffee mug as a design for t-shirt.
No. There is no infringement of copyright. The Kirst
Yes. There is infringement. The design can be sale doctrine provides that an individual who
detached from the usefulness of the product and as knowingly purchases a copy of a copyrighted work
such, it is copyrightable under the Denicola test. from the copyright holder received the right to sell,
display, or otherwise dispose of that particular copy,
notwithstanding the interests of the copyright
96
owner. The copyright holder’s right to control the (o) Reprinting by a private library of a book that
distribution of his work goes away after the “Kirst has gone out of stock
sale” of the work.
(k) The buyer of a copyrighted book reproduced it Yes. There is copyright infringement because only a
in its entirety and shared it with his classmate library allowed by law to receive copies of a printed
for their private study. work is entitled to reproduce a copy of a published
work which is necessary for the collection of the
Yes. There is infringement of copyright. The person library but which is out of stock. Private library has
who photocopied the book violated the economic no such privilege.
right of reproduction of the book violated the (p) Legislative bill pirated by another congressman
economic right of reproduction of the work of the and introduced it as his own
copyright owner. The law excludes books from the
right granted by law to an individual allowing a No. There is no copyright infringement. Copyright
single-copy-private-reproduction of a published does not subsist on works of government. legislative
work. bill is a work of government.
(l) Commercial reproduction of published articles (q) Reproduction of a collection of classical books
in a specialized format for the use of the blind, on literature (those which have been published
visually, and reading-impaired persons more than 50 years after death of the authors)
indicating the copyright owner and date of by someone other than the person who made
publication. the compilation and arrangement.
Yes. There is copyright infringement. The Yes. There is copyright infringement. While the
reproduction of published articles in a specialized classical books have become public dominion in
format for the use of the blind, visually, and reading- view of the expiration of the term of the copyright,
impaired persons is a limitation on copyright only if the collection of the classical books, as a derivative
the distribution of the copies is done on a non-proKit work, is independently copyrighted from the
basis. original works by reason of the selection or
(m) Cover song or new performance or recording of coordination or arrangement of its contents.
a contemporary or previously recorded, (r) Reproducing backup copies or adaptation of a
commercially released song or popular song by licensed computer program for archival
someone other than the original artist without purposes.
modi]ication on the lyrics and melody, then
uploading it in the Youtube application. Yes. There is copyright infringement. The law only
allows reproduction of one (1) back-up copy of a
No. There is no infringement of copyright because computer program for archival purposes except
cover song assumes that the song, as a when reproduction of more than one adaptation is
copyrightable work, has been lawfully made allowed by the terms of the license agreement with
accessible to the public, provided that the singer the copyright owner.
(other than the original artist) did not receive any (s) Rebroadcast of a radio program after 25 years
royalty from Youtube or did not gain any proKit for from the date the broadcast took place without
the cover song. the consent of the broadcasting organization
(n) CD burning which owns the copyright.
Yes. To “burn” a CD simply means to copy or write No. There is no copyright infringement. The term of
information into compact disc. There is copyright broadcast is only 20 years from the date the broadcast
infringement because distributing a copy of the took place.
copyrighted material (like the music CD) can only (t) Reproduction of the photography by the owner
be done with the permission of the copyright without the consent of the person, subject of the
holder. photograph.
97
No. There is no copyright infringement. The

photographer, not the subject, has the copyright to the
photograph, and as such, enjoys the economic right of
reproduction.
The only exception is when the subject of the copyright
commissioned the photographer to take the photograph.
! END OF IPL "
98
TRANSPORTATION LAW Ordinarily, not solidary obligation between common carrier

RECITATION (based on contract of carriage) and arrastre operator (based
on contracts with PH Ports Authority). But in one case, the
Q: Shipper engaged a freight forwarder to look for a Court ruled in the afKirmative.
vessel to carry goods from New York to PH. The freight
forwarder engaged the common carrier. The goods Customs Broker – Yes. Common carrier.
loaded in common carrier. Set sail and reach point of Principal Duties:
destination. The goods unloaded by the arrastre 1. Signs the declaration form
operator. Consignee engaged customs broker to get the 2. Facilitate the release of goods from the customs
goods. Arrastre operator delivered the goods to the
Customs Broker. Customs Broker engaged tracking Transportation integral part of its duties as custom broker.
company to deliver the goods. Transportation need not be your principal activity. Cebu case
Out of the 14 drums, only 13 was delivered. If you are Q: What if it does not own single vessel?
the consignee, who do you sue for the loss of the goods? A: Yes, still a common carrier [Torres Marine Brokerage vs.
Who will be liable? Mitsuhi (2016)]
A: If you are in practice, sue everybody.
Q: What about trucking company?
Q: Who among the entities involved are common A: Yes.
carriers?
A: Shipper – No. Q: What if limited clients?
A: If offers services to other clients even though few, still
Freight Forwarder – Depends. common carrier.
The freight forwarder chooses the common carrier. The
liability of freight forwarder is if it was negligent in Q: Can consignee sue trucking company (a common
choosing the common carrier. carrier) for breach of contract of carriage?
(1) Undertakes delivery of the goods itself; A: No. Consignee may sue Customs Brokers for breach of
(2) Issues a bill of lading to the consignee. contract and tracking company for torts. Consignee
In these cases, becomes common carriers and must now contracted with the Customs Broker. Customs Broker
exercise extraordinary diligence. contracted with trucking company.
Arrastre Operator – No. Q: Can the parties stipulate that the obligation of CC
Q: (wasn’t able to get the question) ends upon delivery to the Customs Broker or
A: Negligent handling of goods, the arrastre operator is authorities?
liable. A: The stipulation is not contrary to public policy. Ludo vs.
Q: What about the common carrier? If the goods are Lim (1956)
damaged while the goods were uploaded by the arrastre
operator?
DISCUSSION
A: Yes. It is based on the contract of carriage. The obligation Shipper # Freight Forwarder # Common Carrier #
to exercise extraordinary diligence lasts until the goods are Port of Arrival # Arrastre Operator # Customs Broker
received by the consignee. If the goods are lost, presumption # Carrier # Consignee # Insurance Company
of negligence on the part of the common carrier. West (Subrogation)
Shipping case
COMMON CARRIER
Q: What about arrastre operator?
A: Yes. Consignee may sue both arrastre operator and Q: What is a common carrier?
common carrier. Arrastre operator is liable because under A: A common carrier is a person, corporation, ]irm or
its custody, the goods were damage. association engaged in the business or carrying or
transporting passengers or goods or both, by land,
99
water, or air for compensation, offering its services to ISSUE: Whether or not the school bus operator is a common
the public (Bar 1996; Article 1732 of the Civil Code) carrier. (YES)
A person engaged in the business of carrying or transporting RULING: The Supreme Court said that it is not the quantity
passengers or goods or both, by land, water, or air for or extent of the business actually transacted or the number
compensation, offering its services to the public. and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in
The common carrier need not lawfully be engaged in the by the carrier that he has held out to the general public as
business of carrying and transporting passengers or good or his business or occupation. If the undertaking is a single
both by land, water, or air for compensation. A person is a transaction, not a part of the public, the individual or the
common carrier even though there is no public certiKicate of entity rendering such service is a private, not a common
convenience or franchise from the government. When the carrier.
person is engaged in the business offering services to the
public, then you are considered as common carrier. Dean: It is enough that it offers transportation services to a
segment of the public for compensation. Thus, the school bus
If you are a common carrier, there is a presumption of fault
operator is considered as a common carrier.
or negligence in case of loss or damage to the goods or death
or injury to the passengers. Note: The facts and ruling herein are as discussed by Dean.
Q: What is the test to determine whether a person is a The law makes no distinction between one whose principal
common carrier? business activity is the carrying of persons or goods or both,
A: The test to determine whether a person is a common and one who does such carrying only as an ancillary activity
carrier is: “Does it hold out to the public that it is engaged in (in local idiom as “a sideline”). Article 1732 also carefully
the business of transporting or carrying passengers or avoids making any distinction between a person or
goods, or both as a public employment and not a casual enterprise offering transportation service on a regular or
occupation? Is it open to the use and service of all members scheduled basis and one offering such service on an
of the public who may required the service to the extent of occasional, episodic, or unscheduled basis. Neither does
its capacity?” If it is open to the public, the carrier is a Article 1732 distinguish between a carrier offering its
common carrier. (Marshall vs. Public Service Commission, 195 services to the “general public,” i.e. the general community
A. 475, 129 Pa. Super. 272, cited in Perez, Quizzer in or population, and one who offers services or solicits
Transportation Law, p. 9, 2009 Edition) business only from a narrow segment of the general
population. (Pedro De Guzman vs. Court of Appeals, G.R. No.
It is not the quantity or extent of the business actually
L-47822, December 22, 1988)
transacted or the number and character of the conveyances
used in the activity, but whether the undertaking is a part of It is also not necessary that the common carrier be the
the activity engaged in by the carrier that he has held out to owner of the vehicle/vessel who will carry out the carriage.
the general public as his business or occupation. If the The public is not required to inquire as to the ownership of
undertaking is a single transaction, not a part of the public, the vehicle/vessel. (Cebu Salavage case and Torres Madrid
the individual or the entity rendering such service is a Brokerage case)
private, not a common carrier. (Spouses Teodoro and Nanette
Q: Can a charterer be considered a common carrier?
Perena vs. Spouses Teresita Philippine Nicolas and L. Zarate,
2012) A: Yes. If it offers transportation services to the public for a
compensation. Ownership of vessels is not a condition to be
SPOUSES PERENA VS. SPOUSES NICOLAS considered a common carrier.
FACTS: This is the case of an informal school bus operator. In Torres Madrid Brokerage, this is a Custom Broker. The
Spouses A and B own a van accommodating 14 passengers Custom Broker usually does not have transportation
and offered transportation services to the residents of a vehicles to carry out or consummate the contract of
particular subdivision. Some of the children of the residents carriage. Its principal duty is to pay custom duties and
go to Don Bosco. The transportation services were offered perform any and all acts required to facilitate the release of
only to the residents of the subdivision. There was no offer the shipment to the custom. Those are the principal
of services to the general public. activities.
100
However, the custom broker, in many cases, is considered as During one rainy morning, the guests were informed
a common carrier because it does not end with facilitating that the ferry services for that day were cancelled due to
the release of the shipment to the custom. It ends with the a storm forecast. In order to appease the apparent
transportation of the goods released by the custom to the dismay of most of the guests who will miss their ]light
consignee. Transportation is an integral part of its business. back to Manila, the boat captain of one of LMN, Inc’s
It might not be a principal activity, but an integral part motorized boats decided to push through with its trip
of its activity. Thus, considered a common carrier. back to the city. Shortly after the boat sailed, the storm
In Torres Madrid Brokerage, does not own a vehicle. It has to hit and the winds and waves became stronger, causing
engage a trucking company to transport the goods to the engine trouble to the boat. Unfortunately, the boat
consignee. capsized and sank, resulting in the death of one of the
passengers, Mr. X. This prompted Mr. X’s heirs to ]ile a
Q: What are the requisites to be a common carrier? complaint for damages against LMN, Inc., which they
A: alleged to be a common carrier. In its defense, LMN, Inc.
maintained that it is not a common carrier because its
(1) He must be engaged in the business of transporting boats are not available to the general public but only
passengers or goods generally as a business, not just as ferry resort guests and employees.
casual occupation; May LMN Inc. be considered a common carrier? Explain.
(2) He must undertake to carry passengers or goods over A: LMN is a common carrier. Common carrier are persons
established roads by the method by which the business engaged in the business of transporting or carrying
was conducted; and passengers or goods or both, by land, air, and water, offering
their services to the public, for compensation. The test does
(3) The transportation must be for hire. (Spouses Perena, not make a distinction whether the carrying is done as the
ibid; First Philippine Industrial Pipeline vs. Court of principal or as an auxiliary activity or that the carriage was
Appeals, G.R. No. 125948, December 29, 1989) periodic, occasional, episodic, or unscheduled or has limited
clientele. It is not necessary that the transportation services
First Philippine Industrial Pipeline refers to transportation of be offered only to the general public. Offering the services
goods. Whereas, Perena referes to the transportation of even to a narrow segment of the public sufKices. Thus, the
passengers. But they have common elements. fact that the transportation services are offered only to the
Let’s take a look at the second requisite: “He must undertake guests of the beach resort is immaterial. Transportation is
to carry passengers or goods over established roads by the an integral part of LMN’s business. (Spouses Cruz vs. Sun
method by which the business was conducted.” Holidays, G.R. No. 186312, June 29, 2010)
If for example, a bus company is a common carrier. The

route that was approved by the LTFRB is Manila to Baguio. Q: Are the following persons common carrier?
The same bus was hired by the students for a Kield trip to A:
Taguig. (1) Freight forwarder – A freight forwarder is not a
common carrier. It merely chooses or selects the
Q: With respect to the trip to Cavite (hindi ko sure bakit common carrier. A freight forwarder’s liability is
Cavite sinabe ni Dean?), is it a common carrier or private limited to damages arising from its own negligence
carrier? in choosing the carrier. However, where the
A: It may be a transportation company, as such, it is a forwarder contracts to deliver goods to their
common carrier. But the road established by the destination instead of merely arranging for their
government for that transportation company is Manila to transportation, it becomes liable as a common
Baguio. Therefore, the trip from Manila to Batangas or Cavite carrier for loss or damage to goods. A freight
or Laguna, for that trip, it is considered as a “private carrier.” forwarder assumes the responsibility of a carrier,
If it is a private carrier, you can stipulate and Kix the liability which actually executes the transport, even through
in case of negligence. the forwarder does not carry the merchandise itself.
Q: LMN, Inc. operates a beach resort in a secluded island (Unsworth Transport International Inc. vs. Court of
off the coast of Puerto Princesa City, Palawan. It Appeals and Pioneer Insurance and Surety
operates three (3) motorized boats to ferry its guests Corporation, G.R. No. 166250, July 26, 2010)
from the city proper to the island resort and vice versa.
101
If it is not a common carrier, no obligation to exercise stevedore. But insofar as the PPA or consignee is concerned,
extraordinary diligence. the arrastre operator, not the stevedore, who is liable in case
of loss or damage to the goods.
Q: When is it liable? If not required to exercise
extraordinary diligence? Q: If the goods were damaged while being of]loaded
from the vessel, who is liable?
A: If it was negligent in the choice of the vehicle or vessel
such as if the vessel is not seaworthy. If the vessel is not A: The common carrier (shipowner) and arrastre operator
seaworthy, the freight forwarder shall be liable for damages are liable. The common carrier is liable because the
on its negligence in not choosing the right carrier for the obligation is not delegable in favor of the arrastre operator.
shipment. Bottomline is the common carrier must deliver the goods to
the consignee actually or constructively. Here, the goods
Q: When does the freight forwarder assumes the
were merely ofKloaded from the vessel. Thus, the common
obligation of a common carrier?
carrier is still liable.
A:
The arrastre operator is liable because in its possession or
(1) When it actually executes the transport. Meaning custody, the goods were damaged.
actually caused the delivery of the goods to the consignee.
Sue both arrastre operator and shipowner. The arrastre
(2) It issues a bill of lading. When you issue a bill of lading operator based on the contract with the PPA and the
you acknowledge receipt of the goods for delivery to the shipowner based on the breach of contract of carriage. It is
consignee. easier to hold the common carrier liable since it is easy to
sue and obtain judgment against the common carrier since
(2) Shipowner – The shipowner is a common carrier.
you only have to establish the contract of carriage and that
He is engaged in the business of transporting goods
the goods are damaged and lost.
for compensation and offers his services to the
public. The arrastre operator however can negate liability by
showing ordinary diligence.
(3) Arrastre Operator – An arrastre operator is not a
common carrier. The functions of an arrastre (4) Customs Broker – Although its principal function is
operator involve the handling of cargo deposited on to prepare the correct customs declaration and
the wharf or between the establishment of the proper shipping documents as required by law, the
consignee or shipper and the ship’s tackle. Being the transportation of goods is, nevertheless, an integral
custodian of the goods and to turn them over to the part of a customs broker, thus, the customs broker
party entitled to their possession. (Westwind is also a common carrier. For to declare other wise
Shipping Corporation vs. UCPB General Insurance Co., would be to deprive those with whom it contracts
G.R. No. 2002289, November 25, 2013; Asian the protection which the law affords them
Terminals vs. Daehan Fire and Marine Insurance, G.R. notwithstanding the fact that the obligation to carry
No. 171194, February 4, 2010) goods for its customers is part and parcel of its
business. (Westwind Shipping Corporation vs. UCPB
An arrastre contract is not a contract of carriage. The General Insurance Co., G.R. No. 2002289, November
contract of arrastre operator is not with the shipper or the 25, 2013. A.F. Sanchez Brokerage vs. Court of Appeals,
assignee. His contract is with the Philippine Ports Authority G.R. No. 147079, December 21, 2004)
(PPA) to facilitate ofKloading of the goods from the vessel for
delivery to the warehouse or pickup by the consignee or the
custom broker hired by the consignee.
(5) Trucking Company – It was held that a person is a
An arrastre operator is an entity. It is not a natural person. common carrier because it is engaged in the
(Example: terminals and harbor centers) business of transporting goods by land, through its
This is different from a stevedore. A stevedore is a person trucking service. In this case, a customs broker
who takes the goods from the vessel employed or engaged contracted with a trucking company. The
by the arrastre operator. The one liable is the arrastre transportation services are not exclusive to the
operator in case of loss and damage to the goods not the custom’s broker. Even though it has few clients, the
stevedore. But the arrastre operator can run against the trucking company was considered a common
carrier. If the trucking company caters only to the
102
customs broker, then, it is a private carrier. That a school bus operator is considered common carrier
(Loadmasters Customs Services vs. Glodel Brokerage should be viewed in the context by which the Supreme Court
Corporation, G.R. No. 179446, January 10, 2011) made such ruling. The school bus operator indiscriminately
offered its transportation services even though to a narrow
It depends on whether it is exclusive to the custom broker or segment of the public only (like students whose parents
to a client or offering services to the public. reside in one subdivision only).
Other examples of common carrier: It depends on the context or circumstances by which the
(1) Barge operator (Asia Lighterage and Shipping Inc. vs. school bus operator offers it services.
Court of Appeals, G.R. No. 147246, August 9, 2003, 409 Q: Is a travel agency a common carrier?
SCRA 340)
A: No. A travel agency is not a common carrier. It only
(2) Passenger jeepney, bus company, or a taxai company arranges for the transportation of its clients for air carriage.
(Batangas Transportation vs. Orlanes, 52 Phil 455, cited As such, it is not bound to exercise extraordinary diligence
in Perez, p. 9) in the performance of its obligations. (Crisostomo vs. Court of
Appeals, infra)
(3) Vessels engaged in inter-island shipping (De Villola vs.
Stanley, 32 Phil. 541, cited in Perez, ibid) Q: What laws govern transportation contracts?
(4) Cargo truck to transport anybody’s goods for a fee A:

(Benedicto vs. IAC, 187 SCRA 547, cited in Perez, ibid)
Suppletory
Contract Primary Law
Law
Q: Is a pipeline operator a common carrier? L a n d

Transpo Code of
A: Yes. It is engaged in the business of transporting or New Civil Code
(Common Commerce
carrying goods, i.e. petroleum products, for hire as a public
Carrier)
employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its Private
services, and transports the goods by land and for New Civil
Carrier
compensation. The fact that the pipeline operator has a Code of Commerce Code of the
(Object
limited clientele does not exclude it from the deKinition of a Philippines
Commerce)
common carrier. Moreover, the deKinition of “common
carriers” in the Civil Code, makes no distinctions as to the Object Non- New Civil Code (deposit if
means of transporting, as long as it is by land, water, or air. It Commerce property/contract if passenger
does not provide t hat the transportation of the passengers
or goods should be by motor vehicle. (First Philippine
Industrial Pipeline vs. Court of Appeals, G.R. No. 125948,
December 29, 1989) Air Transportation
The mode of transportation is immaterial. a. Phil as New Civil C o d e of

destination Code Commerce
Q: Are school bus operators common carrier?
Treaties,
A: Yes. Persons engaged in the business of transporting
International
students from their respective residences to their school and
Agreement,
back are considered common carrier. Despite catering to a
b. Phil as one M o n t r e a l N e w C i v i l
limited clientele, they operated as common carrier because
of itineraries C o n v e n t i o n Code
they held themselves out as a ready transportation
supplanted
indiscriminately to the students of a particular school living
the Warsaw
within or near where they operated the service and for a fee.
Convention
(Spouses Perena vs. Spouses Nicolas, G.R. No. 157917, August
29, 2012)
103
The Montreal Convention supplanted the Warsaw limited to the ship. (Ccaltex Philippines Inc. vs. Sulpicio Lines,
Convention. Inc. G.R. No. 131166. September 30, 1999)
Water Transportation It was held in one case that the carrier was converted into a
private carrier notwithstanding the existence of the Time
a. Coastwise New Civil Charter by the parties, their agreement undoubtedly
Code of Commerce
(interisland) Code reKlected that their intention was to enter into a Bareboat
Charter Agreement. (Federal Phoenix Assurance vs. Fortune
b . Fo r e i g n Sea Carrier, G.R. No. 188118. November 23, 2015)
New Civil C o d e of
port to Phil.
Code Commerce/COGSA What makes a bareboat or demise charter a private carrier
Port
as opposed to other types of charter agreement or voyage
c. Phil port to charter? In a bareboat or demise charter, it is not only
Law of country of destination
foreign port possession of the vessel that is leased out and given to the
charter but complete control over the navigation of the
New Civil Code is primary law. The Code of Commerce and vessel.
COGSA suppletory laws.
In Federal Phoenix vs. Fortune Sea Carrier, the carrier is
COGSA used to govern Philippine port to foreign port and converted into private carrier despite existence of Time
vice versa. Civil Code supplanted that provision of COGSA Charter Agreement because the agreement was not limited
insofar as Philippine port to foreign port is concerned. to the ship only but extends even to the control of his crew.
Q: What is a private carrier? In other words, if you read the agreement, it is captioned as
Time Charter, but when you take a look at the clauses of the
A: A private carrier is one who, without making it out to the agreement, it clearly reKlected the intention of the parties to
public as ready to act for all who desire his services, enter into a bareboat charter agreement.
undertakes, by special arrangement in a particular instance
only, to transport persons or property from one destination Not just possession of the vessel was given to the charterer
to another, either gratuitously or for hire. (Spouses Teodoro but also complete control over the crew and navigation of
and Nanette Perena vs. Spouses Teresita Philippine Nicolas the vessel. It is the actual authority granted by the
and L. Zarate, G.R. No. 157917, August 29, 2012) shipowner to the charterer. If it corresponds to both
possession and control over the navigation, it is a bareboat
charter. A private carrier arrangement.
Examples of private carriers Name two characteristics which differentiate a common
1. Bareboat charter carrier from a private carrier.
Two characteristics that differentiate a common carrier
2. Funeral Car
from a private carrier are:
3. An exclusive contractor for hauling the products of (1) A common carrier offers its service to the public; a
one particular company and no other entity. private carrier does not.
4. Company bus ferrying employees to and from place (2) A common carrier is required to observe extraordinary
of work. diligence; a private carrier is only required to exercise
ordinary diligence. (Bar 2002; Spouses Perena, ibid)
Q: May a common carrier be converted to private carrier The other distinction are as follows:
by stipulation? (a) The rights and obligations of the parties to a contract of
A: Yes. A common carrier may be converted to a private private carriage are governed principally by their
carrier in case of bareboat or demise charter, that is, the ship stipulations, whereas, in a contract of public carriage, the
owner lets the vessel and the crew insofar as that particular rights and obligations of the parties are governed by law and
voyage is concerned. Common carrier retains its status as the terms of the contract of carriage.
such in case of voyage or time charter, where the charter is (b) As to whether or not it may refuse to enter into a
contract of carriage. – A common carrier is bound to carry
104
for all who offer such goods as he is accustomed to carry and accident and several employees of Company X were
tender reasonable compensation for carrying them. A injured. State the liability, if any, of Mabuhay Lines, Inc.
private carrier is not bound to carry for any reason, unless A: Although a common carrier, Mabuhay Lines, Inc. was not
bound by a contract. acting as such in the instant case but as a private carrier.
Letter (b) is only for bar exam purposes not in the real Accordingly, the provision applicable to a common carrier in
world. As to whether or not it may refused into a contract of respect of extraordinary diligence cannot be imposed upon
carriage, common carrier cannot refuse passengers as long the bus company. The stipulation limiting the liability of
as there is space. Mabuhay Lines, Inc. is valid and the bus company cannot be
held liable for the injuries suffered by the employees of
Q: What do you do if a taxi refuses to accept your offer Company X on the basis of the contract of carriage. However,
despite ]lagging down the same? the employees who were injured may proceed against the
A: Take note of the plate number and report to the LTFRB. bus company on the basis of a quasi-delict (culpa aquiliana)
but the party charging negligence or wrong doing has the
(c) As to exemption for negligence of employees – A burden of proving the same.
common carrier cannot stipulate that it is exempt from
liability on account of the negligence of its employees. Such It has been held that a common carrier is exempt from the
stipulation is void for being contrary to public policy. A application of the strict public policy governing common
private carrier may validly enter into such stipulation carriers where the carrier is not acting as such but as a
because the public is not involved. (Loadstar Shipping vs. private carrier. Such strict public policy has not force where
Court of Appeals, G.R. No. 131621, September 28, 1999) the public at large is not involved, as when the carrier
charters its bus totally for the use of a single party. (Home
Much of the distinction between a “common or public Ins. Co. vs. American Steamship Agencies, Inc. vs. Luzon
carrier” and a “private or special carrier” lies in the Stevedoring Corp. L-25599, April 24, 1968)
character of the business, such that if the undertaking is an
isolated transaction, not a part of the business or
occupation, and the carrier does not hold itself out to carry
Further, Article 1745 of the Civil Code declaring a stipulation
the goods for the general public or to a limited clientele,
that the common carrier shall not be responsible for the acts
although involving the carriage of goods for a fee, the person
or omissions of his or it employees as unreasonable unjust
or corporation providing such service could very well be just
and contrary to public policy is not applicable here since
a private carrier. (Philippine American General Insurance
Company X and the bus company have entered into a
Company vs. PKS Shipping Company, G.R. No. 149038, April 9,
contract for private carriage. Likewise, the presumption
2003)
created under Article 1756 of the Civil Code, that in case of
If you are a common carrier, you are liable for the acts and death or injuries to passengers, common carriers are
omissions of your employees. If you are a private carrier, presumed to have been at fault or to have acted negligently,
that stipulation is valid. unless they prove that they observed extraordinary
diligence, Kinds no application here. (Bar 1984)
Q: Mabuhay Lines Inc., a common carrier, entered into a
contract with Company X, whereby it agreed to furnish
Company X, for a ]ixed amount, a bus for a company
Q: During the elections last May, AB, a congressional
excursion on its anniversary day. It was agreed that
candidate in Marinduque, charted the helicopter owned
Company X would have the use of the bus and its driver
by Lode Mining Corporation (LMC) for use in the
from 7:00am to 7:00pm on the stipulated date, and that
election campaign. AB paid LMC the same rate normally
the bus driver would be obliged to follow the
charged by companies regularly engaged in the plane
instructions of the company’s general manager as to the
chartering business. In the charter agreement between
places to be visited. Company X agreed to bear the cost
L M C a n d A B , L M C ex p re s s ly d i s c l a i m e d a ny
of the gasoline consumed. The transportation contract
responsibility for the acts or omission of its pilot or for
signed by Company X contained a stipulation that
the defective condition of the plane’s engine. The
Mabuhay Lines, Inc. would be exempt from liability on
helicopter crashed killing AB. Investigations disclosed
account of acts or omissions of its employees. On the
that pilot error was the cause of the accident. LMC now
return trip from the excursion site, the bus had an
consults you on its possible liability for AB’s death in the
light of the above ]indings.
105
How would you reply to LMC’s query? In his Answer, private respondent denied that he was a
common carrier and argued that he could not be held
A: I would reply to LMC’s query as follows:
responsible for the value of the lost goods, such loss
LMC is not liable for the death of AB. LMC is not a common having been due to force majeure.
carrier, but a private carrier, because it did not hold itself to
Is private respondent a common carrier?
the public as being engaged in transportation business. A
stipulation with a private carrier that would exempt A: Private respondent is properly characterized as a
responsibility for simple negligence of the carrier’s common carrier even though he merely “back-hauled” goods
employees is a valid stipulation. Such a stipulation, however, for other merchants from Manila to Pangasinan, although
will not hold in cases of liability for gross negligence or bad such back-hauling was done on a periodic or occasional
faith. (Bar 1987) rather than regular or scheduled manner, and even though
private respondent’s principal occupation was not the
carriage of goods for others. There is no dispute that private
Q: Respondent Ernesto Cendana, a junk dealer, was respondent charged his customers a fee for hauling their
engaged in buying up used bottles and scrap metal in goods; that fee frequently fell below commercial freight
Pangasinan. Upon gathering suf]icient quantities of such rates is not relevant here.
scrap material, respondent would bring such material to A certiKicate of public convenience is not a requisite for the
Manila for resale. He utilized two (2) six-wheeler trucks incurring of liability under the Civil Code provisions
which he owned for hauling the material to Manila. On governing common carriers. That liability arises the
the return trip to Pangasinan, respondent would load moment a person or Kirm acts as a common carrier, without
his vehicles with cargo which various merchants wanted regard to whether or not such carrier has also complied
delivered to differing establishments in Pangasinan. For with the requirements of the applicable regulatory statute
that service, respondent charged freight rates which and implementing regulations and has been granted a
were commonly lower than regular commercial rates. certiKicate of public convenience or other franchise. To
Cendana, has no certi]icate of public convenience. exempt private respondent from the liabilities of a common
Petitioner Pedro de Guzman, a merchant, and carrier because he has not secured the necessary certiKicate
a u t h o r i z e d d e a l e r o f G e n e ra l M i l k Co m p a ny of public convenience would be offensive to sound public
(Philippines) Inc in Urdaneta, Pangasinan, contracted policy; that would be to reward private respondent precisely
with respondent for the hauling of 750 cartons of for failing to comply with the applicable statutory
Liberty ]illed milk from a warehouse of General Milk in requirements. (Pedro De Guzman vs. Court of Appeals and
Makati, Rizal, to petitioner’s establishment in Urdaneta. Ernesto Cendana, G.R. No. 47822, December 22, 1988; Bar
Accordingly, respondent loaded in Makati the 1991 and 1996)
merchandise on to his trucks: 150 cartons were loaded
on a truck driven by respondent himself, while 600
cartons were placed on board the other truck which was Q: Is he liable for the loss of the goods?
driven by Manuel Estrada, respondent’s driver and
employee. A: Private respondent is not liable for the loss of the goods.
The occurrence of the loss must reasonably be regarded as
Only 150 boxes of Liberty ]illed milk were delivered to quite beyond the control of the common carrier and
petitioner. The other 600 boxes never reached properly regarded as fortuitous event. It is necessary to
petitioner, since the truck which carried these boxes recall that even common carriers are not made absolute
was hijacked somewhere along the MacArthur Highway insurers against all risks of travel and of transport of goods,
in Paniqui, Tarlac, by armed men who took with them and are not held liable for acts or events which cannot be
the truck, its driver his helper and the cargo. Petitioner foreseen or are inevitable, provided that they shall have
commenced action against private respondent complied with the rigorous standard of extraordinary
demanding payment of the value of the lost diligence.
m e rc h a n d i s e. Pe t i t i o n e r a rg u e d t h a t p r iva te
respondent, being a common carrier, and having failed
to exercise the extraordinary diligence required of him
DILIGENCE REQUIRED OF COMMON CARRIERS
by the law, should be held liable for the value of the
undelivered goods.
106
Q: What is the diligence required of the common Marcia K. Ochoa vs. G&S Transport Corporation, G.R. No.
carriers? 170071, 170125; 2011)
A: Under Article 1733 of the Civil Code, common carriers
from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the The trial court is not required to make an express Kinding of
vigilance over the goods and for the safety of passengers the common carrier’s fault or negligence. The presumption
transported by them according to all circumstances of each of negligence applies so long as there is evidence showing
case. Thus, under Article 1735 of the same Code, in all cases that: (a) a contract exists between the passenger and the
other than those mentioned in Article 1734 thereof, the common carrier; and (b) the injury or death took place
common carrier shall be presumed to have been at fault or during the existence of such contract. In such event, the
to have acted negligently, in case of death or injury to burden shifts to the common carrier to prove its observance
passengers or loss or damage to goods, unless it proved that of extraordinary diligence, and that an unforeseen event or
it has observed the extraordinary diligence required by law. force majeure had caused the injury. However, for a common
(American Home Assurance Company vs. Court of Appeals, carrier to be absolved form liability in case of force majeure,
G.R. No. 94149, May 5, 1992) it is not enough that the accident was caused by a fortuitous
event. The common carrier must still prove that it did not
contribute to the occurrence of the incident due to its own
or its employees’ negligence. (Sulpicio Lines Inc vs. Napoleon
The notion of common carriers is synonymous with public
Sesante, now substituted by Maribel Atilano, et. al. G.R. No.
service under Commonwealth Act NO. 146 or the Public
172682, July 27, 2016).
Service Act. Due to the public nature of their business,
common carriers are compelled to exercise extraordinary
diligence since they will be burdened with the externalities
or the cost of the consequences of their contract of carriage Q: Peter So hailed a taxicab owned and operated by
if they fail to take the precautions expected of them. Jimmy Cheng and driven by Hermie Cortez. Peter asked
Cortez to take him to his of]ice in Malate. On the way to
Common carriers are mandated to internalize or shoulder Malate, the taxicab collided with a passenger jeepney, as
the costs under the contracts of carriage. This is so because a result of which, Peter was injured, i.e., he fractured his
a contract of carriage is structured in such a way that left leg. Peter sued Jimmy for damages, based upon a
passengers or shippers surrender total control over their contract of carriage, and Peter won. Jimmy wanted to
persons or goods to common carriers, fully trusting that the challenge the decision before the Supreme Court on the
latter will safely and timely deliver them to their destination. ground that the trial court erred in not making an
In light of this inherently inequitable dynamics – and the express ]inding as to whether or not Jimmy was
potential harm that might befall passengers or shippers if responsible for the collision and hence, civilly liable to
common carriers exercise less than extraordinary diligence Peter. He went to see you for advice. What will you tell
– the law is constrained to intervene and impose sanctions him? Explain your answer.
on common carriers for the parties to achieve allocative
efKiciency. (Annie Tan vs. Great Harvest Enterprises, G.R. No. A: I will counsel Jimmy to desist from challenging the
220400, March 20, 2019) decision. The action of Peter being based on culpa
contractual, the carrier’s negligence is presumed upon the
breach of contract. The burden of proof instead would lie on
Jimmy to establish that despite an exercise of utmost
In a contract of carriage, it is presumed that the common
diligence the collision could not have been avoided. (Bar
carrier is at fault or is negligent when a passenger dies or is
1990)
injured. In fact, there is even no need for the court to make
an express Kinding of fault or negligence on the part of the Demurrer to evidence is likewise not a proper remedy on
common carrier. This statutory presumption may only be the ground that plaintiff failed to establish negligence on the
overcome by evidence that the carrier exercised part of the common carrier. Bottomline is once you have
extraordinary diligence. The fact that the driver of the death or injury or loss or damage to the goods, there is a
vehicle was acquitted in the criminal action for reckless presumption of fault on the part of the common carrier.
imprudence has no bearing to the liability of the carrier
arising from breach of contract of carriage. (Heirs of Jose Q: Is extraordinary diligence required only in the
transportation of passengers and carriage of goods?
107
A: No. Common carriers are required to exercise

extraordinary diligence in the performance of its obligations MARCH 09, 2021
under the contract of carriage. This extraordinary diligence
must be observed not only in the transportation of goods Transportation Law (Continuation)
and services but also in the issuance of the contract of
carriage, including its ticketing operations. The common RECITATION
carrier’s obligation to exercise extraordinary diligence in the
issuance of the contract of carriage is fulKilled, however, by Q: Let’s say that X is a passenger in a bus operated by
requiring a full review of the Klight schedules to be given to a XYZ Bus Company, a common carrier. While cruising
prospective passenger before payment. Thus, even assuming along the highway, the bus experienced a ]lat tire or a
that the ticketing agent encoded the incorrect Klight tire blowout. The bus driver safely stationed or parked
information, it is incumbent upon the purchaser of the the vehicle mid the highway and shoulder of the
tickets to at least check if all the information is correct highway. That’s about 7pm.
before making the purchase. Once the ticket is paid for and
printed, the purchaser is presumed to have agreed to all its Unfortunately, the driver and the operator do not have
terms and conditions. (Alfredo Manay, Jr. vs. Cebu Air Inc. G.R. an early warning device. So, to inform or alert the
No. 210621, April 04, 2016, Leonen, J.) incoming vehicles, the bus driver placed numerous
rubber tires one after the other and a small lit
In other words, it is not limited to transportation of goods or
]luorescent lamp – to alert the incoming vehicles of the
passengers but to all its obligations under the contract of
fact that the bus was parked in the middle of the
carriage like issuance of a ticket. It does not relate to
highway.
passengers or goods, but even the mere issuance of a ticket,
there must be extraordinary diligence. That obligation is
Unfortunately, it was not noticed by an incoming vehicle
fulKilled if the passenger was given the opportunity to
(a jeepney) and the incoming vehicle rammed to the
examine each and every page of the ticket. Thus, even
rear of the bus which resulted to the injury of X, a
assuming the ticketing agent encoded the incorrect
passenger of the bus operated by XYZ Bus Company.
information, it is incumbent upon the purchaser to at least
This is a favorite question in the bar.
check if the information corresponds with the entries of the
ticket before purchasing the same. Once the ticket was paid
What are the causes of action available to X as a
or printed, the purchaser is presumed to have agreed with
passenger in a bus operated by XYZ Bus Company?
the terms and conditions.
Cite jurisprudence where the Supreme Court ruled that A: The following are the causes of action available to X:
the common carrier breached its obligation to exercise
extraordinary diligence. 1. Breach of Contract of Carriage – against XYZ Bus
Company;
(a) When the common carrier could not present evidence
2. Reckless Imprudence (Culpa Criminal) – against the
that it speciKically installed a radar which could have
driver of the colliding vehicle (incoming vehicle);
allowed the vessel to navigate safely for shelter during a
and
storm coupled with the negligence of the captain as found by
3. Action for Quasi-Delict or Tort – against the
the appellate court which were the proximate causes of the
operator of the colliding vehicle or jeepney.
sinking of the vessel. (American Home Assurance Company vs.
Court of Appeals, G.R. No. 94149, Mau 5, 1992)
Q: Can he sue the bus driver for Breach of Contract of
(b) The common carriers are deemed to warrant the Carriage?
impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage A: NO.
and manned with a sufKicient number of competent ofKicers
and crew. The failure of a common carrier to maintain in Q: Assuming that the bus driver is criminally liable, can
seaworthy condition the vessel involved in its contract of the owner or the operator of the bus transportation
carriage is a clear breach of its duty prescribed in Article company be held liable subsidiarily?
1755 of the Civil Code. (Vector Shipping Corporation vs.
Adelfo Macasa, G.R. No. 160219, July 21, 2008) A: YES.
108
Q: Can the owner or operator of the bus be held liable Can the owner of the colliding vehicle be made liable to
subsidiarily in case the driver of the colliding vehicle be X even if the owner was not impleaded by X?
found to be criminally liable and has no assets to satisfy
the civil liability arising from the crime? A: YES, the owner of the colliding vehicle could be held
liable. The Court in a case said that this is in order to prevent
A: NO, it should be the operator of that jeepney which multiplicity of suits.
should be subsidiarily liable.
LECTURE
Q: Can X sue both the tortfeasor and the operator of the
bus transportation company in the same complaint or 22. Cite jurisprudence where the Supreme Court ruled
suit but with different causes of action? Can he sue both that the common carrier breached its obligation to
the owner of the colliding vehicle and the operator of exercise extraordinary diligence.
the bus transportation company? Can he recover twice,
assuming that judgement is rendered against both of a. When the common carrier could not present
them? This is the case of Tiu vs. Arriesgado, right? evidence that it speciKically installed a radar which
could have allowed the vessel to navigate safely for
A: YES, but he cannot recover twice. shelter even though it was during a storm coupled
with the negligence of the captain as found by the
Q: Is the tortfeasor and the operator of the bus appellate court which were the proximate causes of
transportation company both liable solidarily to X or the sinking of the vessel. American Home
jointly? Assurance v. CA, G.R. No. 94149, May 5, 1992
A: They are solidarily liable to the passenger – assuming
The failure to install a radar amounts to contributory
that the passenger sued both. But it is easier to sue the
negligence on the part of the ship captain and the
operator of the bus transportation company due to the
shipowner. As a consequence, if there is contributory
presumption of negligence, as opposed to suing the operator
negligence, force majeure cannot be invoked as a defense.
of the colliding vehicle. Since all that they need to establish
is due diligence in the selection of the employees – a lower
degree of diligence required for tort. But at least you can sue b. The common carriers are deemed to warrant
both. If judgement is rendered, it could be enforced against impliedly the seaworthiness of the ship. For a vessel
any one of them solidarily. to be seaworthy, it must be adequately equipped for
the voyage and manned with a sufKicient number of
Q: In the case of Tiu vs. Arriesgado, there are 2 parties competent ofKicers and crew. The failure of a
liable – the operator of the bus company and the common carrier to maintain in seaworthy condition
colliding vehicle. Now, let’s say that the bus is cruising at the vessel involved in its contract of carriage is a
the regular speed and was hit from behind by a colliding clear breach of its duty prescribed in Article 1755 of
vehicle – without any fault on the part of the bus driver. the Civil Code. Vector Shipping Corporation v.
As a result of the collision, X sustained injuries. Adelfo Macasa, G.R. 160219, July 21, 2008
Now, X ]iled a case against the operator of the bus for This is the infamous case of Sulpicio Liner colliding with a
Breach of Contract of Carriage. He did not implead or motor tanker owned by Vector Shipping Corporation. The
sue the operator of the colliding vehicle. He limited his issue here is regarding the seaworthiness of the vessel. A
suit only towards the operator of the bus where he was a motor tanker, considered a vessel, collided with Sulpicio
passenger. Liner, so the failure of the shipowner to maintain the
seaworthiness of the vessel would result into a breach of
Now, that bus company ]iled a third-party complaint contract of carriage.
against the owner of the colliding vehicle. And based on
the evidence during the trial, it was established to the And when is it considered seaworthy?
court that the one at fault is the owner of the colliding
vehicle.
109
When it is adequately equipped and sufKiciently manned to This is a very important case on the limitation of liability of a
carry out likewise the voyage. So, both in terms of common carrier – whether or not the insertion of the invoice
equipment and number of ofKicers to carry out the voyage. number or the letter of credit (LC) in the bill of lading
amounts to higher declaration of value.
c. The testimonial evidence of respondent showed
that petitioner, through its bus driver, failed to Another principle in this case is if the goods were received in
observe extraordinary diligence, and was, therefore, good condition by the common carrier and arrived in bad
negligent in transporting the passengers of the bus condition – meaning there was deterioration or destruction
safely, since the bus bumped a tree and a house, and of the goods – then the presumption is that the common
caused physical injuries to respondent. R. carrier is at fault.
Transport Corporation v. Eduardo Pante, G. R. No.
162104, September 15,2009 f. The driver was clearly negligent when he was
relatively driving fast on a narrow highway and
In this case, obviously the common carrier is liable. The approaching a similarly narrow bridge. A bus is a
moment there is death or injury on the passenger, there is, signiKicantly large vehicle which would be difKicult
likewise, a presumption of fault or negligence on the part of to maneuver and stop if it were travelling at a high
the common carrier. speed. On top of this, the time of the accident was
on or about sunrise when visibility on the road was
d. Petitioners failed to prove that they did exercise compromised. The driver should have been more
the degree of diligence required by law over the prudent and careful in his driving the bus especially
goods they transported. Aside from their persistent considering that the transportation company is a
disavowal of liability by conveniently posing an common carrier. Linda Cacho v. Universal Robina
excuse that their extraordinary responsibility is Corporation, G.R. No. 203081, January 17, 2018
terminated upon release of the goods to the Ports
Authority, petitioners failed to adduce sufKicient This case is more about the negligence of the driver. When
evidence that they exercised extraordinary care to you approach a narrow bridge, you should slow down.
prevent unauthorized withdrawal of the shipments.
Nedlloyd Lijnen B.V. Rotterdam v. Glow Laks g. Part of the extraordinary responsibility of
Enterprises, G.R. No. 156330, November 19, 2014 common carriers is the duty to ensure that
shipments are received by none but "the person
So, this is a case where the goods were released to persons who has a right to receive them." Common carriers
not authorized to receive them but presenting falsiKied or must ascertain the identity of the recipient. Failing
forged documents. So, they were delivered at the port of to deliver shipment to the designated recipient
Panamanian authorities and released to supposed amounts to a failure to deliver. The shipment shall
consignees on the strength of falsiKied permits. The Supreme then be considered lost, and liability for this loss
Court said there being no delivery to the consignee, then the ensues. Federal Express Corporation v. Luwalhati
common carrier is deemed to have breached its obligation. It Antonino, G.R. No. 199455, June 27, 2018
should have exercised extraordinary diligence to ensure the
delivery of the goods to the consignee. This is a case penned by Justice Leonen regarding Federal
Express supposed to deliver a check. This was in New York.
e. Mere proof of delivery of the goods in good order The check was supposed to cover for payment of realty. It
to a common carrier and of their arrival in bad was not received by the intended recipient. Justice Leonen
order at their destination constitutes a prima facie said that part of the responsibility of the common carrier is
case of fault or negligence against the carrier. If no to ensure that shipments, like checks, are received by none
adequate explanation is given as to how the but "the person who has a right to receive them."
deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible. h. At the time the customs broker turned over the
Eastern Shipping Lines v. BPI MS Insurance, G. R. custody of the cargoes to a common carrier for
No. 182864, January 12, 2015 inland transportation, it is still required to observe
extraordinary diligence in the vigilance of the
110
goods. Failure to successfully establish this, carries carriage. Jose Sanico and Vicente Castro v. Werherlina P.
with it the presumption of fault or negligence, thus, Colipano, G.R. No. 209969, September 27, 2017
rendering the customs broker liable to the shipper
it contracted with, subject to right of The driver, however, may be sued based on quasi-delict and/
reimbursement against the carrier in whose or criminally if his negligence can be established.
possession, the goods where hijacked. Keihin-
Everett Forwarding Co. v. Marine Malayan, et al., The one that is liable for breach of contract of carriage is the
G.R. No. 212107, January 28, 2019 operator. Not the driver. The driver could be sued criminally
or for quasi-delict, but not for breach of contract of carriage.
i. When the loss of the goods was not attended by This is since the contract is between the passenger and the
grave or irresistible threat, violence, or force but operator – and not between the driver and the passenger.
was brought about by carrier's failure to exercise
extraordinary diligence when she neglected vetting 24. Are common carriers liable for injuries to
her driver (who absconded with the goods) or passengers even if they have observed ordinary
providing security for the cargo and failing to take diligence and care? Explain.
out insurance on the shipment’s value. Annie Tan v.
Great Harvest, supra Yes, common carriers are liable to injuries to passengers
even if the carriers observed ordinary diligence and care
This is also a case penned by Justice Leonen. So, the driver because the obligation imposed upon them by law is to
absconded with the goods. According to Justice Leonen, the exercise extraordinary diligence. Common carriers are
failure of the carrier to vet – meaning to vouch for the good bound to carry the passengers safely as far as human care
qualiKication of the driver – amounts to the breach of the and foresight can provide, using the utmost diligence of very
duty to exercise extraordinary diligence. cautious persons with a due regard for all the circumstances.
Article 1755 of the Civil Code; Bar 2015
j. Petitioner was extremely remiss before and
during the time of the vessel's sinking. Petitioner There was a BAR exam question. If the cause of action
did not endeavor to dispute the Court of Appeal's was for tort, will the defense of extraordinary diligence
Kinding that the vessel's captain erroneously hold?
navigated the ship, and failed to reduce its speed
considering the ship's size and the weather The chairperson answered that it would not hold because
conditions. The crew members were also negligent the appropriate defense for tort is due diligence in the
when they did not make any stability calculations, selection and supervision of their employees.
and prepare a detailed report of the vessel's cargo
stowage plan. The radio ofKicer failed to send an SOS So, the appropriate defense depends on the nature of the
m e s s a g e i n t h e i n te r n a t i o n a l ly a c c e p te d suit Kiled by plaintiff. If it is one of breach of contract of
communication network, but instead used the carriage, the defense is extraordinary diligence. If it is one
Single Side Band informing the company about the of tort, the defense is ordinary or due diligence in the
emergency situation. Sulpicio Lines v. Major selection and supervision of their employees.
Victorio Karaan, G.R. No. 208590, October 08,
2018 But is it not if he exercised extraordinary diligence, he would
be deemed to exercised due diligence in the selection and
ii. Liabilities of common carrier supervision of their employees, right? But that was not the
answer according to the examiner of Commercial Law. So,
23. Who is liable in case of breach of contract of the answer should be due diligence and not extraordinary
carriage? The operator or the driver or both? diligence.
If the cause of action is based on a breach of a contract of 25. Is the presumption of fault or negligence applicable
carriage, the liability of the owner/operator is direct as the only in case of death or injury to passengers or loss or
contract is between him and the passenger. The driver damage to goods?
cannot be made liable as he is not a party to the contract of
111
No, it also applies in case of any breach in the contract of The Supreme Court said YES, because it breached its
carriage such as when the passenger was not able to board contract in the sense that the passenger was not able to
despite being given the boarding pass. Thus, when an airline board and arrive in his intended destination.
issues a ticket to a passenger conKirmed on a particular
Klight, on a certain date, a contract of carriage arises, and the It was also held that if the passenger’s accommodation is
passenger has every right to expect that he would Kly on that downgraded from Kirst class to economy, the carrier is liable
Klight and on that date. If that does not happen, then the for breach of contract of carriage. Cathay PaciJic Airways,
carrier opens itself to a suit for breach of contract of Ltd., v. Spouses Arnulfo and Evelyn Fuentebella. G. R. No.
carriage. In an action based on a breach of contract of 188283, July 20, 2016
carriage, the aggrieved party does not have to prove that the
common carrier was at fault or was negligent. All he has to Fuentebella is the former Speaker of the House. He and his
prove is the existence of the contract and the fact of its non- wife were downgraded from Kirst class to economy.
performance by the carrier, through the latter's failure to
carry the passenger to its destination. Alfredo S. Ramos vs. The Supreme Court said that the carrier is liable for breach
China Southern Airlines Co. Ltd., G.R. No. 213418, of contract of carriage. Again, the presumption of fault –
September 21, 2016 should there be a breach of the terms and conditions in the
contract of carriage.
The Supreme Court said in this case that the presumption of
fault does not apply only in case of death or injury to The amount of damages awarded by the RTC was PHP 500K.
passengers or loss or damage to goods. The moment there is The Supreme Court said that it is too much. Being a
a breach of contract or violated its obligations under the congressman does not entitle you to such amount.
contract of carriage, there is a presumption of fault, likewise.
The common carrier may also be held liable in case of rude
We saw that in the case of Manay, Jr. v. Cebu Air, Inc., or discourteous conduct on the part of the employees
although the ruling in that case is that Cebu Air is not liable. towards a passenger. Fernando v. Northwest Airlines, Inc.,
G.R. No. 212038 and G.R. No. 212043, February 8, 2017
Now, in Ramos vs. China Southern Airlines, the Supreme
Court said that the carrier is liable for breach of contract of In another case, the carrier was made liable for insisting on
carriage. There was presumption of fault because it was not the upgrade of the passenger from business class to Kirst
able to ensure that the transport of the passenger to his class accommodation. The Supreme Court held that priority
intended destination. upgrading is a privilege which, like all privileges, can be
waived. By insisting on the upgrade, despite the passengers'
Now, what happened in this case? Ramos was the owner of waiver, the carrier breached its contract of carriage. Cathay
National Book Store. He was in China. He was already PaciJic Airways v. Spouses Daniel Vasquez and Maria
checked-in. He was given the boarding pass and claim stub Luisa Madrigal Vazquez, G.R. No. 150843, March 14, 2003
for his luggage. But before he could board the carrier (the
aircraft), he was told that he was on the waitlist and unless
In this case, Dr. Vasquez and his spouse were upgraded
he pays in RMB (⼈⺠币), he would not be accommodated.
from business class to ]irst class. But what was the
The amount of RMB was not even PHP 5,000, if converted, reason why he refused to be upgraded? Because their
but he refused to pay the additional RMB. As a result, he was family friends were in business class. He felt
ofKloaded. His luggage was also ofKloaded. In order to get embarrassed to leave behind their friends in the
home to the Philippines, he had to pay more than the business class section. The Cathay attendant insisted
additional RMB required of him. that if you do not upgrade to ]irst class, we would be
forced to of]load you. So, they grudgingly accepted. As
In this case, was there liability on the part of China soon as they arrived in the Philippines, they ]iled a case
Southern Airlines? Is there presumption of fault on the against Cathay Paci]ic. Is Cathay Paci]ic Liable?
part of the carrier? Again, there is no death or injury,
right? The Supreme Court said that upgrading is a privilege. Like
all privileges, it can be waived. So, regardless of the reason, if
112
the terms and conditions of the carriage were violated, the

carrier is liable – no matter how odd the reason may be. 27. What are transportation network companies
(TNCs)?
26. X Company loaded 6 metric tons of Soybean Meal on
board the vessel M/V "Sea Dream" at the Port of U.S.A., These are companies which use online-enabled platform to
for delivery to the Port of Manila to respondent Simon connect passengers with drivers using their personal and
Enterprises, Inc., as consignee. When the vessel arrived non-commercial vehicles. TNCS in the Philippines include
in Manila, the shipment was discharged to the receiving Grab and Uber. (Uber was acquired by Grab.)
barges of the arrastre operator. Consignee later received
the shipment but claimed having received only 5 metric Compared to taxicabs, TNCs offer advantages to riders
tons of Soybean Meal. Are the common carrier and including the ability to request service via mobile map or
arrastre operator liable for the shortage? website, track the location of driver, and get a receipt via
email. See explanatory note to House Bill 1260 of the 18th
No. Though it is true that common carriers are presumed to Congress by Honorable Luis Raymund Villafuerte
have been at fault or to have acted negligently if the goods
transported by them are lost, destroyed, or deteriorated, and 28. Are TNCs considered common carrier?
that the common carrier must prove that it exercised
extraordinary diligence in order to overcome the The legal and regulatory status of TNCs is not yet clearly
presumption, the plaintiff must still, before the burden is deKined. (It is still under legislation.) They are currently
shifted to the defendant, prove that the subject shipment being regulated by the Land Transportation Franchise
suffered actual shortage. This can only be done if the weight Regulatory Board.
of the shipment at the port of origin and its subsequent
weight at the port of arrival have been proven by a It is submitted though that they are not common carriers.
preponderance of evidence, and it can be seen that the TNCs are technology companies that do not provide
former weight is considerably greater than the latter weight, transportation service and they are not transportation
taking into consideration the exceptions provided in Article providers. They merely link the customers with the third-
1734 of the Civil Code. Asian Terminals, Inc. v. Simon party drivers and are not parties to the transportation
Enterprises, Inc., G.R. No. 177116, February 27, 2013 contract.
This case is yet to be asked in the BAR. This case deviates Also, TNC drivers can go "ofKline" if desired and can decide
from your rule that in case of loss, damage, deterioration to to accept or reject a ride request according to their personal
the goods, the common carrier is liable. travel itinerary as opposed to common carriers which
engage in a continuous offer.
Now, what happened in this case? The goods
deteriorated. It suffered in weight quantity when the If you are asked in the BAR if they are common carriers, it is
goods arrived at the port of destination. So, there being submitted, based on the bill proposed by Hon. Villafuerte,
deterioration, let’s say from 50 kilos reduced to 40 kilos. that they are not common carriers.
Is the carrier liable in this case?
It is further submitted that they are akin to a freight
The Supreme Court said that the presumption of fault in forwarder. They only arrange the vehicles/vessels for the
cases of deterioration would apply if the goods were passengers and as such, should not be treated as common
measured at the port of origin. So, if there is no such carriers. They should be held liable for damage though if
measurement at the port of origin, how could you say that there is negligence in vetting and choosing the vehicle
there was deterioration of the goods? owners whom the TNCs accredited as part of their system.
The House Bill, citing Crisostomo v. Court of Appeals (G.R.
Of course, this case would only apply if the goods are No. 138334, August 25, 2003), applied by analogy TNC
perishable or if the goods could suffer from the reduction of with a travel agency, (who are not common carriers)
quantity like soya, rice, grain, etc. which merely arranges the booking of a person but the
actual act of transporting the customer is done by an
iii. Classi]ication of transport network vehicles services
and transport network companies
113
airline but the author believes that the appropriate 6. Exercise of extraordinary diligence. (Not in the law,
comparison is that of the freight forwarder. but implied as a defense.)
In what sense may TNC be held liable? Force Majeure
Just like a freight forwarder, right? So, the freight forwarder 30. What are the requisites for natural disaster to be
chooses the vehicle or the vessel that would consummate considered an exempting circumstance in case of loss or
the contract of carriage. So, while the TNCs do not own the damage to goods?
transportation vehicles and they do not enter into
transportation contracts – they only pair the owner of the a. The natural disaster is the proximate and only cause
vehicle with the passenger, but they should vet, meaning of the loss; (by express provision of the law)
vouch for qualiKications of the owners of the vehicles and b. The common carrier should have exercised due
drivers. So, if they were negligent of providing the vehicles diligence to prevent or minimize the loss before,
the passengers can choose from, then they could be held during, and after the occurrence of the natural
liable for damages. So, just like a freight forwarder. disaster;
c. The common carrier should not incur in delay.
Now, for example, travel agency, what if something goes Central Shipping Company v. Insurance Company
wrong with the aircraft? Do you sue the travel agency? of North America, G.R. No. 150751, September 20,
2004; Article 1739 and 1740, Civil Code
You don’t, right? The travel agency chose the wrong airline
company. The aircraft exploded. But you don’t sue the travel
agency, right? In one case, it was held that monsoons, during which
strong winds were not unusual, would not be suf]icient
Whereas, for Grab, if they accepted a negligent driver or to categorize the weather condition as storm. When the
operator in their system, it has record of violations of travel loss of the vessel was caused not only by the southwestern
rules and regulations, but despite of that it has admitted the monsoon, but also by the shifting of the logs in the hold due
driver or operator in their system – I think in that case they to improper stowage, the defense of force majeure is
could be held liable for damages. unavailing.
B. VIGILANCE OVER GOODS 31. Philip Mauricio shipped a box of cigarettes to a

dealer in Naga City through Bicol Bus Company (BBC).
When the bus reached Lucena City, the bus developed
i. Exempting causes
engine trouble. The driver brought the bus to a repair
shop in Lucena where he was informed by the mechanic
29. What are the defenses available to the common that an extensive repair was necessary, which would
carrier in case of loss, destruction, or deterioration of take at least 2 days. While the bus was in the repair
the goods? shop, Typhoon Coring lashed Quezon Province. The
cargoes inside the bus, including Mauricio's cigarettes,
As a rule, the common carrier is liable for the loss, got wet and were totally spoiled. Mauricio sued BBC for
destruction, or deterioration of the goods, except in the damage to his cargoes. Decide.
following cases: (FEACO)
The BBC is liable for damages to the cargoes lost by
1. Natural disaster or calamity which is the proximate Mauricio. A natural disaster would relieve liability if it is the
cause of the loss (Klood, storm, earthquake, lightning proximate and only cause of the damage. The carrier itself,
– ]ire is not included); (Force Majeure) in this case, had been negligent. The presumption of
2. Acts of public Enemy in war, whether international negligence in culpa contractual is not overcome by engine
or civil; trouble which does not preclude its having been due to the
3. Act or omission of the shipper or passenger; fault of the common carrier. The fact that an extensive repair
4. Character of the goods or defects in the packing or work was necessary which, in fact, took 2 days to complete
container; (clean bill of lading) somehow justiKies an impression that the engine trouble
5. Order or act of competent public authority;
114
could have been detected, if not already known, well before public for the transport of goods as a business, it is
the actual breakdown. BAR 1987 considered a common carrier regardless of whether
it owns the vehicle used or has to actually hire one.
It cannot invoke force majeure for 2 reasons. It is not the Lastly, TMBI's customs brokerage services – including
proximate cause of the damage and, likewise, there is the transport/delivery of the cargo – are available to
negligence on the part of the common carrier. anyone willing to pay its fees.
For BAR exam purposes, if you see contributory negligence TMBI is a custom broker. A custom broker is a common
on the part of the shipowner such would bar the invocation carrier.
of force majeure as a defense. Actual negligence is also not
allowed. Failure to ensure the seaworthiness of the vessel is b. TMBI is liable for the hijacking of the truck. Theft or the
tantamount to negligence. robbery of the goods is not considered a fortuitous
event or a force majeure. Nevertheless, a common
32. A shipment of electronic goods arrived at the Port of carrier may absolve itself of liability for a resulting
Manila for Sony Philippines, Inc. (Sony). Previous to the loss: (1) if it proves that it exercised extraordinary
arrival, Sony had engaged the services of TMBI to diligence in transporting and safekeeping the goods;
facilitate, process, withdraw, and deliver the shipment or (2) if it stipulated with the shipper/owner of the
from the port to its warehouse in Binan. TMBI - who did goods to limit its liability for the loss, destruction, or
not own any delivery trucks - subcontracted the services deterioration of the goods to a degree less than
of BMT Trucking Services (BMT), to transport the extraordinary diligence. Instead of showing that it had
shipment from the port to the Binan warehouse. Four acted with extraordinary diligence, TMBI simply argued
BMT trucks picked up the shipment from the port. that it was not a common carrier bound to observe
However, only three trucks arrived at Sony's Binan extraordinary diligence. Its failure to successfully
warehouse. The fourth truck driven by Rufo Reynaldo establish this premise carries with it the presumption of
Lapesura was found abandoned. Mitsui, the insurer, fault or negligence, thus rendering it liable to Sony/
paid the claims and ran after TBMI. TBMI, however, Mitsui for breach of contract.
denied being a common carrier because it does not own
a single truck to transport its shipment and it does not A potential question would be what are the defense you
offer transport services to the public for compensation can raise if you are the custom broker, given the facts of
and hence, it is not bound to observe extraordinary the case?
diligence. Furthermore, TMBI insists that the hijacking
of the truck was a fortuitous event which should 1. Theft or Robbery, if there is grave or irresistible
exonerate its liability. force or threat;
2. Exercised extraordinary diligence;
a. Is TMBI is a common carrier? 3. There is a stipulation with the shipper to exercise
diligence less than extraordinary.
b. Should TMBI be held liable for the hijacking of the
truck? c. TMBI and BMT are not solidarity liable to Mitsui. TMBI's
liability to Mitsui does not stem from a quasi-delict
c. Should BMT be held liable with TMBI? (culpa aquiliana) but from its breach of contract (culpa
contractual). The legal reality that results from this
a. Yes, TBMI is a common carrier. The delivery of the goods contractual tie precludes the application of Article 2194
is an integral, albeit ancillary, part of its brokerage on solidary liability of the parties based on quasi-delict.
services. TMBI admitted that it was contracted to The Court, however, do not say that TMBI must absorb
facilitate, process, and clear the shipments from the the loss. By subcontracting the cargo delivery to BMT,
customs authorities, withdraw them from the pier, then TMBI entered into its own contract of carriage with a
transport and deliver them to Sony's warehouse in fellow common carrier. Since BMT failed to prove that it
Laguna. That TMBI does not own trucks and has to observed extraordinary diligence in the performance of
subcontract the delivery of its clients' goods, is its obligation to TMBI, it is liable to TMBI for breach of
immaterial. As long as an entity holds itself to the their contract of carriage. Torres-Madrid Brokerage,
115
Inc. v. Feb Mitsui Marine Insurance Co., Inc. and strings. When sued, Provident Lines, Inc. alleged that
Benjamin P. Manalastas, Doing Business Under the the loss was caused by the spillage of the rice on account
Name of BMT Trucking Services GR. No. 194121, July of the defective condition of the sacks, at the time it
11, 2016 received the shipment, and therefore, it cannot be held
liable. Decide. Give reasons.
Are the custom broker and the trucking company liable
solidarily in this case? The maritime carrier is liable. Where the fact of improper
packing is known to the carrier or its servants, or apparent
NO. The custom broker is liable for breach of contract of upon ordinary observations, but the carrier accepts the
carriage, but the trucking company is not liable for breach of goods notwithstanding such conditions, it is not relieved of
contract of carriage to the consignee. The consignee never liability for loss or injury resulting therefrom. Southern
contracted with the trucking company, but with the custom Lines, Inc. v. Court of Appeals, 4 SCRA 259; BAR 1978 and
broker. So, the trucking company is a common carrier, but is 1984
not liable as such in so far as the consignee is concerned. It
is liable for tort or quasi-delict to the consignee. The rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his
If the consignee runs after the custom broker, who is a employees or apparent upon ordinary observation, but he
common carrier and there is a presumption of fault, and nevertheless accepts the same without protest or exception
the custom broker is made to pay, can it sue the trucking notwithstanding such condition, he is not relieved of liability
company? YES. for damage resulting therefrom. In this case, petitioner
accepted the cargo without exception despite the apparent
What is the nature of the relationship between the defects in some of the container vans. Hence, for failure of
trucking company and the custom broker? petitioner to prove that he exercised extraordinary diligence
in the carriage of goods in this case or that he is exempt
It is one of contract of carriage. So, the custom broker can from liability, the presumption of negligence as provided
sue the trucking company, not for tort, but for breach of under Art. 1735 holds. Virgines Calvo v. UCPB General
contract of carriage. Insurance, G.R. No. 148496, March 19, 2002
Acts of public enemy The Supreme Court said that if the goods were damaged,
then the carrier must make the appropriate notation. So, if it
33. Who is a public enemy? is known to the carrier and it is obvious upon ordinary
observation, but he accepts the goods without any condition
A public enemy is a citizen of another country against which or did not take note of the damage to the goods. Then they
the Philippine government is at war. cannot invoke as a defense the acts or omission of the
shipper or that the goods were improperly packed.
Is Abu Sayyaf a public enemy?
What is a clean bill of lading? No notation of defects.
NO. They are not foreigners. They are citizens of the
Philippine Government. The Supreme Court said that if there is damage or dent to
the shipment or the goods, such should be indicated in the
Acts or omission of shipper bill of lading. Otherwise, the presumption is the goods were
received in good condition. If they arrived in a bad condition,
Character of the goods or defect in packing the carrier is presumed to be at fault or liable.
34. Because of spillage of the rice during the trip from Order of competent public authority
Davao to Manila due to the bad condition of the sacks,
there was a shortage in the rice delivered by the 35. Y contracted the services of X to haul tons of scrap
Provident Lines Inc. to the consignee XYZ Import and iron from Bataan to the port of Manila on board the
Export Corporation. The carrier accepted the shipment, lighter "Batman." Z sent his lighter to dock at Mariveles,
knowing that the sacks had holes and some had broken where Y delivered the scrap irons for loading which also
116
begun on the same day. Acting Mayor, together with 3 Q. What is your basis in saying that the shipper/
policemen, ordered the dumping of the scrap iron passenger should be given the option to declare higher
where the lighter was docked and the rest to be brought valuation to make that stipulation valid?
to NASSCO compound. Is the intervention of the
municipal of]icials considered a force majeure as to A. As you know, there are 2 stipulations or provisions in the
exempt the carrier from any liability? Civil Code regarding the limitation of liability. The Kirst is to
limit the liability based on the value of the goods as declared
No. The intervention of municipal of]icials was not in in the bill of lading, unless the shipper declares higher
any case, of a character that would render impossible valuation. The second one is a Kixed amount of liability. (also
the ful]illment by the carrier of its obligation. The carrier refer to Number 48)
was not duty bound to obey the illegal order to dump into
the sea the scrap iron. Moreover, there is absence of Q. What are the conditions so that a ]ixed amount of
sufKicient proof that the issuance of the same order was liability would become valid, without reference to the
attended with such force and intimidation as to completely value of the goods? What would make it valid?
overpower the will of the carrier's employees. The mere
dif]iculty in the ful]illment of the obligation is not A. So, it should be reasonable and just under the
considered force majeure. Mauro Ganzon v. Court of circumstances and has been fairly and freely agreed upon by
Appeals, G.R. No. L-48757, May 30, 1988 the parties. Not giving the shipper/passenger the option to
declare higher valuation for his goods is not just and
Also, it was not an order of competent public authority reasonable. (refer to Number 47)
because it was not in relation to his duty as Mayor.
Q. So, what if instead it states that the liability is only
RECITATION limited to 90% of the value of the goods as appearing in
the bill of lading? Is it valid?
Q. Let’s say that A took a bus from Manila to Baguio. He
deposited his maleta in the compartment area of the A. NO. Again, there should be an option giving the shipper/
bus. He did not notify the bus driver/conductor of the passenger to declare higher valuation for his goods. (also
fact that he deposited the maleta. He did not pay the refer to Number 47)
charges for depositing the maleta. When he arrived in
Baguio, the maleta was no longer there. It was taken by Q. The bill of lading makes reference to the invoice value
another passenger. Is the common carrier liable in this and letter of credit (LC) that gave rise to the bill of
case? lading. The goods as declared in the invoice and the LC
are worth more than the limit of liability. In case of loss
A. YES. The moment the goods were placed in the or damage to the goods, what is the measure of liability
possession of the common carrier, there is now the on the part of the common carrier?
obligation to exercise extraordinary diligence. Even if the
contract is for the carriage of persons. (refer to Number A. The limitation as indicated in the bill of lading would
42) prevail. The insertion or reference of the invoice value and
the LC is not tantamount to a declaration of a higher value.
Q. Let’s say that the bill of lading in the ticket indicates (refer to Number 55)
limitation on the amount of liability. It says the carrier
shall be liable only up to P1,000. And it turns out that Q. What if bill of lading makes reference to an itemized
the maleta contains jewelries worth more than P1,000. list of goods declared to the carrier and the
Is that stipulation limiting the liability of the common corresponding freightage was paid accordingly? So, how
carrier valid? much can be recovered? (Eastern Shipping Lines v. BPI
MS Insurance)
A. NO. Such stipulation is only valid if there is the option
given to the shipper/passenger to declare higher valuation. A. The value as declared in the itemized list of goods would
(refer to Number 48) prevail. If the shipper pays the corresponding freightage,
then he should recover more than the value of the goods as
declared in the bill of lading.
117
Q. Is there a statutory limit on the amount of liability in ii. Contributory negligence

so far as a carrier is concerned, under the Civil Code?
38. What is the effect of contributory negligence on the
A. NONE. part of the shipper in case of loss or damage to his
goods?
Q. What if under the COGSA?
If the shipper or owner merely contributed to the loss,
A. YES. $500 per package. destruction or deterioration of the goods, the proximate
cause thereof being the negligence of the common carrier,
Q. What do you mean by package? Does package mean the latter shall be liable in damages, which however, shall be
shipment? Or per unit? equitably reduced.
A. Shipment. On the other hand, even if the loss, destruction, or

deterioration of the goods should be caused by the character
Q. Is it per container? Or per unit? of the goods, or the faulty nature of the packing or of the
containers, the common carrier must exercise due diligence
A. Container. to forestall or lessen the loss.
Q. So, if 1 container contains 14 tricycles. Is the $500 per iii. Duration of liability
tricycle or for the entire container?
a. Delivery of goods to common carrier
A. For the entire container. Unless each unit is declared in
the bill of lading and freightage paid accordingly. b. Actual or constructive delivery
LECTURE 40. In a contract of carriage for goods, when does the

obligation to exercise extraordinary diligence
a. Requirement of absence of negligence commence and when does it end?
b. Absence of delay The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the
37. A, in Manila, shipped on board a vessel of B, chairs to possession of, and received by the carrier for transportation
be used in the movie house of consignee C in Cebu. No until the same are delivered, actually or constructively, by
date for delivery or indemnity for delay was stipulated. the carrier to the consignee, or to the person who has a right
The chairs, however, were not claimed promptly by C to receive them.
and were shipped, by mistake, back to Manila, where it
was discovered and re-shipped to Cebu. By the time the So, the moment the goods are placed in the possession of the
chairs arrived, the date of inauguration of the movie carrier. So, it means that even though the bill of lading has
house passed by and it had to be postponed. C brings not been issued yet, right? Even though the fares have not
action for damages against B, claiming loss of pro]its been paid yet, right?
during the Christmas season when he expected the
movie house to be opened. Decide the case with reasons. So, the issuance of the bill of lading is not the reckoning
period for the perfection of the contract of carriage. The
C may bring action for damages against B for loss of proKits. moment the goods are placed in the possession of the
The obligation of the carrier to carry cargo includes the duty common carrier, then the obligation to exercise
not to delay their transportation, so that if the carrier is extraordinary diligence really starts. Then if the goods are
guilty of delay in the shipment of the cargo, causing damages lost or damaged even before the parcel could board the
to consignee, it will be liable. Tan Liao v. American vehicle or vessel, the carrier is liable for damages.
President Lines, L-7250, January 20, 1956; BAR 1979
c. Due diligence to prevent or lessen the loss
118
Can the carrier invoke the defense that there is no contract to carry goods from one port to another, and they
perfected contract of carriage because the vessel has not cannot be loaded directly on the vessel and lighters are sent
yet set sail? by the vessel to bring the goods to it, the lighters are for the
time its substitutes, so that the bill of landing is applicable to
NO. This is because the goods have been placed in the the goods as soon as they are placed on the lighters.
possession and control of the common carrier and the duty Compania Maritime v. Insurance Company of North
to exercise extraordinary diligence has already started. This America, G.R. No. L-18965, October 30, 1964.
duty ends upon receipt, actually or constructively, of the
goods by the consignee or the person authorized to receive In this case, the goods were received by the lighter, free
them. of charge. The lighter would then bring the goods to the
vessel. Let’s say that the lighter or barge got upsized
The carrier's liability as a common carrier begins with the before loading the goods to the vessel. Would the
actual delivery of the goods for transportation and not with common carrier be liable?
the mere formal execution of a receipt or bill of lading
because the issuance of such is not necessary to complete The Supreme Court said YES. The receipt of goods by the
delivery and acceptance. Even where it is provided by carrier has been said to lie at the foundation of the contract
statute that liability commences with the issuance of the bill to carry and deliver, and if actually no goods are received
of lading, actual delivery and acceptance are sufKicient to there can be no such contract.
bind the carrier. Compania Maritime v. Insurance
Company of North America, G.R. No. L-18965, October 30, So, the fact that the goods were received by the lighter,
1964 furnished or provided by the common carrier, signals the
start of the obligation of the carrier to exercise
As you know, when you board a bus, you don’t pay the farer extraordinary diligence. The moment the goods were lost
right away. You don’t issue the bill of lading right away. What and damaged, as in this case the lighter got upsized, the
is the Kirst thing you do? You get a seat. It is only thereafter carrier is liable for damages.
that you would be issued a ticket and to pay to the
conductor, as the case may be. That is why the In another case, it was held that the liability of a common
commencement of the contract of carriage should not start carrier does not cease by mere transfer of custody of the
from the issuance of the bill of lading. cargo to the arrastre operator. Like the duty of
seaworthiness, the duty of care of the cargo is non-delegable
The fact that part of the shipment had not been loaded on and the carrier is accordingly responsible for the acts of the
board the lighter did not impair the said contract of master, the crew, the stevedore and his other agents. The
transportation as the goods remained in the custody and fact that a consignee is required to furnish persons to assist
control of the carrier, albeit still unloaded. Mauro Ganzon v. in unloading a shipment may not relieve the carrier of its
Court of Appeals, G.R. No. L-48757, May 30, 1988 duty as to such unloading. It is settled in maritime law
jurisprudence that cargoes while being unloaded generally
In one case, it was held that the receipt of the goods by the remain under the custody of the carrier. Since the damage to
lighters (even if free of charge) is already deemed to be a the cargo was incurred during the discharge of the shipment
receipt by the vessel even though the goods are not yet and while under the supervision of the carrier, the latter is
actually shipped. The receipt of goods by the carrier has liable for the damage caused to the cargo. Westwind
been said to lie at the foundation of the contract to carry and Shipping Corporation vs. UCPB General insurance Co., GR
deliver, and if actually no goods are received there can be no no. 2002289, November 25, 2013
such contract. The liability and responsibility of the carrier
under a contract for the carriage of goods commence on We said that the obligation of the common carrier to deliver
their actual delivery to, or receipt by, the carrier or an the goods to the consignee is non-delegable.
authorized agent and delivery to a lighter in charge of a
vessel for shipment on the vessel, where it is the custom to You also know that when the vessel reaches or arrives at the
deliver in that way, is a good delivery and binds the vessel port of destination, the goods are not ofKloaded by the
receiving the freight, the liability commencing at the time of employees of the vessel or the common carrier. They are
delivery to the lighter and, similarly, where there is a ofKloaded by other persons, like the arrastre operator.
119
liable. Nedlloyd Lijnen B.V. Rotterdam and the East Asiatic

So, if the goods were damaged while in the possession of Co., Ltd. v. Glow Laks Enterprises, Ltd., G.R. No. 156330,
the arrastre operator or distributor hired by the November 19, 2014
arrastre operator, is the carrier relieved from liability?
Is good faith a defense? Can the carrier invoke that he
In so far as the consignee is concerned, NO. This is since the believes in good faith that he is the consignee because
obligation only ends when the goods are received, actually he presented import documents?
or constructively, by the consignee.
Supreme Court said NO. It is because the obligation is to
On the other hand, the carrier can sue the arrestre operator, deliver the goods to the actual consignee – not the person
right? But it can never invoke as a defense that the fault lies who claims to be the consignee.
upon the arrastre operator. Again, because the obligation
only ends when the goods are received, actually or 41. Does the obligation of the common carrier to
constructively, by the consignee. exercise extraordinary diligence cease when the goods
are turned over to the customs authorities?
You also remember that they have different source of
obligation, right? The common carrier is based upon the The delivery to the customs authorities is not the delivery
contract of carriage. Whereas the liability of the arrastre contemplated by Article 1736 because the owner cannot
operator is based upon its contract with the Philippine Ports exercise dominion over them. It believes that the parties
Authority. may agree to limit the liability of the carrier in connection
therewith considering that the goods have still to go through
This is the only case where the Supreme Court said that the inspection of the customs authorities. The carrier loses
the arrastre operator is liable solidarily. Ordinarily, they control of the goods because of a custom regulation and it is
are not. Now, what makes this case such that they are unfair that it be made responsible for what may happen
liable solidarily even though the goods were damaged during the interregnum.
while it was being of]loaded on the vessel?
In the corresponding bill of lading, both the carrier and the
It would have been different if the goods were ofKloaded consignee have stipulated to limit the responsibility of the
from the vessel without damage whatsoever and then stored former for the loss or damage that may occur to the goods
in the warehouse of the arrastre operator and at that point before they are actually delivered. It appears that the carrier
the goods were damaged. In that case, they are not liable does not assume liability for any loss or damage once they
solidarily, right? The common carrier is liable for breach of have been taken into the custody of customs or other
contract of carriage even though the goods were damaged authorities or when they have been delivered at ship's
while it is in the warehouse of the arrastre operator, since tackle. These stipulations have been adopted precisely to
the goods were still not received by the consignee. mitigate the responsibility of the carrier considering the
present law on the matter and the Court Kinds nothing
If the consignee sues the common carrier and the arrastre therein that is contrary to morals or public policy that may
operator, not knowing under whose custody the goods were justify their nulliKication. Lu Do & Lu Ym Corporation v LV.
damaged or loss. That can be done by the consignee. Defense Binamira, G.R. No. L- 9840, April 22, 1957
of the common carrier is extraordinary diligence, right? As
for the arrastre operator, the defense is that it is only
This is the case that says that it is not contrary to public
required due diligence to prevent the loss or damage to the
policy to stipulate that the obligation of the carrier ends
goods. So, the consignee can sue both and let the court
when the goods are entrusted to the custom authorities.
determine under whose custody the goods were damaged or
lost.
So, if you have no stipulation, when does it end?
The Supreme Court also ruled that when there is no dispute It ends when the goods are received, actually or
that the custody of the goods was never turned over to the constructively, by the consignee. But, again, there is nothing
consignee or his agents, but was lost into the hands of wrong to stipulate that the obligation of the carrier ends
unauthorized persons who secured possession thereof on when the goods are entrusted to the custom authorities.
the strength of falsiKied documents, the common carrier is
120
That stipulation is not null and void. Keep in mind that this deterioration, loss, or destruction of the goods happened,
case was decided under the Civil Code. There is no decision the transporter shall be held responsible. Eastern Shipping
to the contrary. Lines, Inc. v. BPI/MS Insurance Corporation and Mitsui
Insurance Co., Ltd., G.R. No. 182864, January 12, 2015
That is why the consignee contracts with a custom broker to
get the goods from the customs, especially if the goods c. Temporary loading or storage
originated from a foreign port. So, we need custom brokers
to clear payment of import duties and facilitate the release The obligation of the carrier remains in full force and effect
of the goods. So, it is not the shipper who would contract even when the goods are temporarily unloaded or stored in
with the custom broker, right? The shipper would load the transit unless the shipper or owner has made use of the
goods on board the vessel, he would contract with either the right of stoppage in transit. It continues to be operative even
freight forwarder or direct with the common carrier, right? during the time the goods are stored in a warehouse of the
But he would never contract with the custom broker. It carrier at the place of destination until the consignee has
would be done by consignee. That is why it makes sense to been advised of the arrival of the goods and has had
stipulate that the obligation of the carrier ends when the reasonable opportunity thereafter to remove them or
goods are entrusted to the custom authorities. otherwise dispose of them.
42. X took the Benguet Bus from Baguio going to Manila. Here is a provision that makes reference of constructive
He deposited his maleta in the baggage compartment of receipts by the consignee. So, the goods are stored in a
the bus common to all passengers. He did not declare warehouse of the carrier and notice was given to the
his baggage nor pay its charges contrary to the consignee to get the goods. In spite of reasonable
regulations of the bus company. When X got off, he could opportunity, thereafter, from notice, it does not remove or
not ]ind his baggage which obviously was taken by disposed of the goods. In which case, there is constructive
another passenger. Determine the liability of the bus delivery in so far as the carrier is concerned.
company.
If you are asked in the BAR, when does the obligation of
The bus company is liable for the loss of the maleta. The the common carrier reduced from extraordinary to
duty of extraordinary diligence in the vigilance over the ordinary?
goods is due on such goods as are deposited or surrendered
to the common carrier for transportation. The fact that the 1. If the shipper or seller exercised its right of stoppage in
maleta was not declared nor the charges paid thereon would transit. So, it would be diverted from delivery to the
not be consequential so long as it was received by the carrier consignee, to be returned to the shipper/seller. At that
for transportation. BAR 1989 point, the obligation of the carrier is only ordinary.
2. If there is stipulation to reduce the diligence required to
There is a breach of contract in so far as the maleta is less than extraordinary, as long as it is not less than
concerned. The contract includes both carriage of the ordinary diligence.
passenger and of the goods deposited or placed in the
possession of the common carrier. 44. What is the effect of a stipulation regarding exercise
of diligence to less than extraordinary?
This is different from hand-carried items.
In the carriage of goods, the carrier and shipper may agree
43. X delivered 10 boxes of goods in good order to the
on the observance of diligence to a degree less than
carrier. Y, the consignee, however, received the same in
extraordinary (but not total exemption or diligence less than
bad condition. No proof of negligence was offered by X
ordinary) provided the stipulation is:
or Y. Is the common carrier liable for damages?
Mere proof delivery of the goods in good order to a common (1) in writing;
carrier and of their arrival in bad order at their destination (2) supported by a valuable consideration other than
constitutes a prima facie case of fault or negligence against the service rendered by the carrier; and
the carrier. If no adequate explanation is given as to how the (3) reasonable, just, and not contrary to public policy.
121
iv. Stipulation for limitation of liability reasonable opportunity is given to them in order to carefully
examine the said condition prior to the purchase of the
a. Void stipulations tickets. Moreover, it must be noted that the shipping
companies are franchise holders of certiKicates of public
45. Cite stipulations in a contract of carriage which are convenience and therefore possess a virtual monopoly of the
considered unreasonable, unjust and contrary to public business of transporting passengers. As such, they may
policy. dictate the terms of passage, leaving the passengers with no
choice but to buy tickets and avail of their vessels and
Any of the following or similar stipulations shall be facilities.
considered unreasonable, unjust, and contrary to public
policy: (ON-ELDER) Second, it subverts the public policy on transfer of venue of
proceedings since the same will prejudice the rights and
interests of innumerable passengers. Although venue may
(1) That the goods are transported at the risk of the
be changed by agreement, such an agreement will not be
Owner or shipper;
held valid where it practically negates the action of the
(2) That the common carrier will Not be liable for any
claimants. Considering the expense and trouble a passenger
loss, destruction, or deterioration of the goods;
residing outside of Cebu City would incur to prosecute a
(3) That the common carrier need not observe any
claim in the said city, he would most probably decide not to
Diligence in the custody of the goods;
Kile the action at all. Sweet Lines v. Hon. Bernardo Teves,
(4) That the common carrier shall exercise a degree of
G.R. No. L-37750, May 19, 1978
diligence Less than that of a good father of a family,
or of a man of ordinary prudence in the vigilance
over the movables transported; This would fall under “similar stipulations”. (refer to
(5) That the common carrier shall not be responsible Number 45) That is why it is considered void,
for the acts or omission of his or its Employees; unreasonable, unjust, and contrary to public policy.
(6) That the common carrier’s liability for acts
committed by thieves, or of Robbers who do not act b. Limitation of liability to ]ixed amount
with grave or irresistible threat, violence or force, is
dispensed with or diminished; 47. May a common carrier limit his liability to a ]ixed
(7) That the common carrier is not responsible for the amount in case of loss or damage to goods?
loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, A contract Kixing the sum that may be recovered by the
ship, airplane, or other Equipment used in the owner or shipper for the loss, destruction, or deterioration
contract of carriage. of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
46. A condition was printed at the back of the tickets
The fact that the common carrier has no competitor along
which provides that any and all actions arising out of the
the line or route, or a part thereof, to which the contract
ticket, irrespective of where it is issued, shall be ]iled
refers shall be taken into consideration on the question of
before the courts of Cebu City. Is this stipulation valid
whether or not a stipulation limiting the common carrier's
and enforceable? Were the passengers deemed to have
liability is reasonable, just, and in consonance with public
acceded to it when they purchased the tickets and took
policy.
the carrier's vessel for passage and thus amounted to
effective waiver of venue?
c. Limitation of liability in the absence of
declaration of greater value
The condition is void and unenforceable for two
reasons:
48. May a common carrier limit his liability to the value
of the goods?
First, it is not just and fair to bind passengers to the
conditions printed in Kine letter at the back of the tickets, it
Yes, a stipulation that the common carrier's liability is
is hardly proper to expect the passengers to examine their
limited to the value of the goods appearing in the bill of
tickets after they received them from crowded counters. No
122
lading, unless the shipper or owner declares a greater value, operate to limit the carrier's liability, even if the loss or
is binding. damage results from the carrier's negligence. It is the duty of
the shipper to disclose, rather than the carrier’s, to demand
A stipulation to limit liability of the goods as appearing in the true value of the goods and silence on the part of the
the bill of lading, even though the amount was determined shipper will be sufKicient to limit recovery in case of loss to
arbitrarily by the common carrier, is valid, provided that the the amount stated in the contract of carriage. Eastern and
shipper or owner is given the option to declare higher Australian Steamship Co., Ltd v. Great American
valuation. So, that he can recover more than the value Kixed Insurance Co., G.R. No. L-37604, October 23, 1981
by the common carrier.
Supposing the carrier is negligent. So, the carrier’s
As we have mentioned earlier, there are 2 provisions in the negligence resulted in the damage or loss to the goods
Civil Code regarding limit on the liability of the common worth more than the value as declared under the bill of
carrier. The Kirst one, it would Kix the amount, like PHP lading. So, can the shipper or consignee recover based
1,000. The other one, it would Kix the amount based on the on the actual loss or damage sustained?
value of the goods as appearing in the bill of lading.
NO. Regardless of the negligence of the carrier. The moment
Now, the Kirst one, to limit based on the amount is valid, as the parties stipulated on the amount of liability; it is
long as it is reasonable and the parties have fairly and freely considered valid, as long as the shipper or owner is given
agreed to that stipulation. The Supreme Court said that part the option to declare higher valuation.
of the condition to make it reasonable is to give the
passenger or shipper the option to declare higher value, so The Supreme Court also said that it is the duty of the shipper
that he can recover more than the amount indicated by the to disclose, rather than the carrier to demand, the value of
common carrier. But what if there is a price to pay if the the goods decided on the part of the shipper true value of
passenger or shipper wants to recover more, he has to pay the goods and silence on the part of the shipper will be
additional freightage to the carrier. sufKicient to limit recovery in case of loss to the amount
stated in the contract of carriage.
49. Discuss whether or not the following stipulation in a
contract of carriage of a common carrier is valid: As to the insurance company, it must be noted that after
paying the claim of the insured, the former is merely
A stipulation that in the event of loss, destruction, or subrogated to the rights of the latter. As subrogee, it can
deterioration of goods on account of the defective condition recover only the amount that is recoverable by the insured.
of the vehicle used in the contract of carriage, the carrier's Since the right of the insured, in case of loss or damage to
liability is limited to the value of the goods appearing in the the goods, is restricted by the provisions in the bill of lading,
bill of lading unless the shipper or owner declares a higher a suit by the insurer necessarily is subject to like limitations.
value. St. Paul Fire & Marine Insurance co. v. Macondray & Co,
Inc, G.R. No. L-27796, March 25, 1976
The stipulation limiting the carrier's liability to the value of
the goods appearing in the bill of lading unless the shipper The insured, the owner of the goods, may get insurance
or owner declares a higher value, is expressly recognized in coverage. So, let’s say the shipper did not declare higher
Article 1749 of the Civil Code. BAR 2002 valuation. So, limited, therefore, to the value of the
goods as appearing in the bill of lading. The insurance
Pursuant to such provision, where the shipper is silent as to company paid the insured worth more than the value of
the value of his goods, the carrier's liability for loss or the goods as appeared in the bill of lading. As you know,
damage thereto is limited to the amount speciKied in the the insured gets insurance coverage not based on the
contract of carriage and where the shipper states the value value as appeared in the bill of lading, but based on the
of his goods, the carrier's liability for loss or damage thereto actual value of the goods. How much can the insurer
is limited to that amount. A stipulation in a contract of recover from the carrier?
carriage that the carrier will not be liable beyond a speciKied
amount unless the shipper declares the goods to have a The Supreme Court said the same amount of liability. This is
greater value is generally deemed to be valid and will because the insurer steps into the shoes of the insured
123
bound by the same terms and conditions agreed upon by the

shipper and the common carrier. The stipulation is considered unreasonable, unjust and
contrary to public policy under Article 1745 of the Civil
v. Stipulation for limitation of liability Code. (And because you did not give the shipper the
option to declare higher value.) BAR 2002
50. What are the usual stipulations often made in a bill
of lading regarding the liability of the common carrier? 52. In the plane ticket stub of Air Manila Inc. (AMI),
there appears a statement that the liability “if any loss
Three kinds of stipulations have often been made in a bill of or damage of checked-in baggage or for delay in the
lading. The Jirst is one exempting the carrier from any and delivery thereof” of the AMI "is limited to its value and
all liability for loss or damage occasioned by its own unless the passenger declares in advance a higher
negligence. The second is one providing for an unqualiKied valuation and pays an additional charge therefore, the
limitation of such liability to an agreed valuation. And the value shall be conclusively deemed not to exceed P100
third is one limiting the liability of the carrier to an agreed for each ticket." A passenger whose baggage was lost in
valuation unless the shipper declares a higher value and transit from Manila to Cebu sued for a higher amount,
pays a higher rate of freight. According to an almost i.e., P5,000. May AMI successfully claim that the above
uniform weight of authority, the ]irst and second kinds statement precludes the plaintiff from asking more than
of stipulations are invalid as being contrary to public P100? Decide. Give reasons for your answer.
policy, but the third is valid and enforceable. Loadstar
Shipping Co. v. Court of Appeals, G.R. No. 131621, No. AMI may not successfully claim that the plaintiff was
September 28, 1999 precluded from asking more than P100 for each ticket. The
liability of a common carrier may by contract be limited to a
51. Are the following stipulations regarding liability of Kixed amount, but said agreement must be in writing and
the common carrier in case of loss or damage to goods signed by the shipper or owner of the goods, besides the
valid? other requirements of the law, but said requirements have
not been shown to have been met by the carrier. AMI.
• Limiting the liability of the common carrier to less Shewaran v. Philippine Airlines, L20099, July 7,1966; BAR
than extraordinary. 1978.
A stipulation to limit the liability of the common carrier to This decision is DEBATABLE. The answer in NUMBER 56 is
less than extraordinary is valid provided it is in writing, the prevailing doctrine. Dean REMOVED NUMBER 52 in his
supported by valuable consideration other than (or Kinal draft.
distinct from) the service rendered by the common
carrier and reasonable, just, and not contrary to public 53. Juan, a paying passenger, noted the stipulation at the
policy. back of the bus ticket stating that the liability of the bus
company is limited to P1,000 in case of injuries to its
• Limiting the liability of the common carrier to a passengers and P500 in case of loss or damage to
]ixed amount. baggage caused by the negligence or willful acts of its
employees. Upon arrival at his destination, Juan got into
A contract Kixing the sum that may be recovered by the an altercation with the ticket conductor, who pulled out
owner or shipper for the loss, destruction, and deterioration a knife and in]licted several wounds on Juan. The bus
of the goods is valid, if it is reasonable and just under the driver intervened, heaping abusive language on Juan
circumstances and has been fairly and freely agreed and completely destroying Juan’s baggage which
upon. Not giving the shipper though the option to contained expensive goods worth P3,000. The hospital
declare higher valuation for his goods is not a just and expenses for Juan would probably amount to at least
reasonable stipulation. P6.000. Give the extent of liability of the bus company,
with reasons.
• A stipulation limiting the sum that may be recovered
by the shipper or owner to 90% of the value of the The bus company’s liability for the injuries inKlicted upon
goods in case of loss due to theft is void. Juan is at least P6,000, notwithstanding the stipulation
124
limiting its liability, and only for P500, the amount stipulated cargo ($5,000 or about P100,000) instead of just P200
in the bus ticket, as the damage and destruction to Juan’s as per the limitation on the bill of lading. Is there any
baggage. legal basis for Nove’s claim?
With respect to the injuries inKlicted upon Juan, common There is legal basis for the claim of Martin Nove. The
carriers are liable for the death or injuries to passengers stipulation limiting the carrier's liability up to a certain
through the negligence or willful acts of the former's amount "regardless of the actual value of such cargo,
employees, although such employees may have acted whether declared by its shipper or otherwise," is violative of
beyond the scope of their authority or in violation of the the requirement of the Civil Code that such limiting
orders of the common carriers. The common carrier’s stipulations should be fairly and freely agreed upon. A
responsibility for these acts cannot be eliminated or limited stipulation that denies to the shipper the right to declare the
by stipulation by the posting of notices, by statements on the actual value of his cargoes and to recover, in case of loss or
tickets or otherwise. damage, on the basis would be invalid. BAR 1987
The rule is different with respect to a stipulation limiting the 55. Sylvex Purchasing Corporation delivered to
carrier’s liability for the loss, destruction or deterioration of Unsworth Transport International (UTI) a shipment of
goods shipped. Under Article 1750, Civil Code, a contract 27 drums of various raw materials for pharmaceutical
Kixing the sum that may be recovered by the owner or manufacturing. UTI issued a Bill of Lading covering the
shipper for the loss, destruction, or deterioration of the aforesaid shipment. The shipment arrived at the port of
goods is valid, if it is reasonable and just under the Manila wherein it was later found to be damaged.
circumstances and has been fairly and freely agreed upon.
BAR 1984 The court rejected UTI's claim that its liability should be
limited to $500 per package pursuant to the Carriage of
In this one, there is a limit for liability in case of loss or Goods by Sea Act (COGSA) considering that the value of
damage of goods. Are these stipulations valid? the shipment was declared pursuant to the letter of
credit and the pro forma invoice.
As you know, you can limit the liability of the common
carrier for goods up to a certain amount or based on the Is UTI liable for the value of the goods not stated in the
value as declared in the bill of lading, but you cannot limit bill of lading?
the liability in case of the death or injury to the passengers,
except in International Contract of Carriage under the No, UTI is liable only for $500 per package. Sylvex did not
Montreal Convention. declare a higher valuation of the goods to be shipped. The
insertion of an invoice number in the bill of lading does
Any stipulations that limit the liability or responsibility for not in itself suf]iciently and convincingly show that the
acts of the carrier for the passenger’s safety cannot be common carrier had knowledge of the value of the
eliminated or limited by stipulation by the posting of cargo. Unsworth Transport International v. Court of
notices, by statements on the tickets or otherwise. The only Appeals, G.R. No. 166250, July 26, 2010
exception is International Contract of Carriage under the
Montreal Convention.
So, if it made reference only to the LC or the invoice number,
it is not tantamount to declaration of higher valuation of the
54. Martin Nove shipped an expensive video equipment goods. So, he cannot pin the carrier on the strength of the
to a friend in Cebu. Martin had bought the equipment insertion in the bill of lading or making reference only to the
from Hong Kong for U.S. $5,000. The equipment was LC or the invoice number.
shipped through M/S Lapu-Lapu under a bill of lading
which contained the following provision in big bold
In another case, however, it was ruled that the declaration
letters: "The limit of the carrier's liability for any loss or
requirement does not require that all the details must
damage to cargo shall be P200 regardless of the actual
be written down on the very bill of lading itself.
value of such cargo, whether declared by shipper or
Compliance can be attained by incorporating the
otherwise." The cargo was totally damaged before
invoice, by way of reference, to the bill of lading
reaching Cebu. Martin Nove claimed for the value of his
provided that the former containing the description of
125
the nature, value and/or payment of freight charges is

duly admitted as evidence. 57. What is the liability of the common carrier for
baggage of passengers?
So, there are 2 conditions. Making reference to the invoice
value or LC is not enough, unless it contains the description If the baggage is in the custody of the common carrier
of the nature, value, and/or payment of freight charges is (checked-in), the latter is obliged to observe extraordinary
admitted as evidence. It should be established by substantial diligence. The presumption of negligence applies against the
evidence. common carrier. Articles 1733 to 1753 of the Civil Code
apply.
The Supreme Court clariKied that while in Unsworth
Transport International (Phils.), Inc. v. Court of Appeals, the But if the baggage is in the custody of the passenger (hand-
Court held that the insertion of an invoice number does carried), the carrier is liable as a depositary provided that:
not in itself suf]iciently and convincingly show that (a) notice was given to him or his employees; and (b) the
petitioner had knowledge of the value of the cargo. passenger took the necessary precaution which the carrier
However, the same interpretation does not squarely had advised relative to the care and vigilance of the baggage.
apply if the carrier had been advised of the value of the The baggage in transit is deemed as a necessary deposit. The
goods as evidenced by the invoice and payment of diligence required of the carrier/depositary is merely
corresponding freight charges. Eastern Shipping Lines, ordinary diligence. In case of loss owing to the fault of the
Inc v. BPI/MS Insurance Corp., & Mitsui Sumitomo passenger, the carrier will not be held liable.
Insurance Co., Ltd, G.R. No. 182864, January 12, 2015
In both cases, if the goods were lost or damaged due to the
The bottom line is, did the shipper pay extra freightage? If he fault of the employee, the carrier is liable. The difference is
did, then he could recover higher than the declared value in the kind of diligence required.
the bill of lading.
If it is checked-in luggage, even if it was without the
56. X took a plane from Manila bound for Davao via Cebu knowledge of the carrier, the carrier is still liable in case of
where there was a change of planes. X arrived in Davao loss or damage to the goods.
safely, but to his dismay, his two suitcases were left
behind in Cebu. The airline company assured X that the If it is being held by the passenger or hand-carried, the
suitcases would come in the next ]light, but they never obligation of the carrier is that of a depositary. Therefore, it
did. X claimed P2,000 for the loss of both suitcases, but could invoke the defense of ordinary diligence in case of loss
the airline was willing to pay only P500 because the or damage to the luggage.
airline ticket stipulated that unless a higher value was
declared, any claim for the loss cannot exceed P250 for 58. Pasahero, a paying passenger, boarded a Victory
each piece of luggage. X, however, reasoned out that he Liner bus bound for Olongapo. He chose a seat at the
did not sign the stipulation and in fact had not even read front near the bus driver. Pasahero told the bus driver
it. X did not declare a greater value despite the fact that that he had valuable items in his bag which was placed
the clerk had called his attention to the stipulation in near his feet. Since he had not slept for 24 hours, he
the ticket. Decide the case. requested the driver to keep an eye on the bag should he
doze off during the trip.
Even if he did not sign the ticket, X is bound by the
stipulation that any claim for loss cannot exceed P250 for a) While Pasahero was asleep, another passenger took
each luggage. He did not declare a higher value. X is entitled the bag away and alighted at Guagua, Pampanga. Is
to P500 for the two luggages lost. BAR 1998; 1985 Victory Liner liable to Pasahero? Explain.
Liability for baggage of passengers b) Supposing the two (2) armed men staged a hold-up
while the bus was speeding along the North Expressway.
a. Checked-in baggage One of them pointed a gun at Pasahero and stole not
only his bag, but also his wallet as well. Is Victory Line
b. Baggage in possession of strangers liable to Pasahero? Explain.
126
to exercise extraordinary diligence as required by law. BAR

a) The responsibility of common carriers in the case of loss 1997
or damage to hand-carried baggage is governed by the rule
on necessary deposits. The common carrier is thus liable for If the death or injury is caused by the employee, the law
the loss of the personal property caused by its employees or makes the carrier liable for the death or injury of the
by strangers. passenger. Even if the employees acted beyond the scope
of their authorities. It is not just a presumption. Why is
b) The use of arms (in the staging of the holdup) is force that so?
majeure under the rule on necessary deposits. Accordingly,
Pasahero may not hold Victory Liner liable. The Supreme Court said with respect to the safety of the
passengers, the common carrier is an insurer of the safety of
The answer here is DEBATABLE. It is only a BAR exam the passengers for acts of its employees. Not an insurer of
question. Dean REMOVED this in his Kinal draft. the safety of the passengers for acts of other passengers or
strangers, right?
C. SAFETY OF PASSENGERS
61. X is a passenger of RJT Bus which suffered injuries
59. What is the diligence required for common carriers due to the collision of the bus he is riding with a jeepney.
in the carriage of its passengers? X sued RJT Bus Company for damages. RJT Bus Company
invokes as a defense that it was the jeepney that had the
A common carrier is bound to carry its passengers last clear chance to avoid the injury. Hence, the bus
safely as far as human care and foresight can provide, company cannot be held liable. Is the principle of last
using the utmost diligence of very cautious persons, clear chance applicable?
with due regard to all the circumstances. In a contract of
carriage, it is presumed that the common carrier was at fault No. The principle of last clear chance only applies in a suit
or was negligent when a passenger dies or is injured. Unless between owners and drivers of two colliding vehicles. It
the presumption is rebutted, the court need not even make does not arise where a passenger demands responsibility
an express Kinding of fault or negligence on the part of the from the carrier to enforce its contractual obligations, for it
common carrier. This statutory presumption may only be would be inequitable to exempt the negligent driver and its
overcome by evidence that the carrier exercised owner on the ground that the other driver was likewise
extraordinary diligence. Victory Liner, Inc. v. Rosalito guilty of negligence. William Tiu v. Pedro Arriesgado, G.R.
Gammad, G.R. No. 159636, November 25, 2004; Articles No. 138060, September 1, 2004
1755 and 1756, NCC
Both the tortfeasor and the common carrier are jointly
and severally liable for damages of the injuries caused
60. In a court case involving claims for damages arising to X.
from death and injury of bus passengers, counsel for the
bus operator ]iles a demurrer to evidence arguing that
This defense is only applicable towards tort and not towards
the complaint should be dismisses because the plaintiffs
a breach of contract of carriage.
did not submit any evidence that the operator or its
employees were negligent. If you were the judge, would
So, what are your defenses if you are sued for breach of
you dismiss the complaint?
contract of carriage?
No. In the carriage of passengers, the failure of the common
1. Extraordinary diligence; and
carrier to bring the passengers safely to their destination
2. Force Majeure.
immediately raises the presumption that such failure is
attributable to the carrier's fault or negligence. In the case at
MARCH 15, 2021
bar, the fact of death and injury of the bus passengers raises
the presumption of fault or negligence on the part of the
carrier. The carrier must rebut such presumption Otherwise, Transportation Law (Continuation)
the conclusion can be properly made that the carrier failed
RECITATION
127
Q. Is 1 hour a reasonable time if you alighted from a

Q. When does the contract of carriage for passengers jeepney or bus?
perfected?
A. NO.
A. It depends on the carrier.
Q. Let’s say that there are 4 passengers in a bus operated
For air carriage, it is perfected from the issuance of the by ABC transportation company. A who paid the fare in
ticket conKirming the date, time, and nature or type of full. B was given a discount. C was carried gratuitously. D
accommodation. who managed to hide inside a bayong or a stowaway. All
of them sustained injuries as a result of the negligent
For LRT, it is perfected from the purchase of the ticket/ operations of the bus driver. What are the liabilities of
token by the passenger, even while waiting for the train to the driver and the operator in this case?
arrive. (refer to Number 64)
A.
For public vehicle or public transportation bus, every 1. A (paid in full) – breach of contract of carriage
time the bus makes a stop, it amounts to a continuous offer 2. B (given a discount) – breach of contract of carriage.
to the passengers. The moment there is acceptance of the It does not alter or change the obligation of the
offer, the contract is perfected. (refer to Number 66) common carrier.
3. C (carried gratuitously) – breach of contract of
Q. When do you say that the passenger accepted the carriage. But the Civil Code allows a stipulation
offer of the common carrier? At what point? Because the limiting the liability of the common carrier for
ticket would only be issued after the passenger gained a negligence is valid, except willful acts or gross
seat, right? For land transportation? negligence. Don’t say limiting it to less than
extraordinary, that is not what the Civil Code
A. It depends on the circumstances, right? provides.
4. D (stowaway) – There is no contract of carriage. But
In the case of Dangwa, the Supreme Court said that the D may sue for quasi-delict if there was negligence
moment you step into the platform of the bus, it amounts to on the part of the driver.
an acceptance of the offer of the common carrier. At that
point, there is already the obligation to exercise LECTURE
extraordinary diligence. It is not required that you’ll even
have to gain a seat in the bus. Even the issuance of the ticket i. Void stipulations
is not required, right? (also refer to Number 66)
61. Cite stipulations that are considered void in a
But I think you are right. As you walk towards the bus, it contract of carriage for passengers.
means that you have accepted the offer of the carrier, except
that there is no jurisprudence on that. 1. Stipulation dispensing with or lessening by
stipulation, by the posting of notices, by statements
Q. When does the obligation to exercise extraordinary on ticket, or otherwise, the responsibility of the
diligence end? common carrier for the safety of passengers.
A. It is from the time the passenger alighted from the vehicle
This is also the reason why you cannot stipulate on limits on
and reasonable time or opportunity to leave the premises.
liability in case of death or injury to the passengers. You can
(refer to Number 64)
only do so in a contract of carriage of goods, but not so with
passengers.
Q. What would be a reasonable time to stay or loiter
within the premises?
2. Stipulation limiting the liability for willful acts or
A. Again, it depends on the circumstances. What is gross negligence.
reasonable depends on the facts of the case.
128
When a passenger is carried gratuitously, a stipulation The bus company is liable for damages to A’s heirs and to all
limiting the common carrier's liability for negligence is valid, the injured passengers. Under the Civil Code, a common
but not for willful acts or gross negligence. carrier is duty bound to exercise extraordinary
diligence in carrying its passengers through the
This is the only instance where a stipulation limit negligence or willful acts of its employees even if the
limiting the common carrier's liability for negligence is latter have acted beyond the scope of their authority or
valid. in violation of their orders. This liability cannot be
eliminated or limited by stipulation or by posting
The reduction of fare does not justify any limitation of the notices. Although it may be urged that A was guilty of
common carrier's liability. contributory negligence, such an argument loses its force in
the face of the driver’s recklessness in taking the dare. And
62. Suppose "A" was riding on an airplane of a common even if such argument would be accepted, at most it can only
carrier when the accident happened and "A" suffered mitigate the amount of damages, since the proximate cause
serious injuries. In an action by "A" against the common of the accident was the driver's willful and reckless act in
carrier, the latter claimed that (1) there was a running a race with the other bus. BAR 1983
stipulation in the ticket issued to "A" absolutely
exempting the carrier from liability from the ii. Duration of liability
passenger's death or injuries and notices were posted
by t h e co m m o n c a r r i e r d i s p e n s i n g w i t h t h e 64. In the carriage of passengers, when does the
extraordinary diligence of the carrier, and (2) "A" was obligation to exercise extraordinary diligence
given a discount on his plane fare thereby reducing the commence and when does it end?
liability of the common carrier with respect to "A" in
particular. Are those valid defenses? Utmost diligence starts once the passenger places
himself to, and is accepted by, and while he remains
No. These are not valid defenses because they are contrary under the proper care and charge of the carrier. It lasts
to law and public policy as they are in violation of the until such time that the passenger safely alights from
extraordinary diligence required of common carriers. and is given reasonable opportunity to leave the
premises of the common carrier, including such time that
In the carriage of passengers, the responsibility of common he looks for and claims his luggage.
carriers cannot be dispensed with or lessened by
stipulation. This rule applies notwithstanding the reduction Can we say that obligation to exercise extra-ordinary
of fare. But, when the passenger is carried gratuitously, a diligence commences upon the perfection of the
stipulation limiting liability for negligence is valid, except for contract?
willful acts or gross negligence.
YES. But this is dependent upon the circumstances.
63. A and his classmates take a bus from UP to Quiapo.
On the way, another Quiapo bound bus tries to overtake For air carriers, the contract is perfected the moment the
them. A and his classmates dare the bus driver to run air carrier issued a ticket to the passenger that is conKirmed
faster and race with the other bus. The driver takes for a particular Klight , time, date, and type of
their dare, to the delight of A and his friends who accommodation.
cheered him. On rounding the curve, the bus driver fails
to slow down and the bus turns turtle, resulting in the Now as to when extra-ordinary diligence would commence
death of A and injuries to the other passengers. The bus for the air carrier depends upon the circumstances. It does
carried the following sign: "Do not talk to driver while not start from the moment you purchase the ticket, right?
bus is on motion, otherwise the company will not Because usually it would take more or less a week after you
assume liability for any accident." Explain brie]ly the purchase a ticket and before the actual Klight – for
extent of the liability, if any, of the bus company, giving international transportations, usually 1 month before your
the legal provisions and principles involved. actual Klight.
129
So, what happens between the time you bought the proceed to the nearest exit, ready to disembark as the train
ticket and the actual departure date? What if you or bus comes to a full stop. This is especially true of a train
sustained injury, does this mean the carrier is already because passengers feel that if the train resumes its run
liable? before, they are able to disembark, there is no way to stop it
as a bus may be stopped.
Not necessarily. So, you have to be within the premises of the
air carrier to hold the air carrier liable in cases of death or It was negligence on the conductor's part to announce
injury of the passenger or loss or damage to the luggage. the next ]lag stop when said stop was still a full three
minutes ahead. That the announcement was premature
For land transportation, it starts from the moment there is and erroneous is shown by the fact that immediately
acceptance to the offer by the passenger of the common after the train slowed down, it unexpectedly accelerated
carrier’s offer for services. to full speed. Manila Railroad Company failed to show any
reason why the train suddenly resumed its regular speed.
The Supreme Court said that every time the bus makes a The announcement was made while the train was still in
stop, it amounts to an offer to the passenger. When the Barrio Lagalag. This announcement prompted the victims to
passenger accepts its offer or shows any act to accept the stand and proceed to the nearest exit. Without said
offer, then the contract is perfected and at that point, the announcement, the victims would have been safely seated in
obligation to exercise extra-ordinary diligence commences. their respective seats when the train jerked as it picked up
speed. Clemente Brinas v. People of the Philippines, G.R.
For the light rail transit system of transportation, it was held No. L-30309, November 25, 1983
that a contract of carriage was created from the moment the
passenger paid the fare at the LRT station and entered the a. Waiting for carrier or boarding a carrier
premises of the latter, entitling him/her to all the rights and
protection under a contractual relation. (Even though it has 66. A bus of GL Transit on its way to Davao stopped to
not actually boarded the train yet.) Light Rail Transit enable a passenger to alight. At that moment, Santiago,
Authority v. Marjorie Navidad, G.R. No. 145804, February who had been waiting for a ride, boarded the bus.
6, 2003 However, the bus driver failed to notice Santiago who
was still standing on the bus platform, and stepped on
So, it not the act of boarding that commences the contract of the accelerator. Because of the sudden motion, Santiago
transportation. It could be the issuance of the ticket, but slipped and fell down, suffering serious injuries. May
depending upon the circumstances. For LRT, it says the Santiago hold GL Transit liable for breach of contract of
moment the ticket or token is purchased by the passenger. carriage? Explain. (This is the case of Dangwa.)
65. A and her child boarded the train of Manila Railroad Santiago may hold GL liable for breach of contract of
Company. Upon approaching Barrio Lagalag, the train carriage. It was the duty of the driver, when he stopped the
slowed down and the conductor shouted "Lusacan, bus, to do no act that would have the effect of increasing the
Lusacan!" A walked towards the train exit carrying her peril to a passenger such as Santiago while he was
child with one hand and holding her baggage with the attempting to board the same. When a bus is not in
other. When they were near the door, the train suddenly motion, there is no necessity for a person who wants to
picked up speed. A and her child stumbled from the ride the same to signal his intention to board. A public
train causing them to fall down the tracks and were hit utility bus, once it stops, is in effect making a continuous
by an oncoming train, causing their instant death. Is offer to bus riders. It is the duty of common carriers of
Manila Railroad Company carrier liable? passengers to stop their conveyances for a reasonable length
of time in order to afford passengers an opportunity to
Yes. It is a matter of common knowledge and experience board and enter, and they are liable for injuries suffered by
about common carriers like train and buses that before boarding passengers resulting from the sudden starting up
reaching a station or Klag stop, they slow down and the or jerking of their conveyances while they are doing so
conductor announces the name of the place. It is also a Santiago, by stepping and standing on the platform of
matter of common experience that as the train or bus the bus, is already considered a passenger and is
slackens its speed, some passengers usually stand and
130
entitled to all the rights and protection pertaining to a obligation to transport safely its passengers. The presence of
contract of carriage. BAR 1996 said passengers near the bus was not unreasonable and they
are, therefore, to be considered still as passengers of the
b. Arrival at destination carrier, entitled to the protection under their contract of
carriage. La Mallorca v. Court of Appeals, G.R. No. L-20761,
67. X, an 80-year-old epileptic, boarded the S/S July 27, 1966
Tamaraw in Manila going to Mindoro. To disembark, the
passengers have to walk thru a gangplank. While 69. An hour after the passengers and Viana had
negotiating the gangplank, X slipped and fell into the disembarked the vessel, the crane operator began its
waters. X was saved from drowning, brought to a unloading operation, while the crane was being
hospital but after a month died from pneumonia. Except operated, Viana who had already disembarked the
for X, all the passengers were able to walk thru the vessel remembered that some of his cargoes were still
gangplank. What is the liability of the owner of S/S loaded there. He went back and while he was pointing to
Tamaraw? the crew where his cargoes were, the crane hit him
resulting to his death. A complaint for damages was
The owner of S/S Tamaraw is liable for the death of X in ]iled against Aboitiz Shipping Lines (Aboitiz) for breach
failing to exercise utmost diligence in the safety of of contract of carriage. Aboitiz contends that Viana
passengers. Evidently, the carrier did not take the necessary ceased to be a passenger when he disembarked the
precautions in ensuring the safety of passengers in the vessel and that consequently his presence there was no
boarding of and disembarking from the vessel. Unless longer reasonable. Is Aboitiz still liable as a common
shown to the contrary, a common carrier is presumed to carrier?
have been negligent in cases of death or injury to its
passengers. Since X has not completely disembarked yet, the Yes. The rule is that the relation of carrier and
obligation of the ship owner to exercise utmost diligence passenger continues until the passenger has been
still then subsisted and he can still be held. BAR 1989 landed at the port of destination and has left the vessel
owner's dock or premises. Once created, the relationship
The obligation to exercise extraordinary diligence ends only will not ordinarily terminate until the passenger has,
after the passenger has safely disembarked and left the after reaching his destination, safely alighted from the
premises. carrier's conveyance or had a reasonable opportunity to
leave the carrier's premises. All persons who remain on
68. The father returned to the bus to get one of his the premises a reasonable time after leaving the conveyance
baggages which was not unloaded when they alighted are to be deemed passengers, and what is a reasonable time
from the bus. Racquet, his child, followed him. However, or a reasonable delay within this rule is to be determined
although the father was still on the running board of the from all the circumstances, and includes a reasonable time
bus waiting for the conductor to hand him the bag or to see after his baggage and prepare for his departure. While
bayong, the bus started to run. Raquel was run over and the victim was admittedly contributorily negligent, still
killed. Is the bus operator still liable as a common petitioner's aforesaid failure to exercise extraordinary
carrier? diligence was the proximate and direct cause of, because it
could deKinitely have prevented, the former's death. Aboitiz
Yes. The relation of carrier and passenger does not cease Shipping Corporation v. Court of Appeals, G.R. No. 84458,
at the moment the passenger alights from the carrier's November 6, 1989
vehicle at a place selected by the carrier at the point of
destination, but continues until the passenger has had a In this case, 1 hour to stay around the premises is
reasonable time or a reasonable opportunity to leave considered as a reasonable period, given that it usually takes
the carrier's premises. And, what is a reasonable time or a 1 hour for the vessel to unload all of the luggage.
reasonable delay within this rule is to be determined from
all the circumstances. It cannot be claimed that the carrier's c. Liability for acts of others
agent had exercised the 'utmost diligence' of a 'very cautious
person’ required by Article 1755 of the Civil Code to be Employees
observed by a common carrier in the discharge of its
131
69. Is a common carrier liable for the death of or As can be gleaned from Art. 1759, the Civil Code of the
injuries to passengers through the acts of its employees? Philippines evidently follows the rule based on the
second view. At least three very cogent reasons underlie
Yes, common carriers are liable for the death of or injuries this rule:
to passengers through the negligence or willful acts of the
former's employees, although such employees may have 1) the special undertaking of the carrier requires that it
acted beyond the scope of their authority or in violation furnish its passenger that full measure of protection
of the orders of the common carriers. afforded by the exercise of the high degree of care
prescribed by the law, inter alia from violence and
So, if the common carrier instructs the security guard insults at the hands of strangers and other passengers,
maximum tolerance to the passengers, but in spite of but above all, from the acts of the carrier's own servants
that, the security guard under the employ of the charged with the passenger's safety;
common carrier hit or in]licted injuries to the
passenger. Is the carrier liable? Even though the security 2) said liability of the carrier for the servant's violation of
guard acted beyond the scope of its authority? YES. duty to passengers, is the result of the formers conKiding
in the servant's hands the performance of his contract to
What if the common carrier instructs the conductor to safely transport the passenger, delegating therewith the
don’t ever bring a gun? But the conductor was able to duty of protecting the passenger with the utmost care
bring a gun surreptitiously and had an altercation with prescribed by law; and
one of the passengers. He shot one of the passengers. Is
the common carrier liable? YES. 3) as between the carrier and the passenger, the former
must bear the risk of wrongful acts or negligence of the
70. What is the basis of liability of common carriers for carrier's employees against passengers, since it, and not
injuries on passengers committed by its employees? the passengers, has power to select and remove them.
The basis of the carrier's liability for assaults on passengers Accordingly, it is the carrier’s strict obligation to select its
committed by its employees rests either on (1) the doctrine drivers and similar employees with due regard not only to
of respondeat superior or (2) the principle that it is the their technical competence and physical ability, but also, no
carrier's implied duty to transport the passenger safely. (2 less important, to their total personality, including their
Schools of Thought) patterns of behavior, moral Kibers, and social attitude.
Maranan v. Perez, et al., G R. NO. L-22272, June 26, 1967;
Under the ]irst, which is the minority view, the carrier is BAR 2011
liable only when the act of the employee is within the scope
of his authority and duty. It is not sufKicient that the act be The carrier was made liable in the foregoing case after his
within the course of employment only. driver stabbed and killed the passenger despite the
assertion that the driver acted in self-defense against the
Under the second view, upheld by the majority and also by passenger who made the assault Kirst.
the later cases, it is enough that the assault happens within
the course of the employee's duty. It is no defense for the In the case of Maranan v. Perez, the driver killed the
carrier that the act was done in excess of authority or in passenger. According to the driver, he only acted in self-
disobedience of the carrier's orders. The carrier's liability defense and that it was the passenger who assaulted
here is absolute in the sense that it practically secures the him ]irst. Assuming this is correct, is the carrier still
passengers from assaults committed by its own employees. liable? YES.
We adopt the second view. So, the carriers have the duty to The moment there is death or injury to the passengers, then
transport the passengers safely. So, a bus which does not the carrier is at fault. Not merely a presumption, right?
arrive at the place of destination safely, then the carrier is
liable for damages. 71. Marjorie, while waiting for the ZRT train to arrive,
had a ]ist]ight with the guard on duty. With the injuries
she suffered, she sued ZRT Company for damages. ZRT
132
Company denied liability and argued that the guard on willful act of its employees, pursuant to Art. 1759 of the Civil
duty was not their employee, but of an independent Code, to wit:
contractor. Is ZRT Company liable?
"Art. 1759. Common carriers are liable for the death of or
Yes. The foundation of LRTA’s liability is the contract of injuries to passengers through the negligence or willful acts
carriage and its obligation to indemnify the victim arises of the former's employees, although such employees may
from the breach of that contract by reason of its failure to have acted beyond the scope of their authority or in
exercise the high diligence required of the common carrier. violation of the orders of the common carriers. The liability
In the discharge of its commitment to ensure the safety of of the common carriers does not cease upon proof that they
passengers, a carrier may choose to hire its own employees exercised all the diligence of a good father of a family in the
or avail itself of the services of an outsider or an selection and supervision of their employees." BAR 2008
independent Kirm to undertake the task, in either case, the
common carrier is not relieved of its responsibilities under 73. Tupang boarded a train as a paying passenger bound
the contract of carriage. Light Rail Transit Authority and for Manila. Unfortunately, upon passing lyam Bridge at
Rodolfo Roman v. Marjorie Natividad, G.R. No. 145804, Lucena, Quezon, Tupang fell off the tram resulting in his
February 6, 2003 death. The train did not stop despite the alarm raised by
the other passengers that somebody fell from the train.
Let us take a look at the angle that the security guard Instead, the tram conductor called the station agent and
who must have pushed the passenger to the railway was requested for veri]ication of the information. Police
not an employee of the common carrier. For that reason, authorities of Lucena City were dispatched to the lyam
is the common carrier relieved from liability? Bridge where they found the lifeless body of Tupang.
The train company denied liability and argued that it
NO. It is liable not only for the acts of its employees, but even was the passenger who opted to sit in the open platform
independent contractor hired or contracted by the common which led to his falling off from the train. Is the train
carrier. So, “employee” is expanded to include even company correct?
independent contractor.
No. The train company has the obligation to transport its
72. City Railways, Inc. (CRI) provides train service, for a passengers to their destinations and to observe
fee, to commuters from Manila to Calamba, Laguna. extraordinary diligence in doing so. Death or any injury
Commuters are required to purchase tickets and then suffered by any of its passengers gives rise to the
proceed to designated loading and unloading facilities presumption that it was negligent in the performance of its
to board the train. Ricardo Santos purchased a ticket for obligation under the contract of carriage. Thus, it failed to
Calamba and entered the station. While waiting, he had overthrow such presumption of negligence with clear and
an altercation with the security guard of CRI leading to a convincing evidence.
]ist]ight. Ricardo Santos fell on the railway just as the
train was entering the station. Ricardo Santos was run But while the train company failed to exercise
over by the train. He died. In the action for damages ]iles extraordinary diligence as required by law, it appears
by the heirs of Ricardo Santos, CRI interposed lack of that the deceased was chargeable with contributory
cause of action, contending that the mishap occurred negligence. Since he opted to sit on the open platform
before Ricardo Santos boarded the train and that It was between the coaches of the train, he should have held tightly
not guilty of negligence. Decide. and tenaciously on the upright metal bar found at the side of
said platform to avoid falling off from the speeding train.
CRI is liable. It has a contract of carriage with Ricardo, Such contributory negligence, while not exempting the
created from the moment the latter purchased a ticket and PNR from liability, nevertheless justi]ied the deletion of
entered the station. The duty of a common carrier like the the amount adjudicated as moral damages.
CRI is to provide safety to its passengers, not only during the (contributory negligence only mitigates its liability)
course of the trip, but as long as they are within its premises Philippine National Railways v. Court of Appeals, G.R. No.
and where they ought to be in pursuance to the contract of L-55347, October 4, 1987
carriage. Furthermore, a common carrier is liable for the
death of or injuries to passengers through the negligence or Other passengers and strangers
133
suspicion based on the circumstances, such as when it

74. what is the liability of the common carrier for death appears that the passenger is armed.
or injuries to passengers caused by other passengers
and/or strangers? But there is such an obligation for air transportation.
A common carrier is responsible for injuries suffered by a 76. Mariter, a paying bus passenger, was hit above her
passenger on account of the willful acts or negligence of left eye by a stone hurled at the bus by an unidenti]ied
other passengers or of strangers, if the common carrier’s bystander as the bus was speeding through the National
employees through the exercise of the diligence of a good Highway. The bus owner's personnel lost no time in
father of a family could have prevented or stopped the act bringing Mariter to the provincial hospital where she
or omission. was con]ined and treated. Mariter wants to sue the bus
company for damages and seeks your advice whether
The contributory negligence of the passenger does not bar she can legally hold the bus company liable?
recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common No. Mariter cannot legally hold the bus company liable.
carrier, but the amount of damages shall be equitably There is no showing that any such incident previously
reduced. happened so as to impose an obligation on the part of the
personnel of the bus company to warn the passengers and to
75. Battung boarded a bus in Isabela bound for Manila. take the necessary precaution. Such hurling of a stone
He was seated at the ]irst row behind the driver and constitutes fortuitous event in this case. The bus company is
slept during the ride. When the bus reached the Nueva not an insurer. BAR 1994
Ecija, the bus driver, stopped the bus and alighted to
check the tires. At this point, a man who was seated at Similarly, a tort committed by a stranger which causes injury
the fourth row of the bus stood up, shot Battung at his to a passenger does not accord the latter a cause of action
head resulting in his death. Should the common carrier against the carrier. The negligence for which a common
be liable for the death of the victim? carrier is held responsible is the negligent omission by the
carrier's employees to prevent the tort from being
No. While the law requires the highest degree of diligence committed when the same could have been foreseen and
from common carriers in the safe transport of their prevented by them. Jose Pilapil v. Court of Appeals, G.R. No.
passengers and creates a presumption of negligence against 52159, December 22, 1989
them.
The passenger also argued in this case that the carrier
It does not, however, make the carrier an insurer of the could have prevented the injury if something like mesh-
absolute safety of its passengers. Further, during the ride, work grills had covered the windows of its bus, but the
the driver and the conductor observed nothing which would Court ]inds the same untenable. Although the suggested
rouse their suspicion that the men were armed or were to precaution could have prevented the injury, the rule of
carry out an unlawful activity. With no such indication, there ordinary care and prudence is not so exacting as to require
was no need for them to conduct a more stringent search one charged with its exercise to take doubtful or
(i.e., body search) on the aforesaid men. By all accounts, unreasonable precautions to guard against unlawful acts of
therefore, it cannot be concluded that the common carrier or strangers. Where the carrier uses cars of the most approved
any of its employees failed to employ the diligence of a good type used generally by others engaged in the same
father of a family. G.V. Florida Transport, Inc. v. Heirs of occupation, and exercises a high degree of care in
Romeo L. Battung, Jr., Represented by Romeo Battung, Sr., maintaining them in suitable condition, the carrier cannot
G.R. No. 208802, October 14, 2015 be charged with negligence in this respect.
The Supreme Court said that it was not lack of diligence on In a subsequent BAR question, the facts of the question
the part of the conductor to not have conducted a body indicate that there were repeated incidents of stone
search on the passengers. There is no obligation to conduct throwing in the area. The common carrier cruised in the
a body search on passengers when it comes to land same highway. A bystander then through a stone in one
transportation, unless there is something which arouses of the passengers and sustained injuries. Is the carrier
liable?
134
people had already fallen off the bus; and the bus was not
YES. Unlike in the premise of Pilapil where there were no properly equipped with doors in accordance with law; it is
previous incidents of stone throwing in the area, in this clear that Bachelor Express, Inc. failed to overcome the
question, there were previous incidents of stone throwing. presumption of fault and negligence found in the law
So, the carrier should have taken the appropriate measures governing common carriers. It failed to prove that the
to warn the passengers and take precautionary measures deaths of the two passengers were exclusively due to force
likewise. To avoid the incident. majeure and not to the failure to observe extraordinary
diligence in transporting safely the passengers to their
There was another BAR exam question where a destinations as warranted by law. Bachelor Express,
passenger stuck his arm to feel the wind as the bus incorporated, and Cresencio Rivera v. Court of Appeals,
cruised along the highway, but the bus was side-swiped G.R. No. 85691, July 31, 1990
by another car. His arm got detached in the process. Can
he sue the carrier for breach of contract of carriage? Bachelor Express was held liable in this case because during
the commotion, the bus driver should have made an
NO, because it is his fault. immediate stop. Instead, he sped away. As a result, the
victims fell off the bus while the bus is still running.
77. A bus of Fortune Express, Inc. (FEI) ]igured in an Bachelor Express failed to overcome the presumption of
accident with a jeepney which resulted in the death of fault and negligence found in the law governing common
several passengers including two Maranaos. It was carriers.
found out that a Maranao owns said jeepney and certain
Maranaos planned to take revenge by burning some of Liability for delay in the commencement of the voyage
FEI's buses. The operations manager of FEI was advised
to take precautionary measures, however, three armed Liability for defects in the equipment and facilities
Maranaos were able to seize a bus of FEI and set it on
]ire, causing the death of its passenger. Is FEI exempt 79. Spouses Tumboy and their minor children boarded
from liability? Yobido Liner bus. While on the trip, the left front tire of
the bus exploded. The bus fell into a ravine and stuck a
No. Despite the report of Philippine Constabulary agent that tree. The incident resulted in the death of Spouses
the Maranaos were going to attack its buses, FEI took no Tumboy and injuries to other passengers. Is the tire
steps to safeguard the lives and properties of its passengers. blow-out a fortuitous event?
The seizure of the bus of FEI was foreseeable and, therefore,
was not a fortuitous event which would exempt petitioner
No. A fortuitous event is possessed of the following
from liability. Fortune Express, Inc. v. Court of Appeals, G.R.
characteristics: (elements of force majeure)
No. 119756, March 18, 1999
a. the cause of the unforeseen and unexpected

78. A passenger at the rear portion of the bus owned by
occurrence, or the failure of the debtor to comply
Bachelor Express, Inc. suddenly stabbed a Philippine
with his obligations, must be independent of human
Constabulary soldier. Because of the commotion and
will;
panic inside the bus, passengers Beter and Rautraut
b. it must be impossible to foresee the event which
jumped off the bus causing their death. Bachelor
constitutes the caso fortuito, or if it can be foreseen,
Express, Inc. denies liability arguing that the death of
it must be impossible to avoid;
the said passengers was caused by a third person who
c. the occurrence must be such as to render it
was beyond its control and supervision. Is Bachelor
impossible for the debtor to fulKill his obligation in a
Express, Inc. correct?
normal manner; and
d. the obligor must be free from any participation in
No. Considering that the bus driver did not immediately stop
the aggravation of the injury resulting to the
the bus at the height of the commotion; the bus was
creditor.
speeding from a full stop; the victims fell from the bus door
when it was opened or gave way while the bus was still
running; the conductor panicked and blew his whistle after Under the circumstances of this case, the explosion of the
new tire may not be considered a fortuitous event. There are
135
human factors involved in the situation. The fact that the tire Civil Code, the factors to be considered are: (1) life
was new did not imply that it was entirely free from expectancy (considering the health of the victim and the
manufacturing defects or that It was properly mounted on mortality table which is deemed conclusive) and loss of
the vehicle. Neither may the fact that the tire bought and earning capacity, (b) pecuniary loss, loss of support and
used in the vehicle is of a brand name noted for quality, service; and (c) moral and mental sufferings. The loss of
resulting in the conclusion that it could not explode within earning capacity is based mainly on the number of years
Kive days use. Be that as it may, it is settled that an accident remaining in the persons expected life span. In turn, this
caused either by defects in the automobile or through the number is the basis of the damages that shall be computed
negligence of its driver is not a caso fortuito that would and the rate at which the loss sustained by the heirs shall be
exempt the carrier from liability for damages. Kixed.
Moreover, a common carrier may not be absolved from The formula for the computation of loss of earning
liability in case of force majeure or fortuitous event alone. capacity is as follows:
The common carrier must still prove that it was not
negligent in causing the death or injury resulting from an Net earning capacity = Life expectancy x [Gross Annual
accident. While it may be true that the tire that blew-up was Income - Living Expenses (50% of gross annual income)],
still good because the grooves of the tire were still visible, where life expectancy = 2/3 (80 - the age of the deceased)
this fact alone does not make the explosion of the tire a
fortuitous event. No evidence was presented to show that Smith Bell Dodwell Shipping Agency Corp. v. Borja. 383
the accident was due to adverse road conditions or that SCRA 341 [2002]
precautions were taken by the jeepney driver to compensate
for any conditions liable to cause accidents. Alberta Yobido Don’t forget to include attorney’s fees and cost of litigation.
v. Court of Appeals, G.R. No. 113003, October 17, 1997
What if there is no death? What can you recover?
What are the defenses available if death or injuries were
sustained by the passengers if these were caused by the 1. Actual Damages;
employees of the carrier? The defense of extra-ordinary 2. Moral Damages, if there is bad faith;
diligence will not hold, right? What then would be a 3. Attorney’s Fees and Costs of Suit; and
good defense? 4. Loss of Earning Capacity, if severely injured.
Force Majeure. But there are a lot of cases where the RECITATION
Supreme Court said that tire blow-out is not considered
force majeure. Q. Let’s say a bill of lading indicates a limit on the
amount of the liability of the common carrier, $500 per
Extent of liability for damages package. The goods were received by the consignee and
it turns out there was damage to it more than $500. Is
80. What is the extent of damages awarded in case of the consignee bound by the terms and conditions
death or injury among the passengers? contained in the bill of lading that sets the liability only
up to $500 per package?
Article 1764 in relation to Article 2206 of the Civil Code,
holds the common carrier in breach of its contract of A. YES. There are 2 reasons why the consignee is bound by
carriage that results in the death of a passenger liable to pay that limitation even though the bill of lading was between
(This is automatic.) the following: (1) indemnity for death, the seller/shipper and the common carrier and that there
[PHP 50,000] (2) indemnity for loss of earning capacity, was no participation on the part of the consignee: (refer to
[refer to the formula] and (3) moral damages. Victory Number 90)
Liner, Inc. v. Rosalito Gammad, G.R. No. 159636,
November 25, 2004 1. The seller/shipper acted as the principal of the
consignee, or vice versa.
In determining the reasonableness of the damages awarded 2. Stipulation pour autrui – binds the third person if he
under Article 1764 in conjunction with Article 2206 of the accepts the beneKit. If the consignee accepts the
136
goods, he accepts the beneKit given by the contract. favor of the consignee, subject to payment of freightage and
As a consequence, he is bound to the terms. other charges.
Q. Seller/shipper cause the shipment of goods through a 82. What are the three main characteristics of a bill of
common carrier in favor of a consignee. The terms and lading?
conditions of the bill of lading indicate that if the goods
were not of]loaded from the vessel, the consignee shall a. A bill of lading is considered a receipt for the
pay demurrage charges (the charges that the vessel goods shipped to the common carrier.
collects because of the unreasonable delay in getting the b. It also serves as the contract by which three
goods out of the vessel). Is the consignee liable to pay parties, namely: the shipper, the carrier, and the
the demurrage charges, if he does not get the goods consignee, undertake speciKic responsibilities and
from the vessel? assumed stipulated obligations.
c. It is the evidence of the existence of the contract
A. Not liable. If the consignee does not accept the goods or of carriage providing for the terms and conditions
does not accept the beneKit, he is not bound by the terms thereof. Keng Hua Paper Products vs Court of
and conditions in the bill of lading. Therefore, not liable to Appeals, 286 SCRA 257; BAR 2015
pay the demurrage charges. (also refer to Number 90)
Q. So, the consignee need not surrender the bill of lading 83. If the bill of lading was accepted without any
to be able to collect the goods from the common carrier. objection, what does it imply?
Acknowledgement receipt would suf]ice. What if the
seller/shipper instructs the common carrier to not The holding in most jurisdictions has been that a shipper
release the goods to the consignee? So, the consignee who receives a bill of lading without objection after an
has the bill of lading and about to present to the opportunity to inspect it, and permits the carrier to act on it
common carrier, but the common carrier is in a by proceeding with the shipment is presumed to have
dilemma because there is an instruction from the accepted it as correctly stating the contract and to have
shipper/seller to not release the goods to the consignee. assented to its terms. In other words, the acceptance of the
Can the common carrier release the goods despite the bill without dissent raises the presumption that all the terms
instructions of the seller/shipper? Under what therein were brought to the knowledge of the shipper and
circumstances or conditions may the carrier release the agreed to by him and, in the absence of fraud or mistake, he
goods to the consignee? is estopped from thereafter denying that he assented to such
terms. This rule applies with particular force where a
A. YES. Let the consignee sign an Indemnity Agreement. shipper accepts a bill of lading with full knowledge of its
(refer to Number 92) contents and acceptance under such circumstances makes it
a binding contract. Magellan Manufacturing Marketing
LECTURE Corporation v. Court of Appeals, G.R. No. 95529, August
22, 1991
D. BILL OF LADING
If the bill of lading is accepted as is, then the seller/shipper
is deemed to have accepted the terms and conditions found
1. Three-Fold Character in the instrument.
81. What is a Bill of Lading? 84. JRT, Inc. entered into a contract with C. Co. of Japan
to export anahaw fans valued at $23,000. As payment
A bill of lading may be deKined as a written acknowledgment thereof, a letter of credit was issued to JR, Inc. by the
(or document) of the receipt of goods and an agreement to buyer. The letter of credit required was issued to JR, Inc.,
transport and to deliver them at a speciKied place to a person the buyer. The letter of credit required the issuance of
named therein or on his order. BAR 1998 an on-board bill of lading and prohibited the
transshipment. The President of JRT, inc. then
So, by issuing a bill of lading, the common carrier contracted a shipping agent to ship the anahaw fans
acknowledges having received the goods for delivery in through O Containers Lines, specifying the
137
requirements of the letter of credit. However, the bill of

lading issued by the shipping lines bore the notation 86. For a cargo of machinery shipped from abroad to a
"received for shipment" and contained an entry sugar central in Dumaguete, Negros Oriental, the Bill of
indicating transshipment in Hongkong. The President of Lading (B/L) stipulated "To Shipper's Order” with notice
JRT, Inc, personally received and signed the bill of lading of arrival to be addressed to the Central. The cargo
and despite the entries, he delivered the corresponding arrived at its destination and was released to the
check in payment of the freight. Central without surrender of the B/L on the basis of the
latter's undertaking to hold the carrier free and
The shipment was delivered at the port of discharge but harmless from any liability. Subsequently, a Bank to
the buyer refused to accept the anahaw fans because whom the Central was indebted claimed the cargo and
there was no on-board bill of lading, and there was presented the original of the B/L stating that the Central
transshipment since the goods were transferred in had failed to settle its obligations with the Bank. Was
Hongkong from MV Paci]ic, the feeder vessel, to MV there misdelivery by the carrier to the sugar central
Oriental, a mother vessel. The same cannot be considering the non-surrender of the B/L? Why?
considered transshipment because both vessels belong
to the same shipping company. JRT, Inc. further argued There was no misdelivery to the carrier since the cargo was
that assuming there was transshipment, it cannot be consigned to the sugar central per the “Shipper’s Order”.
deemed to have agreed thereto even if it signed the bill BAR 1992
of lading containing such entry because it has made
known to the shipping lines from the start that Dean REMOVED this already in his Kinal draft.
transshipment was prohibited under the letter of credit
and that, therefore, it had no intention to allow 87. When should the shipment be delivered?
transshipment of the subject cargo. Is the argument
tenable? Reason. The oft-repeated rule regarding a carrier's liability for delay
is that in the absence of a special contract, a carrier is not an
No. JRT is bound by the terms of the bill of lading when it insurer against delay in transportation of goods. When a
accepted the bill of lading with full knowledge of its contents common carrier undertakes to convey goods, the law
which included transshipment in Hongkong. Acceptance implies a contract that they shall be delivered at destination
under such circumstances makes the bill of lading binding within a reasonable time, in the absence, of any agreement
contract. BAR 1993 as to the time of delivery. But where a carrier has made an
express contract to transport and deliver properly within a
On-board bill of lading – all throughout the voyage it stays in speciKied time, it is bound to fulKill its contract and is liable
the same vessel. So, no transshipment. for any delay, no matter from what cause it may have arisen.
This result logically follows from the well settled rule that
2. Delivery of Goods where the law creates a duty or charge, and the default in
himself, and has no remedy over, then his own contract
a. Period for delivery creates a duty or charge upon himself, he is bound to make it
good notwithstanding any accident or delay by inevitable
85. If a shipper, without changing the place of delivery necessity because he might have provided against it by
changes the consignment or consignee of the goods contract. It was held that a delay in the delivery of the goods
(after said goods had been delivered to the carrier), spanning a period of 2 months and 7 days was beyond the
under what condition will the carrier be required to realm of reasonableness. Maersk Line v. Court of Appeals,
comply with the new orders of the shipper? 222 SCRA 108 [1993]
If the shipper should change the consignee of the goods, When would the common carrier be liable in case of
without changing their destination, the carrier shall comply delay?
with the new order provided the shipper returns to the
carrier the bill of lading, and a new one is issued showing A carrier is not an insurer against delay in case there is no
the novation of the contract. All expenses for the change special contract providing for a speciKic date for delivery. If
must be paid by the shipper. BAR 1975 there is no special contract and there is no date indicated in
138
the contract, then the carrier is not liable if the goods were Even if the consignee was not a signatory to the contract of
delivered on that date. So, reasonable period would sufKice. carriage between the shipper and the carrier, the consignee
can still be bound by the contract. The right of a party here,
In this case, the Supreme Court said that 2 months and 7 to recover for loss of a shipment consigned to him under a
days was too long; hence, there is delay in this case – making bill of lading drawn up only by and between the shipper and
the carrier liable. the carrier, springs from either a relation of agency that may
exist between him and the shipper or consignor, or his
88. The remains of the plaintiffs' mother (considered as status as stranger in whose favor some stipulation is made
“goods”) were supposed to be transported from Chicago in said contract, and who becomes a party thereto when he
to California and from California to the Philippines. But demands fulKillment of that stipulation, when the consignee
because of a mix up, the remains were sent to Mexico formally claimed reimbursement for the missing goods from
initially, which caused a delay. The plaintiff's sued Trans the common carrier and subsequently Kiled a case against
World Airlines and Philippine Airlines for damages on the latter based on the very same bill of lading, it accepted
the ground of delay in transporting their mother's the provisions of the contract and thereby made itself a
remains. Is the carrier liable for the delay in the delivery party thereto, or at least has come to court to enforce it.
of a cargo? Thus, it cannot now reject or disregard the carrier's limited
liability stipulation in the bill of lading It is now bound by
No, common carriers are not obligated by law to carry and the whole stipulations in the bill of lading and must respect
to deliver merchandise, and persons are not vested with the the same. Everett Steamship Corporation v. Court of
right to prompt delivery, unless such common carriers Appeals, G.R. No. 122494, October 08, 1998.
previously assume the obligation. Said rights and
obligations are created by a speci]ic contract entered There are 2 ways or instances that the consignee is
into by the parties. Saludo v. Court of Appeals, G.R. No. bound by the terms and conditions between the seller/
95536, March 23, 1992 shipper and the common carrier. In other words, 2 cases
where the consignee, although not initially part of the
There would be liability for delay only if stipulated in the bill contract, is bound by the terms and conditions
of lading. If there is no date of delivery, the reasonable appearing therein:
period would apply.
1. Agency – the relationship between the seller/shipper
b. Delivery without surrender of the bill of lading and the consignee. So, the seller/shipper acted as the
agent of the consignee in agreeing to the terms and
89. May a Common carrier be held liable despite non- conditions. The act of the seller/shipper is the act of
issuance of a bill of lading? the consignee.
Yes. There is a complete and consummated contract of 2. Stipulation pour autrui – stipulation for the beneKit
carriage once the cargo is delivered to the carrier and of the third party. The third party here is the
the latter takes possession thereof. The delivery of a bill consignee. Stipulation pour autrui is binding upon the
of lading is not a requisite for the perfection of the contract consignee, the third party, only if he accepts the
of carriage. As such, the common carrier is liable despite beneKit conferred by the contract. The acceptance of
non-issuance of a bill of lading. BAR 2012 the beneKit is the acceptance of the goods. So, if the bill
of lading indicates a limit in liability, like $500 per
It is not the issuance and delivery of the bill of lading which package, which was agreed upon by the seller/shipper
consummates the contract of carriage. So, if the goods were and the carrier, the consignee is bound by the terms
lost or damaged, then the carrier would still be liable having accepted the goods from the carrier.
despite the non-issuance delivery of the bill of lading.
91. May the consignee obtain delivery of the goods even
90. Is the consignee bound by the contract of carriage without the surrender of the bill of lading?
between the shipper and the carrier?
In case the consignee, upon receiving the goods, cannot
return the bill of lading subscribed by the carrier, because of
139
its loss or of any other cause, he must give the latter a

receipt for the goods delivered, this receipt producing the “Other cause” includes the signing of an Indemnity
same effects as the return of the bill of lading. The Agreement between the carrier and the consignee. Of
surrender of the original bill of lading is not a condition course, that is not to say that the common carrier would not
precedent for a common carrier to be discharged of its be held liable for breach of contract or damages to the
contractual obligation. If surrender of the original bill of seller/shipper. But, at least, from the standpoint of the law,
lading is not possible, acknowledgment of the delivery he may release the goods to the consignee. If the seller/
by signing the delivery receipt suf]ices. National shipper sues the common carrier, the common carrier can
Trucking and Forwarding Corporation v. Lorenzo seek reimbursement from the consignee on the strength of
Shipping Corporation, G.R. No. 153563, February 07, 2005 the Indemnity Agreement.
The case of National Trucking v. Lorenzo is on the premise c. Refusal of consignee to take delivery
that the consignee is the one claiming the goods. If the
consignee is not the one claiming the goods, let’s say the 93. When may the consignee refuse to accept the goods?
claimant is a third party, one who is not under whose favor it
is to be delivered under the bill of lading, the claimant must According to the Code of Commerce, if the goods are
produce and surrender the duly negotiated bill of lading in delivered but arrived at the destination in damaged
his favor. The common carrier cannot be compelled to condition, the remedies to be pursued by the consignee
deliver the goods to the non-consignee, unless the bill of depend on the extent of damage on the goods in case the
lading is negotiated in favor of the non-consignee. damaged portion of the goods can be segregated from those
delivered in good condition, the consignee may reject those
92. The buyer could not produce the bill of lading in damaged condition and accept merely those which are in
covering the shipment not because it was lost, but good condition. If the effect of damage on the goods
because the bill of lading was retained by the seller consisted merely of diminution in value, the carrier is bound
pending buyer's full payment of the shipment. The to pay only the difference between its price on that day and
buyer and the carrier then entered into an Indemnity its depreciated value as provided under Article 364 of the
Agreement, wherein the former asked the latter to Code of Commerce. Loadstar Shipping Company v.
release the shipment even without the surrender of the Malayan Insurance Company, G.R. No. 185565, November
bill of lading. May the goods be released even without 26, 2014
the surrender of the bill of lading?
However, if the goods are rendered useless for sale,
Yes. The general rule is that upon receipt of the goods, the consumption or for the intended purpose, the consignee
consignee surrenders the bill of lading to the carrier and may reject the goods and demand the payment of such
their respective obligations are considered canceled. Article goods at their market price on that day pursuant to Article
353 of the Code of Commerce, however, provides two 365 of the Code of Commerce.
exceptions where the goods may be released without
the surrender of the bill of lading because the consignee 3. Period for ]iling claims
can no longer return it. These exceptions are when the
bill of lading gets lost or for other cause. In either case, 94. What is the period to ]ile claim in case of damage to
the consignee must issue a receipt to the carrier upon the goods?
release of the goods. Such receipt shall produce the same
effect as the surrender of the bill of lading. For coastwise or inter-island commerce (or carriage of
goods within the Philippines)
Here, the execution of the Indemnity Agreement, and the
undisputed fact that the shipment was released to seller When the damage is apparent, the claim should be Kiled
pursuant to it, operates as a receipt in substantial immediately with the common carrier. If the damage is not
compliance with the last paragraph of Article 353 of the apparent, the notice must be Kiled within 24 hours from
Code of Commerce. Designer Baskets, Inc., v. Air Sea delivery.
Transport, Inc. and Asia Cargo Container Lines, Inc. G.R.
No. 184513, March 09, 2016.
140
Here, you have to take a look at the facts of the case. Where extent of the injury. This protects the carrier by affording it
would it originate and where would it be delivered? an opportunity to make an investigation of a claim while the
matter is fresh and easily investigated so as to safeguard
What if the consignee opens the shipment only after 24 itself from false and fraudulent claims. Notice is a condition
hours from delivery and then discovered the damage? precedent and the carrier is not liable if notice is not given in
accordance with the stipulation, as the failure to comply
He is barred from Kiling any case against the common carrier. with such a stipulation in a contract of carriage with respect
His cause of action is barred. So, you have to open upon to notice of loss or claim for damage bars recovery for the
delivery or right away. loss or damage suffered. Philippine American General
Insurance Co v. Sweet Lines, Inc., G.R. No. 87434, August 5,
What is the consequence if you don’t notify the common 1992
carrier?
If there is a requirement to give notice within 24 hours
It affects your cause of action. So, despite the damage, you under the Code of Commerce or a longer period by
cannot sue or run after the common carrier. stipulation of the bill of lading and that notice was not given,
then the carrier has no liability for the damage of the goods.
95. When does the 24-hour period for the ]iling of notice That is if this is inter-island commerce or coastwise
commence? shipping.
The twenty-four-hour period within which claims must be A different rule obtains when it comes to COGSA.
presented does not begin to run until the consignee has
received such possession of the merchandise that he may 96. Y shipped several boxes of goods from Mindoro to
exercise over it the ordinary control pertinent to ownership. Batangas on board a vessel owned by Montenegro
In other words, there must be delivery of the cargo by the Shipping Lines. Inc. Upon opening of the goods, it was
carrier to the consignee at the place of destination. Art. 366 discovered that the goods had been damaged. It was
of the Code of Commerce; Lorenzo Shipping Corporation v. only after 3 days that a notice against the carrier was
Chubb and Sons Inc., G.R. No. 147724, June 8, 2004 made by the consignee. Does the shipper have a cause of
action against the carrier?
The giving of notice of loss or injury is a condition precedent
to the action for loss or injury or the right to enforce the No. The notice or claim that is required to be made
carrier's liability. This notice requirement protects the against the carrier under Article 366 of the Code of
carrier by affording it an opportunity to make an Commerce is a condition precedent (indispensable) to
investigation of the claim while the matter is still fresh and the accrual of a right of action against the latter for loss of,
easily investigated. It is meant to safeguard the carrier from or damage to, the goods transported. Without such prior
false and fraudulent claims. Aboitiz Shipping Corporation v. notice or claim having been made within the time allowed,
Insurance Company of North America, G.R. No. 168402, no right of action against the Carrier can rise in favor of the
August 6, 2008; UCPB General Insurance Co. Inc v. Aboitiz shipper or consignee. UCPB General Insurance Co. Inc. v.
Shipping Corp., G.R. No. 168433, February 10, 2009 Abortiz Shipping Corporation, S78 SC RA 251 [2009]
It was also held that where the contract of shipment (bill The aforementioned requirement is a reasonable condition
of lading) contains a reasonable requirement of giving precedent; it does not constitute a limitation of action. The
notice of loss of or injury to the goods, (in this case 30 requirement of giving notice of loss of or injury to the goods
days for ]iling a claim with the carrier for loss or is not an empty formalism. The fundamental reasons for
damage) the giving of such notice is a condition such a stipulation are (1) to inform the carrier that the
precedent to the action for loss or injury or the right to cargo has been damaged, and that it is being charged
enforce the carrier’s liability. Such requirement is not an with liability therefor, and (2} to give it an opportunity
empty formalism. The fundamental reason or purpose of to examine the nature and extent of the injury. This
such a stipulation is not to relieve the carrier from just protects the carrier by affording it an opportunity to
liability, but reasonably to inform it that the shipment has make an investigation of a claim while the matter is
been damaged and that it is charged with liability therefor, fresh and easily investigated so as to safeguard itself
and to give it an opportunity to examine the nature and
141
from false and fraudulent claims. Federal Express before it could be Kinalized and endorsed by the institution
Corporation v. American Home Assurance Company, G.R. to the claims department of the shipping company.
No. 150094, August 18, 2004
The call to petitioner was made two days from delivery, a
97. X shipped several boxes of goods from Manila to reasonable period considering that the goods could not have
Cebu on board a vessel owned by Mabuhay Lines, Inc. corroded instantly overnight such that it could only have
Several boxes externally appeared to have been sustained the damage during transit. Moreover, petitioner
damaged. The proprietor of Y Dry Goods, Inc. paid the was able to immediately inspect the damage while the
freight charges upon receipt of the goods. However, matter was still fresh. In so doing, the main objective of the
when the boxes were opened 2 days later, it was prescribed time period was fulKilled. Thus, there was
discovered that the contents of all the boxes had been substantial compliance with the notice requirement in this
damaged. The proprietor of Y Dry Goods, Inc. seeks your case.
advice on whether he may proceed against the carrier
for damages. State your answers with reasons. This is an exception to the 24-hour rule. This is for practice.
Forget about this for the BAR exam.
No action for damages to the goods may be maintained
against the carrier. With respect to a claim arising from For international carriage (Foreign ports to Philippine
damages caused to the goods contained in the boxes where ports) (governed by COGSA)
the damage was ascertainable from the outside part of the
packages. Article 366 of the Code of Commerce requires that If the damage is apparent, the notice must be Kiled upon
the claim against the carrier must be made at the time of the discharge of goods. (right away or immediately) If it is not
receipt. apparent, notice must be within 3 days from delivery. (The
notice is merely desirable or ideal.)
With respect to the goods contained in the boxes where the
damage was not ascertainable from the outside part of the The lack of notice to the common carrier does not prevent
packages and such damage was only ascertainable upon the the accrual of the cause of action for loss or damage to
opening of the boxes, the claim against the carrier must goods, as long as the suit is ]iled within 1 year from the
be made within 24 hours following receipt of the date that the goods were delivered or should have been
merchandise. It does not appear that the proprietor of Y delivered.
Dry Goods, Inc. made any claim for damages to the goods
within the periods set forth in Article 366. For BAR exam purposes, take a look at the facts very
carefully. Where did the goods come from? Where would the
Moreover, as he paid the freight charges upon his receipt of goods be delivered? So, if Philippines lang, the lack of notice
the goods shipped, it is too late for the proprietor of Y Dry is fatal to the cause of action.
Goods Inc. to make a claim against the carrier for damages
to the goods. BAR 1984 4. Period for Filing Actions
98. Can there be substantial compliance with the notice 99. What is the prescriptive period for ]iling actions?
requirement?
• Coastwise (within Philippines)
Yes. In the case of Aboitiz Shipping Corporation v. Insurance
Company of North America, it was held that provisions
The action should be Kiled within 6 years, if no bill of lading
specifying a time to give notice of damage to common
is issued.
carriers are ordinarily to be given a reasonable and
practical, rather than a strict construction. Understandably,
However, if a bill of lading was issued, the prescriptive
when the goods were delivered, the necessary clearance had
period is ten years from the receipt of the goods. A cause of
to be made before the package was opened. Upon opening
action based on a written instrument prescribes in ten
and discovery of the damaged condition of the goods, a
years.
report to this effect had to pass through the proper channels
142
• International (Foreign ports to Philippine ports) A charter party is a contract by which an entire ship or some
principal part thereof is let by the owner to another person
In case of international carriage of goods by sea, notice of for a speciKied time or use. It has two types. First, it can be a
damage is not a condition precedent for the accrual of the contract of affreightment (essentially a lease of the
cause of action as long as the action is Kiled within vessel) whereby the use of shipping space on vessels is
one year from date of delivery (delivered but damaged leased in part or a whole to carry good for others. The
goods) or the goods should have been delivered (date the charter party provides for the hire of vessel only, either
vessel left the port). for a determinate period of time (time charter) or for a
single or consecutive voyage (voyage charter). The
In one case, it was held that the provision in the Bill of shipowner supplies the ship's stores, pay for the wages of
Lading providing that suits must be Kiled within 60 days the master and the crew, and defray the expenses for the
from accrual of the right of action violated the one-year maintenance of the ship. The voyage remains under the
period prescribed under the COGSA. Hence, it is void and responsibility of the common carrier and is answerable
cannot be applied. Loadstar Shipping Co. v. Court of for the loss of the goods received for transportation. The
Appeals, G.R. No. 131621, September 28, 1999 charterer is free from liability to third persons in respect of
the ship. (In both time and voyage charter, it retains its
status as a common carrier.) Philam insurance Company
100. Can the parties validly reduce the one-year period
(now Chartis Philippines insurance) v. Heung-A Shipping
for the ]iling of the action?
Corporation and Wallem Philippines Shipping, Inc., G.R.
No. 187701, July 23, 2014; Caltex Philippines, Inc. v.
No. A stipulation reducing one-year period for Kiling the
Sulpicio lines, Inc., et. al., G.R. No. 131166, September 30,
action for recovery on lost or damaged cargo is null and
1999; National Food Authority v. Court of Appeals, G.R. No.
void. (because it is contrary to public policy) Loadstar
96453, August 4, 1999
Shipping Co., Inc. v. Court of Appeals, 315 SCRA 339
[1999].
Second, charter by demise or bareboat charter under
which the whole vessel is let to the charterer with a
Can the period be lengthened? YES. transfer to him of its entire command and possession
and consequent control over its navigation, including
What if the bill of lading says 9 months to ]ile a case only, the master and the crew, who are his servants. The
but the goods originated from foreign port to Philippine charterer mans the vessel with his own people and becomes
port, which one is binding? The bill of lading? Or the 1- in effect the owner for the voyage or service stipulated and
year prescriptive period? hence, liable for damages or loss sustained by the goods
transported. Philam Insurance Company (now Chartis
Supreme Court said the 1-year prescriptive period. So, the Philippines Insurance) v. Heung-A Shipping Corporation
bill of lading must conform to what the law provides. and Wallem Philippines Shipping, Inc., G.R. No. 187701,
July 23, 2014; Caltex Philippines, Inc. v. Sulpicio Lines,
E. MARITIME COMMERCE Inc., et. al., G.R. No. 131166, September 30, 1999; National
Food Authority v. Court of Appeals, G.R. No. 96453, August
101. What contracts govern maritime commerce? 4, 1999
Contract to carry goods and/or transport passengers is A bareboat charter effectively converts a common
governed by the Civil Code provisions on common carriers carrier to a private carrier. The shipowner becomes a
and the terms and conditions of the bill of lading. mere lessor and ceases to be the owner of the vessel
with respect to a speci]ied navigation. The shipowner has
1. Charter parties no liability to the passengers or cargo owners who
contracted with the charterer in case of death or injury to
102. What is a charter party? What are the kinds of the passengers or loss or damage to the goods.
charter party? (There are three kinds.)
103. Is the shipowner presumed to be at fault or
negligent in case of loss, damage, or deterioration of the
143
goods on board its vessel or in case of death or injury to No. When the charter included both the vessel and its crew,
passengers under a charter party agreement? as in a bareboat or demise charter, a common carrier
becomes private, at least in so far as the particular voyage
(It depends on the kind of charter party.) the charter-party is concerned. Caltex v. Sulpicio Lines, G.R.
No. 131166 September 30, 1999
Yes, in the case of voyage and/or time charter because in
this type of charter party agreement, the shipowner retains a. Bareboat/ Demise Charter
the status of common carrier. There is no presumption of
fault on the part of the shipowner, however, in the case of 107. Tirso Molina charters a vessel owned and operated
bareboat or demise charter, because the shipowner is not by Star Shipping Co., a common carrier, for the purpose
a party to the contract for the shipment of the goods or of transporting two tractors to his logging concession.
transportation of passengers. The crane operator of the shipping company somehow
negligently puts the tractors in a place where they
104. A contract of carriage was entered into where the would tilt each other. During the trip, a strong wind hits
carrier and shipowner are not the same person. In case the vessel, causing severe damage to the tractors. Tirso
an event arises wherein the responsibilities of common Molina sues the shipping company for damages. The
carrier attach, who will be made liable to the charterer/ latter cites a stipulation in the charter agreement
shipper, the carrier or the shipowner? exempting the company from liability from loss or
damage arising from the negligence of its agents. Tirso
The Carrier. The carrier that enters into a contract of Molina countered by stating that the aforementioned
carriage is liable to the charterer or shipper even if it does stipulation is against public policy and, therefore, null
not own the vessel it chooses. The fact that it did not own and void. Is the stipulation valid? Would you hold the
the vessel it decided to use to consummate the contract shipping company liable?
of carriage did not negate its character and duties as
common carrier. The shipper (and the insurer by reason Yes. The stipulation in the charter party is valid, and Star
of subrogation) could not be reasonably expected to Shipping Co. is not liable. The Civil Code provision on
inquire about the ownership of the vessel which the common carriers should not apply where the common
charterer offered to utilize. As a practical matter, it is very carrier is not acting as such but as a private carrier, as in the
difKicult and often impossible for the general public to case in the above problem. A common carrier undertaking to
enforce its rights of action under a contract of carriage if it carry a special cargo or chartered to a special person only,
should be required to know who the actual owner of the becomes a private carrier. As a private carrier, a stipulation
vessel is. Cebu Salvage Corporation v. Philippine Home exempting the owner (Star Shipping Co.) from liability for
Assurance Corporation, GR. No. 150403, January 25, 2007 the negligence of its agent is valid, being not against public
policy. Home Insurance Co. v. American Steamship
105. What is a 'Jason clause" in a charter party? Agencies, April 4, 1968; 23 SCRA 24; Bar 1980
The Jason clause derives its name from The Jason 225 US 32 108. "C" Company shipped 20,000 bags of soy beans
(1912) decided by the US Supreme Court under the Harter through the S/S Melon, owned and operated by "X"
Act. By the Jason clause, a shipowner (provided he had Shipping Lines, consigned to the Toyo Factory and
exercised due diligence to make the ship seaworthy and insured by the Surety Insurance Co., against all risks. “C”
properly manned, equipped, and supplied) could claim a Company hired the entire vessel, with the option to go
general average contribution from cargo, even where the north or south, loading, stowing, and discharging at its
damage was caused by faulty navigation of the vessel, risk and expense. The owner and shipper agreed on a
provided that the bill of lading excluded liability for such stipulation exempting the owner from liability for the
faults. BAR 2015 negligence of its agents. When the cargo was delivered
to the consignee, there were shortages amounting to
106. Are the rules of common carriers applicable to P10,500. The insurance company paid for the damage
Bareboat/ Demise Charter? and sought reimbursement from the "X" Shipping Lines
as carrier. Is the carrier liable?
144
The carrier is not liable. A common carrier undertaking to ABC Shipping Company. Where the agreement executed by
carry a special cargo or chartered to a special person only the parties was a time charter where the possession and
becomes a private carrier. The provisions of the New Civil control of the vessel was retained by the owner, the latter is,
Code on common carriers should not be applied where the therefore, a common carrier legally charged with
carrier is not acting as such but as a private carrier. As a extraordinary diligence in the vigilance over the goods
private carrier, a stipulation exempting the ship owner from transported by him. The sinking of the vessel created a
liability for the negligence of its agents is not against public presumption of negligence and/or unseaworthiness which
policy and is deemed valid. Home Insurance Co. v. the barge owner failed to overcome and gave rise to his
American Steamship Agencies, Inc., April 4, 1968; 23 SCRA liability for the charterer's lost cargo despite the latter's
25; BAR 1981 failure to insure the same. Oceaneering Contractrors
(Phils), Inc. vs. Nestor Barreto, doing business as NNB
109. X owns the ship M/V Aguinaldo. He bareboat Lighterage, G.R. No. 184215, February 9, 2011
chartered the ship to Y who appointed all its crew
members from the captain down to its last of]icial. Y In this case, there was an allegation that the goods were
then transported a shipment of 10,000 bags of sugar improperly scooped into the barge, but the vessel or the
belonging to Z. Thru the negligence of the ship captain, barge upsized. So, who is liable in that case?
half of the sugar was damaged due to sea water. Since Y
is bankrupt, Z sued the captain and X. Will the suit It is still the owner of the barge, the common carrier. It is
prosper? because only a time charter was agreed upon.
The action could prosper against the ship captain whose c. Voyage/Trip Charter
negligence caused the damage but not against X who merely
was a lessor of the vessel and who was neither a party to the 112. Who controls the master and the crew in a Voyage/
contract for the shipment of the goods nor an employer of Trip Charter?
the ship captain. BAR 1989
A voyage charter is simply a contract of affreightment where
110. Who is liable for the expenses of the voyage the master and crew remain in the employ of the ship owner.
including the wages of the seamen in a bareboat or Under a voyage charter, the shipowner retains the
demise charter? possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in
It is well settled that in a demise or bareboat charter, the the vessel in return for his payment of freight. An owner
charterer is treated as owner pro hac vice of the vessel, the who retains possession of the ship remains liable as carrier
charterer assuming in large measure the customary rights and must answer for loss or non-delivery of the goods
and liabilities of the shipowner in relation to third persons received for transportation. Cebu Salvage Corporation v.
who have dealt with him or with the vessel. In such case, the Philippine Home Assurance Corporation, G.R. No. 150403,
Master of the vessel is the agent of the charterer and not of January 25, 2007
the shipowner. The charterer or owner pro hac vice, and
not the general owner of the vessel, is held liable for the In one case, it was held that a 'slot charter arrangement'
expenses of the voyage including the wages of the where there is a reserved a space in the vessel is a contract
seamen. Litonjua Shipping Company v. National Seamen of affreightment. The arrangement did not divest the ship
Board, G.R. No. L-51910, August 10, 1989 owner its character as the common carrier nor relieve it of
any accountability for the shipment. Philam Insurance v.
b. Time Charter Heung-A Shipping, supra.
111. X entered into a time charter with ABC Shipping Slot Charter Arrangement – Contract of Affreightment (Time
Company. Unfortunately, the vessel containing few or Voyage Charter)
cargoes sank during its voyage. No insurance was taken
by X over the cargoes. Who should be held liable for the 113. Is the charterer of a sea vessel liable for damages
lost cargoes? resulting from a collision between the chartered vessel
and a passenger ship?
145
(It depends on the kind of charter party agreement.) Q. May a claim imposed by statute be recovered despite
the loss of the vessel? Besides the ECC?
No. If the charter is a contract of affreightment, which leaves
the general owner in possession of the ship as owner for the A. YES. The limited liability is inapplicable in a claim
voyage, the rights and the responsibilities of ownership rest imposed by statute to compensate employees and laborers
on the owner. The charterer is free from liability to third in cases of injuries while in the performance of their work.
persons in respect of the ship. The charterer is free from [refer to Number 127(c)]
liability to third persons in respect of the ship.
Q. Is there a need for the shipowner to abandon the
On the other hand, under a demise or bareboat charter, the vessel to be able to invoke the Limited Liability Rule?
charterer mans the vessel with his own people and becomes,
in effect, the owner for the voyage or service stipulated, A. Not in all cases. Abandonment is only required in case of
subject to liability for damages caused by negligence. Caltex constructive total loss. Not in case of total loss. [refer to
Philippines, Inc. v. Sulpicio Lines, Inc., G.R. No. 131166, Number 127(e)]
September 30, 1999
LECTURE
In this case, Caltex entered into a charter party contract
with Vector Shipping to deliver fuel products owned by 2. Liability of Ship Owners and Shipping Agents
Caltex from one port to another port. Unfortunately, the
vessel, a motor tanker, collided with Sulpicio Liner. Is 114. Who is a ship agent?
Caltex liable to the passengers of Sulpicio Liner who
died? In this case, the motor tanker was not seaworthy. A ship agent is "the person entrusted with provisioning or
So, who’s duty is it to make that tanker seaworthy? representing the vessel in the port in which it may be found."
In this case, since the contract entered into by Caltex was It was held that whether acting as agent of the owner of the
only a voyage charter, then Caltex, as charterer, has no vessel or as agent of the charterer, a person will be
obligation to check the seaworthiness of the vessel. That considered as the ship agent and may be held liable as such,
duty belongs to the shipowner. as long as the latter is the one that provisions or represents
the vessel. Macondray & Co. Inc. v. Provident Insurance
MARCH 16, 2021 Corporation, G.R. No. 154305, December 9, 2004
Transportation Law (Continuation) Republic Act No. 9515 provides for the distinctions
between a general agent and a tramp agent.
RECITATION
"General Agent" shall mean a ship agent appointed by the
Q. Let’s say the charterer entered into a Bareboat or ship owner or carrier in the liner service for all voyages and
Demise Charter with the shipowner. The charterer covered by a General Agency Agreement whereby the agent
entered into contracts with cargo owners and assumes the role and responsibility of its principal within
passengers. As the vessel sets sail, the vessel upsized the Philippine territory including but not limited to
which resulted to the loss of the goods and to the deaths solicitation of cargo and freight, payment of discharging or
of the passengers. Can the charterer invoke the Limited loading expenses, collection of shipping charges and
Liability Rule to negate the claims of the cargo owners issuing/releasing bills of lading and cargo manifest;
and the heirs of the deceased passengers?
"Tramp Agent” shall mean a ship agent appointed by the
A. NO. This rule is intended to encourage shipbuilding and to ship owner, charterer or carrier to carry the tramp service
offset the hazards in going to maritime commerce. So, this for one particular voyage whose authority is limited to the
would only pertain to the shipowner. In other words, this customary and usual procedures and formalities required
rule is designed to protect the interest of the shipowner and for the facilitation of the vessel's entry, stay and departure in
not the charterer. (refer to Number 126) the port and does not include the assumption of the ship
146
owner's, charterer's, or carrier's obligations with the with the shipper, the law makes the agent liable solidarily
shipper or receiver for the goods carried by the ship; with the shipowner. So, the ship agent cannot invoke the
Civil Code provisions on agency.
"Tramp Service" shall mean the operation of a contract
carrier which has no regular and Kixed routes and schedules The ship agent shall also be civilly liable for the indemnities
but accepts cargo wherever and whenever the shipper in favor of third persons which may arise from the conduct
desires, is hired on a contractual basis, or chartered by any of the captain in the care of the goods which he loaded on
one or few shippers under mutually agreed terms and the vessel; but he may exempt himself therefrom by
usually carries-bulk or break-bulk cargoes. abandoning the vessel with all her equipment and the
freight it may have earned during the voyage.
If during the BAR exams, the question makes reference to a
ship agent, then you apply the Code of Commerce. Abandonment is only required in case of constructive total
loss and not in case of total loss. So, such option need not be
But if it makes reference to a Tramp Agent, a Tramp Agent is exercised if the vessel is completely lost.
not the same as a ship agent. A Tramp Agent is not liable
solidarily with the shipowner in case of loss or damage to Republic Act No. 9515, in turn, provides that the
goods. responsibility or liability, if any, of the ship agent, general
agent and tramp agent shall continue to be governed by the
113. What are the liabilities of the ship agent? pertinent provisions of the Code of Commerce: Provided,
that in the case of the tramp agent, his liability shall not
The Code of Commerce provides for the liabilities of the ship extend to the obligations assumed by the ship owner,
agent, as follows: charterer or carrier with the shipper or receiver for the
goods carried by the ship. Provided, further, that it is the
The shipowner and the ship agent shall be civilly liable for duty of the tramp agent, however, to assist the shipper or
the acts of the captain and for the obligations contracted by receiver in making cargo liability claims against the ship
the latter to repair, equip, and provision the vessel, provided owner, charterer or carrier Provided, Kinally, that failure or
the creditor proves that the amount claimed was invested inaction to perform the aforesaid duty shall subject the
for the beneKit of the same. tramp agent to applicable administrative sanctions based on
the Implementing Rules and Regulations (IRR) to be
Regarding the obligations contracted by the ship formulated thereon by the Maritime Industry Authority
captain, can they be charged against the shipowner and (MARINA) under the Department of Transportation and
the ship agent if they were incurred without consent or Communication (DOTC) and by the Philippine Shippers
authority of the shipowner and the ship agent? Bureau (PSB) under the Department of Trade and Industry
(DTI).
NO, these cannot be charged against the shipowner and the
ship agent. UNLESS, these pertain to repair and provision 114. “S” shipped goods from Australia on board a
the vessel. foreign vessel owned and operated by "X", a shipping
company, based in Australia and represented in the
So, if loans were obtained by the ship captain without Philippines by “R". The goods were consigned to "T" of
the consent of the shipowner and the ship agent, and Manila and insured by “U” against all risks. Upon arrival
those were obtained for the repair of the vessel, can in Manila Bay, the goods were discharged from the
they be charged against the shipowner and the ship vessel to a lighter owned by the Bay Brokerage Co. When
agent? delivered to and received by “T”, the goods were found
to have sustained losses or damages. Evidence disclosed
YES. As long as the creditor can prove that the amount that the damage occurred while the goods were in the
claimed was invested for the beneKit of the vessel. custody of the carrier.
Jurisprudence provides that the shipowner and the ship The insurance company paid the amount of the loss but
agent are liable solidarily for the loss or damage to the sought reimbursement from “X” and/or “R". “R"
goods. Even though the ship agent may not have contracted disclaimed any liability alleging that he is a mere agent
147
of "X” and having acted as agent of a disclosed principal within the meaning and context of Article 586 of the Code of
is, therefore, not liable. Commerce: "the person who represents the vessel in the
port in which she happens to be.” Best Lines, Inc. cannot be
a) Can the insurance company recover from “R"? considered as a “mere agent" of a disclosed principal
Reasons. under the civil law on agency. The doctrine having
reference to the relation between principal and agents
b) What is the liability, if any, of Bay Brokerage Co.? cannot be applied in the case of ship agents and ship
Explain. owners. Yu Biao Suntua & Co. v. Ossorio, 43 Phil. 51; BAR
1984
a) Yes, the insurance company can recover from "R". A ship
agent (“R”) under the Code of Commerce is liable The Code of Commerce provides that the ship agent shall be
solidarily with its principal (X), in an amount liable for indemnities in favor of third persons which arise
representing the value of the good lost or damaged. from the conduct of the captain in the care of the goods
Switzerland General Insurable Co., Ltd. v. Ramirez, which the vessel carried. The insolvency of Able Shipping
February 21, 1980; 96 SCRA 297 Co. has no bearing insofar as the liability of Best Lines,
Inc. is concerned. The law does not make the liability of the
b) The Bay Brokerage Co. is not liable. The evidence ship agent dependent upon the solvency or insolvency of the
disclosed that the damage occurred while the goods ship owner. Best Lines, Inc., as ship agent, is liable solidarity
were yet in the custody of the carrier, before that goods with its principal, Able Shipping Co., for the amount of the
were discharged from the vessel to a lighter owned by losses or damages sustained by the goods. Switzerland
the Bay Brokerage Co. BAR 1981 General Insurance Co., Ltd. v. Ramirez, 96 SCRA 297, 1980.
115. X Mining Co shipped cargo of machineries on board Is Best Lines a ship agent even though it makes
the S/S Good Ship which was chartered by the Able reference only as an agent?
Shipping Co., a foreign corporation represented in the
Philippines by its agent, Best Lines. Inc. When the goods YES, if it performs those functions and services such as
were delivered to the consigner, Y Corporation, they provisioning the vessel and facilitating the release of the
were found to have sustained losses. The insurer, goods to the cargo owner, then it is effectively a ship agent.
Sunshine Insurance Co, paid for the losses, thereby As such, it is liable solidarily with the shipowner. You apply
subrogating itself to the rights of X Mining Company or Y the principle of agency under the Code of Commerce, not
Corporation vis-a-vis the shipping company and the that of the Civil Code.
shipping agent.
The insolvency of shipowner has no bearing as to the
Upon arrival of the S/S Good Ship in Manila, Best Lines, liability of the ship agent with respect to the cargo owners.
Inc. took charge of the following: (a) unloading of the But it would have a bearing on the right to reimbursement
cargo and issuing of cargo receipts in its own name for by the ship agent against the ship owner. If the shipowner is
the purpose of evidencing the condition and discharge insolvent, the chance of recovery by the ship agent is almost
of the cargo from the vessel to the arrastre operator nil.
and/or unto the barge lighters; (b) ]iling and processing
of claims against the vessel S/S Good Ship for damages/ Liability for Acts of Captain
losses sustained by the cargo.
116. What is the liability of the shipowner and the ship
When Sunshine Insurance Co sued both Able Shipping agent for the acts of, and obligations contracted by the
Co. and Best Lines, Inc., the latter contended that it was captain?
a disclosed agent and could not therefore be held liable,
despite the insolvency of Able Shipping Co. Rule on the The shipowner and the ship agent shall be civilly liable for
contention of Best Lines, Inc., with reasons. the (authorized) acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the
It is clear that Best Lines, Inc. is the entity that represents vessel, (even if unauthorized) provided the creditor proves
the vessel in the port of Manila and hence is a ship agent that the amount claimed was invested therein.
148
declaring that under the Code of Commerce, the

117. Give instances when the shipowner and ship agent shipping agent is civilly liable for damages in favor of
are liable for culpa contractual arising from the acts of third persons due to the conduct of the carrier's captain,
the captain. and the stipulation in the charter party exempting the
owner from liability is not against public policy. Coca-
a. The owner of the property which has been jettisoned of Cola appealed. Will its appeal prosper? Reason brie]ly.
cast overboard by order of the captain should have a
right of action against the shipowner for the breach of No. The appeal of Coca-Cola will not prosper. Under Article
any duty which the law may have imposed on the 587 of the Code of Commerce, the shipping agent is civilly
captain with respect to such cargo. Standard Oil Co. v. liable for damages in favor of third persons due to the
Lopez Castelo, 42 Phil 256, cited in Perez, p. 135 conduct of the carrier’s captain, and the shipping agent can
exempt himself therefrom only by abandoning the vessel
b. In case the captain, without any valid cause or reason with all his equipment and the freight he may have earned
and without any unforeseen accident or stress of during the voyage. On the other hand, assuming there is a
weather, willfully abandoned the lorcha under a bareboat charter, the stipulation in the charter party
contract of towage resulting in the loss thereof, the exempting the owner from liability is not against public
shipowner and ship agent are liable for the acts of the policy because the public at large is not involved. BAR 2004
captain. Guzman v. Behn, Meyer & Co, 9 Phil. 112, cited
in Perez, ibid. b. Limited Liability Rule
c. The shipowner and ship agent are liable for the 120. What is the doctrine of Limited Liability? BAR 1994,
negligence of the captain unloading the cargo on the 1997
pier on account of which the cargo accumulated thereon
sank. Ohta Development Co. v. Steamship Pompey, 49 The limited liability rule, also known as the real or
Phil. 117, cited In Perez, Ibid. hypothecary nature of maritime law, simply means that the
liability of the carrier (shipowner) in connection with
118. X chartered the ship of Y to transport his logs from losses related to maritime contract is limited to his interest
Zamboanga to Manila. In the course of their voyage, the in the vessel which is hypothecated for such obligations or
ship met a storm and had to dock in Cebu for 3 days. Z, which stands as the guaranty for their settlement.
the captain of the ship, borrowed P20,000 from X on the
pretext that he would need the money for the repair of This rule may best be explained by the doctrine: "No vessel,
the ship. Z misappropriated the money and converted it no liability".
to his own bene]it. What is the liability of Y, if any?
So, the loss of the vessel extinguishes maritime claims
A shipowner would only be liable for contracts made by the against the shipowner and the ship agent. This rule beneKits
captain (a) when duly authorized or (b) even when not just the shipowner, but also the ship agent.
unauthorized, for ship repairs, or for equipping or
provisioning the vessel when the proceeds are invested 121. What is the rationale for the Limited Liability Rule?
therein. Since the loan by the captain from X does not fall
under any of the foregoing cases, the amount borrowed shall It was designed to offset the adverse conditions (or
be considered a personal liability of Z, the captain, and Y, the hazards) of maritime trade and to encourage people and
shipowner, cannot thus be held liable. BAR 1989 venture into maritime commerce despite the risks and
prohibitive cost of shipbuilding. Aboitiz Shipping
119. Under a charter party, XXO Trading Company Corporation v. General Accident Fire and Life Assurance
shipped sugar to Coca-Cola Company through SS Negros Corporation, 217 SCRA 359, 1993
Shipping Corp., insured by Capital Insurance Company.
The cargo arrived but with shortages. Coca-Cola 122. Pablo Esparadon, a duly-licensed ship captain of
demanded from Capital Insurance Co. P500,000 in the M/V Don Jose was drunk while he was on duty as
settlement (or XXO Trading. The RTC, where the civil such, and while M/V Don Jose was sailing from Manila to
suit was ]iled, absolved the insurance company, the Visayas. As a consequence, thereof, the M/V Don Jose
149
rammed another vessel near Corregidor, causing both capacity. Sued for damages by the victim's surviving
vessels to sink completely and thus become total losses. relatives, Marina Navigation Company contended: (1)
The cargo owners of both sunken vessels sued the that its liability, if any, had been extinguished with the
owner of the M/V Don Jose for their losses. Is the sinking of MV Mariposa; and (2J that assuming it had
shipowner of M/V Don Jose liable? Explain your answer. not been so extinguished, such liability should be
(There was negligence on the part of the ship captain.) limited to the loss of the cargo Are these contentions
meritorious in the context of applicable provisions of
No. The shipowner of M/V Don Jose is not liable. (This is the Code of Commerce?
based on the Limited Liability Rule.) The civil liability of
the shipowner of a vessel, in maritime collision which is Yes. The contentions of Marina Navigation Company are
caused by the fault of the captain, as in this problem (being meritorious. The captain of MV Mariposa is guilty of
drunk), is merely coexistent with his interest in the vessel negligence in ignoring the typhoon bulletins issued by
(M/V Don Jose), such that the total loss thereof, results in PAGASA and in overloading the vessel. But only the captain
the extinction of such liability. (as long as there is no of the vessel MV Mariposa is guilty of negligence. The
negligence on the part of the shipowner) shipowner is not. Therefore, the shipowner can invoke the
doctrine of limited liability. BAR 2000
123. Captain Hook, the ship captain of M.V. Peter Pan,
overloaded the M.V. Peter Pan, as a consequence of 125. In a collision between M/T Manila, a tanker, and M/
which the vessel sank in the middle of the Sulu Sea, and V Don Claro, an inter-island vessel, M/V Don Claro sank
nothing whatsoever was recovered. The owners of the and many of its passengers drowned and died. All its
cargo and the heirs of the three passengers of the vessel cargoes were lost. The collision occurred at nighttime
]iled an action for damages in the amount of P500,000 but the sea was calm, the weather fair and visibility
against Mr. Wendy, the owner. Will the action prosper? were good. Prior to the collision and while still 4
Reasons. nautical miles apart, M/V Don Claro already sighted M/
T Manila on its radar screen. M/T Manila had no radar
The total loss or the lawful abandonment of the vessel equipment. As for speed. M/V Don Claro was twite as
precludes further liability on the part of the shipowner, fast as M /T Manila.
except to the extent of earned freightage or proceeds of
insurance, if any, for the loss of cargo arising from the At the time of the collision, M/T Manila failed to follow
"conduct of the captain in the care of goods". Under the Rule 19 of the International Rules of the Road which
limited liability rule, the loss of the vessel extinguishes the required 2 vessels meeting head on to change their
liability of the shipowner for loss of the goods on board the course by each vessel steering to starboard (right) so
vessel even if the loss was due to the negligence of the ship that each vessel may pass on the port side (left) of the
captain; provided that there is no negligence on the part of other. M/T Manila signaled that it would turn to port
the shipowner, as in this case. BAR 1988 side and steered accordingly, thus resulting in the
collision. M/T Don Claro’s captain was off-duty and was
Even though there was over-boarding, it was not done by the having a drink at the ship's bar at the time of the
shipowner, it was done by the ship captain. Therefore, the collision. If M/V Don Claro was at fault, may the heirs of
invocation of the Limited Liability Rule is allowed. the passengers who died and the owners of the cargoes
recover damages from the owner of said vessel?
124 MV Mariposa, one of ]ive passenger ships owned by
the Manna Navigation Company, sank off the coast of Yes, but subject to the doctrine of limited liability. The
Mindoro while en route to Iloilo City. More than 200 doctrine is to the effect that the liability of the shipowners is
passengers perished in the disaster. Evidence showed conKined to their interest in the vessel and as such, would be
that the ship captain ignored typhoon bulletins issued to the extent of any remaining value of the vessel, proceeds
by PAGASA during the 24-hour period immediately prior of insurance, if any, and earned freightage. The doctrine
to the vessel's departure from Manila. The bulletins applies given that based on the factual settings, the
warned all types of sea crafts to avoid the typhoon's shipowner himself was not guilty of negligence. BAR 1991
expected path near Mindoro. To make matters worse, he
took more load than was allowed for the ship's rated
150
126. A chartered vessel (bareboat or demise) sank due of the shipowner and the captain; (Any kind of
to improper unloading of the cargo by the charterer. Can negligence on the part of the shipowner
the charterer use the Limited Liability Rule against the precludes the invocation of Limited Liability
shipowner? Rule.)
No, the only person who could avail of this is the shipowner. Thus, the doctrine does not apply in these cases:
He is the very person whom the Limited Liability Rule has
been conceived to protect and the one who is supposed to be a. When the shipowner reconKigured the bulkhead of the
supposed and encouraged to pursue maritime commerce. deck of the ship to load excessive amount of cargo which
Thus, it would be absurd to apply the Limited Liability Rule made the vessel unseaworthy, LOADSTAR was at fault or
against him who, in the Kirst place, should be the one negligent in not maintaining a seaworthy vessel and in
beneKiting from the said rule. having allowed its vessel to sail despite knowledge of an
approaching typhoon. The doctrine of limited liability does
The charterer does not completely and absolutely step into not apply where there was negligence on the part of the
the shoes of the shipowner or even the ship agent because vessel owner or agent. (The deck of the ship is not for
there remain conKlicting rights between them as derived cargo.)
from their charter agreement. The charterer's possession
was therefore, the uncertain title of lease, not possession of b. When the shipowner himself, was guilty of such fault or
the owner. Therefore, even if the contract is for a bareboat or negligence in not making certain that the passenger vessel is
demise charter where possession, free administration and not overloaded, as well as and is having failed to provide
even navigation are temporarily surrendered to the suf]icient life belts on board the vessel. Philippine General
charterer, dominion over the vessel remains with the Insurance Company v. Court of Appeals, G.R. No. 116940,
shipowner. Ergo, the charterer or the sub-charterer, whose June 11, 1997, BAR 201.
rights cannot rise above that of the former, can never set up
the Limited Liability Rule against the very owner of the c. if the injury or damage is caused by the shipowner's fault
vessel. Augustin P. Dela Torre, et al., v. Court of Appeals, et as where he engages the services of an inexperienced and
al., G.R. No. 160565, 2011 unlicensed captain or engineer, he cannot avail of the
provisions of Article 837 of the Code by abandoning the
Can the charterer invoke Limited Liability Rule against vessel. He is personally liable for the damages arising
the passengers or the cargo owners he contracted with? thereby. Luzon Stevedoring Corporation v. Court of
Appeals, G.R. No. L-58897, December 3, 1987
NO. This rule is intended to encourage shipbuilding and to
offset the hazards in going to maritime commerce. So, this d. For a vessel to be seaworthy, it must be adequately
would only pertain to the shipowner. The lessee or the equipped for the voyage and manned with a sufKicient
charterer is not the one that constructs the vessel or the number of competent ofKicers and crew. The failure of a
ship. common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of
c. Exceptions to the Limited Liability Rule its duty prescribed in Article 1755 of the Civil Code.
Loadstar Shipping Co. v Court of Appeals, G.R. No. 131621,
127. In what cases is the Limited Liability Rule September 28, 1999
inapplicable?
c. Claims of the Crew under the Workmen's
The limited liability rule does not apply in any of the Compensation Act; (Employee’s Compensation
following cases: (CRIN-nAMC) Commission)
a. Expenses for Repairs contracted before the Thus, the employees and laborers, or heirs or dependents in
vessel is lost; cases of Injury received by or inKlicted upon them while in
the performance of their work or employment shall be
b. When the injury or death of the passenger is due compensated
to the fault of the shipowner, or the Negligence
151
It was ruled that the limited liability rule found in the Code
of Commerce is inapplicable in a liability created by statute f. In case the voyage is not Maritime but only in
to compensate employees and laborers, or the heirs and river, bay, or gulf; and
dependents, in cases of injury received by or inKlicted upon
them while engaged in the performance of their work or g. In case the vessel is not a Common carrier.
employment.
h. When there is contributory fault on the port of
Akin to the death beneKits under the Labor Code, death
the shipowner such as when the vessel's
beneKits under the POEA-SEC are given when the employee
departure.
dies due to a work-related cause during the term of his
contract. The liability of the shipowner or agent under the
Philippine Overseas Employment Administration Standard In all of these cases, the shipowner and/or ship agent shall
Employment Contract (POEA-SEC) has likewise nothing to be liable in case of loss or damage to goods or death or
do with the provisions of the Code of Commerce regarding injury to passengers.
maritime commerce But while the nature of death beneKits
under the labor Code and the POEA SEC are similar, the 128. Judgement creditors of a vessel that sank wish to
death beneKits under the POEA-SEC are intended to be enforce their claims. The shipowner asserts that the
separate and distinct from, and in addition to, whatever execution must be stayed as not all the cases occasioned
beneKits the seafarer is entitled to under Philippine laws, by the subject sinking have been completed. Is the
including those beneKits which may be claimed from the shipowner's claim tenable?
State Insurance Fund.
Yes. The rights of a vessel owner or agent under the limited
In other words, the limited liability rule found in the liability rule are akin to those of the rights of shareholders to
Code of Commerce is inapplicable in a liability created limited liability under our corporation law. More to the
by statute to compensate employees and laborers, or the point, the rights may be compared to those creditors against
heirs and dependents, in cases of injury received by or an insolvent corporation whose assets are not enough to
inKlicted upon them while engaged in the performance of satisfy the totality of claims as against it. In both insolvency
their work or employment. Phil-Nippon Kyoei, Corp. v. of a corporation and the sinking of a vessel, the claimants or
Gudelosao, G.R. No 181375, July 13, 2016 creditors are limited in their recovery to the remaining value
of accessible assets. In the case of insolvent corporation.
d. When the vessel is Insured, in which case, the these are the residual assets of the corporation left over
liability of the shipowner or ship agent is from its operations. In the case of a lost vessel, these are the
limited to the extent of the insurance proceeds; insurance proceeds and pending freightage for the
particular voyage. There is therefore a need to collate all
claims preparatory to their satisfaction from the insurance
This simply means that in case of a lost vessel, the claimants
proceeds on the vessel and its pending freightage at the time
may go after the proceeds of the insurance covering the
of its loss. No claimant can be given precedence over the
vessel.
others by the simple expedience of having Kiled or
completed its action earlier than the rest. Thus, execution of
The interest of the shipowner pertains to the insurance judgment in earlier completed cases even those already Kinal
proceeds which would then be the source of claims, in so far and executory, must be stayed pending completion of all
maritime claims are concerned. cases occasioned by the subject sinking. Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance
e. When the vessel is not Abandoned. Corporation, 217 SCRA 359, 1993
Abandonment, however, is only necessary in case of In this case, Aboitiz Shipping Corporation procured an
constructive total loss. There is no need to abandon if the insurance from an insurance company. And then the
vessel sunk. cargoes loaded on board the vessel insured by different
insurance companies. So, there are different insurance
You don’t really abandon the vessel, but you abandon your coverages given by different insurance companies to the
interest in the vessel. vessel and the different cargoes.
152
131. What is a General Average? (Opposite of Simple

The vessel sunk. Aboitiz ]iled an insurance claim and got Average)
the insurance proceeds. Some of the cargo owners got
paid by their own respective insurance companies and General or gross averages shall, as a general rule, include all
therefore subrogated to the rights of the cargo owners. damages and expenses which are deliberately caused in
But the other cargo owners have not been paid yet. order to save the vessel, her cargo, or both at the same time,
Their claims are still being processed. from a real known risk. In order to satisfy the amount of the
gross of general average, all the persons having an interest
Can the insurance companies who paid some of the in the vessel and cargo therein at the time of the occurrence
cargo owners can already recover from Aboitiz the of the average shall contribute.
insurance proceeds?
Examples:
NOT YET. Until all the claims have been collated and
ascertained, so the rest would have to wait. The Supreme 1. Effects (refers to properties, cargoes, etc.) jettisoned
Court likened it with an insolvency proceeding. to lighten the vessel, whether they belong to the cargo,
to the vessel, or to the crew and the damage suffered
3. Accidents and Damages in Maritime Commerce through said act by the effects which are kept on board.
(The loss incurred by the owners of the cargoes
129. What are averages? jettisoned would be charged against the shipowner
and the other cargo owners bene]itted from the
Averages are all extraordinary or accidental expenses which jettisoning of the cargoes.)
may be incurred during the voyage for the preservation of
the vessel or cargo, or both, as well as damages or 2. The expenses of removing or transferring a portion of
deterioration which the vessel may suffer from the time she the cargo in order to lighten the vessel and place it in a
puts to the sea at the port of departure until she casts condition to enter a port or roadstead and the damage
anchor at the port of destination and those suffered by the resulting therefrom to the effects removed or
goods from the time they are loaded in the port of shipment transferred.
until they are unloaded in the port of their consignment.
132. What are the requisites of a General Average?
The usual expenses of navigation shall be considered as
ordinary expenses and shall be defrayed by the shipowner
a. There must be a common danger to the ship and
unless there is stipulation to the contrary.
cargo after it has been loaded;
b. A portion of the vessel or some of the cargoes or
130. What is Simple Average? both are sacri]iced deliberately for the common
safety;
Simple or particular averages include all the expenses and c. The vessel or cargo is successfully saved; and
damage caused to the vessel or to her cargo which have not d. The expenses are incurred after taking the
inured to the common bene]it and pro]it of all persons formalities provided for under Articles 813 and
interested in the vessel and her cargo. The owner of the 814 of the Code of Commerce, as follows: (ADR-
things which give rise to expenses or suffered damage shall EDR)
bear the simple or particular averages.
i. Assembly to be called by captain of all the
Example: Damage suffered by the cargo from the time of
cargo owners and other ofKicers of the
embarkation until it is loaded either on account of the
vessel,
inherent defect of the goods or by reason of marine accident
ii. Deliberation with the sailing mate and the
or force majeure and the expenses incurred to avoid and
other ofKicers of the vessel and after
repair the same.
hearing the persons interested in the cargo
who may be present;
a. General and Particular Averages iii. Resolution of the captain to cause damage
which constitutes general average;
153
iv. Entry of resolution in the logbook stating make any contribution in favor of those who did. Is the
the motives and reasons on which it is shippers' contention valid? Explain.
based, the votes against it and the reason
for the dissent, should there be, and the No. The shippers' contention is not valid. The owners of the
irresistible and urgent causes which cargo jettisoned, to save the vessel from sinking and to save
impelled the captain, if he acted on his own the rest of the cargoes, are entitled to contribution. The
accord; jettisoning of said cargoes constitute general average loss
v. Delivery of the minutes of the meeting to which entitles the owners thereof to contribution from the
the maritime judicial authority of the Kirst owner of the vessel and also from the owners of the cargoes
port of arrival within 24 hours from arrival; saved. SF Shipping is not entitled to contribution/
vi. RatiKication by captain under oath. reimbursement for the cost of repairs on the vessel from the
shippers. BAR 2000
133. What are the distinctions between particular and
general average? 135. Global Transport Services. Inc (GTSI) operates a
]leet of cargo vessels plying inter-island routes. One of
a. Particular averages have not inured to the its vessels. MV Donna Juana, left the port of Manila for
common bene]it and proKit of all persons Cebu laden with, among other goods, 10,000 television
interested in the vessel and her cargo, while general sets consigned to Romualdo, a TV retailer in Cebu.
averages are caused for the bene]it of those
interested in the vessel and her cargo. When the vessel was about 10 nautical miles away from
b. General averages are deliberately caused in order Manila, the ship captain heard on the radio that a
to save the vessel and/or her cargo, while particular typhoon which. as announced by PAGASA. was on its way
averages may be due to causes other than a out of the country, had suddenly veered bark into
deliberate act. Philippine territory. The captain readied that MV Dona
c. Particular averages are borne by the owner of the Juana would traverse the storm's path, but decided to
things damaged while general or gross averages proceed with the voyage. True enough, the vessel sailed
shall be shared and contributed by having all into the storm. The captain ordered the jettison of the
persons having an interest in the vessel and 10,000 television sets, along with some other cargo. In
cargo. order to lessen the vessel and make it easier to steer the
vessel out of the path of the typhoon. Eventually, the
vessel, with its crew intact, arrived safely in Cebu.
134 MV SuperFast, a passenger cargo vessel owned by
SF Shipping Company plying the inter-island routes, was
a. Will you characterized the jettison of Romualdo's TV
on its way to Zamboanga City from the Manila port when
sets as an average? If so, what kind of an average, and
it accidentally, and without fault or negligence of anyone
why? If not, why not?
on the ship, hit a huge ]loating object. The accident
caused damage to the vessel and loss of an
b. Against whom does Romualdo have a cause of action
accompanying crated cargo of passenger PR. In order to
for indemnity of his lost TV sets? Explain.
lighten the vessel and save it from sinking and in order
to avoid risk of damage to or loss of the rest of the
a. The jettison of Romualdo's TV sets resulted in a general
shipped items (none of which was located on the deck),
average loss, which entitles him compensation or
some had to be jettisoned. SF Shipping had the vessel
indemniKication from the shipowner and the owners of
repaired at its port of destination. SF Shipping
the cargoes saved by the jettison.
thereafter ]iled a complaint demanding all the other
cargo owners to share in the total repair costs incurred
b. Romualdo has a cause of action for his lost TV sets
by the company and in the value jettisoned cargoes. In
against the shipowner and the owners of the cargoes
answer to the complaint, the shippers' sole contention
saved by the jettison. The jettison of the TV sets resulted
was that, under the Code of Commerce, each damaged
in a general average loss, entitling Romualdo to
party should bear its or his own damage and those that
indemnity for the lost TV sets. BAR 2009
did not suffer any loss or damage were not obligated to
154
136. An importer of Christmas toys loaded 100 boxes of diligence in the selection and supervision of its
Santa Clause talking dolls aboard a ship in Korea bound employees?
for Manila. With the intention of smuggling 1/2 of his
cargo, he took a bill of lading for only 50 boxes to save NO. Both vessels are at fault. Under the Code of Commerce,
the more precious cargo. Is the importer entitled to both vessels are liable solidarily to the cargo owners,
receive any indemnity for average? wherever they may be boarded or loaded.
No. The importer is not entitled to receive any indemnity for What if the ship captains are both drunk and the vessels
average. In order that the goods jettisoned may be included collided resulting to the loss of both of the cargoes, do
in the general average and the owner be entitled to you apply the same rule?
indemnity, it is necessary that their existence on board be
proven by means of the bill of lading. BAR 2010 NO. You apply the Limited Liability Rule.
b. Collisions 138. Is protest necessary in an action for the recovery of

damages arising from collisions?
137. State the Rules on collision of vessels.
The action for the recovery of damages arising from
collisions cannot be admitted if a protest or declaration is
a. Collision refers to the contact of two moving vessels.
not presented within 24 hours before the competent
If one vessel is moving while the other is stationary,
authority of the port where the collision took place, or that
this is known as allision.
of the Kirst port of arrival, if in Philippine territory, and to the
b. But collision is used in a broad sense to include
Filipino consul, if it occurred in a foreign country. However,
allision.
with respect to the damage caused to persons to the
c. The vessel at fault shall indemnify the damages
cargo, the absence of a protest may not prejudice the
sustained or losses incurred.
persons interested who were not on board or were not
d. If both vessels are at fault, each shall suffer its own
in a condition to make known their wishes.
damages, and both shall be solidarity liable for
losses or damages to the cargoes. (This is on the
premise that it is the shipowner is at fault.) 139. What is the liability of the shipowners in case of
collision?
In this situation, the common carrier operating the vessel is
The liability of the shipowners in case of collision is based
precluded from interposing the defense of due diligence in
on the doctrine of limited liability. It is limited to the value of
the selection and supervision of its employees in an action
the vessel with all her appurtenances and freight earned
against it by a shipper of the other colliding vessel.
during the voyage. The loss of the vessel extinguishes the
liability of the shipowner or ship agent of a vessel for the
Let’s focus on letter D. Let’s say you have vessel A and loss and damage to goods or death or injuries to passengers
vessel X. Both of them are at fault. So, each shipowner caused by the collision. However, where such vessel is
would bear the liability or damage for the loss of its own insured and the insurance is collected by the shipowner, the
vessel. insurance substitutes the vessel and the shipowner become
liable to the extent of the insurance collected and if the
Can the owners of the cargoes loaded onboard vessel X vessel is not insured, then the freights earned shall answer
sue vessel A? YES. for the civil liability of the shipowner.
Can the owners of the cargoes loaded onboard vessel A These are all based on the assumption that the there was no
sue vessel X? actual or contributory negligence on the part of the
shipowners.
YES. This is because they are both liable solidarily.
In case the owners of the cargoes loaded onboard vessel 140. Vessel “U” and “V” collided with each other causing
X sue vessel A, can vessel A invoke the defense of due damage to both vessels, vessel “U" had the last clear
chance to avoid the collision but failed to do so.
155
course by each vessel steering to starboard (right) so

a. Is the doctrine of last clear chance in tort applicable that each vessel may pass on the port side (left) of the
to collisions of vessels at sea under the Code of other. M/T Manila signaled that it would turn to port
Commerce? Which vessel should shoulder liability for side and steered accordingly, thus resulting in the
the damage suffered by both vessels and by the cargo? collision. M/T Don Claro's captain was off-duty and was
having a drink at the ship’s bar at the time of the
b. Assume that the negligence of the captain of vessel collision. Who would you hold liable for the collision?
“U” was the proximate cause of collision, while the
negligence of the captain of vessel "V" was merely I could hold the 2 vessels liable. In the problem given,
contributory. To which vessel should the collision be whether on the basis of the factual settings or under the
deemed imputable? Doctrine of Inscrutable Fault, both vessels can be said to
have been guilty of negligence. The liability of the 2
a. The doctrine of last dear chance in tort is not applicable carriers for the death or injury of passengers and for the loss
to collision of vessels at sea under the Code of of or damage to the goods arising from the collision is
Commerce, and the case is deemed as if the collision is solidary. Neither carrier may invoke the doctrine of last dear
imputable to both vessels; thus, each one of the vessels chance which can only be relevant, if at all, between the 2
shall suffer her own damage, and both shall be vessels but not on the claims made by passengers or
solidarity liable for the damages occasioned to their shippers. BAR 1991
cargoes. (wherever they may be boarded or loaded)
C. B. Williams v. Yangco, 27 Phil. 68; Sara sola v. 142. Two vessels coming from opposite directions
Sontua, 47 Phil 365 collided with each other due to fault imputable to both.
What are the liabilities of the two vessels with respect to
b. The collision shall be deemed imputable also to both the damage caused to them and their cargoes? Explain.
vessels, as in the preceding answer to Question No. 1. Which party should bear the damage to the vessels and
Since the "doctrine of contributory negligence” in tort is the cargoes if the cause of the collision was a fortuitous
not also applicable to collisions of vessel at sea under event? Explain.
the Code of Commerce, the case is deemed as if the
collision is imputable to both vessels. Gov't of the P.I. v. Each vessel must bear its own damage. Both of them are at
Phil. Steamship Co. Inc., 44 Phil. 359; BAR 1980 fault. No party shall be held liable since the cause of the
collision is fortuitous event. The carrier is not an insurer.
What if you are not sure which vessel is at fault? BAR 1995
Under the Doctrine of Inscrutable Fault, it is as if both 143. TRUE or FALSE: There is a presumption of
vessels are at fault. Both of them liable solidarily to the cargo negligence against a moving vehicle that strikes a
owners. stationary object.
141, In a collision between M/T Manila, a tanker, and M/ TRUE. In American jurisprudence, there is a presumption of
V Don Claro, an inter-island vessel, M/V Don Claro sank fault against a moving vessel that strikes a stationary object
and many of its passengers drowned and died. All its such as a dock or navigational aid. In admiralty, this
cargoes were lost. The collision occurred at nighttime, presumption does more than merely require the ship to go
but the sea was calm, the weather fair and visibility forward and produce some evidence on the presumptive
were good. Prior to the collision and while still 4 matter. The moving vessel must show that it was without
nautical miles apart, M/V Don Claro already sighted M/ fault or that the collision was occasioned by the fault of the
T Manila on its radar screen. M/T Manila had no radar stationary object or was the result of inevitable accident. It
equipment. As for speed. M/V Don Claro was twice as has been held that such vessel must exhaust every
fast as M /T Manila. reasonable possibility which the circumstances admit and
show that in each, they did all that reasonable care required
At the time of the collision. M/T Manila failed to follow in the absence of sufKicient proof in rebuttal, the
Rule 19 of the International Rules of the Road which presumption of fault attaches to a moving vessel which
required 2 vessels meeting head on to change their collides with a Kixed object and makes a prima facie case of
156
fault against the vessel. Far Eastern Shipping Company v.

Court of Appeals, G.R. No. 130068, October 1, 1998 a. What is a maritime protest?
144. A severe typhoon was raging when the vessel SS b. Can A and B successfully maintain an action to recover
Masdaam collided with the M/V Princess. It is conceded losses and damages arising from the collision? Reason
that the typhoon was the major cause of collision, brie]ly.
although there was a very strong possibility that it could
have been avoided if the captain of the SS Masdaam was a. A maritime protest is a sworn statement made within
not drunk and the captain of the M/V Princess was not 24 hours after a collision in which the circumstances
asleep at the time of the collisions. Who should bear the thereof are declared or made known before a competent
damages to the vessels and their cargoes? authority at the point of accident or the Kirst port of
arrival, if in the Philippines or the Philippine consul in a
The shipowners of the SS Masdaam and M/V Princess shall foreign country.
each bear their respective loss of vessels. For the losses and
damages suffered by their cargoes, both shipowners are b. B, the shipper, can successfully maintain an action to
solidarily liable. BAR 1998, 1987 recover losses and damages arising from the collision
notwithstanding his failure to Kile a maritime protest
since the Kiling thereof is required only on the part of A,
145. In case of collision, is abandonment necessary to
who, being a passenger of the vessel at the time of the
claim the limited liability rule?
collision, was expected to know the circumstances of the
collision. A's failure to Kile a maritime protest will
Yes. abandonment is necessary to claim the limited liability
therefore prevent him from successfully maintaining an
wherein it shall be limited to the value of the vessel with all
action to recover his losses and damages. BAR 2007;
the appurtenances and freightage earned in the voyage.
1988; 1977
However, if the injury was due to the ship owner's fault the
ship owner may not avail of his right to avail of limited
liability by abandoning the vessel. RECITATION
The real nature of the liability of the ship owner or agent is Q. Let’s say the vessel arrived in the Philippines from
embodied in the Code of Commerce. Articles 587, 590, and New York on March 17, 2021. So, the goods that the
837 are intended to limit the liability of the ship owner, consignee was expecting were not released or delivered
provided that the owner or agent abandons the vessel. to such consignee. The vessel returned to its port of
Although Article 837 does not speciKically provide that in origin in New York on March 19, 2021. Is it governed by
case of collision there should be abandonment, to enjoy such COGSA?
limited liability, said article is a mere ampliKication of the
provisions of Articles 587 and 590 which makes it a mere A. YES. It involved carriage of goods by sea from foreign port
superKluity. to Philippine port. (refer to Number 147)
The exception to this rule in Article 837 is when the Q. So, within what period may the consignee sue the
vessel is totally lost in which case there is no vessel to shipowner and the ship agent? No delivery, right? So, it
abandon, thus abandonment is not required. Because of is presumed to be loss.
such loss, the liability of the owner or agent is
extinguished. Luzon Stevedoring Corporation v. Court of A. On or before March 17, 2022. The one-year period within
Appeals, G.R. No. L-58897. December 3, 1987 which the consignee should sue the carrier is computed
from the delivery of the goods or the date when the goods
should have been delivered. The latter is applicable in this
146. Two vessels ]igured in a collision along the Straits case. [refer to Number 148(a)]
of Guimaras resulting in considerable loss of cargo. The
damaged vessels were safely conducted to the Port of Q. Let’s say a suit was ]iled within 6 months from the
Iloilo. Passenger A failed to ]ile a maritime protest. B, a date the goods were delivered. Unfortunately, the case
non-passenger but a shipper who suffered damage to was dismissed on account of technicality. Can it be
his cargo, likewise did not ]ile a maritime protest at all. re]iled by the consignee if it took the court more than 6
157
months from the time the action was ]iled to rule on the likewise applicable up to the Kinal port of destination and
case. Would the ]iling of the suit toll the running of the the fact that transshipment was made on an inter-island
one-year prescriptive period? vessel did not remove the contract of carriage of goods from
the operation of the said Act. Sea-Land Service, Inc. v.
A. YES. The case can be reKiled. The one-year period is Intermediate Appellate Court, G.R. No. 75118, August 31,
interrupted in case an action has been Kiled in court. The 1987
Supreme Court said that if the case was dismissed not on the
merits, the consignee has a fresh period of one year to Kile COGSA covers loss or damage to goods arising from
again. [refer to Number 156(a)] contracts of carriage by sea from foreign port to Philippine
port. It does not cover carriage of goods from Philippine
Q. If the insured ]iles a claim with the insurance port to foreign port as such provision of COGSA has been
company and the insurance company paid the insured, superseded by the Civil Code of the Philippines.
within what period may the insurance company ]ile a
case against the shipowner and the ship agent? 1 year So, if the goods originated from New York, supposedly
from payment? The balance of the 1 year? Or 10 years? heading to Manila. But before heading to Manila, there
was transshipment in Cebu, then to Manila. Is that still
A. Only the balance of the 1-year period. The insurance covered by COGSA?
company merely steps into the shoes of the insured,
therefore, the insurance company only has the remaining YES. As long as it originated from a foreign port and the Kinal
period to Kile a suit against the shipowner and the ship destination is a Philippine Port. The transshipment did not
agent. (refer to Number 160) remove it from the coverage of COGSA, even though the
transshipped vessel may not be owned by the same common
Q. Is the one-year period applicable to the arrastre carrier.
operator?
148. What are the legal consequences of the application
A. NO. It is 4 years based on the contract with the Philippine of COGSA in case of loss or damage to goods?
Ports Authority. (refer to Number 159)
Q. Within what period can the insured ]ile a case against a. If the contract of carriage is governed by COGSA, the
the insurance company? prescriptive period to Kile an action against the ship
owner or ship agent in case of loss or damage to
A. 10 years. (also refer to Number 160) goods is not ten years even though the contract of
carriage may be in writing. The prescriptive
Q. Can it be reduced? period is one year from delivery of the goods or
the date the goods should have been delivered.
A. YES. Provided, that it would be not less than 1 year from
the accrual of the cause of action – namely, the rejection of The one-year period of limitation is designed to meet the
the claim at the Kirst opportunity. (also refer to Number exigencies of maritime hazards. Mitsui O.S.K. lines Ltd.,
160) represented by Magsaysay Agencies, Inc. v. Court of
Appeals, G.R. No. 119571, March 11, 1998
LECTURE
b. COGSA also provides under Section 4, Subsection 5
4. Carriage of Goods by Sea Act (COGSA) that an amount recoverable in case of loss or
damage shall not exceed US$500.00 per package
a. Application or per customary freight unless the nature and
value of such goods have been declared by the
147. To what kinds of contracts of carriage does COGSA shipper before shipment and inserted in the bill of
apply? lading. (There is no statutory amount of liability
under the Civil Code.)
COGSA is applicable to all contracts of carriage of goods by
sea to and from Philippine ports in foreign trade. COGSA is
158
149. What law will apply in case of loss of goods shipped situation is different, and the special need for the short
from foreign country to the Philippines? period of limitation in cases of loss or damage caused by
maritime perils does not obtain.
The law of the country to which the goods are to be
transported governs the liability of the common carrier in An example here would be Christmas decors delivered
case of their loss, destruction or deterioration. Thus, the rule not in time for Christmas. Because of that, the consignee
was speciKically laid down that for cargoes transported from paid only one-half to the seller/shipper. The delay
Japan to the Philippines, the liability of the carrier is prevented the consignee from maximizing the bene]it,
governed primarily by the Civil Code and in all matters not as a consequence of the inordinate delay of the delivery
regulated by said Code, the rights and obligations of of the Christmas décor. But he paid one-half. So, within
common carrier shall be governed by the Code of Commerce what period can he ]ile the case against the shipowner
and by laws. Hence, the Carriage of Goods by Sea Act, a and ship agent?
special law, is merely suppletory to the provision of the Civil
Code. National Development Company v. Court of Appeals, The 10-year period would apply. The loss in value is not the
G.R. No. L- 49469, August 19, 1988. BAR 2013 kind of loss referred to under COGSA.
150. What is the meaning of loss under COGSA? 151. AA entered into a contract with BB thru CC to
transport ladies’ wear from Manila to France with
The term “loss” under COGSA contemplates merely a transshipment at Taiwan. Somehow, the goods were not
situation where no delivery at all was made by the shipper loaded at Taiwan on time. Hence, when the Roods
of the goods because the same had perished, gone out of arrived in France, they arrived ‘'off-season’’ and AA was
commerce, or disappeared in such a way that their existence paid only 1/2 for value by the buyer. AA claimed
is unknown or they cannot be recovered. damages from the shipping company and its agent. The
defense of the respondents was prescription.
It was ruled that when the goods are not transshipped
immediately with the result that the shipment arrived Considering that the ladies’ wear suffered "loss value"
beyond the delivery date and the consignee paid only one- as claimed by AA, should the prescriptive period be one
half the value of the goods on the ground that they did not year under the COGSA, or 10 years under the Civil Code?
arrive until the offseason in the country, the loss incurred by Explain brie]ly.
the shipper is not the loss contemplated by COGSA. Thus, the
one-year prescriptive period for bringing the suit will not The applicable prescriptive period is 10 years under the
apply. (The ten-year period would then apply.) Mitsui Civil Code. The 1-year prescriptive period under the COGSA
OSK Lines Ltd v. Court of Appeals, GR No 119571, March applies in cases of loss or damage to the cargo. The term
11, 1998 "loss” contemplates a situation where no delivery at all was
made by the carrier of the goods because the same had
However, where the suit is predicated not upon loss or perished or gone out of commerce deteriorated or decayed
damage but on alleged misdelivery (or conversion) of the while in transit. In the present case, the shipment of ladies’
goods, the applicable rule on prescription is not the one- wear was actually delivered. The "loss of value" is not the
year period provided for in Section 3(6), paragraph 4 of the total loss contemplated by the COGSA. BAR 2004
Carriage of Goods by Sea Act, which short period is designed
merely to meet the exigencies of maritime hazards but that 152. M/V Meryern Ana received a shipment of Prilled
found in the Civil Code, namely, either ten years for breach of Urea Fertilizer from Ukraine. The ship sailed on to
a written contract or four years for quasi-delict. Arts. Tabaco, Albay, to unload the cargo. The fertilizer
1144[1] & 1146, Civil Code; Ang v. Compania Marttima, unloaded at Albay appeared to have a gross weight of
133 SCRA 600 (1984); BAR 1975; Ang v. American 7,700 metric tons. When the cargo was subsequently
Steamship, G.R. No. L-22491, January 27, 1967 weighed, it was discovered that only 7,350.35 metric
tons of fertilizer had been delivered. Because of the
In a case where the goods shipped were neither lost nor alleged shortage of 349.65 metric tons, Fertiphil ]iled a
damaged in transit but were, on the contrary, delivered in claim with Mafre Asian Insurance Corporation for
port to someone who claimed to be entitled thereto, the P1,617,527.37, which was found compensable. After
159
paying the claim of Fertiphil, Mafre Asian insurance

Corporation demanded reimbursement from Transimex Even assuming that the inclement weather encountered by
Co., the ship agent of the common carrier, on the basis of the vessel amounted to a "storm" under Article 1734(1) of
the right of subrogation. In support of its claim, Mafre the Civil Code, Transimex Co cannot be absolved from
Asian Insurance Corporation presented a Report of liability for loss or damage to the cargo because there is no
Survey and a Certi]ication from David Cargo Survey proof that the bad weather encountered by M/V Meryem
Services to prove the shortage in the report, the adjuster Ana was the proximate and only cause of damage to the
also stated that the shortage was attributable to the shipment and that Transimex Co. failed to establish that it
melting of the fertilizer while inside the hatches, when had exercised the diligence required from common carriers
the vessel took on water because of the bad weather to prevent loss or damage to the cargo. Transimex Co. v.
experienced at sea. Mafre Asian Insurance Corp., G.R. No. 190271, September
14, 2016
a. Is the transaction governed by the provisions of the
Civil Code on common carriers or by the provisions of b. Notice of Loss or Damage
COGSA?
153. Under the provisions of Section 3 of the Carriage of
b. Is Transimex Co. liable for the loss or damage Goods by Sea Act, notice must be given of loss or damage
sustained by the cargo because of bad weather? to the goods. Within what period must notice be given, if
the loss or damage is not apparent?
a. The provisions of the Civil Code on common carriers are
applicable. Notice of damage must be given within three days from the
delivery of the goods, if the damage is not apparent. BAR
As expressly provided in Article 1753 of the Civil Code, "the 1975
law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their 154. Is Notice necessary to enable the consignee to be
loss, destruction, or deterioration." Since the cargo in this able to recover from the carrier in case of loss or
case was transported from Odessa, Ukraine, to Tabaco, damage to the goods?
Albay, the liability of Transimex Co. for the alleged shortage
must be determined in accordance with the provisions of the COGSA provides for the procedure in case of loss or damage
Civil Code on common carriers. In Eastern Shipping Lines, of the cargo. To be able to recover from the carrier, a notice
Inc. v. BPI/M5 Insurance Corp., the Court declared: of loss or damage should be given in writing to the carrier or
his agent at the port of discharge or at the time of the
b. Transimex Co. is liable for the shortage incurred by the removal of the goods into the custody of the person entitled
shipment. It must be emphasized that not all instances to delivery thereof under the contract of carriage. If the loss
of bad weather may be categorized as "storms” or or damage is not apparent, the notice must be given within
"perils of the sea" within the meaning of the provisions three days of delivery.
of the Civil Code and COGSA on common carriers.
The notice in writing need not be given if the state of the
With respect to storms, this Court has explained the goods has at the time of their receipt been the subject of
difference between a storm and ordinary weather joint survey inspection.
conditions in Central Shipping Co. Inc. v. Insurance Company
of North America: The action for loss or damage under COGSA should be
brought within one year after delivery of the goods or the
According to PAGASA, a storm has a wind force of 48 to 55 date when the goods should have been delivered, otherwise,
knots, equivalent to 55 to 63 miles per hour or 10 to 11 in the carrier and ship shall be discharged from all liability for
the Beaufort Scale. The second mete of the vessel stated that such loss or damage. If the notice of loss is not given as
the wind was blowing around force 7 to 8 on the Beaufort provided for by law, the fact shall not affect or prejudice
Scale. Consequently, the strong winds accompanying the the right of the shipper to bring suit within one year
southwestern monsoon could not be classiKied as a "storm." after delivery of the goods or the date when the goods
Such winds are the ordinary vicissitudes of a sea voyage. should have been delivered.
160
commenced to run on November 2, 1962 and expired on

A request for, and the result of a bad order examination, November 4, 1963. Rizal Surety & Insurance Co. v.
done within the reglementary period for furnishing notice of Macondray & Co, 22 SCRA 902, cited in Perez, p. 257
loss or damage to the carrier or its agent serves the purpose
of a claim. Moreover, failure to comply with the notice The one-year period should be reckoned not from the time
requirement shall not affect or prejudice the right of the they were received by the consignee but from the receipt of
shipper to bring suit within one year after delivery of the arrastre operator, if one is engaged to get the goods
the goods. Asian Terminals vs. Philam Insurance Co, G.R. for the consignee. So, this is on the premise that there is
No. 181262, July 24, 2013; Section 3 (6) COGSA an arrastre operator furnished or engaged by the
consignee.
In other words, under COGSA, while notice to the carrier
should be given in case of loss or damage to goods, the What if there is no arrastre operator?
lack of notice does not affect the cause of action of the
shipper as long as the suit is ]iled within one year from You would count the one year from the receipt of the
delivery of the goods or the goods should have been consignee.
delivered. (It is not fatal.)
Remember that in inter-island shipping, when the damage is
c. Period of Prescription apparent, the claim should be Kiled immediately. If the
damage is not apparent, within 24 hours from delivery. Most
155. When should the one-year prescriptive period for of the time there is no arrastre operator in inter-island
bringing an action for loss or damage of goods delivered shipping.
commence?
156. In what circumstances can the one-year
The one-year period within which the consignee should prescriptive period to bring an action under COGSA be
sue the carrier is computed from the delivery of the interrupted?
goods or the date when the goods should have been
delivered. The sensible and practical interpretation is that The one-year period is interrupted in the following
delivery within the meaning of Section 3(6) of the Carriage cases:
of Goods by Sea Law means delivery to the arrastre operator.
That delivery is evidenced by tally sheets which show
a. One-year period is interrupted in case an action has
whether the goods were landed in good order or in bad
already been Kiled in court. F.H. Stevens & Co v.
order, a fact which the consigner or shipper can easily
Nordeutscher Llloyd, 6 SCRA 180, cited in Perez, p.
ascertain through the customs broker.
256.
To use as basis for computing the one-year period the
delivery to the consignee would be unrealistic and might It was held that upon dismissal of the suit, not on the
generate confusion between the loss or damage sustained merits, the consignee may commence a new action
by the goods while in the carrier's custody and the loss or within one year from dismissal.
damage caused to the goods while in the arrastre operator's
possession. Union Carbide Philippines, Inc. v. Manila b. When there is an express agreement by the parties that
Railroad Co., G.R. No. L-27798, June 15, 1977. BAR 2000 an extrajudicial claim for damages will suspend the
and 1975 running of the prescriptive period for in such case, their
agreement becomes the law for them. Tan Liao v.
On the other hand, if no delivery is made, then the period American President Lines. Ltd. L-7280. January 20,
should be computed from the date the goods should 1956, cited in Perez, ibid.
have been delivered. Thus, if the carrier arrived on
November 2, 1962 and left on November 4, 1962 without The period could be extended or suspended, but not
delivering the cargo, it was on the latter date that the carrier shortened, because it beneKits the consignee.
had the last opportunity to deliver the goods. Hence, the
one-year period within which the carrier could be sued
161
Mere negotiations for settlement or extrajudicial

demand, however, do not interrupt or toll the one-year 158. A local consignee sought to enforce judicially a
period to Kile action under COGSA. Dole Philippines v. claim against the carrier for loss of a shipment of drums
Maritime Company of the Philippines, G.R. No. of lubricating oil from Japan under the COGSA after the
L-61352, February 27, 1987 carrier had rejected its demand. The carrier pleaded in
its Answer the af]irmative defense of prescription under
157. Does the ]iling of insurance claim by the consignee the provisions of the same Act in as much as the suit was
for loss or damage to cargo interrupt the running of the brought by the consignee after 1 year from delivery of
one-year prescriptive period under COGSA? the goods. In turn, the consignee contended that the
period of prescription was suspended by the written
No. In fact, if the insurer Kinds the documents in support of extrajudicial demand it had made against the carrier
the insurance claim for loss or damage to cargo as within the 1-year period, pursuant to Article 1155 of the
unsubstantiated, it should formally reject the claim so that Civil Code providing that the prescription of actions is
the consignee can Kile a suit against the carrier within the interrupted when there is a written extrajudicial
one-year prescriptive period under COGSA. The delay in the demand by the creditors. Has the action, in fact,
rejection of the claim and the consequent expiration of the prescribed? Why?
one-year prescriptive period makes the insurer liable to pay
the value stated in the policy. Had the insurer processed and The action taken by the local consignee has, in fact,
examined the claim promptly, the claimant or the insurer prescribed. The period of 1 year under the COGSA is not
itself, as subrogee, could have taken the judicial action on interrupted by a written extrajudicial demand. The
time. By making an unreasonable demand for an itemized provision of Article 1155 of the Civil Code merely applies to
list of damages which caused delay, the insurer should bear the prescriptive periods provided for in said Code and not
the loss with interest. New World International the special laws except when otherwise provided. BAR
Development Corporation v. NYK-FilJapan Shipping 1992; Dole Philippines v. Maritime Company of the
Corporation, G.R. No. 171468, August 24, 2011 Philippines, G.R. No. L-61352, February 27, 1987
If you are the consignee, you have two options. 159. On December 1, 2010, Kore A Corporation shipped
from South Korea to IT Corporation in Manila some
1. You can Kile a suit right away against the ship owner 300,000 sheets of high-grade special steel. The
and the ship agent, but you only have one year to do shipment was insured against all risk by NA Insurance
so. (NA). The carrying vessel arrived at the Port of Manila
2. You can Kile a claim with the insurance company. on January 10, 2011. When the shipment was
discharged, it was noted that 25,000 sheets were
Ordinarily, the insurance company, upon the receipt of the damaged and in bad order. The entire shipment was
notice of loss and upon proof to substantiate the loss, would turned over to the custody of ATI, the arrastre operator,
pay the insured consignee and would be subrogated to the on January 21, 2011, for storage and safekeeping,
rights of the consignee and would Kile a suit against the ship pending its withdrawal by the consignee's authorized
owner and the ship agent within the balance of the one-year customs broker, RVM. On January 26 and 29, 2011, the
period. subject shipment was withdrawn by RVM from the
custody of ATI.
So, what happened in the case of New World
International? The insurance company delayed the On January 29, 2011, prior to the withdrawal of the last
processing of the claim. As a consequence, the one-year batch of the shipment, a joint inspection of the cargo
period lapsed. Can the common carrier still be sued? was conducted per the Request for Bad Order Survey
(RBO) dated January 28, 2011. The examination report
NO. The processing of the insurance claim does not toll the showed that 30,000 sheets of steel were damaged and in
running of the one-year period. So, the ship owner and the bad order.
ship agent are relieved from liability. However, the insurance
company must pay or bear the loss due to the inordinate NA Insurance paid LT Corporation the amount of P30M
delay in the processing of the insurance claim. for the 30,000 sheets that were damaged, as shown in
162
the Subrogation Receipt dated January 13, 2013. Under Section 3(6) of COOSA, only the carrier's liability is
Thereafter, NA Insurance demanded reparation against extinguished if no suit is brought within one year. The ruling
ATI for the goods damaged in its custody, in the amount in Filipino Merchants Insurance Co., Inc. v. Alejandro should
of P5M. ATI alleged that the COGSA applies in this case apply only to suits against the carrier Kiled by the shipper,
since the goods were shipped from a foreign port to the the consignee or the insurer, not to suits by insured against
Philippines. NA Insurance claims that the COGSA does the insurer. When the Court said in Filipino Merchants that
not apply, since ATI is not a shipper or carrier. Who is Section 3(6) of the COGSA applies to the insurer, it meant
correct? that the insurer, like the shipper, may no longer Kile a claim
against the carrier beyond the one-year period provided in
NA Insurance is correct. The term "carriage of goods” covers the law. But it does not mean that the shipper may no longer
the period from the time when the goods are loaded to the Kile claims against the insurer because the basis of the
time when they are discharged from the ship; thus, it can be insurer's liability is the insurance contract. Such claim
inferred that the period of time when the goods have been prescribes in 10 years, in accordance with Article 114 of
discharged from the ship and given to the custody of the the Civil Code. (Unless the policy reduces the period to
arrastre operator is not covered by the COGSA. Under ]ile the case, but not less than one year from the accrual
COGSA. the carrier and the ship may put up the defense of of the cause of action.)
prescription if the action for damages is not brought within
one year after the delivery of the goods or the date when the Otherwise. what the Act intends to prohibit after the lapse of
goods should have been delivered. However, the COGSA does the one-year prescriptive period can be done indirectly by
not mention that an arrastre operator may invoke the the shipper or owner of the goods by simply Kiling a claim
prescriptive period of one year; hence, it does not cover the against the insurer even after the lapse of one year. This
arrastre operator. Insurance Company of North America v. could not have been the intention of the law which has also
Asian Terminals, Inc., G.R. No. 180784, February 15, 2012 for its purpose the protection of the carrier and the ship
from fraudulent claims by having “matters affecting
The arrastre operator's responsibility and liability for transportation of goods by sea be decided in as short a time
losses and damages and the periods to ]ile a claim and as possible" and by avoiding incidents which would
enforce liability are set forth in the Contract for Cargo “unnecessarily extend the period and permit delays in the
Handling Services executed between the Philippine settlement of question” affecting the transportation. Filipino
Ports Authority and the arrastre operator. (Not a Merchants Insurance Company, Inc. v. Hon. Jose
contract of carriage) Alejandro, G.R. No. L-54140, October 14, 1986
The suit may be ]iled against the arrastre operator However, as previously stated, where there is inordinate
within four years from receipt of the goods by the delay in the processing of the insurance claim, as when the
arrastre operator. (This is found in the Contract for insurer made an unreasonable demand for an itemized list
Cargo Handling Services.) Insurance Company of North of the damaged units, parts and accessories with
America v. Phil. Ports Terminal, Inc., L-6420, July 18, corresponding values when it appeared settled that the loss
1955, cited in Perez, p. 258 was total and the insurance policy did not require the
production of such list in the event of a claim, and as a
160. Is the one-year period to ]ile a suit against the consequence, the insured failed to Kile a suit against the
carrier and ship agent applicable also to the insurer of carrier within the one year period, the ship owner is
the goods? relieved from liability, but the insurer must make good the
loss incurred by the insured. New World International
No. The one-year prescriptive period only applies in a suit Development v. NYK-FilJapan Shipping Corp., G.R. Nos.
against the common carrier, shipowner, or charterer (and 171468 and 174241, August 24, 2011
even the ship agent). It applies to a suit by the insurer
against the ship owner or ship agent but not to a suit 161. A cargo shipment for ABC Inc., the consignee, was
against the insurer. Mayer Steel Pipe Corporation v. Court discharged at the port of Manila on April 15, 1992 on
of Appeals, G.R. No. 124050, June 19, 1997 board a vessel owned and operated by XYZ Ltd. Because
of a cargo shortage, a suit for damages was ]iled by ABC
Inc. against XYZ Ltd. on March 11, 1993. An amended
163
pleading was ]iled by ABC Inc. on June 7, 1993 to APL. APL invoked a clause in the Bill of Lading which
implead Wallem Philippines Shipping Inc. (“Wallem”), absolves the carrier from any liability unless a case is
the ship agent of XYZ Inc. Can the action against Wallem ]iled within nine months after delivery of the goods. Is
prosper considering the one-year prescriptive period the clause valid?
under COGSA?
No. The present case involves lost or damaged cargo. It has
No, the action against Wallem cannot prosper. The Kiling of long been settled that in case of loss or damage of cargoes,
an amended pleading does not retroact to the date of the the one-year prescriptive period under the Carriage of
Kiling of the original; hence, the statute of limitation runs Goods by Seas (COGSA) applies. It is at this juncture where
until the submission of the amendment. It is true that, as an the parties are at odds. With Pioneer Insurance claiming
exception, this Court has held that an amendment which that the one-year prescriptive period under the COGSA
merely supplements and ampliKies facts originally alleged in governs, whereas APL insists that the nine-month
the complaint relates back to the date of the commencement prescriptive period under the Bill of Lading applies.
of the action and is not barred by the statute of limitations
which expired after the service of the original complaint. A reading of the Bill of Lading between the parties reveals
The exception, however, would not apply to the party that the nine-month prescriptive period is not applicable in
impleaded for the ]irst time in the amended complaint. all actions or claims. As an exception, the nine-month period
The claim against Wallem, was therefore ]iled out of is inapplicable when there is a different period provided by
time under the COGSA. Wallem Philippines Shipping, Inc., a law for a particular claim or action — unlike in Philippine
v. S.R. Farms, Inc., (2009) American General Insurance Co., Inc. v Sweet Lines, Inc where
the Bill of Lading stipulated a prescriptive period for actions
The one-year period applies to both the shipowner and the without exceptions. Thus, it is readily apparent that the
ship agent. exception under the Bill of Lading became operative because
there was a compulsory law applicable which provides for a
So, if the suit is Kiled against the shipowner only and it was different prescriptive period. Hence, strictly applying the
later amended to implead for the Kirst time the ship agent, if terms of the Bill of Lading, the one-year prescriptive period
the amendment was done beyond 1 year, the case would be under the COGSA should govern because the present case
dismissed. If it is done within the one-year period, then that involves loss of goods or cargo. Pioneer Insurance and
is allowed. Surety Corp. v. APL Co. Pte. Ltd., G.R. No. 226345, August 2,
2017
162. On Jan. 13, 2012, Chillies Export House Ltd., turned
over to APL Co. Pte. Ltd. (APL) 250 bags of chili pepper The law prevails over the provisions of the bill of lading.
for transport from the port of India to Manila. The
shipment, with a total declared value of $12,272.50, was 163. The liability of the common carrier under COGSA is
loaded on board M/V Wan Hai 262. In turn, BSFIL US$500 per package unless the shipper declares higher
Technologies/ Inc. (BSFIL), as consignee. insured the valuation. Does the term "package” mean container or
cargo with petitioner Pioneer Insurance and Surety number of units?
Corporation (Pioneer Insurance). On Feb. 2, 2012, the
shipment arrived at the port of Manda and was The term “package” means container unless the bill of lading
temporarily stored at North Harbor, Manila. On Feb. 6, disclosed the contents of the containers, the number of
2012, the bags of chili were withdrawn and delivered to cartons or units, as well as the nature of the goods, in which
BSFIL. Upon receipt thereof, it discovered that 76 bags case, each of those units and not the container constitutes
were wet and heavily infested with molds. The shipment the "package" referred to in the liability limitation provision
was declared un]it for human consumption and was of the COGSA. Eastern Shipping Lines v. Intermediate
eventually declared as a total loss. As a result, BSFIL Appellate Court, G.R. No. L-69044, May 29, 1987
made a formal claim against API and Pioneer Insurance.
Having been subrogated to all the rights and cause of 1 container consisting of 14 motorcycles = $500 in total.
action of BSFIL. Pioneer Insurance sought payment from Unless the shipper declared each unit in the container and
APL, but the latter refused. This prompted Pioneer pays for the corresponding freightage.
Insurance to ]ile a complaint for sum of money against
164
164. Is the liability limitation binding on the parties to If the bill of lading made reference to an LC NUMBER, it is
the contract of carriage even though it is not NOT TANTAMOUNT to higher declaration of value.
incorporated in the bill of lading?
If the bill of lading made reference to an INVOICE VALUE
Yes. The Civil Code does not limit the liability of the BUT WITH ITEMIZATION OF THE GOODS WITH THEIR
common carrier to a ]ixed amount per package. In all CORRESPONDING VALUE AND PAYMENT OF EXTRA
matters not regulated by the Civil Code, the right and the FREIGHTAGE, it is TANTAMOUNT to higher declaration of
obligations of common carriers shall be governed by the value.
Code of Commerce and special laws. Thus, the COGSA,
which is suppletory to the provisions of the Civil Code,
supplements the latter by establishing a statutory
MARCH 22, 2021
provision limiting the carrier's liability in the absence of
a shipper's declaration of a higher value in the bill of
lading. The provisions on limited liability are as much a
part of the bill of lading as though physically in it and as AIR TRANSPORTATION
though placed there by agreement of the parties. RECITATION
Belgian Overseas Chartering and Shipping v. Philippine Q: What laws govern air transportation?
First Insurance Company, G.R. No. 143133, June 5, 2002 A: Civil Code – if place of departure and place of destination
is Philippines.
In the same case, there was no stipulation in the Bill of Warsaw Convention was supplanted by Montreal
Lading limiting the carrier’s liability. Neither did the shipper Convention (Warsaw is now defunct) - if Philippines is only
declare a higher valuation of the goods to be shipped. It was one of the itineraries.
held that this fact notwithstanding, the insertion of the If there is another stop over that agreed to the Warsaw
words “L/C No. 90/02447”, cannot be the basis for the convention – Warsaw Convention will apply.
carriers' liability. First, a notation in the Bill of Lading Q: Period to ]ile suit against air carrier under the
which indicated the amount of the Letter of Credit obtained Warsaw Convention?
by the shipper for the importation of steel sheets did not A: Suit must be Kiled within 2 years from the arrival of the
effect a declaration of the value of the goods as required by aircraft.
the bill. That notation was made only for the convenience of Q: Is there a change as to the amount?
the shipper and the bank processing the Letter of Credit. A: Now it is 113,100 SDR (Special Drawing Right) – for death
Second, a Bill of Lading is separate from the other Letter of or injury and 1,113 SDR for damage of baggage.
Credit arrangements. The carriers’ liability was thus Q: In case of Embarking, On-board and Disembarking
computed based on US$500 per package and not on the per A: in both Conventions, common carrier is liable.
metric ton price declared in the Letter of Credit. Q: What if passenger is waiting for the ]light, he was
attacked by an airport employee – which will apply?
The value of the goods which the carrier must pay in cases Civil Code or Montreal Convention?
of loss or misplacement shall be determined in accordance A: Civil Code. There is no embarking or disembarking here.
with that declared in the bill of lading, the shipper not being The passenger is also not on-board when he was attacked.
allowed to present proof that among the goods declared Hence, the Civil Code, not the Convention will apply.
therein there were articles of greater value and money. In Q: 21 days of delay is equivalent to loss?
case, however, of the shipper’s failure to declare the value of A: Yes. You can recover 1,113 SDR per passenger.
the goods in the bill of lading, the carrier nor the ship shall Q: What is the Two-tier liability under the Warsaw
in any event be or become liable for any loss or damage to or Convention?
in connection with the transportation of goods in an amount A: 1) Death or injury to passengers while on board,
exceeding $500 per package. Philam Insurance Company v. embarking or disembarking - 113,100 SDR, with or without
Heung-A Shipping Corporation, G.R. No. 187701, July 23, negligence. But in case there is negligence, it can be more
2014
than that amount.
If the bill of lading made reference to an INVOICE NUMBER,
it is NOT TANTAMOUNT to higher declaration of value.
2) Loss, damage, or destruction of goods during the carriage.
165
A: NO. The passenger should have been allowed to Kile the

case in the Philippines consistent to the Montreal
Q: Can plaintiff (passenger) forego the Convention even Convention. Moreover, it was a tort case. The SC has held in
though applicable and pursue his cause of action on the so many cases (until the Lhuillier case) that if there is any
local laws? misconduct or tortious act on the part of the air carrier, its
employer, or agent, the case could be Kiled in local courts.
Hence, the court should have allowed the Kiling here in
A: NO. If covered by the Convention, local laws cease to Philippines.
apply.
Q: Are jurisdictional rules maintained by the Montreal

Convention?
LECTURE
A: On a supplement, a case may be Kiled in the country

where the plaintiff is a residence. Hence, one can Kile a case The Warsaw Convention has been supplanted by the
in Philippine Courts. Montreal Convention.
Q: What are the 4 jurisdictional rules under the Warsaw What laws govern air transportation in the Philippines?
Convention?
A: The 4 jurisdictional rules are:

1. Local destination (place of departure and place of
a) Court where the carrier is domiciled; destination are both located in the Philippines)
b) Court where the carrier has its principal place of -the Civil Code provisions on common carrier will apply.
business; Code of Commerce will apply suppletorily.
c) Court where the carrier has an establishment by which
the contract has been made;
However, if the place of departure adheres to the
d) Court of the place of destination. Convention, the governing law will be the Convention even if
the place of destination is the Philippines.
Q: Was this retained by the Montreal Convention? Was

there any change under the Montreal Convention? 2. If Philippines is just one of the itineraries:
A: The 4 jurisdictional rules were retained. However, in - the Convention will apply.
addition, the Montreal Convention now allows the plaintiff
to Kile in the city/ country where the plaintiff has residence.
2 ways to be covered by a Convention:
Q: Personally, do you agree to the previous ruling of the 1. When a country is a signatory to the Convention.
SC (Lhuiller v. British Airways) wherein the plaintiff was
not allowed to ]ile in Philippine courts? 2. When a country subsequently adheres to the Convention.
166
Q: In case of lay-overs to a country which is a signatory A: 2 types:

to the Convention (other than the Philippines), what law
will apply? 1. Transport cargo to its destination
A: The Convention will apply. 2. Transport passenger to its destination
Q: The itinerary was San Francisco, USA – Tokyo – Q: Are air carriers expected to exercise extra-ordinary
Manila, Philippines – San Francisco, USA. Isn’t it that if diligence?
there is a stop-over/lay-over in Manila, the Convention Yes. The same rule applies: A common carrier is bound to
will apply? carry the passengers safely as far as human care
A: In the case of Santos v. Northwest Orient Airlines (a and foresight can provide, using the utmost diligence of
controversial case), the SC held NO, the Convention will not very cautious persons, with a due regard for all the
apply. The ultimate destination is San Francisco, USA and the circumstances.
point of departure is also San Francisco, USA. Since both the
place of departure and place of destination are in San
Francisco, USA, Philippine Courts have no jurisdiction. Q: When is the contract of air transportation perfected?
The Court, in that case, only sympathized with the A: It commences when an airline issues a ticket to a
petitioner, who must prosecute his claims in the United passenger for a particular Klight on a certain time and type
States rather than in his own country at least inconvenience. and a certain type of Klight accommodation. It gives the
It was unable to grant him the relief he seeks because the passenger a right to expect that he will be transported on
Court was then limited by the provisions of the Warsaw that Klight. It becomes the obligation of the air carrier to
Convention. Be that as it may, the Court emphasized that the carry him and his luggage and to ensure that the
mere fact that petitioner will have to litigate in the American accommodation as indicated in the ticket is provided to the
courts does not necessarily mean he will litigate in vain. The passenger. If the passenger was not transported, died or
judicial system of that country is known for its sense of suffered injuries, the air carrier may be held liable for
fairness and, generally, its strict adherence to the rule of law. breach of contract of carriage.
In an action based on contract of carriage, the passenger

Montreal Convention
only needs to prove the existence of the contract and the fact
of its non-performance. The ticket will establish the
existence of the contract.
On 10 August 2015, the Philippine Senate ratiKied the
Convention for the UniKication of Certain Rules for
International Carriage by Air, Montreal, 28 May 1999. If the terms of the contract were not observed, the air
carrier is likewise held liable for breach of contract, should it
be at fault.
It has the force and effect of a law in our country.
Q: What happens if passenger was downgraded from

Q: What are the obligations of an air carrier under the ]irst class to business class or economy class?
contract of air transportation?
167
A: In Zulueta v. Cathay Paci]ic and Fuentebella v. Cathay luggage or its contents were stolen, can you sue the
Paci]ic, SC held the air carrier liable for breach of contract of airline?
carriage due to the downgrade. The SC further held that in
this case, there is a presumption of fault on the part of A: Yes. The exercise of extra-ordinary diligence has already
common carrier and that presumption can only be overcome commenced. It commences when the baggage is placed in
or negated by evidence of extraordinary diligence. the possession of the air carrier even before actual boarding
and when the passenger is in the airport for check-in of his
Klight.
Q: If passenger’s ]light accommodation was upgraded?
A: In Vasquez v. Cathay Paci]ic, the passenger was

upgraded from business class to Kirst class and for that
reason, he sued the airline company. The SC awarded him Q: What governs the relationship between the
nominal damages. The SC held that it is a breach of contract passengers, consignors, and air carrier?
of carriage to force the passenger to take a Kirst class A: Provisions of the law, governing air transportation (law
accommodation instead of business class accommodation. on common carrier) and the terms of the contract of
carriage.
Notes
Q: What if the passengers were not allowed to board the
● NOTE: Whether the Wlight accommodation is ]light because they were late? They checked-in at 3:10
upgraded or downgraded, if there is a breach of and the ]light was at 3:15. Can the airline be faulted for
contract, then there is presumption of fault on the not entertaining the passengers?
part of the air carrier.
A: The SC, in the case of Morris v. CA held NO, the airline
cannot be faulted for not entertaining the late passengers.
Q: When is the exercise of extra-ordinary diligence For having arrived at the airport after the closure of the
commenced for air carriers? Klight manifest, respondent's employee could not be faulted
for not entertaining petitioners' tickets and travel
A: Unlike the rule on land transportation, where the documents for processing, as the checking in of passengers
obligation to exercise extra-ordinary diligence commences for SAS Flight SK 893 was Kinished, there was no fraud or
from the perfection of the contract, a different rule is applied bad faith as would justify the award of damages.
in air transportation. Hence, a passenger cannot sue an
airline company if he suffered injuries on his way to the
airport. In the above-mentioned case, Morris admitted that they
were at the check-in counter at around 3:10, exactly the
same time the Klight manifest was closed, but still too late to
It commences when the baggage is placed in the possession be accommodated on the plane.
of the air carrier even before actual boarding and when the
passenger is in the airport for check-in of his Klight.
In said case, the SC held that Morris is not entitled to moral
damages, and an award of exemplary damages is likewise
Q: When you get hold of your boarding pass, sometimes baseless. Where the award of moral and exemplary damages
you have to wait for an hour for your ]light. What if the
168
is eliminated, so must the award for attorney's fees be A: The Warsaw Convention applies to all international
deleted. carriage of persons, luggage or goods performed by aircraft
for reward. It applies equally to gratuitous carriage by
aircraft performed by an air transport undertaking.
Q: Where do you ]ind the check-in time?
A: Not in the law, but in the terms of the ticket. Q: What is an International Air Carriage?
A: Any carriage in which, according to the contract made by

Alitalia v. CA – Just like in the case of Morris v. CA, the the parties, the place of departure and the place of
passenger arrived late. The Filipino passenger arrived 9:15 destination, whether or not there be a break in the carriage
am when the departure time is 9:30 am. Ordinarily, the air or a transshipment, are situated either:
carrier will not be held liable. In this case however, Alitalia
was made liable.
1. Within the territories of two High Contracting Parties; or
2. Within the territory of a single High Contracting Party, if

Q: What is peculiar about this case? there is an agreed stopping place within a territory subject
A: The other passengers were accommodated. There was a to the sovereignty, suzerainty, mandate, or authority of
line letting them in. They were even being escorted, except another Power, even though that Power is not a party to the
for the Filipino passenger. Instead of being escorted in the Convention.
line, he was met with rude behavior. The SC said that
because of the rude treatment she received from the airline
staff, Alitalia is liable, even if the Filipino passenger was late. Q: How should carriage performed by several successive
Local laws will apply, not the Convention, because there was air carriers be treated under Warsaw Convention?
a tortious act on the part of the airline staff.
A: A carriage to be performed by several successive air
carriers is deemed, for the purposes of Warsaw Convention
to be one undivided carriage, if it has been regarded by the
Q: What if the passenger was accommodated even parties as a single operation whether it had been agreed
though the check-in was last minute, the airline did not upon under the form of a single contract or of a series of
accommodate his luggage? contracts.
A: The accommodation of said passenger even though there Such carriage does not lose its international character
was no enough time to accommodate his luggage amounts to merely because one contract or a series of contracts is to be
bad faith/ malice. performed entirely within a territory subject to the
sovereignty, suzerainty, mandate or authority of same High
This is why when you are late, many airline companies will Contracting Party
really refuse to accommodate you. This is because there is
no more enough time to load your luggage on the aircraft
even if you are accommodated. This happens in Q: What do we mean by High Contracting Parties?
international Klights whenever there is a connecting Klight,
especially if there is only a small time frame to catch the A: High Contracting Parties are the signatories to the
connecting Klight. Warsaw Convention and those which subsequently adhered
to it. The Montreal Convention retained this provision.
Q: When does the Warsaw Convention apply?
169
Q: What are the liabilities of an air carrier under the

Warsaw Convention? In the case Lufthansa German Airlines v. CA, there were 5
successive carriers or 5 different segments of the
A: The carrier is liable under the following cases: transportation because there was no direct Klight from
Philippines to Africa. The ticket was bought from Lufthansa.
The transportation from Manila to India was by Lufthansa.
1. Damage sustained in the event of the death or wounding Once in India, it is no longer Lufthansa which will bring you
of a passenger taking place while on board the aircraft or to the next destination, but a different airline company. The
in the course of any of the operations of embarking or passenger was bumped off from the subsequent Klights.
disembarking;
The SC held that such is not considered a “delay” under the

Warsaw Convention. However, the passenger may sue under
Notes local laws. The one who issued the ticket (Lufthansa) is
● As we said earlier, if the death or injury is liable because it is responsible for each segment of the Klight.
sustained before boarding, then it is not the Hence, the passenger can sue the airline company and the
Convention that will apply but local laws. travel agent under the local law without prejudice to the
right of the air carrier to proceed against the air carrier
ultimately liable.
2. Loss or damage to any checked-in baggage or goods

sustained during the transport by air; Q: What is Delay?
Notes A: In ordinary sense, it means that there was prolonging of

time which causes someone to be behind schedule. Bumping
● If there is any kind of misconduct or tortious act, off, on the other hand, is the refusal of a passenger from
then the case is taken out of the Warsaw boarding on a Klight despite a Klight conKirmation. Delay
Convention. temporarily postpones a right while being bumped off
totally forecloses such right. In the latter, the Warsaw
Convention cannot be invoked.
If the loss or damage happened prior to the check-in, then
the Civil Code provision on common carriage will apply.
Q: What are the legal effects of the Warsaw Convention?
A: This answers the question: “So what?”

3. Delay in the transport by air of passengers, baggage or
goods. The list is not exclusive. 1. The PRESCRIPTIVE PERIOD to Kile the suit against the air
carrier – claim for damages must be brought within two
(2) years reckoned:
Q: Is getting bumped off from the ]light a form of delay? a) from the date of arrival at the destination; or
Do you sue under the Warsaw Convention?
b) from the date on which the aircraft ought to have
A: No, getting bumped off from a Klight is not considered a arrived; or
delay. Hence, do not sue under the Warsaw Convention, but
sue under local laws. Getting bumped off a Klight is outside c) from the date on which the carriage stopped,
the scope of the Warsaw Convention. otherwise, right to damages shall be extinguished.
170
Notice of Claim – complaint must be Kiled within the

Notes
following period:
Under the Wirst-tier, the air carrier is liable
1. Three (3) days from receipt of baggage; or
regardless of negligence.
2. Seven (7) days from receipt of goods; or
3. Fourteen (14) days, in case of delay, counted from the

time the baggage was placed at the disposal of the It is easy to remember: 113,100 for death or injury OR
passenger. 1,131 for damage to goods. Just remove the 2 zeros.
2. The LIMITATION OF LIABILITY of the air carrier when it Q: What is an SDR?

comes to loss or damage of the goods/ death or injury of
A: Special Drawing Right. It is a mix of currencies consisting
passengers – With respect to goods, the limit is per kilo
of Euro, Pound and Japanese Yen. It is imposed by the IMF.
under the Warsaw Convention. 20 USD or 9.0 Pounds per
kilo unless the shipper declares a higher valuation. In case of
checked-in baggage, 400 USD. For death or injury of
passengers - 25,000 USD, regardless of whether the airline In this regard, the air carrier may be held liable even if it is
was at fault or not. There are Protocols – 75, 000 USD. not at fault. The carrier therefore is presumptively liable up
However, we are not part of said Protocols. Hence, under the to 113,100 SDR. It may be reduced or exonerated depending
Warsaw Convention, 25,000 Dollars in so far as the on the extent of contributory negligence on the part of the
Philippines is concerned. passenger/ person claiming the compensation.
Under the Montreal Convention, the air carrier liability has 2. Second-tier – for all claims higher than the amounts of
been modi]ied as follows: 113,100/ 1,131 SDR, the air carrier will not be held liable
only when it is proved that the air carrier is not at fault. The
burden of proof is on the air carrier. If found to be at fault,
then the air carrier can be held liable to an amount higher
1. Death or injury of passengers:
than 113,100/ 1,131 SDR.
Q: What is the two-tier liability for death or injury of

NOTE: The 2-tier liability is a radical departure from the
passengers:
Warsaw Convention, where liability to passengers is limited
to 25,000 USD, regardless of whether the airline was at fault
or not. Also, the defense that the air carrier took all
a. First-tier – Strict Liability – the air carrier is made liable reasonable measures is not available under the Montreal
in case of death or bodily injury of the passenger, on the convention. As we said, the Kirst-tier makes the air carrier
condition that the death or bodily injury took place on board liable regardless of negligence. In the second-tier, the
the aircraft or in the course of embarking or disembarking. amount of claim can go higher, depending on the extent of
Here, the air carrier cannot limit its liability as long as it damage.
does not exceed 113, 100 SDR. This does not mean that
this will be the amount that you will get. It will still depend
on the extent of the damage, but it will not exceed 113,100
2. Loss or damage of goods/cargoes
SDR.
171
Q: Where should it be ]iled?
Air carrier is liable on the condition that the death or bodily

injury took place on board the aircraft or when the goods
are under the custody of the air carrier. The carrier may only A: The 4 jurisdictional rules are:
be held liable if it faulted.
a) Court where the carrier is domiciled;

The amount now: 1,131 SDR for each passenger. b) Court where the carrier has its principal place of
business;
NOTE: It is now based on passenger, no longer based on c) Court where the carrier has an establishment by which
kilo. the contract has been made;
d) Court of the place of destination.
Q: Can the limitation on liability be waived?
A. Yes. The limitation on liability may be waived if not raised Lhuiller v. British Airways
during trial. In the case of British Airway v. CA, the
passenger Kiled a claim at an amount higher than the limit.
The lawyer did not complain. The SC deemed the limitation
on liability waived because there was no timely invocation of The passenger asked for help from the Klight attendant to be
the Montreal Convention. assisted in placing his luggage inside the overhead bin, the
Klight attendant instead of helping said: “If I will have to help
you and everyone else, then I will have a bad back. It is not
my duty to help you”. Lhuiller complained to the manager.
Q: May the passenger recover an amount greater than
However, instead of being given sympathy, Lhuiller was
that set by the Convention?
scolded by said manager.
A: Yes, in 2 cases:
1. When the passenger declared a higher value and paid the

When Lhuiller came back to Manila, Lhuiller Kiled a case
Supplementary Sum. Do not forget these KEYWORDS:
before the RTC. The SC has held that Philippine courts have
Supplementary Sum. It simply means extra fair. For
no jurisdiction because of the 4 jurisdictional rules. The
example, there is jewelry in your baggage or other valuable
British Airways is domiciled in UK. Its place of business is
items – you should have hand-carried it, right? But in case
also in UK. The place where the ticker was bought is in UK.
you don’t want to hand carry it, declare the jewelry and pay
The place of destination: Italy.
the supplementary sum.
DEAN’s OPINION: The SC held in so many cases (until the

2. When the air carrier fails to timely object. The limitation
Lhuillier case) that if there is any misconduct or tortious act
on liability may be waived if not raised during trial. In the
on the part of the air carrier, its employer, or agent, the case
case of British Airway v. CA, the passenger Kiled a claim at
could be Kiled in local courts. Hence, the court should have
an amount higher than the limit. The lawyer did not
allowed the Kiling here in Philippines. Under the Montreal
complain. The SC deemed the limitation on liability waived
Convention, it also adopted these 4 jurisdictional rules.
because there was no timely invocation of the Montreal
However, as a supplement it now allows the Kiling of an
Convention.
action in the residence of the passenger.
172
complain this way, then it is taken out of the scope of the

Convention. It is now a TORT case.
There are two conditions to ]ile in Philippine courts:
Q: Cite Jurisprudence wherein the SC ruled that the

1. Territory of the state party in which at the time of the Warsaw Convention does not apply.
accident, the passenger has principal & permanent
residence; AND A: In Philippine Airlines Inc. v. Savillo, the SC held that the
Warsaw convention does not exclusively regulate
2. Carrier of freight services for the carriage of the relationship between the passenger and the carrier on an
passenger by air in that territory. international Klight. For instance, the SC distinguished
between the damage caused to the baggage of the passenger
and damage by way of intimidation suffered in the hands of
Dean: I asked a friend who works in Cebu PaciKic whether it airline employees. The Kirst is covered by the Warsaw
is really the responsibility of Klight attendants to help Convention which prescribes in 2 years. The second is
passengers load their bags inside the overhead bin. He said covered by the Civil Code provision on Torts which
it is not written as a rule, but Filipinos are “likas na prescribes in 4 years. Hence, if the case consisted merely of
matulungin.” claims incidental to airline delay, Warsaw Convention
applies. Otherwise, local laws will apply.
Q: Can plaintiff (passenger) forego the Convention even

though applicable and pursue his cause of action on the
local laws?
WILLFUL MISCONDUCT
A: The SC held NO. If covered by the Convention, local laws

cease to apply. A claim based on the Convention cannot be The airline carrier is not entitled to the limitation of liability
pursued under local laws. You don’t have an option – if the if the damage is caused by willful misconduct or default on
action falls under the Convention, then you do not have a its part (Warsaw Convention, Art. 25).
choice but to pursue the action under the Convention and be
governed by the limits set forth by said Convention.
Moreover, you cannot resurrect your action under local laws The deKinition of "willful misconduct" depends in some
if it is governed by the Convention. measure on which court is deciding the issue. Some common
factors that courts will consider are:
1. Knowledge that an action will probably result in injury or

However, that is in theory. In practice, when you allege or damage;
couch in your complaint in such a way that there is TORT
committed by the air carrier or its employee, then the suit 2. Reckless disregard of the consequences of an action, or
Kiled in Philippine courts may prosper.
3. Deliberately failing to discharge a duty related to safety.
In one case, the passenger of Singapore Airlines was given a

‘cold treatment’. He was treated with apathy. Hence, it
depends on how you couch it in your complaint. You can Q: Cite 4 cases wherein the Warsaw Convention was not
state that you were treated in an arrogant manner, boorish applied.
behavior, or any uncalled for attitude. If you couch your
173
SPECIAL SPECIES OF INJURY 2. PAL v. CA
This case involves a microwave oven.
1. Alitalia v. CA
Gilda Mejia testiKied that sometime on January 27, 1990, she

took defendant's plane from San Francisco, U.S.A. for Manila,
In one case which involves a UP professor was deprived of Philippines. Amongst her baggage was a slightly used
the opportunity to talk in a convention because her suitcase microwave oven with the brand name "Sharp".
was lost. All the documents were there. Back then,
documents are not easily accessible in our smart phones.
Hence, she went back to Manila.
When shipped, defendant's ofKice at San Francisco inspected
it. It was in good condition with its front glass intact. She did
not declare its value upon the advice of defendant's
Just like in the case of Morris v. CA, the Dr. Pablo arrived late. personnel at San Francisco.
Dr. Pablo arrived 9:15 am when the departure time is 9:30
am. Ordinarily, the air carrier will not be held liable. In this
case however, Alitalia was made liable.
When the baggage was claimed however, the front glass of
the microwave oven was already broken and cannot be
repaired because of the danger of radiation.
The SC held that there was no bad faith on the part of the air
carrier or its employees. The luggage was returned to her
belatedly but without appreciable damage. If there is bad
faith, it will be taken out of the Warsaw Convention. The SC held that the acceptance in due course by PAL of
private respondent's cargo as packed and its advice against
the need for declaration of its actual value operated as an
assurance to private respondent that in fact there was no
The fact is, nevertheless, that some special species of need for such a declaration.
injury was caused to Dr. Pablo because petitioner ALITALIA
misplaced her baggage and failed to deliver it to her at
the time appointed — a breach of its contract of
carriage, to be sure — with the result that she was unable In other words, private respondent Mejia could and would
to read the paper and make the scientiKic presentation that have complied with the conditions stated in the air
she had painstakingly labored over, at the prestigious waybill, i.e., declaration of a higher value and payment of
international conference, to attend which she had traveled supplemental transportation charges, entitling her to
hundreds of miles, to her chagrin and embarrassment and recovery of damages beyond the stipulated limit of US $20
the disappointment and annoyance of the organizers. per kilogram of cargo in the event of loss or damage, had she
not been effectively prevented from doing so upon the
advice of PAL's personnel for reasons best known to
themselves. Respondent can hardly be faulted for relying
The invitation for her was a singular honor not only to on the representations of PAL's own personnel.
herself, but to the University of the Philippines and the
country as well, an opportunity to make some sort of
impression among her colleagues in that Kield of scientiKic The aforestated facts were not denied by PAL. Hence, the SC
activity. The opportunity to claim this honor or distinction held that PAL is estopped from blaming private respondent
was irretrievably lost to her because of Alitalia's breach of for not declaring the value of the cargo shipped and which
its contract. would have otherwise entitled her to recover a higher
amount of damages.
174
plane and he faced the daunting possibility that he would be

stranded in Singapore Airport because the PAL ofKice was
The Warsaw Convention will not apply. Hence, the already closed.
provision on limited liability is not applicable in this case.
However, while the facts and circumstances of this case do
not call for the direct application of the provisions of the
Warsaw Convention, it should be stressed that, indeed, 4. KLM v. CA
recognition of the Warsaw Convention does not preclude the
operation of the Civil Code and other pertinent laws in the
determination of the extent of liability of the common The respondents with their wards went to the Barcelona
carrier. airport to take their plane which arrived at 4:00 o'clock. At
the airport, the manager of Aer Lingus directed the
respondents to check in. They did so as instructed and were
SPECIAL SPECIES OF INJURY accepted for passage. However, although their daughter and
niece were allowed to take the plane, the respondents were
off-loaded on orders of the Aer Lingus manager who
brusquely shoved them aside with the aid of a policeman
3. Philippine Airline v. Savillo and who shouted at them, "Conos! Ignorantes Filipinos!"
Singapore Airlines barred private respondent from boarding Mrs. Mendoza later called up the manager of Aer Lingus and
the Singapore Airlines Klight because PAL allegedly failed to requested that they provide her and her husband means to
endorse the tickets of private respondent and his get to Lourdes, but the request was denied. A stranger,
companions, despite PAL’s assurances to respondent that however, advised them to take a train, which the two did;
Singapore Airlines had already conKirmed their passage. despite the third class accommodations and lack of food
service, they reached Lourdes the following morning. During
the train trip the respondents had to suffer draft winds as
An action based on these allegations will not fall under the they wore only minimum clothing, their luggage having gone
Warsaw Convention, since the purported negligence on the ahead with the Aer Lingus plane.
part of PAL did not occur during the performance of the
contract of carriage but days before the scheduled Jlight.
Thus, the present action cannot be dismissed based on the The respondents, referring to KLM as the principal of Aer
statute of limitations provided under Article 29 of the Lingus, Kiled a complaint for damages with the Court of First
Warsaw Convention. Instance of Manila arising from breach of contract of
carriage and for the humiliating treatment received by them
at the hands of the Aer Lingus manager in Barcelona.
Had the present case merely consisted of claims incidental
to the airlines’ delay in transporting their passengers, the
private respondent’s Complaint would have been time- The SC held that the Warsaw Convention will not apply.
barred under Article 29 of the Warsaw Convention. That article presupposes the occurrence of either an
However, the present case involves a special species of accident or a delay, neither of which took place at the
injury resulting from the failure of PAL and/or Singapore Barcelona airport; what is here manifest, instead, is that the
Airlines to transport private respondent from Singapore to Aer Lingus, through its manager there, refused to
Jakarta – the profound distress, fear, anxiety and transport the respondents to their planned and
humiliation that private respondent experienced when, contracted destination.
despite PAL’s earlier assurance that Singapore Airlines
conKirmed his passage, he was prevented from boarding the
175
The argument that the KLM should not be held accountable

for the tortious conduct of Aer Lingus because of the
provision printed on the respondents' tickets expressly
limiting the KLM's liability for damages only to occurrences
on its own lines is unacceptable. As noted by the CA, that
condition was printed in letters so small that one would
have to use a magnifying glass to read the words. It would be
unfair and inequitable to charge the respondents with
automatic knowledge or notice of the said condition.
KLM was chargeable with the duty and responsibility of

speciKically informing the respondents of conditions
prescribed in their tickets or, in the very least, to ascertain
that the respondents read them before they accepted their
passage tickets. A thorough search of the record, however,
inexplicably fails to show that any effort was exerted by the
KLM ofKicials or employees to discharge in a proper manner
this responsibility to the respondents.
TO SUMMARIZE, what are the cases wherein the Warsaw

Convention will not apply?
1. In case of Tortious act or misconduct on the part of the

airline, its employees, or its agent.
2. Special species of injury caused by the airline company

and it employees or agent.
If any of these 2 are present, it is already outside the scope

of the Warsaw Convention. The period of prescription is not
2 years but 4 years because it is based on the Civil Code.
Moreover, we are bound by the 4 jurisdictional rules.
The same principle applies to the Montreal Convention.
176
MARCH 23, 2021 Q: If the encumbrance or sale of said properties were

not approved by the LTFRB, what is the legal effect?
A: The encumbrance or sale remains to be valid. It will not

PUBLIC SERVICE ACT affect the validity of the encumbrance or sale, but it will not
bind 3rd persons.
RECITATION
Q: ABC is a public transportation company, obtained a Q: Why then do we have to obtain the consent of the
loan and buses were ENCUMBERED. The Franchise / LTFRB with regard to such sale/ encumbrance?
certi]icate of public convenience (CPC) was ASSIGNED.
A: For the sake of public convenience. Not to make the
The loan was not paid. Can the bank foreclose the
transaction valid.
mortgage over the BUSES and the CPC?
A: The answer should be: Yes, the bank can foreclose the
mortgage over the buses as long as the encumbrance was SUMMARY:
approved by the LTFRB. Likewise, the levy/garnish of the
franchise or the Certi]icate of Public Convenience (CPC) is 1. The CPC is non-transferrable – One cannot assign,
not allowed if no consent was obtained from the LTFRB. transfer, or encumber the CPC. It is non-assignable. Non-
transferrable.
2. The properties of a CPC holder can be levied or

Q: What if there is no mortgage over the buses, can the garnished provided that the consent of the LTFRB is
lender LEVY/GARNISH the CPC? obtained. Without the approval of the encumbrance or sale,
the same remains to be valid because the reason for
A: The answer should be no, the CPC cannot be levied or
obtaining consent was only for the sake of public
garnished. The judgment creditor might not have the
convenience.
qualiKications to be a holder of the certiKicate of public
convenience. Hence, the judgment debtor cannot garnish/ 3. The CPC itself cannot be sold or encumbered.
levy the CPC if the judgment creditor is not qualiKied anyway.
Q: Is there a law governing public utility?

Q: Let us do it step by step, can the judgment creditor
really LEVY/GARNISH a CPC? A: The answer should be no. No law deKines ‘public utility’.
Only public service.
A: The answer should be no.
Q: Is public service the same as public utility?

Q: Can you ever ASSIGN a CPC?
A: No, they are NOT SYNANYMOUS. There is a law governing
public SERVICE only. Nevertheless, jurisprudence provides
A: The answer should be no. The franchise is a privilege that the same requirements provided under the law on
personal to the franchise holder. Hence, it is non-assignable. public service also applies to public UTILITIES. Hence, 60%
must be owned by Filipinos.
But you can garnish/levy the properties of the holder of

the certiKicate as long as it has the consent of the LTFRB. Q: What is the governing agency for the following:
A:
177
Public vehicles – LTFRB

Q: What are the purposes for the enactment of Public
Vessels – MARINA (not Coastguard) Service Act?
Airline company e.g. Cebu PaciKic – Civil Aeronautics Board A:
Tricycle – Sangguniang Bayan/ Sangguniang Panglungsod. 1. To secure adequate sustained services for the public at
least possible cost.
2. To protect the public from unreasonable charges and poor

and inefKicient service.
NOTE: Franchise from Congress is not required if what is
only needed is a CertiKicate of Public Convenience (CPC). 3. To protect and secure investment in public services.
4. To prevent ruinous competition.
Q: Is Certi]icate of Public Convenience (CPC) the same as

Certi]icate of Public Convenience and Necessity (CPCN)? (Luzon Stevedoring Co., Inc. v. Public Service
A: No CPC is different from CPCN. Both requires a franchise. Commission, G.R. No. L-5458, September 16, 1953; Tan
But for CPC, there is no need for a legislative franchise/ Sima v. Hacbang, G.R. No. 37321, March 3, 1933.)
franchise from Congress. For CPCN, there is a need for
determining who will be allowed to provide public service in
legislative franchise.
a particular area.
Q: Electric Cooperative – what do they need, CPC or

CPCN? We have this First Operator Rule which gives preferential
right to the Kirst operator to perform service before a second
A: CPCN. They need legislative franchise.
operator will be allowed to come in. The second operator
will be allowed only when public interest will be served. In
the meantime, if the Kirst operator can provide satisfactory
Q: If they increase RATES, where should they go? service, ruinous competition is barred from entry.
A: They need to ask permission from ERC (Energy
Regulatory Commission) which is another government
agency, not Congress. They do not need to go to Congress in LAGMAN v. CITY OF MANILA
case they want to increase the electricity rate.
The ordinance is valid. Under its charter, the City of

Q: For a land transportation company? Manila has the power to regulate the use of its streets.
A: CPC only. This charter is a special law and therefore prevails over
the Public Service Act. Consequently, the power of the
LECTURE: BOT to grant certiKicates is subject to this provision of
the charter of Manila. A has thus not acquired any vested
right as alleged by him. Lagman v. City of Manila, G.R.
No.- L-23305, June 30, 1966
The Kirst two objectives are carried out by appropriate
government agencies in terms of Kixing utility rates like
water and electricity. These are all regulated by the State.
Meralco, for example, can increase the rate of electricity
with the consent of the ERC. The 4th is achieved by
178
FACTS: The City of Manila passed an ordinance banning Lastly, petitioner has not been totally banned or prohibited
provincial buses from the city. It was challenged as invalid from operating all his buses, he having allowed to operate
for violating the Public Service Act. two (2) "shuttle" buses within the city limits.
ISSUE: is the Ordinance invalid? The power vested in the Public Service Commission under
Section 16 (m) is, therefore, subordinate to the authority
granted to respondent City, under said section 18 (hh).
RULING: NO. The SC held that Ordinances designating the
streets within a municipality upon which buses may operate Hence, the petition for prohibition has been dismissed.
or prohibiting their operation in certain streets do not
encroach upon the jurisdiction of the Public Service
Commission over motorbus common carriers, so long as
the ordinances do not prevent or unreasonably interfere
with the utility's operation under the certiKicate or franchise NO VESTED RIGHT IN THE CONTINUED GRANT OF A
granted by that Commission. FRANCHISE
Moreover, the powers conferred by law upon the Public PROVINCIAL BUS OPERATORS v. DOLE AND LTFRB
Service Commission were not designed to deny or supersede
the regulatory power of local governments over motor
traf]ic, in the streets subject to their control.
In this case, the government created policy based on the
Kinding that the boundary payment scheme that has since
determined the take-home pay of bus drivers and
This is made evident by section 17 (j) of the Public Service conductors has been proven inadequate in providing our
Act (Commonwealth Act No. 146) that provides as follows: public utility bus drivers and conductors a decent and living
wage. It decided that this was the best approach to ensure
that they get the economic and social welfare beneKits that
SEC. 17. Proceedings of Commission without previous they deserve. The SC held that it will not stand in its way.
hearing. — The Commission shall have power, without Policy questions are not what the SC decides.
previous hearing, subject to established limitations and
exceptions, and saving provisions to the contrary:
The SC held that the LTFRB was not unreasonable when it
required bus operators to comply with the part-]ixed-part-
xxx xxx xxx performance-based payment scheme under pain of
revocation of their certiKicates of public convenience. The
LTFRB has required applicants or current holders of
(j) To require any public service to comply with the laws of franchises to comply with labor standards as regards their
the Philippines, and with any provincial resolution or employees, and bus operators must be reminded that
municipal ordinance relating thereto, and to conform to certiKicates of public convenience are not property.
the duties imposed upon it thereby, or by the provisions of CertiKicates of public convenience are franchises always
its own charter, whether obtained under any general or subject to amendment, repeal, or cancellation. Additional
special law of the Philippines. requirements may be added for their issuance, and there can
be no violation of due process when a franchise is cancelled
for non-compliance with the new requirement.
179
The term "public service" includes every person that now

or hereafter may own, operate, manage, or control in the
Likewise, contracts which relate to rights not considered Philippines, for hire or compensation, with general or
property, such as a franchise or permit, are also not limited clientele, whether permanent, occasional or
protected by the non-impairment clause. The reason is that accidental, and done for general business purposes, any
the public right or franchise is always subject to amendment common carrier, railroad, street railway, traction railway,
or repeal by the State, the grant being a mere privilege. In sub-way motor vehicle, either for freight or passenger, or
other words, there can be no vested right in the continued both with or without Kixed route and whether may be its
grant of a franchise. Additional conditions for the grant of classiKication, freight or carrier service of any class, express
the franchise may be made and the grantee cannot claim service, steamboat or steamship line, pontines, ferries, and
impairment. water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine railways, marine repair
shop, [warehouse] wharf or dock, ice plant, ice-refrigeration
Q: De]ine Public Utility. plant, canal, irrigation system, gas, electric light, heat and
power water supply and power, petroleum, sewerage
A: Public utility refers to a business or service engaged in
system, wire or wireless communications system, wire or
supplying the public with some commodity or service of
wireless broadcasting stations and other similar public
public consequence, or essential to the general public.
services: Provided, however, That a person engaged in
agriculture, not otherwise a public service, who owns a
motor vehicle and uses it personally and/or enters into a
Q: De]ine public service. special contract whereby said motor vehicle is offered for
A: The term 'public service' is hereby deKined to include hire or compensation to a third party or third parties
every individual co-partnership, association, corporation, or engaged in agriculture, not itself or themselves a public
joint-stock company, whether domestic or foreign, their service, for operation by the latter for a limited time and for
lessees, trustees, or receivers appointed by any court a speciKic purpose directly connected with the cultivation of
whatsoever, or any municipality, province, or other his or their farm, the transportation, processing, and
department of the Government of the Philippine Islands, marketing of agricultural products of such third party or
that now or hereafter may own, operate, manage, or control third parties shall not be considered as operating a
within the Philippine Islands, for hire or compensation, any public service for the purposes of this Act.
common carrier, railroad, street railway, traction railway,
subway, freight or passenger motor vehicles, with or
without ]ixed route, freight or any other car service, Q: Differentiate public utility from public service.
express service, steamboat or steamship line, ferries, small
A: While the concepts of public service and public utility are
water craft, such as lighters, pontines, lorchas, and others,
related, they are NOT SYNANYMOUS. They do not have the
engaged in the transportation of passengers or cargo,
same legal meaning. In contrast with public service which
shipyard, marine railway, marine repair shop, public
has a deKinition under the law, the deKinition of public utility
warehouse, public wharf or dock not under the jurisdiction
has only been laid down by the Supreme Court. It is not by
of the Insular Collector of Customs, ice, refrigeration, canal,
statute but by the Supreme Court.
irrigation, pipe line, gas, electric light, heat, power, water, oil,
sewer, telephone, wire or wireless system, plant or
equipment.
JG Summit Holdings v. Court of Appeals
In this case, the SC held that Philippine Shipyard and

NOTE: Shipyard is considered public service. But as you will Engineering Corporation (PHILSECO) is not a public utility,
see later, a shipyard is not a public utility. as by nature, a shipyard is not a public utility and that no
law declares a shipyard to be a public utility.
180
public as such which has a legal right to demand and receive

its services or commodities. Stated otherwise, the owner or
NAPOCOR v. CA person in control of a public utility must have devoted it
to such use that the public generally or that part of the
public which has been served and has accepted the
The SC deKined public utility. service, has the right to demand that use or service so
long as it is continued, with reasonable ef]iciency and
under proper charges.
A "public utility" is a business or service engaged in
regularly supplying the public with some commodity or
service of public consequence such as electricity, gas, Unlike a private enterprise which independently
water, transportation, telephone, or telegraph service. The determines whom it will serve, a "public utility holds out
term implies public use and service. generally and may not refuse legitimate demand for service.
Note the keywords: “public consequence” “public use and Hence, a public utility has 2 characteristics:
service”.
1. There must be readiness to serve.

Just the fact that a business provides services that promote
public good/ serves the public interest, does not 2. The public can demand against a public utility.
automatically make it a public utility.
In other words, the owner controlling the public

Q: Mercury Drug Store – it serves public interest. But is utility must have devoted it to such use that the public it
it a public utility? serves has the right to demand such service as long as it is
continuous, with reasonable efKiciency and there are proper
A: No. Just the fact that a business provides services that charges.
promote public good/ serves the public interest, does not
automatically make it a public utility.
Q: A public electric company is a public utility. It
requires franchise from Congress. Can it choose the
To constitute a public utility, the facility must be necessary persons to whom it can render services?
for the maintenance of life and occupation of the residents.
A: No, the public utility cannot choose the persons to whom

However, the fact that a business offers services or goods it can render services.
that promote public good and serve the interest of the public
does not automatically make it a public utility. Public use is
not synonymous with public interest.
As its name indicates, the term "public utility" implies public A public utility has 2 characteristics:
use and service to the public. The principal determinative
characteristic of a public utility is that of service to, or
readiness to serve, an inde]inite public or portion of the
181
1. There must be readiness to serve. private property. To begin with, the very installation of the
distribution system depends on a franchise. Ownership was
2. The public can demand against a public utility. co-existent with the franchise. Moreover, the distribution
system is burdened with public use even after the
termination of the franchise either by expiration or
Hence, it cannot be selective as to whom it will provide its decision of the government.
services.
This is evident in the original franchise of PECO which

NOTE: ‘A public utility may generally not refuse a demand for provides that upon expiration of the franchise, the
service. When a demand by the public is made, such demand distribution system automatically becomes the property of
must be granted by the public utility.’ the government, without mention of payment of
compensation to Dela Rama or PECO. Moreover, even before
expiration of the franchise of PECO, its distribution system
MORE v. PECO may be taken over by the government and put to the very
same public use.
FACTS:
Furthermore, R.A. No. 1136186 recently took effect
declaring that the uninterrupted conveyance of electricity
R.A. No. 11212 grants to MORE a franchise to establish, from generating plants to end-users is not just a matter
operate and maintain an electric power distribution system of public interest, but already an elevated "matter of
in Iloilo City. MORE, as the new franchise holder, is national security and is essential to sustaining the
authorized to take over the distribution system and apply country's economic an development”.
the same to the service of the public, after expropriation and Finally, MORE points out that the end-users in Iloilo have a
payment of just compensation to PECO. stake in the uninterrupted operation of the distribution
system. The end-users have a valid expectation that they
will enjoy uninterrupted supply of power and electricity
The distribution system which is currently and actually during the transition from the old franchise holder to
being used in Iloilo City. It is owned by PECO, the holder of the new franchise holder. In sum, expropriation by MORE
the franchise since 1922. PECO's franchise expired after 65 of the distribution system of PECO under Sections 10 and 17
years and no new franchise has been issued to it since. of R.A. No. 11212 serves both the general public interest of
However, as MORE has yet to set up its service, Section 17 of conveying power and electricity in Iloilo City and the
R.A. No. 11212 allows PECO to operate the existing peculiar public interest and security of ensuring the
distribution system in the interim. PECO presently operates uninterrupted supply of electricity.
the system under a Provisional CertiKicate of Public
Convenience and Necessity (CPCN) issued by the ERC in
2019. Hence, the RTC erred in declaring these provisions
unconstitutional.
ISSUE: Whether R.A. No. 11212 is constitutional.
Motion for Reconsideration by PECO (potential bar

RULING: Yes, RA 11212 is constitutional. question):
The history of the legislative franchise of PECO establishes

that its distribution system in Iloilo City is no ordinary
182
MORE is a private corporation. RA11212 gave it the A: A shipyard is not a public utility but it is part of public
authority to expropriate. PECO questioned the previous service.
ruling.
Q: In case the corporation is 60% owned by Filipinos, can a
foreign corporation own a shipyard?
Q: Can a private corporation exercise the right of A:

eminent domain. Will it not violate the equal protection
clause because this is the ]irst time that a new franchise
holder can acquire the assets and operations of the In the case of JG Summit v. CA
previous franchise holder? Isn’t that a form of corporate
takeover in the guise of expropriation?
A: No, it does not violate the equal protection clause. The ISSUE: whether a shipyard is a public utility whose
distribution system of PECO can capitalization must be sixty percent (60%) owned by
Filipinos.
be subjected to expropriation for the same public purpose.
The MR was decided in 2019.
SC: NO. A shipyard is not a public utility. Hence, it need not
comply with the rule on capitalization wherein 60% of the
The history of the legislative franchise of PECO establishes corporation must be owned by Filipinos.
that its distribution system in Iloilo City is no ordinary
private property. To begin with, the very installation of the
distribution system depends on a franchise. Ownership was
I.
co-existent with the franchise. Moreover, the distribution
system is burdened with public use even after the By nature, a shipyard is not a public utility.
termination of the franchise either by expiration or
decision of the government.
"Public use" means the same as "use by the public." The
essential feature of the public use is that it is not conKined to
This is evident in the original franchise of PECO which privileged individuals but is open to the indeKinite public. It
provides that upon expiration of the franchise, the is this indeKinite or unrestricted quality that gives it its
distribution system automatically becomes the property of public character.
the government, without mention of payment of
compensation to Dela Rama or PECO. Moreover, even before
expiration of the franchise of PECO, its distribution system A "shipyard" is "a place or enclosure where ships are built or
may be taken over by the government and put to the very repaired.” Its nature dictates that it serves but a limited
same public use. clientele whom it may choose to serve at its discretion.
While it offers its facilities to whoever may wish to avail of
its services, a shipyard is not legally obliged to render its
Dean: According to the Supreme Court, there is nothing services indiscriminately to the public.
wrong to such arrangement as long as it is dedicated to the
same public purpose. Moreover, PECO no longer has a
franchise. Hence, the properties can be acquired by MORE, There can be no disagreement that the shipbuilding and ship
the new franchise holder. repair industry is imbued with public interest as it involves
the maintenance of the seaworthiness of vessels dedicated
to the transportation of either persons or goods.
Q: Can a shipyard be considered a public utility? Nevertheless, the fact that a business is affected with public
183
interest does not imply that it is under a duty to serve the

public. While the business may be regulated for public good,
the regulation cannot justify the classiKication of a purely Teresa Electric and Power Co. v. Public Service
private enterprise as a public utility. Commission
II. Facts:
Moreover, there is no law declaring a shipyard as a Petitioner is a domestic corporation operating an electric
public utility. plant in Rizal under a subsisting CPCN. Respondent Filipinas
Cement, a domestic corporation engaged in the manufacture
and sale of cement, Kiled an application with the PSC for a
CPC to install, maintain and operate an electric plant for the
The theory that KAWASAKI can acquire, as a maximum, only purpose of supplying electric power and light to its own
40% of PHILSECO’s shares is correct only if a shipyard is a factory and compound. Petitioner opposed alleging that it
public utility. But as afore-discussed, PHILSECO is not a is the duly authorized operator of electric light. Respondent
public utility and no other restriction is present that contends that the electric service will be limited to its
would limit the right of KAWASAKI to purchase the exclusive needs without affecting the interests and services
Government’s share to 40% of Philseco’s total of petitioner.
capitalization.
ISSUE: Whether or not respondent is a public utility that

Q: What is a Certi]icate of Public Convenience (CPC)? must be granted Kirst legislative franchise to operate an
A: It is an authorization issued for the operation of public electric plant.
services for which no legislative franchise is required by law,
such as a common carrier.
Ruling: NO, only a CPC is required because the reason
for the application of the CPC is for the respondent’s
Q: What is a CPCN? exclusively use in connection with the operation of its
cement factory and for the use of its employees living within
A: A CertiKicate of Public Convenience and Necessity (CPCN) the compound of the factory.
or authorization predicted on a valid congressional
franchise is required before an entity is allowed to install,
operate and maintain public facilities and services in the The above requirements show that the act was intended to
country e.g. telecommunication – PLDT. apply exclusively to any person or corporation who desires a
franchise to construct and maintain an electric line or power
plant and line for business purposes, that is, to render
service to the general public at such rate of compensation as
Q: The Batong Bakal Corporation ]iled with the
may be approved and regulated by the government.
Board of Energy an application for a Certi]icate of
Public Convenience for the purpose of supplying
electric power and lights to the factory and its
employees living within the compound. The Clearly, therefore, it should not be made to apply to
application was opposed by the Bulacan Electric respondent who applied for a certiKicate of public
Corporation contending that the Batong Bakal convenience and service to operate and maintain an electric
Corporation has not secured a franchise to operate plant exclusively for its own use in connection with the
and maintain an electric plant. ls the opposition's operation of its cement factory and for the use of its
contention correct?
A: No. A certiKicate of public convenience may be
granted to Batong Bakal Corporation, though not
184
possessing a legislative franchise, if it meets all the
other Words
NOTE: requirements. There is
in red-font-color nothing
are in the
Dean NTD’s law nor the
additional
comments, questions,
Constitution, and explanations
which indicates that a made duringfranchise
legislative the class.
is necessary or required for an entity to operate as
supplier of electric power and light to its factory and its
employees living within the compound. BAR 1998
employees living within the compound of the factory — the government or Political subdivision except as to rates.
latter to receive service free of charge.
7. Airships except as to Kixing rate.
It cannot be denied that the operation of an electric light,

heat and power plant is necessarily connected with the Q: Does the issuance of a Certi]icate of Public
business of manufacturing cement. If in the modern world Convenience and/or Necessity confer property
where we live today electricity is virtually a necessity for our right?
daily needs, it is more so in the case of industries like the A: No. The certiKicate constitutes neither a franchise
manufacture of cement. nor a contract, confers no property right, and is a
mere license or privilege. The holder of said
certiKicate does not acquire a property right in the
route covered thereby. Nor does it confer any
Petitioner claims that respondent is not entitled to a CPC to
property right, interest or interest in the public
maintain and operate electric service for its cement plant highways. Revocation of this certiKicate deprives him
and its employees because petitioner is operating an electric of no vested right. New and additional burdens,
plant in the same municipality where Filipinas cement plant alteration of the certiKicate, or even revocation or
is located. annulment thereof is reserved to the State.
Luque vs. Villegas, G.R. No. L-22545, November
28, 1969.
The SC held that while it is true that operators of public
convenience and service deserve some protection from
Q: does CPC and CPCN confer property right?
unnecessary or unlawful competition, yet the rule is that
nobody has any exclusive right to secure a franchise or a A: No, it does not. It is a mere license or privilege. The holder
certi]icate of public convenience. Above any or all thereof does not acquire a property right.
considerations, the grant of franchises and certiKicates of
public convenience and service should be guided by public
service and interest; the latter are the primordial The holder of such certiKicate does not acquire a property
considerations to be taken into account. right in the route covered thereby. Nor does it confer upon
the holder any proprietary right or interest of franchise in
the public highways. Revocation of this certiKicate deprives
Q: Instances where a Certi]icate of Public him of no vested right. Little reKlection is necessary to show
that the certiKicate of public convenience is granted with so
Convenience is NOT necessary?
many strings attached. New and additional burdens,
alteration of the certiKicate, and even revocation or
annulment thereof is reserved to the State.
(WAR-PIPA)
Dean: Hence, ABS-CBN cannot argue. It is the prerogative of

1. Warehouses Congress whether to renew or not its franchise.
2. Animal-drawn vehicles or banca powered by oar or by
sail; tug boats and lighters
Q: Other than transportation what else is considered
3. Radio companies, except as to Kixing of rates public utility?
4. Public market A: radio, television, telecom entities, electric companies and
5. Ice plants6. Public utilities operated by the national cooperatives, water utilities.
185
Q: When is a CPC/CPCN revoked? Q: Robert is a holder of a certi]icate of public

convenience to operate a taxicab service in Manila
A: GROUNDS TO REVOKE CPC/CPCN: and suburbs. One evening, one of his taxicab units
was boarded by three robbers as they escaped
after staging a hold-up. Because of said incident,
1. when the facts and circumstances in the application for the LTFRB revoked the certi]icate of public
convenience of Robert on the ground that said
the certiKicate was fraudulent or when circumstances
operator failed to render safe, proper and
changed e.g. when the company is not 60% owned by
adequate service as required under Sec 19(a) of
Filipinos, or when the company has no Kinancial capacity as the Public Service Act.
required by law i.e. the certiKicates of deposit to prove the a. Was the revocation of the certi]icate of public
Kinancial capability were spurious. convenience of Robert justi]ied? Explain.
b. When can the Commission (Board) exercise its
power to suspend or revoke certi]icate of public
2. Whenever the holder thereof has violated or willfully and convenience?
contumaciously refused to comply with any order rule or a. No. A single hold-up incident which does not link
Robert's taxicab cannot be construed that he rendered
regulation of the Commission or any provision of this Act:
a service that is unsafe, inadequate and improper.
Provided, That the Commission, for good cause, may prior to
Manzanal v Ausejo 164 s 36; BAR 1993.
the hearing suspend for a period not to exceed thirty days
b. Under Sec 19(a) of the Public Service Act, the
any certiKicate or the exercise of any right or authority Commission (Board) can suspend or revoke a
issued or granted under this Act by order of the certiKicate of public convenience when the operator
Commission, whenever such step shall in the judgment of fails to provide a service that is safe, proper or
the Commission be necessary to avoid serious and adequate, and refuses to render any service which can
irreparable damage or inconvenience to the public or to
private interests.
Q: Pepay, a holder of a CPC, failed to register the
complete number of buses/ jeepneys in the registration
because she was dealing with a lot of problems/she was
e.g. when the owner is a dummy to a foreigner which not on her right mind when she ]illed up the registration
violates the Anti-Dummy law/ if the 60% ownership is only form. Is this excuse tenable?
on paper as discovered on period reviews.
A: No. Pepay could have assigned the same to one of her
children.
3. When the operator abandons it.
Requirements for the grant of Certi]icate of Public

Convenience
The SC held that a single hold up incident is not a sufKicient

reason to revoke the CPC on the ground that the operator (COPS)
failed to render service, which is safe, proper and adequate.
1. Citizen of the Philippines. If the applicant is a Corporation,
at least 60% of the capital must be owned by Filipino
If it happened for the 4th time, then the CPC can now be citizens.
revoked. 2. Proof that the Operation of proposed public service will
promote public interest in a proper and suitable manner.
3. Prove Public necessity.
186
4. SufKicient Kinancial capability to undertake proposed

services and meeting responsibilities incidental to its
operation. Q: Can a foreign corporation own the facilities by which
a public utility may operate?
Q: What constitutional provision governs the A: In Tatad v. Garcia, the SC made a distinction between
citizenship requirement for public utilities? ownership of the facilities and operating the facilities.
A: Section 11, Article XII of the 1987 Constitution governs
the citizenship requirement for public utilities. It provides:
No franchise, certiKicate, or any other form of authorization In this case, what private respondent owns are the rail
for the operation of a public utility shall be granted except to
tracks, rolling stocks like the coaches, rail stations, terminals
citizens of the Philippines or to corporations or associations
and the power plant, not a public utility. While a franchise is
organized under the laws of the Philippines at least sixty per
centum of whose capital is owned by such citizens, nor shall needed to operate these facilities to serve the public, they do
such franchise, certiKicate, or authorization be exclusive in not by themselves constitute a public utility. What
character or for a longer period than Kifty years. Neither constitutes a public utility is not their ownership but
shall any such franchise or right be granted except under the their use to serve the public.
condition that it shall be subject to amendment, alteration,
or repeal by the Congress when the common good so
requires. The State shall encourage equity participation in The right to operate a public utility may exist independently
public utilities by the general public. The participation of
and separately from the ownership of the facilities thereof.
foreign investors in the governing body of any public utility
One can own said facilities without operating them as a
enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing ofKicers of such public utility, or conversely, one may operate a public utility
corporation or association must be citizens of the without owning the facilities used to serve the public. The
Philippines. devotion of property to serve the public may be done by the
owner or by the person in control thereof who may not
necessarily be the owner thereof.
Q: Can foreigners own public utility?
A: Yes, to the extent allowed by law. While private respondent is the owner of the facilities
necessary to operate the EDSA LRT III, it admits that it is not
enfranchised to operate a public utility as per requirement
Q: Can they participate in the management of the public of Section 11 of Article XII of the Constitution.
utility?
A: No. This will violate the Anti-Dummy law. They cannot In view of this incapacity, private respondent and DOTC
hold any executive and managerial position as this will agreed that on the completion date, the private respondent
violate the Constitution and the Anti-Dummy Law. will immediately deliver possession of the LRT system by
way of lease for 25 years, during which period DOTC shall
Q: What does capital, in relation to the Constitution, operate the same as a common carrier and private
mean? respondent shall provide technical maintenance and
repair services to DOTC.
A: Gamboa v. Teves – the term capital means voting shares
only, not the outstanding capital stock. Hence, the term
capital stock refers to the voting shares and such capital Since DOTC shall operate the EDSA LRT III, it shall assume
stock must be owned by Filipinos. At least 60% of both the all the obligations and liabilities of a common carrier. For
economic and beneKicial ownership must be owned by this purpose, DOTC shall indemnify and hold harmless
Filipinos. private respondent from any losses, damages, injuries or
187
death which may be claimed in the operation or requirement under the Constitution and the other
implementation of the system, except losses, damages, requirements and qualiKications that was mentioned a while
injury or death due to defects in the EDSA LRT III on account ago.
of the defective condition of equipment or facilities or the
defective maintenance of such equipment facilities.
Again, the public utility company must be owned by at least

60% by Filipino Citizens. RECITATION
Q: Operator, Y, has this arrangement with X. X will be

Q: What if the corporation has real properties? What if allowed to drive one of the jeepneys in exchange of
the corporation engages in real estate business? 1,000 a day. What is the relationship between X and Y?
A: Then the same rule applies in both cases, the corporation A: There is Employer – Employee relationship.
must be owned by at least 60% by Filipino Citizens.
Q: Cite 2 reasons why operator Y (owner) is liable under

Q: WWW is an e-commerce company. It plans to re-focus this boundary arrangement?
the company into full convergence organization. The
c o m p a n y h a s b e e n a c q u i r i n g , a g g r e s s i v e l y,
telecommunication businesses and broadcast media The answer should be:
enterprises and consolidating their corporate
1. The Operator Rule – there is an owner. He is the one liable
structures. The ultimate plan is to have 2 organizations.
for damages caused by the operation of that vehicle.
The ]irst organization – to own facilities. Second
organization – to provide mass media and commercial 2. No Independent Contractor relationship between the Q: M
telecom services. operator and the driver – there is employer-employee conve
relationship. Hence, the act of the employer is the act of the area t
Hallel
employee. It is as if the operator is a common carrier liable
servin
WWW will be the ]lagship entity which will own the for the acts of its employees.
rule"
facilities of the conglomerate and provide content to the prior
other organization. In turn, the other organization will Discu
operate the facilities. WWW seeks your advice on Q: In case Y sold one of his jeepneys to a 3rd party with/ or pro
whether or not the organization is a public utility which without consent of LTFRB and new operator was ”prior
requires any form of authorization from the negligent? which
government. What will be your advice? A: The
A: Seller (X) is liable. opera
within
satisfa
A: Your answer should be based on Tatad v. Garcia. The In cas
activity of WWW requires a franchise or CertiKicate or any Q: What remedy is available to the owner of record to be
the ”p
form of government authority since it is a public utility relived from liability in case operator is negligent? In
the o
based on the activities of the organization, if WWW only this case no ORCR is obtained by the buyer hence the
servic
owns the facilities of the conglomerate but does not operate 3rd party will run after you, what is your remedy?
them.
NOTE: The keyword is “operate”. If it operates the

conglomerate, then it must comply with the 60%
188
A: Although the sale was not approved, the sale is still valid PRIOR OPERATOR RULE
and existing between the buyer and seller. Seller can Kile a
3rd party complaint against the buyer.
Here, an area has a well-established operator already. The
rule allows an existing franchised operator to invoke a
NOTE: Acceptable answer if the question is “What is the preferential right within the authorized territory as long as
remedy of the seller-owner against the negligent buyer, he renders satisfactory and economical service. The prior
but Dean clariKied the question: operator must Kirst be given the Kirst opportunity to improve
its service if it is inadequate in order to meet public needs.
In other words, a public utility operator shall be shielded
Q: Again, the questions is how will you protect yourself from ruinous competition.
(Seller) from claims by 3rd party for the negligence of
the buyer?
Example: there is scarcity in public transportation in a
A: The remedy is to get the CONSENT of LTFRB so that the certain location. Under the Prior Operator Rule, the Kirst
sale will be reKlected in the records. operator must be given the chance to increase the number
of units before the second operator comes in. This is to
protect the investment made by the Kirst operator.
Q: In case of private vehicles?
A: Write a letter to the LTO stating that ownership has

already been transferred. Mandbusco, Inc. vs. Francisco
Q: What is the reasonable rate of return in case of CPC The petitioners invoked the "old operator rule," which is to
holders/ franchise holders? the effect that a public utility operator should be shielded
from ruinous competition by affording him the opportunity
A: 12% rate of return for public utilities. to improve his equipment and service before allowing a new
operator to serve in the same territory he covers. This rule
has no application in this case because the certiKicate of
Q: Does it mean that 12% is the maximum rate for public convenience granted to the respondent is a maiden
PROFIT? franchise covering the particular line connecting barrio
Pinagbuhatan and the crossing of Highway 54 and Shaw
A: No. This is just reasonable rate of return. Not ProKit. Boulevard.
Q: Is income tax considered in determining reasonable The certiKicate of public convenience authorizing the
rate of return? Mandaluyong Bus Co., Inc. to operate two buses, with one
A: NO. Income tax is not considered operating expense. It reserve, on the line extending from barrio Pinagbuhatan to
cannot be deducted from income. Plaza Miranda in Quiapo, Manila, while in a sense
overlapping with the authority given to the respondent, was
essentially intended to cover the great distance run between
barrio Pinagbuhatan and Quiapo, Manila, via Pasig
LECTURE
Boulevard, P. Sanchez, V. Mapa, Valenzuela, Old Sta. Mesa,
Sta. Mesa Boulevard, Legarda, Tanduay, P. Casal, Ayala
Bridge, Concepcion, Arroceros, Quezon Bridge and Quezon
Boulevard. Upon the other hand, the grant in favor of the
189
respondent covers only a brief shuttle run of 8 kilometers

l i n k i n g b a r r i o P i n a g b u h a t a n d i re c t ly w i t h t h e
Pasig poblacion and the crossing of Highway 54 and Shaw Under the prior applicant rule, where there are various
Boulevard. applicants for a public utility over the same territory, all
conditions being equal, priority in the Kiling of the
application for CPC becomes a factor. The applicant who
Kiled Kirst shall be granted the CertiKicate.
The Commission favored the respondent with the certiKicate
of public convenience in question. The SC was not prepared
to substitute their discretion with that of the Public Service
Commission in the determination of what can best meet the Q: Bayan Bus Lines had been operating satisfactorily a
requirements of public convenience. bus service over the route Manila
to Tarlac and vice versa via the McArthur Highway. With

the upgrading of the new North
Q: Is the prior operator rule the same as prior applicant
rule? Expressway, Bayan Bus Lines service became
inadequate despite its efforts of improving the same.
A: No. Pasok Transportation, Inc. now applies for the issuance
to it by the Land Transportation Franchising and
Regulatory Board of a certi]icate of public convenience
The prior operator rule allows an existing franchised for the same
operator to invoke a preferential right within the authorized route. Could Bayan Bus Lines, Inc. invoke the prior
territory as long as he renders satisfactory and economical operator rule against Pasok Transportation, Inc? Why?
service. The prior operator must Kirst be given the Kirst (2003 Bar)
opportunity to improve its service if it is inadequate in order
to meet public needs. In other words, a public utility A: NO. As a general principle, public utility operators must
operator shall be shielded from ruinous competition. be protected from ruinous competition, such that before
permitting a new operator to serve in a territory already
served by another operator, the latter should Kirst be given
The prior applicant rule, on the other hand, provides that an opportunity to improve his equipment and service. This
where there are various applicants for a public utility over principle, however, is subject to justiKiable exceptions. The
the same territory, all conditions being equal, priority in the primary consideration in the grant of a certiKicate of public
Kiling of the application for CPC becomes a factor. It convenience must always be public convenience.
presupposes a situation when two interested persons apply
for a certiKicate to operate a public utility in the same
community over which no person has as yet granted any Bayan Bus Lines had been given an opportunity to improve
certiKicate. This is similar to the First to File Rule under its service but despite its efforts, its services still proved
Trademarks and Patents. The applicant who Kiled Kirst shall inadequate which rendered the need to avail of the services
be granted the CertiKicate. of Pasok Transportation, Inc. as the addition would better
serve public convenience, which is the paramount
consideration in the granting of a certiKicate of public
There is a bus line service in Manila and Malolos. A new road convenience.
opened between said points and a new carrier applies for a
CPC. The old bus line argues that it should be given priority.
Exceptions to the application of Prior operator rule or
A: The prior applicant rule, not the prior operator rule shall Protection of investment rule:
apply.
190
1. Where public interest would be better served by the new

operator;
Q: Is the prior operator rule absolute?
2. Where the old operator has failed to make an offer to meet
the increase in trafKic; A: No. The paramount consideration is public interest and
convenience.
3. Where the CPC granted to the new operator is a maiden
certiKicate, which does not overlap with the entire route of
the old operator but only a short portion thereof as a Q: What is the protection of investment rule?
convergence point;
A: One of the purposes of PSA is to protect and conserve the
4. If the application of the rule will be conducive to investments which have already been made for that purpose
monopoly of the service, and contrary to the principle that by public service operators. Objection should be made if the
promotes healthy competition; grant of the application would result to a ruinous
5. If the old operator unjustiKiably abandoned his service for competition. Mere possibility of reduction in the income of
two or three years by not registering the necessary an existing operator does not, of itself, establish that issuing
equipment forfeits his right to said equipment and the a permit to another will result in ruinous competition. It
service authorized to him; should be shown that the Oppositor will not obtain
sufKicient proKits to pay a dividend or reasonable interest
6. The service of the prior operator is inefKicient; upon invested capital.
7. The prior operator denies that there is a need to expand

his service;
Q: What is "rate"?
8. The prior operator has abandoned his service; A: Rate is a charge, payment, or price Kixed according to a
ratio, scale, or standard. It is an amount paid or charged for
9. The prior operation is operating less units than he was
a good or service.
authorized;
National Power Corp. v. Philippine Electric Plant
10. The prior operator was given the opportunity to expand
his service and failed to do so. Q: How are rates ]ixed?
A: Rates are Kixed on the basis of the investment amount
or property value that the public utility is allowed to earn
an amount value otherwise called "rate base." A just rate
Q: What is the policy behind the prior operator rule? is founded on conditions thatare fair and reasonable to
A: To be protected from ruinous competition and to protect both the public utility and the public. This stipulation
means that the public utility must have, as proKit, a fair
the prior operator’s investments.
return on the reasonable value of the property. The
imposition of the maximum rates it charges cannot be
The policy behind the Prior Operator Rule is the general conKiscatory. As to the public, reasonableness requires
principle that public utility operators must be protected entitlement to the service at an affordable cost.
from ruinous competition, such that before permitting a National Power Corp. v. Philippine Electric Plant
new operator to serve in a territory already serviced by Owners Association, lnc., G.R. No. 159457, April 7,
another operator, the latter should Kirst be given 2006.
opportunity to improve his equipment and service. Note,
however, that this policy is not without any exceptions.
The primary consideration will always be public
convenience. Halili v. Cruz,G.R. No. L-21061, June 27, Republic v. Meralco
1968.
The SC held that the reasonable rate of return is 12%. This
refers to the Return on Investment and not the proKit. In this
case, Meralco earned more than 12% of its capital.
191
In regulating rates charged by public utilities, the State

protects the public against arbitrary and excessive rates
Q: What are the factors to determine reasonable rates? while maintaining the efKiciency and quality of services
A: rendered. However, the power to regulate rates does not
give the State the right to prescribe rates which are so low as
a. The original cost of construction; to deprive the public utility of a reasonable return on
investment. Thus, the rates prescribed by the State must be
b. the amount expended in permanent improvements;
one that yields a fair return on the public utility upon the
c. the amount and market value of the bonds and stock of the value of the property performing the service and one that is
public utility; reasonable to the public for the
d. the present cost compared with the original cost of services rendered. The Kixing of just and reasonable rates
construction; involves a balancing of the investor and the consumer
interests.
e. the probable earning capacity of the property under the
particular rates
prescribed; and UNLAWFUL ARRANGEMENTS
f. the sum required to meet operating expenses.

BOUNDARY SYSTEM
It must be noted that the government is not bound to apply

any particular method or formula for determining rates.
Under this system the driver is engaged to drive the owner/
These are factors but the government is not bound to
operator’s unit and pays the latter a fee commonly called
comply or adhere to all of these factors. The ultimate
boundary for the use of the unit. Whatever he earned in
consideration is still public interest.
excess of that amount is his income. The gasoline consumed
by the jeep is for the account of the driver.
Q: What is the policy behind the ]ixing of rates?
A: The regulation of rates to be charged by public utilities is The relationship between jeepney owners/ operators on
founded upon the police powers of the State and statutes one hand and jeepney drivers on the other under the
prescribing rules for the control and regulation of public boundary system is that of employer-employee and not of
utilities are a valid exercise thereof. lessor-lessee.
When private property is used for a public purpose and is The owner of the public vehicle operating under the
affected with public interest, it ceases to be juris privati only boundary system is not exempt from liability in a case of
and becomes subject to regulation. The regulation is to injury to or death of passengers. To exempt from liability the
promote the common good. Submission owner of a public vehicle who operates it under the
“boundary system” on the ground that he is a mere lessor
to regulation may be withdrawn by the owner by would be not only to abet Klagrant violations of the PSA, but
discontinuing use; but as long as use of the property is also to place the riding public at the mercy of reckless and
continued, the same is subject to public regulation. irresponsible drivers. Moreover, due care in the selection of
employees is called for by Article 2180 of the Civil Code.
Failing on this, the owner of the vehicle, who is likewise the
employer, shall not be exempt from liability.
192
KABIT SYSTEM
NOTE: This is the reason why jeepney drivers and taxi

drivers must meet their boundary. Otherwise they will incur
losses. The kabit system is an arrangement whereby a person who
has been granted a CPC allows other persons who own
motor vehicles to operate them under his license, sometimes
for a fee or percentage of the earnings. Although not
Q: Baldo is a driver of Yellow Cab Company under the outrightly penalized as a criminal offense, the kabit system
boundary system. While cruising along the South is invariably recognized as being contrary to public policy
Expressway, Baldo‘s cab ]igured in a collision, killing his and therefore, void and inexistent under Art. 1409 of the
passenger, Pietro. The heirs of Pietro sued Yellow Cab New Civil Code. It is a fundamental principle that the court
Company for damages, but the latter refused to pay the will not aid either party to enforce an illegal contract, but
heirs, insisting that it is not liable because Baldo is not will leave them both where it Kinds them.
its employee. Resolve with reasons. (2005 Bar)
NOTE: Both parties will be held liable. They will be both

A: Yellow Cab is solidarily liable with Baldo. Baldo is an jointly and severally liable for the damages caused.
employee of Yellow Cab under the boundary system. As
such, the death of passenger Pietro is a breach of contract of
carriage. Q: What are the effects of the Kabit System?
A: The transfer, sale, lease or assignment of the
privilege granted is valid between the contracting
parties but not upon the public or third persons.
2 reasons why operator is liable: Gelisan v. Alday, G.R. No. L-30212, September 9,
1987.
1. The Operator Rule – there is an owner. He is the one liable
The registered owner is primarily liable for all the
for damages caused by the operation of that vehicle.
consequences Klowing from the operations of the
2. No Independent Contractor relationship between the carrier. Benedicto v. IAC, G.R. No. 70876, July 19,
operator and the driver – there is employer-employee 1990.
The thrust of the law in enjoining the kabit system is to
relationship. Hence, the act of the employer is the act of the
identify the person upon whom responsibility may be
employee. It is as if the operator is a common carrier liable
Kixed with the end in view of protecting the riding
for the acts of its employees. public. Lim. v. CA, G.R. No. 125817, January 16,
2002.
The registered owner cannot recover from the actual
Q: X owns a ]leet of taxicabs. He operates it through owner and the latter cannot obtain transfer of the
what is known as boundary system. Y drives one of such vehicle to himself, both being in pari delicto. Teja
taxicabs and pays X a ]ixed amount of Php1 ,000 daily Marketing V. IAC, (G.R. N0. L-65510, March 9, 1987.
under the boundary system. This means that anything For the better protection of the public, both the
registered owner and the new owner are jointly and
above Php1,000 would be the earnings of Y. Y, driving
severally liable with the driver. Zamboanga
recklessly, hit an old lady crossing the street. Is X
Transportation v. CA, G.R. No. L-25292, November
exempt from any liability? (2012 Bar) 29, 1969.
A: NO. X will not be exempt from liability because he
remains to be the registered owner and the boundary
system will not allow the circumvention of the law to avoid
liability.
193
Without this system, it would have been easy on the part of only necessary to protect public interest. The sale,
the operator to evade liability because of the contractual encumbrance, or lease is valid between the parties but it
relationship. The operator cannot say that. It is not binding does not bind 3rd persons.
insofar as 3rd persons are concerned.
DEAN: They could have worded a better term like

“PIGGYBACK”, not “KABIT”.
What are the rules on sale, encumbrance, or lease of public

utilities? NOTE: Public utilities, not the CertiKicate itself.
Sec. 20 (g) of the Public Service Act, then the applicable law,
speciKically provided:
... it shall be unlawful for any public service or for the owner,
lessee or operator thereof, without the approval and
authorization of the Commission previously had – ... (g) to
sell, alienate, mortgage, encumber or lease its property,
franchise, certiKicates, privileges, or rights, or any part
thereof.
The approval herein required shall be given, after notice to

the public and hearing the persons interested at a public
hearing, if it be shown that there are just and reasonable
grounds for making the mortgaged or encumbrance, for
liabilities of more than one year maturity, or the sale,
alienation, lease, merger, or consolidation to be approved,
and that the same are not detrimental to the public interest,
and in case of a sale, the date on which the same is to be
consummated shall be Kixed in the order of approval.
Q: Is the approval by the Commission of the sale,

encumbrance or lease of property a condition precedent
to the validity of a contract? If there is no consent by the
LTFRB, is the sale, encumbrance or lease valid?
A: No, the approval by the Commission is not a condition

precedent to the validity of the contract. The approval is
194

MERC REV 2 Intellectual Property Law Transportation Law Public Service Act 1

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4A- Study Circle Mercantile Law Review II

A.Y. 2020-2021 Dean Nilo T. Divina

MERCANTILE LAW REVIEW II appearance to and can serve as a pattern for an

Dean Divina: barrels, or other similar containers so marked or stamped,

It is a private right and as such, when it comes to

The inventor, discoverer, or possessor of a trade secret or

How do you acquire trademark?

Scope or object Trademark is acquired through registration and good faith.

Dean Divina: Dean Divina:

Supposing a person sells the beauty cream product inside

In another case, eye leaf bushing is a useful article but it has

No, because it is not an international mark but only

Q: Juan Dela Cruz came up with an invention that

So, if it is patented, what are the rights granted by law to the

If the applicant will not disclose how the invention can be

Corporation) and is industrially applicable. It may be, or may relate to,

Just like a patent of invention is likewise non-renewable. Dean Divina:

We say that there are kinds of patentable inventions.

What element of patentability of invention is not present in

This is very much UNLIKE copyright where the author of the

A: (1) Actual damages; (2) Costs of the suit; and (3)

Q: What about the order of condemnation, the order of

A: No. This is one thing PECULIAR about patent

In Aguas vs. De Leon, the Supreme Court ruled that an

In the case of drugs and medicines, there is no inventive

For c, that is why acupuncture is not patentable.

Obviously, no. Ownership to a patent

SUBSCRIPTION, as we have seen in corpo, is NOT THE SAME

b. Institute of Computer Technology; Right of priority

Rights conferred by a patent

Who may ]ile an action for infringement?

In one case, the SC said that identity of result does not

If infringement is repeated by the infringer or by anyone in

Later, Carlos Asistio, who used to be Nestor’s plant

Dean Divina: Damages; Requirement of Notice.

Dean Divina: What are the kinds of licensing agreements?

A voluntary license is an authorization given by the patent

h. Those which require that the technology recipient shall

Basically, Health, public interest, national interest, anti-

The Director General of the Intellectual Property OfKice may

d. In case of public non-commercial use of the patent by the

of AIDS cases in Metro Manila and other urban areas,

1. Can the compulsory license be granted over the entire

The fact that there is an acknowledgement and payment of

Trade name is different from trademark. Trade name is a

So whats my conclusion? It should be the Kirst one to use

to goods or services which are not similar to those

- It is a well-known mark and is entitled to

a way to determine whetherthere exists an For Dominancy Test:

- Emerald Garment Manufacturing Corporation v.

- Amigo Manufacturing, Inc. v. Cluett Peabody Co.

Q: How about master? DISCUSSION:

The same principle was applied in Sketchers, U.S.A., Inc. v.

Cite jurisprudence where the Supreme Court applied

g.The trademark registration of LOTUS for soy sauce

Dean Divina: In determining whether goods are similar or related,

g. Television sets, stereo components, DVD and VCD

Provided further, That the interests of the owner of the

2. Yes, since both companies use water in conducting

1. oppose the application for registration of a mark

T is the registered trademark owner of “CROCOS,” a well-

A: There is no unfair competition. Unfair competition is

Q: X, a dealer of low grade oil, to save on expenses, uses