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Ma. Carla P. Mapalo Professor Susan Villanueva(2005-22630) July 12, 2013

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INTELLECTUAL PROPERTY LAW

1) Is an assignment involving copyright required to comply with Sec. 87and 88 of the IP Code? What's the basis for your answer?

Answer: No, not all assignments involving copyright is required to comply withsec. 87 and 88 of the IP Code.

Basis:Sec. 85 of the IP code requires that all technology transfer

arrangement comply with the provisions of Chapter IX (Voluntary Licensing) ofIP Code. The provision states:

Section 85. Voluntary License Contract. - To encourage thetransfer and dissemination of technology, prevent or controlpractices and conditions that may in particular cases constitutean abuse of intellectual property rights having an adverse effecton competition and trade, all technology transferarrangements shall comply with the provisions of thisChapter .

Pursuant to this rule, all technology transfer arrangements must meetthe terms provided for in Sec. 87 and 88 of the IP code. The applicability ofthe provision, however, is dependent on the definition of Technology Transfer Arrangement. Sec. 4.2 of the IP code defines “technology transferarrangment” as follows:

The term "technology transfer arrangements" refers to contractsor agreements involving the transfer of systematic knowledge forthe manufacture of a product, the application of a process, orrendering of a service including management contracts; and the

transfer, assignment or licensing of all forms of intellectualproperty rights, including licensing of computer software exceptcomputer software developed for mass market.

Although the above-cited provision seem to imply that any assignmentor transfer of copyright is considered as technology transfer arrangement, theRules and Regulations on Voluntary Licensing Agreement, which is theimplementing rule of the provisions of Chapter IX of the IP code, provides amore restrictive definition to wit:

(n) “Technology Transfer Arrangements” shall mean contracts or

agreements involving the transfer of systematic knowledge forthe manufacture of a product, the application of a process, or



rendering of a service including management contracts; and thetransfer, assignment or licensing of all forms of intellectualproperty rights, including licensing of computer software exceptcomputer software developed for mass market

The licensing of copyright is considered a technology

transfer arrangement only if it involves the transfer ofsystematic knowledge.

In light of the above-cited definition, an assignment of copyright isrequired to comply with the provisions of sec. 87 only if it involves a transfer ofsystematic knowledge. Therefore, not all assignments of copyright requirecompliance with the Chapter of Voluntary Licensing of the IP Code.

2) Why is it that the IP Code requires parties to a contract to agree toprovide for mandatory provisions under Sec. 88 and to agree not toprovide for prohibited clauses under Sec. 87?

Answer: As provided for by Sec. 87, the prohibited clauses are considered tohave an adverse effect on competition and trade. The prohibited clauses aretherefore, contrary to the 1987 Constitution, which mandates that “The Stateshall regulate or prohibit monopolies when the public interest so requires. Nocombinations in restraint of trade or unfair competition shall be allowed.”1 Therule was, thus imposed to prevent unfair competition and encourage trade andcommerce. This provision is made to accomplish the State policy of the IPcode to promote the diffusion of knowledge and information for the promotionof national development and progress and the common good.2.

The mandatory provisions of the IP code on the other hand, isnecessary to ensure that the State has the power to regulate these transfersto further advance the avowed policies of the State. It is essential tostrengthen the intellectual property rights protection in the Philippines. Indeed,the use of intellectual property bears a social function, and the State has theright to regulate the transfer of knowledge and flow of information for thebenefit of the public

3) Are TTAs required to be registered with the Documentation,Information and Technology Transfer Bureau?

Answer : No, According to Sec. 92, TTAs that conform to the provisions ofSections 87 and 88 of the IP Code need not be registered with theDocumentation, Information, and Technology Transfer Bureau (“DITTB”)However, an agreement that does not conform to the aforementioned relevantprovisions, to be enforceable, is required to be approved and registered withthe DITTB but only in limited exceptional cases provided in sec. 91:

Section 91. Exceptional Cases. - In exceptional or meritoriouscases where substantial benefits will accrue to the economy,

1 Art. XII, Sec. 19 of the 1987 Constitution.2 RA 8293, Sec. 2



such as high technology content, increase in foreign exchangeearnings, employment generation, regional dispersal ofindustries and/or substitution with or use of local rawmaterials, or in the case of Board of Investments, registeredcompanies with pioneer status, exemption from any of the

above requirements may be allowed by the Documentation,Information and Technology Transfer Bureau after evaluationthereof on a case by case basis.

4) What's the effect if the TTA doesn't comply with Secs. 87-88 of theCode? What's the status of the contract? When the law uses the word"unenforceable" does it mean in the civil law sense? 92

Answer: Non-conformance with any of the provisions of Sections 87 and 88shall automatically render the technology transfer arrangement

unenforceable, unless said technology transfer arrangement is approved andregistered with the Documentation, Information and Technology TransferBureau under the provisions of Section 91 on exceptional cases above-mentioned.

Neither the Intellectual property code nor the Rules and Regulations onVoluntary Licensing Agreement define the term “unenforceable”. The term isdifferent from the Civil Code concept. Unenforceable contracts, in the Civil lawsense, produce no legal effect unless ratified. Under 1403 of the Civil Code,an unenforceable contract will be deemed effective if ratified by a person ofcompetent authority. However, the Intellectual Property Code and related

statutes make no mention of a person who has the authority to ratify thecontract. Sec. 91 in relation to 92 only pertains to exceptions to the rule butdoesn’t provide for ratification of the agreement. The mandatory wording ofthe provision seem to imply that the word “unenforceable” means void.

Moreover, Pursuant to 1403 of the civil code, contracts are inexistentand void from the beginning if the cause, object or purpose is contrary to law,morals, good customs, public order or public policy. As earlier discussed, theprohibited provisions of Sec. 88 are deemed to have an adverse effect oncompetition and trade, and thus, violative of the constitutional mandateagainst restraint of trade or unfair competition. Since the agreement

containing the prohibited clauses is contrary to public policy or law, it shouldbe declared void.

5) If copyright vests from the very moment of creation, why would youadvise a person to make a deposit? What's the advantage to thecopyright holder?

Answer : Although deposit is not a requirement for the vesting of copyright, thedeposit establishes that the work was already created and existing at the timethe deposit was made. The deposit certificate may be helpful or useful to the

creator when he or she deals with other person since it gives an assurancethat a work is in existence at the time of the transaction. Even though



registration and deposit is not conclusive as to copyright ownership. Thecertificate of deposit gives the holder a sense of authority over the work andgives an impression to the public that the holder is the appropriate person totransact with.

Another advantage to the owner of the copyright is that he is exemptedfrom making additional deposit of the works with the National Library and theSupreme Court Library under other laws, as provided by Sec. 193 of the IPCode. Moreover, based on the same provision, a person may also be heldliable for a fine if there is failure to deposit the work after demand was madeby the Director to deposit the creation. Sec. 193 states that “If, within three(3) weeks after receipt by the copyright owner of a written demand from thedirectors for such deposit, the required copies or reproductions are notdelivered and the fee is not paid, the copyright owner shall be liable to pay afine equivalent to the required fee per month of delay and to pay to theNational Library and the Supreme Court Library the amount of the retail price

of the best edition of the work.”

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