Franchise

As a well-settled general rule, franchises are subject to the law of the

place that granted them.
The term franchise has numerous implications and as a result there
is misperception in its use. It does not matter what label the parties
put on a transaction or agreement: license, joint venture, consulting
and supply agreement, dealership; if an arrangement has all of the
elements of a franchise, it's a franchise.
Commonly, still, it is a special privilege conferred by the government
on an individual. When referring to government grants (other than
patents, trademarks, and copyrights), the term franchise is often used
to connote more substantial rights, the rights necessary for public
utility companies to carry on their operations are generally designated
as franchise rights.( Black's Law Dictionary (8th ed., p. 1944 2004 ) The
granting of franchises is a power that, unfortunately has not always
been exercised with proper caution. A franchise being a branch of the
sovereign prerogative subsisting in the subject by a grant from the
government, the delegation of such power should be primarily
beneficial to the sovereign public, then to the grantee. Hence, any
franchises granted by the Philippine Government are governed and
construed in accordance with its laws
It is also a privilege granted by a corporation and which does not
belong to citizens generally of common right, e.g., a right granted to
offer Cable Television service. With specific reference to corporations,
the term franchise may indicate either to the corporation itself (as an
franchise belonging to the shareholders of the corporation) or to the
different powers of a corporation (such as the franchise of the right of
the corporation to the issuance of a bank not by an incorporated bank
(Pp v Utica Ins. Co., supra). Basically it is a privilege granted or sold,
such as to use a name or to sell products or services. In its simplest
terms, a franchise is a license from the owner of a trademark or trade
name permitting another to sell a product or service under that name
or mark. As an illustration, a municipality may grant franchise that
shall be in its nature exclusive , conveying thereunder rights that the
city may not subsequently impair nor restrict. Nevertheless, the
franchise so granted acquires simply the nature of a contract, and if
the cable television company erects its poles and wires under authority
of an ordinance, which provides for the expiration of its privileges on

and after a certain date, such company is possessed of no legal right to

maintain such equipment within the corporate limits, after the life of
such grant. Hence, such company owes obedience to the laws of the
place within which they are located and which granted them such
franchise
Goodwill
The goodwill of a business, and taxation thereon, is governed by the
law of the place where the business is carried on.
Article 521 of the New Civil Code provides that goodwill of a business is
property and may be transferred together with the right to use the
name under which the business is conducted. Goodwill is defined as
the advantage acquired by any product or firm because of general
encouragement and patronage of the public. Its elements are: place,
name, and reputation. Although goodwill is contemplated as a property
and provided in Article 521 of the New Civil Code; it is not an
independent property which is separable from the firm or business
which owns it. Moreover,
goodwill is a legal right of property
associated with every business. It has concisely been described as
the attractive force which brings customs ( Per Lord Maenaghten in
Inland Revenue Commisioners vs Muller & Cos Margarine Ltd [1901]
A.C. 217, HL.) As a legal property, a goodwill may be created, owned ,
assigned and extinguished , and all of these operations are governed
by the system of law under which the goodwill exists.
Goodwill is further defined as a business's reputation and other
intangible assets that are considered when appraising the business,
esp. for purchase; the ability to earn income in excess of the income
that would be expected from the business viewed as a mere collection
of assets. Because an established business's trademark or servicemark
is a symbol of goodwill, trademark infringement is a form of theft of
goodwill. Therefore, the goodwill of a business shall be governed by
and construed in accordance with the laws of the place where the
business is carried on. This includes ny dispute arising out of or
relating to goodwill of a business and taxation and the transactions
contemplated.

Intellectual Properties
It has been provided as a general rule that Intellectual Properties which
consists of patents, trade marks, trade names and, copyrights, and
other related rights are, in the absence of a treaty protected only by
the state that granted or recognized them.
The Intellectual Property Code of the Philippines (Republic Act 8293)
which was signed into law by then President Fidel Ramos on June 16,
1997 and took effect on January 1, 1998, defines Intellectual property
as consisting of patents, trade marks, trade names and, copyrights,
and other related rights. (THE LAW ON INTELLECTUAL PROPERTY (A
PRIMER), Office of the Press Secretary, Bureau of Communication
Services, Manila, p. 1. )
Patent refers to titles granted to inventions only. In the Philippines,
patent has been used in its generic sense, to include titles to
inventions, utility models, and industrial designs. Under Sec 21 of
Republic Act No. 8293, patentable inventions refer to any technical
solution of a problem in any field of human activity which is new,
involves an inventive step and is industrially applicable shall be
Patentable. It may be, or may relate to, a product, or process, or an
improvement of any of the foregoing.
A trademark pertains to a system providing for protection for mark,
collective mark, or trade name, name or symbol of goods made or
manufactured.(Example: McGregor.) Trade name pertains to name or
symbol of store, business, or occupation. (Example: Heacocks). It
means the name or designation identifying or distinguishing an
enterprise.. Article 520 of the New Civil Code provides that A
trademark or trade name duly registered in the proper government
bureau or office is owned by and pertains to the person, corporation, or
firm registering the same, subject to the provisions of special laws.
A copyright is defined as a protection extended to expressions and not
to ideas, procedures, methods of operation or mathematical concepts.
Such expressions may be in the form of literary, scholarly, scientific
and artistic works.
Once a copyright has been created it is imperative to discern what
matter of the exclusive right will be. Rationally speaking, the issue is
inseparably linked with the decision to grant copyright, as it
determines what is exactly being granted. The choice of law point is
important. While it is generally accepted that a copyright holder has
the exclusive right to reproduce the work and make public

representations of the work, certain national legislations add to this

exclusive right for the copyright holder to distribute copies of work. The
exact scope of the rights granted depend on the national law and are
different on a country-to-country basis An earlier rule states that a
copyright is given protection only by the state that granted or
recognized it in the absence of a treaty. As an illustration, in the
absence of a treaty, a copyright duly recognized in State Z could not
be enforced in our country lest a comparable copyright was also
applied for and granted in the Philippines.
Related rights denote to the protection extended to derivative works,
to include among others, dramatizations, translations, adaptations,
abridgements, arrangements, and other alterations of literary or
artistic works.
Alike other choses in action, intellectual property is without a definite
situs and must consequently follow the place of its registration or
protection. Lex loci protection is, also known as the "territorial
principle", is a choice of law rule applied to cases concerning the
infringement of intellectual property (IP) rights, such as copyrights or
patents. It stipulates that the law applied to such cases is the law of
the locus protectionis, that is, the law of the country for which legal
protection for the intellectual property is claimed The reason for this is
that intellectual property rights arise, though creation or registration,
in each country for which a work seeks protection; infringements are
governed by the laws of the countries where the alleged infringing acts
take place. In intellectual property, cross-border acts may best be
localized, for purposes of resolving conflicts of laws, by considering
consequences for judicial remedies. This has inclined to mean that the
medium, as the place of registration or of infringement, will apply its
own substantive intellectual property laws. Depicting from the point
that this principle has been adopted by both the Berne Convention for
the Protection of Literary and Artistic Works of 1886 as well as the Paris
Convention for the Protection of Industrial Property of 1883, it can be
confirmed that the rights held in each country are independent.
Although in copyright cases, the courts apply the law of the country
where the violation is committed, the counterfeiting of an industrial
property right is governed by the law of the country in which the
patent is issued or the trademark or model is registered. Hence, in
whichever case, the general rules as provided by Martin Wolff is that
A state will protect only such patents, designs, trade marks, trade
names, and copyrights as it has itself granted either by particular act
or general statute. No state applies foreign laws to questions of
patents, copyrights, and the like or recognizes rights of this class
created under foreign law. Thus, if an inventor would like his creation
be protected by a patent in States A and B, then he has to have

patents granted by both states.

Under the Intellectual Property Code of the Philippines, a patent has a
term of protection of twenty years from the date of application; for
utility models, seven years; for industrial design, five years; for trade
mark, ten years; for layout designs, ten years; for copyrights, it shall
endure during the lifetime of the creator and fifty years thereafter, in
case of works of join creation, the period of fifty (50) years shall be
counted from the death of the last surviving co-creator; for new plant
varieties, twenty-five years from the date of granting of certificate of
registration for trees and vines, and twenty years for all other types of
plants. After the expiration of the forgoing terms of protection, the
intellectual property becomes a public property.
In Philips Erport B.V. v CA 206 SCRA 457 (1992), The Court reiteratied
its earlier decision in Western Equipment and SUplly Co. vs. Reyes 51
Phil 115 (1927) which stated that the right to use the companys
corporate and trade name is a property right which may be asserted
against the whole world. In the said case, defendants filed an Articles
of Incorporation with the intention of organizing a domestic corporation
under the Philippines Corporation law to be known as Western Electric
Company, Inc., for the purpose of manufacturing and dealing in
electrical and telephone apparatus and supplies. To protect its trade
name, Western Electric Company, Inc., a foreign corporation organized
under the laws of New York, USA, which was not licensed or engaged in
business in the Philippines, prayed for a temporary injunction to
restrain the issuance of Certificate of Incorporation to the defendants.
The defendants opposed the move, contending that WEC (USA) did not
have the capacity to sue for not being licensed to operate nor being
engaged in the business in the country. In the case, the Court ruled
that the right to use the companys corporate and trade name is a
property right which may be asserted against the whole world.
Moreover, the Supreme Court ruled in numerous cases that . . . a
corporations right to use its corporate and trade name is a property
right, a right in rem, which if may assert and protect against the world
in the same manner as it may protect its tangible property, real or
personal, against trespass or conversion. It is regarded , to a certain
extent, as a property right and one which cannot be impaired or
defeated by subsequent appropriation by another corporation in the
same field.
With respect to trademarks, the Supreme Court, in Emerald Garment
Mfg. Cor. Vs. C.A 251 SCRA 600 (1995), held that the policy of the
Court in allowing foreign corporations not licensed to do business in
the Philippines to sue in Philippine Courts was upheld. In the said case,

H.D. Lee Co., Inc. a foreign corporation not engaged to do business in

the Philippines, filed with the bureau of Patents, Trademarks and
Technology Transfer a Petition for Cancellation of Registration for the
trademark Stylistic Mr. Lee used on different lines of clothing under
the name of Emerald Garment Manufacturing Corporation, a domestic
corporation. As a justification, Emerald questioned the capacity to sue
of Lee Co., being a foreign corporation not licensed to do business in
the country. It was ruled by the Supreme Court that H.D. Lee Co., Inc.
had the capacity to sue for infringement notwithstanding of its lack of
license to engage in business in the country but denied the company
protection for it failure to substantiate actual use of the emblem in the
local market, a requirement of Sections 2 and 2-a of the same law560
Finally, in 1998, the Intellectual Property Code of the Philippine
(Republic Act 8293) was passed into law. This law permitted foreign
corporation not engaged in business in the Philippines to file civil or
administrative action for opposition, cancellation, infringement, or
unfair competition.
As intellectual property becomes an increasingly valuable commodity
in international transactions, the choice-of-law rules that determine the
substantive law governing the transactions will become very
important. Uncertainty in this area will lead not only to unnecessary
costs and uncertainty whenever worldwide rights and transactions are
involved, but also to unjust results that would be contrary to the
expectations of the interested parties. Hence in any case, the
prevailing conflicts rule in most jurisdictions is that expressed by Wolff
A State will protect only such patents designs, trademarks, trade
names, and copyrights as it has itself granted either by a particular act
or general statue. No State apples foreign laws to questions of patents,
copyrights and the like or recognized of this class created under
foreign law
On January 1 1995, the Philippines became a member of World Trade
Organization . As a member of the said organization, the Philippines
has agreed to ensure the conformity of its laws, regulations and
administrative procedures with tis obligations as provided and abides
by the principles of national treatment. Under this principle, as
provided in Article 3, Agreement on TRIPS, Each member shall accord
to the nationals of other members no less favorable than that it
accords to its own nationals with regard to the protection of intellectual
property