INTELLECTUAL PROPERTY

MERCANTILE AND TAXATION LAWS > V. INTELLECTUAL PROPERTY

Intellectual Property (IP) law in the Philippines is regulated primarily through the Intellectual Property Code of the Philippines (Republic Act No. 8293, as amended), which consolidates laws governing patents, trademarks, copyright, trade secrets, and other IP protections. The IP Code aligns Philippine IP laws with international standards, following agreements like the WTO’s TRIPS Agreement, to which the Philippines is a signatory. Here’s a comprehensive breakdown of the major facets of IP law under mercantile and taxation laws in the Philippines:

I. Intellectual Property Code of the Philippines

The Intellectual Property Code, enacted in 1997, codifies the various forms of IP rights in the Philippines, categorizing and setting out protections for patents, utility models, industrial designs, trademarks, service marks, copyright, and geographic indicators. The law is enforced by the Intellectual Property Office of the Philippines (IPOPHL), which oversees registration and enforcement.

II. Major Types of Intellectual Property Rights in the Philippines

  1. Patents

    • Definition: A patent provides the holder exclusive rights to exclude others from making, using, selling, or importing an invention for a limited period, typically 20 years from filing.
    • Requirements for Patentability: The invention must be novel, involve an inventive step, and be industrially applicable.
    • Procedure: Applications are submitted to IPOPHL, where they are examined and, if meeting requirements, approved for patent grants.
    • Exceptions: Non-patentable inventions include discoveries, scientific theories, mathematical methods, and other specifically excluded items under the IP Code.
    • Tax Implications: Income derived from patents may be subject to income tax, but the Bureau of Internal Revenue (BIR) may allow deductions for certain IP-related expenses.

  2. Utility Models and Industrial Designs

    • Utility Models: Provides protection for new and industrially applicable models or improvements that don’t meet the full patent requirements, protected for a shorter term (typically 7 years).
    • Industrial Designs: Protects aesthetic, non-functional elements of industrial products, lasting for 5 years and renewable for up to 15 years.
    • Taxation: Similar to patents, revenue from licensing of utility models or designs is taxed as income, and specific IP expenses may be deductible.

  3. Trademarks and Service Marks

    • Trademarks: A trademark is a word, name, symbol, or device identifying and distinguishing goods. It must be distinctive and non-generic.
    • Registration and Renewal: Trademarks require registration with IPOPHL to obtain exclusive rights, lasting for 10 years and renewable indefinitely.
    • Filing Basis: Philippine law allows for use-based and intent-to-use filings, which must show bona fide intent to use the trademark.
    • Protection Against Infringement: Registered trademarks provide the holder with legal remedies against infringement, including damages and injunctive relief.
    • Taxation on Trademarks: Licensing income is generally taxable. The transfer or assignment of trademarks may also trigger capital gains tax. Moreover, withholding tax applies to royalties paid to foreign licensors.

  4. Copyright

    • Protection Coverage: Copyright protects original works of authorship, including literary, artistic, and musical works. It doesn’t cover ideas but protects the expression of ideas.
    • Duration of Copyright: Generally lasts during the life of the author plus 50 years after death. For joint authorship, 50 years from the death of the last surviving author.
    • Registration: While copyright protection is automatic upon creation, voluntary registration with the National Library or IPOPHL provides additional evidentiary support.
    • Infringement and Remedies: Copyright holders can pursue damages and other relief against unauthorized use, with criminal penalties for willful infringement.
    • Tax Implications: Revenue from copyrighted work licensing is subject to income tax. Authors and artists may also deduct expenses related to copyright production and maintenance.

  5. Trade Secrets

    • Protection: Trade secrets are protected under civil law rather than the IP Code. They must be confidential and provide economic value due to their secrecy.
    • Misappropriation: Philippine laws, through civil remedies, provide recourse for trade secret theft, typically under contractual non-disclosure or non-compete agreements.
    • Taxation: Licensing or sale of trade secrets is subject to income tax, with possible deductions for maintaining confidentiality measures.

  6. Geographical Indications (GI)

    • Definition: GIs protect names or signs used on products from a specific location that have qualities unique to that geography.
    • Regulation and Registration: GIs can be registered with IPOPHL and offer legal protection against unauthorized use.
    • Taxation of GI Products: Income derived from licensed GIs is taxable; however, certain local products may qualify for reduced tax treatment under specific laws.

III. Enforcement and Remedies

The IP Code provides several enforcement mechanisms and remedies for IP holders, which include:

  1. Administrative Complaints: IPOPHL’s Bureau of Legal Affairs accepts complaints against IP violations, where it can impose sanctions and issue injunctions.
  2. Judicial Action: Civil suits may be filed in the regular courts, where IP holders can seek damages, injunctions, and the destruction of infringing goods.
  3. Customs and Border Control: The Bureau of Customs is authorized to block the import and export of goods that infringe IP rights.
  4. Criminal Actions: Severe infringements, such as counterfeiting, are punishable under the IP Code with imprisonment and fines.

IV. International IP Law Compliance and Treaties

The Philippines, as part of the international IP community, is a member of various treaties and agreements, which influence local IP laws:

  1. WTO TRIPS Agreement: Mandates a minimum standard for IP rights across member countries, affecting patents, copyrights, trademarks, and trade secrets.
  2. Paris Convention for the Protection of Industrial Property: Facilitates filing rights for patents, trademarks, and industrial designs across member countries.
  3. Berne Convention for Copyright Protection: Ensures copyright protection for works across member states without formalities.
  4. Madrid Protocol: Allows Filipino businesses to apply for trademark protection in multiple countries through a single application filed with IPOPHL.

V. Taxation and Intellectual Property

  1. Income Tax on IP Income: Revenue derived from IP (e.g., royalties, sale proceeds) is subject to standard income tax rates. For corporations, this is typically 25% (lower rates may apply to small businesses).
  2. Withholding Tax on Royalties: Royalties paid to non-residents are generally subject to withholding tax, ranging from 20% to 30%, depending on treaties.
  3. Capital Gains Tax on IP Transfers: Transfers of IP rights, if considered a capital asset, are subject to capital gains tax.
  4. Deductions for IP-Related Expenses: The BIR allows certain deductions for costs associated with creating, developing, and maintaining IP rights.
  5. VAT and IP Transactions: Licensing agreements may be subject to VAT, typically at 12%, unless exempt under special rules.
  6. Treaty Relief for Foreign Entities: Treaties may provide relief or reduced tax rates for royalties and other IP-related income for foreign entities, subject to BIR compliance requirements.

VI. Key Compliance Requirements for IP Holders

  1. Annual Maintenance Fees: Patents and registered trademarks require periodic fees to maintain active status.
  2. Use Requirements for Trademarks: Failure to use a registered trademark within a specified period may result in cancellation of registration.
  3. Documenting Assignments and Licenses: All IP transfers, assignments, and licenses should be recorded with IPOPHL to ensure enforceability against third parties.
  4. Renewals and Record-Keeping: Holders must renew IP registrations within prescribed timeframes and retain all documents for tax and legal compliance.

VII. Emerging Trends in Philippine IP Law

  1. Digital IP and Copyright in the Digital Age: The increase in digital content has led to stricter copyright enforcement online, including anti-piracy measures.
  2. Stronger Anti-Counterfeit Measures: The Philippines has enhanced its enforcement mechanisms against counterfeit goods to meet international standards.
  3. Data Privacy and Trade Secrets: The Data Privacy Act intersects with trade secret protections, especially regarding confidential customer or business data.

The landscape of IP law in the Philippines is continually evolving, adapting to global standards and new technological developments. For IP holders, staying compliant with IPOPHL requirements and tax regulations is critical, ensuring that intellectual property remains a viable and protected asset.

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