16th Apr 2013

Patent background concept

The protection of intellectual property rights is a primordial concern, especially in the field of business format franchising. Business format franchising, to a large extent, involves the use by a person called a franchisee of the intellectual property another called the franchisor, of course, with the consent of the latter. The intellectual property involved in such case includes use of trademarks, trade and business secrets, patents and patented processes, inventions, copyrights, and other “creations of the mind” which are owned by the franchisor. Through a franchise agreement, the franchisor allows his or her franchisee limited and controlled use of his intellectual property and rights.

Hence, would be franchisors have to ensure that, prior to entering into any franchise agreement with a prospective franchisee, his or her intellectual property rights are secure. After all, a franchisor’s intellectual property is a core element of his enterprise, without which he or she would not have gone into the business of franchising.

Most franchisors think that registration of their business/es with the Securities and Exchange Commission (SEC) or the Department of Trade and Industry (DTI), either as corporations, partnerships or single proprietorships, are sufficient to ensure that their intellectual property, particularly their trademarks, are secure. However, the fact of the matter is, protection of intellectual property can only be achieved by registration with the Intellectual Property Office.

SEC and DTI registration only creates the entity conducting the business. Like real property such as land, buildings and condominium units, and personal property such as cars and other motor vehicles, the only conclusive proof of ownership of such classes of property is the possession of a certificate of title or certificate of registration. Absent such certificate, a person cannot conclusively claim against the whole world that he or she is the owner of said property.

The same is true with trademarks and other intellectual property. Prior to 1998, ownership of a trademark could be acquired by continuous and substantial use. Back then, registration only confirms ownership of a trademark. However, with the passage of Republic Act 8293 also known as the Intellectual Property Law of 1998, our legislators made acquisition of the intellectual property uniform and simple. Presently, you can only acquire ownership of a trademark by filing the trademark application with the Intellectual Property Office. Moreover, the Intellectual Property Law of 1998 now adopts the first-to-file system.

The first-to-file system means that if an applicant files a trademark application ahead of another applicant, the first-filer is presumed to be the owner and given priority right. Moreover, the second-filer’s trademark application will be denied registration by the Intellectual Property Office because at the time he or she filed, there is an application with an earlier filing date, which is a ground for denial of the trademark application under the Intellectual Property Law of 1998.

At the risk of an unscrupulous individual, or even an innocent entrepreneur, from acquiring ownership of a franchisor’s trademark and intellectual property rights, the best advise one can give to any person, especially those who intend to enter into the franchising business, is to file their trademarks and intellectual property applications as early as possible. This ensures protection, not only of the business, but also of the goodwill of the businessman which he or she has painstakingly created through the years.

Let us help you. For further inquiries, you may seek legal assistance by e-mailing us at info@ndvlaw.com.

Nicolas & De Vega Law Offices is a full service law firm in the Philippines. You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines. You may also call us at +632 4706126, +632 4706130, +632 4016392.

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