How to Recover Electronic or Digital Assets under Philippine Law

How to Recover Digital and Electronic Assets

Recovering Personal Property, including Electronic or Digital Assets

Recovering personal property, such as vehicles, stock certificates, land titles, and even your pet dog, is something that can undeniably be done under the existing rules of procedure in the Philippines. However, with the increasing use of the internet, new and unprecedent types of properties have come into existence beyond the physical realm.

Digital tokens, non-fungible assets or tokens, electronic pictures, and more, have presented challenges. Obviously, these developments, being unprecedented, were not within the direct contemplation of the drafters of the laws and rules of procedure that govern such new types of assets. But this does not imply their inapplicability.

Take this particular example. If you hired someone to create something digital for you, for example, a digital portrait or artwork, a fully functional website, software, or even an entire operating system, and based on your agreement, you, as the person who contracted the work, is entitled to the work done. If, for some reason, you are deprived of the asset which you had contracted another to accomplish, you can still rely on the “bricks and mortars” concepts of the law, to recover them.

Recovering Digital Assets through Replevin

An action to recover personal property, which includes these digital assets, can be had through what we call a “replevin”.

Section 1, Rule 60 of the 1997 Rules of Civil Procedure states: “a party praying for the recovery of possession of personal property may, at the commencement of the action or at any time before answer, apply for an order for the delivery of such property to him, in the manner hereinafter provided.”

An applicant for the issuance of a writ of replevin must comply with the following requirements:

“1. He must show by his own affidavit or that of some other person who personally knows the facts:

  1. That the applicant is the owner of the property to be claimed, particularly describing it, or is entitled to the possession thereof;
  2. That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief;
  3. That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under custodial legis, or if so seized, that it is exempt from such seizure or custody; and
  4. The actual market value of the property.
  • The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action.”[i]

A website or an online program is a computer program. Under Section 171.4 of the IP Code, this is defined as “a set of instruction expressed in words, codes, schemes, or in any other form, which is capable when incorporated in a medium that the computer can read, of causing the computer to perform or achieve a particular task or result.

A Digital Asset is Classified as Personal Property

Following the ruling in Strochecker vs. Ramirez, where the Court stated that since an interest in business is not included in the exclusive enumeration of real properties under Article 415 of the Civil Code, computer programs which are similarly not included in Article 415 should be considered personal or movable properties. (HPS Software vs. Philippine Long Distance Telephone Company, G.R. No. 170217, Dec. 10, 2012 citing Involuntary Insolvency of Paul Strochecker vs. Ramirez, G.R. 18520, Sept. 26, 1922).

Although the Rules do not specifically provide for a difference in the treatment among kinds of personal property, the long standing rule is that the remedy of replevin extends only to personal property capable of manual delivery.[ii] In the case of Machinery & Engineering Supplier, Inc. vs. Court of Appeals, G.R. No. L-7057, Oct. 29, 1954, the Court explained that an action for replevin is applicable only to personal property capable of identification and delivery; but it will not lie for the recovery of real property or incorporeal personal property.

While there is a lack of Philippine jurisprudence that allows replevin on incorporeal, intangible personal properties, American jurisprudence sheds light on whether electronic data may be subject to conversion and/or replevin. In the case of Children’s Hospital Corp. vs. Cakir,[iii] the supposedly defendant stole computer files which he argued were intangible property that can neither be converted nor be subjected to replevin. However, the Court held that “electronically stored documents constituted property that could be the subject of a conversion” and that “in [a] modern world, computer files hold the same place as physical documents have in the past. If paper documents can be converted, as they no doubt can…no reason appears that computer files cannot.” By analogy, the Court explained that if Cakir had taken a book from the Hospital and ripped pages out of it, then returned the book, he is similarly liable for conversion because he stole the laptop, deleted data from it, then returned the laptop.[iv] For the same reasons in holding the conversion claim, the Court ruled that the Hospital is entitled to summary judgment on replevin since there was an object unlawfully detained and the Hospital has a right to possess it.[v]

Ownership of a Digital Asset

To be able to utilize the remedy of replevin, the applicant must be the owner of the digital asset. In our example, where a person was contracted by another to accomplish some form of digital work, the latter will be the owner of such work under Section 178.3 of the Intellectual Property Code (“IP Code”), or Republic Act No. 8293, which states:

“In the case of work created by an author during and in the course of employment, the copyright shall belong to:

  1. The employee, if the creation of the object of copyright is not a part of his regular duties even if the employee uses the time, facilities, and materials of the employer.
  2. The employer, if the work is the result of the performance of his regularly-assigned duties, unless there is an agreement, express or implied, to the contrary.

These provisions relate to the “work-for-hire doctrine”, which states that an employer owns the copyright on a product prepared by an employee within the scope of his or her employment, absent a written agreement to the contrary.[vi] Amador, in his treatise, also cites an example whereby a consultant created computer programs for a client, and although the client did not have formal title in copies, the client paid the consultant substantial consideration to develop said programs which were stored in its servers, and had the right to use or discard copies if it wanted to do so. [vii]

Additionally, Section 178.4 of the IP Code states:

“In the case of a work commissioned by a person other than an employer of the author and who pays for it and the work is made in pursuance of the commission, 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 stipulation to the contrary.”

Even if the actual ownership of the digital assets is still in dispute, i.e., the person who contracted the creation of digital artwork, electronic picture, program, website or operating system, does not own the website and/or programs, jurisprudence provides that the applicant for replevin need not be the owner of the property for the writ to issue. The case of Yang v. Valdez shows that it is enough that he has the right to the possession.[viii] In this case, although the respondents were not the registered owners of the cargo trucks, the writ was still issued, with the Court holding that the “provisional remedy of replevin is in the nature of a possessory action and the applicant who seeks immediate possession of the property involved need not be holder of the legal title to the property.” The Court stated that it is sufficient that the applicant is “entitled to the possession thereof” as provided under the Rules of Court.

So long as the person who contracted them alleges in the application for replevin that he is unlawfully deprived of possession over such digital assets, there will be ground for its grant. In the case of D’Aigle vs. People, G.R. No. 174181, June 27, 2012, a Writ of Replevin was granted in favor of Samfit Philippines, Inc. (SPI) in relation to an Estafa case it filed against its employee, in order to recover electronic and computer boxes which were in the employee’s care and custody.

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[i] Ferdinand A. Tan, Civil Procedure: A Guide for the Bench and the Bar, Book II, 167 (2017) (citing Yang v. Valdez, 177 SCRA 141).

[ii] Tan, supra note 1, at 165.

[iii] Civil Action No.: 15-cv-13281 (U.S. District Court, District of Massachusetts 2017) (unreported).

[iv] Id.

[v] Id.

[vi] Vicente B. Amador, Intellectual Property Fundamentals, 342 (2007).

[vii] Id at 344.

[viii] Id.