Legal Environment

Chapter Outline Multiplicity of Legal Environments and

Legal Systems

• Jurisdiction and Extraterritoriality

• Legal Form of Organization
• Branch vs. Subsidiary
• Litigation vs. Arbitration
•Jurisdiction is the practical authority granted to
a legal body to administer justice within a
defined field of responsibility.
• Jurisdiction is the term that refers to the limits of a legal
authority.
• It can refer to both political territories and geographic
regions, as well as the types of legal matters over which a
legal body has authority.
• A formally authorized legal body is a court, political or
governmental office, and in many situations, law
enforcement agency.
• When a legal body holds jurisdiction, it has the authority to
administer justice within that jurisdiction.
In the court system, there are three primary types of
judicial jurisdiction:
• subject matter, territorial, and in personal jurisdiction.
• If a court without proper jurisdiction hears a case, it does not
have the authority to render a judgment, to provide the
plaintiff with a remedy to his legal issue, or to hand down
sentencing.
• Personal jurisdiction is the authority over a person,
regardless of their location.
• Territorial jurisdiction is the authority confined to a bounded
space, including all those present therein, and events which
occur there.
• Subject-matter jurisdiction is the authority of a court to hear cases of
a particular type or cases relating to a specific subject matter. For
instance, bankruptcy court only has the authority to hear bankruptcy
cases.
• For this reason, it is important for all parties involved
to be sure the case has been filed in a court of proper
jurisdiction.
• This is one of the first things that should be
determined by the judge as well, before allowing the
case to proceed.
• Typically, a court holds more than one jurisdiction type in
any case. This might mean the court can hear cases that
originate in its geographical jurisdiction, and it has subject
matter jurisdiction as well.
• As an example of jurisdiction, a family law court has the
authority to hear and decide matters related to divorce,
child custody, child support, and other related issues, if the
family lives in its geographical region.
• Family court does not, however, have jurisdiction to hear a
criminal case, even if it somehow relates to a family issue.
 Example
• Jack and Anna have separated and are going through the divorce
process, including a child custody battle. Anna initially left Jack
after he had beat her up badly, putting her in the hospital, and
sending the children to stay with their grandparents. Jack was
arrested that day, and charged with felony spousal assault.

• The family court is handling the issues of divorce and child

custody, which are greatly affected by the behavior of the father
for the past several years.
• It does not, however, have authority to try Jack on his criminal
charges. That authority rests solely with the criminal court.
• Extraterritorial jurisdiction is the ability of a nation to
assert its laws beyond its territorial boundaries. ...
Prescriptive jurisdiction, which is the authority to pass
extraterritorial jurisdiction laws and legislation.
Enforcement jurisdiction, which is the authority to
enforce laws in another nation.
Legal Form of Organization

• Every small business must select a legal form of ownership. The most
common forms are sole proprietorship, partnership, and corporation
• In Philippines the most common types of businesses are sole proprietorships,
partnerships and corporation.

Sole Proprietorship
• Sole Proprietorship is a business structure owned by an individual who has
full control/authority of its business and owns all the assets, personally owes
answers to all liabilities or suffers all losses but enjoys all the profits to the
exclusion of others.
• A sole proprietorship must apply for a business name and be registered with
the Department of Trade and Industry (DTI) - National Capital Region (NCR). In
the provinces, application may be filed with the DTI regional/provincial
offices.
• Partnership
• Under the Civil Code of the Philippines, a partnership is treated as
juridical person, having a separate legal personality from that of its
members.
• Partnerships may either be general partnerships, where the partners
have unlimited liability for the debts and obligation of the
partnership, or limited partnerships, where one or more general
partners have unlimited liability and the limited partners have
liability only up to the amount of their capital contributions.
• It consists of two or more partners.
• A partnership with more than Peso 3,000 capital must register with
the Securities and Exchange Commission (SEC).
• Corporation
• Corporation is composed of juridical persons established under the
Corporation Code and regulated by the SEC with a personality separate and
distinct from that of its stockholders.
• The liability of the shareholders of a corporation is limited to the amount of
their share capital.
• It consists of at least five to 15 incorporators, each of whom must hold at least
one share and must be registered with the SEC.
• Minimum paid up capital is Peso 5,000.
• A corporation can either be stock or non-stock company regardless of
nationality.
• Such company, if 60% Filipino - 40% foreign-owned is considered a Filipino
corporation; if more than 40% foreign-owned, it is considered a domestic
foreign-owned corporation.
• Stock Corporation
• Stock Corporation is a corporation with capital stock
divided into shares and authorized to distribute to the
holders of such shares dividends or allotments of the
surplus profits on the basis of the shares held.
• Non-Stock Corporation
• Non Stock Corporation is a corporation organized principally
for public purposes such as charitable, educational, cultural,
or similar purposes and does not issue shares of stock to its
members.
 Branch vs. Subsidiary
• While a branch has no separate legal standing, a subsidiary
company is a separate legal entity and has an identity different
from its holding company.
• In case of branches, there may be the joint or separate
maintenance of accounts, whereas the subsidiaries maintain their
own separate accounts.
• A Branch Office is an extension of a foreign corporation that
carries out the business activities of its head office from abroad
into the Philippines.
Arbitration and Litigation
• Litigation is a very old process that involves determining
issues through a court, with a judge or jury.
• Arbitration, on the other hand, involves two parties in a
dispute who agree to work with a disinterested third party in
an attempt to resolve the dispute.
• Arbitration often is less costly than court litigation, primarily
due to the compressed schedule for the completion of
discovery and trial.
• Arbitration is different from court litigation in many ways. The basic
difference, however, is that arbitration is a private and voluntary
dispute resolution process. It is contractual in nature and is less
formal. The tribunal derives its authority to resolve the dispute from
the consent of the parties.
• The Construction Industry Arbitration Commission
(CIAC) shall have original and exclusive jurisdiction
over disputes arising from, or connected with
contracts entered into by parties involved in
construction in the Philippines.
Chapter Outline Bribery - Legal Dimension - Ethical
Dimension

• Intellectual Property
• - Categories of Intellectual Property
• - Legal Rights and Requirements
• Intellectual Property in the Philippines.
• Intellectual property refers to anything created by
someone, including but not limited to inventions,
literary works, items created by artists (e.g. artwork
and musical pieces), symbols, designs, images,
pictures, and even names that are used for
commercial purposes.
• What is RA 8293 all about?
• Republic Act No. 8293 [An Act Prescribing the Intellectual Property
Code and Establishing the Intellectual Property Office, Providing for
Its Powers and Functions, and for Other Purposes] otherwise known
as the Intellectual Property Code of the Philippines.
What are the 4 types of intellectual property?

• You'll find four main types of IP protection for your business:

• Patents. A patent grants property rights on an invention, allowing the
patent holder to exclude others from making, selling, or using the
invention. ...
• Trademarks. ...
• Trade Secrets. ...
• Copyrights.
Patent
• Patentable inventions are any technical solution of a problem
in any field of human activity that is new, involves an
inventive step, and is industrially applicable. It may be, or
may relate to, a product, process or any improvement of
thereof. An invention is considered new if it does not form
part of a prior art.
How do I apply for a patent in the Philippines?
• Check the steps and the application process below.
• Application for a grant of Philippine Patent (for Invention). ...
• Examination of the Product. ...
• Classification and Publication of the Product. ...
• Request for Substantive Examination. ...
• Decision is made. ...
• Appeal if there is refusal.
• Address: Intellectual Property Center, #28 Upper McKinley Rd, Taguig, 1634
Metro Manila
How do you patent a product?
• Check the steps and the application process below.
• Application for a grant of Philippine Patent (for Invention). ...
• Examination of the Product. ...
• Classification and Publication of the Product. ...
• Request for Substantive Examination. ...
• Decision is made. ...
• Appeal if there is refusal.
• A trademark is a word, a group of words, sign, symbol, logo or a
combination thereof that identifies and differentiates the source of
the goods or services of one entity from those of others.
• If you’re a business, distinguishing your goods or services from others
gives you a competitive edge.
How do I trademark my name in the Philippines?
• Trademark Application in IPO Philippines
• Step 1: Filing of an application. File an application to the Bureau of
Trademarks at the Philippine Intellectual Property Office. ...
• Step 2: Search and Examination. ...
• Step 3: Publication in IP Philippines Gazette. ...
• Step 4: Registration.
• A trade secret is any formula, pattern, device, or
compilation of information that is used in one's
business and gives the owner an opportunity to
obtain an advantage over competitors who do not
possess the same information.
• Trade secrets are, after all, recognized as confidential under many
laws, which provide penalties for the breach of confidentiality.
Protection of trade secrets
• The Revised Penal Code, for one, penalizes the revelation of industrial
or trade secrets of an employer by an employee.

• Also, the Securities Regulation Code prohibits the Securities and

Exchange Commission from requiring the revelation of trade secrets
or processes in any application, report or documentation filed before
it.
• In corporate rehabilitation proceedings, the Rules of
Procedure on Corporate Rehabilitation allow the court
to issue an order to protect trade secrets or other
confidential research or information of debtors.
• The National Internal Revenue Code of 1997 likewise
prohibits and punishes any employee of the Bureau of
Internal Revenue who shall divulge any confidential
information or trade secrets concerning the business income
or inheritance of any taxpayer.
• Are trade secrets privileged information?

• According to our jurisprudence, the answer is in the affirmative.

The case:
• In Air Philippines Corporation vs Pennswell Inc., (December
13, 2007), petitioner Air Philippines Corporation was a
domestic corporation engaged in the business of air
transportation services, whereas respondent Pennswell Inc.
was engaged in the business of manufacturing and selling
industrial chemicals, solvents and special lubricants.
• Pennswell sold and delivered to Air Philippines Corporation
sundry goods in trade.
• Air Philippines refused to pay its outstanding obligations to
Pennswell, contending that it was defrauded and deceived
by Pennswell when the latter merely altered the names and
labels of the goods that it had sold.
• Pennswell filed a complaint for collection against Air Philippines.
During the trial, Air Philippines filed a motion to compel Pennswell to
give a detailed list of the chemical components and the ingredients
used for the products that were sold.
• Pennswell opposed the motion for production, contending that the
requested information was a trade secret that it could not be forced
to disclose.
• So, the issue in the case is whether the requested information was
privileged in nature.

• The Supreme Court ruled that the ingredients and chemical content
of the product requested by Air Philippines formed part of the trade
secrets of Pennswell.
• Citing precedents, the Court held that because of public
policy, trade secrets are privileged and the rules providing for
the production and inspection of books and papers do not
authorize their production in a court of law.
• The Court further held that, like banking transactions, trade secrets
are among the recognized restrictions to the right of the people to
information as exemplified in the Constitution.

• In the context of the case at hand, the Supreme Court reiterated that
the revelation of respondent’s trade secrets will serve no better
purpose to the disposition of the case at bar, which actually involves a
collection of a sum of money.
Moving forward

• The express judicial recognition of trade secrets as privileged

information is a significant measure taken by the Supreme Court to
protect and enhance business in the Philippines.

• After all, any successful product in the market is founded on a trade

secret, in one way or another.
• In the words of the high court, “[t]rade secrets should receive greater
protection from discovery because they derive economic value from
being generally unknown and not readily ascertainable by the public.”
• A copyright is the legal protection extended to the owner
of the rights in an original work. Original work refers to every
production in the literary, scientific, and artistic domains.
• Copyright is a legal means of protecting an author's work. It
is a type of intellectual property that provides exclusive
publication, distribution, and usage rights for the author.
• Many different types of content can be protected by
copyright.
• Examples include books, poems, plays, songs, films, and
artwork.
• Under Philippine law, copyright infringement occurs when there is a
violation of any of the exclusive economic or moral rights granted to
the copyright owner.
Examples of copyright infringement
• A typical example of copyright infringement is the use of
music in your videos.
• If you have not obtained the permission to use a song as
background music for your home movies, business
presentations, or your own creative work, then you could be
liable for copyright infringement.
What are examples of copyright protected under the
Philippine law?
Copyrightable works include the following categories:
• literary works.
• musical works, including any accompanying words.
• dramatic works, including any accompanying music.
• pantomimes and choreographic works.
• pictorial, graphic and sculptural works.
• motion pictures and other audiovisual works.
• sound recordings.
Project:
• You are going to research a recent business case
decided within at least the last ten years that also
involves an ethical issue.
• You can use the internet as your reference on this
project.
• Locate the full text of the court decision on Google
Scholar
Reference:
• UMSL Homepage, Libraries, Databases, Databases
Sorted Alphabetically, L – Lexis Nexis Academic,
Search, Look Up a Legal Case – law section)
• Brief the legal issue: name of the case, essential facts,
issue, relevant law, analysis by the court, conclusion (or
holding) of the court.
• Identify the ethical issues in the case.
• Do the legal and ethical issues conflict?
• Do you agree with the court’s decision? Why or
why not?
• How should the affected business ethically
respond and fulfill their corporate responsibility?