CONTRACT MAKING INVOLVING

INTELLECTUAL PROPERTY RIGHTS

(TRADEMARKS AND COPYRIGHTS)

ATTY. PETER CALIMAG

The Outline

 What is a Contract?
◦ What makes a contract a contract?
◦ When does a contract becomes binding?

 Things to look out for in contracts involving

Intellectual Property Rights (IP)
◦ Interpreting contracts
◦ Protecting your IP in contracts

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What is a contract?
A contract is a meeting of minds between
two persons whereby one binds himself,
with respect to the other, to give something
or render some service.1

In simple terms, a contract is an

agreement between persons, in which they
bind themselves with respect to one another
to either give something or perform a
service.
1 Civil Code, Article 1305

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What makes a contract a contract?
There is no contract unless the following are
present:
1. Consent
2. Object
CONSENT
3. Cause2
A contract is a meeting of minds
between two persons whereby one
CAUSE binds himself, with respect to the
(Reason) other, to give something or render
some service.

OBJECT
2 Civil Code, Article 1318

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When does a contract becomes binding?
A contract becomes binding upon its perfection,
which is the moment that the parties come to an
agreement as to object and cause of the contract.

Perfection

• Negotiation and • Fulfillment

bargaining of terms. • Birth of the or
contract, the performance
moment when the .
Generation/ parties agree on the Consummation
Negotiation terms of the
contract.

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Things to look out for in contracts involving IP
Principle of the autonomy of contracts

The contracting parties may establish such stipulations, clauses

and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public
policy.3

In simple terms, parties are allowed to agree on the terms of the

contract as long as such terms are not contrary to law, morals, good
customs, public order, or public policy.

The law governing IP is Republic Act No. 8293, otherwise known

as the “Intellectual Property Code of the Philippines”. Thus, contracts
involving IP should primarily not contradict the provisions of the
Intellectual Property Code.

3 Civil Code, Article 1306

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Interpreting Contracts
 Contracts involving IP tend to be highly
technical, complex, and full of jargons. Thus,
knowing how to properly interpret the terms
of the contract is essential.

Absolute Rule:
 If the terms of the contract are clear and leave no doubt upon the
intention of the parties, the literal meaning of its stipulations shall
control.

 In other words, if the terms are clear, there is no room for

interpretation.

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When there are doubts
 The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.4

 In simple terms, obscure words or stipulations in the contract

must be interpreted against the person that prepared the
contract, on the premise that the ambiguity is his/her fault.

 The intention of the parties may also be used in interpreting

the terms of the contract 5

 In other words, the contract must be interpreted in line with the

intentions of the parties. Thus, during the negotiation stage of
the contract, it is a good practice to keep records or minutes
thereof.

4 Civil Code, Article 1377

5 Rules of Court, Rule 130, Section 13.

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When there are doubts
 In order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be
principally considered.6

 Since intentions are usually within the state of mind of

the parties, their acts can be used in order to determine
their intentions.

 Thus, it is possible that contracts may include obligations

that while not expressly provided in the contract, are
nonetheless implied by the intentions of the parties.

6 Civil Code, Article 1371.

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Protecting your IP in contracts
 Make sure that the object and cause of the contract is clearly
provided.

 In cases involving IP, the object is the IP itself, while the cause is
the consideration, usually the Royalty or the compensation paid
for the use of the patented, trademarked, or copyrighted
material.

 Bear in mind that any ambiguity in the terms of the contract is

taken against the person that prepared the contract.

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Protecting your IP in contracts
 Be sure to include terms that are geared towards the
protection and preservation of your IP.

 Remember that parties are allowed to agree on terms as long as

such terms are not contrary to law, morals, good customs,
public order, or public policy.

 Be mindful of the following:

 In case of works created during course of employment:
 Copyright belongs to the employee if the object of copyright is not a
part of his (or her) regular duties, even if the employee uses the time,
facilities and materials of the employer.
 Copyright belongs to the employer if the work is the result of the
performance of regularly-assigned duties, unless there is an
agreement, express or implied, to the contrary. 7
7 IP Code, Section 178.3.
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Protecting your IP in contracts
 In case of commissioned work:

 The object of the copyright belongs to the person who paid for it,
while the copyright itself remains with the author, unless there is a
written stipulation to the contrary. 8

 Always aim for the least transmission of IP.

 IP is a “bundle of rights” and handing one component thereof

may sometimes include its other components. Thus, whenever
making contracts involving IP, it is better to limit the object of
the contract (IP) only those that you really intend to grant to the
other.

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Protecting your IP in contracts

 Always err on the side of caution.

 Taking into consideration the complexities that come along with

contracts involving IP, it is better to exercise caution whenever
able to.

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 Thank you

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