The Intellectual Property Office of the Philippines (“IPOPHL”) has issued IPOPHL Memorandum Circular No. 2020-002 providing for the Revised Rules and Regulations on Voluntary Licensing (“Revised Rules”).
The salient provisions of the Revised Rules, which took effect on 21 February 2020, are as follows:
Definition of Technology Transfer Arrangements (“TTA”)
The Revised Rules provide that “the transfer, assignment or licensing of intellectual property will be considered a technology transfer arrangement only if it involves the transfer of systematic knowledge.” [Rule 1 (n)].
Catch-all Provision for Prohibited Clauses in TTAs
In addition to the fourteen (14) prohibited clauses enumerated in the old Rules and Regulations on Voluntary Licensing (the “old Rules”), the Revised Rules added another item in the enumeration which is a catch-all provision for other clauses with equivalent effects:
“Rule 2. Prohibited Clauses. Pursuant to Section 87 of the IP Code, the following provisions shall be deemed prima facie to have an adverse effect on competition and trade:
x x x
(15) Other clauses with equivalent effects
Other Anti-competitive Clauses or Stipulations in Restraint of Trade, e.g. unreasonable Post-termination Non-Compete Covenants, likewise are prima facie to have an adverse effect on competition and trade. The burden of overcoming the presumption rests with the party claiming exemption.” (Rule 2)
Clarification on the Meaning of “Any Neutral Country” for Purposes of Arbitration under Mandatory Provisions of the TTA
“Any neutral country” is now defined as “any third country, other than the Philippines, where neither the licensor nor the licensee was organized, registered or existing, and one where neither party has a direct connection or legal ties.” [Rule 3 (3)]
Evaluation of Purchase Option in Requests for Exemption
Apart from considering acceptable worldwide industry standards, recognition of valid intellectual property rights and the payment of taxes, the Revised Rules introduced purchase option as another point of evaluation for requests for exemption, explained as follows:
“In determining whether a provision in a technology transfer arrangement establishes a full or partial purchase option in favour of the licensor prohibited under Section 87.6 of the IP Code, the Bureau shall take into consideration if there is an option for the licensor to purchase the licensee’s business. An option to purchase the remaining amount of stocks or inventory after the term of a technology transfer arrangement may be allowed. However, an option to purchase all or substantially all of the licensee’s assets or equity is a prohibited clause.” [Rule 5.1 (b)(2)]
Conformity with the Intellectual Property Code
Technology transfer arrangements that conform to the provisions of Sections 87 (Prohibited Clauses) and 88 (Mandatory Provisions) of the IP Code need not be registered with the Documentation, Information, and Technology Transfer Bureau of the IPO, which is also known as the Innovation Bureau (“Bureau”). However, non-conformance with any of the provisions on Prohibited Clauses and Mandatory Provisions of the IP Code shall automatically render the technology transfer arrangement unenforceable. An exception to this is if an application for exemption in exceptional and meritorious cases has been filed with the Bureau and subsequently granted, and the Technology Transfer Arrangement is approved and registered with the Bureau.
Guidelines for Requesting Exemption from the Prohibited Clauses and Mandatory Provisions of the IP Code
Unless specified, the guidelines and procedures for filing and processing requests for exemptions are the same as other requests covered by the subsequent rules such as Rule 6 (Registration of Technology Transfer Arrangement) and Rules 7 (General Provisions).
Filing Period for Requests for Exemption
The recommended schedule for filing requests for exemption is as follows:
i. Draft Agreements for Preliminary Review – anytime before execution of the agreement;
ii. New Agreements – within thirty (30) calendar days from the date of execution or effectivity, whichever is earlier;
iii. Renewal Agreements – anytime prior to the expiration of the term of the existing technology;
iv. Amendatory Agreements – within thirty (30) calendar days from the date of the effectivity of such amendment or modification.
Registration Procedure for Technology Transfer Arrangements
i. Filing Date. Upon receipt of all the requirements as contained in the Notice of Additional Requirements, the Bureau shall issue a Notice of Filing Date within three (3) working days from such receipt. The Filing Date shall be the date when the Bureau has satisfactorily received all the requirements. This date is also the date when evaluation of the request shall commence.
ii. Decision. The Bureau Director has twenty (20) working days from the Filing Date to decide on the request.
iii. Issuance of Certificate. Upon the applicant’s satisfactory response to the findings and subsequent compliance with the IP Code provisions, and/or after a favorable decision by the Bureau Director, the Bureau shall issue the appropriate certificate within seven (7) days from receipt of the duly executed and notarized agreement and payment of the required fees for the following as requested:
a. Certificate of Registration – A certification that a technology transfer arrangement has been granted certain exemptions from the requirements of the Prohibited Clauses provision and/or Mandatory Provisions provision of the IP Code;
b. Certificate of Compliance – A certification that the technology transfer arrangement does not violate any of the Prohibited Clauses and conforms to all the Mandatory Provisions of the IP Code.
c. Certificate of Clearance – A certification that a trademark license agreement covered by Section 150 (License Contracts) of the IP Code has been cleared for recordal with the Bureau of Trademarks.