PHILIPPINES Law and Practice Contributed by: Patricia A O Bunye, Anica Angela G Gomez, Angel Rae N Balbin and Bianca Marie J Angela M Rañola, Cruz Marcelo & Tenefrancia
the contract’s terms between themselves and against third parties in case there is any breach of such contract. • Third, for the recordal of franchise agreements with the BOT, parties should request a Certificate of Clearance, which certifies that a franchise agree - ment that contains trade mark licensing provisions has been cleared for recordal with the BOT. Under Section 150 of the IP Code, a trade mark licensing agreement, which is necessarily incorporated in franchise agreements, shall have no effect against third parties until such recordal is effected. Thus, the recordal is required for the agreement to be valid and binding with respect to third persons. Nevertheless, even prior to recordal, the trade mark licence agreement is valid and effective between the contracting parties. In any case, the request should be filed together with: • the original franchise agreement, which should be notarised (if executed in the Philippines) or apos - tilled (if executed abroad); • a notarised application form, including a verified statement that the agreement is not subject to any judicial, administrative or other proceedings; • a list of all IP rights (trade marks, copyrights and patents) covered by the agreement; and • payment of fees. Upon filing the request, the DITTB is mandated to decide on the same within 20 working days from the filing date. Should the DITTB issue a favourable deci - sion, it shall issue the appropriate certificate/s within seven days from receipt of the duly executed and notarised agreement and payment of the required fees. Should any provision of the agreement violate any of the provisions under the IP Code, the DITTB shall issue a Notice of Findings and a Notice to Comply, which shall inform the parties of any violation and require them to respond and comply with the orders contained therein. Upon the parties’ satisfactory response to the findings of the DITTB and their subse - quent compliance, the DITTB shall issue the appropri - ate certificate/s within seven days from receipt of the
duly executed and notarised agreement and payment of the required fees. 3.3 Consequences of a Failure to Register As a general rule, franchise agreements, which are considered as TTAs, do not need to be registered with the DITTB if they comply with the requirements of Sections 87 and 88 of the IP Code on prohibited and mandatory clauses, respectively. Thus, if the fran - chise agreement complies with Sections 87 and 88 of the IP Code, there will be no consequences of non- registration of the franchise agreement. On the other hand, if the franchise agreement does not comply with Sections 87 and 88 of the IP Code, it shall be deemed unenforceable, unless an application for exemption has been filed with the DITTB and subsequently grant - ed, and the franchise agreement is approved and reg - istered with the DITTB. Unenforceability, in this context, has been interpreted to mean that neither party will be allowed to have any legal recourse against the other in court in case of breach of contract. The Civil Code states that con - tracts deemed “unenforceable” are considered valid and binding as between the parties who entered into them. However, in case there is a breach of such contract, neither party can go to court to enforce the contract’s terms. Further, the Civil Code provides that an unenforceable contract is valid between the con - tracting parties but may not be invoked against third persons.
4. Other Requirements 4.1 Past-Profitability Requirements
Aside from the legal capacity to enter into franchise agreements discussed in 3.1 Mandatory Registra- tion , there are no other requirements that must be met before a company can enter into a franchise agree - ment. Thus, Philippine law does not require a fran - chisor to demonstrate that the business has operated profitably for a period of time in a number of locations before allowing the franchise business to operate.
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