Technology Transfer, Licensing and Franchising

Technology Transfer Arrangements

In the Philippines, technology transfer arrangements (TTA) are regulated under the Intellectual Property Code. Under the Intellectual Property Code, TTAs are “contracts or agreements involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for mass market.” The defintion of TTAs generally covers the licensing of intellectual property rights.

The terms and conditions of a TTA should be consistent with the provisions of the Intellectual Property Code on mandatory and prohibited clauses. Otherwise, the agreement will be unenforceable. The Intellectual Property Office (IPO) has the authority to determine whether a TTA is consistent with those clauses.  To confirm compliance with the TTA regulations, a draft of a TTA may be submitted to the IPO for pre-clearance on a no-names basis. Under the pre-clearance procedure, the IPO will review the agreement, confirm that it is (or is not) a TTA, and identify the provisions which should be deleted, added or revised, if there are any. It usually takes around 7 to 10 business days for the IPO to issue its findings. The advantage of going through the pre-clearance process is that it allows the contracting parties to be certain prior to execution that the agreement is not defective under the TTA regulations.

Trademark Licenses

Although trademark licenses fall under the definition of TTAs, special rules apply to the recordation of trademark licenses with the Intellectual Property Office. A trademark license may be recorded against an existing registration or a pending application. In order to be acceptable for recordal, the license should:

provide for effective control by the licensor on the quality of the goods or services of the licensee in connection with which the mark is used
comply with the provisions of the IP Code on mandatory and prohibited clauses relating to TTAs
be signed by both parties, notarized and, if executed outside the Philippines, legalized/authenticated.

The IPO’s Bureau of Trademarks will refer a trademark license contract submitted for recordal to the IPO’s Documentation, Information and Technology Transfer Bureau (DITTB) for clearance. The Bureau of Trademarks will record a trademark license only upon the issuance by the DITTB of a certificate that the trademark license complies with the provisions of the IP Code on prohibited and mandatory clauses.

Franchising

Franchise agreements come within the description of TTAs. Franchising is regulated to the extent that the contract clauses of franchise agreements are required to be consistent with technology transfer regulations. There are currently no Philippine laws or regulations that specifically impose disclosure and offering requirements on prospective franchisors.

A franchising agreement that is consistent with the provisions of the Intellectual Property Code on mandatory and prohibited clauses need not be registered with the IPO. However, franchise agreements that involve Micro, Small and Medium Enterprises (MSMEs) as franchisees are required to contain minimum terms and conditions as prescribed under Executive Order No. 169 and should be registered with the Department of Trade and Industry.