When Good Faith Matters: Knowledge and Liability under the Intellectual Property Code
Introduction
Infringement under the Intellectual Property Code of the Philippines (“IP Code”) is malum prohibitum, where malice or criminal intent is immaterial.[1] In patent, trademark, and copyright infringement cases, fraudulent intent need not be established. Good faith is not a defense, except where it is expressly recognized by the IP Code—most notably in claims of good faith prior use or where the recovery of damages depends on knowledge, notice, or bad faith.[2]
This article highlights provisions of the IP Code that either presume knowledge or intent to deceive, or require proof of actual knowledge as a prerequisite for liability, including the proper use of good faith defenses.
Presumed Knowledge or Intent to Deceive
The IP Code presumes knowledge or intent to deceive in the following instances:
Process Patents (Sec. 78)
In process patents for producing a product, an identical product is presumed to have been produced using the patented process if the product is new or there is a substantial likelihood that the process was used, and the patentee is unable, despite reasonable efforts, to determine the actual process employed by the defendant. In requiring the defendant to prove otherwise, courts must protect the defendant’s manufacturing and business secrets.Patent Infringement and Notice (Sec. 80)
Damages are not recoverable for acts committed before the infringer knew or had reasonable grounds to know of the patent. Knowledge is presumed when the product, its packaging, or advertising materials show the words “Philippine Patent” with the patent number.Trademark Infringement (Sec. 158)
Recovery of profits or damages requires proof that the infringer knew that the imitation was likely to cause confusion or deception. Such knowledge is presumed when the registrant provides notice of registration by the use of “Registered Mark,” the ® symbol, or when the defendant otherwise had actual notice.Unfair Competition (Sec. 168.3 and Rule 18, Sec. 7, 2020 Revised IPR Rules)
In unfair competition cases, intent to defraud or deceive the public is presumed when the defendant:
(a) passes off goods using imitative features that mislead consumers;
(b) makes false statements to discredit another’s goods or business; or
(c) presents goods whose appearance is strikingly similar to those of a competitor.
Cases Requiring Actual Knowledge: Good Faith Defenses
In certain cases, the IP Code requires proof of actual knowledge or intent, the absence of which allows reliance on good faith defenses.
A. Patent Infringement
Prior Users in Good Faith (Secs. 73.1–73.2)
A person who, in good faith, was using an invention or had made serious preparations to use it before the filing or priority date of the patent application may continue such use within the territory where the patent is effective. This right may be transferred only with the corresponding business or enterprise.Use Without Knowledge of Published Applications (Secs. 46, 46.1, 46.2)
Liability for acts committed during the pendency of a patent application arises only if the user had actual knowledge of the published application or received written notice identifying the application.Contributory Infringement (Sec. 76.6)
Liability attaches only if the defendant knowingly induces infringement or supplies a component especially adapted for infringing use and not suitable for substantial non-infringing purposes.
B. Industrial Designs and Layout-Designs of Integrated Circuits
Independent Third-Party Creators (Sec. 119.5[5])
The owner of a registered layout-design cannot prevent the commercial exploitation of an identical layout-design that is original and independently created by a third party.
C. Trademark Infringement
Prior Users in Good Faith (Sec. 159.1)
A registered mark does not affect the rights of a person who, in good faith, used the mark prior to the filing or priority date. Such rights are transferable only with the business in which the mark is used.Innocent Infringers (Sec. 159.2)
Printers who solely print infringing materials for others without knowledge of infringement are innocent infringers, subject only to injunction against future printing.Innocent Publishers or Distributors (Sec. 159.3)
Where infringement appears in paid advertisements, remedies against innocent publishers or distributors are limited to injunctions against future dissemination, subject to statutory limitations.Double Damages for Bad Faith (Sec. 156.3)
Courts may award double damages upon proof of actual intent to mislead the public or defraud the complainant.
D. Geographical Indications
Prior Users (GI Regulations, Rule 27 [2022])
Protection is afforded to prior users of geographical indications who satisfy statutory requirements regarding nationality or domicile, continuity and good faith of use, and prior acquisition of trademark rights, without prejudice to the validity of such trademarks.
E. Copyright Infringement
Benefiting from Infringement (Sec. 216[b])
Liability of an indirect infringer requires notice of the infringing activity and the ability to control the direct infringer.Inducing or Contributing to Infringement (Sec. 216[c])
Liability of a person inducing or contributing to infringement requires knowledge of the infringing activity.Statutory Damages (Sec. 216.1)
Bad faith may justify higher statutory damages, while lack of awareness or reasonable belief may warrant reduction to a maximum of Php10,000.Removal of electronic rights management information (Sec. 217.2 [b])
The highest criminal penalties apply if the offender knowingly and without permission removes or changes electronic copyright information.Possession of pirated materials (Sec. 217.3)
Liability attaches to a person who knowingly possesses infringing copies for the purpose of selling, renting, distributing them in a manner that prejudices the copyright owner, or publicly exhibiting them for trade.Bad-Faith Copyright Challenges (Sec. 218.2 [c])
If a defendant, without good faith, disputes whether copyright exists or who owns it, thereby causing unnecessary cost or delay, the court may refuse the defendant’s costs and order the defendant to pay the other parties’ costs.
Preservation of Existing Rights
The IP Code preserves rights acquired in good faith prior to its effectivity on January 1, 1998, ensuring that pre‑existing rights in patents, utility models, industrial designs, marks, and works remain unimpaired.[3]
Jurisprudence
In Zuneca v. Natrapharm,[4] the Supreme Court recognized the concurrent use of confusingly similar marks by a prior user in good faith and a first-to-file registrant, both acting in good faith. To mitigate consumer confusion, the Court required the use of appropriate warnings and regulatory monitoring.
In Tuna Processors, Inc. v. Frescomar,[5] the Supreme Court reiterated that contributory patent infringement—as a form of indirect infringement—requires knowledge that the supplied component is intended for infringing use and lacks substantial non-infringing applications.
In ABS-CBN Corporation v. Gozon,[6] the Supreme Court held that copyright infringement under the IP Code is subject to strict liability. Unless clearly stated in the law, copyright infringement is malum prohibitum. It is the act of infringement, not the intent, which causes the damage. To require or assume the need to prove intent defeats the purpose of intellectual property protection.
Summary
By default, the Intellectual Property Code presumes knowledge or intent to deceive for purposes of liability. In strictly defined exceptions, however, liability depends upon proof of actual knowledge; absent this, the offender may assert a defense of good faith.
[1] ABS-CBN Corporation v. Gozon, G.R. No. 195956, March 11, 2015
[2] Rule 16, Section 1, 2020 Revised Rules of Procedure for Intellectual Property Rights Cases.
[3] Sections 237 and 242 of the IP Code.
[4] G.R. No. 211850, September 8, 2020
[5] G.R. No. 226445, February 27, 2024
[6] G.R. No. 195956, March 11, 2015
