An Intellectual Property Office was created to administer and implement the State policies declared in the IP Code. The agency was first placed under the supervision of the Department of Trade and Industry (DTI) during its initial creation, but was later transferred to the Office of the President, specifically under the Office of the Executive Secretary.
The IPO is commissioned to implement the changes introduced by the IP Code, such as: 1) the streamlining of the procedure in registering trademarks by abolishing the Supplemental Register; 2) the overhaul of the patent system from first-to-invent to first-to-file system; and, 3) the liberalization of the registration of technology transfer arrangements. The IPO also executes a policy-making role and exercises quasi-judicial jurisdiction for violation of all kinds of intellectual property rights. The agency has the authority of hear and decide on:
administrative cases involving violations of intellectual property rights where the claim for damages is P200,000 and above;
opposition and cancellation cases for trademarks;
cancellation of patents, utility models and industrial designs; and
It also has the authority to settle disputes involving technology transfer payments and author’s rights to public performance or other communication to the public of his works.50
The agency is the main coordinating body for IPR enforcement activities done by the government and, to some extent, those of the private sector’s as well. In July of 2002, the Intellectual Property Rights Enforcement Action Panel (IPREAP) was formed to further advance the IPR advocacy and protection in the country. The IPREAP consists of government agencies and private representatives from the academe, Research and Development Institutions and business/trade organizations, and IP organizations. At present, the following sit in the panel as members: Intellectual Property Office (IPO), National Bureau of Investigation (NBI), Department of Justice (DOJ), National Telecommunications Commission (NTC), Videogram Regulatory Board (VRB), Philippine National Police (PNP), Bureau of Customs (BOC), Intellectual Property Coalition (IPC), Council to Combat Piracy and Counterfeiting of Patents, Copyrights and Trademarks (COMPACT), Intellectual Property Association of the Philippines (IPAP), Philippine Internet Commerce Society (PICS), Electronics Industry Association of the Philippines (EIAP), Quezon City Chamber of Commerce and Industry (QCCCI) and Davao City Chamber of Commerce and Industry (DCCCI).
The IPO has taken the lead in all the said activities of the IPREAP. The agency also created an Intellectual Property Enforcement Unit in its organization, under the Office of the Director General, for a more effective execution of the other strategies in the agency's master plan.
Earlier efforts in enforcing IPR laws include the creation of the Presidential Inter-Agency Committee on Intellectual Property Rights (PIAC-IPR) through the Executive Order No. 60 in February 26, 1993.51 The PIAC-IPR monitored IPR infringement activities and enforced the IP Laws, thus, generating a good business environment beneficial to both local and foreign IP stakeholders. The PIAC-IPR was composed of nine (9) government agencies namely: the Department of Trade and Industry - Bureau of Trade Regulation and Consumer Protection (DTI-BTRCP), Videogram Regulatory Board (VRB), Department of Justice (DOJ), National Telecommunications Commission (NTC), Bureau of Customs (BOC), National Bureau of Investigations (NBI), Philippine National Police (PNP), Economic Intelligence and Investigation Bureau (EIIB), and the Bureau of Food and Drugs (BFAD). When the PIAC-IPR was abolished in 2002, the said agencies continued to individually implement the IPR laws.
Among the law enforcement agencies, the DTI, DOJ, NBI, PNP, EIIB “respond to search warrant raids” 52, while the NTC and VRB are able to use their own mandates to enforce their authority. The two latter agencies execute their individual monitoring and arrest activities. However, joint agency inspection and seizure efforts are also performed.
The DTI-BTRCP activities were carried out in the whole country by the regional offices of the said department. This agency has an extensive jurisdiction over the confiscation of trademarked goods, from wristwatches, wines/liquors, construction materials, clothes, accessories, etc., to copyrighted and licensed materials such as CD-Rom software programs, playstation CDs, music cassette tapes and CDs, and video VCDs and DVDs. Similarly, the NBI, EEIB, PNP, and BOC had been able to seize the same types of fake goods during their enforcement activities.
On the other hand, the BFAD has authority over the arrest of specific kinds of establishments and people, such as those reproducing and distributing fake drugs, food, cosmetics, and various pieces of medical device. Lastly, the VRB was the lead agency concentrating on curtailing video piracy, and has apprehended establishments engaged in this particular kind of IPR infringement53.
How did the government conduct its IPR enforcement activities?
D uring the time when the PIAC-IPR was still active, two of its main enforcement activities were to monitor and apprehend firms for violation of IPR laws. From 1993-2001, the number of firms monitored for IPR violations has been increasing. This is true except during 1996 and 2001 when the figure dropped by 1.3% and 8.2%, respectively. On the other hand, the number of apprehended firms reflected a wave-like trend. The trend reached its twin peaks during the years 1995, at 2,145, and 2000, at 1,480 (Figure 9).
Among the agencies, the Department of Trade and Industry (DTI) registered the highest number of firms monitored. On average, it inspected 77.7% of the total from 1996-2001, followed by the Videogram Regulatory Board (VRB), at 15.1% (Table 15). This suggests that the over-all trend in the monitoring performance of the PIAC-IPR, during the years presented, was generally determined by the operations of DTI.
O n the other hand, Table 16 shows that most of the raids conducted from 1996-2001 was accomplished by the Department of Justice (DOJ) and the National Bureau of Investigation (NBI). They carried out an average of 28.6% and 23.4% of the total operations, respectively. These are the two agencies that generally influenced the performance of the PIAC-IPR regarding apprehending firms that commit IPR violations.
M ore recent enforcement activities54 of the government include the intensified search and arrest operations of the VRB in 2002, at 259, compared to the 37 cases recorded in 2001 (Figure 10). This resulted in the confiscation of eleven (11) optical disk lines and a number of CD burners. In addition, 4.31 million units of video discs were also seized during the year. However, there was a 25.9% decline in the figure during 2003 wherein the number of search warrant operations was recorded at 192. The number of confiscated machines from these activities registered at 218 pieces, while that of the confiscated equipments was 36 pieces.
The VRB experienced a 22.7% decline in their monitoring/inspection activities in 2002. These operations resulted to the confiscation of 1.7 million units of video discs, and 55 pieces of A/V equipment. On the other hand, the number of operations rose by 423 in 2003, registering at 1,957. Consequently, there was an increase in number of confiscated goods and A/V equipment to 2.3 million units and 248 pieces, respectively. Furthermore, 60 pieces of machineries were also seized.
The operations conducted by the NBI in 2002 declined by -8.83%, from the 419 figure in 2001 (Table 17). However, the number rose by 5.24 in 2003. The PNP has more than doubled its efforts in enforcing IPR protection as the operations carried out rose by 120% in 2002, from 177 in 2001. Enforcement activities of the agency were further intensified by 7.2% in 2003. Meanwhile, the BOC conducted additional operations in 2002, at 10, compared to the 9 operations registered in 2001. However, the figure slid by 20% in 2003.
One of the relevant achievements of the PNP, among the raids it conducted in 2002, was the seizure of the counterfeit videogram materials in Meycauayan, Bulacan estimated to worth PhP1 billion. Case for violation was filed before the DOJ against 12 foreign nationals caught in the activity.
Figure 11. Enforcement Activity Flow Chart
The flow chart55 in Figure 11 shows the series of activities conducted before an IPR case is tried in the IPR courts. Simultaneous with the filing of a criminal case is the filing of a civil one, wherein the client in the former is the government and in the latter, the private infringed party. Due to the numerous cases handled by the state prosecutor, the private prosecutors are given permission by the courts to handle both the criminal and civil aspects of the cases. This occurs to about 80%-90% of the total IPR cases.
Most often than not, about 60%-70%, the IPR cases do not continue to formal court trial proceedings. This is because at Stage 8, of the flow chart, the parties involved agree on a settlement. As a rational economic individual, one would engage in a transaction that will minimize his costs and maximize his benefits. An IPR case, like any other case, entails not only financial, but other transaction costs to both parties involved in the proceedings. When the private complainant settles before the case is formally filed in the courts, the state is left with no complainants and no case. Although the state may continue to file criminal charges against the violators and prosecute, it is now left with no willing witnesses. The same occurs even when the private complainants do continue with the criminal and civil cases, but settle in the middle of the trial. The civil charges against the violators may be dropped, but the criminal case may still be 0continued by the state. Again, with no cooperation from the private complainants, the IPR criminal cases are no longer pursued.
Government Sector Efforts on Border Control
With the new regulations in place such as that of the border control56, additional trainings for BOC employees were conducted for the effective and efficient implementation of the law. Orientation training seminars on border control were conducted in key cities in the Philippines such as Manila, Cebu and Davao last December 28-29, 2002, January 16-17, 2003, and February 12-13, 2003, respectively. The training seminars were attended by 441 BOC officials and private IP stakeholders.
To further strengthen border control in the country, the BOC conducted the training/workshop entitled "The New Intellectual Property (IP) Border Control Measures" last October 3, 2003. The activity aimed to familiarize the BOC IP Unit officials and personnel on:
the key functions and responsibilities of the IP Unit as mandated in the CSO 19-2003;
the rudiments of the IP Code;
the importance of protecting intellectual property rights; and
the salient provisions of the CAO 6-2002 on border control measures. This will ensure that a uniform and effective implementation of the regulation is applied in customs ports, nationwide.
This workshop is basically a capacity-building activity for the BOC's IP Unit. It is expected that the training seminar will increase the IP Unit's awareness on IPR issues, and further strengthen their commitment in protecting IPR at the border.
Government Sector Efforts On Mediation
Due to the problems in the judicial system, i.e. judicial bottlenecks and backlog of cases, the IPO started to develop its capacity for resolving IPR infringement disputes. This is also in view that the IPO’s increased use of the mediation process will help promote a climate of confidence among investors regarding the intensity of IPR protection in the country.
In 2003, the IPO conducted the mediation internship program which produced twenty-six (26) highly trained mediators. The program resulted to an 85% settlement rate; of the twenty (20) cases that were fully mediated, 17 were settled, while only three (3) cases failed. The mediation process that transpired during the program proved to be more expedient than the current adjudicative process regarding IPR cases. Prior to the mediation program, the same IPR cases have been pending at the Bureau of Legal Affairs (BLA) for an average of 4.9 years. On the other hand, the cases were settled during the program within an average rate of twenty-one (21) working days, from the date the cases were assigned to mediation until the agreements were signed.
The IPO also conducted mediation workshops/seminars in 2003 which discussed concerns such as: 1) the principles of conflict, its typologies, and the basic responses to and motives of conflict, 2) the types of negotiations, 3) principles of interest-based mediation and the types of mediations, 4) the various tools in mediation, the ethics involved, and 5) the challenges of a mediator. These activities are efforts to strengthen human resource capabilities in handling mediation processes concerning IPR.
Effects of Enforcement Activities on Piracy Rates
A s seen from Figure 12, an inverse relationship between the number of monitored firms for IPR violations and the software piracy rate is observed. As the number of monitored firms increased, the software piracy rate estimated by the Business Software Alliance (BSA) declined. The two variables also registered high negative correlation (-0.96507), which indicates a strong relationship between the two57.
H owever, the same cannot be said about the association between the apprehension activities and the piracy rates (Figure 13). No distinct relationship between the number of raids and the piracy rate was observed. Furthermore, the statistical analysis between the two variables resulted to a 0.456932 correlation. This suggests that the large values in the piracy rates may be associated with the large values of the number of apprehended firms, although this relationship is weak 58.
From this comparison, it can be observed that piracy rates relate more to the monitoring, rather than the apprehension enforcement activities.
Figure 14 shows that the number of monitored firms and level of new BOI investments in Software Development and IT Services trends are moving in the same direction. As the number of monitored firms rises, the level of new investments also increases, though with a one year lag. Meanwhile, when the monitoring activities declined in 2001, the level of investments followed the same direction in 2002. This is an evidence of an association between IPR protection and investment decisions in the Software Development sector.
T his strengthens the IPR Protection conceptual framework presented earlier (Figure 6) -- that market perceptions and speculations are significant issues that affect demand for software products and services. Investment decisions, made by risk-averse investors, do not only depend on economic elements but on security factors as well. Hence, decision-makers also take note of the government efforts on the totality of IPR protection through the legislation passed and enforcement activities conducted.
The level of piracy in the Music/Recording Industry has continued to climb since 1997 until 2003. In the IIPA estimates, piracy rates had been consistent at 20% until 2000, but rose by 13.0 percentage points in 2001, and eventually reached 40% in 2002. The 2003 rate remained at 40%. IPC estimates coincided with the IIPA level in 1999 and 2003. The IPC rates, however, rose to 21% in 1999, and also climbed by 8.2 percentage points in 2001 (Table 18).
C omparative analysis of the IPC music piracy rates and government enforcement activities showed that as the number of apprehended firms declines, music piracy rate increases (Figure 15). When the raid activities climbed in 2000, piracy rate still rose but only by 0.31 percentage points, the lowest registered increase in rates from 1997-2001.
O n the other hand, IPC estimates of video piracy showed an association with the monitoring activities of all IPR enforcement agencies (Figure 16). In 1998, a year after the implementation of the IP Code, the video piracy rate slid by 4 percentage points, while the number of monitored firms for IPR violations rose to 10,138, from the 8,944 figure in 1997. As the monitoring activities intensified, video piracy, on the other hand, declined. This was observed until the year 2000. In addition, analysis showed a –0.716 correlation between the two variables.
Figure 17 shows that the number of apprehended firms for IPR violations, by selected agencies with jurisdiction in confiscating pirated video products, had an opposite trend that of the estimated video piracy rates. When the raid operations of the VRB, NBI, PNP and BOC declined from 1,148 in 1996 to 213 in 1997, the piracy rate rose by 8.6 percentage points. Moreover, as the arrest operations of the identified agencies increased, piracy rates experienced a slowdown. Analysis showed a –0.71747 correlation between the two variables.
In 2000, the impact of the increase in the number of arrests was intensified by the confiscation of 10 replicating machines, worth approximately PhP80 million each. The seizure of 6 replicating machines in 2001 had a similar effect on the state of movie copyright infringement in the country. Furthermore, in 2003, the VRB was able to seize a large number of machines and A/V equipment in both their inspection and arrest operations, of 278 and 284 pieces, respectively. This also helped in the decline of video piracy rate during the year.
It is observed that music piracy rates responded to the apprehension activities of all the IPR enforcement agencies. The declining trend of the total apprehension activities has encouraged the proliferation of the infringements. On the other hand, movie piracy rates reacted more to the total monitoring activities of all agencies active in the PIAC-IPR from 1997-2001.
But it should be noted that, with the existence of the VRB, there was a lead agency that concentrated on combating video piracy. Hence, there are relatively more efforts in enforcement with regards to curtailing video piracy. As seen in Figure 17, the video piracy rates responded to the apprehension activities of agencies (VRB, NBI, PNP, BOC) with jurisdiction over video piracy.
Private Sector Effort
The private sector has also been active in the enforcement activities regarding IPR protection. It has been working hand-in-hand with the government agencies in their monitoring and apprehension activities.
The organizations composing the Intellectual Property Coalition (IPC)59 help in the IPR protection in their individual capacities. The Philippine Association of the Recording Industry (PARI) has been active in enforcement of IP laws, and has assisted the VRB and NBI in their arrest and seizure activities. In 1999, it had worked with the NBI, EIIB, and DOJ in confiscating pirated music CDs. It has also provided rewards for information leading to illegal replication operations.
Another member organization, the Filipino Society of Composers, Authors, and Publishers FILSCAP, has the Intellectual Property Foundation which aims to assist the government modernize IP legislation. Moreover, it seeks to help the government build capabilities in IP administration and enforcement, and take regional and international initiatives in IP. Its effectiveness, however, has been hampered by the lack of resources.
Meanwhile, the IP-stakeholders themselves, and their companies, individually maintain pools of investigators primarily for IPR protection. These people provide monitoring services against IPR infringements, for them to report to the government enforcement agencies. They also help the government gather enough pieces of evidence in support for the court to grant a search warrant. Moreover, for additional man-power, they cooperate with the NBI or PNP in the agencies' raid activities.