ARELLANO UNIVERSITY SCHOOL OF LAW

CASES IN COPYRIGHT Compilation of Cases in IPL – Copyright

Compiled by: Anne Meagen DC. Maningas

AUSL| SUMMER 2014 | COPY000 | Atty. Josephine Santiago

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Topic - Functions/Role of IPO/Bureaus

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. NO. 156041 February 21, 2007

PEST MANAGEMENT ASSOCIATION OF THE PHILIPPINES (PMAP), represented by its President, MANUEL J. CHAVEZ, Petitioner, vs. FERTILIZER AND PESTICIDE AUTHORITY (FPA), SECRETARY OF THE DEPARTMENT OF AGRICULTURE, FPA OFFICER- IN-CHARGE CESAR M. DRILON, AND FPA DEPUTY DIRECTOR DARIO C. SALUBARSE, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari seeking to set aside the Decision1 of the Regional Trial Court of Quezon City, Branch 90 (RTC) dated November 5, 2002.

The case commenced upon petitioner’s filing of a Petition For Declaratory Relief With Prayer For Issuance Of A Writ Of Preliminary Injunction And/Or Temporary Restraining Order with the RTC on January 4, 2002. Petitioner, a non-stock corporation duly organized and existing under the laws of the Philippines, is an association of pesticide handlers duly licensed by respondent Fertilizer and Pesticide Authority (FPA). It questioned the validity of Section 3.12 of the 1987 Pesticide Regulatory Policies and Implementing Guidelines, which provides thus:

3.12 Protection of Proprietary Data

Data submitted to support the first full or conditional registration of a pesticide active ingredient in the Philippines will be granted proprietary protection for a period of seven years from the date of such registration. During this period subsequent registrants may rely on these data only with third party authorization or otherwise must submit their own data. After this period, all data may be freely cited in support of registration by any applicant, provided convincing proof is submitted that the product being registered is identical or substantially similar to any current registered pesticide, or differs only in ways that would not significantly increase the risk of unreasonable adverse effects.

Pesticides granted provisional registration under P.D. 1144 will be considered first registered in 1977, the date of the Decree.

Pesticide products in which data is still under protection shall be referred to as proprietary pesticides, and all others as commodity pesticides. (Emphasis supplied)

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Petitioner argued that the specific provision on the protection of the proprietary data in FPA’s Pesticide Regulatory Policies and Implementing Guidelines is unlawful for going counter to the objectives of Presidential Decree No. 1144 (P.D. No. 1144); for exceeding the limits of delegated authority; and for encroaching on the exclusive jurisdiction of the Intellectual Property Office.

On November 5, 2002, the RTC dismissed the petition for declaratory relief for lack of merit. The RTC held that "the FPA did not exceed the limits of its delegated authority in issuing the aforecited Section 3.12 of the Guidelines granting protection to proprietary data x x x because the issuance of the aforecited Section was a valid exercise of its power to regulate, control and develop the pesticide industry under P.D. 1144"2 and the assailed provision does "not encroach on one of the functions of the Intellectual Properly Office (IPO)."3

Dissatisfied with the RTC Decision, petitioner resorted to filing this petition for review on certiorari where the following issues are raised:

I

WHETHER OR NOT RESPONDENT FPA HAS ACTED BEYOND THE SCOPE OF ITS DELEGATED POWER WHEN IT GRANTED A SEVEN-YEAR PROPRIETARY PROTECTION TO DATA SUBMITTED TO SUPPORT THE FIRST FULL OR CONDITIONAL REGISTRATION OF A PESTICIDE INGREDIENT IN THE PHILIPPINES;

II

WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE EXCLUSIVE JURISDICTION OF THE INTELLECTUAL PROPERTY OFFICE (IPO) WHEN IT INCLUDED IN ITS PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-YEAR PROPRIETARY DATA PROTECTION;

III

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN UNLAWFUL RESTRAINT OF FREE TRADE;

IV

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION RUNS COUNTER TO THE OBJECTIVES OF P.D. NO. 1144;

V

WHETHER OR NOT THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 90, COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE VALIDITY OF SECTION 3.12 OF THE PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES ISSUED BY RESPONDENT FPA.

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Respondents, on the other hand, maintain that the provision on the protection of proprietary data in the FPA's Pesticide Regulatory Policies and Implementing Guidelines is valid and legal as it does not violate the objectives of P.D. No. 1144; the proprietary data are a substantial asset which must be protected; the protection for a limited number of years does not constitute unlawful restraint of free trade; and such provision does not encroach upon the jurisdiction of the Intellectual Property Office.

Respondents expound that since under P.D. No. 1144, the FPA is mandated to regulate, control and develop the pesticide industry, it was necessary to provide for such protection of proprietary data, otherwise, pesticide handlers will proliferate to the the detriment of the industry and the public since the inherent toxicity of pesticides are hazardous and are potential environmental contaminants.

They also pointed out that the protection under the assailed Pesticide Regulatory Policies and Implementing Guidelines is warranted, considering that the development of proprietary data involves an investment of many years and large sums of money, thus, the data generated by an applicant in support of his application for registration are owned and proprietary to him. Moreover, since the protection accorded to the proprietary data is limited in time, then such protection is reasonable and does not constitute unlawful restraint of trade.

Lastly, respondents emphasize that the provision on protection of proprietary data does not usurp the functions of the Intellectual Property Office (IPO) since a patent and data protection are two different matters. A patent prohibits all unlicensed making, using and selling of a particular product, while data protection accorded by the FPA merely prevents copying or unauthorized use of an applicant's data, but any other party may independently generate and use his own data. It is further argued that under Republic Act No. 8293 (R.A. No. 8293), the grant of power to the IPO to administer and implement State policies on intellectual property is not exclusionary as the IPO is even allowed to coordinate with other government agencies to formulate and implement plans and policies to strengthen the protection of intellectual property rights.

The petition is devoid of merit.

The law being implemented by the assailed Pesticide Regulatory Policies and Implementing Guidelines is P.D. No. 1144, entitled Creating the Fertilizer and Pesticide Authority and Abolishing the Fertilizer Industry Authority. As stated in the Preamble of said decree, "there is an urgent need to create a technically-oriented government authority equipped with the required expertise to regulate, control and develop both the fertilizer and the pesticide industries." (Underscoring supplied) The decree further provided as follows:

Section 6. Powers and Functions. The FPA shall have jurisdiction, over all existing handlers of pesticides, fertilizers and other agricultural chemical inputs. The FPA shall have the following powers and functions:

I. Common to Fertilizers, Pesticides and other Agricultural Chemicals

x x x

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4. To promulgate rules and regulations for the registration and licensing of handlers of these products, collect fees pertaining thereto, as well as the renewal, suspension, revocation, or cancellation of such registration or licenses and such other rules and regulations as may be necessary to implement this Decree;

x x x

Section 7. Power to Issue Rules and Regulations to Implement Decree. The FPA is hereby authorized to issue or promulgate rules and regulations to implement, and carry out the purposes and provisions of this Decree.

Did the FPA go beyond its delegated power and undermine the objectives of P.D. No. 1144 by issuing regulations that provide for protection of proprietary data? The answer is in the negative.

Under P.D. No. 1144, the FPA is given the broad power to issue rules and regulations to implement and carry out the purposes and provisions of said decree, i.e., to regulate, control and develop the pesticide industry. In furtherance of such ends, the FPA sees the protection of proprietary data as one way of fulfilling its mandate. In Republic v. Sandiganbayan,4 the Court emphasized that:

x x x [t]he interpretation of an administrative government agency, which is tasked to implement a statute is generally accorded great respect and ordinarily controls the construction of the courts. The reason behind this rule was explained in Nestle Philippines, Inc. vs. Court of Appeals in this wise:

The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to the accumulation of experience and growth of specialized capabilities by the administrative agency charged with implementing a particular statute. In Asturias Sugar Central, Inc. vs. Commissioner of Customs, the Court stressed thatexecutive officials are presumed to have familiarized themselves with all the considerations pertinent to the meaning and purpose of the law, and to have formed an independent, conscientious and competent expert opinion thereon. The courts give much weight to the government agency officials charged with the implementation of the law, their competence, expertness, experience and informed judgment, and the fact that they frequently are the drafters of the law they interpret."

x x x.5 [Emphasis supplied]

Verily, in this case, the Court acknowledges the experience and expertise of FPA officials who are best qualified to formulate ways and means of ensuring the quality and quantity of pesticides and handlers thereof that should enter the Philippine market, such as giving limited protection to proprietary data submitted by applicants for registration. The Court ascribes great value and will not disturb the FPA's determination that one way of attaining the purposes of its charter is by granting such protection, specially where there is nothing on record which shows that said administrative agency went beyond its delegated powers.

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Moreover, petitioner has not succeeded in convincing the Court that the provision in question has legal infirmities.1awphi1.net

There is no encroachment upon the powers of the IPO granted under R.A. No. 8293, otherwise known as theIntellectual Property Code of the Philippines. Section 5 thereof enumerates the functions of the IPO. Nowhere in said provision does it state nor can it be inferred that the law intended the IPO to have the exclusive authority to protect or promote intellectual property rights in the Philippines. On the contrary, paragraph (g) of said Section even provides that the IPO shall "[c]oordinate with other government agencies and the private sector efforts to formulate and implement plans and policies to strengthen the protection of intellectual property rights in the country." Clearly, R.A. No. 8293 recognizes that efforts to fully protect intellectual property rights cannot be undertaken by the IPO alone. Other agencies dealing with intellectual property rights are, therefore, not precluded from issuing policies, guidelines and regulations to give protection to such rights.

There is also no evidence whatsoever to support petitioner's allegation that the grant of protection to proprietary data would result in restraining free trade. Petitioner did not adduce any reliable data to prove its bare allegation that the protection of proprietary data would unduly restrict trade on pesticides. Furthermore, as held in Association of Philippine Coconut Desiccators v. Philippine Coconut Authority,6 despite the fact that "our present Constitution enshrines free enterprise as a policy, it nonetheless reserves to the government the power to intervene whenever necessary to promote the general welfare." There can be no question that the unregulated use or proliferation of pesticides would be hazardous to our environment. Thus, in the aforecited case, the Court declared that "free enterprise does not call for removal of ‘protective regulations’."7 More recently, in Coconut Oil Refiners Association, Inc. v. Torres,8 the Court held that "[t]he mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition." It must be clearly explained and proven by competent evidence just exactly how such protective regulation would result in the restraint of trade.

In sum, the assailed provision in the 1987 Pesticide Regulatory Policies and Implementing Guidelines granting protection to proprietary data is well within the authority of the FPA to issue so as to carry out its purpose of controlling, regulating and developing the pesticide industry.

WHEREFORE, the petition is DENIED. The Decision of the Regional Trial Court of Quezon City, Branch 90, in SP. Civil Case No. Q-01-42790 is AFFIRMED.

SO ORDERED.

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Topic: Differences of forms of IP

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 172835 December 13, 2007

AIR PHILIPPINES CORPORATION, Petitioner, vs. PENNSWELL, INC. Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the Rules of Court, the nullification of the 16 February 2006 Decision1 and the 25 May 2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 86329, which affirmed the Order3 dated 30 June 2004 of the Regional Trial Court (RTC), Makati City, Branch 64, in Civil Case No. 00-561.

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air transportation services. On the other hand, respondent Pennswell, Inc. was organized to engage in the business of manufacturing and selling industrial chemicals, solvents, and special lubricants.

On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by Sales Invoices No. 8846,4 9105,5 8962,6 and 8963,7 which correspond to Purchase Orders No. 6433, 6684, 6634 and 6633, respectively. Under the contracts, petitioner’s total outstanding obligation amounted to P449,864.98 with interest at 14% per annum until the amount would be fully paid. For failure of the petitioner to comply with its obligation under said contracts, respondent filed a Complaint8 for a Sum of Money on 28 April 2000 with the RTC.

In its Answer,9 petitioner contended that its refusal to pay was not without valid and justifiable reasons. In particular, petitioner alleged that it was defrauded in the amount of P592,000.00 by respondent for its previous sale of four items, covered by Purchase Order No. 6626. Said items were misrepresented by respondent as belonging to a new line, but were in truth and in fact, identical with products petitioner had previously purchased from respondent. Petitioner asserted that it was deceived by respondent which merely altered the names and labels of such goods. Petitioner specifically identified the items in question, as follows:

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Label/Description Item No. Amount P.O. Date

1. a. Anti-Friction Fluid b. Excellent Rust Corrosion (fake)

MPL-800 MPL-008

153,941.40 155,496.00

5714 5888

05/20/99 06/20/99

2. a. Contact Grease b. Connector Grease (fake)

COG #2 CG

115,236.00 230,519.52

5540 6327

04/26/99 08/05/99

3. a. Trixohtropic Grease b. Di-Electric Strength Protective Coating (fake)

EPC EPC#2

81,876.96 81,876.96

4582 5446

01/29/99 04/21/99

4. a. Dry Lubricant b. Anti-Seize Compound (fake)

ASC-EP ASC-EP 2000

87,346.52 124,108.10

5712 4763 & 5890

05/20/99 02/16/99 & 06/24/99

According to petitioner, respondent’s products, namely Excellent Rust Corrosion, Connector Grease, Electric Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction Fluid, Contact Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated that had respondent been forthright about the identical character of the products, it would not have purchased the items complained of. Moreover, petitioner alleged that when the purported fraud was discovered, a conference was held between petitioner and respondent on 13 January 2000, whereby the parties agreed that respondent would return to petitioner the amount it previously paid. However, petitioner was surprised when it received a letter from the respondent, demanding payment of the amount of P449,864.94, which later became the subject of respondent’s Complaint for Collection of a Sum of Money against petitioner.

During the pendency of the trial, petitioner filed a Motion to Compel10 respondent to give a detailed list of the ingredients and chemical components of the following products, to wit: (a) Contact Grease and Connector Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c) Dry Lubricant and Anti-Seize Compound.11It appears that petitioner had earlier requested the Philippine Institute of Pure and Applied Chemistry (PIPAC) for the latter to conduct a comparison of respondent’s goods.

On 15 March 2004, the RTC rendered an Order granting the petitioner’s motion. It disposed, thus:

The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air Philippines Corporation[,] a detailed list of the ingredients or chemical components of the following chemical products:

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a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and

c. Dry Lubricant to be compared with Anti-Seize Compound[.]

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to submit to [petitioner] Air Philippines Corporation the chemical components of all the above-mentioned products for chemical comparison/analysis.12

Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to disclose the chemical components sought because the matter is confidential. It argued that what petitioner endeavored to inquire upon constituted a trade secret which respondent cannot be forced to divulge. Respondent maintained that its products are specialized lubricants, and if their components were revealed, its business competitors may easily imitate and market the same types of products, in violation of its proprietary rights and to its serious damage and prejudice.

The RTC gave credence to respondent’s reasoning, and reversed itself. It issued an Order dated 30 June 2004, finding that the chemical components are respondent’s trade secrets and are privileged in character. A priori, it rationalized:

The Supreme Court held in the case of Chavez vs. Presidential Commission on Good Government, 299 SCRA 744, p. 764, that "the drafters of the Constitution also unequivocally affirmed that aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposit Act) are also exempted from compulsory disclosure."

Trade secrets may not be the subject of compulsory disclosure. By reason of [their] confidential and privileged character, ingredients or chemical components of the products ordered by this Court to be disclosed constitute trade secrets lest [herein respondent] would eventually be exposed to unwarranted business competition with others who may imitate and market the same kinds of products in violation of [respondent’s] proprietary rights. Being privileged, the detailed list of ingredients or chemical components may not be the subject of mode of discovery under Rule 27, Section 1 of the Rules of Court, which expressly makes privileged information an exception from its coverage.13

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals, which denied the Petition and affirmed the Order dated 30 June 2004 of the RTC.

The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients of its lubricants is to disregard respondent’s rights over its trade secrets. It was categorical in declaring that the chemical formulation of respondent’s products and their ingredients are embraced within the meaning of "trade secrets." In disallowing the disclosure, the Court of Appeals expounded, thus:

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The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held that trade secrets and confidential, commercial and financial information are exempt from public scrutiny. This is reiterated in Chavez v. Presidential Commission on Good Government (299 SCRA 744 [1998]) where the Supreme Court enumerated the kinds of information and transactions that are recognized as restrictions on or privileges against compulsory disclosure. There, the Supreme Court explicitly stated that:

"The drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act) re also exempt from compulsory disclosure."

It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose documents, papers, or any object which are considered trade secrets.

In the instant case, petitioner [Air Philippines Corporation] would have [respondent] Pennswell produce a detailed list of ingredients or composition of the latter’s lubricant products so that a chemical comparison and analysis thereof can be obtained. On this note, We believe and so hold that the ingredients or composition of [respondent] Pennswell’s lubricants are trade secrets which it cannot be compelled to disclose.

[Respondent] Pennswell has a proprietary or economic right over the ingredients or components of its lubricant products. The formulation thereof is not known to the general public and is peculiar only to [respondent] Pennswell. The legitimate and economic interests of business enterprises in protecting their manufacturing and business secrets are well-recognized in our system.

[Respondent] Pennswell has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information against the public. Otherwise, such information can be illegally and unfairly utilized by business competitors who, through their access to [respondent] Pennswell’s business secrets, may use the same for their own private gain and to the irreparable prejudice of the latter.

x x x x

In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises of the ingredients and formulation of [respondent] Pennswell’s lubricant products which are unknown to the public and peculiar only to Pennswell.

All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent Judge in finding that the detailed list of ingredients or composition of the subject lubricant products which petitioner [Air Philippines Corporation] seeks to be disclosed are trade secrets of [respondent] Pennswell; hence, privileged against compulsory disclosure.14

Petitioner’s Motion for Reconsideration was denied.

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Unyielding, petitioner brought the instant Petition before us, on the sole issue of:

WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING LAWS AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT THAT THE CHEMICAL COMPONENTS OR INGREDIENTS OF RESPONDENT’S PRODUCTS ARE TRADE SECRETS OR INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO COMPULSORY DISCLOSURE.15

Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and ingredients of respondent’s products to conduct a comparative analysis of its products. Petitioner assails the conclusion reached by the Court of Appeals that the matters are trade secrets which are protected by law and beyond public scrutiny. Relying on Section 1, Rule 27 of the Rules of Court, petitioner argues that the use of modes of discovery operates with desirable flexibility under the discretionary control of the trial court. Furthermore, petitioner posits that its request is not done in bad faith or in any manner as to annoy, embarrass, or oppress respondent.

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it.16 The definition also extends to a secret formula or process not patented, but known only to certain individuals using it in compounding some article of trade having a commercial value.17 A trade secret may consist of any formula, pattern, device, or compilation of information that: (1) is used in one's business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information.18 Generally, a trade secret is a process or device intended for continuous use in the operation of the business, for example, a machine or formula, but can be a price list or catalogue or specialized customer list.19 It is indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which may be treated as property, and ordinarily an injunction will be granted to prevent the disclosure of the trade secret by one who obtained the information "in confidence" or through a "confidential relationship."20 American jurisprudence has utilized the following factors21 to determine if an information is a trade secret, to wit:

(1) the extent to which the information is known outside of the employer's business;

(2) the extent to which the information is known by employees and others involved in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the information;

(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in developing the information; and

(6) the extent to which the information could be easily or readily obtained through an independent source.22

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In Cocoland Development Corporation v. National Labor Relations Commission,23 the issue was the legality of an employee’s termination on the ground of unauthorized disclosure of trade secrets. The Court laid down the rule that any determination by management as to the confidential nature of technologies, processes, formulae or other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny. The Court rejected the employer’s naked contention that its own determination as to what constitutes a trade secret should be binding and conclusive upon the NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be none at all to speak of.24 Hence, in Cocoland, the parameters in the determination of trade secrets were set to be such substantial factual basis that can withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondent’s special lubricants are trade secrets within the contemplation of the law. Respondent was established to engage in the business of general manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose of goods, wares, merchandise, products, including but not limited to industrial chemicals, solvents, lubricants, acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar preparations, among others. It is unmistakable to our minds that the manufacture and production of respondent’s products proceed from a formulation of a secret list of ingredients. In the creation of its lubricants, respondent expended efforts, skills, research, and resources. What it had achieved by virtue of its investments may not be wrested from respondent on the mere pretext that it is necessary for petitioner’s defense against a collection for a sum of money. By and large, the value of the information to respondent is crystal clear. The ingredients constitute the very fabric of respondent’s production and business. No doubt, the information is also valuable to respondent’s competitors. To compel its disclosure is to cripple respondent’s business, and to place it at an undue disadvantage. If the chemical composition of respondent’s lubricants are opened to public scrutiny, it will stand to lose the backbone on which its business is founded. This would result in nothing less than the probable demise of respondent’s business. Respondent’s proprietary interest over the ingredients which it had developed and expended money and effort on is incontrovertible. Our conclusion is that the detailed ingredients sought to be revealed have a commercial value to respondent. Not only do we acknowledge the fact that the information grants it a competitive advantage; we also find that there is clearly a glaring intent on the part of respondent to keep the information confidential and not available to the prying public.

We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect documents or things upon a showing of good cause before the court in which an action is pending. Its entire provision reads:

SECTION 1. Motion for production or inspection order. – Upon motion of any party showing good cause therefore, the court in which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to

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any matter involved in the action and which are in his possession, custody or control; or (b) order any party to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and conditions as are just.

A more than cursory glance at the above text would show that the production or inspection of documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing of good cause therefor before the court in which an action is pending. The court may order any party: a) to produce and permit the inspection and copying or photographing of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, which are not privileged;25 which constitute or contain evidence material to any matter involved in the action; and which are in his possession, custody or control; or b) to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or tangible things that may be produced and inspected should not be privileged.26 The documents must not be privileged against disclosure.27 On the ground of public policy, the rules providing for production and inspection of books and papers do not authorize the production or inspection of privileged matter; that is, books and papers which, because of their confidential and privileged character, could not be received in evidence.28 Such a condition is in addition to the requisite that the items be specifically described, and must constitute or contain evidence material to any matter involved in the action and which are in the party’s possession, custody or control.

Section 2429 of Rule 130 draws the types of disqualification by reason of privileged communication, to wit: (a) communication between husband and wife; (b) communication between attorney and client; (c) communication between physician and patient; (d) communication between priest and penitent; and (e) public officers and public interest. There are, however, other privileged matters that are not mentioned by Rule 130. Among them are the following: (a) editors may not be compelled to disclose the source of published news; (b) voters may not be compelled to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank deposits. 30

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld the finding of the RTC that there is substantial basis for respondent to seek protection of the law for its proprietary rights over the detailed chemical composition of its products.

That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction affords to trade secrets is evident in our laws. The Interim Rules of Procedure on Government Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A,31 as amended; and (2) cases for rehabilitation transferred

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from the Securities and Exchange Commission to the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, expressly provides that the court may issue an order to protect trade secrets or other confidential research, development, or commercial information belonging to the debtor.32 Moreover, the Securities Regulation Code is explicit that the Securities and Exchange Commission is not required or authorized to require the revelation of trade secrets or processes in any application, report or document filed with the Commission.33 This confidentiality is made paramount as a limitation to the right of any member of the general public, upon request, to have access to all information filed with the Commission.34

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the following articles:

Art. 291. Revealing secrets with abuse of office. — The penalty of arresto mayor and a fine not exceeding 500 pesos shall be imposed upon any manager, employee or servant who, in such capacity, shall learn the secrets of his principal or master and shall reveal such secrets.

Art. 292. Revelation of industrial secrets. — The penalty of prision correccional in its minimum and medium periods and a fine not exceeding 500 pesos shall be imposed upon the person in charge, employee or workman of any manufacturing or industrial establishment who, to the prejudice of the owner thereof, shall reveal the secrets of the industry of the latter.

Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, has a restrictive provision on trade secrets, penalizing the revelation thereof by internal revenue officers or employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law, any income, profit, loss or expenditure appearing in any income tax return, shall be punished by a fine of not more than two thousand pesos (P2,000), or suffer imprisonment of not less than six (6) months nor more than five (5) years, or both.

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, enacted to implement the policy of the state to regulate, restrict or prohibit the importation, manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures that present unreasonable risk and/or injury to health or the environment, also contains a provision that limits the right of the public to have access to records, reports or information concerning chemical substances and mixtures including safety data submitted and data on emission or discharge into the environment, if the matter is confidential such that it would divulge trade secrets, production or sales figures; or methods, production or processes unique to such

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manufacturer, processor or distributor; or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor.35

Clearly, in accordance with our statutory laws, this Court has declared that intellectual and industrial property rights cases are not simple property cases.36 Without limiting such industrial property rights to trademarks and trade names, this Court has ruled that all agreements concerning intellectual property are intimately connected with economic development.37 The protection of industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. It speeds up transfer of technology and industrialization, and thereby bring about social and economic progress.38 Verily, the protection of industrial secrets is inextricably linked to the advancement of our economy and fosters healthy competition in trade.

Jurisprudence has consistently acknowledged the private character of trade secrets.1âwphi1 There is a privilege not to disclose one’s trade secrets.39 Foremost, this Court has declared that trade secrets and banking transactions are among the recognized restrictions to the right of the people to information as embodied in the Constitution.40 We said that the drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from compulsory disclosure.41

Significantly, our cases on labor are replete with examples of a protectionist stance towards the trade secrets of employers. For instance, this Court upheld the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company, on the rationalization that the company has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors.42 Notably, it was in a labor-related case that this Court made a stark ruling on the proper determination of trade secrets.

In the case at bar, petitioner cannot rely on Section 7743 of Republic Act 7394, or the Consumer Act of the Philippines, in order to compel respondent to reveal the chemical components of its products. While it is true that all consumer products domestically sold, whether manufactured locally or imported, shall indicate their general make or active ingredients in their respective labels of packaging, the law does not apply to respondent. Respondent’s specialized lubricants -- namely, Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating, Dry Lubricant and Anti-Seize Compound -- are not consumer products. "Consumer products," as it is defined in Article 4(q),44 refers to goods, services and credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices. This is not the nature of respondent’s products. Its products are not intended for personal, family, household or agricultural purposes. Rather, they are for industrial use, specifically for the use of aircraft propellers and engines.

Petitioner’s argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires the disclosure of the active ingredients of a drug is also on faulty

15

ground.45 Respondent’s products are outside the scope of the cited law. They do not come within the purview of a drug46 which, as defined therein, refers to any chemical compound or biological substance, other than food, that is intended for use in the treatment, prevention or diagnosis of disease in man or animals. Again, such are not the characteristics of respondent’s products.

What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical formulation of respondent’s products is not known to the general public and is unique only to it. Both courts uniformly ruled that these ingredients are not within the knowledge of the public. Since such factual findings are generally not reviewable by this Court, it is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below.47 We need not delve into the factual bases of such findings as questions of fact are beyond the pale of Rule 45 of the Rules of Court. Factual findings of the trial court when affirmed by the Court of Appeals, are binding and conclusive on the Supreme Court.48

We do not find merit or applicability in petitioner’s invocation of Section 1249 of the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records, reports or information concerning chemical substances and mixtures, including safety data submitted, and data on emission or discharge into the environment. To reiterate, Section 1250 of said Act deems as confidential matters, which may not be made public, those that would divulge trade secrets, including production or sales figures or methods; production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. It is true that under the same Act, the Department of Environment and Natural Resources may release information; however, the clear import of the law is that said authority is limited by the right to confidentiality of the manufacturer, processor or distributor, which information may be released only to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. The right to confidentiality is recognized by said Act as primordial. Petitioner has not made the slightest attempt to show that these circumstances are availing in the case at bar.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it is indispensable for doing justice.51We do not, however, find reason to except respondent’s trade secrets from the application of the rule on privilege. The revelation of respondent’s trade secrets serves no better purpose to the disposition of the main case pending with the RTC, which is on the collection of a sum of money. As can be gleaned from the facts, petitioner received respondent’s goods in trade in the normal course of business. To be sure, there are defenses under the laws of contracts and sales available to petitioner. On the other hand, the greater interest of justice ought to favor respondent as the holder of trade secrets. If we were to weigh the conflicting interests between the parties, we rule in favor of the greater interest of respondent. Trade secrets should receive greater protection from discovery, because they derive economic value from being generally unknown and not readily ascertainable by the public.52 To the mind of this Court, petitioner was not able to

16

show a compelling reason for us to lift the veil of confidentiality which shields respondent’s trade secrets.

WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.

SO ORDERED.

Footnotes 1 Penned by Associate Justice Jose C. Reyes, Jr. with Associate Justice Eliezer R. de los Santos and Associate Justice Arturo G. Tayag, concurring. CA rollo, pp. 166-176. 2 Id. at 206. 3 Penned by Judge Delia H. Panganiban. Records, p. 313-314. 4 Corresponding to the sale of Penns-Lube Graphite Grease. Id. at 7. 5 Corresponding to the sale of Rectified Insulation and Carbon Remover. Id. at 9. 6 Corresponding to the sale of Anti-Contaminant. Id. at 11. 7 Corresponding to the sale of Non-Toxic Ease Off with Product Code Penns-Chem CIR. Id. at 13. 8 Id. at 1-6. 9 Id. at 33-48. 10 Id. at 291-294. 11 Id. at 291-292. 12 Id. at 300. 13 Id. at 313-314. 14 CA rollo, pp. 172-175. 15 Rollo, p. 26 16 BLACK’S LAW DICTIONARY 1494 (1991), 6th ed. 17 Id., citing Palin Mfg. Co., Inc. v. Water Technology, Inc., 103 Ill.App.3d 926, 59 Ill.Dec. 553, 431 18 AMJUR EMPLOYMENT § 178, citing Saunders v. Florence Enameling Co., Inc., 540 So. 2d 651 (Ala. 1988); Air Products and Chemicals, Inc. v. Johnson, 296 Pa. Super. 405, 442 A.2d 1114 (1982). The foregoing citation also expounded that trade secrets need not be technical in nature. Market-related information such as information on current and future projects, as well as potential future opportunities for a firm, may constitute a trade secret., citing Air Products and Chemicals, Inc. v. Johnson, 296 Pa. Super. 405, 442 A.2d 1114 (1982). 19 Id., citing Saunders v. Florence Enameling Co., Inc., 540 So. 2d 651 (Ala. 1988); Air Products and Chemicals, Inc. v. Johnson, 296 Pa. Super. 405, 442 A.2d 1114 (1982). A former employee of an insurance company, who routinely received information regarding the company's customer list and policy termination dates while serving as vice-president, was barred from disclosing that information, even though the company had partially disclosed the customer list in attempts to secure new clients. Alexander & Alexander, Inc. v. Drayton, 378 F. Supp. 824 (E.D. Pa. 1974), aff'd, 505 F.2d 729 (3d Cir. 1974).

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20 9 A.L.R.3d 665, citing Am Jur, Injunctions (Rev ed § 72). The Restatement of the Law of Torts § 757, emphasizes that liability for the disclosure of a trade secret learned under conditions giving no privilege of disclosure or use is not based on the mere copying or use but on the improper means by which the information was procured. 21 Id., as adopted from the Uniform Trade Secrets Act which is intended to provide states with a legal framework for improved trade-secret protection. 22 Id. 23 328 Phil. 351 (1996). 24 Id. 25 "Privileged communications" are communications which occur in a context of legal or other recognized professional confidentiality. The fact that a certain communication is termed privileged allows the speakers to resist legal pressure to disclose its contents. (See Barron’s Law Dictionary, 3rd ed., p. 373.) The term "privileged" in Section 2, Rule 24, Rules of Court, on depositions and discovery, refers to privileged confidential communications under Sec. 21, Rule 130, Rules of Court. (See Philippine Law Dictionary, 1982 ed., p. 484.) 26 Feria and Noche, Civil Procedure Annotated (2001 ed.), p. 553. 27 Agpalo, Handbook on Civil Procedure (2001 ed.), p. 288. 28 Id. at 289. 29 Sec. 24. Disqualification by reason of privileged communication. – The following persons cannot testify as to matters learned in confidence in the following cases: (a) The husband or the wife, during or after the marriage cannot be examined without the consent of the other as to any communication received in confidence by one from the other during the marriage except in a civil case by one against the other, or in a criminal case for a crime committed by one against the other or the latter's direct descendants or ascendants; (b) An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of, or with a view to, professional employment, nor can an attorney's secretary, stenographer, or clerk be examined, without the consent of the client and his employer, concerning any fact the knowledge of which has been acquired in such capacity; (c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil case, without the consent of the patient, be examined as to any advice or treatment given by him or any information which he may have acquired in attending such patient in a professional capacity, which information was necessary to enable him to act in capacity, and which would blacken the reputation of the patient; (d) A minister or priest cannot, without the consent of the person making the confession, be examined as to any confession made to or any advice given by him in his professional character in the course of discipline enjoined by the church to which the minister or priest belongs; (e) A public officer cannot be examined during his term of office or afterwards, as to communications made to him in official confidence, when the court finds that the public interest would suffer by the disclosure. 30 Francisco, Evidence (3rd ed., 1996), pp. 171-173. 31 SEC Reorganization Act. 32 Section 4, Rule 3 of the Interim Rules of Procedure on Government Rehabilitation.

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33 Section 66.2 of the Securities Regulation Code of 2000 provides that, "66.2. Nothing in this Code shall be construed to require, or to authorize the Commission to require, the revealing of trade secrets or processes in any application, report, or document filed with the Commission. 34 SEC. 66. Revelation of Information Filed with the Commission. – 66.1. All information filed with the Commission in compliance with the requirements of this Code shall be made available to any member of the general public, upon request, in the premises and during regular office hours of the Commission, except as set forth in this Section. 35 Section 12. - Public Access to Records, Reports or Notification. The public shall have access to records, reports, or information concerning chemical substances and mixtures including safety data submitted, data on emission or discharge into the environment, and such documents shall be available for inspection or reproduction during normal business hours except that the Department of Environment and Natural Resources may consider a record, report or information or particular portions thereof confidential and may not be made public when such would divulge trade secrets, production or sales figures or methods, production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. The Department of Environment and Natural Resources, however, may release information subject to claim of confidentiality to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. 36 Mirpuri v. Court of Appeals, 376 Phil. 628 (1999). 37 Id. 38 Id. In Mirpuri (id. at 666), the Court acknowledges the Philippines’ respect for intellectual and industrial property, and held: The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." The Intellectual Property Code took effect on January 1, 1998 and by its express provision, repealed the Trademark Law, the Patent Law, Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, and the Decree on Compulsory Reprinting of Foreign Textbooks. The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). 39 Id. 40 The pertinent Constitutional provisions on the right of the people to information are, to wit: Sec. 7 [Article III]. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. Sec. 28 [Article II]. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. 41 Chavez v. Presidential Commission on Good Government and Magtanggol Gunigundo, 360 Phil. 133, 161 (1998).

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42 Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R. No. 162994, 17 September 2004, 438 SCRA 343, 352; See also Star Paper Corporation v. Simbol, G.R. No. 164774, 12 April 2006, 487 SCRA 228, 242. 43 ARTICLE 77. Minimum Labeling Requirements for Consumer Products. All consumer products domestically sold whether manufactured locally or imported shall indicate the following in their respective labels of packaging: a) its correct and registered trade name or brand name; b) its duly registered trademark; c) its duly registered business name; d) the address of the manufacturer, importer, repacker of the consumer product in the Philippines; e) its general make or active ingredients; f) the net quantity of contents, in terms of weight, measure or numerical count rounded off to at least the nearest tenths in the metric system; g) country of manufacture, if imported; and h) if a consumer product is manufactured, refilled or repacked under license from a principal, the label shall so state the fact. The following may be required by the concerned department in accordance with the rules and regulations they will promulgate under authority of this Act: a) whether it is flammable or inflammable; b) directions for use, if necessary; c) warning of toxicity; d) wattage, voltage or amperage; or e) process of manufacture used, if necessary. Any word, statement or other information required by or under authority of the preceding paragraph shall appear on the label or labeling with such conspicuousness as compared with other words, statements, designs, or devices therein, and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase or use. The above requirements shall form an integral part of the label without danger of being erased or detached under ordinary handling of the product. 44 ARTICLE 4. Definition of Terms. For purposes of this Act, the term: x x x x q) "Consumer products and services" means goods, services and credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall include but not limited to, food, drugs, cosmetics, and devices. 45 Petitioner cites the definition of a counterfeit drug/medicine in Republic Act 8203 or the Special Law on Counterfeit Drugs to buttress its argument, specifically Section 3(b)(4) thereof, to wit: a drug which contains no amount of, or a different active ingredient, or less than eighty percent (80%) of the active ingredient it purports to possess, as distinguished from an adulterated drug including reduction or loss or efficacy due to expiration. 46 SECTION 3. Definition of Terms – For purposes of this Act, the terms: (a) Drugs shall refer to any chemical compound or biological substance, other than food, intended for use in the treatment, prevention or diagnosis of disease in man or animals, including but not limited to:

20

(1) any article recognized in the official United States Pharmacopoeia – National Formulary (USP-NF), official Homeopathic Pharmacopoeia of the United States, Philippines National Drug Formulary, British Pharmacopoeia, any National Compendium or any supplement to any of them; (2) any article intended for use in the diagnosis, cure mitigation, treatment, or prevention of disease in man or animals; (3) any article other than food intended to affect the structure or any function of the body of man or animals; (4) any article intended for use as a component of any articles specified in clauses (1), (2), (3) not including devices or their components, parts, or accessories; and (5) herbal and/or traditional drugs which are articles of plant or animal origin used in folk medicine which are: (a) recognized in the Philippine National Drug Formulary; (b) intended for use in the treatment or cure or mitigation of disease symptoms, injury or body defect in man; (c) other than food, intended to affect the structure or any function of the body of man; (d) in finished or ready-to-use dosage form; and (e) intended for use as a component of any of the articles specified in clauses (a), (b), (c) and (d). 47 Ceballos v. Intestate Estate of the Late Emigdio Mercado, G.R. No. 155856, 28 May 2004, 430 SCRA 323, 331. 48 Filinvest Land, Inc. v. Court of Appeals, G.R. No. 138980, 20 September 2005, 470 SCRA 260, 267-268. 49 Section 12. - Public Access to Records, Reports or Notification. The public shall have access to records, reports or information concerning chemical substances and mixtures including safety data submitted, data on emission or discharge into the environment, and such documents shall be available for inspection or reproduction during normal business hours except that the Department of Environment and Natural Resources may consider a record, report or information or particular portions thereof confidential and may not be made public when such would divulge trade secrets, production or sales figures or methods, production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. The Department of Environment and Natural Resources, however, may release information subject to claim of confidentiality to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. (Republic Act No. 6969.) 50 Republic Act No. 6969. 51 Francisco, Evidence (3rd ed., 1996), pp. 171-173. 52 AMJUR DEPOSITION §42 , citing Ex parte Miltope Corp., 823 So. 2d 640 (Ala. 2001).

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Topic: Differences of forms of IP; Statutory right; No unfair competition in copyright

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 148222 August 15, 2003

PEARL & DEAN (PHIL.), INCORPORATED, Petitioner, vs. SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED, Respondents.

D E C I S I O N

CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision1 of the Court of Appeals reversing the October 31, 1996 decision2 of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals3 contained a summary of this dispute:

"Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display units simply referred to as light boxes. These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The advertising light boxes were marketed under the trademark "Poster Ads". The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From 1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufacture its advertising displays.

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed. On September 11, 1985, Pearl and Dean’s General Manager, Rodolfo Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SMI’s Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding

22

him that their agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not bother to reply.

Instead, in a letter dated January 14, 1986, SMI’s house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the same letter, he pushed for the signing of the contract for SM Cubao.

Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to fabricate its display units, offered to construct light boxes for Shoemart’s chain of stores. SMI approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were delivered on a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMI’s different branches. Pearl and Dean noted that NEMI is a sister company of SMI.

In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the same from SMI’s establishments. It also demanded the discontinued use of the trademark "Poster Ads," and the payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and NEMI took down its advertisements for "Poster Ads" from the lighted display units in SMI’s stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this instant case for infringement of trademark and copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and available technology, without notice of or reference to Pearl and Dean’s copyright. SMI noted that the registration of the mark "Poster Ads" was only for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word "Poster Ads" is a generic term which cannot be appropriated as a trademark, and, as such, registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was

23

purely intended to malign SMI’s good name. On this basis, SMI, aside from praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and Dean’s Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12, 1988.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged in the business of advertising. It repleaded SMI’s averments, admissions and denials and prayed for similar reliefs and counterclaims as SMI."

The RTC of Makati City decided in favor of P & D:

Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed:

(1) to pay plaintiff the following damages:

(a) actual damages - P16,600,000.00, representing profits derived by defendants as a result of infringe- ment of plaintiff’s copyright from 1991 to 1992

(b) moral damages - P1,000.000.00

(c) exemplary damages - P1,000,000.00

(d) attorney’s fees - P1,000,000.00

plus

(e) costs of suit;

(2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI which were fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation;

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark "Poster Ads", for destruction; and

(4) to permanently refrain from infringing the copyright on plaintiff’s light boxes and its trademark "Poster Ads".

Defendants’ counterclaims are hereby ordered dismissed for lack of merit.

SO ORDERED.4

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On appeal, however, the Court of Appeals reversed the trial court:

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable class "O" work, we have to agree with SMI when it posited that what was copyrighted were the technical drawings only, and not the light boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellant’s will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled "Selden’s Condensed Ledger or Bookkeeping Simplified" which purported to explain a new system of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in connection with the system explained in the work. These forms showed the entire operation of a day or a week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Selden’s copyrighted books. The Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that "to grant a monopoly in the underlying art when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of copyright." And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled "Bridge Approach – the drawing showed a novel bridge approach to unsnarl traffic congestion". The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiff’s drawings. In this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyright does not extend to the structures themselves.

In fine, we cannot find SMI liable for infringing Pearl and Dean’s copyright over the technical drawings of the latter’s advertising display units.

xxx xxx xxx

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The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the Trademark Law, which reads:

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark or trade-name, and of the registrant’s exclusive right to use the same in connection with the goods, business or servicesspecified in the certificate, subject to any conditions and limitations stated therein." (underscoring supplied)

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark "Poster Ads" with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the following products: stationeries such as letterheads, envelopes and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to the finding of liability on the part of the defendants-appellants for their use of the words "Poster Ads", in the advertising display units in suit. Jurisprudence has interpreted Section 20 of the Trademark Law as "an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration." The Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law.

While we do not discount the striking similarity between Pearl and Dean’s registered trademark and defendants-appellants’ "Poster Ads" design, as well as the parallel use by which said words were used in the parties’ respective advertising copies, we cannot find defendants-appellants liable for infringement of trademark. "Poster Ads" was registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants who used the same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But, having already done so, it must stand by the consequence of the registration which it had caused.

xxx xxx xxx

We are constrained to adopt the view of defendants-appellants that the words "Poster Ads" are a simple contraction of the generic term poster advertising. In the absence of any convincing proof that "Poster Ads" has acquired a secondary meaning in this jurisdiction,

26

we find that Pearl and Dean’s exclusive right to the use of "Poster Ads" is limited to what is written in its certificate of registration, namely, stationeries.

Defendants-appellants cannot thus be held liable for infringement of the trademark "Poster Ads".

There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the monetary award granted by the lower court to Pearl and Dean has no leg to stand on.

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.5

Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Court’s consideration:

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEAN’S TRADEMARK "POSTER ADS" WAS COMMITTED BY RESPONDENTS SM AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT, DESPITE THE LATTER’S FINDING, NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.

D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.6

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns of intellectual property law — patents, copyrights, trademarks and unfair competition arising from infringement of any of the first three. We shall focus then on the following issues:

(1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright?

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(2) or should the light box be registered separately and protected by a patent issued by the Bureau of Patents Trademarks and Technology Transfer (now Intellectual Property Office) — in addition to the copyright of the engineering drawings?

(3) can the owner of a registered trademark legally prevent others from using such trademark if it is a mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

Petitioner P & D’s complaint was that SMI infringed on its copyright over the light boxes when SMI had the units manufactured by Metro and EYD Rainbow Advertising for its own account. Obviously, petitioner’s position was premised on its belief that its copyright over the engineering drawings extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings alone and not to the light box itself. We agree with the appellate court.

First, petitioner’s application for a copyright certificate — as well as Copyright Certificate No. PD-R2588 issued by the National Library on January 20, 1981 — clearly stated that it was for a class "O" work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then prevailing. Said Section 2 expressly enumerated the works subject to copyright:

SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following works:

x x x x x x x x x

(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps;

x x x x x x x x x

Although petitioner’s copyright certificate was entitled "Advertising Display Units" (which depicted the box-type electrical devices), its claim of copyright infringement cannot be sustained.

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute.7 Accordingly, it can cover only the works falling within the statutory enumeration or description.8

P & D secured its copyright under the classification class "O" work. This being so, petitioner’s copyright protection extended only to the technical drawings and not to the light box itself because the latter was not at all in the category of "prints, pictorial illustrations, advertising copies, labels, tags and box wraps." Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have referred only to the technical drawings within the category of "pictorial illustrations." It could not have possibly

28

stretched out to include the underlying light box. The strict application9of the law’s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its copyright certificate was entitled "Advertising Display Units." What the law does not include, it excludes, and for the good reason: the light box was not a literary or artistic piece which could be copyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by the National Library as "Advertising Display Units."

In fine, if SMI and NEMI reprinted P & D’s technical drawings for sale to the public without license from P & D, then no doubt they would have been guilty of copyright infringement. But this was not the case. SMI’s and NEMI’s acts complained of by P & D were to have units similar or identical to the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing out to different advertisers. Was this an infringement of petitioner’s copyright over the technical drawings? We do not think so.

During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but an "engineering or marketing invention."10 Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and trademarks. In the leading case of Kho vs. Court of Appeals,11 we ruled that these three legal rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another.A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point: if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents cannot be held legally liable for infringement of P & D’s copyright over its technical drawings of the said light boxes, should they be liable instead for infringement of patent? We do not think so either.

For some reason or another, petitioner never secured a patent for the light boxes. It therefore acquired no patent rights which could have protected its invention, if in fact it really was. And because it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially using the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,12 we held that "there can be no infringement of a patent until a patent has been issued, since whatever right one has to the invention covered by the patent arises

29

alone from the grant of patent. x x x (A)n inventor has no common law right to a monopoly of his invention. He has the right to make use of and vend his invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive right of making, selling or using the invention.13 On the assumption that petitioner’s advertising units were patentable inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the National Library.

To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is to bring new designs and technologies into the public domain through disclosure.14 Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint.15

On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be protected. As held in Bauer & Cie vs. O’Donnel,16 "The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee. It was passed for the purpose of encouraging useful invention and promoting new and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the exclusive privileges granted the benefit of such inventions and improvements."

The law attempts to strike an ideal balance between the two interests:

"(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances in technology and design, in return for the exclusive right to practice the invention for a number of years. The inventor may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus enabled to practice it and profit by its use."17

The patent law has a three-fold purpose: "first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the free use of the public."18

It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation is required because "in rewarding a useful invention, the rights and welfare of the community must be fairly dealt with and effectively guarded. To that end, the prerequisites to obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally strictly enforced. To begin with, a genuine invention or discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight technological advance in art."19

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There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a person is claiming the creation of a work. The law confers the copyright from the moment of creation20 and the copyright certificate is issued upon registration with the National Library of a sworn ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the technical drawings.

Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize the light box’s eligibility as a patentable invention. The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through the simplified procedure of copyright-registration with the National Library — without undergoing the rigor of defending the patentability of its invention before the IPO and the public — the petitioner would be protected for 50 years. This situation could not have been the intention of the law.

In the oft-cited case of Baker vs. Selden21, the United States Supreme Court held that only the expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed. The publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to those illustrated in the plaintiff’s copyrighted book. The US Supreme Court ruled that:

"There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere statement of the proposition is so evident that it requires hardly any argument to support it. The same distinction may be predicated of every other art as well as that of bookkeeping. A treatise on the composition and use of medicines, be they old or new; on the construction and use of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would contend that the copyright of the treatise would give the exclusive right to the art or manufacture described therein. The copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or thing described or explained has nothing to do with the validity of the copyright. To give to the author of the book an exclusive property in the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That is the province of letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and a patent from the government can only secure it.

The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated. Take the case of medicines. Certain mixtures are

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found to be of great value in the healing art. If the discoverer writes and publishes a book on the subject (as regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter. He may copyright his book, if he pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all other inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may contain, gives no exclusive right to the modes of drawing described, though they may never have been known or used before. By publishing the book without getting a patent for the art, the latter is given to the public.

x x x

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any person may practice and use the art itself which he has described and illustrated therein. The use of the art is a totally different thing from a publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books prepared upon the plan set forth in such book. Whether the art might or might not have been patented, is a question, which is not before us. It was not patented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art described in the books, which have been made the subject of copyright. In describing the art, the illustrations and diagrams employed happened to correspond more closely than usual with the actual work performed by the operator who uses the art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent." (underscoring supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark "Poster Ads" which petitioner’s president said was a contraction of "poster advertising." P & D was able to secure a trademark certificate for it, but one where the goods specified were "stationeries such as letterheads, envelopes, calling cards and newsletters."22 Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate.

Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court,23where we, invoking Section 20 of the old Trademark Law, ruled that "the certificate of registration issued by the Director of Patents can confer (upon petitioner) the

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exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a different description."24 Faberge, Inc. was correct and was in fact recently reiterated inCanon Kabushiki Kaisha vs. Court of Appeals.25

Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the failure of P & D to secure a trademark registration for specific use on the light boxes meant that there could not have been any trademark infringement since registration was an essential element thereof.1âwphi1

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was possible even if P & D had no registration.26 However, while the petitioner’s complaint in the RTC also cited unfair competition, the trial court did not find private respondents liable therefor. Petitioner did not appeal this particular point; hence, it cannot now revive its claim of unfair competition.

But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair competition.

By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase becomes associated with the business or product in the mind of the purchasing public), be entitled to protection against unfair competition.27 In this case, there was no evidence that P & D’s use of "Poster Ads" was distinctive or well-known. As noted by the Court of Appeals, petitioner’s expert witnesses himself had testified that " ‘Poster Ads’ was too generic a name. So it was difficult to identify it with any company, honestly speaking."28 This crucial admission by its own expert witness that "Poster Ads" could not be associated with P & D showed that, in the mind of the public, the goods and services carrying the trademark "Poster Ads" could not be distinguished from the goods and services of other entities.

This fact also prevented the application of the doctrine of secondary meaning. "Poster Ads" was generic and incapable of being used as a trademark because it was used in the field of poster advertising, the very business engaged in by petitioner. "Secondary meaning" means that a word or phrase originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his property.29 The admission by petitioner’s own expert witness that he himself could not associate "Poster Ads" with petitioner P & D because it was "too generic" definitely precluded the application of this exception.

Having discussed the most important and critical issues, we see no need to belabor the rest.

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All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the Regional Trial Court of Makati City.

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May 22, 2001 is AFFIRMED in toto.

SO ORDERED.

Footnotes 1 Penned by Associate Justice Salvador J. Valdez, Jr. and concurred in by Associate Justices Wenceslao L. Agnir and Juan Q. Enriquez Jr. 2 Penned by Judge Napoleon E. Inoturan. 3 Seventeenth Division; CA G.R. 55303. 4 Records, pp. 620-621. 5 Rollo, pp. 17-19, 21-22, 23-24, 26. 6 Rollo, p. 34. 7 18 C.J.S. 161. 8 Joaquin vs. Drilon, 302 SCRA 225 [1999]. 9 Ibid. 10 Pp. 11-13, TSN, February 3, 1993. 11 G.R. No. 115758, March 19, 2002. 12 286 SCRA 13 [1998]. 13 Id., at p. 21, citing Anchor Hocking Glass Corp. vs. White Cap Co., 47 F. Supp. A 451, and Bauer & Cie vs. O’Donnel, 229 US 1. 14 Bonito Boats, Inc. vs. Thunder Craft Boats, Inc., 489 US 141 [1989]. 15 Id., at p. 156. 16 Ibid., at p. 10. 17 Bonito Boats, Inc. vs. Thunder Craft Boats, Inc., ibid., p. 150, citing U.S. vs. Dubilier Condenser Corp., 289 U.S. 178. 18 Aronson vs. Quick Point Pencil Co., 440 U.S. 257, 262 [1979], citing Kewanee Oil Co. vs. Bicron Corp., 416 U.S. 470 [1994], cited Amador, patents, p. 496. 19 Sears Roebuck vs. Stiffel, 376 US 225, 229 [1964]. 20 Section 2, PD 49 (The Intellectual Property Decree). 21 101 US 102-105 [1879]. 22 Exhibit "B," Original Records, p. 63. 23 215 SCRA 316 [1992]. 24 Id., at p. 326. 25 336 SCRA 266 [2000]. 26 Ogura vs. Chua, 59 Phil. 471. 27 Sapalo, The Law on Trademark Infringement and Unfair Competition, 2000 ed., p. 185. 28 Decision, p. 16, citing TSN, December 3, 1992, pp. 19-20. 29 Sapalo, at p. 92.

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Topic: Differences of forms of IP; Statutory right

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 161295 June 29, 2005

JESSIE G. CHING, petitioner, vs. WILLIAM M. SALINAS, SR., WILLIAM M. SALINAS, JR., JOSEPHINE L. SALINAS, JENNIFER Y. SALINAS, ALONTO SOLAIMAN SALLE, JOHN ERIC I. SALINAS, NOEL M. YABUT (Board of Directors and Officers of WILAWARE PRODUCT CORPORATION), respondents.

D E C I S I O N

CALLEJO, SR., J.:

This petition for review on certiorari assails the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 70411 affirming the January 3, 2002 and February 14, 2002 Orders3 of the Regional Trial Court (RTC) of Manila, Branch 1, which quashed and set aside Search Warrant Nos. 01-2401 and 01-2402 granted in favor of petitioner Jessie G. Ching.

Jessie G. Ching is the owner and general manager of Jeshicris Manufacturing Co., the maker and manufacturer of a Utility Model, described as "Leaf Spring Eye Bushing for Automobile" made up of plastic.

On September 4, 2001, Ching and Joseph Yu were issued by the National Library Certificates of Copyright Registration and Deposit of the said work described therein as "Leaf Spring Eye Bushing for Automobile."4

On September 20, 2001, Ching requested the National Bureau of Investigation (NBI) for police/investigative assistance for the apprehension and prosecution of illegal manufacturers, producers and/or distributors of the works.5

After due investigation, the NBI filed applications for search warrants in the RTC of Manila against William Salinas, Sr. and the officers and members of the Board of Directors of Wilaware Product Corporation. It was alleged that the respondents therein reproduced and distributed the said models penalized under Sections 177.1 and 177.3 of Republic Act (R.A.) No. 8293. The applications sought the seizure of the following:

a.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of plastic polypropylene;

b.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of polyvinyl chloride plastic;

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c.) Undetermined quantity of Vehicle bearing cushion that is made up of polyvinyl chloride plastic;

d.) Undetermined quantity of Dies and jigs, patterns and flasks used in the manufacture/fabrication of items a to d;

e.) Evidences of sale which include delivery receipts, invoices and official receipts.6

The RTC granted the application and issued Search Warrant Nos. 01-2401 and 01-2402 for the seizure of the aforecited articles.7 In the inventory submitted by the NBI agent, it appears that the following articles/items were seized based on the search warrants:

Leaf Spring eye bushing

a) Plastic Polypropylene

- C190 27 }

- C240 rear 40 }

- C240 front 41 } BAG 1

b) Polyvinyl Chloride Plastic

- C190 13 }

c) Vehicle bearing cushion

- center bearing cushion 11 }

Budder for C190 mold 8 }

Diesel Mold

a) Mold for spring eye bushing rear 1 set

b) Mold for spring eye bushing front 1 set

c) Mold for spring eye bushing for C190 1 set

d) Mold for C240 rear 1 piece of the set

e) Mold for spring eye bushing for L300 2 sets

f) Mold for leaf spring eye bushing C190 with metal 1 set

g) Mold for vehicle bearing cushion 1 set8

The respondents filed a motion to quash the search warrants on the following grounds:

2. The copyright registrations were issued in violation of the Intellectual Property Code on the ground that:

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a) the subject matter of the registrations are not artistic or literary;

b) the subject matter of the registrations are spare parts of automobiles meaning – there (sic) are original parts that they are designed to replace. Hence, they are not original.9

The respondents averred that the works covered by the certificates issued by the National Library are not artistic in nature; they are considered automotive spare parts and pertain to technology. They aver that the models are not original, and as such are the proper subject of a patent, not copyright.10

In opposing the motion, the petitioner averred that the court which issued the search warrants was not the proper forum in which to articulate the issue of the validity of the copyrights issued to him. Citing the ruling of the Court in Malaloan v. Court of Appeals,11 the petitioner stated that a search warrant is merely a judicial process designed by the Rules of Court in anticipation of a criminal case. Until his copyright was nullified in a proper proceeding, he enjoys rights of a registered owner/holder thereof.

On January 3, 2002, the trial court issued an Order12 granting the motion, and quashed the search warrant on its finding that there was no probable cause for its issuance. The court ruled that the work covered by the certificates issued to the petitioner pertained to solutions to technical problems, not literary and artistic as provided in Article 172 of the Intellectual Property Code.

His motion for reconsideration of the order having been denied by the trial court’s Order of February 14, 2002, the petitioner filed a petition for certiorari in the CA, contending that the RTC had no jurisdiction to delve into and resolve the validity of the copyright certificates issued to him by the National Library. He insisted that his works are covered by Sections 172.1 and 172.2 of the Intellectual Property Code. The petitioner averred that the copyright certificates areprima facie evidence of its validity, citing the ruling of the United States Court of Appeals in Wildlife Express Corporation v. Carol Wright Sales, Inc.13 The petitioner asserted that the respondents failed to adduce evidence to support their motion to quash the search warrants. The petitioner noted that respondent William Salinas, Jr. was not being honest, as he was able to secure a similar copyright registration of a similar product from the National Library on January 14, 2002.

On September 26, 2003, the CA rendered judgment dismissing the petition on its finding that the RTC did not commit any grave abuse of its discretion in issuing the assailed order, to wit:

It is settled that preliminarily, there must be a finding that a specific offense must have been committed to justify the issuance of a search warrant. In a number of cases decided by the Supreme Court, the same is explicitly provided, thus:

"The probable cause must be in connection with one specific offense, and the judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath, the complainant and any witness he may produce, on facts personally known to them and attach to the record their sworn statements together with any affidavit submitted.

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"In the determination of probable cause, the court must necessarily resolve whether or not an offense exists to justify the issuance or quashal of the search warrant."

In the instant case, the petitioner is praying for the reinstatement of the search warrants issued, but subsequently quashed, for the offense of Violation of Class Designation of Copyrightable Works under Section 177.1 in relation to Section 177.3 of Republic Act 8293, when the objects subject of the same, are patently not copyrightable.

It is worthy to state that the works protected under the Law on Copyright are: literary or artistic works (Sec. 172) and derivative works (Sec. 173). The Leaf Spring Eye Bushing and Vehicle Bearing Cushion fall on neither classification. Accordingly, if, in the first place, the item subject of the petition is not entitled to be protected by the law on copyright, how can there be any violation?14

The petitioner’s motion for reconsideration of the said decision suffered the same fate. The petitioner forthwith filed the present petition for review on certiorari, contending that the revocation of his copyright certificates should be raised in a direct action and not in a search warrant proceeding.

The petitioner posits that even assuming ex argumenti that the trial court may resolve the validity of his copyright in a proceeding to quash a search warrant for allegedly infringing items, the RTC committed a grave abuse of its discretion when it declared that his works are not copyrightable in the first place. He claims that R.A. No. 8293, otherwise known as the Intellectual Property Code of the Philippines, which took effect on January 1, 1998, provides in no uncertain terms that copyright protection automatically attaches to a work by the sole fact of its creation, irrespective of its mode or form of expression, as well as of its content, quality or purpose.15 The law gives a non-inclusive definition of "work" as referring to original intellectual creations in the literary and artistic domain protected from the moment of their creation; and includes original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design and other works of applied art under Section 172.1(h) of R.A. No. 8293.lawphil.net

As such, the petitioner insists, notwithstanding the classification of the works as either literary and/or artistic, the said law, likewise, encompasses works which may have a bearing on the utility aspect to which the petitioner’s utility designs were classified. Moreover, according to the petitioner, what the Copyright Law protects is the author’s intellectual creation, regardless of whether it is one with utilitarian functions or incorporated in a useful article produced on an industrial scale.

The petitioner also maintains that the law does not provide that the intended use or use in industry of an article eligible for patent bars or invalidates its registration under the Law on Copyright. The test of protection for the aesthetic is not beauty and utility, but art for the copyright and invention of original and ornamental design for design patents.16 In like manner, the fact that his utility designs or models for articles of manufacture have been expressed in the field of automotive parts, or based on something already in the public domain does not automatically remove them from the protection of the Law on Copyright.17

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The petitioner faults the CA for ignoring Section 218 of R.A. No. 8293 which gives the same presumption to an affidavit executed by an author who claims copyright ownership of his work.

The petitioner adds that a finding of probable cause to justify the issuance of a search warrant means merely a reasonable suspicion of the commission of the offense. It is not equivalent to absolute certainty or a finding of actual and positive cause.18 He assists that the determination of probable cause does not concern the issue of whether or not the alleged work is copyrightable. He maintains that to justify a finding of probable cause in the issuance of a search warrant, it is enough that there exists a reasonable suspicion of the commission of the offense.

The petitioner contends that he has in his favor the benefit of the presumption that his copyright is valid; hence, the burden of overturning this presumption is on the alleged infringers, the respondents herein. But this burden cannot be carried in a hearing on a proceeding to quash the search warrants, as the issue therein is whether there was probable cause for the issuance of the search warrant. The petitioner concludes that the issue of probable cause should be resolved without invalidating his copyright.

In their comment on the petition, the respondents aver that the work of the petitioner is essentially a technical solution to the problem of wear and tear in automobiles, the substitution of materials, i.e., from rubber to plastic matter of polyvinyl chloride, an oil resistant soft texture plastic material strong enough to endure pressure brought about by the vibration of the counter bearing and thus brings bushings. Such work, the respondents assert, is the subject of copyright under Section 172.1 of R.A. No. 8293. The respondents posit that a technical solution in any field of human activity which is novel may be the subject of a patent, and not of a copyright. They insist that the certificates issued by the National Library are only certifications that, at a point in time, a certain work was deposited in the said office. Furthermore, the registration of copyrights does not provide for automatic protection. Citing Section 218.2(b) of R.A. No. 8293, the respondents aver that no copyright is said to exist if a party categorically questions its existence and legality. Moreover, under Section 2, Rule 7 of the Implementing Rules of R.A. No. 8293, the registration and deposit of work is not conclusive as to copyright outlay or the time of copyright or the right of the copyright owner. The respondents maintain that a copyright exists only when the work is covered by the protection of R.A. No. 8293.

The petition has no merit.

The RTC had jurisdiction to delve into and resolve the issue whether the petitioner’s utility models are copyrightable and, if so, whether he is the owner of a copyright over the said models. It bears stressing that upon the filing of the application for search warrant, the RTC was duty-bound to determine whether probable cause existed, in accordance with Section 4, Rule 126 of the Rules of Criminal Procedure:

SEC. 4. Requisite for issuing search warrant. – A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he

39

may produce, and, particularly, describing the place to be searched and the things to be seized.

In Solid Triangle Sales Corporation v. The Sheriff of RTC QC, Br. 93,19 the Court held that in the determination of probable cause, the court must necessarily resolve whether or not an offense exists to justify the issuance of a search warrant or the quashal of one already issued by the court. Indeed, probable cause is deemed to exist only where facts and circumstances exist which could lead a reasonably cautious and prudent man to believe that an offense has been committed or is being committed. Besides, in Section 3, Rule 126 of the Rules of Criminal Procedure, a search warrant may be issued for the search and seizure of personal property (a) subject of the offense; (b) stolen or embezzled and other proceeds or fruits of the offense; or (c) used or intended to be used as the means of committing an offense.

The RTC is mandated under the Constitution and Rules of Criminal Procedure to determine probable cause. The court cannot abdicate its constitutional obligation by refusing to determine whether an offense has been committed.20 The absence of probable cause will cause the outright nullification of the search warrant.21

For the RTC to determine whether the crime for infringement under R.A. No. 8293 as alleged in an application is committed, the petitioner-applicant was burdened to prove that (a) respondents Jessie Ching and Joseph Yu were the owners of copyrighted material; and (b) the copyrighted material was being copied and distributed by the respondents. Thus, the ownership of a valid copyright is essential.22

Ownership of copyrighted material is shown by proof of originality and copyrightability. By originality is meant that the material was not copied, and evidences at least minimal creativity; that it was independently created by the author and that it possesses at least same minimal degree of creativity.23 Copying is shown by proof of access to copyrighted material and substantial similarity between the two works.24 The applicant must thus demonstrate the existence and the validity of his copyright because in the absence of copyright protection, even original creation may be freely copied.25

By requesting the NBI to investigate and, if feasible, file an application for a search warrant for infringement under R.A. No. 8293 against the respondents, the petitioner thereby authorized the RTC (in resolving the application), to delve into and determine the validity of the copyright which he claimed he had over the utility models. The petitioner cannot seek relief from the RTC based on his claim that he was the copyright owner over the utility models and, at the same time, repudiate the court’s jurisdiction to ascertain the validity of his claim without running afoul to the doctrine of estoppel.

To discharge his burden, the applicant may present the certificate of registration covering the work or, in its absence, other evidence.26 A copyright certificate provides prima facie evidence of originality which is one element of copyright validity. It constitutes prima facie evidence of both validity and ownership27 and the validity of the facts stated in the certificate.28 The presumption of validity to a certificate of copyright registration merely orders the burden of proof. The applicant should not ordinarily be forced, in the first

40

instance, to prove all the multiple facts that underline the validity of the copyright unless the respondent, effectively challenging them, shifts the burden of doing so to the applicant.29 Indeed, Section 218.2 of R.A. No. 8293 provides:

218.2. In an action under this Chapter:

(a) Copyright shall be presumed to subsist in the work or other subject matter to which the action relates if the defendant does not put in issue the question whether copyright subsists in the work or other subject matter; and

(b) Where the subsistence of the copyright is established, the plaintiff shall be presumed to be the owner of the copyright if he claims to be the owner of the copyright and the defendant does not put in issue the question of his ownership.

A certificate of registration creates no rebuttable presumption of copyright validity where other evidence in the record casts doubt on the question. In such a case, validity will not be presumed.30

To discharge his burden of probable cause for the issuance of a search warrant for violation of R.A. No. 8293, the petitioner-applicant submitted to the RTC Certificate of Copyright Registration Nos. 2001-197 and 2001-204 dated September 3, 2001 and September 4, 2001, respectively, issued by the National Library covering work identified as Leaf Spring Eye Bushing for Automobile and Vehicle Bearing Cushion both classified under Section 172.1(h) of R.A. No. 8293, to wit:

SEC. 172. Literary and Artistic Works. – 172.1. Literary and artistic works, hereinafter referred to as "works," are original intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular:

...

(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design, and other works of applied art.

Related to the provision is Section 171.10, which provides that a "work of applied art" is an artistic creation with utilitarian functions or incorporated in a useful article, whether made by hand or produced on an industrial scale.

But, as gleaned from the specifications appended to the application for a copyright certificate filed by the petitioner, the said Leaf Spring Eye Bushing for Automobile is merely a utility model described as comprising a generally cylindrical body having a co-axial bore that is centrally located and provided with a perpendicular flange on one of its ends and a cylindrical metal jacket surrounding the peripheral walls of said body, with the bushing made of plastic that is either polyvinyl chloride or polypropylene.31 Likewise, the Vehicle Bearing Cushion is illustrated as a bearing cushion comprising a generally semi-circular body having a central hole to secure a conventional bearing and a plurality of ridges provided therefore, with said cushion bearing being made of the same plastic materials.32 Plainly, these are not literary or artistic works. They are not intellectual

41

creations in the literary and artistic domain, or works of applied art. They are certainly not ornamental designs or one having decorative quality or value.

It bears stressing that the focus of copyright is the usefulness of the artistic design, and not its marketability. The central inquiry is whether the article is a work of art.33 Works for applied art include all original pictorials, graphics, and sculptural works that are intended to be or have been embodied in useful article regardless of factors such as mass production, commercial exploitation, and the potential availability of design patent protection.34

As gleaned from the description of the models and their objectives, these articles are useful articles which are defined as one having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information. Indeed, while works of applied art, original intellectual, literary and artistic works are copyrightable, useful articles and works of industrial design are not.35 A useful article may be copyrightable only if and only to the extent that such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of the utilitarian aspects of the article.

We agree with the contention of the petitioner (citing Section 171.10 of R.A. No. 8293), that the author’s intellectual creation, regardless of whether it is a creation with utilitarian functions or incorporated in a useful article produced on an industrial scale, is protected by copyright law. However, the law refers to a "work of applied art which is an artistic creation." It bears stressing that there is no copyright protection for works of applied art or industrial design which have aesthetic or artistic features that cannot be identified separately from the utilitarian aspects of the article.36 Functional components of useful articles, no matter how artistically designed, have generally been denied copyright protection unless they are separable from the useful article.37

In this case, the petitioner’s models are not works of applied art, nor artistic works. They are utility models, useful articles, albeit with no artistic design or value. Thus, the petitioner described the utility model as follows:

LEAF SPRING EYE BUSHING FOR AUTOMOBILE

Known bushings inserted to leaf-spring eye to hold leaf-springs of automobile are made of hard rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent pressure would eventually wore (sic) out that would cause the wobbling of the leaf spring.

The primary object of this utility model, therefore, is to provide a leaf-spring eye bushing for automobile that is made up of plastic.

Another object of this utility model is to provide a leaf-spring eye bushing for automobiles made of polyvinyl chloride, an oil resistant soft texture plastic or polypropylene, a hard plastic, yet both causes cushion to the leaf spring, yet strong enough to endure pressure brought about by the up and down movement of said leaf spring.

42

Yet, an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a much longer life span than the rubber bushings.

Still an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a very simple construction and can be made using simple and ordinary molding equipment.

A further object of this utility model is to provide a leaf-spring eye bushing for automobile that is supplied with a metal jacket to reinforce the plastic eye bushing when in engaged with the steel material of the leaf spring.

These and other objects and advantages will come to view and be understood upon a reading of the detailed description when taken in conjunction with the accompanying drawings.

Figure 1 is an exploded perspective of a leaf-spring eye bushing according to the present utility model;

Figure 2 is a sectional view taken along line 2-2 of Fig. 1;

Figure 3 is a longitudinal sectional view of another embodiment of this utility model;

Figure 4 is a perspective view of a third embodiment; and

Figure 5 is a sectional view thereof.

Referring now to the several views of the drawings wherein like reference numerals designated same parts throughout, there is shown a utility model for a leaf-spring eye bushing for automobile generally designated as reference numeral 10.

Said leaf-spring eye bushing 10 comprises a generally cylindrical body 11 having a co-axial bore 12 centrally provided thereof.

As shown in Figs. 1 and 2, said leaf-spring eye bushing 10 is provided with a perpendicular flange 13 on one of its ends and a cylindrical metal jacket 14 surrounding the peripheral walls 15 of said body 11. When said leaf-spring bushing 10 is installed, the metal jacket 14 acts with the leaf-spring eye (not shown), which is also made of steel or cast steel. In effect, the bushing 10 will not be directly in contact with steel, but rather the metal jacket, making the life of the bushing 10 longer than those without the metal jacket.

In Figure 2, the bushing 10 as shown is made of plastic, preferably polyvinyl chloride, an oil resistant soft texture plastic or a hard polypropylene plastic, both are capable to endure the pressure applied thereto, and, in effect, would lengthen the life and replacement therefor.

Figure 3, on the other hand, shows the walls 16 of the co-axial bore 12 of said bushing 10 is insertably provided with a steel tube 17 to reinforce the inner portion thereof. This steel tube 17 accommodates or engages with the leaf-spring bolt (not shown) connecting the leaf spring and the automobile’s chassis.

43

Figures 4 and 5 show another embodiment wherein the leaf eye bushing 10 is elongated and cylindrical as to its construction. Said another embodiment is also made of polypropylene or polyvinyl chloride plastic material. The steel tube 17 and metal jacket 14 may also be applied to this embodiment as an option thereof.38

VEHICLE BEARING CUSHION

Known bearing cushions inserted to bearing housings for vehicle propeller shafts are made of hard rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent pressure would eventually be worn out that would cause the wobbling of the center bearing.

The primary object of this utility model therefore is to provide a vehicle-bearing cushion that is made up of plastic.

Another object of this utility model is to provide a vehicle bearing cushion made of polyvinyl chloride, an oil resistant soft texture plastic material which causes cushion to the propeller’s center bearing, yet strong enough to endure pressure brought about by the vibration of the center bearing.

Yet, an object of this utility model is to provide a vehicle-bearing cushion that has a much longer life span than rubber bushings.

Still an object of this utility model is to provide a vehicle bearing cushion that has a very simple construction and can be made using simple and ordinary molding equipment.

These and other objects and advantages will come to view and be understood upon a reading of the detailed description when taken in conjunction with the accompanying drawings.

Figure 1 is a perspective view of the present utility model for a vehicle-bearing cushion; and

Figure 2 is a sectional view thereof.

Referring now to the several views of the drawing, wherein like reference numeral designate same parts throughout, there is shown a utility model for a vehicle-bearing cushion generally designated as reference numeral 10.

Said bearing cushion 10 comprises of a generally semi-circular body 11, having central hole 12 to house a conventional bearing (not shown). As shown in Figure 1, said body 11 is provided with a plurality of ridges 13 which serves reinforcing means thereof.

The subject bearing cushion 10 is made of polyvinyl chloride, a soft texture oil and chemical resistant plastic material which is strong, durable and capable of enduring severe pressure from the center bearing brought about by the rotating movement of the propeller shaft of the vehicle.39

44

A utility model is a technical solution to a problem in any field of human activity which is new and industrially applicable. It may be, or may relate to, a product, or process, or an improvement of any of the aforesaid.40 Essentially, a utility model refers to an invention in the mechanical field. This is the reason why its object is sometimes described as a device or useful object.41 A utility model varies from an invention, for which a patent for invention is, likewise, available, on at least three aspects: first, the requisite of "inventive step"42 in a patent for invention is not required; second, the maximum term of protection is only seven years43 compared to a patent which is twenty years,44 both reckoned from the date of the application; and third, the provisions on utility model dispense with its substantive examination45 and prefer for a less complicated system.

Being plain automotive spare parts that must conform to the original structural design of the components they seek to replace, the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not ornamental. They lack the decorative quality or value that must characterize authentic works of applied art. They are not even artistic creations with incidental utilitarian functions or works incorporated in a useful article. In actuality, the personal properties described in the search warrants are mechanical works, the principal function of which is utility sans any aesthetic embellishment.

Neither are we to regard the Leaf Spring Eye Bushing and Vehicle Bearing Cushion as included in the catch-all phrase "other literary, scholarly, scientific and artistic works" in Section 172.1(a) of R.A. No. 8293. Applying the principle ofejusdem generis which states that "where a statute describes things of a particular class or kind accompanied by words of a generic character, the generic word will usually be limited to things of a similar nature with those particularly enumerated, unless there be something in the context of the state which would repel such inference,"46 the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not copyrightable, being not of the same kind and nature as the works enumerated in Section 172 of R.A. No. 8293.

No copyright granted by law can be said to arise in favor of the petitioner despite the issuance of the certificates of copyright registration and the deposit of the Leaf Spring Eye Bushing and Vehicle Bearing Cushion. Indeed, in Joaquin, Jr. v. Drilon47 and Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,48 the Court ruled that:

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-existing right regulated by it. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute. Accordingly, it can cover only the works falling within the statutory enumeration or description.

That the works of the petitioner may be the proper subject of a patent does not entitle him to the issuance of a search warrant for violation of copyright laws. In Kho v. Court of Appeals49 and Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,50 the Court ruled that "these copyright and patent rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works thatexclusively pertain to the others." The Court expounded further, thus:

45

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.

The petitioner cannot find solace in the ruling of the United States Supreme Court in Mazer v. Stein51 to buttress his petition. In that case, the artifacts involved in that case were statuettes of dancing male and female figures made of semi-vitreous china. The controversy therein centered on the fact that although copyrighted as "works of art," the statuettes were intended for use and used as bases for table lamps, with electric wiring, sockets and lampshades attached. The issue raised was whether the statuettes were copyright protected in the United States, considering that the copyright applicant intended primarily to use them as lamp bases to be made and sold in quantity, and carried such intentions into effect. At that time, the Copyright Office interpreted the 1909 Copyright Act to cover works of artistic craftsmanship insofar as their form, but not the utilitarian aspects, were concerned. After reviewing the history and intent of the US Congress on its copyright legislation and the interpretation of the copyright office, the US Supreme Court declared that the statuettes were held copyrightable works of art or models or designs for works of art. The High Court ruled that:

"Works of art (Class G) – (a) – In General. This class includes works of artistic craftsmanship, in so far as their form but not their mechanical or utilitarian aspects are concerned, such as artistic jewelry, enamels, glassware, and tapestries, as well as all works belonging to the fine arts, such as paintings, drawings and sculpture. …"

So we have a contemporaneous and long-continued construction of the statutes by the agency charged to administer them that would allow the registration of such a statuette as is in question here.52

The High Court went on to state that "[t]he dichotomy of protection for the aesthetic is not beauty and utility but art for the copyright and the invention of original and ornamental design for design patents." Significantly, the copyright office promulgated a rule to implement Mazer to wit:

… [I]f "the sole intrinsic function of an article is its utility, the fact that the work is unique and attractively shaped will not qualify it as a work of art."

In this case, the bushing and cushion are not works of art. They are, as the petitioner himself admitted, utility models which may be the subject of a patent.

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 70411

46

are AFFIRMED. Search Warrant Nos. 01-2401 and 01-2402 issued on October 15, 2001 are ANNULLED AND SET ASIDE. Costs against the petitioner.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Footnotes 1 Penned by Associate Justice Amelita G. Tolentino, with Associate Justices Eloy R. Bello, Jr. (retired) and Arturo D. Brion, concurring; Rollo, pp. 17-24. 2 Rollo, pp. 31-32. 3 Penned by Acting Presiding Judge Antonio M. Eugenio, Jr. 4 CA Rollo, pp. 28-34. 5 Id. at 47. 6 CA Rollo, p. 54. 7 Id. at 54-61. 8 Id. at 68. 9 CA Rollo, p. 70. 10 Id. at 73-75. 11 G.R. No. 104879, 6 May 1994, 232 SCRA 249. 12 Rollo, pp. 22-23. 13 18 F.3d 502. 14 Rollo, p. 23. 15 Section 172.2, Republic Act No. 8293. 16 Citing Amador, Vicente B., Copyright Under the Intellectual Property Code, 1998 ed., p. 128, citing Mazerv. Stein, 347 U.S. 201 (1954). 17 Norma Ribbon & Trimming v. Little, United States Court of Appeals, Fifth Circuit, No. 94-60389, 27 April 1995. 18 Columbia Pictures, Inc. v. Court of Appeals, G.R. No. 110318, 28 August 1996, 261 SCRA 144. 19 G.R. No. 144309, 23 November 2001, 370 SCRA 491. 20 Ibid. 21 Republic of the Philippines v. Sandiganbayan, G.R. Nos. 112708-09, 29 March 1996, 255 SCRA 438. 22 Feist Publications, Inc. v. Rural Telephone Service Company, 499 U.S. 340; 111 S.Ct. 1282 (1991). 23 Donald Bruce Company v. B.G. Multi-Comm. Corporation, 964 F.Supp. 265 (1997). 24 Apple Barrel Productions, Inc. v. R.D. Beard, 730 F.2d 384 (1984). 25 Durnham Industries, Inc. v. Tomy Corporation, 630 F.2d 905 (1980). 26 Apple Barrel Productions, Inc. v. R.D. Beard, supra. 27 Midway Manufacturing Corporation v. Bandai-America, Inc., 546 F.Supp. 125 (1982); Lakedreams v. Steve Taylor, 932 F.2d 1103 (1991). 28 Durnham Industries, Inc. v. Tomy Corporation, supra. 29 Barnhart, Inc. v. Economy Cover Corporation, 773 F.2d 411 (1985). 30 Ibid; Midway Manufacturing Corporation v. Bandai-America, Inc., supra.

47

31 Rollo, p. 86. 32 Id. at 94. 33 Pivot Port International, Inc. v. Charlene Products, Inc., 372 F.2d 913 (2004). 34 Gay Toys, Inc. v. Buddy L. Corporation, 703 F.2d 970 (1983). 35 Pivot Port International, Inc. v. Charlene Products, Inc., supra. 36 Ibid; DBC of New York v. Merit Diamond Corporation, 768 F.Supp. 414 (1991). 37 Norris Industries, Inc. v. ITT Corporation, 696 F.2d 918 (1983). 38 Rollo, pp. 84-87. 39 Rollo, pp. 93-94. 40 Section 109.1(a) and (b) in relation to Section 21 of Republic Act No. 8293. 41 Amador, Vicente B., Patents Under The Intellectual Property Code, 2001 ed., p. 751. 42 An invention involves an inventive step if, having regard to prior art, it is not obvious to a person skilled in the art at the time of the filing date or priority date of the application claiming the invention. (Section 26, Republic Act No. 8293). 43 Section 109.3, supra. 44 Section 54, supra. 45 Sections 108 to 111 of Republic Act No. 8293 state the rule on utility models and grant of a patent therefor: SEC. 108. Applicability of Provisions Relating to Patents. – 108.1 Subject to Section 109, the provisions governing patents shall apply, mutatis mutandis, to the registration of utility models. 108.2. Where the right to a patent conflicts with the right to a utility model registration in the case referred to in Section 29, the said provisions shall apply as if the word "patent" were replaced by the words "patent or utility model registration." (Sec. 55, R.A. No. 165a) SEC. 109. Special Provisions Relating to Utility Models. – 109.1. (a) An invention qualifies for registration as a utility model if it is new and industrially applicable. (b) Section 21, "Patentable Inventions," shall apply except the reference to inventive step as a condition of protection. 109.2. Sections 43 to 49 shall not apply in the case of applications for registration of a utility model. 109.3. A utility model registration shall expire, without any possibility of renewal, at the end of the seventh year after the date of the filing of the application. 109.4. In proceedings under Sections 61 to 64, the utility model registration shall be canceled on the following grounds: (a) That the claimed invention does not qualify for registration as a utility model and does not meet the requirements of registrability, in particular having regard to Subsection 109.1 and Sections 22, 23, 24 and 27; (b) That the description and the claims do not comply with the prescribed requirements; (c) That any drawing which is necessary for the understanding of the invention has not been furnished; (d) That the owner of the utility model registration is not the inventor or his successor in title. (Secs. 55, 56 and 57, R.A. No. 165a) SEC. 110. Conversion of Patent Applications or Applications for Utility Model Registration.– 110.1 At any time before the grant or refusal of a patent, an applicant for a patent may, upon payment of the prescribed fee, convert his application into an application for

48

registration of a utility model, which shall be accorded the filing date of the initial application. An application may be converted only once. 110.2 At any time before the grant or refusal of a utility model registration, an applicant for a utility model registration may, upon payment of the prescribed fee, convert his application into a patent application, which shall be accorded the filing date of the initial application. (Sec. 58, R.A. No. 165a) SEC. 111. Prohibition against Filing of Parallel Applications. – An applicant may not file two (2) applications for the same subject, one for utility model registration and the other for the grant of a patent whether simultaneously or consecutively. (Sec. 59, R.A. No. 165a) 46 See Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit, G.R. No. 150769, 31 August 2004, 437 SCRA 371, citing Philippine Basketball Association v. Court of Appeals, 337 SCRA 358 (2000); National Power Corporation v. Angas, G.R. Nos. 60225-26, 8 May 1992, 208 SCRA 542; Cebu Institute of Technology v. Ople, G.R. No. L-58870, 18 December 1987, 156 SCRA 629; Ollada v. Court of Tax Appeals, 99 Phil. 604 (1956); Murphy, Morris & Co. v. Collector of Customs, 11 Phil. 456 (1908). 47 G.R. No. 108946, 28 January 1999, 302 SCRA 225. 48 G.R. No. 148222, 15 August 2003, 409 SCRA 231. 49 G.R. No. 115758, 19 March 2002, 379 SCRA 410. 50 Supra. 51 74 S.Ct. 460; 347 U.S. 201. 52 Great Northern Ry. Co. v. United States, 315 U.S. 262, 275, 62 S.Ct. 529, 534, 86 L.Ed. 836.

49

Topic: Repeal of repugnant provisions of Republic Act No. 166; Statutory right

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 115758 March 19, 2002

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner, vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, andANG TIAM CHAY, respondents.

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 dated May 24, 1993 of the Court of Appeals setting aside and declaring as null and void the Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction.

The facts of the case are as follows:

On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926, against the respondents Summerville General Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay.

The petitioner's complaint alleges that petitioner, doing business under the name and style of KEC Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she also has patent rights on Chin Chun Su & Device and Chin Chun Su for medicated cream after purchasing the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent Summerville advertised and sold petitioner's cream products under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the petitioner's business sales and income; and, that the respondents should be enjoined from allegedly infringing on the copyrights and patents of the petitioner.

The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register its trade name Chin Chun Su Medicated Creamwith the Philippine Patent Office and other appropriate governmental agencies; that

50

KEC Cosmetics Laboratory of the petitioner obtained the copyrights through misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had already been terminated by the said Taiwanese Manufacturing Company.

After due hearing on the application for preliminary injunction, the trial court granted the same in an Order dated February 10, 1992, the dispositive portion of which reads:

ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of five hundred thousand pesos (P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto.

SO ORDERED.3

The respondents moved for reconsideration but their motion for reconsideration was denied by the trial court in an Order dated March 19, 1992.4

On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the trial court. After the respondents filed their reply and almost a month after petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents did not state the docket number of the civil case in the caption of their petition and, more significantly, they did not include therein a certificate of non-forum shopping. The respondents opposed the petition and submitted to the appellate court a certificate of non-forum shopping for their petition.

On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the respondents, the dispositive portion of which reads:

WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners' motion for reconsideration are hereby set aside and declared null and void. Respondent court is directed to forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties on the merits.

SO ORDERED.5

In granting the petition, the appellate court ruled that:

The registration of the trademark or brandname "Chin Chun Su" by KEC with the supplemental register of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in the principal register, which is duly protected by the Trademark Law.1âwphi1.nêt

51

xxx xxx xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393:

"Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there are certain defects, some obstacles which the use must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register.

The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that 'registrants is presumed to be the owner of the mark until after the registration is declared cancelled' is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. As even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6

The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be obtained only from Summerville General Merchandising and Co.

In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages. On October 22, 1993, the trial court rendered a Decision7 barring the petitioner from using the trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did not award damages and costs to any of the parties but to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorney's fees. The petitioner duly appealed the said decision to the Court of Appeals.

On June 3, 1994, the Court of Appeals promulgated a Resolution8 denying the petitioner's motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803.

Hence, this petition anchored on the following assignment of errors:

52

I

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONER'S MOTION TO DISMISS.

II

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION.

III

IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONER'S RIGHT TO DUE PROCESS.

IV

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT.9

The petitioner faults the appellate court for not dismissing the petition on the ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the appellate court denied the petitioner's right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court against the respondents.

We rule in favor of the respondents.

Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded.10 This is the reason why we have ruled that it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious damage.11

In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground that she is entitled to the use of the trademark on Chin Chun Su and its

53

container based on her copyright and patent over the same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty cream product would entitle the registrant to the use and ownership over the same to the exclusion of others.

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods.12 In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise.13 Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation.14 Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.15

Petitioner has no right to support her claim for the exclusive use of the subject trade name and its container. The name and container of a beauty cream product are proper subjects of a trademark inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the same in the sale of the beauty cream product, the user must sufficiently prove that she registered or used it before anybody else did. The petitioner's copyright and patent registration of the name and container would not guarantee her the right to the exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that she has a clear right over the said name and container to the exclusion of others, not having proven that she has registered a trademark thereto or used the same before anyone did.

We cannot likewise overlook the decision of the trial court in the case for final injunction and damages. The dispositive portion of said decision held that the petitioner does not have trademark rights on the name and container of the beauty cream product. The said decision on the merits of the trial court rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista Association, Inc. v. Court of Appeals16, to wit:

Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed

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independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect. (italics supplied)

La Vista categorically pronounced that the issuance of a final injunction renders any question on the preliminary injunctive order moot and academic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff's right to a final injunction, although appealed, renders moot and academic any objection to the prior dissolution of a writ of preliminary injunction.

The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the technical objection of non-compliance with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which provides that "(I)n petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after petitioner had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer submit a motion to dismiss nor raise defenses and objections not included in the answer/comment she had earlier tendered. Thirdly, substantial justice and equity require this Court not to revive a dissolved writ of injunction in favor of a party without any legal right thereto merely on a technical infirmity. The granting of an injunctive writ based on a technical ground rather than compliance with the requisites for the issuance of the same is contrary to the primary objective of legal procedure which is to serve as a means to dispense justice to the deserving party.

The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion for reconsideration. But we find that petitioner contributed to this delay when she filed successive contentious motions in the same proceeding, the last of which was on October 27, 1993, necessitating counter-manifestations from private respondents with the last one being filed on November 9, 1993. Nonetheless, it is well-settled that non-observance of the period for deciding cases or their incidents does not render such judgments ineffective or void.17 With respect to the purported damages she suffered due to the alleged delay in resolving her motion for reconsideration, we find that the said issue has likewise been rendered moot and academic by our ruling that she has no right over the trademark and, consequently, to the issuance of a writ of preliminary injunction.1âwphi1.nêt

Finally, we rule that the Court of Appeals correctly denied the petitioner's several motions for contempt of court. There is nothing contemptuous about the advertisements complained of which, as regards the proceedings in CA-G.R. SP No. 27803 merely

55

announced in plain and straightforward language the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive writ was immediately executory.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner.

SO ORDERED.

Footnote

1 Penned by Associate Justice Ricardo P. Galvez, and concurred in by Associate Justices Manuel M. Herrera and Asaali S. Isnani, Ninth Division; Rollo, pp. 36-40. 2 Penned by Judge Abraham P. Vera; CA Rollo, pp. 12-18. 3 CA Rollo, pp. 12-17. 4 CA Rollo, p. 18. 5 Rollo, p. 39. 6 Rollo, pp. 38-39. 7 Rollo, pp. 19, 241. 8 Rollo, pp. 42-43. 9 Rollo, p. 21. 10 Section 4, Rule 58, Revised Rules of Civil Procedure. 11 Sy v. Court of Appeals, 313 SCRA 328 (1999). 12 Section 121.1, Republic Act No. 8293. 13 Section 121.3, Republic Act. No. 8293. 14 Section 172, Republic Act No. 8293. 15 Section 21, Republic Act No. 8293. 16 278 SCRA 498, 506 quoting Solid Homes, Inc. v. LA Vista, G.R. No. 71150 dated April 20, 1988 (unpublished). 17 De Roma v. Court of Appeals, 152 SCRA 205, 209 (1987).

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Topic: Repeal of repugnant provisions of Republic Act No. 166

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. Nos. 160054-55 July 21, 2004

MANOLO P. SAMSON, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge, Regional Trial Court of Quezon City, Branch 90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for certiorari is the March 26, 2003 Order1 of the Regional Trial Court of Quezon City, Branch 90, which denied petitioner’s – (1) motion to quash the information; and (2) motion for reconsideration of the August 9, 2002 Order denying his motion to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. Petitioner also questioned its August 5, 2003 Order2 which denied his motion for reconsideration.

The undisputed facts show that on March 7, 2002, two informations for unfair competition under Section 168.3 (a), in relation to Section 170, of the Intellectual Property Code (Republic Act No. 8293), similarly worded save for the dates and places of commission, were filed against petitioner Manolo P. Samson, the registered owner of ITTI Shoes. The accusatory portion of said informations read:

That on or about the first week of November 1999 and sometime prior or subsequent thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, above-named accused, owner/proprietor of ITTI Shoes/Mano Shoes Manufactuirng Corporation located at Robinson’s Galleria, EDSA corner Ortigas Avenue, Quezon City, did then and there willfully, unlawfully and feloniously distribute, sell and/or offer for sale CATERPILLAR products such as footwear, garments, clothing, bags, accessories and paraphernalia which are closely identical to and/or colorable imitations of the authentic Caterpillar products and likewise using trademarks, symbols and/or designs as would cause confusion, mistake or deception on the part of the buying public to the damage and prejudice of CATERPILLAR, INC., the prior adopter, user and owner of the following internationally: "CATERPILLAR", "CAT", "CATERPILLAR & DESIGN", "CAT AND DESIGN", "WALKING MACHINES" and "TRACK-TYPE TRACTOR & DESIGN."

CONTRARY TO LAW.3

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On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view of the existence of an alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair competition pending with the same branch; and also in view of the pendency of a petition for review filed with the Secretary of Justice assailing the Chief State Prosecutor’s resolution finding probable cause to charge petitioner with unfair competition. In an Order dated August 9, 2002, the trial court denied the motion to suspend arraignment and other proceedings.

On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for reconsideration of the order denying motion to suspend, this time challenging the jurisdiction of the trial court over the offense charged. He contended that since under Section 170 of R.A. No. 8293, the penalty4 of imprisonment for unfair competition does not exceed six years, the offense is cognizable by the Municipal Trial Courts and not by the Regional Trial Court, per R.A. No. 7691.

In its assailed March 26, 2003 Order, the trial court denied petitioner’s twin motions.6 A motion for reconsideration thereof was likewise denied on August 5, 2003.

Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing the assailed orders.

The issues posed for resolution are – (1) Which court has jurisdiction over criminal and civil cases for violation of intellectual property rights? (2) Did the respondent Judge gravely abuse his discretion in refusing to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44 on the ground of – (a) the existence of a prejudicial question; and (b) the pendency of a petition for review with the Secretary of Justice on the finding of probable cause for unfair competition?

Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is imprisonment from 2 to 5 years and a fine ranging from Fifty Thousand Pesos to Two Hundred Thousand Pesos, to wit:

SEC. 170. Penalties. – Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155 [Infringement], Section 168 [Unfair Competition] and Section 169.1 [False Designation of Origin and False Description or Representation].

Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under Sections 150, 155, 164, 166, 167, 168 and 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws, thus –

SEC. 163. Jurisdiction of Court. – All actions under Sections 150, 155, 164 and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws. (Emphasis supplied)

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The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark Law) which provides that jurisdiction over cases for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is lodged with the Court of First Instance (now Regional Trial Court) –

SEC. 27. Jurisdiction of Court of First Instance. – All actions under this Chapter [V – Infringement] and Chapters VI [Unfair Competition] and VII [False Designation of Origin and False Description or Representation], hereof shall be brought before the Court of First Instance.

We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No. 8293. The repealing clause of R.A. No. 8293, reads –

SEC. 239. Repeals. – 239.1. All Acts and parts of Acts inconsistent herewith, more particularly Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are hereby repealed. (Emphasis added)

Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it would not have used the phrases "parts of Acts" and "inconsistent herewith;" and it would have simply stated "Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended are hereby repealed." It would have removed all doubts that said specific laws had been rendered without force and effect. The use of the phrases "parts of Acts" and "inconsistent herewith" only means that the repeal pertains only to provisions which are repugnant or not susceptible of harmonization with R.A. No. 8293.6 Section 27 of R.A. No. 166, however, is consistent and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest jurisdiction over violations of intellectual property rights with the Metropolitan Trial Courts, it would have expressly stated so under Section 163 thereof.

Moreover, the settled rule in statutory construction is that in case of conflict between a general law and a special law, the latter must prevail. Jurisdiction conferred by a special law to Regional Trial Courts must prevail over that granted by a general law to Municipal Trial Courts.7

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws8 conferring jurisdiction over violations of intellectual property rights to the Regional Trial Court. They should therefore prevail over R.A. No. 7691, which is a general law.9 Hence, jurisdiction over the instant criminal case for unfair competition is properly lodged with the Regional Trial Court even if the penalty therefor is imprisonment of less than 6 years, or from 2 to 5 years and a fine ranging from P50,000.00 to P200,000.00.

In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual property rights under R.A. No. 8293, the Court issued A.M. No. 02-1-11-SC dated February 19, 2002 designating certain Regional Trial Courts as Intellectual Property Courts. On June 17, 2003, the Court further issued a Resolution consolidating jurisdiction to

59

hear and decide Intellectual Property Code and Securities and Exchange Commission cases in specific Regional Trial Courts designated as Special Commercial Courts.

The case of Mirpuri v. Court of Appeals,10 invoked by petitioner finds no application in the present case. Nowhere inMirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No. 8293. Neither did we make a categorical ruling therein that jurisdiction over cases for violation of intellectual property rights is lodged with the Municipal Trial Courts. The passing remark in Mirpuri on the repeal of R.A. No. 166 by R.A. No. 8293 was merely a backgrounder to the enactment of the present Intellectual Property Code and cannot thus be construed as a jurisdictional pronouncement in cases for violation of intellectual property rights.

Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial question. In his petition, he prayed for the reversal of the March 26, 2003 order which sustained the denial of his motion to suspend arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. For unknown reasons, however, he made no discussion in support of said prayer in his petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the pertinent portion thereof to prove the existence of a prejudicial question.

At any rate, there is no prejudicial question if the civil and the criminal action can, according to law, proceed independently of each other.11 Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence.

In the case at bar, the common element in the acts constituting unfair competition under Section 168 of R.A. No. 8293 is fraud.12 Pursuant to Article 33 of the Civil Code, in cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446, which as admitted13 by private respondent also relate to unfair competition, is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify the suspension of the criminal cases at bar.

Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure provides –

SEC. 11. Suspension of arraignment. – Upon motion by the proper party, the arraignment shall be suspended in the following cases –

x x x x x x x x x

(c) A petition for review of the resolution of the prosecutor is pending at either the Department of Justice, or the Office of the President; Provided, that the period of suspension shall not exceed sixty (60) days counted from the filing of the petition with the reviewing office.

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While the pendency of a petition for review is a ground for suspension of the arraignment, the aforecited provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of the petition with the reviewing office. It follows, therefore, that after the expiration of said period, the trial court is bound to arraign the accused or to deny the motion to defer arraignment.

In the instant case, petitioner failed to establish that respondent Judge abused his discretion in denying his motion to suspend. His pleadings and annexes submitted before the Court do not show the date of filing of the petition for review with the Secretary of Justice.14 Moreover, the Order dated August 9, 2002 denying his motion to suspend was not appended to the petition. He thus failed to discharge the burden of proving that he was entitled to a suspension of his arraignment and that the questioned orders are contrary to Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure. Indeed, the age-old but familiar rule is that he who alleges must prove his allegations.

In sum, the dismissal of the petition is proper considering that petitioner has not established that the trial court committed grave abuse of discretion. So also, his failure to attach documents relevant to his allegations warrants the dismissal of the petition, pursuant to Section 3, Rule 46 of the Rules of Civil Procedure, which states:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. — The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto.

x x x x x x x x x

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition. (Emphasis added)

WHEREFORE, in view of all the foregoing, the petition is dismissed.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Footnotes

1 Rollo, p. 25. Issued by Judge Reynaldo B. Daway. 2 Rollo, p. 26. 3 Id., pp. 27-28.

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4 Imprisonment from two (2) years to five (5) years and a fine ranging from Fifty Thousand Pesos (P50,000.00) to Two Hundred Thousand Pesos (P200,000.00). 5 The dispositive portion thereof states: "IN VIEW OF THE FOREGOING, the accused’s aforecited Motion To Quash Information and Motion For Reconsideration Of Order Denying Motion To Suspend is denied for lack of merit." (Rollo, p. 25) 6 Agpalo, The Law on Trademark, Infringement and Unfair Competition, 2000 Edition, pp. 1-2. 7 Manzano v. Valera, G.R. No. 122068, 8 July 1998, 292 SCRA 66, 74. 8 Faberge Incorporated v. Intermediate Appellate Court, G.R. No. 71189, 4 November 1992, 215 SCRA 316, 323. 9 Manzano v. Valera, supra, p. 73. 10 376 Phil. 628 (1999). 11 People v. Consing, Jr., G.R. No. 148193, 16 January 2003, 395 SCRA 366, 371. 12 Agpalo, supra, p. 234. 13 Rollo, p. 47. 14 The petition and reply to comment do not disclose whether the issue of probable cause has already been resolved with finality.

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Republic of the Philippines SUPREME COURT

THIRD DIVISION

G.R. No.148420 December 15, 2005

ANDREA TAN, CLARITA LLAMAS, VICTOR ESPINA and LUISA ESPINA, Petitioners, vs. BAUSCH & LOMB, INC., Respondent.

D E C I S I O N

CORONA, J.:

Assailed in this petition for review1 are the decision2 and resolution3 of the Court of Appeals which set aside the December 22, 1998 order4 of Judge Genis Balbuena of Branch 21, Regional Trial Court (RTC), Cebu City and ordered the transfer of Criminal Case No. CBU-45890 to Branch 9, RTC, Cebu City.

The antecedents follow.

On April 8, 1997, an information5 for violation of paragraph 1, Article 189 6 of the Revised Penal Code (RPC) was filed before Branch 21, RTC, Cebu City against petitioners Andrea Tan, Clarita Llamas, Victor Espina and Luisa Espina of Best Buy Mart, Inc. The information read:

That on or about June 27, 1996 and sometime prior or subsequent thereto, in the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, abovementioned accused, conspiring and mutually helping each other, did then and there willfully, unlawfully and feloniously distribute and sell counterfeit RAY BAN sunglasses bearing the appearance and trademark of RAY BAN in the aforesaid store wherein they have direct control, supervision and management thereby inducing the public to believe that these goods offered by them are those of RAY BAN to the damage and prejudice of BAUSCH AND LOMB, INC., the exclusive owner and user of trademark RAY BAN on sunglasses.7

On January 21, 1998, respondent filed a motion to transfer the case to Branch 9, RTC, Cebu City. Administrative Order No. 113-958 (A.O. No. 113-95) designated the said branch as the special court in Region VII to handle violations of intellectual property rights.

On March 2, 1998, petitioners filed a motion to quash9 the information on the ground that the RTC had no jurisdiction over the offense charged against them. The penalty10 provided by the RPC for the crime was within the jurisdiction of the Municipal Trial Court in Cities (MTCC).

On March 6, 1998, respondent filed an opposition to the motion to quash,11 explaining that BP 129 had already transferred the exclusive jurisdiction to try and decide violations of intellectual property rights from the MTC and MTCC to the RTC and that the Supreme Court had also issued Administrative Order No. 104-96 (A.O. No. 104-96)12 deleting and

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withdrawing the designation of several branches of the MTC and MTCC as special intellectual property courts.

On December 22, 1998, the court a quo denied respondent’s motion to transfer the case and granted petitioners’ motion to quash. It ruled:

Accused [wa]s charged for violation of Art. 189 of Revised Penal Code the penalty for which is prision correccional in its minimum period or a fine ranging from P500.00 to P2,000.00, or both. Hence, within the jurisdiction of the metropolitan and municipal trial courts (Sec. 32(2), B.P. Blg. 129, as amended).

Administrative Orders Nos. 113-95 and 104-96, cited by plaintiff, cannot prevail over the express provisions of Batas Pambansa Blg. 129, as amended, jurisdiction of courts being a matter of substantive law.

If this Court has no jurisdiction over the case, the same is true with Branch 9 of the same court, Therefore, the motion to transfer the case to the latter should fail.

WHEREFORE, premises considered, the motion to transfer is denied, while the motion to quash is granted. The case is thus dismissed.

SO ORDERED.13

Respondent received the order on January 21, 1999 but filed neither an appeal nor a motion for reconsideration. Rather, it filed a petition for certiorari14 in the Court of Appeals on March 23, 1999 or one (1) day beyond the period allowed in Section 4, Rule 6515 of the Rules of Court.

Respondent’s procedural lapses notwithstanding, the appellate court gave due course to the petition and set aside the trial court order:

WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The assailed Order of December 22, 1998 is VACATED and another is entered ordering the transfer of Crim. Case No. CBU-45890 to Branch 9 of the Regional Trial Court of Cebu City, and directing the public respondent to accordingly transmit the records thereof.

SO ORDERED.16

Hence, the present petition for review, centered on the following issues:

I. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT DISMISSING THE PETITION OF RESPONDENT THAT IS FRAUGHT WITH FATAL INFIRMITIES.

II. THE COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE CORRECT RULING OF THE TRIAL COURT THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE OFFENSE OF UNFAIR COMPETITION UNDER ARTICLE 189 OF THE REVISED PENAL CODE.17

There is no merit in the petition.

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As to the first assigned error, petitioners contend that the Court of Appeals erred in giving due course to the petition for certiorari because respondent failed to appeal or file a motion for reconsideration of the trial court’s order granting the motion to quash. Worse, respondent filed the petition in the appellate court one day after the reglementary period expired.

Needless to state, the acceptance of a petition for certiorari as well as the grant of due course thereto is, in

general, addressed to the sound discretion of the court.18

Besides, the provisions of the Rules of Court, which are technical rules, may be relaxed in certain exceptional situations.19 Where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a manifest failure or miscarriage of justice, it is within our power to suspend the rules or exempt a particular case from its operation.20

Under certain special circumstances,21 a petition for certiorari may be given due course notwithstanding that no motion for reconsideration was filed in the lower court. The exception applies in this case since the order of the trial court was, as will be discussed later, a patent nullity.

Likewise, the one-day delay in the filing of the petition may be excused on the basis of equity to afford respondent the chance to prove the merits of the complaint.

In Yao v. Court of Appeals,22 we held:

In the interest of substantial justice, procedural rules of the most mandatory character in terms of compliance may be relaxed. In other words, if strict adherence to the letter of the law would result in absurdity and manifest injustice or where the merit of a party’s cause is apparent and outweighs consideration of non-compliance with certain formal requirements, procedural rules should definitely be liberally construed. A party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on mere technicalities.

Hence, the only relevant issue left for our resolution is whether or not the jurisdiction over the crime allegedly committed by petitioners is vested on the RTC.

Section 5 (5) of the 1987 Constitution empowers the Supreme Court to promulgate rules concerning pleading, practice and procedure in all courts. The limitations to this rule-making power are the following: the rules must (a) provide a simplified and inexpensive procedure for the speedy disposition of cases; (b) be uniform for all courts of the same grade and (c) not diminish, increase or modify substantive rights.23 As long as these limits are met, the argument used by petitioners that the Supreme Court, through A.O. Nos. 113-95 and 104-96, transgressed on Congress’ sole power to legislate, cannot be sustained.

A.O. No. 113-95 designated special intellectual property courts to promote the efficient administration of justice and to ensure the speedy disposition of intellectual property cases.

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A.O. No. 104-96,24 on the other hand, was issued pursuant to Section 23 of BP 12925 which transferred the jurisdiction over such crimes from the MTC and MTCC to the RTC and which furthermore gave the Supreme Court the authority to designate certain branches of the RTC to exclusively handle special cases in the interest of the speedy and efficient administration of justice. Accordingly, the RTC was vested with the exclusive and original jurisdiction to try and decide intellectual property cases.

The transfer of jurisdiction from the MTC and MTCC to the RTC did not in any way affect the substantive rights of petitioners. The administrative orders did not change the definition or scope of the crime of unfair competition with which petitioners were charged.

Both administrative orders therefore have the force and effect of law, having been validly issued by the Supreme Court in the exercise of its constitutional rule-making power. The trial court, being a subordinate court, should have followed the mandate of the later A.O. 104-96 which vested jurisdiction over the instant case on the RTC. Thus, the appellate court correctly found that the court a quo committed grave abuse of discretion.

Furthermore, the order of the trial court was a patent nullity. In resolving the pending incidents of the motion to transfer and motion to quash, the trial court should not have allowed petitioners to collaterally attack the validity of A.O. Nos. 113-95 and 104-96. We have ruled time and again that the constitutionality or validity of laws, orders, or such other rules with the force of law cannot be attacked collaterally. There is a legal presumption of validity of these laws and rules. Unless a law or rule is annulled in a direct proceeding, the legal presumption of its validity stands.26 The trial court’s order was consequently null and void.

The transfer of this case to Branch 9, RTC, Cebu City, however, is no longer possible. A.M. No. 03-03-03-SC27consolidated the intellectual property courts and commercial SEC courts in one RTC branch in a particular locality to streamline the court structure and to promote expediency. The RTC branch so designated will try and decide cases involving violations of intellectual property rights, and cases formerly cognizable by the Securities and Exchange Commission. It is now called a special commercial court. In Region VII, the designated special commercial court is Branch 11, RTC, Cebu City. The transfer of this case to that court is therefore warranted.

WHEREFORE, the Court of Appeals decision dated October 20, 2000 is hereby AFFIRMED with theMODIFICATION that Criminal Case No. CBU-45890 shall be transferred to Branch 11, RTC, Cebu City. Let the records of the case be transmitted thereto and the case tried and decided with dispatch.

Costs against petitioners.

SO ORDERED.

Footnotes

1 Under Rule 45 of the Revised Rules of Court.

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2 Penned by Associate Justice Roberto A. Barrios and concurred in by Associate Justices Ramon Mabutas, Jr. and Eriberto U. Rosario, Jr. of the Eighth Division of the Court of Appeals; dated October 20, 2000; Rollo, pp. 51-56. 3 The resolution denied the motion for reconsideration; dated May 21, 2001; Id., pp. 70-71. 4 Id., pp. 32-33. 5 Filed by State Prosecutor Zenaida M. Lim; docketed as Criminal Case No. CBU-45890; Id., pp. 22-23. 6 Unfair competition. 7 Id., pp. 22-23. 8 Re: Designation of Special Courts for Intellectual Property Rights; issued on October 2, 1995. 9 Dated February 17, 1998; Id., pp. 24-26. 10 Penalty for violation of Article 189, RPC: prision correccional in its minimum period or fine ranging fromP500 to P2,000, or both. 11 Id., pp. 27-30. 12 Re: Designation of Special Courts for Kidnapping, Robbery, Carnapping, Dangerous Drugs Cases and other Heinous Crimes, Intellectual Property Rights Violations and Jurisdiction in Libel Cases; Issued on October 21, 1996. 13 See note 4. 14 Under Rule 65 of the Rules of Court. 15 Sec. 4, Rule 65. When and where petition filed. – The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. x x x 16 See note 2. 17 Id., p. 10. 18 Serrano v. Galant Maritime Services, Inc, et al., G.R. No. 151833, 7 August 2003; 408 SCRA 523. 19 Mercado-Fehr v. Fehr, G.R. No. 152716, 23 October 2003, 414 SCRA 288. 20 Nala v. Barroso, Jr., G.R. No. 153087, 7 August 2003, 408 SCRA 529. 21 The following are the instances when a special civil action for certiorari may be given due course even if no motion for reconsideration has been filed: (1) the issue raised is purely one of law; (2) public interest is involved; (3) the matter is one of urgency; (4) the question of jurisdiction was squarely raised, submitted to, met and decided by the lower court; and (5) the order is a patent nullity. (Far East Bank and Trust Co., v. Toh, Sr., G.R. No. 144018, 23 June 2003, 404 SCRA 590). 22 G.R. No. 132428, 24 October 2000, 344 SCRA 202. 23 Nachura, Outline Reviewer in Political Law, 2002 Edition, p. 242. 24 A.O. No. 104-96 (B) Violations of intellectual property rights such as, but not limited to, violations of Art. 188 of the RPC (substituting and altering trademarks, trade names, or service marks), Art. 189 of the RPC (unfair competition, fraudulent registration of trademarks, trade names, or service marks, fraudulent designation of origin, and false description) P.D. No. 49 (protection of intellectual property rights), P.D. No. 87 (an act creating the videogram regulatory board), R.A. No. 165 as amended (the trademark law) shall be tried exclusively by the RTC in accordance

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with the established raffle scheme except those covered by AO No. 113-95 dated October 2, 1995, in which case, the designated RTC shall continue to observe the provisions therein. Considering that jurisdiction for violations of intellectual property rights hereinbefore mentioned is now confined exclusively to the RTC, the designation of MTC and MTCC under AO No. 113-95 is deleted and withdrawn.(emphasis ours) 25 SEC. 23. Special Jurisdiction to try special cases. – The Supreme Court may designate certain branches of the Regional Trial Courts to handle exclusively criminal cases, juvenile and domestic relations cases, agrarian cases, urban land reform cases which do not fall under the jurisdiction of quasi-judicial bodies and agencies, and /or such other special cases as the Supreme Court may determine in the interest of a speedy and efficient administration of justice. 26 Olsen and Co. v. Aldanese, 43 Phil 259 (1922); San Miguel Brewery v. Magno, 128 Phil. 328 (1967). 27 Issued on June 23, 2003.

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Topic: Statutory right

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 76193 November 9, 1989

UNITED FEATURE SYNDICATE, INC., petitioner, vs. MUNSINGWEAR CREATION MANUFACTURING COMPANY, respondent.

Quasha, Asperilla, Ancheta, Pena and Nolasco for petitioner.

Jaime G. Manzano for private respondent.

PARAS, J.:

This is a petition for review on certiorari filed by United Feature Syndicate Inc., seeking to set aside the Resolution of the Seventh Division of the Court of Appeals * dated September 16, 1986 dismissing the appeal of petitioner-appellant for having been filed out of time and denying its Motion for Reconsideration for lack of merit in its Resolution dated October 14, 1986.

The Resolution dismissing the appeal, reads as follows:

We agree with the Philippine Patent Office and respondent appellee that the decision of the aforementioned office dated October 2, 1984 had already become final and executory at the time the Notice of Appeal was filed.

Our reasons for this conclusions are borne out by the following facts:

a) On October 2, 1984, the decision sought to be appealed was rendered by the Philippine Patent Office and a copy thereof was received by counsel for petitioner-appellant on October 3, 1984 — not October 9, 1984 as stated in the Notice of Appeal. There can be no doubt about the decision having been received by petitioner-appellant's counsel onOctober 3, 1984 for this is clearly written in the Notice of Decision (p. 61, Original Record), and in point of fact the date of receipt cannot be October 9, 1984, as declared in the Notice of Appeal (p. 1, Rollo), because in the motion for reconsideration subsequently filed by petitioner-appellant it was stated that a copy of the decision was received onOctober 4, 1984 (p. 80, Original Record).

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b) On October 18, 1984 — as shown in the stamp mark of the Philippine Patent Office (p. 80, Original Record) or on the 15th and last day either for appealing or for moving for reconsideration, petitioner-appellant filed a motion for reconsideration.

Sadly and unexplainably for a veteran law office, said motion did not contain or incorporate a notice of hearing.

c) Possibly realizing the fatal defect in its motion for reconsideration, petitioner-appellant subsequently filed a motion to set for hearing its motion for reconsideration. This was done, however, only on October 31, 1984 (p. 162, Original Record).

The motion for reconsideration filed on the last day, fatally failing as it did to contain a notice of hearing, said pleading did not interrupt the period for appealing, for the motion was nothing but a piece of scrap paper (Agricultural and Industrial Marketing, Inc. v. Court of Appeals, 118 SCRA [1982] 492; Republic Planters Bank v. Intermediate Appellate Court, 13 SCRA [1984] 631).

This deadly and moral deficiency in the motion for reconsideration, therefore, resulted in the decision of the Philippine Patent Office being final and executory on October 19, 1984, the day after the motion for reconsideration was filed, said motion having been filed on the 15th and last day for appealing.

WHEREFORE, the motion of respondent appellee is hereby granted and the appeal dismissed.

SO ORDERED. (Rollo 42-43)

This case arose from petition filed by petitioner for the cancellation of the registration of trademark CHARLIE BROWN (Registration No. SR. 4224) in the name of respondent MUNSINGWEAR in Inter Partes Case No. 1350 entitled "United Feature Syndicate, Inc. v. Munsingwear Creation Mfg. Co.", with the Philippine Patent Office alleging that petitioner is damaged by the registration of the trademark CHARLIE BROWN of T-Shirts under Class 25 with the Registration No. SR-4224 dated September 12, 1979 in the name of Munsingwear Creation Manufacturing Co., Inc., on the following grounds: (1) that respondent was not entitled to the registration of the mark CHARLIE BROWN, & DEVICE at the time of application for registration; (2) that CHARLIE BROWN is a character creation or a pictorial illustration, the copyright to which is exclusively owned worldwide by the petitioner; (3) that as the owner of the pictorial illustration CHARLIE BROWN, petitioner has since 1950 and continuously up to the present, used and reproduced the same to the exclusion of others; (4) that the respondent-registrant has no bona fide use of the trademark in commerce in the Philippines prior to its application for registration. (Petition, p. 2, Rollo, p. 8)

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On October 2, 1984 the Director of the Philippine Patent Office rendered a decision in this case holding that a copyright registration like that of the name and likeness of CHARLIE BROWN may not provide a cause of action for the cancellation of a trademark registration, (Petition, p. 4; Rollo, p. 10 )

Petitioner filed a motion for reconsideration of the decision rendered by the Philippine Patent Office which was denied by the Director of said office on the ground that the Decision No. 84-83 was already final and executory (Petition, Rollo, pp. 11-12).

From this decision, petitioner-appellant appealed to the Court of Appeals and respondent court in its resolution dated September 16, 1986 denied the appeal. While the Motion for Reconsideration was filed on time, that is, on the last day within which to appeal, still it is a mere scrap of paper because there was no, date, of hearing stated therein.

Subsequently, petitioner-appellant filed a motion for reconsideration which public respondent denied for lack of merit( Annex "B", Rollo p. 45)..

Hence this petition for review on certiorari.

In the resolution of April 6, 1987, the petition was given due course.

In its petition (Rollo, p. 10) and in its memorandum (Rollo, p. 97), petitioner-appellant raised the following legal issues:

I

WHETHER THE RESPONDENT COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION AND/OR COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT BASED ITS RESOLUTION IN DISMISSING ITS APPEAL ON STRICT TECHNICAL RULES OF PROCEDURE AS ENUNCIATED IN RULE 15 OF THE RULES OF COURT INSTEAD OF RELYING ON THE POLICY OF THE PHILIPPINE PATENT OFFICE AS STRESSED IN RULE 169, AS AMENDED, OF THE RULES OF PRACTICE IN TRADEMARK CASES.

II

WHETHER THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION WHEN BY DISMISSING THE APPEAL TO IT FROM THE DECISION OF THE DIRECTOR OF PATENTS, IT KNOWINGLY DISREGARDED ITS OWN DECISION IN AC-GR. SP. NO. 0342, WHICH WAS AFFIRMED BY THIS HONORABLE SUPREME COURT TO THE EFFECT THAT A COPYRIGHTED CHARACTER MAY NOT BE APPROPRIATED AS A TRADEMARK BY ANOTHER UNDER PRESIDENTIAL DECREE NO. 49.

III

WHETHER, ASSUMING ARGUENDO, BUT ONLY ASSUMING, THAT THE DECISION OF THE DIRECTOR OF PATENTS IN THE CASE AT BAR HAD

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ALREADY BECOME FINAL WHEN IT WAS APPEALED TO THE COURT OF APPEALS, THE LATTER, BY REASON OF THE SUPERVENING FACTS AFTER THE DECISION APPEALED FROM WAS RENDERED, SHOULD HAVE HARMONIZED THE DECISION WITH LAW, THE DEMANDS OF JUSTICE AND EQUITY.

The petitioner is impressed with merit.

Petitioner's contention that the purpose of a notice of hearing to the adverse party is to afford him an opportunity to resist the motion, more particularly the motion for reconsideration filed by its company is well taken. Said purpose was served when Munsingwear filed its opposition thereto on November 20, 1984 and cured the technical defect of lack of notice of hearing complained of (Rollo, p. 52). Otherwise stated such shortcomings of petitioner as to compliance with procedural requirements in taking its appeal cannot be deemed sufficient to deprive it of a chance to secure a review by this court in order to obtain substantial justice; more so where liverality accorded to the petitioner becomes compelling because of the ostensible merit of petitioner's case (Olango v. Court of First Instance of Misamis Oriental, 121 SCRA 338 [1983]).

Moreover, in Siguenza v. Court of Appeals, (137 SCRA 570 [1985]) the Court stressed that the right to appeal should not be lightly disregarded by a stringent application of rules of procedure especially where the appeal is on its face meritorious and the interest of substantial justice would be served by permitting the appeal.

As enunciated in the case of Castro v. Court of Appeals (123 SCRA 782, [1983]) the importance and real purpose of the remedy of appeal was stressed as follows:

An appeal is an essential part of oar judicial system. We have advised the courts to proceed with caution so as not to deprive a party of the right to appeal. (National Waterworks and Sewerage Authority v. Municipality of Libmanan, 97 SCRA 138) and instructed that every party-litigant should be afforded the amplest opportunity for the proper and just disposition of his cause, freed from the constraints of technicalities. (A-One Feeds, Inc. v. Court of Appeals, 100 SCRA 590).

The rules of procedure are not to be applied in a very rigid and technical sense. The rules of procedure are used only to help secure not override substantial justice. (Gregorio v. Court of Appeals, 72 SCRA 120), therefore, we ruled in Republic v. Court of Appeals (83 SCRA 453) that a six day delay in the perfection of the appeal does not warrant its dismissal. And again in Ramos v. Bagaso, 96 SCRA 395, this Court held that the delay of four (4) days in filing a notice of appeal and a motion for extension of time to file a record on appeal can be excused on the basis of equity.

It was further emphasized that we allowed the filing of an appeal in some cases where a stringent application of the rules would have denied it, or when to do so would serve the demands of substantial justice and in the exercise of our equity jurisdiction (Serrano v. Court of Appeals, 139 SCRA 179 [1085].)

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In the case at bar, the petitioner's delay in filing their record on appeal should not be strictly construed as to deprive them of the right to appeal especially since on its face the appeal appears to be impressed with merit. (Emphasis supplied). All aforementioned cases are cited in G.R. No. 76595,Pacific Asia Overseas Shipping Corporation v. NLRC, et al., May 6, 1988.

Procedural technicality should not prevail over substantive rights of a party to appeal (NEA v. CA, 126 SCRA 394).

Moreover, a judgment of the Court of Appeals that become final by reason of the mistake of the herein petitioner's lawyer may still be reviewed on appeal by the Supreme Court particularly where the Supreme Court already gave due course to the petition for review (Ernesto v. Court of Appeals, 116 SCRA 755 [1982]).

Where strong considerations of substantial justice are manifest in the petition, this Court may relax the stringent application of technical rules in the exercise of equity jurisdiction. In addition to the basic merits of the main case, such petition usually embodies justifying circumstances which warrant our heeding the petitioner's cry for justice, inspite of the earlier negligence of counsel (Serrano v. Court of Appeals et al., 139 SCRA 179 [1985]).

In a number of cases, this Court in the exercise of equity jurisdiction decided to disregard technicalities in order to resolve the case on its merits based on the evidence (St. Peter Memorial Park, Inc. et al. v. Cleofas, 121 SCRA 287, [1983]; Helmuth, Jr. v. People of the Philippines, 112 SCRA 573 [1983]).

This case was brought before this Court for the resolution of the dismissal of the appeal filed by petitioner-appellant from the decision of the Director of the Philippines Patent Office for being filed out of time. The normal action to take thereafter, would be to remand this case to the Court of Appeals for further proceedings. However, in line with jurisprudence, such time consuming procedure may be properly dispensed with to resolve the issue (Quisumbing v. Court of Appeals, 122 SCRA 709 [1983]) where there is enough basis to end the basic controversy between the parties here and now. In the case at bar dispensing with such procedural steps would not anyway affect substantially the merits of their respective claims as held in Velasco v. Court of Appeals, (95 SCRA 621 [1980] cited in Ortigas & Co. Ltd. v. Ruiz, 148 SCRA [1987] hence the need for this Court to broaden its inquiry in this case land decide the same on the merits rather than merely resolve the procedural question raised (Dorado v. Court of Appeals, 153 SCRA 420 [1987]; De Lima v. Laguna Tayabas Co., 160 SCRA 70 [1988]).

Petitioner contends that it will be damaged by the registration of the trademark CHARLIE BROWN & DEVICE in favor of private respondent and that it has a better right to CHARLIE BROWN & DEVICE since the likeness of CHARLIE BROWN appeared in periodicals having worldwide distribution and covered by copyright registration in its name which antedates the certificate of registration of respondent issued only on September 12, 1979. (Petition, Rollo, p. 21).

Petitioner further stresses that Decision No. 84-83 (TM) promulgated by the Philippine Patent Office on October 2, 1984 which held that "the name likeness of CHARLIE BROWN may not provide a cause of action for the cancellation of a trademark registration," was

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based in the conclusion made in the case of "Children's Television Workshop v. touch of Class" earlier decided by the Director of Patent Office on May 10, 1984. However, when the latter case was appealed to the then Intermediate Appellate Court, docketed as A.C. G.R. SP No. 03432, the appellate court reversed the decision of the Director holding said appealed decision as illegal and contrary to law. this reversal was affirmed by this Court on August 7, 1985 in G.R. No. 71210 by denying the petition of respondent Touch of Class.

The Court of Appeals in reversing the Director of Patent's decision in Touch of Class, Inc. succintly said:

The Patents Office ruled that a trademark, unlike a label, cannot be copyrighted. The "Cookie Monster" is not, however, a trademark. It is a character in a TV series entitled "Sesame Street." It was respondent which appropriated the "Cookie Monster" as a trademark, after it has been copyrighted. We hold that the exclusive right secured by PD 49 to the petitioner precludes the appropriation of the "Cookie Monster" by the respondent.

Pertinently, Section 2 of Presidential Decree No. 49, otherwise known as the "Decree on Intellectual Property", provides:

Section 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works:

xxx xxx xxx

(O) Prints, pictorial illustrations, advertising copies, labels, tags and box wraps. ...

Therefore, since the name "CHARLIE BROWN" and its pictorial representation were covered by a copyright registration way back in 1950 the same are entitled to protection under PD No. 49.

Aside from its copyright registration, petitioner is also the owner of several trademark registrations and application for the name and likeness of "CHARLIE BROWN" which is the duly registered trademark and copyright of petitioner United Feature Syndicate Inc. as early as 1957 and additionally also as TV SPECIALS featuring the "PEANUTS" characters "CHARLIE BROWN" (Memorandum, Rollo p. 97 [211]).

An examination of the records show that the only appreciable defense of respondent-registrant is embodied in its answer, which reads:

It uses, the trademark "CHARLIE BROWN" & "DEVICE" on children's wear such as T-shirts, undershirts, sweaters, brief and sandos, in class 25; whereas "CHARLIE BROWN" is used only by petitioner as character, in a pictorial illustration used in a comic strip appearing in newspapers and magazines. It has no trademark significance and therefore respondent-registrant's use of

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"CHARLIE BROWN" & "DEVICE" is not in conflict with the petitioner's use of "CHARLIE BROWN" (Rollo, p. 97 [21]).

It is undeniable from the records that petitioner is the actual owner of said trademark due to its prior registration with the Patent's Office.

Finally, in La Chemise Lacoste S.A. v. Hon. Oscar Fernandez & Gobindram Hemandas Sujanani v. Hon. Roberto V. Ongpin, et al. 129 SCRA 373 [1984]), the Court declared.

In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foregoing states under the Paris Convention for the Protection of Industrial Property to which the Philippines and (France) U.S. are parties. We are simply interpreting a solemn international commitment of the Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in our national interest to do so.

PREMISES CONSIDERED, the Resolutions of the Court of Appeals dated September 16, 1985 and October 14, 1986 dismissing petitioner's appeal are hereby SET ASIDE and Certificate of Registration no. SR-424 issued to private respondent dated September 12, 1979 is hereby CANCELLED.

SO ORDERED.

Padilla, Sarmiento and Regalado, JJ., concur.

Melencio-Herrera (Chairperson), J., is on leave.

Footnotes

* Penned by Justice Jose A.R. Melo and concurred in by Justices Nathanael P. de Pano, Jr. and Segundino G. Chua.

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Topic: Originality: independent creation; no direct copying or evasive imitation

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 132604 March 6, 2002

VENANCIO SAMBAR, doing business under the name and style of CVS Garment Enterprises, petitioner, vs. LEVI STRAUSS & CO., and LEVI STRAUSS (PHIL.), INC., respondents.

D E C I S I O N

QUISUMBING, J.:

This petition for review on certiorari prays for the reversal of the decision dated January 30, 1998, of the Court of Appeals in CA-G.R. CV No. 51553. That decision affirmed the decision in Civil Case No. 88-2220 of the Regional Trial Court, Branch 66, Makati City, making permanent the writ of preliminary injunction, ordering CVS Garment and Industrial Company (CVSGIC) and petitioner Venancio Sambar to pay private respondents jointly and solidarily the sum of P50,000 as temperate and nominal damages, P10,000 as exemplary damages, and P25,000 as attorney’s fees and litigation costs, and ordering the Director of the National Library to cancel Copyright Registration No. 1-1998 in the name of Venancio Sambar.

The facts are as follows:

On September 28, 1987, private respondents, through a letter from their legal officer, demanded that CVS Garment Enterprises (CVSGE) desist from using their stitched arcuate design on the Europress jeans which CVSGE advertised in the Manila Bulletin.

Atty. Benjamin Gruba, counsel of CVSGE, replied that the arcuate design on the back pockets of Europress jeans was different from the design on the back pockets of Levi’s jeans. He further asserted that his client had a copyright on the design it was using.

Thereafter, private respondents filed a complaint against Sambar, doing business under the name and style of CVSGE. Private respondents also impleaded the Director of the National Library. Summons was sent to Sambar in his business address at 161-B Iriga corner Retiro, La Loma, Quezon City.

Atty. Gruba claimed that he erroneously received the original summons as he mistook it as addressed to his client, CVSGIC. He returned the summons and the pleadings and

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manifested in court that CVSGE, which was formerly doing business in the premises, already stopped operation and CVSGIC took over CVSGE’s occupation of the premises. He also claimed he did not know the whereabouts of Sambar, the alleged owner of CVSGE.

Thereafter, private respondents amended their complaint to include CVSGIC. When private respondents learned the whereabouts of Sambar and CVSGE, the case was revived.

Private respondents alleged in their complaint that Levi Strauss and Co. (LS&Co.), an internationally known clothing manufacturer, owns the arcuate design trademark which was registered under U.S. Trademark Registration No. 404, 248 on November 16, 1943, and in the Principal Register of trademarks with the Philippine Patent Office under Certificate of Registration No. 20240 issued on October 8, 1973; that through a Trademark Technical Data and Technical Assistance Agreement with Levi Strauss (Phil.) Inc. (LSPI) in 1972, LS&Co. granted LSPI a non-exclusive license to use the arcuate trademark in its manufacture and sale of Levi’s pants, jackets and shirts in the Philippines; that in 1983, LS&Co. also appointed LSPI as its agent and attorney-in-fact to protect its trademark in the Philippines; and that sometime in 1987, CVSGIC and Venancio Sambar, without the consent and authority of private respondents and in infringement and unfair competition, sold and advertised, and despite demands to cease and desist, continued to manufacture, sell and advertise denim pants under the brand name "Europress" with back pockets bearing a design similar to the arcuate trademark of private respondents, thereby causing confusion on the buying public, prejudicial to private respondents’ goodwill and property right.

In its answer, CVSGIC admitted it manufactured, sold and advertised and was still manufacturing and selling denim pants under the brand name of "Europress", bearing a back pocket design of two double arcs meeting in the middle. However, it denied that there was infringement or unfair competition because the display rooms of department stores where Levi’s and Europress jeans were sold, were distinctively segregated by billboards and other modes of advertisement. CVSGIC avers that the public would not be confused on the ownership of such known trademark as Levi’s, Jag, Europress, etc.. Also, CVSGIC claimed that it had its own original arcuate design, as evidenced by Copyright Registration No. 1-1998, which was very different and distinct from Levi’s design. CVSGIC prayed for actual, moral and exemplary damages by way of counterclaim.

Petitioner Venancio Sambar filed a separate answer. He denied he was connected with CVSGIC. He admitted that Copyright Registration No. 1-1998 was issued to him, but he denied using it. He also said he did not authorize anyone to use the copyrighted design. He counterclaimed for moral and exemplary damages and payment of attorney’s fees.

After hearing, the trial court issued a writ of preliminary injunction enjoining CVSGIC and petitioner from manufacturing, advertising and selling pants with the arcuate design on their back pockets. CVSGIC and petitioner did not appear during the October 13 and 27, 1993 hearings, when they were to present evidence. Consequently, the trial court ruled that they waived their right to present evidence.

On May 3, 1995, the trial court rendered its decision. The dispositive portion reads:

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IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay the plaintiffs jointly and solidarily the sum of P50,000.00 as temperate and nominal damages, the sum of P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorney’s fees and litigation expenses and to pay the costs.

SO ORDERED.1

Private respondents moved for a reconsideration praying for the cancellation of petitioner’s copyright registration. The trial court granted reconsideration in its July 14, 1995 order, thus:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay the plaintiffs jointly and solidarily the sum of P50,000.00 as temperate and nominal damages, the sum of P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorney’s fees and litigation expenses and to pay the costs;

c) ordering the Director of the National Library to cancel the Copyright Registration No. 1-1998 issued in the name of Venancio Sambar.2

Petitioner appealed to the Court of Appeals which on January 30, 1998 decided in favor of private respondents as follows:

WHEREFORE, the judgment appealed from is AFFIRMED in toto.

SO ORDERED.3

In this instant petition, petitioner avers that the Court of Appeals erred in:

I. ...RULING THAT THERE WAS AN INFRINGEMENT OF RESPONDENT’S ARCUATE MARK.

II. ...RULING THAT PETITIONER IS JOINTLY AND SOLIDARILY LIABLE WITH CVS GARMENTS INDUSTRIAL CORPORATION FOR INFRINGEMENT OF RESPONDENT’S ARCUATE MARK.

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III. ...IN ORDERING, THERE BEING NO INFRINGEMENT OR UNFAIR COMPETITION, THE AWARD OF DAMAGES AND CANCELLATION OF COPYRIGHT REGISTRATION NO. 1-1998 ISSUED IN THE NAME OF PETITIONER.4

Briefly, we are asked to resolve the following issues:

1. Did petitioner infringe on private respondents’ arcuate design?

2. Must we hold petitioner solidarily liable with CVS Garments Industrial Corporation?

3. Are private respondents entitled to nominal, temperate and exemplary damages and cancellation of petitioner’s copyright?

On the first issue, petitioner claims that he did not infringe on private respondents’ arcuate design because there was no colorable imitation which deceived or confused the public. He cites Emerald Garment Manufacturing Corporation vs. Court of Appeals, G.R. No. 100098, 251 SCRA 600 (1995), as authority. He disagreed with the Court of Appeals that there were confusing similarities between Levi’s and Europress’ arcuate designs, despite the trial court’s observation of differences in them. Petitioner maintains that although the backpocket designs had similarities, the public was not confused because Levi’s jeans had other marks not found in Europress jeans. Further, he says Levi’s long history and popularity made its trademark easily identifiable by the public.

In its comment, private respondents aver that the Court of Appeals did not err in ruling that there was infringement in this case. The backpocket design of Europress jeans, a double arc intersecting in the middle was the same as Levi’s’ mark, also a double arc intersecting at the center. Although the trial court found differences in the two designs, these differences were not noticeable. Further, private respondents said, infringement of trademark did not require exact similarity. Colorable imitation enough to cause confusion among the public, was sufficient for a trademark to be infringed. Private respondents explained that in a market research they conducted with 600 respondents, the result showed that the public was confused by Europress trademark vis the Levi’s trademark.

We find that the first issue raised by petitioner is factual. The basic rule is that factual questions are beyond the province of this Court in a petition for review. Although there are exceptions to this rule, this case is not one of them.5 Hence, we find no reason to disturb the findings of the Court of Appeals that Europress’ use of the arcuate design was an infringement of the Levi’s design.

On the second issue, petitioner claims that private respondents did not show that he was connected with CVSGIC, nor did they prove his specific acts of infringement to make him liable for damages. Again, this is a factual matter and factual findings of the trial court, concurred in by the Court of Appeals, are final and binding on this Court.6 Both the courts below found that petitioner had a copyright over Europress’ arcuate design and that he consented to the use of said design by CVSGIC. We are bound by this finding, especially in

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the absence of a showing that it was tainted with arbitrariness or palpable error.7 It must be stressed that it was immaterial whether or not petitioner was connected with CVSGIC. What is relevant is that petitioner had a copyright over the design and that he allowed the use of the same by CVSGIC.

Petitioner also contends that the Court of Appeals erred when it said that he had the burden to prove that he was not connected with CVSGIC and that he did not authorize anyone to use his copyrighted design. According to petitioner, these are important elements of private respondents’ cause of action against him, hence, private respondents had the ultimate burden of proof.

Pertinent is Section 1, Rule 131 of the Rules of Court8 which provides that the burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact in issue by the amount of evidence required by law. In civil cases, the burden of proof may be on either the plaintiff or the defendant. It is on the latter, if in his answer he alleges an affirmative defense, which is not a denial of an essential ingredient in the plaintiff’s cause of action, but is one which, if established, will be a good defense – i.e., an "avoidance" of the claim, which prima facie, the plaintiff already has because of the defendant’s own admissions in the pleadings.9

Petitioner’s defense in this case was an affirmative defense.1âwphi1 He did not deny that private respondents owned the arcuate trademark nor that CVSGIC used on its products a similar arcuate design. What he averred was that although he owned the copyright on the Europress arcuate design, he did not allow CVSGIC to use it. He also said he was not connected with CVSGIC. These were not alleged by private respondents in their pleadings, and petitioner therefore had the burden to prove these.

Lastly, are private respondents entitled to nominal, temperate and exemplary damages and cancellation of petitioner’s copyright?

Petitioner insists that he had not infringed on the arcuate trademark, hence, there was no basis for nominal and temperate damages. Also, an award of nominal damages precludes an award of temperate damages. He citesVentanilla vs. Centeno, G.R. No. L-14333, 1 SCRA 215 (1961) on this. Thus, he contends, assuming arguendo that there was infringement, the Court of Appeals still erred in awarding both nominal and temperate damages.

Petitioner likewise said that the grant of exemplary damages was inconsistent with the trial court’s finding that the design of Europress jeans was not similar to Levi’s design and that no pecuniary loss was suffered by respondents to entitle them to such damages.

Lastly, petitioner maintains that as Europress’ arcuate design is not a copy of that of Levi’s, citing the trial court’s findings that although there are similarities, there are also differences in the two designs, cancellation of his copyright was not justified.

On this matter, private respondents assert that the lower courts found that there was infringement and Levi’s was entitled to damages based on Sections 22 and 23 of RA No. 166

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otherwise known as the Trade Mark Law,10 as amended, which was the law then governing. Said sections define infringement and prescribe the remedies therefor. Further, private respondents aver it was misleading for petitioner to claim that the trial court ruled that private respondents did not suffer pecuniary loss, suggesting that the award of damages was improper. According to the private respondents, the trial court did not make any such ruling. It simply stated that there was no evidence that Levi’s had suffered decline in its sales because of the use of the arcuate design by Europress jeans. They offer that while there may be no direct proof that they suffered a decline in sales, damages may still be measured based on a reasonable percentage of the gross sales of the respondents, pursuant to Section 23 of the Trademark law.11

Finally, regarding the cancellation of petitioner’s copyright, private respondents deny that the trial court ruled that the arcuate design of Europress jeans was not the same as Levi’s arcuate design jeans. On the contrary, the trial court expressly ruled that there was similarity. The cancellation of petitioner’s copyright was justified because petitioner’s copyright can not prevail over respondents’ registration in the Principal Register of Bureau of Patents, Trademarks, and Technology Transfer. According to private respondents, the essence of copyright registration is originality and a copied design is inherently non-copyrightable. They insist that registration does not confer originality upon a copycat version of a prior design.

From the foregoing discussion, it is clear that the matters raised by petitioner in relation to the last issue are purely factual, except the matter of nominal and temperate damages. Petitioner claims that damages are not due private respondents and his copyright should not be cancelled because he had not infringed on Levi’s trademark. Both the trial court and the Court of Appeals found there was infringement. Thus, the award of damages and cancellation of petitioner’s copyright are appropriate.12 Award of damages is clearly provided in Section 23,13 while cancellation of petitioner’s copyright finds basis on the fact that the design was a mere copy of that of private respondents’ trademark.1âwphi1 To be entitled to copyright, the thing being copyrighted must be original, created by the author through his own skill, labor and judgment, without directly copying or evasively imitating the work of another.14

However, we agree with petitioner that it was error for the Court of Appeals to affirm the award of nominal damages combined with temperate damages15 by the Regional Trial Court of Makati. What respondents are entitled to is an award for temperate damages, not nominal damages. For although the exact amount of damage or loss can not be determined with reasonable certainty, the fact that there was infringement means they suffered losses for which they are entitled to moderate damages.16 We find that the award of P50,000.00 as temperate damages fair and reasonable, considering the circumstances herein as well as the global coverage and reputation of private respondents Levi Strauss & Company and Levi Strauss (Phil.), Inc.

WHEREFORE, the decision dated January 30, 1998, of the Court of Appeals, in CA-G.R. CV No. 51553 AFFIRMING the judgment of the Regional Trial Court of Makati, Branch 66, dated July 14, 1995, is hereby MODIFIED so that nominal damages are deleted but the amount of

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P50,000 is hereby awarded only as TEMPERATE DAMAGES. In all other respects, said judgment is hereby AFFIRMED, to wit:

a) the writ of preliminary injunction is made permanent;

b) the defendants CVS Garment and Industrial Company and Venancio Sambar are ordered also to pay the plaintiffs jointly and solidarily the sum of P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorney’s fees and litigation expenses, and to pay the costs; and

c) the Director of the National Library is ordered to cancel the Copyright Registration No. 1-1998 issued in the name of Venancio Sambar.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

Footnotes

1 RTC Records, p. 260.

2 Id. at 274-275.

3 Rollo, p. 20.

4 Id. at 34.

5 Salcedo vs. People, G.R. No. 137143, 347 SCRA 499, 504-505 (2000).

6 Id. at 1.

7 David vs. Manila Bulletin Publishing Company, Inc., G.R. No. 139272, 347 SCRA 68, 69 (2000).

8 Section 1, Rule 131: Burden of Proof. - Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense by the amount of evidence required by law.

9 Paras. Rules of Court 448 (Third Edition, 2000).

10 Section 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation

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of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all the remedies herein provided.

Section 23. Actions, and damages and injunction for infringement. - Any person entitled to the exclusive use of a registered mark or trade-name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or trade-name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing, may also be granted injunction.

11 Ibid.

12 Heirs of Crisanta Y. Gabriel-Almoradie vs. Court of Appeals, G.R. No. 91385, 229 SCRA 15, 30 & 34 (1994).

13 See note 10.

14 Hoffman vs. Le Traunik, 209 Federal Reporter 375, 379 (1913).

15 Ventanilla vs. Centeno, No. L-14333, 1 SCRA 215, 216 (1961).

16 Art. 2224, Civil Code: Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered where the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.

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Topic: Originality: independent creation; no direct copying or evasive imitation

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 130360 August 15, 2001

WILSON ONG CHING KlAN CHUAN, petitioner, vs. HON. COURT OF APPEALS and LORENZO TAN, respondents.

QUISUMBING, J.:

This petition for review1 seeks to annul the decision2 dated August 27, 1997 of the Court of Appeals which set aside the resolutions3 dated October 13 and December 15, 1993 as well as the order dated March 1, 1994 of the Regional Trial Court of Quezon City, Branch 94.4

Petitioner Wilson Ong Ching Kian Chuan ("Ong"), imports vermicelli from China National Cereals Oils and Foodstuffs Import and Export Corporation, based in Beijing, China, under the firm name C.K.C. Trading. He repacks it in cellophane wrappers with a design of two-dragons and the TOWER trademark on the uppermost portion. Ong acquired a Certificate of Copyright Registration from the National Library on June 9, 1993 on the said design.

Ong discovered that private respondent Lorenzo Tan repacked his vermicelli he imports from the same company but based in Qingdao, China in a "nearly" identical wrapper. On September 16, 1993, Ong filed against Tan a verified complaint for infringement of copyright with damages and prayer for temporary restraining order or writ of preliminary injunction with the Regional Trial Court in Quezon City. Ong alleged that he was the holder of a Certificate of Copyright Registration over the cellophane wrapper with the two-dragon design, and that Tan used an identical wrapper in his business. In his prayer for a preliminary injunction in addition to damages, he asked that Tan be restrained from using the wrapper. He said he would post a bond to guarantee the payment of damages resulting from the issuance of the writ of preliminary injunction.1âwphi1.nêt

The trial court issued a temporary restraining order on the same date the complaint was filed. Tan filed an opposition to Ong's application for a writ of preliminary injunction with counter-application for the issuance of a similar writ against Ong. Tan alleged that Ong was not entitled to an injunction. According to Tan, Ong did not have a clear right over the use of the trademark Pagoda and Lungkow vermicelli as these were registered in the name of CHINA NATIONAL CEREALS OIL AND FOODSTUFFS IMPORT AND EXPORT CORPORATION, SHANDONG CEREALS AND OILS BRANCH (hereafter Ceroilfood Shandong), based in Qingdao, China. Further, Tan averred that he was the exclusive distributor in the Philippines of the Pagoda and Lungkow vermicelli and was solely authorized to use said

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trademark. He added that Ong merely copied the two-dragon design from Ceroilfood Shandong which had the Certificates of Registration issued by different countries. He concluded that Ong's Certificate of Copyright Registration was not valid for lack of originality.

On September 30, 1993, Ong countered Tan's opposition to the issuance of the writ of preliminary injunction.

On October 13, 1993, the could issued the writ in Ong's favor upon his filing of a P100,000.00 bond.5

Tan filed a motion to dissolve the writ of preliminary injunction, but the trial court denied it on December 15, 1993.6 The motion for reconsideration was also denied on March 1, 1994.

Tan elevated the case to the Court of Appeals via a special civil action for certiorari with a prayer for the issuance of a TRO and/or writ of preliminary injunction. Ong filed an opposition to Tan's prayer for an issuance of TRO and/or writ of preliminary injunction on the ground that the trial court did not commit a grave abuse of discretion in issuing the writ in his favor.

After oral argument, the Court of Appeals rendered a decision on August 8, 1994, setting aside the trial court's order. It decreed:

WHEREFORE, in the petition is GIVEN, DUE COURSE, and, GRANTED. The order dated October 13, 1993 and related orders, as well as the writ of preliminary injunction issued by the respondent court, are SET ASIDE as issued with grave abuse of discretion. No costs.

SO ORDERED.7

Ong filed a motion for reconsideration and on January 3, 1995, the Court of Appeals modified its August 8, 1994 order as follows:

WHEREFORE the phrase "the order dated October 13, 1993 and related orders, as well as the writ of preliminary injunction issued by the respondent court, are SET ASIDE as issued with grave abuse of discretion" is hereby deleted in our resolution dated 08 August 1994. In all other respects, said resolution must be maintained.

However, let a writ of preliminary injunction be issued enjoining the herein respondents and any and all persons acting for and in their behalf from enforcing and/or implementing the Writ of Preliminary Injunction issued on October 15, 1993 pursuant to the Resolution dated October 13, 1993 of the PUBLIC RESPONDENT in Civil Case No. Q-93-17628 entitled "WILSON ONG CHING KIAN CHUAN, ETC. vs. LORENZO TAN, ETC." upon petitioner's filing of a bond of P200,000.00.

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The Branch Clerk of Court of the RTC, Branch 94, Quezon City is directed to elevate the records of Civil Case No. 293-17128 within TEN (10) DAYS from notice.

The parties are given THIRTY (30) DAYS from notice to file their memorandum or any pertinent manifestation on the matter, after which the case shall be considered submitted for decision.

SO ORDERED.8

Pursuant to the Court of Appeals' resolution on January 16, 1996, the parties submitted their memoranda. On August 27, 1997, the appellate court promulgated its decision, decreeing as follows:

WHEREFORE, the resolutions dated October 13, 1993 and December 15, 1993 as well as the order dated March 1, 1994 - all in Civil Case No. Q-93-17628 are hereby SET ASIDE and our injunction heretofore issued made permanent.

IT IS SO ORDERED.9

On October 17, 1997, Ong filed the instant petition for review, claiming that the Court of Appeals committed grave and serious errors tantamount to acting with grave abuse of discretion and/or acting without or in excess of its jurisdiction:

I. ...WHEN IT ISSUED A PERMANENT PRELIMINARY INJUNCTION IN FAVOR OF THE PRIVATE RESPONDENT WHEN THE LATTER'S RIGHT TO SUCH A RELIEF IS NOT CLEAR, DOUBTFUL AND HAS NO LEGAL OR FACTUAL BASIS.

A. CERTIFICATE OF COPYRIGHT REGISTRATION JUSTIFY ISSUANCE OF WRIT OF PRELIMINARY INJUNCTION UNDER P.D. NO. 49.

B. ISSUANCE OF PRELIMINARY INJUNCTION MUST BE BASED ON CLEAR AND UNMISTAKABLE RIGHT WHICH PETITIONER HAD AND WHICH RIGHT WAS INVADED BY THE PRIVATE RESPONDENT.

C. COURT OF APPEALS' DECISION OF AUGUST 8, 1994 AND ITS RESOLUTION OF JANUARY 3, 1995 RESULTS IN CONFUSION.

II. ...BY 'INTERFERING' WITH THE JUDICIAL DISCRETION OF THE TRIAL COURT.

A. RESPONDENT COURT OF APPEALS' INTERFERENCE WITH THE DISCRETION OF TRIAL COURT CONSTITUTES GRAVE ABUSE OF DISCRETION.

III. ...BY ISSUING A WRIT OF PRELIMINARY INJUNCTION IN FAVOR OF THE PRIVATE RESPONDENT AND DISREGARDING THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE TRIAL COURT WHOM (SIC), UNDER THE JANUARY 13,

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1995 RESOLUTION OF RESPONDENT COURT OF APPEALS, WAS JUDICIALLY HELD NOT TO HAVE COMMITTED ANY GRAVE ABUSE OF DISCRETION IN THE ISSUANCE OF THE OCTOBER 13, 1993 AND 'RELATED ORDERS'.

A. ISSUANCE OF WRIT OF PRELIMINARY INJUNCTION ADDRESSED TO THE SOUND DISCRETION OF THE TRIAL COURT.

IV. ...WHEN IT MADE ITS OWN FINDINGS AND CONCLUSIONS, PRE-EMPTING THE TRIAL COURT AND PRE-JUDGING THE CASE, THUS LEAVING THE TRIAL COURT WITH NOTHING TO RULE UPON.

"A. COURT OF APPEALS PREJUDGED THE CASE REMANDED TO THE TRIAL COURT

The issues for our determination are: Was the issuance of the writ of preliminary injunction proper? Was there grave abuse of discretion committed by the Court of Appeals when it set aside the order of the trial court, then issued a judgment touching on the merits?

Petitioner avers that the CA erred in issuing a preliminary injunction in private respondent's favor. He says, firstly, that he is more entitled to it. He states that as holder of the Certificate of Copyright Registration of the twin-dragon design, he has the protection of P.D. No. 49.10 Said law allows an injunction in case of infringement. Petitioner asserts that private respondent has no registered copyright and merely relies on the trademark of his principal abroad, which insofar as Philippine laws is concerned, cannot prevail over petitioner's copyright.

Private respondent, for his part, avers that petitioner has no "clear right" over the use of the copyrighted wrapper since the PAGODA trademark and label were first adopted and used and have been duly registered by Ceroilfood Shandong not only in China but in nearly 20 countries and regions worldwide. Petitioner was not the original creator of the label, but merely copied the design of Ceroilfood Shandong. Private respondent presented copies of the certificates of copyright registration in the name of Ceroilfood Shandong issued by at least twenty countries and regions worldwide which although unauthenticated are, according to him, sufficient to provide a sampling of the evidence needed in the determination of the grant of preliminary injunction.11 Private respondent alleges, that the trademark PAGODA BRAND was registered in China on October 31, 197912 while the trademark LUNGKOW VERMICELLI WITH TWO-DRAGON DEVICE was registered on August 15, 1985.13

To resolve this controversy, we have to return to basics. A person to be entitled to a copyright must be the original creator of the work. He must have created it by his own skill, labor and judgment without directly copying or evasively imitating the work of another.14 The grant of preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should be made with extreme caution.15 Its grant depends chiefly on the extent of doubt on the validity of the copyright, existence of infringement,

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and the damages sustained by such infringement.16 In our view, the copies of the certificates of copyright registered in the name of Ceroilfood Shandong sufficiently raise reasonable doubt. With such a doubt preliminary injunction is unavailing.17 In Medina vs. City Sheriff, Manila, 276 SCRA 133, 139 (1997), where the complainant's title was disputed, we held that injunction was not proper.

Petitioner Ong argues that the Court of Appeals erred and contradicted itself in its January 3, 1995 Resolution, where it deleted the phrase "the order dated October 13, 1993 and related orders, as well as the writ of preliminary injunction issued by the respondent court, are SET ASIDE as issued with grave abuse of discretion" in its August 8, 1994 decision, and at the same time issued a writ of preliminary injunction in Tan's favor.

Ong's claim (that the Court of Appeals In deleting the aforequoted phrase in the August 8, 1994 decision abandoned its earlier finding of grave abuse of discretion on the part of the trial court), however, is without logical basis. The appellate court merely restated In its own words the issue raised in the petition: from a) whether the RTC committed grave abuse of discretion, to b) whether Tan was entitled to an injunctive relief. Then it clarified that the relief sought is a prohibition against Ong and his agents from enforcing the writ of preliminary injunction. Properly understood, an order enjoining the enforcement of a writ of preliminary injunction issued by the RTC in a certiorari proceeding under Rule 65 of the Rules of Court effectively, sets aside the RTC order for being issued with grave abuse of discretion.

To be entitled to an injunctive writ, petitioner must show, inter alia, the existence of a clear and unmistakable right and an urgent and paramount necessity for the writ to prevent serious damage.18 From the above discussion, we find that petitioner's right has not been clearly and unmistakably demonstrated. That right is what is in dispute and has yet to be determined. In Developers Group of Companies, Inc. vs. Court of Appeals, 219 SCRA 715, 722-723 (1993), we held that in the absence of proof of a legal right and the injury sustained by the plaintiff, an order of the trial court granting the issuance of an injunctive writ will be set aside, for having been issued with grave abuse of discretion. Conformably, there was no abuse of discretion by the Court of Appeals when it issued its own order to restrain the enforcement of the preliminary injunction issued by the trial court.

Finally, we note that the complaint initially filed with the RTC was for infringement of copyright. The trial court's resolution subject of Tan's petition under Rule 65 before the CA concerns the correctness of the grant of the writ of preliminary injunction. The only issue brought before the CA involved the grave abuse of discretion allegedly committed by the trial court in granting the writ of preliminary injunction. The Court of Appeals in declaring that the wrapper of petitioner is a copy of Ceroilfood Shandong's wrapper went beyond that issue touched on the merits of the infringement case, which remains to be decided by the trial court.19 In our view, it was premature for the Court of Appeals to declare that the design of petitioner's wrapper is a copy of the wrapper allegedly registered by Ceroilfood Shandong. That matter remains for decision after appropriate proceedings at the trial court.

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WHEREFORE, the instant petition is PARTIALLY GRANTED. The prayer for a writ of preliminary injunction to prohibit Tan from using the cellophane wrapper with two-dragon device is denied, but the finding of the respondent appellate court that Ong's copyrighted wrapper is a copy of that of Ceroilfood Shandong is SET ASIDE for being premature. The Regional Trial Court of Quezon City, Branch 94, is directed to proceed with the trial to determine the merits of Civil Case No. 33779 expeditiously. Let the records of this case be REMANDED to said trial court promptly.

No pronouncement as to costs.1âwphi1.nêt

SO ORDERED

Bellosillo, Mendoza, Buena, De Leon, JJ. concur.

Footnotes

1 Rollo, pp. 11-20.

2 Id. at 34-38.

3 Id. at 50-55.

4 Id. at 34-49.

5 Id. at 50-53.

6 Id. at 54-55.

7 Id. at 23.

8 Id. at 72-73.

9 Id. at 48.

10 PD 49, Chapter 1, Sec. 2. The rights granted by this Decree shall, from the moment of creation, subsist, with respect to any of the following classes of works:

xxx

(0) Prints, pictorial, illustrations, advertising copies, labels, tags, and box wraps.

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Chapter II, Article VI. Sec. 28. Any person infringing a copyright shall be liable:

(a) To an injunction restraining such infringement.

11 Syndicated Media Access Corporation. et al. vs. CA, et al., 219 SCRA 794, 798 (1993).

12 CA Rollo, p. 51.

13 Ibid.

14 Hoffman vs. Le Traunik, 209 Federal Reporter 375, 379.

15 Bataclan vs. CA. et al., 175 SCRA 764, 770 (1989).

16 18 CJS 241, citing Boosey vs. Empire Music Co., 224 F 646 and Sweet vs. Bromley. 154 F 754.

17 18 CJS 242.

18 Arcega vs. CA. et al., 275 SCRA 176, 180 (1997).

19 See Developers Group of Companies Inc. vs. CA. 219 SCRA 715, 722 (1993).

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Topic: Denicola test: Conceptual separability (aesthetics v. functionality)

Brandir International, Inc. v.

Cascade Pacific Lumber Co.

834 F.2d 1142

United States Court of Appeals, Second Circuit

Dec. 2, 1987

OAKES, J.: In passing the Copyright Act of 1976 Congress attempted to distinguish between protectable "works of applied art" and "industrial designs not subject to copyright protection." See H.R. Rep. No.1476, 94th Cong., 2d Sess. 54 . . . . The courts, however, have had difficulty framing tests by which the fine line establishing what is and what is not copyrightable can be drawn. Once again we are called upon to draw such a line, this time in a case involving the "RIBBON Rack," a bicycle rack made of bent tubing that is said to have originated from a wire sculpture. . . . We are also called upon to determine whether there is any trademark protection available to the manufacturer of the bicycle rack, appellant Brandir International, Inc. The Register of Copyright, named as a third-party defendant under the statute, 17 U.S.C. ' 411, but electing not to appear, denied copyrightability. In the subsequent suit brought in the United States District Court for the Southern District of New York, Charles S. Haight, Jr., Judge, the district court granted summary judgment on both the copyright and trademark claims to defendant Cascade Pacific Lumber Co., d/b/ a Columbia Cascade Co., manufacturer of a similar bicycle rack. We affirm as to the copyright claim, but reverse and remand as to the trademark claim.

Against the history of copyright protection well set out in the majority opinion in Carol Barnhart Inc. v. Economy Cover Corp., . . . and in Denicola, Applied Art and Industrial Design: A Suggested Approach to Copyright in Useful Articles, 67 Minn. L. Rev. 707,709-17 (1983), Congress adopted the Copyright Act of 1976. The "works of art" classification of the Copyright Act of 1909 was omitted and replaced by reference to "pictorial, graphic, and sculptural works," 17 U .S.C. ' 102(a)(5). According to the House Report, the new category was intended to supply ''as clear a line as possible between copyrightable works of applied art and uncopyrightable works of industrial design." . . .

As courts and commentators have come to realize, however, the line Congress attempted to draw between copyrightable art and noncopyrightable design "was neither clear nor new ." Denicola, supra, 67 Minn. L. Rev. at 720. One aspect of the distinction that has drawn considerable attention is the reference in the House Report to "physically or conceptually " (emphasis added) separable elements. . . .

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In Carol Barnhart . . . a divided panel of this circuit affirmed a district court grant of summary judgment of noncopyrightability of four life-sized, anatomically correct human torso forms. Carol Barnhart distinguished Kieselstein-Cord, but it surely did not overrule it. The distinction made was that the ornamented surfaces of the Kieselstein-Cord belt buckles "were not in any respect required by their utilitarian functions," but the features claimed to be aesthetic or artistic in the Carol Bamhart forms were "inextricably intertwined with the utilitarian feature, the display of clothes." . . .

"Conceptual separability" is thus alive and well, at least in this circuit. The problem, however, is determining exactly what it is and how it is to be applied. . . .

Perhaps the differences between the majority and the dissent in Carol Barnhart might have been resolved had they had before them the Denicola article on Applied Art and Industrial Design: A Suggested Approach to Copyright in Useful Articles, supra. There, Professor Denicola points out that although the Copyright Act of 1976 was an effort "'to draw as clear a line as possible,'" in truth "there is no line, but merely a spectrum of forms and shapes responsive in varying degrees to utilitarian concerns." 67 Minn. L. Rev. at 741. Denicola argues that "the statutory directive requires a distinction between works of industrial design and works whose origins lie outside the design process, despite the utilitarian environment in which they appear ." He views the statutory limitation of copyrightability as "an attempt to identify elements whose form and appearance reflect the unconstrained perspective of the artist," such features not being the product of industrial design. Id. at 742. "Copyrightability, therefore, should turn on the relationship between the proffered work and the process of industrial design." Id. at 741. He suggests that "the dominant characteristic of industrial design is the influence of non-aesthetic, utilitarian concerns" and hence concludes that copyrightability "ultimately should depend on the extent to which the work reflects artistic expression uninhibited by functional considerations." Id. To state the Denicola test in the language of conceptual separability, if design elements reflect a merger of aesthetic and functional considerations, the artistic aspects of a work cannot be said to be conceptually separable from the utilitarian elements. Conversely, where design elements can be identified as reflecting the designer's artistic judgment exercised independently of functional influences, conceptual separability exists.

We believe that Professor Denicola's approach provides the best test for conceptual separability and, accordingly, adopt it here for several reasons. First, the approach is consistent with the holdings of our previous cases. . . . Second, the test's emphasis on the influence of utilitarian concerns in the design process may help, as Denicola notes, to "alleviate the de facto discrimination against nonrepresentational art that has regrettably accompanied much of the current analysis." Id. at 745. Finally, and perhaps most importantly, we think Denicola's test will not be too difficult to administer in practice. The work itself will continue to give "mute testimony" of its origins. In addition, the parties will be required to present evidence relating to the design process and the nature of the work with the trier of fact making the determination whether the aesthetic design elements are significantly influenced by functional considerations.

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Turning now to the facts of this case, we note first that Brandir contends, and its chief owner David Levine testified, that the original design of the RIBBON Rack stemmed from wire sculptures that Levine had created, each formed from one continuous undulating piece of wire. These sculptures were, he said, created and displayed in his home as a means of personal expression, but apparently were never sold or displayed elsewhere. He also created a wire sculpture in the shape of a bicycle and states that he did not give any thought to the utilitarian application of any of his sculptures until he accidentally juxtaposed the bicycle sculpture with one of the selfstanding wire sculptures. It was not until November 1978 that Levine seriously began pursuing the utilitarian application of his sculptures, when a friend, G. Duff Bailey, a bicycle buff and author of numerous articles about urban cycling, was at Levine's home and informed him that the sculptures would make excellent bicycle racks, permitting bicycles to be parked under the overloops as well as on top of the underloops. Following this meeting, Levine met several times with Bailey and others, completing the designs for the RIBBON Rack by the use of a vacuum cleaner hose, and submitting his drawings to a fabricator complete with dimensions. The Brandir RIBBON Rack began being nationally advertised and promoted for sale in September 1979.

In November 1982 Levine discovered that another company, Cascade Pacific Lumber Co., was selling a similar product. Thereafter -- beginning in December 1982, a copyright notice was placed on all RIBBON Racks before shipment and on December 10, 1982, five copyright applications for registration were submitted to the Copyright Office. The Copyright Office refused registration by letter, stating that the RIBBON Rack did not contain any element that was "capable of independent existence as a copyrightable pictorial, graphic or sculptural work apart from the shape of the useful article." . . .

. . .

Applying Professor Denicola's test to the RIBBON Rack, we find that the rack is not copyrightable. It seems clear that the form of the rack is influenced in significant measure by utilitarian concerns and thus any aesthetic elements cannot be said to be conceptually separable from the utilitarian elements. This is true even though the sculptures which inspired the RIBBON Rack may well have been--the issue of originality aside--copyrightable.

. . .

Had Brandir merely adopted one of the existing sculptures as a bicycle rack, neither the application to a utilitarian end nor commercialization of that use would have caused the object to forfeit its copyrighted status. Comparison of the RIBBON Rack with the earlier sculptures, however, reveals that while the rack may have been derived in part from one of more "works of art," it is in its final form essentially a product of industrial design. In creating the RIBBON Rack, the designer has clearly adapted the original aesthetic elements to accommodate and further a utilitarian purpose. These altered design features of the RIBBON Rack, including the spacesaving, open design achieved by widening the upper loops to permit parking under as well as over the rack's curves, the straightened vertical elements that allow in and above-ground installation of the rack, the ability to fit all types

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of bicycles and mopeds, and the heavy-gauged tubular construction of rustproof galvanized steel, are all features that combine to make for a safe, secure, and maintenance-free system of parking bicycles and mopeds. Its undulating shape is said in Progressive Architecture, January 1982, to permit double the storage of conventional bicycle racks. Moreover, the rack is manufactured from 2 3/8-inch standard steam pipe that is bent into form, the six-inch radius of the bends evidently resulting from bending the pipe according to a standard formula that yields bends having a radius equal to three times the nominal internal diameter of the pipe.

Brandir argues that its RIBBON Rack can and should be characterized as a sculptural work of art within the minimalist art movement. Minimalist sculpture's most outstanding feature is said to be its clarity and simplicity, in that it often takes the form of geometric shapes, lines, and forms that are pure and free of ornamentation and void of association. . . .

It is unnecessary to determine whether to the art world the RIBBON Rack properly would be considered an example of minimalist sculpture. The result under the copyright statute is not changed. Using the test we have adopted, it is not enough that, to paraphrase Judge Newman, the rack may stimulate in the mind of the reasonable observer a concept separate from the bicycle rack concept. While the RIBBON Rack may be worthy of admiration for its aesthetic qualities alone, it remains nonetheless the product of industrial design. Form and function are inextricably intertwined in the rack, its ultimate design being as much the result of utilitarian pressures as aesthetic choices. Indeed, the visually pleasing proportions and symetricality of the rack represent design changes made in response to functional concerns. Judging from the awards the rack has received, it would seem in fact that Brandir has achieved with the RIBBON Rack the highest goal of modern industrial design, that is, the harmonious fusion of function and aesthetics. Thus there remains no artistic element of the RIBBON Rack that can be identified as separate and "capable of existing independently of, the utilitarian aspects of the article." Accordingly, we must affirm on the copyright claim.

. . .

WINTER. J., concurring in part and dissenting in part: Although I concur in the reversal of the district court's grant of summary judgment on the trademark and unfair competition claims, I respectfully dissent from the majority's discussion and disposition of the copyright claim.

. . . The grounds of my disagreement are that: (1) my colleagues' adaptation of Professor Denicola's test diminishes the statutory concept of "conceptual separability" to the vanishing point; and (2) their focus on the process or sequence followed by the particular designer makes copyright protection depend upon largely fortuitous circumstances concerning the creation of the design in issue.

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With regard to "conceptual separability," my colleagues deserve considerable credit for their efforts to reconcile Carol Barnhart, Inc. v. Economy Cover Corp. . . . with Kieselstein-Cord v. Accessories by Pearl, Inc. . . . . In my view, these cases are not reconcilable. Carol Bamhart paid only lip service to the fact that the "conceptual separability" of an article's aesthetic utilitarian aspects may render the design of a "useful article" a copyrightable "sculptural work." 17 U.S.C. ' 101 (1982). Actually, the Carol Barnhart majority applied a test of physical separability. . . .

My colleagues' adaptation of the Denicola test tracks the Carol Barnhart approach, whereas I would adopt that taken in Kieselstein-Cord, which allows for the copyrightability of the aesthetic elements of useful articles even if those elements simultaneously perform utilitarian functions. The latter approach received its fullest elaboration in Judge Newman's dissent in Carol Barnhart . . . .

In other words, the relevant question is whether the design of a useful article, however intertwined with the article's utilitarian aspects, causes an ordinary reasonable observer to perceive an aesthetic concept not related to the article's use. The answer to this question is clear in the instant case because any reasonable observer would easily view the Ribbon Rack as an ornamental sculpture. Indeed, there is evidence of actual confusion over whether it is strictly ornamental in the refusal of a building manager to accept delivery until assured by the buyer that the Ribbon Rack was in fact a bicycle rack. Moreover, Brandir has received a request to use the Ribbon Rack as environmental sculpture, and has offered testimony of art experts who claim that the Ribbon Rack may be valued solely for its artistic features. As one of those experts observed: "If one were to place a Ribbon Rack on an island without access, or in a park and surround the work with a barrier, . . . its status as a work of art would be beyond dispute."

My colleagues also allow too much to turn upon the process or sequence of design followed by the designer of the Ribbon Rack. . . . I cannot agree that copyright protection for the Ribbon Rack turns on whether Levine serendipitously chose the final design of the Ribbon Rack during his initial sculptural musings or whether the original design had to be slightly modified to accommodate bicycles. Copyright protection, which is intended to generate incentives for designers by according property rights in their creations, should not turn on purely fortuitous events. For that reason, the Copyright Act expressly states that the legal test is how the final article is perceived, not how it was developed through various stages. . . .

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Topic: Non-copyrightable (Article 175)

FEIST PUBLICATIONS, INC. v. RURAL TELEPHONE SERVICE CO., 499 U.S. 340 (1991)

O'CONNOR, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and WHITE, MARSHALL, STEVENS, SCALIA, KENNEDY, and SOUTER, JJ., joined. BLACKMUN, J., concurred in the judgment.

[p*342] JUSTICE O'CONNOR delivered the opinion of the Court.

[1] This case requires us to clarify the extent of copyright protection available to telephone directory white pages.

I

[2] Rural Telephone Service Company is a certified public utility that provides telephone service to several communities in northwest Kansas. It is subject to a state regulation that requires all telephone companies operating in Kansas to issue annually an updated telephone directory. Accordingly, as a condition of its monopoly franchise, Rural publishes a typical telephone directory, consisting of white pages and yellow pages. The white pages list in alphabetical order the names of Rural's subscribers, together with their towns and telephone numbers. The yellow pages list Rural's business subscribers alphabetically by category and feature classified advertisements of various sizes. Rural distributes its directory free of charge to its subscribers, but earns revenue by selling yellow pages advertisements.

[3] Feist Publications, Inc., is a publishing company that specializes in area-wide telephone directories. Unlike a typical [p*343] directory, which covers only a particular calling area, Feist's area-wide directories cover a much larger geographical range, reducing the need to call directory assistance or consult multiple directories. The Feist directory that is the subject of this litigation covers 11 different telephone service areas in 15 counties and contains 46,878 white pages listings -- compared to Rural's approximately 7,700 listings. Like Rural's directory, Feist's is distributed free of charge and includes both white pages and yellow pages. Feist and Rural compete vigorously for yellow pages advertising.

[4] As the sole provider of telephone service in its service area, Rural obtains subscriber information quite easily. Persons desiring telephone service must apply to Rural and provide their names and addresses; Rural then assigns them a telephone number. Feist is not a telephone company, let alone one with monopoly status, and therefore lacks independent access to any subscriber information. To obtain white pages listings for its area-wide directory, Feist approached each of the 11 telephone companies operating in northwest Kansas and offered to pay for the right to use its white pages listings.

[5] Of the 11 telephone companies, only Rural refused to license its listings to Feist. Rural's refusal created a problem for Feist, as omitting these listings would have left a gaping hole in its area-wide directory, rendering it less attractive to potential yellow pages advertisers.

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In a decision subsequent to that which we review here, the District Court determined that this was precisely the reason Rural refused to license its listings. The refusal was motivated by an unlawful purpose "to extend its monopoly in telephone service to a monopoly in yellow pages advertising." Rural Telephone Service Co. v. Feist Publications, Inc., 737 F. Supp. 610, 622 (Kan. 1990).

[6] Unable to license Rural's white pages listings, Feist used them without Rural's consent. Feist began by removing several thousand listings that fell outside the geographic range of its area-wide directory, then hired personnel to investigate the 4,935 that remained. These employees verified [p*344] the data reported by Rural and sought to obtain additional information. As a result, a typical Feist listing includes the individual's street address; most of Rural's listings do not. Notwithstanding these additions, however, 1,309 of the 46,878 listings in Feist's 1983 directory were identical to listings in Rural's 1982-1983 white pages. App. 54 (para. 15-16), 57. Four of these were fictitious listings that Rural had inserted into its directory to detect copying.

[7] Rural sued for copyright infringement in the District Court for the District of Kansas taking the position that Feist, in compiling its own directory, could not use the information contained in Rural's white pages. Rural asserted that Feist's employees were obliged to travel door-to-door or conduct a telephone survey to discover the same information for themselves. Feist responded that such efforts were economically impractical and, in any event, unnecessary because the information copied was beyond the scope of copyright protection. The District Court granted summary judgment to Rural, explaining that "courts have consistently held that telephone directories are copyrightable" and citing a string of lower court decisions. 663 F. Supp. 214, 218 (1987). In an unpublished opinion, the Court of Appeals for the Tenth Circuit affirmed "for substantially the reasons given by the district court." App. to Pet. for Cert. 4a, judgt. order reported at 916 F. 2d 718 (1990). We granted certiorari, 498 U.S. 808 (1990), to determine whether the copyright in Rural's directory protects the names, towns, and telephone numbers copied by Feist.

II

A

[8] This case concerns the interaction of two well-established propositions. The first is that facts are not copyrightable; the other, that compilations of facts generally are. Each of these propositions possesses an impeccable pedigree. That there can be no valid copyright in facts is universally understood. The most fundamental axiom of copyright law is that [p*345] "no author may copyright his ideas or the facts he narrates." Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 556 (1985). Rural wisely concedes this point, noting in its brief that "facts and discoveries, of course, are not themselves subject to copyright protection." Brief for Respondent 24. At the same time, however, it is beyond dispute that compilations of facts are within the subject matter of copyright. Compilations were expressly mentioned in the Copyright Act of 1909, and again in the Copyright Act of 1976.

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[9] There is an undeniable tension between these two propositions. Many compilations consist of nothing but raw data -- i. e., wholly factual information not accompanied by any original written expression. On what basis may one claim a copyright in such a work? Common sense tells us that 100 uncopyrightable facts do not magically change their status when gathered together in one place. Yet copyright law seems to contemplate that compilations that consist exclusively of facts are potentially within its scope.

[10] The key to resolving the tension lies in understanding why facts are not copyrightable. The sine qua non of copyright is originality. To qualify for copyright protection, a work must be original to the author. See Harper & Row, supra, at 547-549. Original, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity. 1 M. Nimmer & D. Nimmer, Copyright §§ 2.01[A], [B] (1990) (hereinafter Nimmer). To be sure, the requisite level of creativity is extremely low; even a slight amount will suffice. The vast majority of works make the grade quite easily, as they possess some creative spark, "no matter how crude, humble or obvious" it might be. Id., § 1.08[C][1]. Originality does not signify novelty; a work may be original even though it closely resembles other works so long as the similarity is fortuitous, not the result of copying. To illustrate, [p*346] assume that two poets, each ignorant of the other, compose identical poems. Neither work is novel, yet both are original and, hence, copyrightable. See Sheldon v. Metro-Goldwyn Pictures Corp., 81 F. 2d 49, 54 (CA2 1936).

[11] Originality is a constitutional requirement. The source of Congress' power to enact copyright laws is Article I, § 8, cl. 8, of the Constitution, which authorizes Congress to "secure for limited Times to Authors . . . the exclusive Right to their respective Writings." In two decisions from the late 19th Century -- The Trade-Mark Cases, 100 U.S. 82 (1879); and Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53 (1884) -- this Court defined the crucial terms "authors" and "writings." In so doing, the Court made it unmistakably clear that these terms presuppose a degree of originality.

[12] In The Trade-Mark Cases, the Court addressed the constitutional scope of "writings." For a particular work to be classified "under the head of writings of authors," the Court determined, "originality is required." 100 U.S., at 94. The Court explained that originality requires independent creation plus a modicum of creativity: "While the word writings may be liberally construed, as it has been, to include original designs for engraving, prints, &c., it is only such as are original, and are founded in the creative powers of the mind. The writings which are to be protected are the fruits of intellectual labor, embodied in the form of books, prints, engravings, and the like." Ibid. (emphasis in original).

[13] In Burrow-Giles, the Court distilled the same requirement from the Constitution's use of the word "authors." The Court defined "author," in a constitutional sense, to mean "he to whom anything owes its origin; originator; maker." 111 U.S., at 58 (internal quotations omitted). As in The Trade-Mark Cases, the Court emphasized the creative component of originality. It described copyright as being limited to "original intellectual conceptions of the author," ibid., and stressed the importance of requiring an author who accuses another

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of infringement to prove "the existence [p*347] of those facts of originality, of intellectual production, of thought, and conception." Id., at 59-60.

[14] The originality requirement articulated in The Trade-Mark Cases and Burrow-Giles remains the touchstone of copyright protection today. See Goldstein v. California, 412 U.S. 546, 561-562 (1973). It is the very "premise of copyright law." Miller v.Universal City Studios, Inc., 650 F. 2d 1365, 1368 (CA5 1981). Leading scholars agree on this point. As one pair of commentators succinctly puts it: "The originality requirement is constitutionally mandated for all works." Patterson & Joyce, Monopolizing the Law: The Scope of Copyright Protection for Law Reports and Statutory Compilations, 36 UCLA L. Rev. 719, 763, n. 155 (1989) (emphasis in original) (hereinafter Patterson & Joyce). Accord id., at 759-760, and n. 140; Nimmer § 1.06[A] ("originality is a statutory as well as a constitutional requirement"); id., § 1.08[C][1] ("a modicum of intellectual labor . . . clearly constitutes an essential constitutional element").

[15] It is this bedrock principle of copyright that mandates the law's seemingly disparate treatment of facts and factual compilations. "No one may claim originality as to facts." Id., § 2.11[A], p. 2-157. This is because facts do not owe their origin to an act of authorship. The distinction is one between creation and discovery: the first person to find and report a particular fact has not created the fact; he or she has merely discovered its existence. To borrow from Burrow-Giles, one who discovers a fact is not its "maker" or "originator." 111 U.S., at 58. "The discoverer merely finds and records." Nimmer § 2.03[E]. Census-takers, for example, do not "create" the population figures that emerge from their efforts; in a sense, they copy these figures from the world around them. Denicola, Copyright in Collections of Facts: A Theory for the Protection of Nonfiction Literary Works, 81 Colum. L. Rev. 516, 525 (1981) (hereinafter Denicola). Census data therefore do not trigger copyright because these data are not "original" in the constitutional sense. Nimmer [p*348] § 2.03[E]. The same is true of all facts -- scientific, historical, biographical, and news of the day. "They may not be copyrighted and are part of the public domain available to every person." Miller, supra, at 1369.

[16] Factual compilations, on the other hand, may possess the requisite originality. The compilation author typically chooses which facts to include, in what order to place them, and how to arrange the collected data so that they may be used effectively by readers. These choices as to selection and arrangement, so long as they are made independently by the compiler and entail a minimal degree of creativity, are sufficiently original that Congress may protect such compilations through the copyright laws. Nimmer §§ 2.11[D], 3.03; Denicola 523, n. 38. Thus, even a directory that contains absolutely no protectible written expression, only facts, meets the constitutional minimum for copyright protection if it features an original selection or arrangement. See Harper & Row, 471 U.S., at 547. Accord Nimmer § 3.03.

[17] This protection is subject to an important limitation. The mere fact that a work is copyrighted does not mean that every element of the work may be protected. Originality remains the sine qua non of copyright; accordingly, copyright protection may extend only to those components of a work that are original to the author. Patterson & Joyce 800-802;

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Ginsburg, Creation and Commercial Value: Copyright Protection of Works of Information, 90 Colum. L. Rev. 1865, 1868, and n. 12 (1990) (hereinafter Ginsburg). Thus, if the compilation author clothes facts with an original collocation of words, he or she may be able to claim a copyright in this written expression. Others may copy the underlying facts from the publication, but not the precise words used to present them. InHarper & Row, for example, we explained that President Ford could not prevent others from copying bare historical facts from his autobiography, see 471 U.S., at 556-557, but that he could prevent others from copying his "subjective descriptions and portraits of public figures." [p*349] Id., at 563. Where the compilation author adds no written expression but rather lets the facts speak for themselves, the expressive element is more elusive. The only conceivable expression is the manner in which the compiler has selected and arranged the facts. Thus, if the selection and arrangement are original, these elements of the work are eligible for copyright protection. See Patry, Copyright in Compilations of Facts (or Why the "White Pages" Are Not Copyrightable), 12 Com. & Law 37, 64 (Dec. 1990) (hereinafter Patry). No matter how original the format, however, the facts themselves do not become original through association. See Patterson & Joyce 776.

[18] This inevitably means that the copyright in a factual compilation is thin. Notwithstanding a valid copyright, a subsequent compiler remains free to use the facts contained in an another's publication to aid in preparing a competing work, so long as the competing work does not feature the same selection and arrangement. As one commentator explains it: "No matter how much original authorship the work displays, the facts and ideas it exposes are free for the taking . . . . The very same facts and ideas may be divorced from the context imposed by the author, and restated or reshuffled by second comers, even if the author was the first to discover the facts or to propose the ideas." Ginsburg 1868.

[19] It may seem unfair that much of the fruit of the compiler's labor may be used by others without compensation. As Justice Brennan has correctly observed, however, this is not "some unforeseen byproduct of a statutory scheme." Harper & Row, 471 U.S., at 589 (dissenting opinion). It is, rather, "the essence of copyright," ibid., and a constitutional requirement. The primary objective of copyright is not to reward the labor of authors, but "to promote the Progress of Science and useful Arts." Art. I, § 8, cl. 8. AccordTwentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975). To this end, copyright assures authors the right to their original [p*350] expression, but encourages others to build freely upon the ideas and information conveyed by a work. Harper & Row, supra, at 556-557. This principle, known as the idea-expression or fact-expression dichotomy, applies to all works of authorship. As applied to a factual compilation, assuming the absence of original written expression, only the compiler's selection and arrangement may be protected; the raw facts may be copied at will. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art.

[20] This Court has long recognized that the fact-expression dichotomy limits severely the scope of protection in fact-based works. More than a century ago, the Court observed: "The very object of publishing a book on science or the useful arts is to communicate to the world the useful knowledge which it contains. But this object would be frustrated if the

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knowledge could not be used without incurring the guilt of piracy of the book." Baker v. Selden, 101 U.S. 99, 103 (1880). We reiterated this point inHarper & Row:

"No author may copyright facts or ideas. The copyright is limited to those aspects of the work -- termed 'expression' -- that display the stamp of the author's originality.

“Copyright does not prevent subsequent users from copying from a prior author's work those constituent elements that are not original -- for example . . . facts, or materials in the public domain -- as long as such use does not unfairly appropriate the author's original contributions.” 471 U.S., at 547-548 (citation omitted).

[21] This, then, resolves the doctrinal tension: Copyright treats facts and factual compilations in a wholly consistent manner. Facts, whether alone or as part of a compilation, are not original and therefore may not be copyrighted. A factual compilation is eligible for copyright if it features an original selection or arrangement of facts, but the copyright is limited to [p*351] the particular selection or arrangement. In no event may copyright extend to the facts themselves.

B

[22] As we have explained, originality is a constitutionally mandated prerequisite for copyright protection. The Court's decisions announcing this rule predate the Copyright Act of 1909, but ambiguous language in the 1909 Act caused some lower courts temporarily to lose sight of this requirement.

[23] The 1909 Act embodied the originality requirement, but not as clearly as it might have. See Nimmer § 2.01. The subject matter of copyright was set out in § 3 and § 4 of the Act. Section 4 stated that copyright was available to “all the writings of an author.” 35 Stat. 1076. By using the words “writings” and “author” -- the same words used in Article I, § 8 of the Constitution and defined by the Court in The Trade-Mark Cases and Burrow-Giles -- the statute necessarily incorporated the originality requirement articulated in the Court's decisions. It did so implicitly, however, thereby leaving room for error.

[24] Section 3 was similarly ambiguous. It stated that the copyright in a work protected only “the copyrightable component parts of the work.” It thus stated an important copyright principle, but failed to identify the specific characteristic -- originality -- that determined which component parts of a work were copyrightable and which were not.

[25] Most courts construed the 1909 Act correctly, notwithstanding the less-than-perfect statutory language. They understood from this Court's decisions that there could be no copyright without originality. See Patterson & Joyce 760-761. As explained in the Nimmer treatise: “The 1909 Act neither defined originality, nor even expressly required that a work be 'original' in order to command protection. However, the courts uniformly inferred the requirement from the fact that copyright protection may only be claimed by 'authors' . . . . It was reasoned that since an author is 'the . . . [p*352] creator, originator' it follows that a

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work is not the product of an author unless the work is original.” Nimmer § 2.01 (footnotes omitted) (citing cases).

[26] But some courts misunderstood the statute. See, e. g., Leon v. Pacific Telephone & Telegraph Co., 91 F. 2d 484 (CA9 1937); Jeweler's Circular Publishing Co. v. Keystone Publishing Co., 281 F. 83 (CA2 1922). These courts ignored § 3 and § 4, focusing their attention instead on § 5 of the Act. Section 5, however, was purely technical in nature: it provided that a person seeking to register a work should indicate on the application the type of work, and it listed 14 categories under which the work might fall. One of these categories was “books, including composite and cyclopedic works, directories, gazetteers, and other compilations.” § 5(a). Section 5 did not purport to say that all compilations were automatically copyrightable. Indeed, it expressly disclaimed any such function, pointing out that “the subject-matter of copyright is defined in section four.” Nevertheless, the fact that factual compilations were mentioned specifically in § 5 led some courts to infer erroneously that directories and the like were copyrightableper se, “without any further or precise showing of original -- personal -- authorship.” Ginsburg 1895.

[27] Making matters worse, these courts developed a new theory to justify the protection of factual compilations. Known alternatively as “sweat of the brow” or “industrious collection,” the underlying notion was that copyright was a reward for the hard work that went into compiling facts. The classic formulation of the doctrine appeared in Jeweler's Circular Publishing Co., 281 F., at 88:

“The right to copyright a book upon which one has expended labor in its preparation does not depend upon whether the materials which he has collected consist or not of matters which are publici juris, or whether such materials show literary skill or originality, either in thought or in language, or anything more than industrious [p*353] collection. The man who goes through the streets of a town and puts down the names of each of the inhabitants, with their occupations and their street number, acquires material of which he is the author” (emphasis added).

[28] The “sweat of the brow” doctrine had numerous flaws, the most glaring being that it extended copyright protection in a compilation beyond selection and arrangement -- the compiler's original contributions -- to the facts themselves. Under the doctrine, the only defense to infringement was independent creation. A subsequent compiler was “not entitled to take one word of information previously published,” but rather had to “independently work out the matter for himself, so as to arrive at the same result from the same common sources of information.” Id., at 88-89 (internal quotations omitted). “Sweat of the brow” courts thereby eschewed the most fundamental axiom of copyright law -- that no one may copyright facts or ideas. See Miller v. Universal City Studios, Inc., 650 F. 2d, at 1372 (criticizing “sweat of the brow” courts because “ensuring that later writers obtain the facts independently . . . is precisely the scope of protection given . . . copyrighted matter, and the law is clear that facts are not entitled to such protection”).

[29] Decisions of this Court applying the 1909 Act make clear that the statute did not permit the “sweat of the brow” approach. The best example is International News

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Service v. Associated Press, 248 U.S. 215 (1918). In that decision, the Court stated unambiguously that the 1909 Act conferred copyright protection only on those elements of a work that were original to the author. Associated Press had conceded taking news reported by International News Service and publishing it in its own newspapers. Recognizing that § 5 of the Act specifically mentioned “periodicals, including newspapers,” § 5(b), the Court acknowledged that news articles were copyrightable. Id., at 234. It flatly rejected, however, the notion that the copyright in an article extended to [p*354] the factual information it contained: “The news element -- the information respecting current events contained in the literary production -- is not the creation of the writer, but is a report of matters that ordinarily are publici juris; it is the history of the day.” Ibid. [n1]

[30] Without a doubt, the “sweat of the brow” doctrine flouted basic copyright principles. Throughout history, copyright law has “recognized a greater need to disseminate factual works than works of fiction or fantasy.” Harper & Row, 471 U.S., at 563. Accord Gorman, Fact or Fancy: The Implications for Copyright, 29 J. Copyright Soc. 560, 563 (1982). But “sweat of the brow” courts took a contrary view; they handed out proprietary interests in facts and declared that authors are absolutely precluded from saving time and effort by relying upon the facts contained in prior works. In truth, “it is just such wasted effort that the proscription against the copyright of ideas and facts . . . [is] designed to prevent.” Rosemont Enterprises, Inc. v. Random House, Inc., 366 F. 2d 303, 310 (CA2 1966), cert. denied, 385 U.S. 1009 (1967). “Protection for the fruits of such research . . . may in certain circumstances be available under a theory of unfair competition. But to accord copyright protection on this basis alone distorts basic copyright principles in that it creates a monopoly in public domain materials without the necessary justification of protecting and encouraging the creation of 'writings' by 'authors.'” Nimmer § 3.04, p. 3-23 (footnote omitted).

C

[31] “Sweat of the brow” decisions did not escape the attention of the Copyright Office. When Congress decided to overhaul the copyright statute and asked the Copyright Office to study existing problems, see Mills Music, Inc. v. Snyder, 469 U.S. 153, 159 (1985), the Copyright Office promptly recommended that Congress clear up the confusion in the lower courts as to the basic standards of copyrightability. The Register of Copyrights explained in his first report to Congress that “originality” was a “basic requisite” of copyright under the 1909 Act, but that “the absence of any reference to [originality] in the statute seems to have led to misconceptions as to what is copyrightable matter.” Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law, 87th Cong., 1st Sess., p. 9 (H. Judiciary Comm. Print 1961). The Register suggested making the originality requirement explicit. Ibid.

[32] Congress took the Register's advice. In enacting the Copyright Act of 1976, Congress dropped the reference to “all the writings of an author” and replaced it with the phrase “original works of authorship.” 17 U.S.C. § 102(a). In making explicit the originality requirement, Congress announced that it was merely clarifying existing law: “The two fundamental criteria of copyright protection [are] originality and fixation in tangible form .

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. . . The phrase 'original works of authorship,' which is purposely left undefined, is intended to incorporate without change the standard of originality established by the courts under the present [1909] copyright statute.” H. R. Rep. No. 94-1476, p. 51 (1976) (emphasis added) (hereinafter H. R. Rep.); S. Rep. No. 94-473, p. 50 (1975) (emphasis added) (hereinafter S. Rep.). This sentiment was echoed by the Copyright Office: “Our intention here is to maintain the established standards of originality . . . .” Supplementary Report of the Register of Copyrights on the General Revision of U.S. Copyright Law, 89th Cong., 1st Sess., Part 6, p. 3 (H. Judiciary Comm. Print 1965) (emphasis added).

[33] To ensure that the mistakes of the “sweat of the brow” courts would not be repeated, Congress took additional measures. For example, § 3 of the 1909 Act had stated that copyright protected only the “copyrightable component parts” of a work, but had not identified originality as the basis for distinguishing those component parts that were copyrightable from those that were not. The 1976 Act deleted this section and replaced it with § 102(b), which identifies specifically those elements of a work for which copyright is not available: “In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” § 102(b) is universally understood to prohibit any copyright in facts. Harper & Row, supra, at 547, 556. Accord Nimmer § 2.03[E] (equating facts with “discoveries”). As with § 102(a), Congress emphasized that § 102(b) did not change the law, but merely clarified it: “Section 102(b) in no way enlarges or contracts the scope of copyright protection under the present law. Its purpose is to restate . . . that the basic dichotomy between expression and idea remains unchanged.” H. R. Rep., at 57; S. Rep., at 54.

[34] Congress took another step to minimize confusion by deleting the specific mention of “directories . . . and other compilations” in § 5 of the 1909 Act. As mentioned, this section had led some courts to conclude that directories were copyrightable per se and that every element of a directory was protected. In its place, Congress enacted two new provisions. First, to make clear that compilations were not copyrightable per se, Congress provided a definition of the term “compilation.” Second, to make clear that the copyright in a compilation did not extend to the facts themselves, Congress enacted 17 U.S.C. § 103.

[35] The definition of “compilation” is found in § 101 of the 1976 Act. It defines a “compilation” in the copyright sense as “a work formed by the collection and assembly of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship” (emphasis added).

[36] The purpose of the statutory definition is to emphasize that collections of facts are not copyrightable per se. It conveys this message through its tripartite structure, as emphasized above by the italics. The statute identifies three distinct elements and requires each to be met for a work to qualify as a copyrightable compilation: (1) the collection and assembly of pre-existing material, facts, or data; (2) the selection, coordination, or arrangement of those materials; and (3) the creation, by virtue of the particular selection, coordination, or

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arrangement, of an “original” work of authorship. “This tripartite conjunctive structure is self-evident, and should be assumed to 'accurately express the legislative purpose.'” Patry 51, quoting Mills Music, 469 U.S., at 164.

[37] At first glance, the first requirement does not seem to tell us much. It merely describes what one normally thinks of as a compilation -- a collection of pre-existing material, facts, or data. What makes it significant is that it is not the sole requirement. It is not enough for copyright purposes that an author collects and assembles facts. To satisfy the statutory definition, the work must get over two additional hurdles. In this way, the plain language indicates that not every collection of facts receives copyright protection. Otherwise, there would be a period after “data.”

[38] The third requirement is also illuminating. It emphasizes that a compilation, like any other work, is copyrightable only if it satisfies the originality requirement (“an original work of authorship”). Although § 102 states plainly that the originality requirement applies to all works, the point was emphasized with regard to compilations to ensure that courts would not repeat the mistake of the “sweat of the brow” courts by concluding that fact-based works are treated differently and measured by some other standard. As Congress explained it, the goal was to “make plain that the criteria of copyrightable subject matter stated in section 102 apply with full force to works . . . containing preexisting material.” H. R. Rep., at 57; S. Rep., at 55.

[39] The key to the statutory definition is the second requirement. It instructs courts that, in determining whether a fact-based work is an original work of authorship, they should focus on the manner in which the collected facts have been selected, coordinated, and arranged. This is a straightforward application of the originality requirement. Facts are never original, so the compilation author can claim originality, if at all, only in the way the facts are presented. To that end, the statute dictates that the principal focus should be on whether the selection, coordination, and arrangement are sufficiently original to merit protection.

[40] Not every selection, coordination, or arrangement will pass muster. This is plain from the statute. It states that, to merit protection, the facts must be selected, coordinated, or arranged “in such a way” as to render the work as a whole original. This implies that some “ways” will trigger copyright, but that others will not. See Patry 57, and n. 76. Otherwise, the phrase “in such a way” is meaningless and Congress should have defined “compilation” simply as “a work formed by the collection and assembly of preexisting materials or data that are selected, coordinated, or arranged.” That Congress did not do so is dispositive. In accordance with “the established principle that a court should give effect, if possible, to every clause and word of a statute,” Moskal v.United States, 498 U.S. 103, 109-110 (1990) (internal quotations omitted), we conclude that the statute envisions that there will be some fact-based works in which the selection, coordination, and arrangement are not sufficiently original to trigger copyright protection.

[41] As discussed earlier, however, the originality requirement is not particularly stringent. A compiler may settle upon a selection or arrangement that others have used; novelty is

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not required. Originality requires only that the author make the selection or arrangement independently (i. e., without copying that selection or arrangement from another work), and that it display some minimal level of creativity. Presumably, [p*359] the vast majority of compilations will pass this test, but not all will. There remains a narrow category of works in which the creative spark is utterly lacking or so trivial as to be virtually nonexistent. See generally Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903) (referring to “the narrowest and most obvious limits”). Such works are incapable of sustaining a valid copyright. Nimmer § 2.01[B].

[42] Even if a work qualifies as a copyrightable compilation, it receives only limited protection. This is the point of § 103 of the Act. Section 103 explains that “the subject matter of copyright . . . includes compilations,” § 103(a), but that copyright protects only the author's original contributions -- not the facts or information conveyed:

“The copyright in a compilation . . . extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material.” § 103(b).

[43] As § 103 makes clear, copyright is not a tool by which a compilation author may keep others from using the facts or data he or she has collected. “The most important point here is one that is commonly misunderstood today: copyright . . . has no effect one way or the other on the copyright or public domain status of the preexisting material.” H. R. Rep., at 57; S. Rep., at 55. The 1909 Act did not require, as “sweat of the brow” courts mistakenly assumed, that each subsequent compiler must start from scratch and is precluded from relying on research undertaken by another. See, e. g., Jeweler's Circular Publishing Co., 281 F., at 88-89. Rather, the facts contained in existing works may be freely copied because copyright protects only the elements that owe their origin to the compiler -- the selection, coordination, and arrangement of facts.

[44] In summary, the 1976 revisions to the Copyright Act leave no doubt that originality, not “sweat of the brow,” is the [p*360] touchstone of copyright protection in directories and other fact-based works. Nor is there any doubt that the same was true under the 1909 Act. The 1976 revisions were a direct response to the Copyright Office's concern that many lower courts had misconstrued this basic principle, and Congress emphasized repeatedly that the purpose of the revisions was to clarify, not change, existing law. The revisions explain with painstaking clarity that copyright requires originality, § 102(a); that facts are never original, § 102(b); that the copyright in a compilation does not extend to the facts it contains, § 103(b); and that a compilation is copyrightable only to the extent that it features an original selection, coordination, or arrangement, § 101.

[45] The 1976 revisions have proven largely successful in steering courts in the right direction. A good example is Miller v. Universal City Studios, Inc., 650 F. 2d, at 1369-1370: “A copyright in a directory . . . is properly viewed as resting on the originality of the selection and arrangement of the factual material, rather than on the industriousness of the efforts to develop the information. Copyright protection does not extend to the facts themselves, and the mere use of information contained in a directory without a substantial copying of the

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format does not constitute infringement” (citation omitted). Additionally, the Second Circuit, which almost 70 years ago issued the classic formulation of the “sweat of the brow” doctrine in Jeweler's Circular Publishing Co., has now fully repudiated the reasoning of that decision. See, e. g., Financial Information, Inc. v. Moody's Investors Service, Inc., 808 F. 2d 204, 207 (CA2 1986), cert. denied, 484 U.S. 820 (1987); Financial Information, Inc. v. Moody's Investors Service, Inc.,751 F. 2d 501, 510 (CA2 1984) (Newman, J., concurring); Hoehling v. Universal City Studios, Inc., 618 F. 2d 972, 979 (CA2 1980). Even those scholars who believe that “industrious collection” should be rewarded seem to recognize that this is beyond the scope of existing copyright law. See Denicola 516 (“the very vocabulary of copyright [p*361] is ill suited to analyzing property rights in works of nonfiction”); id., at 520-521, 525; Ginsburg 1867, 1870.

III

[46] There is no doubt that Feist took from the white pages of Rural's directory a substantial amount of factual information. At a minimum, Feist copied the names, towns, and telephone numbers of 1,309 of Rural's subscribers. Not all copying, however, is copyright infringement. To establish infringement, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. See Harper & Row, 471 U.S., at 548. The first element is not at issue here; Feist appears to concede that Rural's directory, considered as a whole, is subject to a valid copyright because it contains some foreword text, as well as original material in its yellow pages advertisements. See Brief for Petitioner 18; Pet. for Cert. 9.

[47] The question is whether Rural has proved the second element. In other words, did Feist, by taking 1,309 names, towns, and telephone numbers from Rural's white pages, copy anything that was “original” to Rural? Certainly, the raw data does not satisfy the originality requirement. Rural may have been the first to discover and report the names, towns, and telephone numbers of its subscribers, but this data does not “'owe its origin'” to Rural. Burrow-Giles, 111 U.S., at 58. Rather, these bits of information are uncopyrightable facts; they existed before Rural reported them and would have continued to exist if Rural had never published a telephone directory. The originality requirement “rules out protecting . . . names, addresses, and telephone numbers of which the plaintiff by no stretch of the imagination could be called the author.” Patterson & Joyce 776.

[48] Rural essentially concedes the point by referring to the names, towns, and telephone numbers as “preexisting material.” Brief for Respondent 17. Section 103(b) states explicitly [p*362] that the copyright in a compilation does not extend to “the preexisting material employed in the work.”

[49] The question that remains is whether Rural selected, coordinated, or arranged these uncopyrightable facts in an original way. As mentioned, originality is not a stringent standard; it does not require that facts be presented in an innovative or surprising way. It is equally true, however, that the selection and arrangement of facts cannot be so mechanical or routine as to require no creativity whatsoever. The standard of originality is low, but it does exist. See Patterson & Joyce 760, n. 144 (“While this requirement is

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sometimes characterized as modest, or a low threshold, it is not without effect”) (internal quotations omitted; citations omitted). As this Court has explained, the Constitution mandates some minimal degree of creativity, see The Trade-Mark Cases, 100 U.S., at 94; and an author who claims infringement must prove “the existence of . . . intellectual production, of thought, and conception.” Burrow-Giles, supra, at 59-60.

[50] The selection, coordination, and arrangement of Rural's white pages do not satisfy the minimum constitutional standards for copyright protection. As mentioned at the outset, Rural's white pages are entirely typical. Persons desiring telephone service in Rural's service area fill out an application and Rural issues them a telephone number. In preparing its white pages, Rural simply takes the data provided by its subscribers and lists it alphabetically by surname. The end product is a garden-variety white pages directory, devoid of even the slightest trace of creativity.

[51] Rural's selection of listings could not be more obvious: it publishes the most basic information -- name, town, and telephone number -- about each person who applies to it for telephone service. This is “selection” of a sort, but it lacks the modicum of creativity necessary to transform mere selection into copyrightable expression. Rural expended sufficient effort [p*363] to make the white pages directory useful, but insufficient creativity to make it original.

[52] We note in passing that the selection featured in Rural's white pages may also fail the originality requirement for another reason. Feist points out that Rural did not truly “select” to publish the names and telephone numbers of its subscribers; rather, it was required to do so by the Kansas Corporation Commission as part of its monopoly franchise. See 737 F. Supp., at 612. Accordingly, one could plausibly conclude that this selection was dictated by state law, not by Rural.

[53] Nor can Rural claim originality in its coordination and arrangement of facts. The white pages do nothing more than list Rural's subscribers in alphabetical order. This arrangement may, technically speaking, owe its origin to Rural; no one disputes that Rural undertook the task of alphabetizing the names itself. But there is nothing remotely creative about arranging names alphabetically in a white pages directory. It is an age-old practice, firmly rooted in tradition and so commonplace that it has come to be expected as a matter of course. See Brief for Information Industry Association et al. as Amici Curiae 10 (alphabetical arrangement “is universally observed in directories published by local exchange telephone companies”). It is not only unoriginal, it is practically inevitable. This time-honored tradition does not possess the minimal creative spark required by the Copyright Act and the Constitution.

[54] We conclude that the names, towns, and telephone numbers copied by Feist were not original to Rural and therefore were not protected by the copyright in Rural's combined white and yellow pages directory. As a constitutional matter, copyright protects only those constituent elements of a work that possess more than a de minimis quantum of creativity. Rural's white pages, limited to basic subscriber information and arranged alphabetically, fall short of the mark. As a statutory matter, 17 U.S.C. § 101 does not afford protection

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[p*364] from copying to a collection of facts that are selected, coordinated, and arranged in a way that utterly lacks originality. Given that some works must fail, we cannot imagine a more likely candidate. Indeed, were we to hold that Rural's white pages pass muster, it is hard to believe that any collection of facts could fail.

[55] Because Rural's white pages lack the requisite originality, Feist's use of the listings cannot constitute infringement. This decision should not be construed as demeaning Rural's efforts in compiling its directory, but rather as making clear that copyright rewards originality, not effort. As this Court noted more than a century ago, “'great praise may be due to the plaintiffs for their industry and enterprise in publishing this paper, yet the law does not contemplate their being rewarded in this way.'” Baker v. Selden, 101 U.S., at 105. The judgment of the Court of Appeals is

[56] Reversed.

JUSTICE BLACKMUN concurs in the judgment.

* Briefs of amici curiae urging reversal were filed for the Association of North American Directory Publishers et al. by Theodore Case Whitehouse; for the International Association of Cross Reference Directory Publishers by Richard D. Grauer and Kathleen McCree Lewis; and for the Third-Class Mail Association by Ian D. Volner.

Briefs of amici curiae urging affirmance were filed for Ameritech et al. by Michael K. Kellogg, Charles Rothfeld, Douglas J. Kirk, Thomas P. Hester, and Harlan Sherwat for Association of American Publishers, Inc., by Robert G. Sugarman and R. Bruce Rich for GTE Corp. by Kirk K. Van Tine, Richard M. Cahill, and Edward R. Sublett; for the National Telephone Cooperative Association by L. Marie Guillory and David Cosson for the United States Telephone Association by Richard J. Rappaport and Keith P. Schoeneberger and for West Publishing Co. by Vance K. Opperman and James E. Schatz.

Briefs of amici curiae were filed for Bellsouth Corp. by Anthony B. Askew, Robert E. Richards, Walter H. Alford, and Vincent L. Sgrosso for Direct Marketing Association, Inc., by Robert L. Sherman for Haines and Co., Inc., by Jeremiah D. McAuliffe, Bernard A. Barken, and Eugene Gressman; and for the Information Industry Association et al. by Steven J. Metalitz and Angela Burnett.

1. The Court ultimately rendered judgment for International News Service on noncopyright grounds that are not relevant here. See 248 U.S., at 235, 241-242.

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Topic: Non-copyrightable (Article 175)

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 108946 January 28, 1999

FRANCISCO G. JOAQUIN, JR., and BJ PRODUCTIONS, INC., petitioners, vs. HONORABLE FRANKLIN DRILON, GABRIEL ZOSA, WILLIAM ESPOSO, FELIPE MEDINA, JR., and CASEY FRANCISCO, respondents.

MENDOZA, J.:

This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice, dated August 12, 1992, in Criminal Case No. Q-92-27854, entitled "Gabriel Zosa, et al. v. City Prosecutor of Quezon City and Francisco Joaquin, Jr.," and its resolution, dated December 3, 1992, denying petitioner Joaquin's motion for reconsideration.

Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922, dated January 28, 1971, of Rhoda and Me, a dating game show aired from 1970 to 1977.

On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of copyright specifying the show's format and style of presentation.

On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw on RPN Channel 9 an episode of It's a Date, which was produced by IXL Productions, Inc. (IXL). On July 18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL, informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue airingIt's a Date.

In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and requested a meeting to discuss a possible settlement. IXL, however, continued airing It's a Date, prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand and warned that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal action.

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Meanwhile, private respondent Zosa sought to register IXL's copyright to the first episode of It's a Date for which it was issued by the National Library a certificate of copyright August 14, 1991.

Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private respondent Zosa together with certain officers of RPN Channel 9, namely, William Esposo, Felipe Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as Criminal Case No. 92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa sought a review of the resolution of the Assistant City Prosecutor before the Department of Justice.

On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City Prosecutor's findings and directed him to move for the dismissal of the case against private respondents. 1

Petitioner Joaquin filed a motion for reconsideration, but his motion denied by respondent Secretary of Justice on December 3, 1992. Hence, this petition. Petitioners contend that:

1. The public respondent gravely abused his discretion amounting to lack of jurisdiction — when he invoked non-presentation of the master tape as being fatal to the existence of probable cause to prove infringement, despite the fact that private respondents never raised the same as a controverted issue.

2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he arrogated unto himself the determination of what is copyrightable — an issue which is exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding.

Both public and private respondents maintain that petitioners failed to establish the existence of probable cause due to their failure to present the copyrighted master videotape of Rhoda and Me. They contend that petitioner BJPI's copyright covers only a specific episode of Rhoda and Me and that the formats or concepts of dating game shows are not covered by copyright protection under P.D. No. 49.

Non-Assignment of Error.

Petitioners claim that their failure to submit the copyrighted master videotape of the television show Rhoda and Me was not raised in issue by private respondents during the preliminary investigation and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutor's finding of probable cause on this ground.

A preliminary investigation falls under the authority of the state prosecutor who is given by law the power to direct and control criminal actions. 2 He is, however, subject to the control of the Secretary of Justice. Thus, Rule 112, §4 of the Revised Rules of Criminal Procedure, provides:

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Sec. 4. Duty of investigating fiscal. — If the investigating fiscal finds cause to hold the respondent for trial, he shall prepare the resolution and corresponding information. He shall certify under oath that he, or as shown by the record, an authorized officer, has personally examined the complainant and his witnesses, that there is reasonable ground to believe that a crime has been committed and that the accused is probably guilty thereof, that the accused was informed of the complaint and of the evidence submitted against him and that he was given an opportunity to submit controverting evidence. Otherwise, he shall recommend dismissal of the complaint.

In either case, he shall forward the records of the case to the provincial or city fiscal or chief state prosecutor within five (5) days from his resolution. The latter shall take appropriate action thereon ten (10) days from receipt thereof, immediately informing the parties of said action.

No complaint or information may be filed or dismissed by an investigating fiscal without the prior written authority or approval of the provincial or city fiscal or chief state prosecutor.

Where the investigating assistant fiscal recommends the dismissal of the case but his findings are reversed by the provincial or city fiscal or chief state prosecutor on the ground that a probable cause exists, the latter may, by himself, file the corresponding information against the respondent or direct any other assistant fiscal or state prosecutor to do so, without conducting another preliminary investigation.

If upon petition by a proper party, the Secretary of Justice reverses the resolution of the provincial or city fiscal or chief state prosecutor, he shall direct the fiscal concerned to file the corresponding information without conducting another preliminary investigation or to dismiss or move for dismissal of the complaint or information.

In reviewing resolutions of prosecutors, the Secretary of Justice is not precluded from considering errors, although unassigned, for the purpose of determining whether there is probable cause for filing cases in court. He must make his own finding, of probable cause and is not confined to the issues raised by the parties during preliminary investigation. Moreover, his findings are not subject to review unless shown to have been made with grave abuse.

Opinion of the Secretary of Justice

Petitioners contend, however, that the determination of the question whether the format or mechanics of a show is entitled to copyright protection is for the court, and not the Secretary of Justice, to make. They assail the following portion of the resolution of the respondent Secretary of Justice:

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[T]he essence of copyright infringement is the copying, in whole or in part, of copyrightable materials as defined and enumerated in Section 2 of PD. No. 49. Apart from the manner in which it is actually expressed, however, the idea of a dating game show is, in the opinion of this Office, a non-copyrightable material. Ideas, concepts, formats, or schemes in their abstract form clearly do not fall within the class of works or materials susceptible of copyright registration as provided in PD. No. 49. 3 (Emphasis added.)

It is indeed true that the question whether the format or mechanics of petitioners television show is entitled to copyright protection is a legal question for the court to make. This does not, however, preclude respondent Secretary of Justice from making a preliminary determination of this question in resolving whether there is probable cause for filing the case in court. In doing so in this case, he did not commit any grave error.

Presentation of Master Tape

Petitioners claim that respondent Secretary of Justice gravely abused his discretion in ruling that the master videotape should have been predented in order to determine whether there was probable cause for copyright infringement. They contend that 20th Century Fox Film Corporation v. Court of Appeals, 4 on which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is inapplicable to the case at bar because in the present case, the parties presented sufficient evidence which clearly establish "linkage between the copyright show "Rhoda and Me" and the infringing TV show "It's a Date." 5

The case of 20th Century Fox Film Corporation involved raids conducted on various videotape outlets allegedlly selling or renting out "pirated" videotapes. The trial court found that the affidavits of NBI agents, given in support of the application for the search warrant, were insufficient without the master tape. Accordingly, the trial court lifted the search warrants it had previously issued against the defendants. On petition for review, this Court sustained the action of the trial court and ruled: 6

The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns.

The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49.

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The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.

This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals 7 in which it was held:

In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the printed copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. . . 8

In the case at bar during the preliminary investigation, petitioners and private respondents presented written descriptions of the formats of their respective televisions shows, on the basis of which the investigating prosecutor ruled:

As may [be] gleaned from the evidence on record, the substance of the television productions complainant's "RHODA AND ME" and Zosa's "IT'S A DATE" is that two matches are made between a male and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the expense of the show. The major concepts of both shows is the same. Any difference appear mere variations of the major concepts.

That there is an infringement on the copyright of the show "RHODA AND ME" both in content and in the execution of the video presentation are established because respondent's "IT'S A DATE" is practically an exact copy of complainant's "RHODA AND ME" because of substantial similarities as follows, to wit:

RHODA AND ME "IT'S A DATE"

Set 1 Set 1

a. Unmarried participant of one gender (searcher) appears on one side of a divider, while three (3) unmarried participants of

a. same

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the other gender are on the other side of the divider. This arrangement is done to ensure that the searcher does not see the

searchees.

b. Searcher asks a question to be answered by each of the searchees. The purpose is to determine who among the searchees is the

most compatible with the searcher.

b. same

c. Searcher speculates on the match to the searchee.

c. same

d. Selection is made by the use of compute (sic) methods, or by the way questions are

answered, or similar methods.

d. Selection is based on the answer of the Searchees.

Set 2 Set 2

Same as above with the genders of the searcher and searchees interchanged. 9

same

Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus entitled to copyright protection. It is their position that the presentation of a point-by-point comparison of the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the existence of probable cause for copyright infringement. Such being the case, they did not have to produce the master tape.

To begin with the format of a show is not copyrightable. Section 2 of P.D. No. 49, 10otherwise known as the DECREE ON INTELLECTUAL PROPERTY, enumerates the classes of work entitled to copyright protection, to wit:

Sec. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works:

(A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers:

(B) Periodicals, including pamphlets and newspapers;

(C) Lectures, sermons, addresses, dissertations prepared for oral delivery;

(D) Letters;

(E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is fixed in writing or otherwise;

(F) Musical compositions, with or without words;

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(G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art; models or designs for works of art;

(H) Reproductions of a work of art;

(I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art;

(J) Maps, plans, sketches, and charts;

(K) Drawings or plastic works of a scientific or technical character;

(I) Photographic works and works produced by a process analogous to photography lantern slides;

(M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings;

(N) Computer programs;

(O) Prints, pictorial illustrations advertising copies, labels tags, and box wraps;

(P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary, musical or artistic works or of works of the Philippine government as herein defined, which shall be protected as provided in Section 8 of this Decree.

(Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree which by reason of the selection and arrangement of their contents constitute intellectual creations, the same to be protected as such in accordance with Section 8 of this Decree.

(R) Other literary, scholarly, scientific and artistic works.

This provision is substantially the same as §172 of the INTELLECTUAL PROPERTY CODE OF PHILIPPINES (R.A. No. 8293). 11 The format or mechanics of a television show is not included in the list of protected works in §2 of P.D. No. 49. For this reason, the protection afforded by the law cannot be extended to cover them.

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons and on terms and conditions specified in the statute. 12

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Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only for a work falling within the statutory enumeration or description. 13

Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no copyright except that which is both created and secured by act of Congress . . . . . 14

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work. 15 Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides:

Sec. 175. Unprotected Subject Matter. — Notwithstanding the provisions of Sections 172 and 173, no protection shall extend, under this law, to any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated or embodied in a work; news of the day and other miscellaneous facts having the character of mere items of press information; or any official text of a legislative, administrative or legal nature, as well as any official translation thereof.

What then is the subject matter of petitioners' copyright? This Court is of the opinion that petitioner BJPI's copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within the class of works mentioned in P.D. 49, §2(M), to wit:

Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings;

The copyright does not extend to the general concept or format of its dating game show. Accordingly, by the very nature of the subject of petitioner BJPI's copyright, the investigating prosecutor should have the opportunity to compare the videotapes of the two shows.

Mere description by words of the general format of the two dating game shows is insufficient; the presentation of the master videotape in evidence was indispensable to the determination of the existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by merely describing the general copyright/format of both dating game shows.

WHEREFORE, the petition is hereby DISMISSED

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SO ORDERED.1âwphi1.nêt

Puno, Quisumbing and Buena, JJ., concur.

Bellosillo, J., took no part.

Footnotes

1 Petition, Annex A, p. 4; Rollo, p. 27..

2 Sangguniang Bayan of Batac, Ilocos Norte v. Albano, 260 SCRA 561 (1996)

3 Petition, Annex B, pp. 1-2; Rollo, pp. 28-29.

4 164 SCRA 655 (1988).

5 Petition, p. 17; Rollo, p. 18.

6 Id., at 663-664.

7 261 SCRA 144 (1996).

8 Id., 173.

9 Petition Annex "G"; Rollo, pp. 44-45.

10 Promulgated on November 14, 1972.

11 Effective on January 1, 1998.

Sec. 172. Literary and Artistic Works. — 172.1. Literary and artistic works, hereinafter referred to as "works", are original intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular:

(a) Books, pamphlets, articles and other writings;

(b) Periodicals and newspapers;

(c) Lectures, sermons, addresses, dissertations prepared for oral delivery whether or not reduced in writing or other material form;

(d) Letters;

(e) Dramatic or dramatico-musical compositions; choreographic works or entertainment in dumb shows;

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(f) Musical compositions, with or without words;

(g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other works of art; models or designs for works of art;

(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design and other works of applied art;

(i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to geography, topography, architecture or science;

(j) Drawings or plastic works of a scientific or technical character;

(k) Photographic works including works produced by a process analogous to photography; lantern slides;

(l) Audiovisual works and cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recording;

(m) Pictorial illustrations and advertisements;

(n) Computer programs; and

(o) Other literary, scholarly, scientific and artistic works.

12 18 C.J.S. 161.

13 Id., at 165.

14 HORACE G. BALL, LAW OF COPYRIGHT AND LITERARY PROPERTY 45 (1944).

15 NEIL BOORSTYN, COPYRIGHT LAW 25 (1981).

16 Comment of Public Respondent, p. 9; Rollo, p. 152.

119

Topic: Exclusive rights

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-19439 October 31, 1964

MAURO MALANG SANTOS, plaintiff-appellant, vs. MCCULLOUGH PRINTING COMPANY, defendant-appellee.

Tañada Teehankee & Carreon for plaintiff-appellant. Esposo & Usison for defendant-appellee.

PAREDES, J.:

This is an action for damages based on the provisions of Articles 721 and 722 of the Civil Code of the Philippines, allegedly on the unauthorized use, adoption and appropriation by the defendant company of plaintiff's intellectual creation or artistic design for a Christmas Card. The design depicts "a Philippine rural Christmas time scene consisting of a woman and a child in a nipa hut adorned with a star-shaped lantern and a man astride a carabao, beside a tree, underneath which appears the plaintiff's pen name, Malang."

The complaint alleges that plaintiff Mauro Malang Santos designed for former Ambassador Felino Neri, for his personal Christmas Card greetings for the year 1959, the artistic motif in question. The following year the defendant McCullough Printing Company, without the knowledge and authority of plaintiff, displayed the very design in its album of Christmas cards and offered it for sale, for a price. For such unauthorized act of defendant, plaintiff suffered moral damages to the tune of P16,000.00, because it has placed plaintiff's professional integrity and ethics under serious question and caused him grave embarrassment before Ambassador Neri. He further prayed for the additional sum of P3,000.00 by way of attorney's fee.

Defendant in answer to the complaint, after some denials and admissions, moved for a dismissal of the action claiming that —

(1) The design claimed does not contain a clear notice that it belonged to him and that he prohibited its use by others;

(2) The design in question has been published but does not contain a notice of copyright, as in fact it had never been copyrighted by the plaintiff, for which reason this action is barred by the Copyright Law;

(3) The complaint does not state a cause of action.

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The documentary evidence submitted were the Christmas cards, as originally designed by plaintiff, the design as printed for Ambassador Neri, and the subsequent reprints ordered by other parties. The case was submitted an a "Stipulation of Fact" the pertinent portions of which are hereunder reproduced:

1. That the plaintiff was the artist who created the design shown in Exhibit A, ...

2. That the design carries the pen name of plaintiff, MALANG, on its face ... and indicated in Exhibit A, ...

3. That said design was created by plaintiff in the latter part of 1959 for the personal use of former Ambassador Felino Neri; ...

4. That former Ambassador Neri had 800 such cards ... printed by the defendant company in 1959, ... which he distributed to his friends in December, 1959;

5. That defendant company utilized plaintiff's design in the year 1960 in its album of Christmas card samples displayed to its customers ... .

6. That the Sampaguita Pictures, Inc., placed an order with defendant company for 700 of said cards ... while Raul Urra & Co. ordered 200 ..., which cards were sent out by them to their respective correspondent, clients and friends during the Christmas season of 1960;

7. That defendant company's use of plaintiff's design was without knowledge, authority or consent of plaintiff;

8. That said design has not been copyrighted;

9. That plaintiff is an artist of established name, good-will and reputation. ... .

Upon the basis of the facts stipulated, the lower court rendered judgment on December 1, 1961, the pertinent portions of which are recited below:

As a general proposition, there can be no dispute that the artist acquires ownership of the product of his art. At the time of its creation, he has the absolute dominion over it. To help the author protect his rights the copyright law was enacted.

In intellectual creations, a distinction must be made between two classes of property rights; the fact of authorship and the right to publish and/or distribute copies of the creation. With regard to the first, i.e. the fact of authorship, the artist cannot be divested of the same. In other words, he may sell the right to print hundred of his work yet the purchaser of said right can never be the author of the creation.

It is the second right, i.e., the right to publish, republish, multiply and/or distribute copies of the intellectual creation which the state, through the enactment of the copyright law, seeks to protect. The author or his assigns or heirs may have the

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work copyrighted and once this is legally accomplished any infringement of the copyright will render the infringer liable to the owner of the copyright.

xxx xxx xxx

The plaintiff in this case did not choose to protect his intellectual creation by a copyright. The fact that the design was used in the Christmas card of Ambassador Neri who distributed eight hundred copies thereof among his friends during the Christmas season of 1959, shows that the, same was published.

Unless satisfactorily explained a delay in applying for a copyright, of more than thirty days from the date of its publication, converts the property to one of public domain.

Since the name of the author appears in each of the alleged infringing copies of the intellectual creation, the defendant may not be said to have pirated the work nor guilty of plagiarism Consequently, the complaint does not state a cause of action against the defendant.

xxx xxx ;xxx

WHEREFORE, the Court dismisses the complaint without pronouncement as to costs.

In his appeal to this Court, plaintiff-appellant pointed five (5) errors allegedly committed by the trial court, all of which bring to the fore, the following propositions: (1) whether plaintiff is entitled to protection, notwithstanding the, fact that he has not copyrighted his design; (2) whether the publication is limited, so as to prohibit its use by others, or it is general publication, and (3) whether the provisions of the Civil Code or the Copyright Law should apply in the case. We will undertake a collective discussion of these propositions.

Under the established facts, We find that plaintiff is not entitled to a protection, the provision of the Civil Code, notwithstanding. Paragraph 33 of Patent Office Administrative Order No. 3 (as amended dated September 18, 1947) entitled "Rules of Practice in the Philippines Patent Office relating to the Registration of Copyright Claims" promulgated pursuant to Republic Act 165, provides, among others, that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within sixty (60) day's if made elsewhere, failure of which renders such creation public property. In the case at bar, even as of this moment, there is no copyright for the design in question. We are not also prepared to accept the contention of appellant that the publication of the design was a limited one, or that there was an understanding that only Ambassador Neri should, have absolute right to use the same. In the first place, if such were the condition then Ambassador Neri would be the aggrieved party, and not the appellant. In the second place, if there was such a limited publication or prohibition, the same was not shown on the face of the design. When the purpose is a limited publication, but the effect is general publication, irrevocable rights thereupon become vested in the public, in consequence of which enforcement of the restriction becomes impossible (Nutt vs. National Institute, 31 F [2d] 236). It has been held that the effect of offering for sale a dress, for example

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manufactured in accordance with an original design which is not protected by either a copyright or a patent, is to divest the owner of his common law rights therein by virtue of the publication of a 'copy' and thereafter anyone is free to copy the design or the dress (Fashion Originators Guild of America v. Federal Trade Commission, 114 F [2d] 80). When Ambassador Neri distributed 800 copies of the design in controversy, the plaintiff lost control of his design and the necessary implication was that there had been a general publication, there having been no showing of a clear indication that a limited publication was intended. The author of a literary composition has a light to the first publication thereof. He has a right to determine whether it shall be published at all, and if published, when, where, by whom, and in what form. This exclusive right is confined to the first publication. When once published, it is dedicated to the public, and the author loses the exclusive right to control subsequent publication by others, unless the work is placed under the protection of the copyright law. (See II Tolentino's Comments on the Civil Code, p. 433, citing Wright v. Eisle 83 N.Y. Supp. 887.)

CONFORMABLY WITH ALL THE FOREGOING, We find that the errors assigned have not been committed by the lower court. The decision appealed from, therefore, should be, as it is hereby affirmed. Costs taxed against plaintiff-appellant.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Makalintal, Bengzon, J. P., and Zaldivar JJ., concur. Regala, J., took no part.

123

Topic: Infringement

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 147043 June 21, 2005

NBI - MICROSOFT CORPORATION & LOTUS DEVELOPMENT CORP., petitioners, vs. JUDY C. HWANG, BENITO KEH & YVONNE K. CHUA/BELTRON COMPUTER PHILIPPINES INC., JONATHAN K. CHUA, EMILY K. CHUA, BENITO T. SANCHEZ, NANCY I. VELASCO, ALFONSO CHUA, ALBERTO CHUA, SOPHIA ONG, DEANNA CHUA/TAIWAN MACHINERY DISPLAY & TRADE CENTER, INC., and THE SECRETARY OF JUSTICE, respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for certiorari1 of the Resolutions2 of the Department of Justice dismissing for "lack of merit and insufficiency of evidence" petitioner Microsoft Corporation’s complaint against respondents for copyright infringement and unfair competition.

The Facts

Petitioner Microsoft Corporation ("Microsoft"), a Delaware, United States corporation, owns the copyright and trademark to several computer software.3 Respondents Benito Keh and Yvonne Keh are the President/Managing Director and General Manager, respectively, of respondent Beltron Computer Philippines, Inc. ("Beltron"), a domestic corporation. Respondents Jonathan K. Chua, Emily K. Chua, Benito T. Sanchez, and Nancy I. Velasco are Beltron’s Directors. On the other hand, respondents Alfonso Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are the Directors of respondent Taiwan Machinery Display & Trade Center, Inc. ("TMTC"), also a domestic corporation.4

In May 1993, Microsoft and Beltron entered into a Licensing Agreement ("Agreement"). Under Section 2(a) of the Agreement, as amended in January 1994, Microsoft authorized Beltron, for a fee, to:

(i) xxx reproduce and install no more than one (1) copy of [Microsoft] software on each Customer System hard disk or Read Only Memory ("ROM"); [and]

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(ii) xxx distribute directly or indirectly and license copies of the Product (reproduced as per Section 2(a)(i) and/or acquired from Authorized Replicator or Authorized Distributor) in object code form to end users[.] xxxx5

The Agreement also authorized Microsoft and Beltron to terminate the contract if the other fails to comply with any of the Agreement’s provisions. Microsoft terminated the Agreement effective 22 June 1995 for Beltron’s non-payment of royalties.6

Afterwards, Microsoft learned that respondents were illegally copying and selling Microsoft software. Consequently, Microsoft, through its Philippine agent,7 hired the services of Pinkerton Consulting Services ("PCS"), a private investigative firm. Microsoft also sought the assistance of the National Bureau of Investigation ("NBI"). On 10 November 1995, PCS employee John Benedic8 Sacriz ("Sacriz") and NBI agent Dominador Samiano, Jr. ("Samiano"), posing as representatives of a computer shop,9 bought computer hardware (central processing unit ("CPU") and computer monitor) and software (12 computer disks ("CDs") in read-only memory ("ROM") format) from respondents. The CPU contained pre-installed10 Microsoft Windows 3.1 and MS-DOS software. The 12 CD-ROMs, encased in plastic containers with Microsoft packaging, also contained Microsoft software.11 At least two of the CD-ROMs were "installers," so-called because they contain several software (Microsoft only or both Microsoft and non-Microsoft).12Sacriz and Samiano were not given the Microsoft end-user license agreements, user’s manuals, registration cards or certificates of authenticity for the articles they purchased. The receipt issued to Sacriz and Samiano for the CPU and monitor bore the heading "T.M.T.C. (PHILS.) INC. BELTRON COMPUTER."13 The receipt for the 12 CD-ROMs did not indicate its source although the name "Gerlie" appears below the entry "delivered by."14

On 17 November 1995, Microsoft applied for search warrants against respondents in the Regional Trial Court, Branch 23, Manila ("RTC").15 The RTC granted Microsoft’s application and issued two search warrants ("Search Warrant Nos. 95-684 and 95-685").16 Using Search Warrant Nos. 95-684 and 95-685, the NBI searched the premises of Beltron and TMTC and seized several computer-related hardware, software, accessories, and paraphernalia. Among these were 2,831 pieces of CD-ROMs containing Microsoft software.17

Based on the articles obtained from respondents, Microsoft and a certain Lotus Development Corporation ("Lotus Corporation") charged respondents before the Department of Justice ("DOJ") with copyright infringement under Section 5(A) in relation to Section 29 of Presidential Decree No. 49, as amended, ("PD 49")18 and with unfair competition under Article 189(1)19 of the Revised Penal Code. In its Complaint ("I.S. No. 96-193"), which the NBI indorsed, Microsoft alleged that respondents illegally copied and sold Microsoft software.20

In their joint counter-affidavit, respondents Yvonne Keh ("respondent Keh") and Emily K. Chua ("respondent Chua") denied the charges against respondents. Respondents Keh and Chua alleged that: (1) Microsoft’s real intention in filing the complaint under I.S. No. 96-193 was to pressure Beltron to pay its alleged unpaid royalties, thus Microsoft should have filed

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a collection suit instead of a criminal complaint; (2) TMTC bought the confiscated 59 boxes of MS-DOS CDs from a Microsoft dealer in Singapore (R.R. Donnelly); (3) respondents are not the "source" of the Microsoft Windows 3.1 software pre-installed in the CPU bought by Sacriz and Samiano, but only of the MS-DOS software; (4) Microsoft’s alleged proof of purchase (receipt) for the 12 CD-ROMs is inconclusive because the receipt does not indicate its source; and (5) respondents Benito Keh, Jonathan K. Chua, Alfonso Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are stockholders of Beltron and TMTC in name only and thus cannot be held criminally liable.21

The other respondents did not file counter-affidavits.

Meanwhile, respondents moved to quash Search Warrant Nos. 95-684 and 95-685. The RTC partially granted their motion in its Order of 16 April 1996. Microsoft sought reconsideration but the RTC denied Microsoft’s motion in its Order of 19 July 1996. Microsoft appealed to the Court of Appeals in CA-G.R. CV No. 54600. In its Decision of 29 November 2001, the Court of Appeals granted Microsoft’s appeal and set aside the RTC Orders of 16 April 1996 and 19 July 1996. The Court of Appeals’ Decision became final on 27 December 2001.

The DOJ Resolutions

In the Resolution of 26 October 1999, DOJ State Prosecutor Jocelyn A. Ong ("State Prosecutor Ong") recommended the dismissal of Microsoft’s complaint for lack of merit and insufficiency of evidence. State Prosecutor Ong also recommended the dismissal of Lotus Corporation’s complaint for lack of interest to prosecute and for insufficiency of evidence. Assistant Chief State Prosecutor Lualhati R. Buenafe ("Assistant Chief State Prosecutor Buenafe") approved State Prosecutor Ong’s recommendations.22 The 26 October 1999 Resolution reads in part:

[T]wo (2) issues have to be resolved in this case, namely:

a) Whether or not Beltron Computer and/or its stockholders should be held liable for the offenses charged.

b) Whether or not prima facie case exist[s] against Taiwan Machinery Display and Trade Center, Inc. (TMTC) for violation of the offense charged.

Complainant had alleged that from the time the license agreement was terminated, respondent/s is/are no longer authorized to copy/distribute/sell Microsoft products. However, respondent/s averred that the case is civil in nature, not criminal, considering that the case stemmed only out of the desire of complainant to collect from them the amount of US$135,121.32 and that the contract entered into by the parties cannot be unilaterally terminated.

In the order of Honorable William Bayhon dated July 19, 1996 [denying reconsideration to the Order partially quashing the search warrants], he observed the following:

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"It is further argued by counsel for respondent that the act taken by private complainant is to spite revenge against the respondent Beltron for the latter failed to pay the alleged monetary obligation in the amount of US$135,121.32. That respondent has some monetary obligation to complainant which is not denied by the complainant."

["]It appears therefore that prior to the issuance of the subject search warrants, complainant had some business transactions with the respondent [Beltron] along the same line of products. Complainant failed to reveal the true circumstances existing between the two of them as it now appears, indeed the search warrant[s] xxx [are] being used as a leverage to secure collection of the money obligation which the Court cannot allow."

From said order, it can be gleaned that the [RTC] xxx, had admitted that the search warrants applied for by complainant were merely used as a leverage for the collection of the alleged monetary obligation of the respondent/s.

From said order, it can be surmise (sic) that the obligations between the parties is civil in nature not criminal.

Moreover, complainant had time and again harped that respondent/s is/are not authorized to sell/copy/distribute Microsoft products at the time of the execution of the search warrants. Still, this office has no power to pass upon said issue for one has then to interpret the provisions of the contract entered into by the parties, which question, should be raised in a proper civil proceeding.

Accordingly, absen[t] a resolution from the proper court of (sic) whether or not the contract is still binding between the parties at the time of the execution of the search warrants, this office cannot pass upon the issue of whether respondent/s is or are liable for the offense charged.

As to the second issue, we find for the respondent/s. TMTC had provided sufficient evidence such as pro-forma invoice from R.R. Donnelley; Debt Advice of the Bank of Commerce; Official Receipts from the Bureau of Customs; and Import Entry Declaration of the Bureau of Customs to prove that indeed the Microsoft software in their possession were bought from Singapore.

Thus, respondent/s in this case has/have no intent to defraud the public, as provided under Article 189 of the Revised Penal Code, for they bought said Microsoft MS-DOS 6.0 from an alleged licensee of Microsoft in Singapore, with all the necessary papers. In their opinion, what they have are genuine Microsoft software, therefore no unfair competition exist.

Moreover, violation of P.D. 49 does not exist, for respondent/s was/were not the manufacturers of the Microsoft software seized and were selling their products as genuine Microsoft software, considering that they bought it from a Microsoft licensee.

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Complainant, on the other hand, considering that it has the burden of proving that the respondent/s is/are liable for the offense charged, has not presented any evidence that the items seized namely the 59 boxes of MS-DOS 6.0 software are counterfeit.

The certification issued on December 12, 1995 by Christopher Austin, Corporate Attorney of the complainant, does not disclose this fact. For the term used by Mr. Austin was that the items seized were unauthorized.

The question now, is whether the products were unauthorized because TMTC has no license to sell Microsoft products, or is it unauthorized because R.R. Donnelley has no authority to sell said products here in the Philippines.

Still, to determine the culpability of the respondents, complainant should present evidence that what is in the possession of the respondent/s is/are counterfeit Microsoft products.

This it failed to do.23

Microsoft sought reconsideration and prayed for an ocular inspection of the articles seized from respondents. However, in the Resolution of 3 December 1999, Assistant Chief State Prosecutor Buenafe, upon State Prosecutor Ong’s recommendation, denied Microsoft’s motion.24

Microsoft appealed to the Office of the DOJ Secretary. In the Resolution of 3 August 2000, DOJ Undersecretary Regis V. Puno dismissed Microsoft’s appeal.25 Microsoft sought reconsideration but its motion was denied in the Resolution of 22 December 2000.26

Hence, this petition. Microsoft contends that:

I. THE DOJ ERRED IN RULING THAT THE LIABILITY OF RESPONDENTS WAS ONLY CIVIL IN NATURE BY VIRTUE OF THE LICENSE AGREEMENT.

II. THE DOJ MISAPPRECIATED THE FACT THAT RESPONDENTS WERE ENGAGED IN THE ILLEGAL IMPORTATION, SALE AND DISTRIBUTION OF COUNTERFEIT SOFTWARE AS EVIDENCED BY THE ITEMS PURCHASED DURING THE TEST-BUY AND THE ITEMS SEIZED FROM RESPONDENTS’ PREMISES.

III. THE DOJ MISAPPRECIATED THE LAW ON COPYRIGHT INFRINGEMENT AND UNFAIR COMPETITION.

IV. ONLY TWO OUT OF THE NINE RESPONDENTS BOTHERED TO FILE COUNTER-AFFIDAVITS; HENCE, THE CHARGES AGAINST SEVEN [RESPONDENTS] REMAIN UNCONTROVERTED.27

In its Comment, filed by the Solicitor General, the DOJ maintains that it did not commit grave abuse of discretion in dismissing Microsoft’s complaint.28

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For their part, respondents allege in their Comment that Microsoft is guilty of forum-shopping because its petition in CA-G.R. CV No. 54600 was filed ahead of, and has a "common interest" with, this petition. On the merits, respondents reiterate their claims in their motion to quash Search Warrant Nos. 95-684 and 95-685 that the articles seized from them were either owned by others, purchased from legitimate sources, or not produced by Microsoft. Respondents also insist that the Agreement entitled Beltron to "copy and replicate or reproduce" Microsoft products. On the confiscated 2,831 CD-ROMs, respondents allege that a certain corporation29 left the CD-ROMs with them for safekeeping. Lastly, respondents claim that there is no proof that the CPU Sacriz and Samiano bought from them contained pre-installed Microsoft software because the receipt for the CPU does not indicate "[s]oftware hard disk." 30

In its Reply, Microsoft counters that it is not liable for forum-shopping because its petition in CA-G.R. CV No. 54600 involved the Orders of the RTC partially quashing Search Warrant Nos. 95-684 and 95-685 while this petition concerns the DOJ Resolutions dismissing its complaint against respondents for copyright infringement and unfair competition. On the merits, Microsoft maintains that respondents should be indicted for copyright infringement and unfair competition.31

The Issues

The petition raises the following issues:

(1) Whether Microsoft engaged in forum-shopping; and

(2) Whether the DOJ acted with grave abuse of discretion in not finding probable cause to charge respondents with copyright infringement and unfair competition.

The Ruling of the Court

The petition has merit.

Microsoft did not Engage in Forum-Shopping

Forum-shopping takes place when a litigant files multiple suits involving the same parties, either simultaneously or successively, to secure a favorable judgment.32 Thus, it exists where the elements of litis pendentia are present, namely: (a) identity of parties, or at least such parties who represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity with respect to the two preceding particulars in the two cases is such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other case.33 Forum-shopping is an act of malpractice because it abuses court processes.34 To check this pernicious practice, Section 5, Rule 7 of the 1997 Rules of Civil Procedure requires the principal party in an initiatory pleading to submit a certification against forum-shopping.35 Failure to comply with this requirement is

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a cause for the dismissal of the case and, in case of willful forum-shopping, for the imposition of administrative sanctions.

Here, Microsoft correctly contends that it is not liable for forum-shopping. What Microsoft appealed in CA-G.R. CV No. 54600 were the RTC Orders partially quashing Search Warrant Nos. 95-684 and 95-685. In the present case, Microsoft is appealing from the DOJ Resolutions dismissing its complaint against respondents for copyright infringement and unfair competition. Thus, although the parties in CA-G.R. CV No. 54600 and this petition are identical, the rights asserted and the reliefs prayed for are not such that the judgment in CA-G.R. CV No. 54600 does not amount to res judicata in the present case. This renders forum-shopping impossible here.

The DOJ Acted with Grave Abuse of Discretion in not Finding Probable Cause to Charge Respondents with Copyright Infringement and Unfair Competition

Generally, this Court is loath to interfere in the prosecutor’s discretion in determining probable cause36 — unless such discretion is shown to have been abused.37 This case falls under the exception.

Unlike the higher quantum of proof beyond reasonable doubt required to secure a conviction, it is the lower standard of probable cause which is applied during the preliminary investigation to determine whether the accused should be held for trial. This standard is met if the facts and circumstances incite a reasonable belief that the act or omission complained of constitutes the offense charged. As we explained in Pilapil v. Sandiganbayan:38

The term [probable cause] does not mean "actual and positive cause" nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the charge.

PD 49 and Article 189(1)

Section 539 of PD 49 ("Section 5") enumerates the rights vested exclusively on the copyright owner. Contrary to the DOJ’s ruling, the gravamen of copyright infringement is not merely the unauthorized "manufacturing" of intellectual works but rather the unauthorized performance of any of the acts covered by Section 5. Hence, any person who performs any of the acts under Section 5 without obtaining the copyright owner’s prior consent renders himself civilly40 and criminally41 liable for copyright infringement. We held in Columbia Pictures, Inc. v. Court of Appeals:42

Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or

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piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. (Emphasis supplied)

Significantly, under Section 5(A), a copyright owner is vested with the exclusive right to "copy, distribute, multiply, [and] sell" his intellectual works.

On the other hand, the elements of unfair competition under Article 189(1)43 of the Revised Penal Code are:

(a) That the offender gives his goods the general appearance of the goods of another manufacturer or dealer;

(b) That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of their packages, or in the (3) device or words therein, or in (4) any other feature of their appearance[;]

(c) That the offender offers to sell or sells those goods or gives other persons a chance or opportunity to do the same with a like purpose[; and]

(d) That there is actual intent to deceive the public or defraud a competitor.44

The element of intent to deceive may be inferred from the similarity of the goods or their appearance.45

On the Sufficiency of Evidence to Support a Finding of Probable Cause Against Respondents

In its pleadings filed with the DOJ, Microsoft invoked three clusters of evidence to support its complaint against respondents, namely: (1) the 12 CD-ROMs containing Microsoft software Sacriz and Samiano bought from respondents; (2) the CPU with pre-installed Microsoft software Sacriz and Samiano also purchased from respondents; and (3) the 2,831 CD-ROMs containing Microsoft software seized from respondents.46 The DOJ, on the one hand, refused to pass upon the relevance of these pieces of evidence because: (1) the "obligations between the parties is civil and not criminal" considering that Microsoft merely sought the issuance of Search Warrant Nos. 95-684 and 95-685 to pressure Beltron to pay its obligation under the Agreement, and (2) the validity of Microsoft’s termination of the Agreement must first be resolved by the "proper court." On the other hand, the DOJ ruled that Microsoft failed to present evidence proving that what were obtained from respondents were counterfeit Microsoft products.

This is grave abuse of discretion.47

First. Being the copyright and trademark owner of Microsoft software, Microsoft acted well within its rights in filing the complaint under I.S. No. 96-193 based on the

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incriminating evidence obtained from respondents. Hence, it was highly irregular for the DOJ to hold, based on the RTC Order of 19 July 1996, that Microsoft sought the issuance of Search Warrant Nos. 95-684 and 95-685, and by inference, the filing of the complaint under I.S. No. 96-193, merely to pressure Beltron to pay its overdue royalties to Microsoft. Significantly, in its Decision in CA-G.R. CV No. 54600 dated 29 November 2001, the Court of Appeals set aside the RTC Order of 19 July 1996. Respondents no longer contested that ruling which became final on 27 December 2001.

Second. There is no basis for the DOJ to rule that Microsoft must await a prior "resolution from the proper court of (sic) whether or not the [Agreement] is still binding between the parties." Beltron has not filed any suit to question Microsoft’s termination of the Agreement. Microsoft can neither be expected nor compelled to wait until Beltron decides to sue before Microsoft can seek remedies for violation of its intellectual property rights.

Furthermore, some of the counterfeit CD-ROMs bought from respondents were "installer" CD-ROMs containing Microsoft software only or both Microsoft and non-Microsoft software. These articles are counterfeit per sebecause Microsoft does not (and could not have authorized anyone to) produce such CD-ROMs. The copying of the genuine Microsoft software to produce these fake CD-ROMs and their distribution are illegal even if the copier or distributor is a Microsoft licensee. As far as these installer CD-ROMs are concerned, the Agreement (and the alleged question on the validity of its termination) is immaterial to the determination of respondents’ liability for copyright infringement and unfair competition.

Lastly, Section 10(b)48 of the Agreement provides that Microsoft’s "rights and remedies" under the contract are "not xxx exclusive and are in addition to any other rights and remedies provided by law or [the] Agreement." Thus, even if the Agreement still subsists, Microsoft is not precluded from seeking remedies under PD 49 and Article 189(1) of the Revised Penal Code to vindicate its rights.

Third. The Court finds that the 12 CD-ROMs ("installer" and "non-installer") and the CPU with pre-installed Microsoft software Sacriz and Samiano bought from respondents and the 2,831 Microsoft CD-ROMs seized from respondents suffice to support a finding of probable cause to indict respondents for copyright infringement under Section 5(A) in relation to Section 29 of PD 49 for unauthorized copying and selling of protected intellectual works. The installer CD-ROMs with Microsoft software, to repeat, are counterfeit per se. On the other hand, the illegality of the "non-installer" CD-ROMs purchased from respondents and of the Microsoft software pre-installed in the CPU is shown by the absence of the standard features accompanying authentic Microsoft products, namely, the Microsoft end-user license agreements, user’s manuals, registration cards or certificates of authenticity.

On the 2,831 Microsoft CD-ROMs49 seized from respondents, respondent Beltron, the only respondent who was party to the Agreement, could not have reproduced them under the

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Agreement as the Solicitor General50 and respondents contend. Beltron’s rights51 under the Agreement were limited to:

(1) the "reproduc[tion] and install[ation of] no more than one copy of [Microsoft] software on each Customer System hard disk or Read Only Memory ("ROM")"; and

(2) the "distribut[ion] xxx and licens[ing of] copies of the [Microsoft] Product [as reproduced above] and/or acquired from Authorized Replicator or Authorized Distributor) in object code form to end users."

The Agreement defines an authorized replicator as "a third party approved by [Microsoft] which may reproduce and manufacture [Microsoft] Product[s] for [Beltron] xxx."52 An authorized distributor, on the other hand, is a "third party approved by [Microsoft] from which [Beltron] may purchase MED53 Product."54 Being a mere reproducer/installer of one Microsoft software copy on each customer’s hard disk or ROM, Beltron could only have acquired the hundreds of Microsoft CD-ROMs found in respondents’ possession from Microsoft distributors or replicators.

However, respondents makes no such claim. What respondents contend is that these CD-ROMs were left to them for safekeeping. But neither is this claim tenable for lack of substantiation. Indeed, respondents Keh and Chua, the only respondents who filed counter-affidavits, did not make this claim in the DOJ. These circumstances give rise to the reasonable inference that respondents mass-produced the CD-ROMs in question without securing Microsoft’s prior authorization.

The counterfeit "non-installer" CD-ROMs Sacriz and Samiano bought from respondents also suffice to support a finding of probable cause to indict respondents for unfair competition under Article 189(1) of the Revised Penal Code for passing off Microsoft products. From the pictures of the CD-ROMs’ packaging,55 one cannot distinguish them from the packaging of CD-ROMs containing genuine Microsoft software. Such replication, coupled with the similarity of content of these fake CD-ROMs and the CD-ROMs with genuine Microsoft software, implies intent to deceive.

Respondents’ contention that the 12 CD-ROMs Sacriz and Samiano purchased cannot be traced to them because the receipt for these articles does not indicate its source is unavailing. The receipt in question should be taken together with Microsoft’s claim that Sacriz and Samiano bought the CD-ROMs from respondents.56 Together, these considerations point to respondents as the vendor of the counterfeit CD-ROMs. Respondents do not give any reason why the Court should not give credence to Microsoft’s claim. For the same reason, the fact that the receipt for the CPU does not indicate "[s]oftware hard disk" does not mean that the CPU had no pre-installed Microsoft software. Respondents Keh and Chua admit in their counter-affidavit that respondents are the "source" of the pre-installed MS-DOS software.

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WHEREFORE, we GRANT the petition. We SET ASIDE the Resolutions dated 26 October 1999, 3 December 1999, 3 August 2000, and 22 December 2000 of the Department of Justice.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

Footnotes

1 Under Rule 65 of the 1997 Rules of Civil Procedure.

2 Dated 26 October 1999, 3 December 1999, 3 August 2000, and 22 December 2000.

3 Microsoft owns the copyright to, among others, the following software: Microsoft Windows, Windows ‘95, Microsoft Excel, Microsoft Word, Microsoft Access, Microsoft Works, Microsoft Powerpoint, Microsoft Office, Microsoft Flight Simulator, and Microsoft FoxPro (Rollo, p. 20).

4 Individual respondents and respondent corporations are referred to as "respondents."

5 Rollo, p. 81.

6 The Agreement provided the following obligations upon its termination (Ibid., pp. 72-73):

"11. OBLIGATIONS UPON TERMINATION

(a) Within ten (10) days after termination or expiration of this Agreement, [BELTRON] shall return to [MICROSOFT] (i) all full or partial copies of each Product including OEM Adaptation Kit(s) and OEM Distribution Kit(s) in [BELTRON’s] possession or under its control for which a royalty has not been paid and (ii) all copies of the Product in source code form. [BELTRON] and each [BELTRON] Subsidiary may, however, retain one copy of each Product in object code form and one copy of the Product documentation to be used solely for support purposes.

(b) From and after termination or expiration, [BELTRON] shall not use internally nor employ any Product as part or portion of any product that [BELTRON] may use, sell, assign, lease, license, or transfer to third parties. [BELTRON] shall cease and desist from all use of any Product name(s) and associated trademark(s) and, upon request, deliver to [MICROSOFT] or its

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authorized representatives or destroy all material upon which the Product name(s) and the associated trademarks appear.

(c) Termination of this Agreement as a result of [BELTRON’s] default shall result in acceleration of [BELTRON’s] obligation to pay all sums [BELTRON] contracted to pay under this Agreement, including all minimum commitment payments as described in Exhibit B.

(d) End user licenses properly granted pursuant to this Agreement and prior to termination of this Agreement shall not be diminished or abridged by termination or expiration of this Agreement.

(e) Sections 5, 12, 13, 14, 15(a), 16, 17, 18(a), and 18(b) shall survive termination or expiration of this Agreement." (Underlining in the original)

7 The law firm Quisumbing Torres.

8 Also spelled as "Benedict" (Rollo, p. 142).

9 Phardette Computer Shop.

10 The process of pre-installing software into the CPU’s resident hard disk is also called "hard-loading."

11 E.g. Microsoft Windows ‘95, Microsoft Publisher, Microsoft Encarta ‘95, MS-DOS 6.22, Microsoft Money, Microsoft Windows for Workgroups, and Microsoft Word (Rollo, pp. 126, 128-129).

12 A CD-ROM containing Microsoft, Adobe Systems, Inc., and Corel Corporation software and a four-in-one CD-ROM containing the Microsoft software MS-DOS 6.22, Microsoft Money, and Microsoft Windows for Workgroups (Ibid., pp. 127, 129).

13 Ibid., p. 125.

14 Ibid., p. 131.

15 Presided by Judge William M. Bayhon.

16 Rollo, pp. 135-140.

17 The following were seized from respondents (Ibid., pp. 141, 243):

1. MS-DOS 6.2 (Manual) @ 20 pcs. per box - - - - - - 59 boxes

2. Compact Disc - - - - - - 2,831 pcs.

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3. Tray - - - - - - 251 pcs.

4. J Case - - - - - - 700 pcs.

5. Label - - - - - - 188 pcs.

6. CD File - - - - - - 1 folder

7. Credit Memo File - - - - - - 1 folder

8. Delivery Receipt - - - - - 11 booklets

9. Monitor SN # IV1502733 - - - - - - 1 unit

10. Keyboard - - - - - - 1 unit

11. Central Processing Unit (CPU) - - - - - - 1 unit

12. Monitor (Dynamic, Leslie G. & Robert-Small - - - - - - 3 units

13. Central Processing Units (MGB, SM, EWC, STI, J. Estrella[,]

System & Data, Leslie G., Benjamin SY, Octagon, Mega) - - - - - 20 units

14. Printer KX P1540 SN# 9KMANEO2931 - - - - - - 1 pc.

15. Monitor 14" SVGA, 15" UVGA (Beltron) - - - - - 2 units

16. CPU 386 DX40 Desk Top, 386DX40-4MB (Slim case) - - - - - 2 units

17. Mouse - - - - - 1 pc.

18. Computer Notebook - - - - - 7 pcs.

19. Central Processing Unit w/ Multi Media - - - - - 12 pcs.

20. Compaq Notebook - - - - - 1 pc.

Microsoft also alleges that a "credit memo" (Ibid., p. 132) and a delivery receipt (Ibid., p. 133) of a Microsoft software (Windows ‘95) for third persons were also seized from respondents (Ibid., p. 28).

18 The Decree on Intellectual Property. PD 49 was repealed by Republic Act No. 8293 ("RA 8293") or the Intellectual Property Code of the Philippines which took effect on 1 January 1998.

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19 Repealed by RA 8293.

20 Rollo, pp. 48-60.

21 Ibid., pp. 201-203. Lotus Corporation later desisted from pursuing its complaint against respondents (Ibid., p. 143).

22 Ibid., pp. 142-152.

23 Ibid., pp. 149-151.

24 Ibid., pp. 160-161.

25 Ibid., pp. 180-181.

26 Ibid., pp. 199-200.

27 Ibid., pp. 30-31.

28 Ibid., pp. 292-305.

29 FUS Plastic Machinery Works Co., Ltd.

30 Rollo, pp. 223-237.

31 Ibid., pp. 310-325.

32 Casupanan v. Laroya, 436 Phil. 582 (2002).

33 Spouses Melo v. Court of Appeals, 376 Phil. 204 (1999).

34 Buan v. Lopez, Jr., G.R. No. L-75349, 13 October 1986, 145 SCRA 34 citing E. Razon, Inc. et al. v.Philippine Port Authority, et al., Minute Resolution, G.R. No. 75197, 31 July 1986.

35 Rule 7, Section 5 provides: "Certification against forum shopping. — The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

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Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions."

36 See Acuña v. Deputy Ombudsman for Luzon, G.R. No. 144692, 31 January 2005; Camanag v. Guerrero, G.R. No. 121017, 17 February 1997, 268 SCRA 473.

37 See Filadams Pharma, Inc. v. Court of Appeals, G.R. No. 132422, 30 March 2004, 426 SCRA 460. See also Dr. Baylon v. Ombudsman, 423 Phil. 705 (2001).

38 G.R. No. 101978, 7 April 1993, 221 SCRA 349 (internal citations omitted).

39 This provision states: "Copyright shall consist in the exclusive right[:]

(A) To print, reprint, publish, copy, distribute, multiply, sell, and make photographs, photo-engravings, and pictorial illustrations of the works;

(B) To make any translation or other version or extracts or arrangements or adaptations thereof; to dramatize it if it be a non-dramatic work; to convert it into a non-dramatic work if it be a drama; to complete or execute it if it be a model or design;

(C) To exhibit, perform, represent, produce, or reproduce the work in any manner or by any method whatever for profit or otherwise; if not reproduced in copies for sale, to sell any manuscripts or any records whatsoever thereof;

(D) To make any other use or disposition of the work consistent with the laws of the land." This has been superseded by Section 177 of RA 8293. (Emphasis supplied)

40 Under Section 28, PD 49, now superseded by Section 216 of RA 8293.

41 Section 29, PD 49 provides: "Any person infringing any copyright secured by this Decree or aiding or abetting such infringement shall be deemed guilty of a crime punishable by imprisonment not exceeding one year or by fine not less than Two Hundred Pesos nor more than Two Thousand Pesos or both, in the discretion of the court." This has been superseded by Section 217 of RA 8293.

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42 329 Phil. 875 (1996). Reported as Columbia Pictures, Inc. v. CA.

43 This provision states: "Unfair competition, fraudulent registration of trade-name, trade-mark, or service mark, fraudulent designation of origin, and false description. — The penalty provided in the next preceding article shall be imposed upon:

1. Any person who, in unfair competition and for the purpose of deceiving or defrauding another of his legitimate trade or the public in general, shall sell his goods giving them the general appearance of the goods of another manufacturer or dealer, either as to the goods themselves, or in the wrapping of the packages in which they are contained, or the device or words thereon, or in any other feature of their appearance which would be likely to induce the public to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or shall give other persons a chance or opportunity to do the same with a like purpose. xxxx"

44 L. Reyes, The Revised Penal Code, vol. II, p. 282 (15th ed.).

45 See Rueda Hermanos & Co. v. Feliz Paglinawan & Co., 33 Phil. 196 (1916); L. Reyes, supra note 44, p. 283.

46 Regarding the confiscated 59 boxes of MS-DOS CDs, Microsoft, in this petition, no longer contests the DOJ’s findings that TMTC bought these MS-DOS CDs from a Microsoft dealer in Singapore.

47 Grave abuse of discretion is committed "where power is exercised in an arbitrary or despotic manner xxx as to amount to evasion of positive duty or virtual refusal to perform a duty xxxx" (Garcia-Rueda v. Pascasio, 344 Phil. 323 [1997] citing Comm. of Internal Revenue v. CA, 327 Phil. 1 [1996]).

48 "10. DEFAULT AND TERMINATION

xxxx

(b) Termination due to a breach of Sections 6, 13, 14(b) or (if applicable) S1 shall be effective upon notice. In all other cases termination shall be effective thirty (30) days after notice of termination to the defaulting party if the defaults have not been cured within such thirty (30) day period. The rights and remedies of the parties provided herein shall not be exclusive and are in addition to any other rights and remedies provided by law or this Agreement." (Underlining in the original; italicization supplied) (Rollo, p. 72).

49 Microsoft contends that these CD-ROMs are all "installers" (Rollo, p. 26). For lack of corroborative evidence on record, the Court refrains from passing upon this question without prejudice to Microsoft’s presentation of relevant evidence during the trial.

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50 Ibid., pp. 299-300.

51 Microsoft contends, for the first time in this appeal, that the Agreement authorized Beltron to copy only one Microsoft software, i.e., "Microsoft MS-DOS 6.0" (Ibid., p. 33). However, the terms of the Agreement do not bear out this contention.

52 Agreement, Section 1(i) (Rollo, p. 66).

53 A MED is a Microsoft product in "Easy Distribution Package" form available for purchase from an authorized distributor (Agreement, Section 1(e), ibid.).

54 Agreement, Section 1(j) (Ibid.).

55 Rollo, pp. 126, 128, 130.

56 Ibid., pp. 25-26.

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Topic: Infringement

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 131522 July 19, 1999

PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners, vs. FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC., respondents.

PARDO, J.:

The case before us is a petition for review on certiorari 1 to set aside the (a) decision or the Court of Appeals 2, and (b) the resolution denying petitioners' motion for reconsideration, 3 in which the appellate court affirmed the trial court's dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorney's fees.1âwphi1.nêt

The facts are as follows:

Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN ENGLISH, Series 1.

Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled "DEVELOPING ENGLISH PROFICIENCY" (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them.

In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET.

141

After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondent's book are similar, if not all together a copy of petitioners' book, which is a case of plagiarism and copyright infringement.

Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the general public the infringed copies of respondent Robles' works.

However, respondents ignored the demands, hence, on July 7, 1988; petitioners filed with the Regional Trial Court, Makati, a complaint for "Infringement and/or unfair competition with damages" 4 against private respondents. 5

In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the contents of petitioners' works, and without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely affected and substantially diminished the sale of the petitioners' book and caused them actual damages by way of unrealized income.

Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its publication and sale.

Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and caused to be published by respondent Robles with obvious connivance with one another.

On July 27, 1988, respondent Robles filed a motion for a bill of particulars 6 which the trial court approved on August 17, 1988. Petitioners complied with the desired particularization, and furnished respondent Robles the specific portions, inclusive of pages and lines, of the published and copyrighted books of the petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way into respondent's book.

On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint 7 and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement

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between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and held the publisher without any liability.

On November 28, 1988, respondent Robles filed her answer 8, and denied the allegations of plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors' exercise of the "right to fair use of copyrigthed materials, as guides."

Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern University. 9

During the pre-trial conference, the parties agreed to a stipulation of facts 10 and for the trial court to first resolve the issue of infringement before disposing of the claim for damages.

After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus:

WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for cost of suit.

IT IS SO ORDERED.

Done in the City of Manila this 23rd day of April, 1993.

(s/t) MARVIE R. ABRAHAM SINGSON

Assisting Judge

S. C. Adm. Order No. 124-92 11

On May 14, 1993, petitioners filed their notice of appeal with the trial court 12, and on July 19, 1993, the court directed its branch clerk of court to forward all the records of the case to the Court of Appeals. 13

143

In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not subject to copyright. Petitioners also assailed the findings of the trial court that they were animated by bad faith in instituting the complaint. 14

On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision state:

It must be noted, however, that similarity of the allegedly infringed work to the author's or proprietor's copyrighted work does not of itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have the same common source, as in this case.

Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from foreign books. She has duly proven that most of the topics or materials contained in her book, with particular reference to those matters claimed by appellants to have been plagiarized were topics or matters appearing not only in appellants and her books but also in earlier books on College English, including foreign books, e.i. Edmund Burke's "Speech on Conciliation", Boerigs' "Competence in English" and Broughton's, "Edmund Burke's Collection."

xxx xxx xxx

Appellant's reliance on the last paragraph on Section II is misplaced. It must be emphasized that they failed to prove that their books were made sources by appellee. 15

The Court of Appeals was of the view that the award of attorneys' fees was not proper, since there was no bad faith on the part of petitioners Habana et al. in instituting the action against respondents.

On July 12, 1997, petitioners filed a motion for reconsideration, 16 however, the Court of Appeals denied the same in a Resolution 17 dated November 25, 1997.

Hence, this petition.

In this appeal, petitioners submit that the appellate court erred in affirming the trial court's decision.

Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of

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respondent when they refused to withdraw the copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writer's right to fair use, in violation of Section 11 of Presidential Decree No. 49. 18

We find the petition impressed with merit.

The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows:

Sec. 177. Copy or Economic rights. — Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts:

177.1 Reproduction of the work or substanlial portion of the work;

177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work;

177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;

177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; (n)

177.5 Public display of the original or copy of the work;

177.6 Public performance of the work; and

177.7 Other communication to the public of the work 19

The law also provided for the limitations on copyright, thus:

Sec. 184.1 Limitations on copyright. — Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright:

(a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49]

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(b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D. 49)

xxx xxx xxx

(e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use:Provided, That the source and the name of the author, if appearing in the work is mentioned; 20

In the above quoted provisions, "work" has reference to literary and artistic creations and this includes books and other literary, scholarly and scientific works. 21

A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET.

On page 404 of petitioners' Book 1 of College English for Today, the authors wrote:

Items in dates and addresses:

He died on Monday, April 15, 1975.

Miss Reyes lives in 214 Taft Avenue,

Manila 22

On page 73 of respondents Book 1 Developing English Today, they wrote:

He died on Monday, April 25, 1975.

Miss Reyes address is 214 Taft Avenue Manila 23

On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus:

The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its

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ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific.

— Edmund Burke, "Speech on Criticism." 24

On page 100 of the book DEP 25, also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not.

In several other pages 26 the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET.

We believe that respondent Robles' act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners' copyrights.

When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished, there is an infringement of copyright and to an injurious extent, the work is appropriated. 27

In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy. 28

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 29

The respondents' claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec 184 of Republic Act 8293 it is provided that:

Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright:

xxx xxx xxx

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(c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned.

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. 30

The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some sections of the books or large segments of the books are the same?

In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the "Author Card". However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration.

The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background.

However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying?

We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners' complaint while pharisaically denying petitioners' demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated.

In cases of infringement, copying alone is not what is prohibited. The copying must produce an "injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners' book materials that were the result of the latter's research work and compilation and misrepresented them as her own. She circulated the book DEP for commercial use did not acknowledged petitioners as her source.

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Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners' work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned.

In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The final product of an author's toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it.

SO ORDERED.

Kapunan and Ynares-Santiago, JJ., concur.

Davide, Jr., C.J., I dissent, please see dissenting opinion.

Melo, J., no part, personal reason.

Separate Opinions

DAVIDE, JR., C.J., dissenting opinion:

I am unable to join the majority view.

From the following factual and procedural antecedents, I find no alternative but to sustain both the trial court and the Court of Appeals.

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On 12 July 1988, HABANA, et al. filed with the trial court a complaint for infringement and unfair competition, with damages against private respondent Felicidad C. Robles (hereafter ROBLES) and her publisher and distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was docketed as Civil Case No. 88-1317.

HABANA, et al. averred in their complaint that they were the co-authors and joint copyright owners of their published works College English for Today, Books 1 and 2 (hereafter CET) and Workbook for College Freshman English, Series 1 1; they discovered that ROBLES' own published works, Developing English Proficiency, Books 1 and 2, (hereafter DEP), published and distributed in 1985, exhibited an uncanny resemblance, if not outright physical similarity, to CET as to content, scheme, sequence of topics and ideas, manner of presentation and illustrative examples; the plagiarism, incorporation and reproduction of particular portions of CET into DEP could not be gainsaid since ROBLES was substantially familiar with CET and the textual asportation was accomplished without their authority and/or consent; ROBLES and GOODWILL jointly misrepresented DEP (over which they shared copyright ownership) "as the former's original published works and concept;" and "notwithstanding formal demands made . . . to cease and desist from the sale and distribution of DEP, [ROBLES and GOODWILL] persistently failed and refused to comply therewith." HABANA et al. then prayed for the court to: (1) order the submission and thereafter the destruction of all copies of DEP, together with the molds, plates, films and other materials used in the printing thereof; (2) require ROBLES and GOODWILL to render an accounting of the sales of the "infringing works from the time of its (sic) inceptive publication up to the time of judgment, as well as the amount of sales and profits . . . derived;" and (3) to enjoin ROBLES and GOODWILL to solidarily pay actual, moral and exemplary damages, as well as attorney's fees and expenses of litigation.

In its Answer, GOODWILL denied culpability since "it had no knowledge or information sufficient to form a belief as to the allegations of plagiarism, incorporation and reproduction" and hence "could not be privy to the same, if (there were) any;" and that in an Agreement with co-defendant ROBLES, the latter would be solely responsible for acts of plagiarism or violations of copyright or any other law, to the extent of answering for any and all damages GOODWILL may suffer. GOODWILL also interposed a compulsory counterclaim against PACITA, et al. and a crossclaim against its co-defendant anchored on the aforementioned Agreement.

In her answer, ROBLES asserted that: (1) DEP was the exclusive product of her independent research, studies and experience; (2) DEP, particularly the segments where the alleged literal similitude appeared, were admittedly influenced or inspired by earlier treatises, mostly by foreign authors; but that "influences and/or inspirations from other writers" like the methodology and techniques as to presentation, teaching concept and design, research and orientation which she employed, fell within the ambit of general information, ideas, principles of general or universal knowledge which were commonly and customarily understood as incapable of private and exclusive use, appropriation or copyright; and (3) her works were the result of the legitimate and reasonable exercise of an author's "right to fair use of even copyrighted materials as [a] guide." She further claimed that her various national and regional professional activities in general education, language

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and literature, as well as her teaching experience in graduate and post graduate education would obviate the remotest possibility of plagiarism.

ROBLES likewise suggested that any similarity between DEP and CET as regards scope and sequence could be attributed to "the orientation of the authors to the scope and sequence or syllabus — which incorporates standards known among English grammar book writers — of the subject-matter for Basic Communication Arts recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was admittedly adopted in DEP, she claimed to have treated quite differently in DEP the very ideas, techniques or principles expressed in CET such that neither textbook could be considered a copy or plagiarism of the other.

At the pre-trial conference, the parties agreed to a stipulation of facts 2 and for the court to first resolve the issue of infringement before disposing of the claims for damages. After trial on the merits, the trial court rendered its decision in favor of defendants, the dispositive portion of which reads:

WHEREFORE, premises considered, the Court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for costs of suit.

IT IS SO ORDERED. 3

Noting that the law applicable to the case was Presidential Decree No. 49, 4 the trial court found that HABANA, et al. failed to discharge their onus of proving that ROBLES and GOODWILL committed acts constituting copyright infringement. Moreover, the trial court found that "the cause of action or acts complained of [were] not covered by said decree" as Section 10 thereof barred authors of works already lawfully made accessible to the public from prohibiting the reproductions, translations, adaptations, recitation and performance of the same, while Section 11 allowed the utilization of reproductions, quotations and excerpts of such works. The trial court thus agreed with ROBLES that "the complained acts [were] of general and universal knowledge and use which plaintiffs cannot claim originality or seek redress to the law for protection" and observed that DEP and CET had the same sources, consisting chiefly of earlier works, mostly foreign books. GOODWILL's crossclaim against ROBLES, counterclaim against HABANA, et al. as well as ROBLES' compulsory counterclaim against GOODWILL were all dismissed for lack of factual and legal bases.

HABANA, et al. appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 44053. Before said court HABANA, et al., in the main, argued that the trial court totally disregarded their evidence and merely subscribed to ROBLES' arguments. The Court of Appeals, however, likewise disposed of the controversy in favor of ROBLES and GOODWILL. 5

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However, the Court of Appeals modified the trial court's decision by reversing the award for attorney's fees. It held that the good faith and sincerity of HABANA, et al. in commencing the action negated the basis therefor. Their motion for reconsideration having been denied for want of cogent reasons, HABANA, et al., instituted this petition. They claim that the Court of Appeals committed reversible error in failing to appreciate: (1) the insuperable evidence and facts admitted and proved demonstrating plagiarism or piracy and instead afforded full weight and credit to ROBLES' matrix of general, hypothetical and sweeping statements and/or defenses; (2) ROBLES' and GOODWILL's animo furandi or intent to appropriate or copy CET with the non-removal of the damaging copies of DEP from the bookstores despite notice to withdraw the same; and (3) the fact that ROBLES abused a writer's right to fair use, in violation of Section 11 of P.D. No. 49. 6 They invoke Laktaw v. Paglinawan 7 which, they theorize is on all fours with the case at bar. ROBLES contends that appeal bycertiorari does not lie in this case for the challenged decision and the trial court's judgment were amply supported by evidence, pertinent laws and jurisprudence. Hence, her counterclaim for moral damages should, therefore, be granted or for us to order the remand of the case to the trial court for reception of evidence on damages. GOODWILL, on its part, stood pat on its disclaimer, with the assertion that no proof was ever introduced. that it co-authored DEP or that it singly or in cabal with ROBLES committed any act constituting copyright infringement.

The core issue then is whether or not the Court of Appeals erred in affirming the trial court's judgment that despite the apparent textual, thematic and sequential similarity between DEP and CET, no copyright was committed by ROBLES and GOODWILL.

While the complaint, in Civil Case No. 88-1317 was filed during the effectivity of P.D. No. 49, the provisions of the new intellectual property law, R.A. No. 8293, 8 nevertheless bears significance here. It took effect on 1 January 1998, but its Section 239.3 clearly states that its provisions shall apply to works in which copyright protection obtained prior to the effectivity of the Act subsists, provided, however, that the application of the Act shall not result in the diminution of such protection. Also, the philosophy behind both statutes as well as the essential principles of copyright protection and copyright infringement have, to a certain extent, remained the same.

A copyright may be accurately defined as the right granted by statute to the proprietor of an intellectual production to its exclusive use and enjoyment to the extent specified in the statute. 9 Under Section 177 of R.A. No. 8293, 10 the copy or economic right (copyright and economic right are used interchangeably in the statute) consists of the exclusive right to carry out, authorize or prevent the following acts:

177.1 Reproduction of the work or substantial portion of the work;

177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;

177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;

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177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental;

177.5 Public display of the original or a copy of the work;

177.6 Public performance of the work; and

177.7 Other communication to the public of the work.

"The work," as repeatedly mentioned, refers to the literary and artistic works defined as original intellectual creations in the literary and artistic domain protected from the moment of their creation and enumerated in Section 172.1, which includes books and other literary, scholarly, scientific and artistic works. 11

Stripped in the meantime of its indisputable social and beneficial functions, 12 the use of intellectual property or creations should basically promote the creator or author's personal and economic gain. Hence, the copyright protection extended to the creator should ensure his attainment of some form of personal satisfaction and economic reward from the work he produced. Without conceding the suitability of Laktaw as precedent, the Court there quoted Manresa and explained:

He who writes a book, or carves a statute, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of the land has the absolute right to sell it or its fruits. But while the owner of the land, by selling it and its fruits, perhaps fully realizes all its economic value, by receiving its benefits and utilities, which are represented for example, by the price, on the other hand the author of a book, statue or invention does not reap all the benefits and advantages of his own property by disposing of it, for the most important form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies, everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort made in the production of the book is in no way rewarded. 13

The execution, therefore, of any one or more of the exclusive rights conferred by law on a copyright owner, without his consent, constitutes copyright infringement. In essence, copyright infringement, known in general as "piracy," is a trespass on a domain owned and occupied by a copyright owner; it is violation of a private right protected by law. 14 With the invasion of his property rights, a copyright owner is naturally entitled to seek redress, enforce and hold accountable the defrauder or usurper of said economic rights.

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Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA et al. by publishing DEP, which the latter alleged to be a reproduction, or in the least, a substantial reproduction of CET? Both the trial court and respondent court found in the negative. I submit they were correct.

To constitute infringement, the usurper must have copied or appropriated the "original" work of an author or copyright proprietor; 15 absent copying, there can be no infringement of copyright. 16 In turn, a work is deemed by law an original if the author created it by his own skill, labor and judgment. 17 On its part, a copy is that which comes so near to the original so as to give to every person seeing it the idea created by the original. It has been held that the test of copyright infringement is whether an ordinary observer comparing the works can readily see that one has been copied from the other. 18 A visual comparison of the portions of CET 19 juxtaposed against certain pages of DEP, 20 would inescapably lead to a conclusion that there is a discernible similarity between the two; however, as correctly assessed by respondent court and the lower court, no conclusion, can be drawn that DEP, in legal contemplation, is a copy of CET.

Was DEP a substantial reproduction of CET? To constitutes a substantial reproduction, it is not necessary that the entire copyrighted work, or even a large portion of it, be copied, if so much is taken that the value of the original is substantially diminished, or if the labors of the original author are substantially, and to an injurious extent, appropriated. 21 But the similarity of the books here does not amount to an appropriation of a substantial portion of CET. If the existence of substantial similarities does not of itself establish infringement, 22 mere similarities (not substantial similarities) in some sections of the books in question decisively militate against a claim for infringement where the similarities had been convincingly established as proceeding from a number of reasons and/or factors.

1. As both books are grammar books, they inevitably deal with the same subjects typically and ordinarily treated by writers of such genre, 23 e.g., system of book classification, the different kinds of card catalogs and their entries, use of punctuation marks, paragraphs, the characteristics of an effective paragraph, language structure, different parts of a book, etc. These standard subjects fall within the domain of ideas, concepts, universal and general knowledge that have, as admitted by the protagonists here, been in existence for quite a long time. 24 As such, HABANA, et al. cannot demand monopoly, by way of example, in the use of the recognized library classification systems (Dewey Decimal System and the Library of Congress System), or how a book can be divided into parts (frontispiece, title page, copyright page, preface, table of contents, etc.) or to the different headings used in a card catalogue (title card, author card and subject card), since these are of common or general knowledge. Even in this jurisdiction, no protection can be extended to such an idea, procedure, system method or operation, concept, principle, discovery or mere data, even if expressed, explained, illustrated or embodied in a work. 25

2. As found by respondent court, CET and DEP had common sources and materials, 26 such that the particular portions claimed to have been lifted and literally reproduced also appeared in earlier works, mostly by foreign authors. This is clear from the testimony of petitioner Dr. Pacita Habana:

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Q Let's clarify your position Dra. Habana. When defendants test (sic) showed 10 words similar to yours, you so concluded it was (sic) copied from yours but when I pointed out to you same (sic) words contained in the earlier book of Wills then you earlier in your test in your book (sic) you refused to admit that it was copied from Wills.

A Yes, sir. We have never — all 35 words were copied from there.

Q But what I am asking how could you conclude that by just similarity of 10 words of defendants words that was copied from yours [sic] and when I point out to you the similarity of that same words from the words earlier than yours (sic) you refused to admit that you copied?

A I would like to change the final statement now that in the case of defendant Robles you pointed out her source very clear. She copied it from that book by Wills.

Q So, she did not copy it from yours?

A Alright, maybe she did not copy it but definitely it is a pattern of plagerism [sic]. 27

3. Similarity in orientation and style can likewise be attributed to the exposure of the authors to the APCAS syllabus and their respective academic experience, teaching approaches and methodology. It is not farfetched that they could have even influenced each other as textbook writers. ROBLES and Dr. Pacita Habana were faculty members of the Institute of English of the Far Eastern University from 1964 to 1974. 28 Both were ardent students, researchers, lecturers, textbook writers and teachers of English and grammar. They even used to be on friendly terms with each other, to the extent that Dr. Habana admitted that ROBLES assisted the former in the preparation of her doctoral dissertation. Given their near-identical academic and professional background, it is natural they would use many expressions and definitions peculiar to teaching English grammar. It comes therefore with no surprise that there are similarities in some parts of the rival books. Indeed, it is difficult to conceive how writers on the same subject matter can very well avoid resorting to common sources of information and materials and employing similar expressions and terms peculiar to the subject they are treating. 29

To illustrate, an excerpt from page 21 of CET reads:

Author Card

The author card is the main entry card. It contains

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1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living;

2. the title of the book, and the subtitle, if there is one;

3. the edition, if it is not the first;

4. the translator or illustrator, if there is any;

5. the imprint which includes the publisher, the place and date of publication;

6. the collation composed of the number of pages, volume, illustrations, and the size of the book;

7. the subjects with which the book deals [sic];

8. the call number on the upper left-hand corner.

Names beginning with Mc, or M are filed in the card catalog as though spelled out as MAC, for example Mc Graw — MacGraw. The same is true of St. and Saint.

While a portion of DEP found on page 18 which discusses the author card provides:

The author card is the main entry card containing:

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living;

2. the title of the book, and the subtitle if there is one;

3. the edition, if it is not the first;

4. the translator or illustrator, if any;

5. the imprint which includes the publisher, the place and date of publication;

6. the collation, composed of the number of pages, volume, illustrations, and the size of the book;

7. the subject with which the book deals; and

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8. the call number on the upper-left hand corner.

Names beginning with MC, or M are filed in the card catalog considered spelled out as MAC, for example: Mcleod-Macleod. This is true also of St. and Saint.

The entries found in an author card, having been developed over quite sometime, are expectedly uniform. Hence, HABANA et al. and ROBLES would have no choice but to articulate the terms particular to the entries in an identical manner.

I thus find that the ruling of the respondent court is totally supported by the evidence on record. Of doctrinal persuasion is the principle that factual determinations of the Court of Appeals and the trial court are conclusive and binding upon this Court, and the latter will not, as a rule, disturb these findings unless compelling and cogent reasons necessitate a reexamination, if not a reversal, of the same. 30 Tested against this jurisprudential canon, to subject the challenged decision of the Court of Appeals to further scrutiny would be superfluous, if not, improvident.

I am not persuaded by the claim of HABANA, et al. that Laktaw is on all fours with and hence applicable to the case at bar. There, this Court disposed that defendant, without the consent of and causing irreparable damage to Laktaw, reproduced the latter's literary work Diccionario Hisapano-Tagalog, and improperly copied the greater part thereof in the work Diccionariong Kastila-Tagalog published by defendant, in violation of Article 7 of the Law of 10 January 1879 on Intellectual Property. This Court anchored its decision on the following observations:

(1) [O] the 23,560 Spanish words in the defendant's dictionary . . . only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words;

(2) [T]he defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different meanings in Tagalog, given in plaintiffs dictionary, having reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are numerous. . .;

(3) [T]he printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in Tagalog from the plaintiff's dictionary. 31

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Plainly, the rationale in Laktaw does not apply in this case. First, aside from an isolated accounting of the number of words supposedly usurped in a segment of DEP from CET, 32 the records do not disclose that all the words allegedly copied were tallied and that the words thus tallied were numerous enough to support a finding of copying. Second, as already conceded, while there is an identity in the manner by which some of the ideas and concepts were articulated, this prescinded from various factors already elucidated. Besides, ROBLES' testimony that she made an independent investigation or research of the original works or authors she consulted was unrebutted; 33 for germane here is the question of whether the alleged infringer could have obtained the same information by going to the same source by her own independent research. 34ROBLES convinced the trial court and the Court of Appeals on this; thus, we are bound by this factual determination, as likewise explained earlier. Third, reproduction of the printer's errors or the author's blunders and inaccuracies in the infringing copy does not ipso facto constitute copying or plagiarism or infringement, but it is conceded that they are telltale signs that infringement might have been committed. 35 However, the records do not reveal this to be the case. Fourth, the law on intellectual property violated in Laktaw was a world and time apart from R.A. No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January 1879, the Court ruled that nobody could reproduce another person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof. The more recent laws on intellectual property, however, recognize recent advancements in technology transfer and information dissemination. They thus allow the use of copyrighted materials if compatible with fair use and to the extent justified for the purpose. In particular, the new laws sanction the fair use of copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research and similar purposes. 36 Further, the limitations of the exclusive use of copyrighted materials under Sections 10 and 11 of P.D. No. 49 in consonance with the principle of fair use have been reproduced and incorporated in the new law. 37 All told, Laktaw is inapplicable.1âwphi1.nêt

Fair use has been defined as a privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as copying the theme or ideas rather than their expression. 38 No question of fair or unfair use arises however, if no copying is proved to begin with. This is in consonance with the principle that there can be no infringement if there was no copying. 39 It is only where some form of copying has been shown that it becomes necessary to determine whether it has been carried to an "unfair," that is, illegal, extent. 40 Consequently, there is no reason to address the issue of whether ROBLES abused a writer's right to fair use with the ascertainment that DEP was not a copy or a substantial copy of CET.

WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged decision of 27 June 1997 of the Court of Appeals.

Separate Opinions

DAVIDE, JR., C.J., dissenting opinion:

I am unable to join the majority view.

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From the following factual and procedural antecedents, I find no alternative but to sustain both the trial court and the Court of Appeals.

On 12 July 1988, HABANA, et al. filed with the trial court a complaint for infringement and unfair competition, with damages against private respondent Felicidad C. Robles (hereafter ROBLES) and her publisher and distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was docketed as Civil Case No. 88-1317.

HABANA, et al. averred in their complaint that they were the co-authors and joint copyright owners of their published works College English for Today, Books 1 and 2 (hereafter CET) and Workbook for College Freshman English, Series 1 1; they discovered that ROBLES' own published works, Developing English Proficiency, Books 1 and 2, (hereafter DEP), published and distributed in 1985, exhibited an uncanny resemblance, if not outright physical similarity, to CET as to content, scheme, sequence of topics and ideas, manner of presentation and illustrative examples; the plagiarism, incorporation and reproduction of particular portions of CET into DEP could not be gainsaid since ROBLES was substantially familiar with CET and the textual asportation was accomplished without their authority and/or consent; ROBLES and GOODWILL jointly misrepresented DEP (over which they shared copyright ownership) "as the former's original published works and concept;" and "notwithstanding formal demands made . . . to cease and desist from the sale and distribution of DEP, [ROBLES and GOODWILL] persistently failed and refused to comply therewith." HABANA et al. then prayed for the court to: (1) order the submission and thereafter the destruction of all copies of DEP, together with the molds, plates, films and other materials used in the printing thereof; (2) require ROBLES and GOODWILL to render an accounting of the sales of the "infringing works from the time of its (sic) inceptive publication up to the time of judgment, as well as the amount of sales and profits . . . derived;" and (3) to enjoin ROBLES and GOODWILL to solidarily pay actual, moral and exemplary damages, as well as attorney's fees and expenses of litigation.

In its Answer, GOODWILL denied culpability since "it had no knowledge or information sufficient to form a belief as to the allegations of plagiarism, incorporation and reproduction" and hence "could not be privy to the same, if (there were) any;" and that in an Agreement with co-defendant ROBLES, the latter would be solely responsible for acts of plagiarism or violations of copyright or any other law, to the extent of answering for any and all damages GOODWILL may suffer. GOODWILL also interposed a compulsory counterclaim against PACITA, et al. and a crossclaim against its co-defendant anchored on the aforementioned Agreement.

In her answer, ROBLES asserted that: (1) DEP was the exclusive product of her independent research, studies and experience; (2) DEP, particularly the segments where the alleged literal similitude appeared, were admittedly influenced or inspired by earlier treatises, mostly by foreign authors; but that "influences and/or inspirations from other writers" like the methodology and techniques as to presentation, teaching concept and design, research and orientation which she employed, fell within the ambit of general information, ideas, principles of general or universal knowledge which were commonly and customarily understood as incapable of private and exclusive use, appropriation or

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copyright; and (3) her works were the result of the legitimate and reasonable exercise of an author's "right to fair use of even copyrighted materials as [a] guide." She further claimed that her various national and regional professional activities in general education, language and literature, as well as her teaching experience in graduate and post graduate education would obviate the remotest possibility of plagiarism.

ROBLES likewise suggested that any similarity between DEP and CET as regards scope and sequence could be attributed to "the orientation of the authors to the scope and sequence or syllabus — which incorporates standards known among English grammar book writers — of the subject-matter for Basic Communication Arts recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was admittedly adopted in DEP, she claimed to have treated quite differently in DEP the very ideas, techniques or principles expressed in CET such that neither textbook could be considered a copy or plagiarism of the other.

At the pre-trial conference, the parties agreed to a stipulation of facts 2 and for the court to first resolve the issue of infringement before disposing of the claims for damages. After trial on the merits, the trial court rendered its decision in favor of defendants, the dispositive portion of which reads:

WHEREFORE, premises considered, the Court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for costs of suit.

IT IS SO ORDERED. 3

Noting that the law applicable to the case was Presidential Decree No. 49, 4 the trial court found that HABANA, et al. failed to discharge their onus of proving that ROBLES and GOODWILL committed acts constituting copyright infringement. Moreover, the trial court found that "the cause of action or acts complained of [were] not covered by said decree" as Section 10 thereof barred authors of works already lawfully made accessible to the public from prohibiting the reproductions, translations, adaptations, recitation and performance of the same, while Section 11 allowed the utilization of reproductions, quotations and excerpts of such works. The trial court thus agreed with ROBLES that "the complained acts [were] of general and universal knowledge and use which plaintiffs cannot claim originality or seek redress to the law for protection" and observed that DEP and CET had the same sources, consisting chiefly of earlier works, mostly foreign books. GOODWILL's crossclaim against ROBLES, counterclaim against HABANA, et al. as well as ROBLES' compulsory counterclaim against GOODWILL were all dismissed for lack of factual and legal bases.

HABANA, et al. appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 44053. Before said court HABANA, et al., in the main, argued that the trial court totally disregarded their evidence and merely subscribed to ROBLES' arguments. The Court of

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Appeals, however, likewise disposed of the controversy in favor of ROBLES and GOODWILL. 5

However, the Court of Appeals modified the trial court's decision by reversing the award for attorney's fees. It held that the good faith and sincerity of HABANA, et al. in commencing the action negated the basis therefor. Their motion for reconsideration having been denied for want of cogent reasons, HABANA, et al., instituted this petition. They claim that the Court of Appeals committed reversible error in failing to appreciate: (1) the insuperable evidence and facts admitted and proved demonstrating plagiarism or piracy and instead afforded full weight and credit to ROBLES' matrix of general, hypothetical and sweeping statements and/or defenses; (2) ROBLES' and GOODWILL's animo furandi or intent to appropriate or copy CET with the non-removal of the damaging copies of DEP from the bookstores despite notice to withdraw the same; and (3) the fact that ROBLES abused a writer's right to fair use, in violation of Section 11 of P.D. No. 49. 6 They invoke Laktaw v. Paglinawan 7 which, they theorize is on all fours with the case at bar. ROBLES contends that appeal bycertiorari does not lie in this case for the challenged decision and the trial court's judgment were amply supported by evidence, pertinent laws and jurisprudence. Hence, her counterclaim for moral damages should, therefore, be granted or for us to order the remand of the case to the trial court for reception of evidence on damages. GOODWILL, on its part, stood pat on its disclaimer, with the assertion that no proof was ever introduced. that it co-authored DEP or that it singly or in cabal with ROBLES committed any act constituting copyright infringement.

The core issue then is whether or not the Court of Appeals erred in affirming the trial court's judgment that despite the apparent textual, thematic and sequential similarity between DEP and CET, no copyright was committed by ROBLES and GOODWILL.

While the complaint, in Civil Case No. 88-1317 was filed during the effectivity of P.D. No. 49, the provisions of the new intellectual property law, R.A. No. 8293, 8 nevertheless bears significance here. It took effect on 1 January 1998, but its Section 239.3 clearly states that its provisions shall apply to works in which copyright protection obtained prior to the effectivity of the Act subsists, provided, however, that the application of the Act shall not result in the diminution of such protection. Also, the philosophy behind both statutes as well as the essential principles of copyright protection and copyright infringement have, to a certain extent, remained the same.

A copyright may be accurately defined as the right granted by statute to the proprietor of an intellectual production to its exclusive use and enjoyment to the extent specified in the statute. 9 Under Section 177 of R.A. No. 8293, 10 the copy or economic right (copyright and economic right are used interchangeably in the statute) consists of the exclusive right to carry out, authorize or prevent the following acts:

177.1 Reproduction of the work or substantial portion of the work;

177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;

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177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;

177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental;

177.5 Public display of the original or a copy of the work;

177.6 Public performance of the work; and

177.7 Other communication to the public of the work.

"The work," as repeatedly mentioned, refers to the literary and artistic works defined as original intellectual creations in the literary and artistic domain protected from the moment of their creation and enumerated in Section 172.1, which includes books and other literary, scholarly, scientific and artistic works. 11

Stripped in the meantime of its indisputable social and beneficial functions, 12 the use of intellectual property or creations should basically promote the creator or author's personal and economic gain. Hence, the copyright protection extended to the creator should ensure his attainment of some form of personal satisfaction and economic reward from the work he produced. Without conceding the suitability of Laktaw as precedent, the Court there quoted Manresa and explained:

He who writes a book, or carves a statute, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of the land has the absolute right to sell it or its fruits. But while the owner of the land, by selling it and its fruits, perhaps fully realizes all its economic value, by receiving its benefits and utilities, which are represented for example, by the price, on the other hand the author of a book, statue or invention does not reap all the benefits and advantages of his own property by disposing of it, for the most important form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies, everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort made in the production of the book is in no way rewarded. 13

The execution, therefore, of any one or more of the exclusive rights conferred by law on a copyright owner, without his consent, constitutes copyright infringement. In essence, copyright infringement, known in general as "piracy," is a trespass on a domain owned and

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occupied by a copyright owner; it is violation of a private right protected by law. 14 With the invasion of his property rights, a copyright owner is naturally entitled to seek redress, enforce and hold accountable the defrauder or usurper of said economic rights.

Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA et al. by publishing DEP, which the latter alleged to be a reproduction, or in the least, a substantial reproduction of CET? Both the trial court and respondent court found in the negative. I submit they were correct.

To constitute infringement, the usurper must have copied or appropriated the "original" work of an author or copyright proprietor; 15 absent copying, there can be no infringement of copyright. 16 In turn, a work is deemed by law an original if the author created it by his own skill, labor and judgment. 17 On its part, a copy is that which comes so near to the original so as to give to every person seeing it the idea created by the original. It has been held that the test of copyright infringement is whether an ordinary observer comparing the works can readily see that one has been copied from the other. 18 A visual comparison of the portions of CET 19 juxtaposed against certain pages of DEP, 20 would inescapably lead to a conclusion that there is a discernible similarity between the two; however, as correctly assessed by respondent court and the lower court, no conclusion, can be drawn that DEP, in legal contemplation, is a copy of CET.

Was DEP a substantial reproduction of CET? To constitutes a substantial reproduction, it is not necessary that the entire copyrighted work, or even a large portion of it, be copied, if so much is taken that the value of the original is substantially diminished, or if the labors of the original author are substantially, and to an injurious extent, appropriated. 21 But the similarity of the books here does not amount to an appropriation of a substantial portion of CET. If the existence of substantial similarities does not of itself establish infringement, 22 mere similarities (not substantial similarities) in some sections of the books in question decisively militate against a claim for infringement where the similarities had been convincingly established as proceeding from a number of reasons and/or factors.

1. As both books are grammar books, they inevitably deal with the same subjects typically and ordinarily treated by writers of such genre, 23 e.g., system of book classification, the different kinds of card catalogs and their entries, use of punctuation marks, paragraphs, the characteristics of an effective paragraph, language structure, different parts of a book, etc. These standard subjects fall within the domain of ideas, concepts, universal and general knowledge that have, as admitted by the protagonists here, been in existence for quite a long time. 24 As such, HABANA, et al. cannot demand monopoly, by way of example, in the use of the recognized library classification systems (Dewey Decimal System and the Library of Congress System), or how a book can be divided into parts (frontispiece, title page, copyright page, preface, table of contents, etc.) or to the different headings used in a card catalogue (title card, author card and subject card), since these are of common or general knowledge. Even in this jurisdiction, no protection can be extended to such an idea, procedure, system method or operation, concept, principle, discovery or mere data, even if expressed, explained, illustrated or embodied in a work. 25

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2. As found by respondent court, CET and DEP had common sources and materials, 26 such that the particular portions claimed to have been lifted and literally reproduced also appeared in earlier works, mostly by foreign authors. This is clear from the testimony of petitioner Dr. Pacita Habana:

Q Let's clarify your position Dra. Habana. When defendants test (sic) showed 10 words similar to yours, you so concluded it was (sic) copied from yours but when I pointed out to you same (sic) words contained in the earlier book of Wills then you earlier in your test in your book (sic) you refused to admit that it was copied from Wills.

A Yes, sir. We have never — all 35 words were copied from there.

Q But what I am asking how could you conclude that by just similarity of 10 words of defendants words that was copied from yours [sic] and when I point out to you the similarity of that same words from the words earlier than yours (sic) you refused to admit that you copied?

A I would like to change the final statement now that in the case of defendant Robles you pointed out her source very clear. She copied it from that book by Wills.

Q So, she did not copy it from yours?

A Alright, maybe she did not copy it but definitely it is a pattern of plagerism [sic]. 27

3. Similarity in orientation and style can likewise be attributed to the exposure of the authors to the APCAS syllabus and their respective academic experience, teaching approaches and methodology. It is not farfetched that they could have even influenced each other as textbook writers. ROBLES and Dr. Pacita Habana were faculty members of the Institute of English of the Far Eastern University from 1964 to 1974. 28 Both were ardent students, researchers, lecturers, textbook writers and teachers of English and grammar. They even used to be on friendly terms with each other, to the extent that Dr. Habana admitted that ROBLES assisted the former in the preparation of her doctoral dissertation. Given their near-identical academic and professional background, it is natural they would use many expressions and definitions peculiar to teaching English grammar. It comes therefore with no surprise that there are similarities in some parts of the rival books. Indeed, it is difficult to conceive how writers on the same subject matter can very well avoid resorting to common sources of information and materials and employing similar expressions and terms peculiar to the subject they are treating. 29

To illustrate, an excerpt from page 21 of CET reads:

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Author Card

The author card is the main entry card. It contains

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living;

2. the title of the book, and the subtitle, if there is one;

3. the edition, if it is not the first;

4. the translator or illustrator, if there is any;

5. the imprint which includes the publisher, the place and date of publication;

6. the collation composed of the number of pages, volume, illustrations, and the size of the book;

7. the subjects with which the book deals [sic];

8. the call number on the upper left-hand corner.

Names beginning with Mc, or M are filed in the card catalog as though spelled out as MAC, for example Mc Graw — MacGraw. The same is true of St. and Saint.

While a portion of DEP found on page 18 which discusses the author card provides:

The author card is the main entry card containing:

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living;

2. the title of the book, and the subtitle if there is one;

3. the edition, if it is not the first;

4. the translator or illustrator, if any;

5. the imprint which includes the publisher, the place and date of publication;

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6. the collation, composed of the number of pages, volume, illustrations, and the size of the book;

7. the subject with which the book deals; and

8. the call number on the upper-left hand corner.

Names beginning with MC, or M are filed in the card catalog considered spelled out as MAC, for example: Mcleod-Macleod. This is true also of St. and Saint.

The entries found in an author card, having been developed over quite sometime, are expectedly uniform. Hence, HABANA et al. and ROBLES would have no choice but to articulate the terms particular to the entries in an identical manner.

I thus find that the ruling of the respondent court is totally supported by the evidence on record. Of doctrinal persuasion is the principle that factual determinations of the Court of Appeals and the trial court are conclusive and binding upon this Court, and the latter will not, as a rule, disturb these findings unless compelling and cogent reasons necessitate a reexamination, if not a reversal, of the same. 30 Tested against this jurisprudential canon, to subject the challenged decision of the Court of Appeals to further scrutiny would be superfluous, if not, improvident.

I am not persuaded by the claim of HABANA, et al. that Laktaw is on all fours with and hence applicable to the case at bar. There, this Court disposed that defendant, without the consent of and causing irreparable damage to Laktaw, reproduced the latter's literary work Diccionario Hisapano-Tagalog, and improperly copied the greater part thereof in the work Diccionariong Kastila-Tagalog published by defendant, in violation of Article 7 of the Law of 10 January 1879 on Intellectual Property. This Court anchored its decision on the following observations:

(1) [O] the 23,560 Spanish words in the defendant's dictionary . . . only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words;

(2) [T]he defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different meanings in Tagalog, given in plaintiffs dictionary, having reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are numerous. . .;

(3) [T]he printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog are also

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reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in Tagalog from the plaintiff's dictionary. 31

Plainly, the rationale in Laktaw does not apply in this case. First, aside from an isolated accounting of the number of words supposedly usurped in a segment of DEP from CET, 32 the records do not disclose that all the words allegedly copied were tallied and that the words thus tallied were numerous enough to support a finding of copying. Second, as already conceded, while there is an identity in the manner by which some of the ideas and concepts were articulated, this prescinded from various factors already elucidated. Besides, ROBLES' testimony that she made an independent investigation or research of the original works or authors she consulted was unrebutted; 33 for germane here is the question of whether the alleged infringer could have obtained the same information by going to the same source by her own independent research. 34ROBLES convinced the trial court and the Court of Appeals on this; thus, we are bound by this factual determination, as likewise explained earlier. Third, reproduction of the printer's errors or the author's blunders and inaccuracies in the infringing copy does not ipso facto constitute copying or plagiarism or infringement, but it is conceded that they are telltale signs that infringement might have been committed. 35 However, the records do not reveal this to be the case. Fourth, the law on intellectual property violated in Laktaw was a world and time apart from R.A. No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January 1879, the Court ruled that nobody could reproduce another person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof. The more recent laws on intellectual property, however, recognize recent advancements in technology transfer and information dissemination. They thus allow the use of copyrighted materials if compatible with fair use and to the extent justified for the purpose. In particular, the new laws sanction the fair use of copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research and similar purposes. 36 Further, the limitations of the exclusive use of copyrighted materials under Sections 10 and 11 of P.D. No. 49 in consonance with the principle of fair use have been reproduced and incorporated in the new law. 37 All told, Laktaw is inapplicable.

Fair use has been defined as a privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as copying the theme or ideas rather than their expression. 38 No question of fair or unfair use arises however, if no copying is proved to begin with. This is in consonance with the principle that there can be no infringement if there was no copying. 39 It is only where some form of copying has been shown that it becomes necessary to determine whether it has been carried to an "unfair," that is, illegal, extent. 40 Consequently, there is no reason to address the issue of whether ROBLES abused a writer's right to fair use with the ascertainment that DEP was not a copy or a substantial copy of CET.1âwphi1.nêt

WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged decision of 27 June 1997 of the Court of Appeals.

Footnotes

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1 Rule 45, 1997 Rules of Civil Procedure.

2 In CA-G. R. CV No. 44053, promulgated on June 27, 1997, J. Tuquero, ponente, JJ. Luna and Hofilena, concurring,Rollo, pp. 28-35.

3 Rollo, p. 43.

4 Original Record Vol. I, Complaint, pp. 1-7.

5 Docketed as Civil Case No. 88-1317 and assigned to Branch 36.

6 Original Record Vol. I, Motion for Bill of Particulars, pp. 30-31.

7 Ibid, Answer, pp. 33-39.

8 Original Record, Vol. I, Answer, pp. 134-139.

9 Ibid., pp. 137-138.

10 Ibid., pp. 205-206.

11 Original Record, Vol. I, Judgment, pp. 415-435.

12 Ibid., Notice of Appeal, p. 436.

13 Docketed as CA-G.R. CV No. 44053.

14 CA Rollo, Brief for Plaintiffs-Appellants Pacita I. Habana, Alicia L. Cinco and Pacita N. Fernando, pp. 41-90, 47, 48, 49.

15 Decision, by Justice Artemio G. Tuquero, ponente, concurred in by J. Artemon D. Luna and J. Hector L. Hofilena, CA Rollo, p. 6.

16 CA Rollo, pp. 198-203.

17 Ibid., p. 236.

18 Rollo, Petition, p. 10.

19 Intellectual Property Code of the Philippines (Republic Act No. 8293), p. 51.

20 Intellectual Property Code of the Philippines, Republic Act No. 8293, pp. 55-56.

21 Sec. 172, Intellectual Property Code of the Philippines.

22 Volume I, Original Record, Exh. S-1, p. 211.

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23 Ibid., Exh. S-2, p. 215.

24 Volume 1, Original Record, Annex "Z", p. 89.

25 Ibid, Annex "V" p. 111.

26 Page 24 of CET as to examples 2, 9, 11, and 14 also found on p. 33 of DEP; similarity in technique and presentation on page 15 of CET and page 27 of DEP; on page 18, 20 and 21 of CET and page 29 of DEP; on page 74 of CET and page 86 of DEP, Original Record, Volume 1, Exhibits pp. 73, 91, 93, 96 and 97.

27 18 Am Jur 2D 104 citing Mazer v. Stein, 347 US 218, 98 L ed 630, 74 S Ct 460, reh den 347 US 949, 98 L ed 1096, 74 S Ct 637 [1953].

28 Columbia Pictures Inc. vs. Court of Appeals, 261 SCRA 144, 184, citing 18 CJS, Copyright and Literary Property, Sec 94, 217, 218.

29 18 CJS, Copyright and Literary Property, Sec. 90, 212; 18 Am Jur 2D, Copyright and Literary Property, Sec. 106, 391-392.

30 Ibid.

DAVIDE, JR., C.J., dissenting opinion;

1 Original Record (OR), 10-12. The certificates of copyright registration for the three books were dated 3 August 1976, 13 October 1977 and 17 July 1973, respectively.

2 OR, 205-206.

3 OR, 415-435. The decision was rendered by Marvie R. Abraham Singson, Assisting Judge per S.C. Adm. Order No. 124-92.

4 Entitled Decree on the Protection of Intellectual Property, promulgated on 14 November 1972.

5 Per Associate Justice Artemio Tuquero, J.; with Artemon D. Luna and Hector L. Hofilena, JJ., concurring.

6 Sec. 11. To an extend (sic) compatible with fair practice and justified by the scientific, critical, informatory or educational purpose, it shall be permissible to make quotations or excerpts from a work already lawfully made accessible to the public. Such quotations may be utilized in their original form or in translation.

News items, editorials, and articles on current political, social, economic, scientific or religious topic may be reproduced by the press or broadcast, unless they contain

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or are accompanied by a notice that their reproduction or publication is reserved. In case of musical works, parts of little extent may also be reproduced.

Quotations and excerpts as well as reproductions shall always be accompanied by an acknowledgment of the source and name of author, if his name appears thereon.

7 44 Phil 855 [1918].

8 Entitled An Act Prescribing the Intellectual Property Code and Establishing the Intellectual Property Office, Providing for its Powers and Functions, and For Other Purposes.

9 18 C.J.S. Copyright and Literary Property §1 (hereafter 18 C.J.S.).

10 Similar rights were granted under P.D. No. 49, thus:

Sec. 5. Copyright shall consist in the exclusive right:

(A) To print, reprint, publish, copy, distribute, multiply, sell and make photographs, photo-engravings, and pictorial illustrations of the works;

(B) To make any translation or other version or extracts or arrangements or adaptations thereof; to dramatize it if it be a non-dramatic work; to convert it into a non-dramatic work if it be a drama; to complete or execute it if it be a model or design;

(C) To exhibit, perform, represent, produce, or reproduce the work in any manner or by any method whatever for profit or otherwise; if not reproduced in copies for sale, to sell any manuscript or any record whatsoever thereof;

(D) To make any other use or disposition of the work consistent with the laws of the land.

11 Sec. 172. Literary and Artistic Works. — 172.1 Literary and artistic works, hereinafter referred to as "works," are original intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular:

(a) Books, pamphlets, articles and other writings;

(b) Periodicals and newspapers;

(c) Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not reduced in writing or other material form;

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(d) Letters;

(e) Dramatic or dramatico-musical compositions; choreographic works or entertainment in dumb shows;

(d) Musical compositions, with or without words;

(g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other works of art; models or designs for works of art;

(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design, and other works of applied art;

(i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to geography, topography, architecture or science;

(j) Drawings or plastic works of a scientific or technical character;

(k) Photographic works including works produced by a process analogous to photography; lantern slides;

(l) Audiovisual works and cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings;

(m) Pictorial illustrations and advertisements;

(n) Computer programs; and

(o) Other literary, scholarly, scientific and artistic works.

12 The use of intellectual property bears a social function. To this end, the State shall promote the diffusion of knowledge and information for the promotion of national development and progress and the common good. (Section 2 of RA 8293) Further, the social interest in copyright lies in the adjustment of two objectives: the encouraging of individuals to intellectual labor by assuring them of just rewards, and by securing to society of the largest benefits of their products. The history of the concept reflects our progress in the mechanical communications, our ideas of property and the functions of the state, and our changing social ethics. 2 ARTURO M. TOLENTINO, THE CIVIL CODE OF THE PHILIPPINES 517 [1992].

13 Supra note 7 at 864-865.

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14 See Columbia Pictures, Inc. v. Court of Appeals, 261 SCRA 144, 183-184 [1996] citing 18 C.J.S. §90; 18 AM JUR 2D, Copyright and Literary Property, §106 (hereinafter 18 AM JUR 2D).

15 See 18 AM JUR 2D §101 citing Weitzenkorn v. Lesser, 40 Cal 2d 778, 256 P2d 947 [1953]. The test of originality is not whether the work was entirely new, but whether it was the result of independent effort or copying. 18 AM JUR 2D § 101 citing Sheldon v. Metro-Goldwyn Pictures Corp., (CA2 NY) 81 F2d 49, cert den 298 US 669, 80 L ed 1392, 56 S Ct 835 [1936]; Golding v. R.K.O. Pictures, Inc., 35 Cal 2d 690, 221 P2d 95 [1950].

16 18 AM JUR 2D, § 104 citing Mazer v. Stein, 347 US 218, 98 L ed 630, 74 S Ct 460, reh den 347 US 949, 98 L ed 1096, 74 S Ct 637 [1953].

17 See Dorsey v. Old Surety L. Ins. Co., (CAIO) 98 F2d 872 [1938].

18 Abiva v. Weinberger (C.A.), 62 OG 3784, 3787 [1964] citing 34 CJ.S. §34 and 17 U.S.C.A. §101; Lewis v. Kroger Co., 109 F. Supp. 484 [1952].

19 Exhibits "I" to "I-25" or Annexes "A" to "AA" of the Bill of Particulars.

20 Exhibits "J" to "J-21" or Annexes "BB to WW" of the Bill of Particulars.

21 See 18 AM JUR 2D §108 citing Universal Pictures Co. v. Harold Lloyd Corp., (CA9 Cal) 162 F2d 354 [1947]; Toksvig v. Bruce Pub. Co., (CA7 Wis) 181 F2d 664 [1950]; Sheldon v. Metro-Goldwyn Pictures Corp., supra note 18.

22 Id., citing Twentieth Century-Fox Film Corp. v. Stonesifer, (CA9 Cal) 140 F2d 579 [1944].

23 Similarity of the alleged infringing work to the author's or proprietor's copyrighted work does not of itself establish copyright infringement, if the similarity results from the fact that both works deal with the same subject or have the same common source. 18 AM JUR 2D §107 citing Dorsey v. Old Surety L. Ins. Co., supra note 20.

24 Per testimony of Dr. Pacita Habana — on the system of library classification, TSN, 11 July 1989, 44-45; on the kinds of card catalogue and their entries, TSN, 11 July 1989, 56-58; on different parts of books and their definitions, 59; uses of paragraph; uses of punctuations 75-76; use of phonemes, graphemes and morphemes, 78. Per testimony of Felicidad Robles — TSN, 31 August 1989, 10-22.

25 Sec. 175 of RA 8293.

26 See note 26; See Court of Appeals' decision, 6.

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27 TSN, 1 August 1989, 24-26.

28 TSN, 29 June 1989, 26 — Dr. Pacita Habana entered FEU as faculty member in 1957 and left the same in 1974; TSN, 28 August 1989, 3 — FELICIDAD became a faculty member of FEU in 1964 up to time the testimony was taken.

29 See Simms v. Stanton, C.C. Cal 75 F. 6 [1896].

30 See Gobonseng, Jr. v. Court of Appeals, 246 SCRA 457, 468 [1996].

31 Supra note 10 at 860.

32 TSN, 1 August 1989, 29.

33 Rollo, 159; TSN, 28 August 1989, 23-24.

34 See 18 AM JUR 2D §104 citing Orgel v. Clark Boardman Co., (CA 2 NY) 301 F2d 119, cert den 371 US 817, 9 L ed 2d 58, 83 S Ct 31 [1962]; Eisenschiml v. Fawcett Publications, Inc., (CA7 III) 246 F2d 598, cert den 355 US 907, 2 L ed 262, 78 S Ct 334 [1957]; Toksvig v. Bruce Publishing Co., supra note 24.

35 One of the most significant evidences of infringement exists in the presence, in an alleged infringing work, of the same errors and peculiarities that are to be found in the work said to be infringed. See 18 AM JUR 2D §107 citingCallaghan v. Myers, 128 US 617, 32 L ed 547, 9 S Ct 177 [1888]; W.H. Anderson Co. v. Baldwin Law Pub. Co., (CA6 Ohio) 27 F2d 82 [1928]; Jeweler's Circular Pub. Co. v. Keystone Pub. Co., (CA2) 281 F 83, 26 ALR 571, cert den 259 US 581, 66 L ed 1074, 42 S Ct 464 [1922].

36 See Section 185 of RA 8293.

37 See Sections 184 & 184.1 of RA 8293.

38 See 18 AM JUR 2D §109 citing Toksvig v. Bruce Pub. Co., supra note 24; Bradbury v. Columbia Broadcasting System, Inc., (CA9 Cal) 287 F2d 478, cert den 368 US 801, 7 L ed 2d 15, 82 S Ct 19 [1961]; Shipman v. R.K.O. Radio Pictures, Inc., (CA2 NY) 100 F2d 533 [1938].

39 Supra note 19.

40 18 C.J.S. §94-94b.

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Topic: Infringement

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. 110318 August 28, 1996

COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROTHERS, INC.,petitioners, vs. COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A. PELINDARIO, respondents.

REGALADO, J.:p

Before us is a petition for review on certiorari of the decision of the Court of Appeals 1 promulgated on July 22, 1992 and its resolution2 of May 10, 1993 denying petitioners' motion for reconsideration, both of which sustained the order 3 of the Regional Trial Court, Branch 133, Makati, Metro Manila, dated November 22, 1988 for the quashal of Search Warrant No. 87-053 earlier issued per its own order 4 on September 5, 1988 for violation of Section 56 of Presidential Decree No. 49, as amended, otherwise known as the "Decree on the Protection of Intellectual Property."

The material facts found by respondent appellate court are as follows:

Complainants thru counsel lodged a formal complaint with the National Bureau of Investigation for violation of PD No. 49, as amended, and sought its assistance in their anti-film piracy drive. Agents of the NBI and private researchers made discreet surveillance on various video establishments in Metro Manila including Sunshine Home Video Inc. (Sunshine for brevity), owned and operated by Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila.

On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a quoagainst Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which were

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enumerated in a list attached to the application; and, television sets, video cassettes and/or laser disc recordings equipment and other machines and paraphernalia used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the premises above described. In the hearing of the application, NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo, reiterated in substance his averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar. Atty. Rico V. Domingo's deposition was also taken. On the basis of the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the court a quo.

The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine and/or their representatives. In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by private complainants, and machines, equipment, television sets, paraphernalia, materials, accessories all of which were included in the receipt for properties accomplished by the raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A. Pelindario, registered owner-proprietor of Sunshine Home Video.

On December 16, 1987, a "Return of Search Warrant" was filed with the Court.

A "Motion To Lift the Order of Search Warrant" was filed but was later denied for lack of merit (p. 280, Records).

A Motion for reconsideration of the Order of denial was filed. The court a quo granted the said motion for reconsideration and justified it in this manner:

It is undisputed that the master tapes of the copyrighted films from which the pirated films were allegedly copies (sic), were never presented in the proceedings for the issuance of the search warrants in question. The orders of the Court granting the search warrants and denying the urgent motion to lift order of search warrants were, therefore, issued in error. Consequently, they must be set aside. (p. 13, Appellant's Brief) 5

Petitioners thereafter appealed the order of the trial court granting private respondents' motion for reconsideration, thus lifting the search warrant which it had theretofore issued, to the Court of Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration thereof was denied. Hence, this

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petition was brought to this Court particularly challenging the validity of respondent court's retroactive application of the ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., 6 in dismissing petitioners' appeal and upholding the quashal of the search warrant by the trial court.

I

Inceptively, we shall settle the procedural considerations on the matter of and the challenge to petitioners' legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines.

Private respondents aver that being foreign corporations, petitioners should have such license to be able to maintain an action in Philippine courts. In so challenging petitioners' personality to sue, private respondents point to the fact that petitioners are the copyright owners or owners of exclusive rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of "doing business in the Philippines" under Section 1 (f)(1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the issuance of a search warrant. 7

In refutation, petitioners flatly deny that they are doing business in the Philippines, 8 and contend that private respondents have not adduced evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange Commission, other than averments in the quoted portions of petitioners' "Opposition to Urgent Motion to Lift Order of Search Warrant" dated April 28, 1988 and Atty. Rico V. Domingo's affidavit of December 14, 1987. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of doing business nor establish the presumption of doing business.9

The Corporation Code provides:

Sec. 133. Doing business without a license. — No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

The obtainment of a license prescribed by Section 125 of the Corporation Code is not a condition precedent to the maintenance of any kind of action in Philippine

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courts by a foreign corporation. However, under the aforequoted provision, no foreign corporation shall be permitted to transact business in the Philippines, as this phrase is understood under the Corporation Code, unless it shall have the license required by law, and until it complies with the law intransacting business here, it shall not be permitted to maintain any suit in local courts. 10 As thus interpreted, any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court. It is not the absence of the prescribed license but "doing business" in the Philippines without such license which debars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. Such license is not necessary if it is not engaged in business in the Philippines. 11

Statutory provisions in many jurisdictions are determinative of what constitutes "doing business" or "transacting business" within that forum, in which case said provisions are controlling there. In others where no such definition or qualification is laid down regarding acts or transactions failing within its purview, the question rests primarily on facts and intent. It is thus held that all the combined acts of a foreign corporation in the State must be considered, and every circumstance is material which indicates a purpose on the part of the corporation to engage in some part of its regular business in the State. 12

No general rule or governing principles can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged in the light of its own peculiar environmental circumstances. 13The true tests, however, seem to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. 14

As a general proposition upon which many authorities agree in principle, subject to such modifications as may be necessary in view of the particular issue or of the terms of the statute involved, it is recognized that a foreign corporation is "doing," "transacting," "engaging in," or "carrying on" business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts. 15

The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has, however, held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and subject of its organization. 16

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This traditional case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction.

For instance, Republic Act No. 5455 17 provides:

Sec. 1. Definitions and scope of this Act. — (1) . . . ; and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

Presidential Decree No. 1789, 18 in Article 65 thereof, defines "doing business" to include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

The implementing rules and regulations of said presidential decree conclude the enumeration of acts constituting "doing business" with a catch-all definition, thus:

Sec. 1(g). "Doing Business" shall be any act or combination of acts enumerated in Article 65 of the Code. In particular "doing business" includes:

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(10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and object of the business organization.

Finally, Republic Act No. 7042 19 embodies such concept in this wise:

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Sec. 3. Definitions. — As used in this Act:

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(d) the phrase "doing business shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

Based on Article 133 of the Corporation Code and gauged by such statutory standards, petitioners are not barred from maintaining the present action. There is no showing that, under our statutory or case law, petitioners are doing, transacting, engaging in or carrying on business in the Philippines as would require obtention of a license before they can seek redress from our courts. No evidence has been offered to show that petitioners have performed any of the enumerated acts or any other specific act indicative of an intention to conduct or transact business in the Philippines.

Accordingly, the certification issued by the Securities and Exchange Commission 20 stating that its records do not show the registration of petitioner film companies either as corporations or partnerships or that they have been licensed to transact business in the Philippines, while undeniably true, is of no consequence to petitioners' right to bring action in the Philippines. Verily, no record of such registration by petitioners can be expected to be found for, as aforestated, said foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to take recourse to our courts.

Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus Investments Code lists, among others —

(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, or by an agent of such foreign firm, not

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acting independently of the foreign firm amounting to negotiations or fixing of the terms and conditions of sales or service contracts, regardless of where the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. The arrangements agreed upon as to manner, time and terms of delivery of the goods or the transfer of title thereto is immaterial. A foreign firm which does business through the middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.

(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of a principal. Thus, where a foreign firm is represented in the Philippines by a person or local company which does not act in its name but in the name of the foreign firm, the latter is doing business in the Philippines.

as acts constitutive of "doing business," the fact that petitioners are admittedly copyright owners or owners of exclusive distribution rights in the Philippines of motion pictures or films does not convert such ownership into an indicium of doing business which would require them to obtain a license before they can sue upon a cause of action in local courts.

Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, with express authority pursuant to a special power of attorney, inter alia —

To lay criminal complaints with the appropriate authorities and to provide evidence in support of both civil and criminal proceedings against any person or persons involved in the criminal infringement of copyright or concerning the unauthorized importation, duplication, exhibition or distribution of any cinematographic work(s) — films or video cassettes — of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such cinematographic work(s), to initiate and prosecute on behalf of . . . criminal or civil actions in the Philippines against any person or persons unlawfully distributing, exhibiting, selling or offering for sale any films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such works. 21

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tantamount to doing business in the Philippines. We fail to see how exercising one's legal and property rights and taking steps for the vigilant protection of said rights, particularly the appointment of an attorney-in-fact, can be deemed by and of themselves to be doing business here.

As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it enters into contracts with residents of the State, where such contracts are consummated outside the State. 22 In fact, a view is taken that a foreign corporation is not doing business in the State merely because sales of its product are made there or other business furthering its interests is transacted there by an alleged agent, whether a corporation or a natural person, where such activities are not under the direction and control of the foreign corporation but are engaged in by the alleged agent as an independent business. 23

It is generally held that sales made to customers in the State by an independent dealer who has purchased and obtained title from the corporation to the products sold are not a doing of business by the corporation. 24 Likewise, a foreign corporation which sells its products to persons styled "distributing agents" in the State, for distribution by them, is not doing business in the State so as to render it subject to service of process therein, where the contract with these purchasers is that they shall buy exclusively from the foreign corporation such goods as it manufactures and shall sell them at trade prices established by it. 25

It has moreover been held that the act of a foreign corporation in engaging an attorney to represent it in a Federal court sitting in a particular State is not doing business within the scope of the minimum contact test. 26 With much more reason should this doctrine apply to the mere retainer of Atty. Domingo for legal protection against contingent acts of intellectual piracy.

In accordance with the rule that "doing business" imports only acts in furtherance of the purposes for which a foreign corporation was organized, it is held that the mere institution and prosecution or defense of a suit, particularly if the transaction which is the basis of the suit took place out of the State, do not amount to the doing of business in the State. The institution of a suit or the removal thereof is neither the making of a contract nor the doing of business within a constitutional provision placing foreign corporations licensed to do business in the State under the same regulations, limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation. 27

As a consideration aside, we have perforce to comment on private respondents' basis for arguing that petitioners are barred from maintaining suit in the Philippines. For allegedly being foreign corporations doing business in the Philippines without a license, private respondents repeatedly maintain in all their

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pleadings that petitioners have thereby no legal personality to bring an action before Philippine Courts. 28

Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue 29 and that the complaint states no cause of action. 30 Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims. 31 On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party in interest, hence grounded on failure to state a cause of action. 32 The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party in interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; 33 whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. 34

Applying the above discussion to the instant petition, the ground available for barring recourse to our courts by an unlicensed foreign corporation doing or transacting business in the Philippines should properly be "lack of capacity to sue," not "lack of personality to sue." Certainly, a corporation whose legal rights have been violated is undeniably such, if not the only, real party in interest to bring suit thereon although, for failure to comply with the licensing requirement, it is not capacitated to maintain any suit before our courts.

Lastly, on this point, we reiterate this Court's rejection of the common procedural tactics of erring local companies which, when sued by unlicensed foreign corporations not engaged in business in the Philippines, invoke the latter's supposed lack of capacity to sue. The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of public policy. It was never intended to favor nor insulate from suit unscrupulous establishments or nationals in case of breach of valid obligations or violation of legal rights of unsuspecting foreign firms or entities simply because they are not licensed to do business in the country. 35

II

We now proceed to the main issue of the retroactive application to the present controversy of the ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., promulgated on August 19, 1988, 36 that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirate copies is necessary.

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Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court subject to the determination of probable cause in accordance with the procedure prescribed therefore under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in question, the controlling criterion for the finding of probable cause was that enunciated in Burgos vs. Chief of Staff 37 stating that:

Probable cause for a search warrant is defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched.

According to petitioners, after complying with what the law then required, the lower court determined that there was probable cause for the issuance of a search warrant, and which determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No. 87-053. It is further argued that any search warrant so issued in accordance with all applicable legal requirements is valid, for the lower court could not possibly have been expected to apply, as the basis for a finding of probable cause for the issuance of a search warrant in copyright infringement cases involving videograms, a pronouncement which was not existent at the time of such determination, on December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on August 19, 1988, or over eight months later.

Private respondents predictably argue in support of the ruling of the Court of Appeals sustaining the quashal of the search warrant by the lower court on the strength of that 20th Century Fox ruling which, they claim, goes into the very essence of probable cause. At the time of the issuance of the search warrant involved here, although the 20th Century Fox case had not yet been decided, Section 2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules on Criminal Procedure embodied the prevailing and governing law on the matter. The ruling in 20th Century Foxwas merely an application of the law on probable cause. Hence, they posit that there was no law that was retrospectively applied, since the law had been there all along. To refrain from applying the 20th Century Fox ruling, which had supervened as a doctrine promulgated at the time of the resolution of private respondents' motion for reconsideration seeking the quashal of the search warrant for failure of the trial court to require presentation of the master tapes prior to the issuance of the search warrant, would have constituted grave abuse of discretion. 38

Respondent court upheld the retroactive application of the 20th Century Fox ruling by the trial court in resolving petitioners' motion for reconsideration in favor of the quashal of the search warrant, on this renovated thesis:

And whether this doctrine should apply retroactively, it must be noted that in the 20th Century Fox case, the lower court quashed the earlier search warrant it issued. On certiorari, the Supreme Court affirmed the quashal on

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the ground among others that the master tapes or copyrighted films were not presented for comparison with the purchased evidence of the video tapes to determine whether the latter is an unauthorized reproduction of the former.

If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme Court would have invalidated the warrant just the same considering the very strict requirement set by the Supreme Court for the determination of "probable cause" in copyright infringement cases as enunciated in this 20th Century Fox case. This is so because, as was stated by the Supreme Court in the said case, the master tapes and the pirated tapes must be presented for comparison to satisfy the requirement of "probable cause."So it goes back to the very existence of probable cause. . . . 39

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play, it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-053. Herein petitioners' consistent position that the order of the lower court of September 5, 1988 denying therein defendants' motion to lift the order of search warrant was properly issued, there having been satisfactory compliance with the then prevailing standards under the law for determination of probable cause, is indeed well taken. The lower court could not possibly have expected more evidence from petitioners in their application for a search warrant other than what the law and jurisprudence, then existing and judicially accepted, required with respect to the finding of probable cause.

Article 4 of the Civil Code provides that "(l)aws shall have no retroactive effect, unless the contrary is provided. Correlatively, Article 8 of the same Code declares that "(j)udicial decisions applying the laws or the Constitution shall form part of the legal system of the Philippines."

Jurisprudence, in our system of government, cannot be considered as an independent source of law; it cannot create law. 40 While it is true that judicial decisions which apply or interpret the Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason that they are part of the legal system of the Philippines. 41 Judicial decisions of the Supreme Court assume the same authority as the statute itself. 42

Interpreting the aforequoted correlated provisions of the Civil Code and in light of the above disquisition, this Court emphatically declared in Co vs. Court of Appeals, et al. 43 that the principle of prospectivity applies not only to original or amendatory statutes and administrative rulings and circulars, but also, and properly so, to judicial decisions. Our holding in the earlier case of People vs. Jabinal 44 echoes the rationale for this judicial declaration, viz.:

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Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the reason why under Article 8 of the New Civil Code, "Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system." The interpretation upon a law by this Court constitutes, in a way, a part of the law as of the date that the law was originally passed, since this Court's construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate. The settled rule supported by numerous authorities is a restatement of the legal maxim "legis interpretatio legis vim obtinet" — the interpretation placed upon the written law by a competent court has the force of law. . . . , but when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof . . . . (Emphasis supplied).

This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al., 45 where the Court expounded:

. . . . But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. . . . .

The reasoning behind Senarillos vs. Hermosisima 46 that judicial interpretation of a statute constitutes part of the law as of the date it was originally passed, since the Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect, is all too familiar. Such judicial doctrine does not amount to the passage of a new law but consists merely of a construction or interpretation of a pre-existing one, and that is precisely the situation obtaining in this case.

It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. 47 To hold otherwise would be to deprive the law of its quality of fairness and justice then, if there is no recognition of what had transpired prior to such adjudication. 48

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There is merit in petitioners' impassioned and well-founded argumentation:

The case of 20th Century Fox Film Corporation vs. Court of Appeals, et al., 164 SCRA 655 (August 19, 1988) (hereinafter 20th Century Fox) was inexistent in December of 1987 when Search Warrant 87-053 was issued by the lower court. Hence, it boggles the imagination how the lower court could be expected to apply the formulation of 20th Century Fox in finding probable cause when the formulation was yet non-existent.

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In short, the lower court was convinced at that time after conducting searching examination questions of the applicant and his witnesses that "an offense had been committed and that the objects sought in connection with the offense (were) in the place sought to be searched" (Burgos v. Chief of Staff, et al., 133 SCRA 800). It is indisputable, therefore, that at the time of the application, or on December 14, 1987, the lower court did not commit any error nor did it fail to comply with any legal requirement for the valid issuance of search warrant.

. . . (W)e believe that the lower court should be considered as having followed the requirements of the law in issuing Search Warrant No. 87-053. The search warrant is therefore valid and binding. It must be noted that nowhere is it found in the allegations of the Respondents that the lower court failed to apply the law as then interpreted in 1987. Hence, we find it absurd that it is (sic) should be seen otherwise, because it is simply impossible to have required the lower court to apply a formulation which will only be defined six months later.

Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements which are inexistent at the time they were supposed to have been complied with.

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. . . If the lower court's reversal will be sustained, what encouragement can be given to courts and litigants to respect the law and rules if they can expect with reasonable certainty that upon the passage of a new rule, their conduct can still be open to question? This certainly breeds instability in our system of dispensing justice. For Petitioners who took special effort to redress their grievances and to protect their property rights by resorting to the remedies provided by the law, it is most unfair that fealty to the rules and procedures then obtaining would bear but fruits of injustice. 49

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Withal, even the proposition that the prospectivity of judicial decisions imports application thereof not only to future cases but also to cases still ongoing or not yet final when the decision was promulgated, should not be countenanced in the jural sphere on account of its inevitably unsettling repercussions. More to the point, it is felt that the reasonableness of the added requirement in 20th Century Fox calling for the production of the master tapes of the copyrighted films for determination of probable cause in copyright infringement cases needs revisiting and clarification.

It will be recalled that the 20th Century Fox case arose from search warrant proceedings in anticipation of the filing of a case for the unauthorized sale or renting out of copyrighted films in videotape format in violation of Presidential Decree No. 49. It revolved around the meaning of probable cause within the context of the constitutional provision against illegal searches and seizures, as applied to copyright infringement cases involving videotapes.

Therein it was ruled that —

The presentation of master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns.

The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49.

The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.

For a closer and more perspicuous appreciation of the factual antecedents of 20th Century Fox, the pertinent portions of the decision therein are quoted hereunder, to wit:

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In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2, 1986:

According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact.

On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him it is of his personal knowledge.

At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand.

Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time-honored precept that proceedings to put a man to task as an offender under our laws should be interpreted in strictissimi juris against the government and liberally in favor of the alleged offender.

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This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution.

So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein.

But the glaring fact is that "Cocoon," the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record.) So, that lacking in the requisite presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox.

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The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission of the offense by the private respondents. Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application (Emphasis ours).

The italicized passages readily expose the reason why the trial court therein required the presentation of the master tapes of the allegedly pirated films in order to convince itself of the existence of probable cause under the factual milieu peculiar to that case. In the case at bar, respondent appellate court itself observed:

We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the master tapes, unlike the other types of personal properties which may be seized, were available for presentation to the court at the time of the application for a search warrant to determine the existence

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of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not the present them (Emphasis supplied ). 50

In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. Judicial dicta should always be construed within the factual matrix of their parturition, otherwise a careless interpretation thereof could unfairly fault the writer with the vice of overstatement and the reader with the fallacy of undue generalization.

In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant with the lower court following a formal complaint lodged by petitioners, judging from his affidavit 51 and his deposition, 52 did testify on matters within his personal knowledge based on said complaint of petitioners as well as his own investigation and surveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his affidavit 53 and further expounded in his deposition 54 that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purpose of selling any of the copyrighted films.

Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C. Baltazar, a private researcher retained by Motion Pictures Association of America, Inc. (MPAA, Inc.), who was likewise presented as a witness during the search warrant proceedings. 55 The records clearly reflect that the testimonies of the abovenamed witnesses were straightforward and stemmed from matters within their personal knowledge. They displayed none of the ambivalence and uncertainty that the witnesses in the 20th Century Fox case exhibited. This categorical forthrightness in their statements, among others, was what initially and correctly convinced the trial court to make a finding of the existence of probable cause.

There is no originality in the argument of private respondents against the validity of the search warrant, obviously borrowed from 20th Century Fox, that petitioners' witnesses — NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo and Rene C. Baltazar — did not have personal knowledge of the subject matter of their respective testimonies and that said witnesses' claim that the video tapes were pirated, without stating the manner by which these were pirated, is a conclusion of fact without basis. 56 The difference, it must be pointed out, is that the records in the present case reveal that (1) there is no allegation of misrepresentation, much less a finding thereof by the lower court, on the part of petitioners' witnesses; (2) there is no denial on the part of private respondents that the tapes seized were illegitimate copies of the copyrighted ones not have they shown that they were given any

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authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the suspected area was undertaken by petitioners' witnesses sufficient to enable them to execute trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which they have personal knowledge.

It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in copyright infringement cases, the presentation of master tapes of the copyrighted films is always necessary to meet the requirement of probable cause and that, in the absence thereof, there can be no finding of probable cause for the issuance of a search warrant. It is true that such master tapes are object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact is made through demonstrations involving the direct use of the senses of the presiding magistrate. 57 Such auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence tending to prove the factum probandum, 58 especially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value. 59

Of course, as a general rule, constitutional and statutory provisions relating to search warrants prohibit their issuance except on a showing of probable cause, supported by oath or affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose to protect against all general searches. 60 Indeed, Article III of our Constitution mandates in Sec. 2 thereof that no search warrant shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized; and Sec. 3 thereof provides that any evidence obtained in violation of the preceding section shall be inadmissible for any purpose in any proceeding.

These constitutional strictures are implemented by the following provisions of Rule 126 of the Rules of Court:

Sec. 3. Requisites for issuing search warrant. — A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized.

Sec. 4. Examination of complainant; record. — The judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath the complainant and any witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with any affidavits submitted.

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Sec. 5. Issuance and form of search warrant. — If the judge is thereupon satisfied of the existence of facts upon which the application is based, or that there is probable cause to believe that they exist, he must issue the warrant, which must be substantially in the form prescribed by these Rules.

The constitutional and statutory provisions of various jurisdictions requiring a showing of probable cause before a search warrant can be issued are mandatory and must be complied with, and such a showing has been held to be an unqualified condition precedent to the issuance of a warrant. A search warrant not based on probable cause is a nullity, or is void, and the issuance thereof is, in legal contemplation, arbitrary. 61 It behooves us, then, to review the concept of probable cause, firstly, from representative holdings in the American jurisdiction from which we patterned our doctrines on the matter.

Although the term "probable cause" has been said to have a well-defined meaning in the law, the term is exceedingly difficult to define, in this case, with any degree of precision; indeed, no definition of it which would justify the issuance of a search warrant can be formulated which would cover every state of facts which might arise, and no formula or standard, or hard and fast rule, may be laid down which may be applied to the facts of every situation. 62 As to what acts constitute probable cause seem incapable of definition. 63 There is, of necessity, no exact test. 64

At best, the term "probable cause" has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is guilty of the offense with which he is charged; 65 or the existence of such facts and circumstances as would excite an honest belief in a reasonable mind acting on all the facts and circumstances within the knowledge of the magistrate that the charge made by the applicant for the warrant is true. 66

Probable cause does not mean actual and positive cause, nor does it import absolute certainty. The determination of the existence of probable cause is not concerned with the question of whether the offense charged has been or is being committed in fact, or whether the accused is guilty or innocent, but only whether the affiant has reasonable grounds for his belief. 67 The requirement is less than certainty or proof , but more than suspicion or possibility. 68

In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched. 69 It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is filed, 70 the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter.

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As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et al., supra, vis-a-visthe provisions of Sections 3 and 4 of Rule 126, were the prevailing and controlling legal standards, as they continue to be, by which a finding of probable cause is tested. Since the propriety of the issuance of a search warrant is to be determined at the time of the application therefor, which in turn must not be too remote in time from the occurrence of the offense alleged to have been committed, the issuing judge, in determining the existence of probable cause, can and should logically look to the touchstones in the laws theretofore enacted and the decisions already promulgated at the time, and not to those which had not yet even been conceived or formulated.

It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable cause, obviously for the purpose of leaving such matter to the court's discretion within the particular facts of each case. Although the Constitution prohibits the issuance of a search warrant in the absence of probable cause, such constitutional inhibition does not command the legislature to establish a definition or formula for determining what shall constitute probable cause. 71 Thus, Congress, despite its broad authority to fashion standards of reasonableness for searches and seizures, 72 does not venture to make such a definition or standard formulation of probable cause, nor categorize what facts and circumstances make up the same, much less limit the determination thereof to and within the circumscription of a particular class of evidence, all in deference to judicial discretion and probity. 73

Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statesmanship. It serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or mechanical function. There is, to repeat, no law or rule which requires that the existence of probable cause is or should be determined solely by a specific kind of evidence. Surely, this could not have been contemplated by the framers of the Constitution, and we do not believe that the Court intended the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons in infringement cases.

Turning now to the case at bar, it can be gleaned from the records that the lower court followed the prescribed procedure for the issuance of a search warrant: (1) the examination under oath or affirmation of the complainant and his witnesses, with them particularly describing the place to be searched and the things to be seized; (2) an examination personally conducted by the judge in the form of searching questions and answers, in writing and under oath of the complainant and witnesses on facts personally known to them; and, (3) the taking of sworn statements, together with the affidavits submitted, which were duly attached to the records.

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Thereafter, the court a quo made the following factual findings leading to the issuance of the search warrant now subject of this controversy:

In the instant case, the following facts have been established: (1) copyrighted video tapes bearing titles enumerated in Search Warrant No. 87-053 were being sold, leased, distributed or circulated, or offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their video outlets, without the written consent of the private complainants or their assignee; (2) recovered or confiscated from defendants' possession were video tapes containing copyrighted motion picture films without the authority of the complainant; (3) the video tapes originated from spurious or unauthorized persons; and (4) said video tapes were exact reproductions of the films listed in the search warrant whose copyrights or distribution rights were owned by complainants.

The basis of these facts are the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Atty. Rico V. Domingo, and Rene C. Baltazar. Motion Pictures Association of America, Inc. (MPAA) thru their counsel, Atty. Rico V. Domingo, filed a complaint with the National Bureau of Investigation against certain video establishments one of which is defendant, for violation of PD No. 49 as amended by PD No. 1988. Atty. Lauro C. Reyes led a team to conduct discreet surveillance operations on said video establishments. Per information earlier gathered by Atty. Domingo, defendants were engaged in the illegal sale, rental, distribution, circulation or public exhibition of copyrighted films of MPAA without its written authority or its members. Knowing that defendant Sunshine Home Video and its proprietor, Mr. Danilo Pelindario, were not authorized by MPAA to reproduce, lease, and possess for the purpose of selling any of its copyrighted motion pictures, instructed his researcher, Mr. Rene Baltazar to rent two video cassettes from said defendants on October 21, 1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented tapes containing Little Shop of Horror. He was issued rental slip No. 26362 dated October 21, 1987 for P10.00 with a deposit of P100.00. Again, on December 11, 1987, the returned to Sunshine Home Video and rented Robocop with rental slip No. 25271 also for P10.00: On the basis of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally went to Sunshine Home Video at No. 6 Mayfair Center, Magallanes Commercial Center, Makati. His last visit was on December 7, 1987. There, he found the video outlet renting, leasing, distributing video cassette tapes whose titles were copyrighted and without the authority of MPAA.

Given these facts, a probable cause exists. . . . 74

The lower court subsequently executed a volte-face, despite its prior detailed and substantiated findings, by stating in its order of November 22, 1988 denying petitioners' motion for reconsideration and quashing the search warrant that —

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. . . The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films of private complainants which were found in the possession or control of the defendants. Hence, the necessity of the presentation of the master tapes from which the pirated films were allegedly copied is necessary in the instant case, to establish the existence of probable cause. 75

Being based solely on an unjustifiable and improper retroactive application of the master tape requirement generated by 20th Century Fox upon a factual situation completely different from that in the case at bar, and without anything more, this later order clearly defies elemental fair play and is a gross reversible error. In fact, this observation of the Court in La Chemise Lacoste, S.A. vs. Fernandez, et al., supra, may just as easily apply to the present case:

A review of the grounds invoked . . . in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. . . .

As correctly pointed out by petitioners, a blind espousal of the requisite of presentation of the master tapes in copyright infringement cases, as the prime determinant of probable cause, is too exacting and impracticable a requirement to be complied with in a search warrant application which, it must not be overlooked, is only an ancillary proceeding. Further, on realistic considerations, a strict application of said requirement militates against the elements of secrecy and speed which underlie covert investigative and surveillance operations in police enforcement campaigns against all forms of criminality, considering that the master tapes of a motion picture required to be presented before the court consists of several reels contained in circular steel casings which, because of their bulk, will definitely draw attention, unlike diminutive objects like video tapes which can be easily concealed. 76 With hundreds of titles being pirated, this onerous and tedious imposition would be multiplied a hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign jurisdictions.

Given the present international awareness and furor over violations in large scale of intellectual property rights, calling for transnational sanctions, it bears calling to mind the Court's admonition also in La Chemise Lacoste, supra, that —

. . . . Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties.

III

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The amendment to Section 56 of Presidential Decree No. 49 by Presidential Decree No. 1987, 77 which should here be publicized judicially, brought about the revision of its penalty structure and enumerated additional acts considered violative of said decree on intellectual property, namely, (1) directly or indirectly transferring or causing to be transferred any sound recording or motion picture or other audio-visual works so recorded with intent to sell, lease, publicly exhibit or cause to be sold, leased or publicly exhibited, or to use or cause to be used for profit such articles on which sounds, motion pictures, or other audio-visual works are so transferred without the written consent of the owner or his assignee; (2) selling, leasing, distributing, circulating, publicly exhibiting, or offering for sale, lease, distribution, or possessing for the purpose of sale, lease, distribution, circulation or public exhibition any of the abovementioned articles, without the written consent of the owner or his assignee; and, (3) directly or indirectly offering or making available for a fee, rental, or any other form of compensation any equipment, machinery, paraphernalia or any material with the knowledge that such equipment, machinery, paraphernalia or material will be used by another to reproduce, without the consent of the owner, any phonograph record, disc, wire, tape, film or other article on which sounds, motion pictures or other audio-visual recordings may be transferred, and which provide distinct bases for criminal prosecution, being crimes independently punishable under Presidential Decree No. 49, as amended, aside from the act of infringing or aiding or abetting such infringement under Section 29.

The trial court's finding that private respondents committed acts in blatant transgression of Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination can be reached even in the absence of master tapes by the judge in the exercise of sound discretion. The executive concern and resolve expressed in the foregoing amendments to the decree for the protection of intellectual property rights should be matched by corresponding judicial vigilance and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of guilt.

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 78

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know what works he was indirectly copying, or did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken

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that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a piracy. 79 The question of whether there has been an actionable infringement of a literary, musical, or artistic work in motion pictures, radio or television being one of fact, 80 it should properly be determined during the trial. That is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for the issuance of a search warrant wherein both lower courts erroneously require the master tapes.

In disregarding private respondent's argument that Search Warrant No. 87-053 is a general warrant, the lower court observed that "it was worded in a manner that the enumerated seizable items bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or intended to be used in the unlawful sale, lease and other unconcerted acts in violation of PD 49 as amended. . . . 81

On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al., 82 instructs and enlightens:

A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the description expresses a conclusion of fact — not of law — by which the warrant officer may be guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued (Sec 2, Rule 126, Revised Rules of Court). . . . If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely to strengthen such evidence. . . .

On private respondents' averment that the search warrant was made applicable to more than one specific offense on the ground that there are as many offenses of infringement as there are rights protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates the rule that a search warrant must be issued only in connection with one specific offense, the lower court said:

. . . . As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49 as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. 83

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That there were several counts of the offense of copyright infringement and the search warrant uncovered several contraband items in the form of pirated video tapes is not to be confused with the number of offenses charged. The search warrant herein issued does not violate the one-specific-offense rule.

It is pointless for private respondents to insist on compliance with the registration and deposit requirements under Presidential Decree No. 49 as prerequisites for invoking the court's protective mantle in copyright infringement cases. As explained by the court below:

Defendants-movants contend that PD 49 as amended covers only producers who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and 50 thereof. Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended. This is not well-taken.

As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic works and PD No. 49 "had done away with the registration and deposit of cinematographic works" and that "even without prior registration and deposit of a work which may be entitled to protection under the Decree, the creator can file action for infringement of its rights". He cannot demand, however, payment of damages arising from infringement. The same opinion stressed that "the requirements of registration and deposit are thus retained under the Decree, not as conditions for the acquisition of copyright and other rights, but as prerequisites to a suit for damages". The statutory interpretation of the Executive Branch being correct, is entitled (to) weight and respect.

xxx xxx xxx

Defendants-movants maintain that complainant and his witnesses led the Court to believe that a crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended, does not require registration and deposit for a creator to be able to file an action for infringement of his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the proscribed acts are shown to exist, an action for infringement may be initiated. 84

Accordingly, the certifications 85 from the Copyright Section of the National Library, presented as evidence by private respondents to show non-registration of some of the films of petitioners, assume no evidentiary weight or significance whatsoever.

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Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to works which are required under Section 26 thereof to be registered and with copies to deposited with the National Library, such as books, including composite and cyclopedic works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; and letters, the failure to comply with said requirements does not deprive the copyright owner of the right to sue for infringement. Such non-compliance merely limits the remedies available to him and subjects him to the corresponding sanction.

The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of copyrightable works with the explicit statement that "the rights granted under this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works." This means that under the present state of the law, the copyright for a work is acquired by an intellectual creator from the moment of creation even in the absence of registration and deposit. As has been authoritatively clarified:

The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order to recover damages in an infringement suit. 86

One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners' copyrighted films immeasurably bolsters the lower court's initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the Philippines become an international pariah in the global intellectual community.

WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the lower court dated November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the validity of Search Warrant No. 87-053 is hereby REINSTATED,

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and said court is DIRECTED to take and expeditiously proceed with such appropriate proceedings as may be called for in this case. Treble costs are further assessed against private respondents.

SO ORDERED.

Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur.

Bellosillo, J., took no part.

Footnotes

1 Rollo, CA-G.R. CV No. 20622, 155-158; Justice Quirino D. Abad-Santos, Jr., ponente, with Justices Luis A. Javellana and Eduardo R. Bengson concurring; Rollo, 36-40.

2 Ibid., 184; ibid., 42.

3 Rollo, 50-51; Original Record, 327-328.

4 Ibid., 43-49; ibid., 274-280; per Judge Buenaventura J. Guerrero.

5 Ibid., 36-37; Rollo, CA-G.R. CV No. 20622, 155-156.

6 G.R. Nos. 76649-51, August 19, 1988, 164 SCRA 655.

7 Original Record, 236-239; Rollo, 83-85, 188-190.

8 Ibid., 267-268; ibid., 124; ibid., 114-115, 169-170.

9 Rollo, 114-115, 169-170.

10 Marshall-Wells Co. vs. Henry W. Elser & Co., 46 Phil. 71 (1924).

11 Martin, T.C., Commentaries and Jurisprudence on Philippine Commercial Laws, Vol. 4, 1986 rev. ed., 371-372,citing Pacific Vegetable Oil Corporation vs. Singzon, L-7917, April 29, 1955, 96 Phil. 986 (unrep.) and Eastbound Navigation, Ltd. vs. Juan Ysmael and Co., Inc., 102 Phil. 1 (1957); La Chemise Lacoste, S.A. vs. Fernandez, etc., et al., G.R. Nos. 63795-97, May 21, 1984, 129 SCRA 373; Antam Consolidated, Inc., et al. vs. Court of Appeals, et al., G.R. No. 61523, July 31, 1986, 143 SCRA 288; Converse Rubber Corporation vs. Universal Rubber Products, Inc., et al., L-27906, January 8, 1987, 147 SCRA 154; Puma Sportschuhfabriken Rudolf Dassler, K.G. vs. Intermediate Appellate Court, et al., G.R. No. 75067, February 26, 1988, 158 SCRA 233; Merill Lynch Futures, Inc. vs. Court of Appeals, et al., G.R. No. 97816, July 24, 1992, 211 SCRA 824; Philip Morris, Inc., et al. vs. Court of Appeals, et al., G.R. No. 91332, July 16, 1993, 224 SCRA 576; Signetics Corporation vs. Court of Appeals, et

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al., G.R. No. 105141, August 31, 1993, 225 SCRA 737, Georg Grotjahn GMBH & Co. vs. Isnani, et al., G.R. No. 109272, August 10, 1994, 235 SCRA 216.

12 Lopez, R.N., Corporation Code of the Philippines Annonated, Vol. 3, 1994 ed., 1152-1153, citing Com. v. Wilkesbarre & H.R. Co., 251 Pa 6, 95 Atl. 915.

13 36 Am. Jur. 2d, Foreign Corporations, Sec. 317, 312-313; National Sugar Trading Corporation, et al. vs. Court of Appeals, et al., G.R. No. 110910, July 17, 1995, 246 SCRA 465.

14 Martin, T.C., op. cit., 373, citing Tracton Co. v. Collector of Internal Revenue, 223 F. 984.

15 Ibid., id., id., 314-315.

16 Mentholatum Co., Inc. vs. Mangaliman, 92 Phil. 524 (1941).

17 An Act to Require that the Making of Investments and the Doing of Business Within the Philippines by Foreigners or Business Organizations Owned in Whole or in Part by Foreigners Should Contribute to the Sound and Balanced Development of the National Economy on a Self-Sustaining Basis, and for Other Purposes; Enacted without executive approval, September 30, 1968.

18 A Decree to Revise, Amend and Codify the Investment, Agricultural and Export Incentives Acts to be Known as the Omnibus Investments Code, effective January 16, 1981. See also Art. 44 of the Omnibus Investments Code of 1987 (Executive Order No. 226, effective July 16, 1987).

19 An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for Other Purposes; Approved, June 13, 1991.

20 Exhibit I; Original Record, 257.

21 Original Record, 268.

22 36 Am. Jur. 2d, Foreign Corporations, Sec. 335, 336.

23 Ibid., id., Sec. 362, 375-376.

24 Cannon Mfg. Co. v. Cudahy Packing Co., 267 US 333, 69 L ed 634, 45 S Ct 250; Hessig-Ellis Drug Co. v. Sly, 83 Kan 60, 109 P 770; Barnes v. Maxwell Motor Sales Corporation, 172 Ky 409, 89 SW 444; Harrell v. Peters Cartridge Co., 36 Okla 684, 129 P 872.

25 Gottschalk Co. v. Distilling & Cattle Feeding Co. (CC Md.), 50 F 681.

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26 O'Brien v. Lanpar Co. (Tex Civ App) 391 SW 2d 483.

27 36 Am. Jur. 2d., Foreign Corporation, Sec. 337, 339.

28 Original Record, 236-237, 281-284; Rollo, CA-G.R. CV No. 20622, 100-102; Rollo, 83-85, 188-190.

29 Sec. 1(d), Rule 16.

30 Sec. 1(g), id.

31 Lunsod vs. Ortega, 46 Phil. 664 (1921); Recreation and Amusement Association of the Philippines vs. City of Manila, et al., 100 Phil. 950 (1957).

32 Casimiro vs. Roque, et al., 98 Phil. 880 (1956); Gonzales, et al. vs. Alegarbes, 99 Phil. 213 (1956).

33 Calano vs. Cruz, 91 Phil. 247 (1952). See also Arguelles vs. Syyap, 22 Phil. 442 (1912); Leviton Industries, et al. vs. Salvador, etc., et al., L-40163, June 19, 1982, 114 SCRA 420; Bulakhidas vs. Navarro, etc., et al., L-49695, April 7, 1986, 142 SCRA 1; Acain vs. Intermediate Appellate Court, et al., G.R. No. 72706, October 27, 1987, 155 SCRA 100; Pilipinas Shell Petroleum Corporation vs. Dumlao, etc., et al., L-44888, February 7, 1992, 206 SCRA 40.

34 Sustiguer, et al. vs. Tamayo, et al., L-29341, August 21, 1989, 176 SCRA 579. See Annotations on Legal Capacity to Sue by Severino S. Tabios, following the published decision in La Chemise Lacoste, S.A. vs. Fernandez, etc., et al., supra, fn. 11.

35 Facilities Management Corporation vs. De la Osa, et al., L-38649, March 26, 1979, 89 SCRA 131; Antam Consolidated, Inc., et al. vs. Court of Appeals, et al., and cases cited therein supra, fn. 11; Signetics Corporation vs. Court of Appeals, et al., supra, fn. 11; National Sugar Trading Corporation, et al. vs. Court of Appeals, et al., supra, fn. 13.

36 164 SCRA 655, fn. 6.

37 G.R. No. 64261, December 26, 1984, 133 SCRA 800.

38 Rollo, 80-81.

39 Ibid., 39-40.

40 Tolentino, A.M., Commentaries and Jurisprudence on The Civil Code of the Philippines, Vol. I, 1990 ed., 36.

41 Paras, E.L., Civil Code of the Philippines Annotated, 12th ed., 57.

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42 Caltex (Philippines), Inc. vs. Palomar, etc., L-19650, September 29, 1966, 18 SCRA 247; Floresca, et al., vs. Philex Mining Corporation, et al., L-30642, April 30, 1985, 136 SCRA 141.

43 G.R. No. 100716, October 28, 1993, 227 SCRA 444, and cases cited therein.

44 L-30061, February 27, 1974, 55 SCRA 607.

45 G.R. No. 97998, January 27, 1992, 205 SCRA 515.

46 100 Phil. 501 (1956). See also People vs. Licera, L-39990, July 22, 1975, 65 SCRA 270.

47 People vs. Jabinal, supra, fn. 44; Unciano Paramedical College, Inc., et al. vs. Court of Appeals, et al., G.R. No. 100335, April 7, 1993, 221 SCRA 285; Tañada, et al. vs. Guingona, Jr., etc., et al., G.R. No. 113888, August 19, 1994, 235 SCRA 507.

48 De Agbayani vs. Philippine National Bank, et al., L-23127, April 29, 1971, 38 SCRA 429.

49 Rollo, 21-24, 159-163.

50 Rollo, 35.

51 Original Record, 4-7.

52 Ibid., 155-156.

53 Ibid., 12-15.

54 Ibid., 157-158.

55 Ibid., 9-10, 159-160.

56 Rollo, 85-86.

57 City of Manila vs. Cabangis, 10 Phil. 151 (1908); Kabase v. State, 31 Ala. App. 77, 12 So. 2nd, 758, 764.

58 See Phil. Movie Workers Association vs. Premiere Productions, Inc., 92 Phil. 843 (1953).

59 See 3 Jones on Evidence, Sec. 1400.

60 47 Am. Jur. 2d, Searches and Seizures, Sec. 21, 576.

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61 79 CJS, Searches and Seizures, Sec. 74, 862.

62 Ibid., id., id., 863.

63 Lucich v. State, Md., 71 A. 2d 432; Smith v. State, 62 A. 2d 287, 191 Md. 329, 5 A.L.R. 2d, 386.

64 U.S. v. Nichols, D.C. Ark., 89 F. Supp. 953, 955.

65 Silver v. State, 110 Tex Crim. Rep. 512, 8 SW (2d) 144, 9 SW (2d) 358, 60 A.L.R. 290.

66 Goodman v. State, 11 A. 2d 635, 639, 178 Md. I.

67 47 Am. Jur. 2d, Searches and Seizures, Sec. 22, 516; Brinegar v. United States, 338 U.S. 160 (1949).

68 79 CJS, Search and Seizures, Sec. 74, 865.

69 Burgos, Sr., et al. vs. Chief of Staff, et al., supra, fn. 37; Quintero vs. National Bureau of Investigation, et al., L-35149, June 23, 1988, 162 SCRA 467; MHP Garments, Inc., et al. vs. Court of Appeals, et al., G.R. No. 86720, September 2, 1994, 236 SCRA 227.

70 State v. Perkins, 285 S.W. 1021, 220 Mo. App. 349.

71 State v. Norris, 109 So. 787, 161 La 988.

72 G.M. Leasing Corp. v. United States, 429 U.S. 338, 97 S Ct. 619, 50 L. Ed. 2d 530.

73 See Central Bank of the Philippines vs. Morfe, et al., L-20119, June 30, 1967, 20 SCRA 507; Luna vs. Plaza, etc., et al., L-27511, November 29, 1968, 26 SCRA 310.

74 Original Record, 277-278; Rollo, 46-47.

75 Ibid., 328; ibid., 51.

76 Rollo, CA-G.R. CV No. 20622, 177-178.

77 Promulgated on October 5, 1985.

78 18 CJS, Copyright and Literary Property, Sec. 90, 212; 18 Am Jur 2d, Copyright and Literary Property, Sec. 106, 391-392.

79 Ibid., id., Sec. 94, 217, 218.

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80 Universal Pictures Co. v. Harold Lloyd Corp. (CA9 Cal), 162 F2d 354; Arnstein v. Porter (CA2 Ny), 154 F2d 464.

81 Original Record, 278; Rollo 47.

82 L-32409, February 27, 1971, 37 SCRA 823.

83 Original Record, 279; Rollo, 47.

84 Ibid., 275, 278; ibid., 44, 45.

85 Exhbit Nos. 1, 2, 3 and 4; Original Record, 174-178.

86 Martin, T.C., op cit., Vol. 2, 366.

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Topic: Infringement

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 96597-99 October 6, 1994

COLUMBIA PICTURES, INC., ORION PICTURES CORP., PARAMOUNT PICTURES CORP., TWENTIETH CENTURY FOX FILM CORP., UNITED ARTISTS CORP., UNIVERSAL CITY STUDIOS, INC., WALT DISNEY COMPANY and WARNER BROS., INC., petitioners, vs. HON. COURT OF APPEALS, TUBE VIDEO ENTERPRISES and EDWARD CHAM, BLOOMING ROSE TAPE CENTER and MA. JAJORIE T. UY, and VIDEO CHANNEL and LYDIA NABONG, respondents.

G.R. No. 97156 October 6, 1994

COLUMBIA PICTURES INDUSTRIES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORP., TWENTIETH CENTURY FOX FILM CORP., MGM/UA COMMUNICATIONS COMPANY, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROS., INC.,petitioners, vs. HON. COURT OF APPEALS, FOX'S VIDEO, INC. and ALFREDO ONGYANGCO., respondents.

Castillo, Laman, Tan & Pantaleon for petitioners.

Herminio T. Banico, Jr. & Associates for private respondent Lydia Nabong.

Molo, Padua, Salazar, Roldan & Associates for Blooming Rose Tape Center/Ma. J.T. Uy.

R E S O L U T I O N

VITUG, J.:

On 07 April 1988, the National Bureau of Investigation ("NBI"), through its Agent Lauro C. Reyes, filed with the Regional Trial Court of Pasig (Branch 159) three applications for search warrant against private respondents Tube Video Enterprises and Edward C. Cham (ASW No. 95), the Blooming Rose Tape Center and

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Ma. Jajorie T. Uy (ASW No. 96), and the Video Channel and Lydia Nabong (ASW No. 97), charging said respondents with violation of Section 56 of Presidential Decree ("P.D.") No. 49, otherwise known as the Decree on the Protection of Intellectual Property, as amended by P.D. No. 1988.

In the three applications for search warrant, NBI Agent Reyes stated under oath that the respondents had in their possession and control —

1. (p)irated video tapes of the copyrighted motion pictures/films the titles of which are mentioned in the attached list;

2. (p)osters, advertising leaflets, flyers, brochures, invoices, journals, ledgers, job order slips, delivery slips, stickers and books of account bearing and/or mentioned the pirated films with titles . . ., or otherwise used in the videogram business or activities of the defendants; sold, leased, distributed or possessed for the purpose of sale, lease, distribution, circulation or public exhibition, journals, ledgers, job order slips, delivery slips, stickers and books of accounts used in the unlawful videogram business or activities of the defendants; (and)

3. (t)elevision sets, video cassette and/or laser disc recorders, dubbing machines, rewinders, film projectors, U-matic machines, image enhancers, dubbing machines, tape head cleaners, converters, accessories, equipment and other machines and paraphernalia, materials or empty/erasable video tapes and master copies used or intended to be used in the unlawful exhibition, showing, reproduction, sale lease or disposition of videograms they are keeping and concealing in the premises abovedescribed. 1

Acting on the applications, then Regional Trial Court Judge Maria Alicia M. Austria conducted a joint hearing during which she made a personal examination of the applicant and his witnesses. Finding just and probable cause for granting the application at the time, Judge Austria issued the corresponding Search Warrants ("SW") numbered 95, 96, and 97.

Private respondents filed their respective motions to quash the three search warrants, citing as grounds therefor the following:

In SW No. 95

1. There is no probable cause nor the existence of a satisfactory fact upon which the search warrant is based;

2. The National Bureau of Investigation has no authority nor the jurisdiction to initiate the filing of suit against the defendants;

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3. The confiscation of defendants' seized articles based on the questioned search warrant violated the latter's constitutional right against deprivation of properties without due process.

4. The films in question are not protected by Pres. Decree No. 1988 in that they were never registered in the National Library as a condition precedent to the availment of the protection secured by that decree. The complaint has acquired no right under the same.

5. The mere publication by complainant of its alleged ownership over the films in question does not ipso factovest in the right to proceed under P.D. No. 49 as that law requires official registration. Moreover, the said publication took place only after the application for the questioned search warrant. 2

In SW No. 96

1. The complainants, one Rico V. Domingo and one Rene C. Baltazar, in representation of the Motion Picture Association of America, Inc., have not proven nor established their ownership over the films listed in Annex "A" of the search warrant issued by this Honorable Court against the defendants herein.

2. The information provided by the National Bureau of Investigation agents and the representatives of the MPAA, Inc. are replete with generalities insofar as the description of the items to be concerned in violation of the provisions of Sec. 3 of Rule 126 of the Rules of Court. Their allegations as to the offense are presumptuous and speculative in violation of the same section of the Rules of Court. 3

Private respondents in SW No. 97 adopted the motions filed for the quashal of both SW No. 95 and SW No. 96.

Herein petitioners (the private complainants in the three cases), namely, Columbia Pictures Entertainment, Inc., Orion Pictures Corporation, Twentieth Century Fox Film Corporation, MGM/UA Communications Company, Universal City Studios, Inc., Walt Disney Company and Warner Bros., Inc., submitted their oppositions to the motions to quash. The movants, herein private respondents, filed their replies to the oppositions and sought, simultaneously, the release of the items seized. After a rejoinder was filed, the court a quo considered all the incidents submitted for resolution.

In a Joint Order, issued on 09 December 1988, Judge Austria defined the issues raised in the motions to quash thusly:

1. Whether or not the NBI had authority to file the application for search warrant; whether or not it is the Videogram Regulatory Board under P.D. No.

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1987 which has exclusive jurisdiction to file suits against violators of said law.

2. Whether or not this Court observed due process of law before issuing the search warrants in question.

3. Whether or not search warrants Nos. 95, 96 and 97 are general warrants and therefore void.

4. Whether or not there was probable cause in the issuance of the search warrants pursuant to Section 3, Rule 126 of the 1985 Rules on Criminal Procedure and Section 2, Article III of the 1987 Constitution of the Republic of the Philippines.

5. Whether or not private complainants who are members of the Motion Picture Association of America, Inc. (MPAA for brevity) through their counsel, Atty. Rico Domingo, have sufficiently proven their ownership over the alleged pirated video tapes of the copyrighted motion pictures/films.

6. Whether or not the items seized by the NBI agents by virtue of SW Nos. 95, 96 and 97 may be ordered released to defendants. 4

Anent the first three issues, Judge Austria ruled that the NBI had the authority to apply for the search warrants; that in the issuance of the search warrants, due process of law was duly observed; and that the questioned search warrants were not general in character since the provision of law violated, i.e., Sec. 56 of P.D. No. 49, as amended by P.D. No. 1988, was clearly specified. Judge Austria, nonetheless, reversed her former stand initially finding probable cause for the issuance of the search warrants and ordered the quashal of the search warrants giving the following reasons:

1. Private complainants were uncertain of their ownership of the titles subject of the seized video tapes;

2. Complainants did not comply with the requirement that the master tapes should be presented during the application for search warrants; and

3. Private complainants cannot seek the protection of Philippine laws as they failed to comply with the deposit and registration requirements of P.D. No. 49 as amended by P.D. No. 1988. 5

Judge Austria thus ordered the return of all the items seized by virtue of the warrants.

Petitioners appealed the order of Judge Austria to the Court of Appeals, docketed CA-G.R. CV No. 22133-22135, assigning the following alleged errors:

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1. The Court a quo erred in ruling that private complainants were uncertain of their ownership of the titles subject of the pirated video tapes.

2. The Court a quo erred in ordering the quashal of the search warrants on the ground that the requirement of producing the "master tapes" during the application for a search warrant, as enunciated in the 20th Century Foxcase, promulgated on 19 August 1988, was applicable to the facts of the instant case which transpired on 07 April 1988, and that the same was not complied with.

3. The Court a quo erred in ruling that appellants do not have a protectable copyright under Philippine laws for their failure to comply with the deposit and registration requirements of Presidential Decree No. 49, as amended by Presidential Decree No. 1988. 6

On 31 October 1990, the Court of Appeals, through Justice Salome A. Montoya, rendered its decision sustaining petitioners' first and third assignment of errors but rejecting petitioners' second assignment of error. It, therefore, still affirmed the quashal of the search warrants.

Hence, this petition (G.R. No. 96597-99). Another decision rendered by the Court of Appeals in another case (CA-G.R. No. 20617), involving the same petitioners on substantially identical facts and issues, was also brought before this Court (G.R. No. 97156). In a Resolution, dated 06 March 1991, this Court consolidated the two petitions.

We affirm the decisions of the Court of Appeals.

This Court, in 20th Century Fox Film Corp. vs. Court of Appeals (164 SCRA 655) has already laid down the rule that a basic requirement for the validity of search warrants, in cases of this nature, is the presentation of the master tapes of the copyrighted films from which pirated films are supposed to have been copied. We quote:

The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns.

The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49.

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The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.

We also fully concur with the Court of Appeals when, in resolving petitioners' motion for reconsideration in CA-G.R. CV No. 22133-35, it ratiocinated thusly:

It is not correct to say that "the basic fact" to be proven to establish probable cause in the instant cases is not the "unauthorized transfer" of a motion picture that has been recorded but the "sale, lease, or distribution of pirated video tapes of copyrighted films."

In applying for the search warrants the NBI charged violation of the entire provisions of Section 56 of P.D. No. 49 as amended by P.D. No. 1988. This included not only the sale, lease or distribution of pirated tapes but also the transfer or causing to be transferred of any sound recording or motion picture or other audio visual work.

But even assuming, as appellants argue, that only the sale, lease, or distribution of pirated video tapes is involved, the fact remains that there is need to establish probable cause that the tapes being sold, leased or distributed are pirated tapes, hence the issue reverts back to the question of whether there was unauthorized transfer, directly or indirectly, of a sound recording or motion picture or other audio visual work that has been recorded. 7

With due respect to petitioners, the Court does not see a compelling reason to reexamine its previous position on the issue.

WHEREFORE, in view of the foregoing, the instant petitions are hereby DENIED for lack of merit.

SO ORDERED.

#Footnotes

1 Rollo of G.R. No. 97156, p. 110.

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2 Rollo of G.R. No. 96597-99, pp. 126-127.

3 Rollo of G.R. No. 96597-99, p. 126.

4 Rollo of G.R. No. 96597-99, pp. 127-128.

5 Rollo of G.R. No. 96597-99, p. 128.

6 Rollo of G.R. No. 96597-99, pp. 128-129.

7 Rollo of G.R. No. 96597-99, pp. 160-161.

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Topic: Infringement

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. Nos. 76649-51 August 19, 1988

20TH CENTURY FOX FILM CORPORATION, petitioner, vs. COURT OF APPEALS, EDUARDO M. BARRETO, RAUL SAGULLO and FORTUNE LEDESMA,respondents.

Siguion Reyna, Montecillo & Ongsiako Law Office for petitioner.

B.C. Salazar & Associates for respondents.

GUTIERREZ, JR., J.:

The petitioner questions the application of the constitutional provision against illegal searches and seizures to raids conducted in connection with the government's anti-film piracy campaign. The main issue hinges on whether or not the judge properly lifted the search warrants he issued earlier upon the application of the National Bureau of Investigation on the basis of the complaint filed by the petitioner.

In a letter-complaint dated August 26, 1985, petitioner 20th Century Fox Film Corporation through counsel sought the National Bureau of Investigation's (NBI) assistance in the conduct of searches and seizures in connection with the latter's anti-film piracy campaign. Specifically, the letter-complaint alleged that certain videotape outlets all over Metro Manila are engaged in the unauthorized sale and renting out of copyrighted films in videotape form which constitute a flagrant violation of Presidential Decree No. 49 (otherwise known as the Decree on the Protection of Intellectual Property).

Acting on the letter-complaint, the NBI conducted surveillance and investigation of the outlets pinpointed by the petitioner and subsequently filed three (3) applications for search warrants against the video outlets owned by the private respondents. The applications were consolidated and heard by the Regional Trial Court of Makati, Branch 132.

On September 4, 1985, the lower court issued the desired search warrants.

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Armed with the search warrants, the NBI accompanied by the petitioner's agents, raided the video outlets and seized the items described therein. An inventory of the items seized was made and left with the private respondents.

Acting on a motion to lift search warrants and release seized properties filed by the private respondents, the lower court issued an order dated October 8, 1985, lifting the three (3) search warrants issued earlier against the private respondents by the court. The dispositive portion of the order reads:

WHEREFORE, the Court hereby orders that Search Warrants Nos. SW- 85-024; issued against Eduardo M. Barreto of the Junction Video, etc., Paranaque, Metro Manila; SW No. 85-025, issued against Raul M. Sagullo of South Video Bug Center, Inc., etc., also of No. 5355 Pres. Avenue BF Homes, Parañaque, Metro Manila; and SW No. 85-026, issued against Fortune A. Ledesma of Sonix Video Services of San Antonio Plaza, Forbes Park, Makati, Metro Manila, be lifted.

Consequently, the articles listed in the returns of the three search warrants which could not be a basis of any criminal prosecution, now in the possession of the National Bureau of Investigation which under the law must be delivered to this Court, but which the NBI failed to do, are hereby ordered to be returned to their owners through their lawyer, Atty. Benito Salazar or his agents or representatives, against proper receipt, to be forwarded to this Court for record purposes, as proof that said properties have been returned to the possession of the rightful owners." (p. 34, Rollo)

The lower court denied a motion for reconsideration filed by the petitioner in its order dated January 2, 1986.

The petitioner filed a petition for certiorari with the Court of Appeals to annul the October 8, 1985 and January 2, 1986 orders of the lower court. The petition was dismissed.

Hence, this petition.

The main issue hinges on the meaning of "probable cause" within the context of the constitutional provision against illegal searches and seizures (Section 3, Article IV, 1973 Constitution, now, Section 2, Article Ill, 1987 Constitution.

The petitioner maintains that the lower court issued the questioned search warrants after finding the existence of a probable cause justifying their issuance. According to the petitioner, the lower court arrived at this conclusion on the basis of the depositions of applicant NBI's two witnesses which were taken through searching questions and answers by the lower court.

Section 2, Article III of the present Constitution which substantially reproduces Section 3, Article IV of the 1973 Constitution on illegal searches and seizures provides:

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The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized.

This constitutional right protects a citizen against wanton and unreasonable invasion of his privacy and liberty as to his person, papers and effects. We have explained in the case of People v. Burgos (144 SCRA 1) citing Villanueva v. Querubin (48 SCRA 345) why the right is so important:

It is deference to one's personality that lies at the core of this right, but it could be also looked upon as a recognition of a constitutionally protected area, primarily one's home, but not necessarily thereto confined. (Cf. Hoffa v. United States, 385 US 293 119661) What is sought to be guarded is a man's prerogative to choose who is allowed entry to his residence. In that haven of refuge, his individuality can assert itself not only in the choice of who shall be welcome but likewise in the kind of objects he wants around him. There the state, however powerful, does not as such have access except under the circumstances above noted, for in the traditional formulation, his house, however humble, is his castle. Thus is outlawed any unwarranted intrusion by government, which is called upon to refrain from any invasion of his dwelling and to respect the privacies of his life. (Cf Schmerber v. California, 384 US 757 [1966], Brennan, J. and Boyd v. United States, 116 630 [1886]). In the same vein, Landynski in his authoritative work (Search and Seizure and the Supreme Court [1966]), could fitly characterize constitutional right as the embodiment of a "spiritual concept: the belief that to value the privacy of home and person and to afford its constitutional protection against the long reach of government is no less than to value human dignity, and that his privacy must not be disturbed except in case of overriding social need, and then only under stringent procedural safeguards."(ibid, p. 74).

The government's right to issue search warrants against a citizen's papers and effects is circumscribed by the requirements mandated in the searches and seizures provision of the Constitution.

In the case of Burgos, Sr. v. Chief of Staff, AFP (133 SCRA 800), we defined probable cause for a valid search "as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched." This constitutional provision also demands "no less than personal knowledge by the complainant or his witnesses of the facts upon which the issuance of a search warrant may be justified" in order to convince the judge, not the individual making the affidavit and seeking the

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issuance of the warrant, of the existence of a probable cause. (Alvarez v. Court of First Instance, 64 Phil. 33; Burgos, Sr. v. Chief of Staff, AFP, supra).

In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2,1986:

According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact.

On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him, it is of his personal knowledge.

At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand. "

Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time- honored precept that proceedings to put a man to task as an offender under our laws should be interpreted instrictissimi juris against the government and liberally in favor of the alleged offender.

xxx xxx xxx

This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution.

So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video

216

tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein.

But the glaring fact is that 'Cocoon,' the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record). So, that lacking in the requisite presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox." (pp. 37-39, Rollo)

xxx xxx xxx

The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission of the offense by the private respondents. Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application.

All these factors were taken into consideration by the lower court when it lifted the three questioned search warrants. There is no truth, therefore, to the petitioner's allegation that the lower court based its January 2, 1986 order only "on the fact that the original or master copies of the copyrighted films were not presented during the application for search warrants, thus leading it to conclude that it had been "misled by the applicant and his witnesses." (p. 17, Rollo)

The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns.

The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49.

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The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.

Furthermore, we note that the search warrants described the articles sought to be seized as follows:

xxx xxx xxx

xxx xxx xxx

c) Television sets, Video Cassettes Recorders, rewinders, tape head cleaners, accessories, equipments and other machines used or intended to be used in the unlawful reproduction, sale, rental/lease distribution of the above-mentioned video tapes which she is keeping and concealing in the premises above-described." (p. 26, Rollo)

In the case of Burgos v. Chief of Staff, AFP supra, we stated:

xxx xxx xxx

Another factor which makes the search warrants under consideration constitutionally objectionable is that they are in the nature of general warrants. The search warrants describe the articles sought to be seized in this wise:

l] All printing equipment, paraphernalia, paper, ink, photo equipment, typewriters, cabinets, tables communications/recording equipment, tape recorders, dictaphone and the like used and/or connected in the printing of the 'WE FORUM' newspaper and any and all document/communications, letters and facsimile of prints related to "WE FORUM" newspaper.

2] Subversive documents, pamphlets, leaflets, books, and other publications to promote the objectives and purposes of the subversive organizations known as Movement for Free Philippines, Light-a-Fire Movement and April 6 Movement; and

3] Motor vehicles used in the distribution/circulation of the 'WE FORUM and other subversive materials and propaganda, more particularly,

1] Toyota-Corolla, colored yellow with Plate No. NKA 892;

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2] DATSUN pick-up colored white with Plate No. NKV 969;

3] A delivery truck with Plate No. NBS 542;

4] TOYOTA-TAMARAW, colored white with Plate No. PBP 665;and,

5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 472 with marking "Bagong Silang."

In Stanford v. State of Texas (379 U.S. 476,13 L ed 2nd 431), the search warrant which authorized the search for 'books, records, pamphlets, cards, receipts, lists, memoranda, pictures, recordings and other written instruments concerning the Communist Parties of Texas, and the operations of the Community Party in Texas," was declared void by the U.S. Supreme Court for being too general. In like manner, directions to "seize any evidence in connection with the violation of SDC 13-3703 or otherwise' have been held too general, and that portion of a search warrant which authorized the seizure of any "paraphernalia which could be used to violate Sec. 54-197 of the Connecticut General Statutes [the statute dealing with the crime of conspiracy]"' was held to be a general warrant, and therefore invalid (68 Am. Jur. 2d., pp. 736-737). The description of the articles sought to be seized under the search warrants in question cannot be characterized differently. (at pp. 814-815)

Undoubtedly, a similar conclusion can be deduced from the description of the articles sought to be confiscated under the questioned search warrants.

Television sets, video cassette recorders, reminders and tape cleaners are articles which can be found in a video tape store engaged in the legitimate business of lending or renting out betamax tapes. In short, these articles and appliances are generally connected with, or related to a legitimate business not necessarily involving piracy of intellectual property or infringement of copyright laws. Hence, including these articles without specification and/or particularity that they were really instruments in violating an Anti-Piracy law makes The search warrant too general which could result in the confiscation of all items found in any video store. In fact, this actually happened in the instant case. Thus, the lower court, in its questioned order dated October 8, 1985 said:

Although the applications and warrants themselves covered certain articles of property usually found in a video store, the Court believes that the search party should have confined themselves to articles that are according to them, evidence constitutive of infringement of copyright laws or the piracy of intellectual property, but not to other articles that are usually connected with, or related to, a legitimate business, not involving piracy of intellectual property, or infringement of copyright laws. So that a television set, a rewinder, and a whiteboard listing Betamax tapes, video cassette cleaners

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video cassette recorders as reflected in the Returns of Search Warrants, are items of legitimate business engaged in the video tape industry, and which could not be the subject of seizure, The applicant and his agents therefore exceeded their authority in seizing perfectly legitimate personal property usually found in a video cassette store or business establishment." (p. 33, Rollo)

All in all, we find no grave abuse of discretion on the part of the lower court when it lifted the search warrants it earlier issued against the private respondents. We agree with the appellate court's findings to the effect that:

An assiduous examination of the assailed orders reveal that the main ground upon which the respondent Court anchored said orders was its subsequent findings that it was misled by the applicant (NBI) and its witnesses 'that infringement of copyright or a piracy of a particular film have been committed when it issued the questioned warrants.' Stated differently, the respondent Court merely corrected its erroneous findings as to the existence of probable cause and declared the search and seizure to be unreasonable. Certainly, such action is within the power and authority of the respondent Court to perform, provided that it is not exercised in an oppressive or arbitrary manner. Indeed, the order of the respondent Court declaring the existence of probable cause is not final and does not constitute res judicata.

A careful review of the record of the case shows that the respondent Court did not commit a grave abuse of discretion when it issued the questioned orders. Grave abuse of discretion' implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.' But far from being despotic or arbitrary, the assailed orders were motivated by a noble desire of rectifying an error, much so when the erroneous findings collided with the constitutional rights of the private respondents. In fact, the petitioner did not even contest the righteousness and legality of the questioned orders but instead concentrated on the alleged denial of due process of law." (pp. 44-45, Rollo)

The proliferation of pirated tapes of films not only deprives the government of much needed revenues but is also an indication of the widespread breakdown of national order and discipline. Courts should not impose any unnecessary roadblocks in the way of the anti-film piracy campaign. However, the campaign cannot ignore or violate constitutional safeguards. To say that the problem of pirated films can be solved only by the use of unconstitutional shortcuts is to denigrate the long history and experience behind the searches and seizures clause of the Bill of Rights. The trial court did not commit reversible error.

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WHEREFORE, the instant petition is DISMISSED. The questioned decision and resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.

Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur

221

Topic: Infringement

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-11937 April 1, 1918

PEDRO SERRANO LAKTAW, plaintiff-appellant, vs. MAMERTO PAGLINAWAN, defendant-appellee.

Perfecto Gabriel for appellant. Felix Ferrer and Crossfield and O'Brien for appellee.

ARAULLO, J.:

In the complaint presented in the Court of First Instance of the City of Manila on February 20, 1915, it was alleged: (1) That the plaintiff was, according to the laws regulating literary properties, the registered owner and author of a literary work entitled Diccionario Hispano-Tagalog (Spanish-Tagalog Dictionary) published in the City of Manila in 1889 by the printing establishment La Opinion, and a copy of which was attached to the complaint, as Exhibit A; (2) that the defendant, without the consent of the plaintiff, reproduced said literary work, improperly copied the greater part thereof in the work published by him and entitled Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), a copy of which was also attached to the complaint as Exhibit B; (3) that said act of the defendant, which is a violation of article 7 of the Law of January 10, 1879, on Intellectual Property, caused irreparable injuries to the plaintiff, who was surprised when, on publishing his new work entitled Diccionario Tagalog-Hispano (Tagalog-Spanish Dictionary) he learned of the fact, and (4) that the damages occasioned to the plaintiff by the publication of defendant's work amounted to $10,000. The plaintiff therefore prayed the court to order the defendant to withdraw from sale all stock of the work herein identified as Exhibit B and to pay the plaintiff the sum of $10,000, with costs.

The defendant in his answer denied generally each and every allegation of the complaint and prayed the court to absolve him from the complaint. After trial and the introduction of evidence by both parties, the court on August 20, 1915, rendered judgment, absolving the defendant from the complaint, but without making any special pronouncement as to costs. The plaintiff moved for a new trial on the ground that the judgment was against the law and the weight of the evidence. Said motion having been overruled, plaintiff excepted to the order overruling it, and appealed the case to the Supreme Court upon a bill of exceptions.

The ground of the decision appealed from is that a comparison of the plaintiff's dictionary with that of the defendant does not show that the latter is an improper copy of the former, which has been published and offered for sale by the plaintiff for about twenty-five years or

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more. For this reason the court held that the plaintiff had no right of action and that the remedy sought by him could not be granted.

The appellant contends that court below erred in not declaring that the defendant had reproduced the plaintiff's work and that the defendant had violated article 7 of the Law of January 10, 1879, on Intellectual Property.

Said article provides:

Nobody may reproduce another person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof.

Therefore, in order that said article may be violated, it is not necessary, as the court below seems to have understood, that a work should be an improper copy of another work previously published. It is enough that another's work has been reproduced without the consent of the owner, even though it be only to annotate, add something to it, or improve any edition thereof.

Upon making a careful and minute comparison of Exhibit A, the dictionary written and published by the plaintiff, and Exhibit B, written and published by the defendant, and, taking into account the memorandum (fols. 55 to 59) presented by the defendant, in which he enumerates the words and terms which, according to him, are in his dictionary but not in that of that of the plaintiff, and viceversa, and the equivalents or definitions given by the plaintiff, as well as the new Tagalog words which are in the dictionary of the defendant but not in that of the plaintiff; and considering the notes, Exhibit C, first series, presented by the plaintiff, in which the terms copied by the defendant from the plaintiff's dictionary are enumerated in detail and in relation to each letter of the alphabet and which the plaintiff's own words and terms are set forth, with a summary, at the foot of each group of letters, which shows the number of initial Spanish words contained in the defendant's dictionary, the words that are his own and the fact that the remaining ones are truly copied from the plaintiff's dictionary — considering all of these facts, we come to a conclusion completely different and contrary to that of the trial court, for said evidence clearly shows:

1. That, of the Spanish words in the defendant's dictionary, Exhibit B, which correspond to each letter of the alphabet, those that are enumerated below have been copied and reproduced from the plaintiff's dictionary, with the exception of those that are stated to be defendant's own.

Letter Words Defendant's own

"A" 1,184 231

"B" 364 28

"C" 660 261

"CH" 76 10

"D" 874 231

"E" 880 301

"F" 383 152

"G" 302 111

"H" 57 64

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"I" 814 328

"J" 113 25

"K" 11 11

"L" 502 94

"LL" 36 2

"M" 994 225

"N" 259 53

"Ñ" 6 2

"O" 317 67

"P" 803 358

"Q" 84 11

"R" 847 140

"S" 746 118

"T" 591 147

"U" 107 15

"V" 342 96

"X" 6 6

"Y" 24 4

"Z" 73 17

______ _____

23,560 3,108

Therefore, of the 23,560 Spanish words in the defendant's dictionary, after deducting 17 words corresponding to the letters K and X (for the plaintiff has no words corresponding to them), only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words.

2. That the defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different meanings in Tagalog, given in plaintiff's dictionary, having reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are numerous as may be seen, by comparing both dictionaries and using as a guide or index the defendant's memorandum and notes, first series, Exhibit C, in which, as to each word, the similarities and differences between them are set forth in detail.

3. That the printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in Tagalog from the plaintiff's dictionary.

The trial court has chosen at random, as is stated in the judgment appealed from, some words from said dictionaries in making the comparison on which its conclusion is based, and consequently the conclusion reached by it must be inaccurate and not well founded, because said comparison was not complete.

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In said judgment some words of the defendant's dictionary are transcribed, the equivalents and meanings of which in Tagalog are exactly the same as those that are given in the plaintiff's dictionary, with the exception, as to some of them, of only one acceptation, which is the defendant's own production. And with respect to the examples used by the defendant in his dictionary, which, according to the judgment, are not copied from the plaintiff's — the judgment referring to the preposition a (to), in Tagalog sa — it must be noted that the defendant, in giving in his dictionary an example of said preposition, uses the expression "voy a Tayabas" (I am going to Tayabas) instead of "voy a Bulacan" (I am going to Bulacan), as the plaintiff does in his dictionary, or what is the same thing, that one speaks of Bulacan while the other speaks of Tayabas. This does not show that there was no reproduction or copying by the defendant of the plaintiffs work, but just the opposite, for he who intends to imitate the work of another, tries to make it appear in some manner that there is some difference between the original and the imitation; and in the example referred to, with respect to the preposition a (to), that dissimilarity as to the province designated seems to effect the same purpose.

In the judgment appealed from, the court gives one to understand that the reproduction of another's dictionary without the owner's consent does not constitute a violation of the Law of Intellectual Property for the court's idea of a dictionary is stated in the decision itself, as follows:

Dictionaries have to be made with the aid of others, and they are improved by the increase of words. What may be said of a pasture ground may be said also of a dictionary, i. e., that it should be common property for all who may desire to write a new dictionary, and the defendant has come to this pasture ground and taken whatever he needed from it in the exercise of a perfect right.

Such idea is very erroneous, especially in relation to the Law of Intellectual Property. Danvilla y Collado the author of the Law of January 10, 1879, on Intellectual Property, which was discussed and approved in the Spanish Cortes, in his work entitled La Propiedad Intelectual (page 362, 1st ed.) states with respect to dictionaries and in relation to article 7 of said law:

The protection of the law cannot be denied to the author of a dictionary, for although words are not the property of anybody, their definitions, the example that explain their sense, and the manner of expressing their different meanings, may constitute a special work. On this point, the correctional court of the Seine held, on August 16, 1864, that a dictionary constitutes property, although some of the words therein are explained by mere definitions expressed in a few lines and sanctioned by usage, provided that the greater part of the other words contain new meanings; new meanings which evidently may only belonged to the first person who published them.

Therefore, the plaintiff, Pedro Serrano, cannot be denied the legal protection which he seeks, and which is based on the fact that the dictionary published by him in 1889 is his property — said property right being recognized and having been granted by article 7, in

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connection with article 2, of said law — and on the further fact that said work was reproduced by the defendant without his permission.

This law was published in the Gaceta de Madrid on January 12, 1879. It took effect in these Islands six months after its promulgation or publication, as provided in article 56 thereof. The body of rules for the execution of said law having been approved by royal decree of September 3, 1880, and published in the Gaceta de Madrid on September 6, 1880 and extended to the Philippine Islands by royal decree of May 5, 1887, it was in turn published in the Gaceta de Manila, with the approval of the Governor-General of the Islands, on June 15, 1887. Said law of January 10, 1879, and the rules for its application, were therefore in force in these Islands when the plaintiff's dictionary was edited and published in 1889.

It appears from the evidence that although the plaintiff did not introduce at the trial the certificate of registration of his property rights to said work which, according to said rules, was kept in the Central Government of these Islands, and was issued to him in 1890, the same having been lost during the revolution against Spain, and no trace relative to the issuance of said certificate being obtainable in the Division of Archives of the Executive Bureau on account of the loss of the corresponding records, yet as in the first page of said dictionary the property right of the plaintiff was reserved by means of the words "Es propiedad del autor" (All rights reserved), taken in connection with the permission granted him by the Governor-General on November 24, 1889, to print and publish said dictionary, after an examination thereof by the permanent committee of censors, which examination was made, and the necessary license granted to him, these facts constitute sufficient proof, under the circumstances of the case, as they have not been overcome by any evidence on the part of the defendant, showing that said plaintiff did not comply with the requirements of article 36 of said law, which was the prerequisite to the enjoyment of the benefits thereof according to the preceding articles, among which is article 7, which is alleged in the complaint to have been violated by the defendant.

Even considering that said Law of January 10, 1879, ceased to operate in these Islands, upon the termination of Spanish sovereignty and the substitution thereof by that of the United States of America, the right of the plaintiff to invoke said law in support of the action instituted by him in the present case cannot be disputed. His property right to the work Diccionario Hispano-Tagalog (Spanish-Tagalog Dictionary), published by him and edited in 1889, is recognized and sanctioned by said law, and by virtue thereof, he had acquired a right of which he cannot be deprived merely because the law is not in force now or is of no actual application. This conclusion is necessary to protect intellectual property rights vested after the sovereignty of Spain was superseded by that of the United States. It was so held superseded by that of the United States. It was so held in the Treaty of Paris of December 10, 1898, between Spain and the United States, when it declared in article 13 thereof that the rights to literary, artistic, and industrial properties acquired by the subject of Spain in the Island of Cuba and in Puerto Rico and the Philippines and other ceded territories, at the time of the exchange of the ratification of said Treaty, shall continue to be respect.

In addition to what has been said, according to article 428 of the Civil Code, the author of a literary, scientific, or artistic work, has the right to exploit it and dispose thereof at will. In

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relation to this right, there exists the exclusive right of the author, who is the absolute owner of his own work, to produce it, according to article 2 of the Law of January 10, 1879, and consequently, nobody may reproduce it, without his permission, not even to annotate or add something to it, or to improve any edition thereof, according to article 7 of said law. Manresa, in his commentaries on article 429 of the Civil Code (vol. 3, p. 633, 3d ed.) says that the concrete statement of the right to literary properties is found in the legal doctrine according to which nobody may reproduce another person's work, without the consent of his owner, or even to annotate or add something to it or to improve any edition thereof. And on page 616 of said volume, Manresa says the following:

He who writes a book, or carves a statue, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of land has the absolute right to sell it or its fruits. But while the owner of land, by selling it and its fruits, perhaps fully realizes all its economic value, by receiving its benefits and utilities, which are presented, for example, by the price, on the other hand the author of a book, statue or invention, does not reap all the benefits and advantages of his own property by disposing of it, for the most important form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies, everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort made in the production of the book is no way rewarded.

Indeed the property right recognized and protected by the Law of January 10, 1879, on Intellectual Property, would be illusory if, by reason of the fact that said law is no longer in force as a consequence of the change of sovereignty in these Islands, the author of a work, who has the exclusive right to reproduce it, could not prevent another person from so doing without his consent, and could not enforce this right through the courts of justice in order to prosecute the violator of this legal provision and the defrauder or usurper of his right, for he could not obtain the full enjoyment of the book or other work, and his property right thereto, which is recognized by law, would be reduced, as Manresa says, to an insignificant thing, if he should have no more right than that of selling his work.

The reproduction by the defendant without the plaintiff's consent of the Diccionario Hispano-Tagalog (Spanish-Tagalog Dictionary), published and edited in the City of Manila in 1889, by the publication of the Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), published in the same city and edited in the press El Progreso in 1913, as appears from Exhibit B, which is attached to the complaint, has caused the plaintiff, according to the latter, damages in the sum of $10,000. It is true that it cannot be denied that the reproduction of the plaintiff's book by the defendant has caused damages to the former, but the amount thereof has not been determined at the trial, for the statement of the plaintiff as to the proceeds he would have realized if he had printed in 1913 the number of copies of his work which he stated in his declaration — a fact which he did not do because the defendant had reproduced it — was not corroborated in any way at the trial

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and is based upon mere calculations made by the plaintiff himself; for which reason no pronouncement can be made in this decision as to the indemnification for damages which the plaintiff seeks to recover.

The plaintiff having prayed, not for a permanent injunction against the defendant, as the plaintiff himself in his brief erroneously states, but for a judgment ordering the defendant to withdraw from sale all stock of his workDiccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), of which Exhibit B is a copy, and the suit instituted by said plaintiff being proper, we reverse the judgment appealed from and order the defendant to withdraw from sale, as prayed for in the complaint, all stock of his work above-mentioned, and to pay the costs of first instance. We make no special pronouncement as to the costs of this instance. So ordered.

Arellano, C. J., Torres, and Street, JJ., concur. Carson, and Malcolm, JJ., concur in the result.

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Topic: Neighboring Rights (or Related Rights) Sec. 202 – 212.4

Republic of the Philippines SUPREME COURT

Manila

G.R. No. L-36402 March 16, 1987

FILIPINO SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, INC., plaintiff-appellant, vs. BENJAMIN TAN, defendant-appellee.

Lichauco, Picazo & Agcaoili Law Office for plaintiff-appellant.

Ramon A. Nieves for defendant-appellee.

PARAS, J.:

An appeal was made to the Court of Appeals docketed as CA-G.R. No. 46373-R * entitled Filipino Society of Composers, Authors, Publishers, Inc., Plaintiff-Appellant v. Benjamin Tan, Defendant-Appellee, from the decision of the Court of First Instance of Manila, Branch VII in Civil Case No. 71222 ** "Filipino Society of Composers, Authors and Publishers, Inc., Plaintiff v. Benjamin Tan, Defendant," which had dismissed plaintiffs' complaint without special pronouncement as to costs.

The Court of Appeals, finding that the case involves pure questions of law, certified the same to the Supreme Court for final determination (Resolution, CA-G.R. No. 46373-R, Rollo, p. 36; Resolution of the Supreme Court of February 16, 1973 in L-36402, Rollo, p. 38).

The undisputed facts of this case are as follows:

Plaintiff-appellant is a non-profit association of authors, composers and publishers duly organized under the Corporation Law of the Philippines and registered with the Securities and Exchange Commission. Said association is the owner of certain musical compositions among which are the songs entitled: "Dahil Sa Iyo", "Sapagkat Ikaw Ay Akin," "Sapagkat Kami Ay Tao Lamang" and "The Nearness Of You."

On the other hand, defendant-appellee is the operator of a restaurant known as "Alex Soda Foundation and Restaurant" where a combo with professional singers, hired to play and sing musical compositions to entertain and amuse customers therein, were playing and singing the above-mentioned compositions without any license or permission from the appellant to play or sing the same. Accordingly, appellant demanded from the appellee payment of the necessary license fee for the playing and singing of aforesaid compositions but the demand was ignored.

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Hence, on November 7, 1967, appellant filed a complaint with the lower court for infringement of copyright against defendant-appellee for allowing the playing in defendant-appellee's restaurant of said songs copyrighted in the name of the former.

Defendant-appellee, in his answer, countered that the complaint states no cause of action. While not denying the playing of said copyrighted compositions in his establishment, appellee maintains that the mere singing and playing of songs and popular tunes even if they are copyrighted do not constitute an infringement (Record on Appeal, p. 11; Resolution, CA-G.R. NO. 46373-R, Rollo, pp. 32-36) under the provisions of Section 3 of the Copyright Law (Act 3134 of the Philippine Legislature).

The lower court, finding for the defendant, dismissed the complaint (Record on Appeal, p. 25).

Plaintiff appealed to the Court of Appeals which as already stated certified the case to the Supreme Court for adjudication on the legal question involved. (Resolution, Court of Appeals, Rollo, p. 36; Resolution of the Supreme Court of February 18, 1973, Rollo, p. 38).

In its brief in the Court of Appeals, appellant raised the following Assignment of Errors:

I

THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE APPELLANT WERE IN THE NATURE OF PUBLIC PROPERTY WHEN THEY WERE COPYRIGHTED OR REGISTERED.

II

THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE APPELLANT WERE PLAYED AND SUNG IN THE SODA FOUNTAIN AND RESTAURANT OF THE APPELLEE BY INDEPENDENT CONTRACTORS AND ONLY UPON THE REQUEST OF CUSTOMERS.

III

THE LOWER COURT ERRED IN HOLDING THAT THE PLAYING AND SINGING OF COPYRIGHTED MUSICAL COMPOSITIONS IN THE SODA FOUNTAIN AND RESTAURANT OF THE APPELLEE ARE NOT PUBLIC PERFORMANCES FOR PROFIT OF THE SAID COMPOSITIONS WITHIN THE MEANING AND CONTEMPLATION OF THE COPYRIGHT LAW.

IV

THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPELLEE IS LIABLE TO THE APPELLANT FOR FOUR (4) SEPARATE INFRINGEMENTS. (Brief for Appellant, pp. A and B).

The petition is devoid of merit.

The principal issues in this case are whether or not the playing and signing of musical compositions which have been copyrighted under the provisions of the Copyright Law (Act 3134) inside the establishment of the defendant-appellee constitute a public performance

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for profit within the meaning and contemplation of the Copyright Law of the Philippines; and assuming that there were indeed public performances for profit, whether or not appellee can be held liable therefor.

Appellant anchors its claim on Section 3(c) of the Copyright Law which provides:

SEC. 3. The proprietor of a copyright or his heirs or assigns shall have the exclusive right:

xxx xxx xxx

(c) To exhibit, perform, represent, produce, or reproduce the copyrighted work in any manner or by any method whatever for profit or otherwise; if not reproduced in copies for sale, to sell any manuscripts or any record whatsoever thereof;

xxx xxx xxx

It maintains that playing or singing a musical composition is universally accepted as performing the musical composition and that playing and singing of copyrighted music in the soda fountain and restaurant of the appellee for the entertainment of the customers although the latter do not pay for the music but only for the food and drink constitute performance for profit under the Copyright Law (Brief for the Appellant, pp. 19-25).

We concede that indeed there were "public performances for profit. "

The word "perform" as used in the Act has been applied to "One who plays a musical composition on a piano, thereby producing in the air sound waves which are heard as music ... and if the instrument he plays on is a piano plus a broadcasting apparatus, so that waves are thrown out, not only upon the air, but upon the other, then also he is performing the musical composition." (Buck, et al. v. Duncan, et al.; Same Jewell La Salle Realty Co., 32F. 2d. Series 367).

In relation thereto, it has been held that "The playing of music in dine and dance establishment which was paid for by the public in purchases of food and drink constituted "performance for profit" within a Copyright Law." (Buck, et al. v. Russon No. 4489 25 F. Supp. 317). Thus, it has been explained that while it is possible in such establishments for the patrons to purchase their food and drinks and at the same time dance to the music of the orchestra, the music is furnished and used by the orchestra for the purpose of inducing the public to patronize the establishment and pay for the entertainment in the purchase of food and drinks. The defendant conducts his place of business for profit, and it is public; and the music is performed for profit (Ibid, p. 319). In a similar case, the Court ruled that "The Performance in a restaurant or hotel dining room, by persons employed by the proprietor, of a copyrighted musical composition, for the entertainment of patrons, without charge for admission to hear it, infringes the exclusive right of the owner of the copyright." (Herbert v. Shanley Co.; John Church Co. v. Hillard Hotel Co., et al., 242 U.S. 590-591). In delivering the opinion of the Court in said two cases, Justice Holmes elaborated thus:

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If the rights under the copyright are infringed only by a performance where money is taken at the door, they are very imperfectly protected. Performances not different in kind from those of the defendants could be given that might compete with and even destroy the success of the monopoly that the law intends the plaintiffs to have. It is enough to say that there is no need to construe the statute so narrowly. The defendants' performances are not eleemosynary. They are part of a total for which the public pays, and the fact that the price of the whole is attributed to a particular item which those present are expected to order is not important. It is true that the music is not the sole object, but neither is the food, which probably could be got cheaper elsewhere. The object is a repast in surroundings that to people having limited power of conversation or disliking the rival noise, give a luxurious pleasure not to be had from eating a silent meal. If music did not pay, it would be given up. If it pays, it pays out of the public's pocket. Whether it pays or not, the purpose of employing it is profit, and that is enough. (Ibid., p. 594).

In the case at bar, it is admitted that the patrons of the restaurant in question pay only for the food and drinks and apparently not for listening to the music. As found by the trial court, the music provided is for the purpose of entertaining and amusing the customers in order to make the establishment more attractive and desirable (Record on Appeal, p. 21). It will be noted that for the playing and singing the musical compositions involved, the combo was paid as independent contractors by the appellant (Record on Appeal, p. 24). It is therefore obvious that the expenses entailed thereby are added to the overhead of the restaurant which are either eventually charged in the price of the food and drinks or to the overall total of additional income produced by the bigger volume of business which the entertainment was programmed to attract. Consequently, it is beyond question that the playing and singing of the combo in defendant-appellee's restaurant constituted performance for profit contemplated by the Copyright Law. (Act 3134 amended by P.D. No. 49, as amended).

Nevertheless, appellee cannot be said to have infringed upon the Copyright Law. Appellee's allegation that the composers of the contested musical compositions waived their right in favor of the general public when they allowed their intellectual creations to become property of the public domain before applying for the corresponding copyrights for the same (Brief for Defendant-Appellee, pp. 14-15) is correct.

The Supreme Court has ruled that "Paragraph 33 of Patent Office Administrative Order No. 3 (as amended, dated September 18, 1947) entitled 'Rules of Practice in the Philippines Patent Office relating to the Registration of Copyright Claims' promulgated pursuant to Republic Act 165, provides among other things that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within the (60) days if made elsewhere, failure of which renders such creation public property." (Santos v. McCullough Printing Company, 12 SCRA 324-325 [1964]. Indeed, if the general public has made use of the object sought to be copyrighted for thirty (30) days prior to the copyright

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application the law deems the object to have been donated to the public domain and the same can no longer be copyrighted.

A careful study of the records reveals that the song "Dahil Sa Iyo" which was registered on April 20, 1956 (Brief for Appellant, p. 10) became popular in radios, juke boxes, etc. long before registration (TSN, May 28, 1968, pp. 3-5; 25) while the song "The Nearness Of You" registered on January 14, 1955 (Brief for Appellant, p. 10) had become popular twenty five (25) years prior to 1968, (the year of the hearing) or from 1943 (TSN, May 28, 1968, p. 27) and the songs "Sapagkat Ikaw Ay Akin" and "Sapagkat Kami Ay Tao Lamang" both registered on July 10, 1966, appear to have been known and sang by the witnesses as early as 1965 or three years before the hearing in 1968. The testimonies of the witnesses at the hearing of this case on this subject were unrebutted by the appellant. (Ibid, pp. 28; 29 and 30).

Under the circumstances, it is clear that the musical compositions in question had long become public property, and are therefore beyond the protection of the Copyright Law.

PREMISES CONSIDERED, the appealed decision of the Court of First Instance of Manila in Civil Case No. 71222 is hereby AFFIRMED.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur.

Alampay, J., took no part.

Footnotes

* Penned by Justice Ruperto G. Martin concurred in by Justices Andres Reyes and Mateo Canonoy.

** Penned by Judge Gregorio T. Lantin.

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Topic: Neighboring Rights (or Related Rights) Sec. 202 – 212.4

Republic of the Philippines SUPREME COURT

Manila

First Division EN BANC

G.R. No. 175769-70 January 19, 2009

ABS-CBN BROADCASTING CORPORATION, Petitioners, vs. PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M. COLAYCO, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the July 12, 2006 Decision2 of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, which affirmed the December 20, 2004 Decision of the Director-General of the Intellectual Property Office (IPO) in Appeal No. 10-2004-0002. Also assailed is the December 11, 2006 Resolution3 denying the motion for reconsideration.

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the Republic of the Philippines to engage in television and radio broadcasting.4 It broadcasts television programs by wireless means to Metro Manila and nearby provinces, and by satellite to provincial stations through Channel 2 on Very High Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The programs aired over Channels 2 and 23 are either produced by ABS-CBN or purchased from or licensed by other producers.

ABS-CBN also owns regional television stations which pattern their programming in accordance with perceived demands of the region. Thus, television programs shown in Metro Manila and nearby provinces are not necessarily shown in other provinces.

Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream Broadcasting System. It delivers digital direct-to-home (DTH) television via satellite to its subscribers all over the Philippines. Herein individual respondents, Cesar G. Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and Aloysius M. Colayco, are members of PMSI’s Board of Directors.

PMSI was granted a legislative franchise under Republic Act No. 86305 on May 7, 1998 and was given a Provisional Authority by the National Telecommunications Commission (NTC) on February 1, 2000 to install, operate and maintain a nationwide DTH satellite service.

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When it commenced operations, it offered as part of its program line-up ABS-CBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5, GMA Channel 7, RPN Channel 9, and IBC Channel 13, together with other paid premium program channels.

However, on April 25, 2001,6 ABS-CBN demanded for PMSI to cease and desist from rebroadcasting Channels 2 and 23. On April 27, 2001,7 PMSI replied that the rebroadcasting was in accordance with the authority granted it by NTC and its obligation under NTC Memorandum Circular No. 4-08-88,8 Section 6.2 of which requires all cable television system operators operating in a community within Grade “A” or “B” contours to carry the television signals of the authorized television broadcast stations.9

Thereafter, negotiations ensued between the parties in an effort to reach a settlement; however, the negotiations were terminated on April 4, 2002 by ABS-CBN allegedly due to PMSI’s inability to ensure the prevention of illegal retransmission and further rebroadcast of its signals, as well as the adverse effect of the rebroadcasts on the business operations of its regional television stations.10

On May 13, 2002, ABS-CBN filed with the IPO a complaint for “Violation of Laws Involving Property Rights, with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,” which was docketed as IPV No. 10-2002-0004. It alleged that PMSI’s unauthorized rebroadcasting of Channels 2 and 23 infringed on its broadcasting rights and copyright.

On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBN’s application for a temporary restraining order. On July 12, 2002, PMSI suspended its retransmission of Channels 2 and 23 and likewise filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 71597.

Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to the must-carry rule under Memorandum Circular No. 04-08-88. It also submitted a letter dated December 20, 2002 of then NTC Commissioner Armi Jane R. Borje to PMSI stating as follows:

This refers to your letter dated December 16, 2002 requesting for regulatory guidance from this Commission in connection with the application and coverage of NTC Memorandum Circular No. 4-08-88, particularly Section 6 thereof, on mandatory carriage of television broadcast signals, to the direct-to-home (DTH) pay television services of Philippine Multi-Media System, Inc. (PMSI).

Preliminarily, both DTH pay television and cable television services are broadcast services, the only difference being the medium of delivering such services (i.e. the former by satellite and the latter by cable). Both can carry broadcast signals to the remote areas, thus enriching the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs.

The DTH pay television services of PMSI is equipped to provide nationwide DTH satellite services. Concededly, PMSI’s DTH pay television services covers very much wider areas in

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terms of carriage of broadcast signals, including areas not reachable by cable television services thereby providing a better medium of dissemination of information to the public.

In view of the foregoing and the spirit and intent of NTC memorandum Circular No. 4-08-88, particularly section 6 thereof, on mandatory carriage of television broadcast signals, DTH pay television services should be deemed covered by such NTC Memorandum Circular.

For your guidance. (Emphasis added)11

On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a letter dated July 24, 2003 from the NTC enjoining strict and immediate compliance with the must-carry rule under Memorandum Circular No. 04-08-88, to wit:

Dear Mr. Abellada:

Last July 22, 2003, the National Telecommunications Commission (NTC) received a letter dated July 17, 2003 from President/COO Rene Q. Bello of the International Broadcasting Corporation (IBC-Channel 13) complaining that your company, Dream Broadcasting System, Inc., has cut-off, without any notice or explanation whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment of the public.

We were told that, until now, this has been going on.

Please be advised that as a direct broadcast satellite operator, operating a direct-to-home (DTH) broadcasting system, with a provisional authority (PA) from the NTC, your company, along with cable television operators, are mandated to strictly comply with the existing policy of NTC on mandatory carriage of television broadcast signals as provided under Memorandum Circular No. 04-08-88, also known as the Revised Rules and Regulations Governing Cable Television System in the Philippines.

This mandatory coverage provision under Section 6.2 of said Memorandum Circular, requires all cable television system operators, operating in a community within the Grade “A” or “B” contours to “must-carry” the television signals of the authorized television broadcast stations, one of which is IBC-13. Said directive equally applies to your company as the circular was issued to give consumers and the public a wider access to more sources of news, information, entertainment and other programs/contents.

This Commission, as the governing agency vested by laws with the jurisdiction, supervision and control over all public services, which includes direct broadcast satellite operators, and taking into consideration the paramount interest of the public in general, hereby directs you to immediately restore the signal of IBC-13 in your network programs, pursuant to existing circulars and regulations of the Commission.

For strict compliance. (Emphasis added)12

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Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-10-2003, entitled “Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and Direct Broadcast Satellite (DBS) Services to Promote Competition in the Sector.” Article 6, Section 8 thereof states:

As a general rule, the reception, distribution and/or transmission by any CATV/DBS operator of any television signals without any agreement with or authorization from program/content providers are prohibited.

On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular No. 04-08-88, the NTC explained to PMSI in a letter dated November 3, 2003 that:

To address your query on whether or not the provisions of MC 10-10-2003 would have the effect of amending the provisions of MC 4-08-88 on mandatory carriage of television signals, the answer is in the negative.

x x x x

The Commission maintains that, MC 4-08-88 remains valid, subsisting and enforceable.

Please be advised, therefore, that as duly licensed direct-to-home satellite television service provider authorized by this Commission, your company continues to be bound by the guidelines provided for under MC 04-08-88, specifically your obligation under its mandatory carriage provisions, in addition to your obligations under MC 10-10-2003. (Emphasis added)

Please be guided accordingly.13

On December 22, 2003, the BLA rendered a decision14 finding that PMSI infringed the broadcasting rights and copyright of ABS-CBN and ordering it to permanently cease and desist from rebroadcasting Channels 2 and 23.

On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of the IPO which was docketed as Appeal No. 10-2004-0002. On December 23, 2004, it also filed with the Court of Appeals a “Motion to Withdraw Petition; Alternatively, Memorandum of the Petition for Certiorari” in CA-G.R. SP No. 71597, which was granted in a resolution dated February 17, 2005.

On December 20, 2004, the Director-General of the IPO rendered a decision15 in favor of PMSI, the dispositive portion of which states:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. Accordingly, Decision No. 2003-01 dated 22 December 2003 of the Director of Bureau of Legal Affairs is hereby REVERSED and SET ASIDE.

Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. The

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Documentation, Information and Technology Transfer Bureau is also given a copy for library and reference purposes.

SO ORDERED.16

Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary restraining order and writ of preliminary injunction with the Court of Appeals, which was docketed as CA-G.R. SP No. 88092.

On July 18, 2005, the Court of Appeals issued a temporary restraining order. Thereafter, ABS-CBN filed a petition for contempt against PMSI for continuing to rebroadcast Channels 2 and 23 despite the restraining order. The case was docketed as CA- G.R. SP No. 90762.

On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R. SP Nos. 88092 and 90762.

In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the findings of the Director-General of the IPO and dismissed both petitions filed by ABS-CBN.17

ABS-CBN’s motion for reconsideration was denied, hence, this petition.

ABS-CBN contends that PMSI’s unauthorized rebroadcasting of Channels 2 and 23 is an infringement of its broadcasting rights and copyright under the Intellectual Property Code (IP Code);18that Memorandum Circular No. 04-08-88 excludes DTH satellite television operators; that the Court of Appeals’ interpretation of the must-carry rule violates Section 9 of Article III19 of the Constitution because it allows the taking of property for public use without payment of just compensation; that the Court of Appeals erred in dismissing the petition for contempt docketed as CA-G.R. SP No. 90762 without requiring respondents to file comment.

Respondents, on the other hand, argue that PMSI’s rebroadcasting of Channels 2 and 23 is sanctioned by Memorandum Circular No. 04-08-88; that the must-carry rule under the Memorandum Circular is a valid exercise of police power; and that the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since it found no need to exercise its power of contempt.

After a careful review of the facts and records of this case, we affirm the findings of the Director-General of the IPO and the Court of Appeals.

There is no merit in ABS-CBN’s contention that PMSI violated its broadcaster’s rights under Section 211 of the IP Code which provides in part:

Chapter XIV BROADCASTING ORGANIZATIONS

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Sec. 211. Scope of Right. - Subject to the provisions of Section 212, broadcasting organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following acts:

211.1. The rebroadcasting of their broadcasts;

x x x x

Neither is PMSI guilty of infringement of ABS-CBN’s copyright under Section 177 of the IP Code which states that copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the public performance of the work (Section 177.6), and other communication to the public of the work (Section 177.7).20

Section 202.7 of the IP Code defines broadcasting as “the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting organization or with its consent.”

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, 21 is “the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization.”

The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting and thus cannot be considered to have infringed ABS-CBN’s broadcasting rights and copyright, thus:

That the Appellant’s [herein respondent PMSI] subscribers are able to view Appellee’s [herein petitioner ABS-CBN] programs (Channels 2 and 23) at the same time that the latter is broadcasting the same is undisputed. The question however is, would the Appellant in doing so be considered engaged in broadcasting. Section 202.7 of the IP Code states that broadcasting means

“the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting organization or with its consent.”

Section 202.7 of the IP Code, thus, provides two instances wherein there is broadcasting, to wit:

1. The transmission by wireless means for the public reception of sounds or of images or of representations thereof; and

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2. The transmission by satellite for the public reception of sounds or of images or of representations thereof where the means for decrypting are provided to the public by the broadcasting organization or with its consent.

It is under the second category that Appellant’s DTH satellite television service must be examined since it is satellite-based. The elements of such category are as follows:

1. There is transmission of sounds or images or of representations thereof;

2. The transmission is through satellite;

3. The transmission is for public reception; and

4. The means for decrypting are provided to the public by the broadcasting organization or with its consent.

It is only the presence of all the above elements can a determination that the DTH is broadcasting and consequently, rebroadcasting Appellee’s signals in violation of Sections 211 and 177 of the IP Code, may be arrived at.

Accordingly, this Office is of the view that the transmission contemplated under Section 202.7 of the IP Code presupposes that the origin of the signals is the broadcaster. Hence, a program that is broadcasted is attributed to the broadcaster. In the same manner, the rebroadcasted program is attributed to the rebroadcaster.

In the case at hand, Appellant is not the origin nor does it claim to be the origin of the programs broadcasted by the Appellee. Appellant did not make and transmit on its own but merely carried the existing signals of the Appellee. When Appellant’s subscribers view Appellee’s programs in Channels 2 and 23, they know that the origin thereof was the Appellee.

Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster transmits, the signals are scattered or dispersed in the air. Anybody may pick-up these signals. There is no restriction as to its number, type or class of recipients. To receive the signals, one is not required to subscribe or to pay any fee. One only has to have a receiver, and in case of television signals, a television set, and to tune-in to the right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all the more supports this discussion. Apparently, the undiscriminating dispersal of signals in the air is possible only through wireless means. The use of wire in transmitting signals, such as cable television, limits the recipients to those who are connected. Unlike wireless transmissions, in wire-based transmissions, it is not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers.

The only limitation to such dispersal of signals in the air is the technical capacity of the transmitters and other equipment employed by the broadcaster. While the broadcaster

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may use a less powerful transmitter to limit its coverage, this is merely a business strategy or decision and not an inherent limitation when transmission is through cable.

Accordingly, the nature of broadcasting is to scatter the signals in its widest area of coverage as possible. On this score, it may be said that making public means that accessibility is undiscriminating as long as it [is] within the range of the transmitter and equipment of the broadcaster. That the medium through which the Appellant carries the Appellee’s signal, that is via satellite, does not diminish the fact that it operates and functions as a cable television. It remains that the Appellant’s transmission of signals via its DTH satellite television service cannot be considered within the purview of broadcasting. x x x

x x x x

This Office also finds no evidence on record showing that the Appellant has provided decrypting means to the public indiscriminately. Considering the nature of this case, which is punitive in fact, the burden of proving the existence of the elements constituting the acts punishable rests on the shoulder of the complainant.

Accordingly, this Office finds that there is no rebroadcasting on the part of the Appellant of the Appellee’s programs on Channels 2 and 23, as defined under the Rome Convention.22

Under the Rome Convention, rebroadcasting is “the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization.” The Working Paper23 prepared by the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting organizations as “entities that take the financial and editorial responsibility for the selection and arrangement of, and investment in, the transmitted content.”24 Evidently, PMSI would not qualify as a broadcasting organization because it does not have the aforementioned responsibilities imposed upon broadcasting organizations, such as ABS-CBN.

ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the viewers receive in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in Channels 2 and 23. Likewise, it does not pass itself off as the origin or author of such programs. Insofar as Channels 2 and 23 are concerned, PMSI merely retransmits the same in accordance with Memorandum Circular 04-08-88. With regard to its premium channels, it buys the channels from content providers and transmits on an as-is basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting organization; thus, it cannot be said that it is engaged in rebroadcasting Channels 2 and 23.

The Director-General of the IPO and the Court of Appeals also correctly found that PMSI’s services are similar to a cable television system because the services it renders fall under cable “retransmission,” as described in the Working Paper, to wit:

(G) Cable Retransmission

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47. When a radio or television program is being broadcast, it can be retransmitted to new audiences by means of cable or wire. In the early days of cable television, it was mainly used to improve signal reception, particularly in so-called “shadow zones,” or to distribute the signals in large buildings or building complexes. With improvements in technology, cable operators now often receive signals from satellites before retransmitting them in an unaltered form to their subscribers through cable.

48. In principle, cable retransmission can be either simultaneous with the broadcast over-the-air or delayed (deferred transmission) on the basis of a fixation or a reproduction of a fixation. Furthermore, they might be unaltered or altered, for example through replacement of commercials, etc. In general, however, the term “retransmission” seems to be reserved for such transmissions which are both simultaneous and unaltered.

49. The Rome Convention does not grant rights against unauthorized cable retransmission. Without such a right, cable operators can retransmit both domestic and foreign over the air broadcasts simultaneously to their subscribers without permission from the broadcasting organizations or other rightholders and without obligation to pay remuneration.25 (Emphasis added)

Thus, while the Rome Convention gives broadcasting organizations the right to authorize or prohibit the rebroadcasting of its broadcast, however, this protection does not extend to cable retransmission. The retransmission of ABS-CBN’s signals by PMSI – which functions essentially as a cable television – does not therefore constitute rebroadcasting in violation of the former’s intellectual property rights under the IP Code.

It must be emphasized that the law on copyright is not absolute. The IP Code provides that:

Sec. 184. Limitations on Copyright. -

184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright:

x x x x

(h) The use made of a work by or under the direction or control of the Government, by the National Library or by educational, scientific or professional institutions where such use is in the public interest and is compatible with fair use;

The carriage of ABS-CBN’s signals by virtue of the must-carry rule in Memorandum Circular No. 04-08-88 is under the direction and control of the government though the NTC which is vested with exclusive jurisdiction to supervise, regulate and control telecommunications and broadcast services/facilities in the Philippines.26 The imposition of the must-carry rule is within the NTC’s power to promulgate rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible.27 As correctly observed by the Director-General of the IPO:

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Accordingly, the “Must-Carry Rule” under NTC Circular No. 4-08-88 falls under the foregoing category of limitations on copyright. This Office agrees with the Appellant [herein respondent PMSI] that the “Must-Carry Rule” is in consonance with the principles and objectives underlying Executive Order No. 436,28 to wit:

The Filipino people must be given wider access to more sources of news, information, education, sports event and entertainment programs other than those provided for by mass media and afforded television programs to attain a well informed, well-versed and culturally refined citizenry and enhance their socio-economic growth:

WHEREAS, cable television (CATV) systems could support or supplement the services provided by television broadcast facilities, local and overseas, as the national information highway to the countryside.29

The Court of Appeals likewise correctly observed that:

[T]he very intent and spirit of the NTC Circular will prevent a situation whereby station owners and a few networks would have unfettered power to make time available only to the highest bidders, to communicate only their own views on public issues, people, and to permit on the air only those with whom they agreed – contrary to the state policy that the (franchise) grantee like the petitioner, private respondent and other TV station owners, shall provide at all times sound and balanced programming and assist in the functions of public information and education.

This is for the first time that we have a structure that works to accomplish explicit state policy goals.30

Indeed, intellectual property protection is merely a means towards the end of making society benefit from the creation of its men and women of talent and genius. This is the essence of intellectual property laws, and it explains why certain products of ingenuity that are concealed from the public are outside the pale of protection afforded by the law. It also explains why the author or the creator enjoys no more rights than are consistent with public welfare.31

Further, as correctly observed by the Court of Appeals, the must-carry rule as well as the legislative franchises granted to both ABS-CBN and PMSI are in consonance with state policies enshrined in the Constitution, specifically Sections 9,32 17,33 and 2434 of Article II on the Declaration of Principles and State Policies.35

ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1 of which authorizes it “to construct, operate and maintain, for commercial purposes and in the public interest, television and radio broadcasting in and throughout the Philippines x x x.” Section 4 thereof mandates that it “shall provide adequate public service time to enable the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x.”

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PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4 of which similarly states that it “shall provide adequate public service time to enable the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x.” Section 5, paragraph 2 of the same law provides that “the radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege conferred upon the grantee by the State and may be withdrawn anytime, after due process.”

In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC,36 the Court held that a franchise is a mere privilege which may be reasonably burdened with some form of public service. Thus:

All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave frequencies have to be allocated as there are more individuals who want to broadcast than there are frequencies to assign. A franchise is thus a privilege subject, among other things, to amendment by Congress in accordance with the constitutional provision that “any such franchise or right granted . . . shall be subject to amendment, alteration or repeal by the Congress when the common good so requires.”

x x x x

Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and television broadcast stations and, until the present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, §11 of the Constitution authorizes the amendment of franchises for “the common good.” What better measure can be conceived for the common good than one for free air time for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed of the issues in an election? “[I]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount.”

Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United States, there are responsible scholars who believe that government controls on broadcast media can constitutionally be instituted to ensure diversity of views and attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give free air time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes:

x x x x

In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service. x x x37

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There is likewise no merit to ABS-CBN’s claim that PMSI’s carriage of its signals is for a commercial purpose; that its being the country’s top broadcasting company, the availability of its signals allegedly enhances PMSI’s attractiveness to potential customers;38 or that the unauthorized carriage of its signals by PMSI has created competition between its Metro Manila and regional stations.

ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for profit; or that such carriage adversely affected the business operations of its regional stations. Except for the testimonies of its witnesses,[39] no studies, statistical data or information have been submitted in evidence.

Administrative charges cannot be based on mere speculation or conjecture. The complainant has the burden of proving by substantial evidence the allegations in the complaint.40 Mere allegation is not evidence, and is not equivalent to proof.41

Anyone in the country who owns a television set and antenna can receive ABS-CBN’s signals for free. Other broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-5, and IBC-13 can likewise be accessed for free. No payment is required to view the said channels42 because these broadcasting networks do not generate revenue from subscription from their viewers but from airtime revenue from contracts with commercial advertisers and producers, as well as from direct sales.

In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN, among others, thus allowing its customers to go beyond the limits of “Free TV and Cable TV.”43 It does not advertise itself as a local channel carrier because these local channels can be viewed with or without DTH television.

Relevantly, PMSI’s carriage of Channels 2 and 23 is material in arriving at the ratings and audience share of ABS-CBN and its programs. These ratings help commercial advertisers and producers decide whether to buy airtime from the network. Thus, the must-carry rule is actually advantageous to the broadcasting networks because it provides them with increased viewership which attracts commercial advertisers and producers.

On the other hand, the carriage of free-to-air signals imposes a burden to cable and DTH television providers such as PMSI. PMSI uses none of ABS-CBN’s resources or equipment and carries the signals and shoulders the costs without any recourse of charging.44 Moreover, such carriage of signals takes up channel space which can otherwise be utilized for other premium paid channels.

There is no merit to ABS-CBN’s argument that PMSI’s carriage of Channels 2 and 23 resulted in competition between its Metro Manila and regional stations. ABS-CBN is free to decide to pattern its regional programming in accordance with perceived demands of the region; however, it cannot impose this kind of programming on the regional viewers who are also entitled to the free-to-air channels. It must be emphasized that, as a national broadcasting organization, one of ABS-CBN’s responsibilities is to scatter its signals to the widest area of coverage as possible. That it should limit its signal reach for the sole purpose

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of gaining profit for its regional stations undermines public interest and deprives the viewers of their right to access to information.

Indeed, television is a business; however, the welfare of the people must not be sacrificed in the pursuit of profit. The right of the viewers and listeners to the most diverse choice of programs available is paramount.45 The Director-General correctly observed, thus:

The “Must-Carry Rule” favors both broadcasting organizations and the public. It prevents cable television companies from excluding broadcasting organization especially in those places not reached by signal. Also, the rule prevents cable television companies from depriving viewers in far-flung areas the enjoyment of programs available to city viewers. In fact, this Office finds the rule more burdensome on the part of the cable television companies. The latter carries the television signals and shoulders the costs without any recourse of charging. On the other hand, the signals that are carried by cable television companies are dispersed and scattered by the television stations and anybody with a television set is free to pick them up.

With its enormous resources and vaunted technological capabilities, Appellee’s [herein petitioner ABS-CBN] broadcast signals can reach almost every corner of the archipelago. That in spite of such capacity, it chooses to maintain regional stations, is a business decision. That the “Must-Carry Rule” adversely affects the profitability of maintaining such regional stations since there will be competition between them and its Metro Manila station is speculative and an attempt to extrapolate the effects of the rule. As discussed above, Appellant’s DTH satellite television services is of limited subscription. There was not even a showing on part of the Appellee the number of Appellant’s subscribers in one region as compared to non-subscribing television owners. In any event, if this Office is to engage in conjecture, such competition between the regional stations and the Metro Manila station will benefit the public as such competition will most likely result in the production of better television programs.”46

All told, we find that the Court of Appeals correctly upheld the decision of the IPO Director-General that PMSI did not infringe on ABS-CBN’s intellectual property rights under the IP Code. The findings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should not be disturbed.47

Moreover, the factual findings of the Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. They carry even more weight when the Court of Appeals affirms the factual findings of a lower fact-finding body,48 as in the instant case.

There is likewise no merit to ABS-CBN’s contention that the Memorandum Circular excludes from its coverage DTH television services such as those provided by PMSI. Section 6.2 of the Memorandum Circular requires all cable television system operators operating in a community within Grade “A” or “B” contours to carry the television signals of the

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authorized television broadcast stations.49 The rationale behind its issuance can be found in the whereas clauses which state:

Whereas, Cable Television Systems or Community Antenna Television (CATV) have shown their ability to offer additional programming and to carry much improved broadcast signals in the remote areas, thereby enriching the lives of the rest of the population through the dissemination of social, economic, educational information and cultural programs;

Whereas, the national government supports the promotes the orderly growth of the Cable Television industry within the framework of a regulated fee enterprise, which is a hallmark of a democratic society;

Whereas, public interest so requires that monopolies in commercial mass media shall be regulated or prohibited, hence, to achieve the same, the cable TV industry is made part of the broadcast media;

Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the National Telecommunications Commission the authority to set down rules and regulations in order to protect the public and promote the general welfare, the National Telecommunications Commission hereby promulgates the following rules and regulations on Cable Television Systems;

The policy of the Memorandum Circular is to carry improved signals in remote areas for the good of the general public and to promote dissemination of information. In line with this policy, it is clear that DTH television should be deemed covered by the Memorandum Circular. Notwithstanding the different technologies employed, both DTH and cable television have the ability to carry improved signals and promote dissemination of information because they operate and function in the same way.

In its December 20, 2002 letter,50 the NTC explained that both DTH and cable television services are of a similar nature, the only difference being the medium of delivering such services. They can carry broadcast signals to the remote areas and possess the capability to enrich the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs. Consequently, while the Memorandum Circular refers to cable television, it should be understood as to include DTH television which provides essentially the same services.

In Eastern Telecommunications Philippines, Inc. v. International Communication Corporation,51 we held:

The NTC, being the government agency entrusted with the regulation of activities coming under its special and technical forte, and possessing the necessary rule-making power to implement its objectives, is in the best position to interpret its own rules, regulations and guidelines. The Court has consistently yielded and accorded great respect to the interpretation by administrative agencies of their own rules unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly conflicting with the letter and spirit of the law.52

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With regard to the issue of the constitutionality of the must-carry rule, the Court finds that its resolution is not necessary in the disposition of the instant case. One of the essential requisites for a successful judicial inquiry into constitutional questions is that the resolution of the constitutional question must be necessary in deciding the case.53 In Spouses Mirasol v. Court of Appeals,54 we held:

As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on other grounds. The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and executive departments and found to be in accord with the Constitution before it was finally enacted and approved.55

The instant case was instituted for violation of the IP Code and infringement of ABS-CBN’s broadcasting rights and copyright, which can be resolved without going into the constitutionality of Memorandum Circular No. 04-08-88. As held by the Court of Appeals, the only relevance of the circular in this case is whether or not compliance therewith should be considered manifestation of lack of intent to commit infringement, and if it is, whether such lack of intent is a valid defense against the complaint of petitioner.56

The records show that petitioner assailed the constitutionality of Memorandum Circular No. 04-08-88 by way of a collateral attack before the Court of Appeals. In Philippine National Bank v. Palma,57 we ruled that for reasons of public policy, the constitutionality of a law cannot be collaterally attacked. A law is deemed valid unless declared null and void by a competent court; more so when the issue has not been duly pleaded in the trial court.58

As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if not raised in the pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court, it will not be considered on appeal.59 In Philippine Veterans Bank v. Court of Appeals,60 we held:

We decline to rule on the issue of constitutionality as all the requisites for the exercise of judicial review are not present herein. Specifically, the question of constitutionality will not be passed upon by the Court unless, at the first opportunity, it is properly raised and presented in an appropriate case, adequately argued, and is necessary to a determination of the case, particularly where the issue of constitutionality is the very lis mota presented.x x x61

Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in order.

Indirect contempt may either be initiated (1) motu proprio by the court by issuing an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt or (2) by the filing of a verified petition, complying with the requirements for filing initiatory pleadings.62

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ABS-CBN filed a verified petition before the Court of Appeals, which was docketed CA G.R. SP No. 90762, for PMSI’s alleged disobedience to the Resolution and Temporary Restraining Order, both dated July 18, 2005, issued in CA-G.R. SP No. 88092. However, after the cases were consolidated, the Court of Appeals did not require PMSI to comment on the petition for contempt. It ruled on the merits of CA-G.R. SP No. 88092 and ordered the dismissal of both petitions.

ABS-CBN argues that the Court of Appeals erred in dismissing the petition for contempt without having ordered respondents to comment on the same. Consequently, it would have us reinstate CA-G.R. No. 90762 and order respondents to show cause why they should not be held in contempt.

It bears stressing that the proceedings for punishment of indirect contempt are criminal in nature. The modes of procedure and rules of evidence adopted in contempt proceedings are similar in nature to those used in criminal prosecutions. 63 While it may be argued that the Court of Appeals should have ordered respondents to comment, the issue has been rendered moot in light of our ruling on the merits. To order respondents to comment and have the Court of Appeals conduct a hearing on the contempt charge when the main case has already been disposed of in favor of PMSI would be circuitous. Where the issues have become moot, there is no justiciable controversy, thereby rendering the resolution of the same of no practical use or value.64

WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, sustaining the findings of the Director-General of the Intellectual Property Office and dismissing the petitions filed by ABS-CBN Broadcasting Corporation, and the December 11, 2006 Resolution denying the motion for reconsideration, are AFFIRMED.

SO ORDERED.

Footnotes

1 Rollo, pp. 65-178.

2 Id. at 8-43.

3 Id. at 54-57.

4 ABS-CBN was granted a franchise under Republic Act No. 7966, entitled AN ACT GRANTING THE ABS-CBN BROADCASTING CORPORATION A FRANCHISE TO CONSTRUCT, INSTALL, OPERATE AND MAINTAIN TELEVISION AND RADIO BROADCASTING STATIONS IN THE PHILIPPINES, AND FOR OTHER PURPOSES.

5 AN ACT GRANTING THE PHILIPPINE MULTI-MEDIA SYSTEM, INC., A FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION STATIONS IN THE PHILIPPINES.

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6 Rollo, p. 316.

7 Id. at 317.

8 Revised Rules and Regulations Governing Cable Television Systems in the Philippines.

9 6.2. Mandatory Coverage

6.2.1. A cable TV system operating in a community which is within the Grade A or Grade B contours of an authorized TV broadcast station or stations must carry the TV signals of these stations.

10 Rollo, p. 322.

11 Id. at 852.

12 Id. at 853-854.

13 Id. at 857.

14 Id. at 567-590. Penned by Estrellita Beltran-Abelardo, Director, Bureau of Legal Affairs.

15 Id at 793-811. Penned by Director-General Emma C. Francisco.

16 Id. at 811.

17 Id. at 43.

18 Republic Act No. 8923, effective January 1, 1998.

19 Article III, Section 9 provides: “Private property shall not be taken for public use without just compensation.”

20 Sec. 177. Copy or Economic Rights. - Subject to the provisions of Chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts:

x x x x

177.6. Public performance of the work; and

177.7. Other communication to the public of the work (Sec. 5, P. D. No. 49a)

21 Entered into force on September 25, 1984. source: http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=17.

22 Rollo, pp. 805-809.

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23 Eighth Session, Geneva, November 4-8, 2002.

24 Id.at paragraph 58, page 12.

25 Id. at paragraphs 47-49, page 10.

26 E.O. No. 546, Sec. 15. Functions of the Commission. The Commission shall exercise the following functions:

a. Issue Certificate of Public Convenience for the operation of communications utilities and services, radio communications systems, wire or wireless telephone or telegraph systems, radio and television broadcasting system and other similar public utilities;

b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and determine and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies recognized by the Philippine Government as the proper arbiter of such charges or rates;

c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems;

d. Sub-allocate series of frequencies of bands allocated by the International Telecommunications Union to the specific services;

e. Establish and prescribe rules, regulations, standards, specifications in all cases related to the issued Certificate of Public Convenience and administer and enforce the same;

f. Coordinate and cooperate with government agencies and other entities concerned with any aspect involving communications with a view to continuously improve the communications service in the country;

g. Promulgate such rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible;

h. Supervise and inspect the operation of radio stations and telecommunications facilities;

i. Undertake the examination and licensing of radio operators;

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j. Undertake, whenever necessary, the registration of radio transmitters and transceivers; and

k. Perform such other functions as may be prescribed by law.

27 Id. Section 15 (g).

28 PRESCRIBING POLICY GUIDELINES TO GOVERN THE OPERATIONS OF CABLE TELEVISION IN THE PHILIPPINES.

29 Rollo, p. 810.

30 Id. at 42.

31 Fr. Ranhillo Callangan Aquino, Intellectual Property Law: Comments and Annotations, 2003, p. 5.

32 SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all.

33 SEC. 17. The State shall give priority to education, science and technology, arts, culture, and sports to foster patriotism and nationalism, accelerate social progress, and promote total human liberation and development.

34 SEC. 24. The State recognizes the vital role of communication and information in nation-building.

35 Rollo, p. 40.

36 352 Phil. 153 (1998).

37Id. at 171-174.

38 Rollo, pp. 129-130.

39 Id. at 134.

40 Artuz v. Court of Appeals, 417 Phil. 588, 597 (2001).

41 Navarro v. Clerk of Court, A.M. No. P-05-1962, February 17, 2005, 451 SCRA 626, 629.

42 Rollo, Comment, p. 1249.

43 http://www.dreamsatellite.com/about.htm

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44 Rollo, p. 810.

45 Telecom. & Broadcast Attys. of the Phils., Inc v. COMELEC, 352 Phil. 153, 173 (1998).

46 Rollo, pp. 810-811.

47 Ocampo v. Salalila, 382 Phil. 522, 532 (2000).

48 Gala v. Ellice Agro-Industrial Corporation, G.R. No. 156819, December 11, 2003, 418 SCRA 431, 444.

49 Supra note 9.

50 Supra note 11.

51 G.R. No. 135992, January 31, 2006, 481 SCRA 163.

52 Id. at 166-167.

53 Meralco v. Secretary of Labor, 361 Phil. 845, 867 (1999).

54 403 Phil. 760 (2001).

55 Id. at 774.

56 Rollo, p. 41; citing the Decision of the Director-General of the IPO.

57 G.R. No. 157279, August 9, 2005, 466 SCRA 307.

58 Id. at 322-323.

59 Joaquin G. Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary, p. 858 (1996), citing People v. Vera, 65 Phil. 56 (1937).

60 G.R. No. 132561, June 30, 2005, 462 SCRA 336.

61 Id. at 349.

62 Montenegro v. Montenegro, G.R. No. 156829, June 8, 2004.

63 Soriano v. Court of Appeals, G.R. No. 128938, June 4, 2004, 431 SCRA 1, 7-8

64 Delgado v. Court of Appeals, G.R. No. 137881, August 19, 2005, 467 SCRA 418, 428.