1

[G.R. No. 148222. August 15, 2003.]

PEARL & DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART, INCORPORATED, and

NORTH EDSA MARKETING, INCORPORATED, respondents.

Rilloraza Africa De Ocampo & Africa for petitioner.

Poblador Bautista & Reyes for ShoeMart.

Gonzales Batiller Bilog & Associates for North Edsa Mktg., Inc.

SYNOPSIS

Petitioner Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display

units simply referred to as light boxes. Pearl and Dean was able to secure a Certificate of Copyright

Registration over the illuminated display units. Sometime in 1985, Pearl and Dean negotiated with

respondent 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. Only the contract for SM Makati, however, was returned

signed. However, in 1986, SMI rescinded the contract for SM Makati due to non-performance of the terms

thereof. 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. It further discovered that respondent North

Edsa Marketing Inc. (NEMI) is a sister company of SMI and was set up primarily to sell advertising space in

lighted display units located in SMI's different branches. In the light of its discoveries, Pearl and Dean, sent

a letter to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the

same from SMI's establishments and the payment to Pearl and Dean of compensatory damages in the

amount of Twenty Million Pesos (P20,000,000.00). Claiming that both SMI and NEMI failed to meet all its

demands, Pearl and Dean filed a case for infringement of trademark and copyright, unfair competition and

damages. The Regional Trial Court of Makati ruled in favor of Pearl and Dean. On appeal, however, the

Court of Appeals reversed the trial court. The appellate court upheld SMI when it posited that what was

copyrighted were the technical drawings only, and not the light boxes themselves, and 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 copyrightable under the law. Hence, the

present petition.

The Supreme Court affirmed the decision of the Court of Appeals and denied the petition. According to the

Court, petitioner Pearl & Dean secured its copyright under the classification class "O" work or under Section

2 (O) of P.D. 49. As such, 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." While 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 stretched out to include the underlying light box The strict application of the law's

enumeration in Section 2 of PD 49 prevented the Court 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. The Court also ruled that petitioner could not legally prevent anyone

from manufacturing or commercially using its invention for the main reason that it never secured a patent

for it. The Court emphasized that to be able to effectively and legally preclude others from copying and

profiting from an 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.

Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation

without significant restraint.

2

SYLLABUS

1. MERCANTILE LAW; INTELLECTUAL PROPERTY LAW (P.D. 49); 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, PICTORIALS ILLUSTRATIONS, ADVERTISING

COPIES, LABELS, TAGS AND BOX WRAPS" UNDER SECTION 2, (O) OF THE LAW. — 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: . . . (O) Prints, pictorial illustrations, advertising

copies, labels, tags, and box wraps; . . . 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. Accordingly, it can

cover only the works falling within the statutory enumeration or description. 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 stretched out to include the underlying

light box. The strict application of 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."

2. ID.; ID.; SINCE PETITIONER NEVER SECURED A PATENT OVER THE LIGHT BOXES, IT THEREFORE

ACQUIRED NO PATENT RIGHTS WHICH COULD HAVE PROTECTED ITS INVENTION; NO PATENT, NO

PROTECTION; CASE AT BAR. — 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, 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 alone from the grant of patent. . . . (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. 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. Ideas, once disclosed to the public without the protection of a valid patent, are subject to

appropriation without significant restraint.

3. ID.; ID.; NOT HAVING UNDERGONE THE STRINGENT REQUIREMENTS AND EXHAUSTIVE EXAMINATION

FOR PATENTS, PETITIONER CANNOT EXCLUDE OTHERS FROM THE MANUFACTURE, SALE OR

3

COMMERCIAL USE OF THE LIGHT BOXES ON THE SOLE BASIS OF ITS COPYRIGHT CERTIFICATE OVER

THE TECHNICAL DRAWINGS. — 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." 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."

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 creation

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.

4. ID.; ID.; PETITIONER'S FAILURE 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. — The Court of Appeals correctly cited Faberge

Inc. vs. Intermediate Appellate Court, where 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 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 . . . One who has adopted and used a trademark on his

goods does not prevent the adoption and use of the same trademark by others or products which are of a

different description. " Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki

Kaisha vs. Court of Appeals. 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.

5. ID.; ID.; NO UNFAIR COMPETITION UNDER THE LAW ON COPYRIGHTS. — 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.

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. 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." 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.

4

6. ID.; ID.; DOCTRINE OF SECONDARY MEANING; NOT APPLICABLE IN CASE AT BAR. — 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. 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.

D E C I S I O N

CORONA, J p:

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 decision 1 of the Court of Appeals reversing the October 31,

1996 decision 2 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 Appeals 3 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

contacts 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 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

5

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 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 infringement

6

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

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

7

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

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 services specified in the certificate, subject to any conditions and limitations

stated therein." (italics 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"

8

has acquired a secondary meaning in this jurisdiction, 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?

(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,

9

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:

xxx xxx xxx

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

xxx xxx xxx

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 stretched

out to include the underlying light box. The strict application 9 of 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 nor an

artistic work but an "engineering or marketing invention." 10Obviously, 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:

10

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 alone from the grant of patent. . . . (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'Donnell, 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 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

11

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

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

creation 20 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. Selden, 21 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 plaintiffs 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. . . . 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.

12

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 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.

xxx xxx xxx

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. . . . 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." (italics

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, 23 where 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 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. . . . . 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 in Canon Kabushiki Kaisha vs.

Court of Appeals. 25

13

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.

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.

All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the

Regional Trial Court of Makati City. ITSaHC

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

AFFIRMED in toto.

SO ORDERED.

||| (Pearl & Dean (Phil.) v. Shoemart, G.R. No. 148222, [August 15, 2003], 456 PHIL 474-497)

[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.

Jesus R. Cornego for petitioners.

14

Crisanto L. Francisco & Associates for respondents.

SYNOPSIS

Petitioners herein are authors and copyright owners of their published books while respondents Robles and

Goodwill Trading Co., Inc. are authors and publishers, respectively, of another published work that was also

covered by copyrights issued to them. In the course of revising their published works, petitioners chanced

upon the book of respondent Robles. After an itemized examination and comparison of the books,

petitioners found that several pages of the respondents' book are similar, if not altogether a copy from the

petitioners' book, which is a case of plagiarism and copyright infringement. When respondents ignored

demands of petitioners for damages, the latter filed a complaint for infringement and/or unfair competition

with damages. The trial court dismissed the complaint of the petitioners herein. Petitioners appealed their

case to the Court of Appeals (CA), which affirmed the judgment of the trial court. The CA also deleted the

award of attorneys' fees, since its view was that there was no bad faith on the part of the petitioners in

instituting the action. The petitioners filed a motion for reconsideration, but, the CA denied the same,

hence, this petition for review on certiorari. HTcDEa

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. The least that

respondent Robles could have done was to acknowledge petitioners as the source of her book. To allow

another to copy the book without appropriate acknowledgment is injury enough. The petition was granted.

The case was 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.

SYLLABUS

1. COMMERCIAL LAW; INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES; PROVIDES PROTECTION

FOR COPYRIGHT OWNER. — 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 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; 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." 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] (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) . . . (e) The inclusion of

a work in a publication, broadcast, or other communication to the public, sound recording of film, if such

15

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; In the above-quoted

provisions, "work" has reference to literary and artistic creations and this includes books and other literary,

scholarly and scientific works.

2. ID.; ID.; INFRINGEMENT; CONSTRUED; WHEN COMMITTED. — 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. 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. 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.

3. ID.; ID.; ID.; WHEN NOT COMMITTED. — 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: . . . (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. DaAISH

4. ID.; ID.; COPYRIGHT; PURPOSE THEREOF. — 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.

DAVIDE, JR., C.J., dissenting opinion:

1. COMMERCIAL LAW; R.A. No. 8293 (INTELLECTUAL PROPERTY CODE); COPYRIGHT; DEFINED; PURPOSE

OF THE LAW. — 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. Under

Section 177 ofR.A. No. 8293, 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;

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

16

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. Stripped in the meantime of its indisputable social and beneficial

actions, 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. SCaEcD

2. ID.; ID.; ID.; INFRINGEMENT; CONSTRUED. — The execution 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. 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.

3. ID.; ID.; ID.; ID.; TEST TO DETERMINE COPYRIGHT INFRINGEMENT; NO VIOLATION; CASE AT BAR. —

To constitute infringement, the usurper must have copied or appropriated the "original" work of an author

or copyright proprietor; absent copying, there can be no infringement of copyright. In turn, a work is

deemed by law an original if the author created it by his own skill, labor and judgment. 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. To constitute 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. But the similarity of the books here does

not amount to an appropriation of a substantial portion of the published work COLLEGE ENGLISH FOR

TODAY. If the existence of substantial similarities does not of itself establish infringement, 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.

4. ID.; ID.; ID.; FAIR USE OF COPYRIGHTED MATERIAL; DEFINED AND CONSTRUED. — 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. 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. 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.

5. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE COURT OF APPEALS AND THE TRIAL COURT;

CONCLUSIVE AND BINDING UPON THE SUPREME COURT; EXCEPTION. — 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. Tested against this jurisprudential

canon, to subject the challenged decision of the Court of Appeals to further scrutiny would be superfluous,

if not, improvident. DECSIT

D E C I S I O N

PARDO, J p:

17

The case before us is a petition for review on certiorari 1 to set aside the (a) decision of 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. prcd

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. cdrep

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. cdasia

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.

18

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. llcd

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 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 copyrighted 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 LLphil

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. LibLex

"(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

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

19

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: LLphil

"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, i.e. Edmund Burke's "Speech on Conciliation", Boerigs'

"Competence in English" and Broughton's, "Edmund Burke's Collection." LibLex

xxx xxx xxx

"Appellant's reliance on the last paragraph on Section 11 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. cdll

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 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. prcd

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:

"SECTION 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 substantial portion of the work;

177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the

work; cda

20

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: cdasia

"SECTION 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]

(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) prLL

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. cdphil

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: cdasia

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

21

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 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. LexLib

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 LexLib

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 ofRepublic Act 8293 it is provided that:

Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute

infringement of copyright: llcd

xxx xxx xxx

(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

22

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? cdrep

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. prLL

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 and did not acknowledge petitioners as her source. cdphil

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. LLpr

SO ORDERED.

Kapunan and Ynares-Santiago, JJ., concur.

23

Davide, C.J., dissents. Please see dissenting opinion.

Melo, J ., took no part; personal reasons.

Separate Opinions

DAVIDE, JR., C.J., dissenting:

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. dctai

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

Freshmen 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. LexLib

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

24

general education, language and literature, as well as her teaching experience in graduate and post

graduate education would obviate the remotest possibility of plagiarism. Cdpr

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: cdrep

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. cdtai

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

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 7which, they theorize is on all fours with the case at bar.

25

ROBLES contends that appeal by certiorari 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. cdasia

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, 8nevertheless 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: LLjur

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;

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. cda

"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: cdasia

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 the land has the absolute right to sell it or its fruits. But while the owner of the land,

26

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. cdasia

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 constitute 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. LexLib

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

27

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 claim 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: prcd

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. cdtai

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 LLphil

To illustrate, an excerpt from page 21 of CET reads:

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; LLjur0

28

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; LibLex

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

8. the call number on the upper-left hand corner. LLphil

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 some time, 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. cdrep

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 Hispano-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: cdasia

(1) [O]f 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 plaintiff's dictionary, having reproduced,

29

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 plaintiffs 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 Cdpr

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. 34 ROBLES 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. LLphil

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.

||| (Habana v. Robles, G.R. No. 131522, [July 19, 1999], 369 PHIL 764-798)

[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.

30

Siguion Reyna, Montecillo & Ongsiako Law Office for petitioner.

B.C. Salazar & Associates for respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT AGAINST UNREASONABLE SEARCHES AND SEIZURE;

IMPORTANCE. — The constitutional right provided in Sec. 2, Art. III of the present Constitution 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 [1966]) 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).'"

2. ID.; ID.; ID.; ISSUANCE OF SEARCH WARRANT; RESTRICTED BY THE SEARCHES AND SEIZURES

PROVISION. — 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.

3. ID.; ID.; ID.; ID.; PROBABLE CAUSE; DEFINED. — 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."

4. ID.; ID.; ID.; ID.; PERSONAL KNOWLEDGE OF COMPLAINANT OR WITNESSES, REQUIRED. — 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 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).

5. ID.; ID.; ID.; ID.; COPYRIGHT INFRINGEMENT, PRESENTATION OF MASTER TAPES ALLEGEDLY COPIED

IS NECESSARY. — 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.

31

6. ID.; ID.; ID.; ID.; GENERAL WARRANTS, A VIOLATION OF THE CONSTITUTIONAL RIGHTS. — In the

case of Burgos v. Chief of Staff, AFP supra, we stated: "Another factor which makes the search warrants

under consideration constitutionally objectionable is that they are in the nature of general warrants."

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, rewinders 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.

7. CRIMINAL LAW; ANTI-PIRACY LAW; COURTS MUST NOT IMPOSE OBSTACLES IN ANTI-FILM PIRACY

CAMPAIGN; CONSTITUTIONAL RIGHT. HOWEVER, MUST BE SAFEGUARDED. — 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.

D E C I S I O N

GUTIERREZ, JR., J p:

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. prLL

On September 4, 1985, the lower court issued the desired search warrants.

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:

32

"WHEREFORE, the Court hereby orders that Search Warrants Nos. SW-85-024; issued against Eduardo M.

Barreto of the Junction Video, etc., Parañaque, 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. llcd

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 III,

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:

"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 [1966]) 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

33

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. llcd

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

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

in strictissimi juris against the government and liberally in favor of the alleged offender.

xxx xxx xxx

34

"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." (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.

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. LLphil

Furthermore, we note that the search warrants described the articles sought to be seized as follows:

35

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:

"'1] 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 related to the WE FORUM' newspaper and any and all

document/communications, letters and facsimile of prints related to the '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.

"1] Toyota-Corolla, colored yellow with Plate No. NKA 892;

"'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. NBS 542;

"'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, rewinders 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

36

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 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. LLpr

WHEREFORE, the instant petition is DISMISSED. The questioned decision and resolution of the Court of

Appeals are AFFIRMED.

SO ORDERED.

37

||| (20th Century Fox Film Corp. v. Court of Appeals, G.R. Nos. 76649-51, [August 19, 1988], 247 PHIL

624-637)

[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.

Siguion Reyna, Montecillo & Ongsiako for petitioners.

Rodriguez & Verano Law Offices and Cesar G. David for private respondents.

SYLLABUS

1. COMMERCIAL LAW; CORPORATION CODE; FOREIGN CORPORATIONS NOT DOING BUSINESS IN THE

PHILIPPINES MAY SUE IN PHILIPPINE COURTS; LICENSE NOT NECESSARY. — 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 courts by 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 in transacting business here, it shall not be permitted to maintain any suit in local courts. 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. 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 of 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.

2. ID.; ID.; FOREIGN CORPORATION; "DOING BUSINESS" OR "TRANSACTING BUSINESS", CONSTRUED. —

No general rule or governing principle 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. The 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. 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 agent 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. The Corporation Code does not itself define or

categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has,

38

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.

3. ID.; ID.; ID.; FACT THAT PETITIONERS ARE COPYRIGHT OWNERS OR OWNERS OF EXCLUSIVE

DISTRIBUTION RIGHTS OF FILMS, NOT AN INDICATION OF "DOING BUSINESS". - The fact that petitioners

are admittedly copyright owners or owners of exclusive distribution rights in the Philippines 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.

4. ID.; ID.; ID.; APPOINTMENT OF AN ATTORNEY-IN-FACT, CANNOT BE DEEMED AS "DOING BUSINESS".

— Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, 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.

5. ID.; ID.; ID.; ENGAGING IN LITIGATION, NOT WITHIN THE MEANING OF "DOING BUSINESS". — 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 transation 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

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.

6. REMEDIAL LAW; ACTIONS; MOTION TO DISMISS; LACK OF LEGAL CAPACITY TO SUE, DISTINGUISHED

FROM LACK OF PERSONALITY TO SUE. — Among the grounds for a motion to dismiss under the Rules of

Court are lack of legal capacity to sue and that the complaint states no cause of action. 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.

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. 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, 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.

7. ID.; ID.; ID.; LACK OF LEGAL CAPACITY TO SUE, NOT LACK OF PERSONALITY TO SUE, PROPER

GROUND AGAINST A FOREIGN CORPORATION DOING BUSINESS WITHOUT A LICENSE. — 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 pleadings that

petitioners have thereby no legal personality to bring an action before Philippine courts. 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.

39

8. ID.; ID.; ID.; DOCTRINE OF LACK OF CAPACITY TO SUE; NEVER INTENDED TO INSULATE FROM SUIT

UNSCRUPULOUS ESTABLISHMENT FOR VIOLATION OF LEGAL RIGHTS OF UNSUSPECTING FOREIGN

FIRMS. — 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.

9. ID.; CRIMINAL PROCEDURE; SEARCH WARRANT; RULING IN CENTURY FOX CASE (164 SCRA 655),

WITH NO RETROACTIVE APPLICATION. — 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 (164 SCRA

655) calling for the production of the master tape of the copyrighted films for determination of probable

cause cannot be retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-

053. 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. 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 decision, 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. Judicial

decisions of the Supreme Court assume the same authority as the statute itself. 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. 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.

10. ID.; ID.; ID.; ID.; RATIONALE. — Our holding in the earlier case of People vs. Jabinal echoes the

rationale for this judicial declaration, viz.: 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 interpretation 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 .

11. ID.; COURTS; JUDICIAL INTERPRETATION BECOMES PART OF THE LAW OF THE LAND AS OF THE

DATE THAT LAW WAS ORIGINALLY PASSED; QUALIFICATION. — 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. 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.

12. ID.; CRIMINAL PROCEDURE; SEARCH WARRANT; RULING IN CENTURY FOX CASE (164 SCRA 655)

SERVES AS A GUIDEPOST IN DETERMINING EXISTENCE OF PROBABLE CAUSE IN COPYRIGHT

INFRINGEMENT CASES ONLY WHERE THERE IS DOUBT AS TO THE TRUE NEXUS BETWEEN THE MASTER

40

TAPE AND THE PIRATED COPIES. — 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.

13. ID.; ID.; ID.; RULING IN CENTURY FOX CASE (164 SCRA 655) DOES NOT RULE OUT USE OF

TESTIMONIAL OR DOCUMENTARY EVIDENCE. — 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. 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, especially where the production in court of object evidence would result in delay,

inconvenience or expenses out of proportion to its evidentiary value.

14. CONSTITUTIONAL LAW; BILL OF RIGHTS; CONSTITUTIONAL STANDARDS IN THE ISSUANCE OF

SEARCH WARRANTS. — 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. 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.

15. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANT; MANDATORY REQUIREMENT OF

EXISTENCE OF PROBABLE CAUSE. — The constitutional (Sections 2 and 3, Article III) and statutory

(Sections 3,4,5 of Rule 126 of the Rule of Court) 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.

16. ID.; ID.; ID.; PROBABLE CAUSE, CONSTRUED. — 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, 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. 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

41

belief. The requirement is less than certainty or proof , but more than suspicion or possibility. 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. It being the duty of

the issuing officer to issue, or refused to issue, the warrant as soon as practicable after the application

therefor is filed, 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.

17. ID.; ID.; ID.; PRESCRIBED PROCEDURE FOR ISSUANCE THEREOF. — The prescribed procedure for the

issuance of a search warrant are: (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.

18. COMMERCIAL LAW; P.D. 49 (DECREE ON THE PROTECTION OF INTELLECTUAL PROPERTY);

INFRINGEMENT OF COPYRIGHT, CONSTRUED. — 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.

19. ID.; ID.; INFRINGEMENT; COPY OF A PIRACY IS AN INFRINGEMENT OF THE ORIGINAL. — 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 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.

20. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANT; MUST PARTICULARLY DESCRIBE

THINGS TO BE SEIZED. — 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 (Bache and co., Phil., Inc., et al. vs. Ruiz, et al.).

21. COMMERCIAL LAW; P.D. 49 (DECREE ON PROTECTION OF INTELLECTUAL PROPERTY);

REGISTRATION AND DEPOSIT REQUIREMENT, PREREQUISITE ONLY TO A SUIT FOR DAMAGES. — It is

pointless for private respondents to insist on compliance with the registration and deposit requirements

under Presidential Decree No. 49as prerequisites for invoking the court's protective mantle in copyright

42

infringement cases. As explained by the court below: 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.

22. ID.; ID.; RIGHTS THEREUNDER SUBSISTS FROM MOMENT OF CREATION. — Section 2 of the decree

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.

23. ID.; ID.; ABSENCE OF AUTHORITY OR CONSENT TO SELL, LEASE, DISTRIBUTE OR CIRCULATE

COPYRIGHTED FILMS CONSTITUTES FILM PIRACY; LICENSE FROM THE VIDEOGRAM REGULATORY

BOARD, NOT A BAR TO CIVIL AND CRIMINAL PROSECUTION. — 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 courts initial finding of probable cause. That

private respondents are licensed by the Videogram Regulatory Board does not insulate from criminal and

civil liability for their unlawful business practices.

D E C I S I O N

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 resolution 2 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 quo

against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which

were 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

43

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 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 therefore 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 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 Philippines 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-at-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 Bldg. 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

44

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 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 in transacting business here, it shall not be permitted to maintain any suit in

local courts. 10 As thus interpreted, any foreign corporation 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 falling 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. 13 The 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

45

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

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:

SECTION 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:

xxx xxx xxx

(10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and

contemplate to the 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:

SEC. 3. Definitions. — As used in this Act:

xxx xxx xxx

(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

46

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 investors; 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 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

use 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

47

rights of owner or 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

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 then, 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

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

48

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 undeniable 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 acquired 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

violations 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 pirated copies is necessary.

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 therefor under Section

3 and 4 of Rule 126 as of the time of the application for the search warrant in question, the controlling

creation 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 discrete 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, and 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,

49

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 Fox was 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 solution 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 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 pirate 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

50

applies not only to originator amendatory statutes and administrative rulings and circulars, but also, and

properly so, to judicial decisions. Our holding in the earlier case of People vs. Jubinal 44 echoes the

rationale for this judicial declaration, vis.:

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

interpretation 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 maximum 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

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.

xxx xxx xxx

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

51

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.

xxx xxx xxx

. . . 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

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

52

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:

"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.

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 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

53

way to determine whether there really was piracy, or copying of the film of the complainant Twentieth

Century Fox."

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 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 of the linkage of the

copyrighted films with the pirated ones. Thus, there is no reason not the present them (Italics supplied for

emphasis). 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-at-fact, stated in his affidavit 53and 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 above named 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.

54

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 nor have they shown that they were given any 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 petitioner's

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 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 prohibits

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.

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.

55

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.

As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et al., supra,

vis-a-vis the 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 or probable cause is tested. Since the proprietary 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

therefore 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

56

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.

Thereafter, the court a quo made the following factual findings leading to the issuance of the search

warrant now subject to 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, he 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, he 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.

57

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 —

. . . 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 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

The amendment of 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,

58

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 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., 82instructs and enlightens:

As 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

59

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

That there were several counts of the offense of copyright infringement and the search warrant uncovered

several contraband items in the form of pirate 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.

60

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, and said court is DIRECTED to take and expeditiously proceed with such appropriate

proceedings as may be called for in this case. Trebles costs are further assessed against private

respondents.

SO ORDERED

||| (Columbia Pictures, Inc. v. Court of Appeals, G.R. No. 110318, [August 28, 1996], 329 PHIL 875-932)

[G.R. No. 156804. March 14, 2005.]

SONY MUSIC ENTERTAINMENT (PHILS.), INC. and IFPI (SOUTHEAST ASIA), LTD., petitioner, vs.

HON. JUDGE DOLORES L. ESPAÑOL OF THE REGIONAL TRIAL COURT, BRANCH 90,

DASMARIÑAS, CAVITE, ELENA S. LIM, SUSAN L. TAN, DAVID S. LIM, JAMES H. UY, WILSON

ALEJANDRO, JR., JOSEPH DE LUNA, MARIA A. VELA CRUZ, DAVID CHUNG, JAMES UY, JOHN

DOES AND JANE DOES, AND SOLID LAGUNA CORPORATION, respondents.

61

D E C I S I O N

GARCIA, J p:

Assailed and sought to be nullified in this petition for certiorari with application for injunctive relief are the

orders issued by the respondent judge on June 25, 2002 1and January 6, 2003, 2 the first quashing Search

Warrant No. 219-00, and the second, denying reconsideration of the first.

From the petition, the comment thereon of private respondents, their respective annexes, and other

pleadings filed by the parties, the Court gathers the following relevant facts:

In a criminal complaint filed with the Department of Justice (DOJ), the Videogram Regulatory Board

(VRB) 3 charged herein private respondents James Uy, David Chung, Elena Lim and another officer of

respondent Solid Laguna Corporation (SLC) with violation of Presidential Decree (PD) No. 1987. 4 As

alleged in the complaint, docketed as I.S. No. 2000-1576, the four (4) were engaged in the replication,

reproduction and distribution of videograms without license and authority from VRB. On account of this and

petitioners' own complaints for copyright infringement, the National Bureau of Investigation (NBI), through

Agent Ferdinand M. Lavin, applied on September 18, 2000, with the Regional Trial Court at Dasmariñas,

Cavite, Branch 80, presided by the respondent judge, for the issuance of search warrants against private

respondentsDavid Chung, James Uy, John and Jane Does, doing business under the name and style "Media

Group" inside the factory and production facility of SLC at Solid corner Camado Sts., Laguna International

Industrial Park, Biñan, Laguna. 5

During the proceedings on the application, Agent Lavin presented, as witnesses, Rodolfo Pedralvez, a

deputized agent of VRB, and Rene C. Baltazar, an investigator retained by the law firm R.V. Domingo &

Associates, petitioners' attorney-in-fact. In their sworn statements, the three stated that petitioners sought

their assistance, complaining about the manufacture, sale and distribution of various titles of compact discs

(CDs) in violation of petitioners' right as copyright owners; that acting on the complaint, Agent Lavin and

the witnesses conducted an investigation, in the course of which unnamed persons informed them that

allegedly infringing or pirated discs were being manufactured somewhere in an industrial park in Laguna;

that in the process of their operation, they were able to enter, accompanied by another unnamed source,

the premises of SLC and to see various replicating equipment and stacks of CDs; and that they were told by

their anonymous source that the discs were being manufactured in the same premises. They also testified

that private respondents were (1) engaged in the reproduction or replication of audio and video compacts

discs without the requisite authorization from VRB, in violation of Section 6 of PD No. 1987, presenting a

VRB certification to such effect; and (2) per petitioners' certification and a listing of Sony music titles,

infringing on petitioners' copyrights in violation of Section 208 of Republic Act (RA) No. 8293, otherwise

known as Intellectual Property Code. 6

On the basis of the foregoing sworn statements, the respondent judge issued Search Warrant No. 219-

00 7 for violation of Section 208 of R.A. No. 8293 and Search Warrant No. 220-00 8 for violation of Section

6 of PD No. 1987. aAcHCT

The following day, elements of the Philippine National Police Criminal Investigation and Detection Group,

led by PO2 Reggie Comandante, enforced both warrants and brought the seized items to a private

warehouse of Carepak Moving and Storage at 1234 Villonco Road, Sucat, Paranaque City and their custody

turned over to VRB. 9 An inventory of seized items, 10 as well as a "Return of Search Warrant" were later

filed with the respondent court.

Meanwhile, the respondents in I.S. No. 2000-1576 belabored to prove before the DOJ Prosecutorial Service

that, since 1998 and up to the time of the search, they were licensed by VRB to operate as replicator and

duplicator of videograms.

62

On the stated finding that "respondents can not . . . be considered an unauthorized reproducers of

videograms", being "licensed to engage in reproduction in videograms under SLC in which they are the

officers and/or or officials", the DOJ, via a resolution dated January 15, 2001, 11 dismissed VRB's complaint

in I.S. No. 2000-1576.

On February 6, 2001, private respondents, armed with the DOJ resolution adverted to, moved to quash the

search warrants thus issued. 12 VRB interposed an opposition for the reason that the DOJ has yet to

resolve the motion for reconsideration it filed in I.S. No. 2000-1576. jur2005cda

Eventually, the DOJ denied VRB's motion for reconsideration, prompting private respondents to move anew

for the quashal of the search warrants. In its supplement to motion, private respondents attached copies of

SLC's license as videogram duplicator and replicator.

In an order dated October 30, 2001, 13 the respondent judge, citing the January 15, 2001 DOJ resolution

in I.S. No. 2000-1576, granted private respondents' motion to quash, as supplemented, dispositively

stating:

"Nonetheless, such being the case, the aforesaid Search Warrants are QUASHED" caHCSD

Petitioners forthwith sought clarification on whether or not the quashal order referred to both search

warrants or to Search Warrant No. 220-00 alone, since it was the latter that was based on the charge of

violation of PD No. 1987. 14 The respondent judge, in a modificatory order dated January 29,

2002, 15 clarified that her previous order quashed only Search Warrant No. 220-00.

Meanwhile, or on November 22, 2001, petitioners filed with the DOJ an affidavit-complaint, docketed

thereat as I.S. No. 2001-1158, charging individual private respondents with copyright infringement in

violation of Sections 172 and 208 in relation to other provisions of RA No. 8293. 16 Attached to the

affidavit-complaint were certain documents and records seized from SLC's premises, such as production and

delivery records.

Following their receipt of DOJ-issued subpoenas to file counter-affidavits, private respondents moved, in

the search warrant case, that they be allowed to examine the seized items to enable them to intelligently

prepare their defense. 17 On January 30, 2002, respondent judge issued an order allowing the desired

examination, provided it is made under the supervision of the court's sheriff and in the "presence of the

applicant of Search Warrant No. 219-00". 18

On February 8, 2002, the parties, represented by their counsels, repaired to the Carepak warehouse. An

NBI agent representing Agent Lavin appeared. The examination, however, did not push through on account

of petitioners' counsel insistence on Agent Lavin's physical presence. 19 Private respondents were able to

make an examination on the following scheduled setting, February 15, 2002, albeit it was limited, as the

minutes of the inspection discloses, to inspecting only one (1) box containing 35 assorted CDs, testing

stampers, diskettes, a calendar, organizers and some folders and documents. The minutes also contained

an entry stating — "Other items/machines were not examined because they cannot be identified as they

are not properly segregated from other items/machines in the warehouse. The parties agreed to schedule

another examination on (to be agreed by the parties) after the items/machines subject of the examination

shall have been segregated from the other items/machines by Carepak Moving and Storage , Inc." 20

During the preliminary investigation conducted on February 26, 2002 in I.S. No. 2001-1158, however,

petitioners' counsel objected to any further examination, claiming that such exercise was a mere subterfuge

to delay proceedings. 21

On April 11, 2002, individual private respondents, through counsel, filed a "Motion To Quash Search

Warrant (And To Release Seized Properties)" grounded on lack of probable cause to justify issuance of

63

search warrant, it being inter alia alleged that the applicant and his witnesses lacked the requisite personal

knowledge to justify the valid issuance of a search warrant; that the warrant did not sufficiently describe

the items to be seized; and that the warrant was improperly enforced. 22 To this motion to quash,

petitioners interposed an opposition dated May 7, 2002 predicated on four (4) grounds. 23 On June 26,

2002, respondent SLC filed a Manifestation joining its co-respondents in, and adopting, their motion to

quash. 24

On June 25, 2002, the respondent judge issued the herein first assailed order quashing Search Warrant No.

219-00 principally on the ground that the integrity of the seized items as evidence had been compromised,

commingled as they were with other articles. Wrote the respondent judge:

Based on the report submitted, it appears that on February 15, 2002, an examination was actually

conducted. Unfortunately, the alleged seized items were commingled with and not segregated from

thousands of other items stored in the warehouse. Only one box . . . were (sic) examined in the presence

of both parties with the sheriff, such that another date was set. . . . On February 22, 2002, during the

hearing before the Department of Justice (DOJ), [petitioners' counsel] Atty. Arevalo manifested their

objection to the further examination on the alleged ground that all of the items subject of the DOJ

complaint have been examined.

Analyzing the report and the incidents relative thereto, it shows that the items subject of the questioned

Search Warrant were commingled with other items in the warehouse of Carepak resulting in the failure to

identify the machines and other items subject of this Search Warrant, while the other items enumerated in

the said Inventory of Seized Items and Certification of Legality, Orderliness and Regularity in the Execution

and enforcement of Search Warrants were not examined, hence, the charge imputed against the

respondents could not be established as the evidence to show such violation fails to determine the

culpability of said respondents, thus, violating their constitutional rights. 25

Excepting, petitioners moved for reconsideration, arguing on the main that the quashal order was

erroneously based on a ground outside the purview of a motion to quash. 26 To this motion, private

respondents interposed an opposition, against which petitioners countered with a reply.

On January 6, 2003, respondent judge issued the second assailed order denying petitioners' motion for

reconsideration on the strength of the following premises:

Careful scrutiny of the records of the case reveals that the application of the above-entitled case stemmed

from the application for Search Warrant alleging that the respondent was not licensed to duplicate or

replicate CDs and VCDs. The Court was misled when the applicants declared that Solid Laguna Corporation

(SLC) is not licensed to engage in replicating/duplicating CDs and VCDs, when in truth and in fact, SLC was

still a holder of a valid and existing VRB license. Considering the fact that respondent was duly licensed

which facts (sic) was not laid bare to this Court when the application for writ was filed by the private

complainant through the National Bureau of Investigation, this Court hereby recalls and quashes the above

writ.

Lastly, taking into account that respondents were licensed to engage in replicating/duplicating CDs and

VCDs, the issuance of search warrant was of no force and effect as there was absence of probable cause to

justify said issuance. . . . 27

Hence, petitioners' present recourse. TIDaCE

In a Resolution dated February 19, 2003, 28 the Court issued a temporary restraining order enjoining the

respondents from implementing and enforcing the respondent judge's questioned orders.

64

Petitioners ascribe on the respondent judge the commission of grave abuse of discretion amounting to lack

or in excess of jurisdiction in issuing the first assailed order in that:

1. It was based on a ground that is not a basis for quashal of a search warrant, i.e., private respondents'

failure to examine the seized items, which ground is extraneous to the determination of the validity of the

issuance of the search warrant.

2. Public respondent, in effect, conducted a "preliminary investigation" that absolved the private

respondents from any liability for copyright infringement.

3. Public respondent recognized the motion to quash search warrant filed by persons who did not have any

standing to question the warrant.

Petitioners also deplore the issuance of the second assailed order which they tag as predicated on a ground

immaterial to Search Warrant No. 219-00.

Private respondents filed their Comment on May 13, 2003, essentially reiterating their arguments in the

"Motion To Quash Search Warrant (And To Release Seized Properties)". Apart therefrom, they aver that

petitioners violated the rule on hierarchy of courts by filing the petition directly with this Court. As to be

expected, petitioners' reply to comment traversed private respondents' position.

Owing to their inability to locate respondent David Chung, petitioners moved and the Court subsequently

approved the dropping, without prejudice, of said respondent from the case. 29

On February 20, 2004, private respondents filed their Rejoinder, therein inviting attention to petitioner

IFPI's failure to execute the certification on non-forum shopping as required by Rule 7, Section 5 of the

Rules of Court and questioning the validity of the Special Powers of Attorney of petitioners' attorney-in-fact

to file this case.

In Resolution of March 31, 2004, the Court gave due course to the petition and directed the submission of

memoranda which the parties, after each securing an extension, did submit.

The underlying issue before Us revolves on the propriety of the quashal of Search Warrant No. 219-

00 which, in turn, resolves itself into question of the propriety of the warrant's issuance in the first place.

It has repeatedly been said that one's house, however, humble is his castle where his person, papers and

effects shall be secured and whence he shall enjoy undisturbed privacy except, to borrow from Villanueva

vs. Querubin, 30 "in case of overriding social need and then only under the stringent procedural

safeguards." The protection against illegal searches and seizure has found its way into our 1935 and 1973

Constitutions and is now embodied in Article III, Section 2 of the 1987Constitution, thus —

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,

and in Section 4, Rule 126 of the Rules of Court, viz —

Sec. 4. Requisites for issuing search warrant. — A search warrant shall not issue but 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.

Complementing the aforequoted provisions is Section 5 of the same Rule, reading:

65

SEC. 5. Examination of the complainant; record. — The judge must, before issuing the warrant, personally

examine in 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.

To prevent stealthy encroachment upon, or gradual depreciation of the right to privacy, a liberal

construction in search and seizure cases is given in favor of the individual. Consistent with this postulate,

the presumption of regularity is unavailing in aid of the search process when an officer undertakes to justify

it. 31 For, the presumption juris tantum of regularity cannot, by itself, prevail against the constitutionally

protected rights of an individual because zeal in the pursuit of criminals cannot ennoble the use of arbitrary

methods that the Constitution itself detests. 32

A core requisite before a warrant shall validly issue is the existence of a probable cause, meaning "the

existence of 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 to be searched". 33 And when the law speaks of facts, the reference is to facts, data or

information personally known to the applicant and the witnesses he may present. Absent the element of

personal knowledge by the applicant or his witnesses of the facts upon which the issuance of a search

warrant may be justified, the warrant is deemed not based on probable cause and is a nullity, its issuance

being, in legal contemplation, arbitrary, as held by us in Columbia Pictures, Inc. vs. Court of

Appeals. 34Testimony based on what is supposedly told to a witness, being patent hearsay and, as rule, of

no evidentiary weight 35 or probative value, whether objected to or not,36 would, alone, not suffice under

the law on the existence of probable cause. DTAcIa

In our view, the issuance of the search warrant in question did not meet the requirements of probable

cause. The respondent judge did not accordingly err in quashing the same, let alone gravely abuse her

discretion.

Petitioners argue that the instant petition is on all fours with Columbia, 37 wherein the en banc Court

upheld the validity of search warrants based on the testimonies of the applicant and his witnesses who

conducted an investigation on the unlawful reproduction and distribution of video tapes of copyrighted

films.

We are not persuaded.

In Columbia, the issuing court probed the applicant's and his witnesses' personal knowledge of the fact of

infringement. It was, however, determined by this Court that during the application hearing, therein

petitioner's attorney-in-fact, a witness of the applicant, "stated in his affidavit and further expounded in his

deposition that he personally knew of the fact that private respondents had never been authorized by his

clients to reproduce, lease and possess for the purposes of selling any of the copyrighted

films." 38 Significantly, the Court, in upholding the validity of the writ issued upon complaint of Columbia

Pictures, Inc., et al., stated that "there is no allegation of misrepresentation, much less finding thereof by

the lower court, on the part of petitioners' witnesses." 39

Therein lies the difference with the instant case.

Here, applicant Agent Lavin and his witnesses, Pedralvez and Baltazar, when queried during the application

hearing how they knew that audio and video compact discs were infringing or pirated, relied for the most

part on what alleged unnamed sources told them and/or on certifications or lists made by persons who

were never presented as witnesses. In net effect, they testified under oath as to the truth of facts they had

no personal knowledge of. The following excerpts of the depositions of applicant Lavin and his witnesses

suggest as much:

66

A. Deposition of Agent Lavin

28. Question: What happened next?

Answer:

We then went to the Laguna Industrial Park, your Honor . . . We then verified from an informant that

David Chung, James Uy . . . under the name and style Media Group were the ones replicating the infringing

CDs.

xxx xxx xxx

36. Question: How do you know that all of these VCDs and CDs you purchased or are indeed infringing?

Answer:

I have with me the VRB certification that the VCDs are unauthorized copies. I also have with me the

Complaint-Affidavit of Sony Music and IFPI that certified that these are infringing copies, as well as the title

list of Sony Music wherein some of the CDs purchased are indicated. (Annex "10", Comment, Rollo, p. 841)

B. Deposition of Baltazar aDSIHc

18. Question: What did you see in that address?

Answer:

We saw that they had in stock several infringing, pirated and unauthorized CDs. They also had videograms

without VRB labels, aside from artworks and labels. John Doe gave us a "Wholesome" CD while Jane Doe

gave us "Kenny Rogers Videoke" and "Engelbert Humperdinck Videoke" which the informant told us were

being reproduced in that facility. The informant further showed us the rooms where the replicating and/or

stamping machine was located.

19. Question: How did you determine that the CDs you purchased are counterfeit, pirated or unauthorized?

Answer:

The Attorney-in-fact of Sony Music and IFPI certified in his Complaint-Affidavit that they are unauthorized

copies. I also have with me a listing of Sony Music titles and some of the CDs I purchased are in that

list. 40

C. Deposition of Pedralvez

27. Question: What proof do you have they are producing infringing materials?

Answer:

We were given some samples by John Doe and Jane Doe. These are Kenny Rogers Videoke, Engelbert

Humperdinck Videoke, and Andrew E. Wholesome CD. The informant told us that the said samples were

being reproduced in the facility.

28. Question: How do you know that all of these VCDs you purchased or got are indeed unauthorized?

Answer:

The VRB has certified that they are unauthorized copies. (Annex "12", Comment, Rollo, pp. 849-852).

67

Unlike their counterparts in Columbia who were found to be personally knowledgeable about their facts,

Agent Lavin and his witnesses, judging from their above quoted answers, had no personal knowledge that

the discs they saw, purchased or received were, in fact, pirated or infringing on petitioners' copyrights. To

us, it is not enough that the applicant and his witnesses testify that they saw stacks of several allegedly

infringing, pirated and unauthorized discs in the subject facility. The more decisive consideration

determinative of whether or not a probable cause obtains to justify the issuance of a search warrant is that

they had personal knowledge that the discs were actually infringing, pirated or unauthorized copies. 41

Moreover, unlike in Columbia, misrepresentation on the part of the applicant and his witnesses had been

established in this case.

This is not to say that the master tapes should have been presented in evidence during the application

hearing, as private respondents, obviously having in mind the holding in 20th Century Fox Film Corp. vs.

Court of Appeals, 42 would have this Court believe. It is true that the Court, in 20th Century Fox,

underscored the necessity, in determining the existence of probable cause in copyright infringement cases,

of presenting the master tapes of the copyrighted work. But, as emphatically clarified inColumbia "such

auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence,

depositions, admissions or other classes of evidence . . . especially where the production in court of object

evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary

value. 43 What this Court is saying is that any evidence presented in lieu of the master tapes, if not readily

available, in similar application proceedings must be reliable, and, if testimonial, it must, at the very least,

be based on the witness' personal knowledge. IEDHAT

Petitioners argue, citing People v. Chua Uy, 44 that Agent Lavin's informants' testimonies are not

indispensable as they would only be corroborative. 45 Like Columbia, Chua Uy is not a winning card for

petitioners, for, in the latter case, there was a reliable testimony to corroborate what the applicant testified

to, i.e., the testimony of the police poseur-buyer in a buy-bust operation involving prohibited drugs. The

circumstances are different in this case wherein the applicant and his witnesses had no personal knowledge

that the discs they purchased were infringing or pirated copies. It cannot be overemphasized that not one

of them testified seeing the pirated discs being manufactured at SLC's premises. What they stated instead

was that they were given copies of "Kenny Rogers Videoke", "Engelbert Humperdinck Videoke" and

"Andrew E. Wholesome CD" by two anonymous sources, while yet another informant told them that the

discs were manufactured at said premises.

Initial hearsay information or tips from confidential informants could very well serve as basis for the

issuance of a search warrant, if followed up personally by the recipient and validated, 46 as what

transpired in Columbia. Unfortunately, the records show that such is not the case before us.

On the issue that the public respondent gravely abused her discretion in conducting what petitioners

perceived amounted to a "preliminary investigation", this Court has already ruled in Solid Triangle Sales

Corp. vs. Sheriff of RTC Quezon City, Branch 93, 47 that "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 warrant".

In the exercise of this mandate — which we can allow as being akin to conducting a preliminary

investigation — abuse of discretion cannot plausibly be laid at the doorstep of the issuing court on account

of its prima facie holding that no offense has been committed, even if consequent to such holding a

warrant is recalled and the private complainant is incidentally deprived of vital evidence to prove his

case. Solid Triangle succinctly explains why:

The proceedings for the issuance/quashal of a search warrant before a court on the one hand, and the

preliminary investigation before an authorized officer on the other, are proceedings entirely independent of

each other. One is not bound by the other's finding as regards the existence of a crime. The first is to

68

determine whether a warrant should issue or be quashed, and the second, whether an information should

be filed in court.

When the court, in determining probable cause for issuing or quashing a search warrant, finds that no

offense has been committed, it does not interfere with or encroach upon the proceedings in the preliminary

investigation. The court does not oblige the investigating officer not to file the information for the court's

ruling that no crime exists is only of purposes of issuing or quashing the warrant. This does not, as

petitioners would like to believe, constitute a usurpation of the executive function. Indeed, to shirk from

this duty would amount to an abdication of a constitutional obligation. 48

While the language of the first questioned Order may be viewed as encroaching on executive functions,

nonetheless, it remains that the order of quashal is entirely independent of the proceedings in I.S. No.

2001-1158. And needless to stress, the DOJ is by no means concluded by the respondent judge's findings

as regards the existence, or the non-existence, of a crime.

We can, to a point, accord merit to petitioners' lament that the basis of the first questioned order, i.e., the

mingling of the seized items with other items, is extraneous to the determination of the validity of the

issuance of the search warrant. It is to be pointed out, though, that public respondent corrected her error

when it was raised in petitioners' motion for reconsideration. There can really be no serious objection to a

judge correcting or altogether altering his case disposition on a motion for reconsideration, it being the

purpose of such recourse to provide the court an opportunity to cleanse itself of an error unwittingly

committed, or, with like effect, to allow the aggrieved party the chance to convince the court that its ruling

is erroneous. 49 A motion for reconsideration before resort to certiorari is required precisely "to afford the

public respondent an opportunity to correct any actual or fancied error attributed to it by way of re-

examination of the legal and factual aspects of the case".50

Similarly, as to the matter of the respondent judge's recognizing the April 11, 2002 motion to quash search

warrant 51 filed by the individual private respondents, instead of by SLC, as presumptive owner of the

seized items, such error was properly addressed when respondent SLC, represented throughout the

proceedings below by the same counsel of its co-respondents, formally manifested that it was adopting the

same motion as its own. 52

It is apropos to point out at this juncture that petitioners have imputed on individual private respondents

criminal liability, utilizing as tools of indictment the very articles and papers seized from the premises of

SLC. Be that as it may, petitioners should be deemed in estoppel to raise the personality of individual

private respondents to interpose a motion to quash. To be sure, it would be unsporting for petitioners to

prosecute individual private respondents on the basis of seized articles but on the same breath deny the

latter standing to question the legality of the seizure on the postulate that only the party whose rights have

been impaired thereby, meaning SLC, can raise that challenge. There can be no quibbling that individual

private respondents stand to be prejudiced or at least be inconvenient by any judgment in any case based

on the seized properties. In a very real sense, therefore, they are real parties in interest who ought not to

be prevented from assailing the validity of Search Warrant 219-00, albeit they cannot plausibly asked for

the release and appropriate as their own the seized articles. ESaITA

Petitioners' related argument that SLC could not have validly adopted individual private respondents' motion

to quash due to laches is untenable.

The records show that the seizure in question was effected on September 19, 2000. The complaint in I.S.

No. 2000-1576 was filed against the officers of SLC, all of whom, except for one, are also private

respondents in the instant petition. I.S. No. 2000-1576 was only resolved on January 15, 2001 when the

69

DOJ dismissed the complaint on the ground that SLC was, in fact, duly licensed by the VRB. Shortly

thereafter, or on February 6, 2001, less than five (5) months after the seizure, private respondents moved

to quash both search warrants. 53 The motion clearly indicates private respondents' desire for the return of

the seized items, and there is nothing in the records showing that petitioners objected to the motion on the

ground that the movants had no standing to question the warrants.

This bring Us to the second assailed order. As earlier stated, DOJ, in I.S. No. 2000-1576, found respondent

SLC to be licensed by VRB to engage in the business of replicating or duplicating videograms.

Petitioners would have the Court believe that the second questioned order was based on a ground

immaterial to the charge of infringement. A scrutiny of the text of the said order, however, shows that the

respondent judge denied petitioners' motion for reconsideration because she was misled by the applicant's

and his witnesses' testimony. It may be that a VRB license is no defense to a charge of violating Section

208 of R.A. No. 8293. It must be stressed in this regard, however, that the core issue here is the validity of

the warrant which applicant secured on the basis of, among others, his representation which turned out to

be false. TcAECH

As above discussed, the answers of Agent Lavin and his witnesses to the public respondent's searching

questions, particularly those relating to how they knew that the compact discs they purchased or received

were illegal, unauthorized or infringing, were based on certifications and not personal knowledge. The

subject warrant, as well as Search Warrant No. 220-00, was issued nonetheless. It may well have been that

the issuing judge was, in the end, convinced to issue the warrants by means of the erroneous VRB

certification presented during the joint application hearing, overriding whatever misgivings she may have

had with the applicant's and his witnesses' other answers. This Court, however, cannot engage in such

speculation and sees no need to.

Summing up, the issuance of Search Warrant No. 219-00 was, at bottom, predicated on the sworn

testimonies of persons without personal knowledge of facts they were testifying on and who relied on a

false certification issued by VRB. Based as it were on hearsay and false information, its issuance was

without probable cause and, therefore, invalid.

Given the foregoing perspective, the peripheral issues of (a) whether or not petitioner IFPI (South East

Asia), Ltd. failed to comply with the rules requiring the filing of a certification on non-forum shopping; and

(b) whether or not IFPI's board of directors ratified its conditional authorization for its attorney-in-fact to

represent IFPI in this petition, need not detain us long. In our review of the records, R.V. Domingo &

Associates, whose authority to represent the petitioners in this petition continues, had duly executed the

sworn certification on non- forum shopping.

In the same manner, this Court, having taken cognizance of this petition, need not belabor the issue of

whether or not petitioners have cavalierly breached the rule on hierarchy of courts. Suffice it to state that,

while the Court looks with disfavor on utter disregard of its rules, 54 it is within its power to suspend its

own rules or to except a particular case from its operation whenever the ends of justice so requires, as

here.

WHEREFORE, the instant petition is hereby DISMISSED and the temporary restraining order issued on

February 19, 2003 is consequently RECALLED.

Costs against petitioners.

SO ORDERED.

||| (Sony Music Entertainment (Phils.) Inc. v. Español, G.R. No. 156804, [March 14, 2005], 493 PHIL 507-

526)