LIP Digest 2

7/27/2019 LIP Digest 2

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PEARL & DEAN PHIL INC. VS. SHOEMART- Trademark, Copyright and Patents

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 or services of an

enterprise and shall include a stamped or marked container of goods. The scope of a copyright is

confined to literary and artistic works which are original intellectual creations in the literary and artistic

domain. Patentable inventions 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.

FACTS:

Pearl and Dean is a corporation in the manufacture of advertising display units also known as light boxes,

which were manufactured by Metro Industrial Services. A copyright Registration was obtained in 1981.

These were marketed in the name of "Poster Ads". They also applied for a registration of trademark withthe Bureau of Patents in 1983, but was only approved in 19988. In 1985, petitioner had n agreement with

respondent Shoemart Inc (SMI) to install these light boxes in their Makati and Cubao branch, Only theMakati branch was able to sigh the agreement. In 1986, the contract was rescinded unilaterally by SMI,

and instead contracted with Metro Industrial Services. They installed these lightboxes in different SM city

branches, including Cubao and Makati, with association with North Edsa Marketing Inc (NEMI), SMI's

sister company. Petitioner requested SMI and NEMI to put down their installations of the light boxes, and payment of compensatory damages worth P20M. Claiming that respondents failed to comply, they filed a

case for infringement of trademark and copyright, unfair competition and damages. RTC ruled in favor of

petitioner, but CA reversed.

ISSUES:

(1) Whether there was a copyright infringement

(2) Whether there was a patent infringement

(3) Whether there was a trademark infringement

(4) Whether there was unfair competition

RULING: No to all.

(1) Copyright is a statutory right, subject to the terms and conditions specified in the statute. Therefore, itcan only cover the works falling within the statutory enumeration or description. Since the copyright was

classified under class "O" works, which includes "prints, pictorial illustrations, advertising copies, labels,tags and box wraps," and does not include the light box itself. A lightbox, even admitted by the president

of petitioner company, was neither a literary nor an artistic work but an engineering or marketing

invention, thus not included under a copyright.



(2) Petitioner was not able to secure a patent for its lightboxes, and cannot legally prevent anyone from

manufacturing or commercially using the same. Patent has a three-fold purpose: a) to foster and reward

invention; b) promotes disclosures of invention and permit public to use the same upon expiration; c)

stringent requirements for patent protection to ensure in the public domain remain there for free use of the public. Since petitioner was not able to go through such examination, it cannot exclude others from

manufacturing, or selling such lightboxes. No patent, no protection.

(3) The certificate of registration issued by the Director of Patents gives exclusive right to use its own

symbol only to the description specified in the certificate. It cannot prevent others to use the same

trademark with a different description.

(4) "Poster Ads" is a general term that cannot be associated specifically to Pearl and Dean, thus it cannot

be considered to use such term to be unfair competition against the petitioner.

Pearl and Dean Inc. vs Shoemart Inc.

Intellectual Property – Law on Copyright – Copyrightable Subject

Pearl and Dean Inc. is a corporation engaged in the manufacture of advertising display units called light

boxes. In January 1981, Pearl and Dean was able to acquire copyrights over the designs of the display

units. In 1988, their trademark application for “Poster Ads” was approved; they used the same trademark

to advertise their light boxes.

In 1985, Pearl and Dean negotiated with Shoemart Inc. (SM) so that the former may be contracted to

install light boxes in the ad spaces of SM. Eventually, SM rejected Pearl and Dean’s proposal.

Two years later, Pear and Dean received report that light boxes exactly the same as theirs are being used

by SM in their ad spaces. They demanded SM to stop using the light boxes and at the same time asked for

damages amounting to P20 M. SM refused to pay damages though they struck down the light boxes. Pearl

and Dean eventually sued SM. SM argued that it did not infringe on Pearl and Dean’s trademark because

Pearl and Dean’s trademark is only applicable to envelopes and stationeries and not to the type of ad

spaces owned by SM. SM also averred that “Poster Ads” is a generic term hence it is not subject to

trademark registration. SM also averred that the actual light boxes are not copyrightable. The RTC ruled

in favor of Pearl and Dean. But the Court of Appeals ruled in favor of SM.

ISSUE: Whether or not the Court of Appeals is correct.

HELD: Yes. 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; what was copyrighted were the technical drawings only, and not the light boxes

themselves. In other cases, 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.

On the trademark infringement allegation, the words “Poster Ads” are a simple contraction of the generic

term poster advertising. In the absence of any convincing proof that “Poster Ads” has acquired a



secondary meaning in this jurisdiction, 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.

Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated G.R. No. 148222, August 15, 2003

Facts: Pearl & Dean (P&D) is engaged in the manufacture of advertising display units referred to as light

boxes. These units utilize specially printed posters sandwiched between plastic sheets and illuminated

with backlights. It was able to secure registration over these illuminated display units. The advertisinglight boxes were marketed under the trademark “Poster Ads”.

In 1985, P&D negotiated with defendant Shoemart, Inc. (SMI) for the lease and installation of the light

boxes in SM North Edsa. However, since SM North Edsa was under construction, SMI offered as

alternative SM Makati and Cubao. During the signing of the Contract, SMI only returned the Contractwith SM Makati. Manager of petitioner reminded SMI that their agreement includes SM Cubao.

However, SMI did not bother to reply. Instead, respondent informed petitioner that they are rescinding the

contract for SM Makati due to non-performance.

Two years later, SMI engaged the services of EYD Rainbow Advertising to make the light boxes. Thesewere delivered in a staggered basis and installed at SM Megamall and SM City. In 1989, petitioner

received reports that exact copy of its light boxes was installed by SMI. It further discovered that North

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

lighted display units located in SMI’s different branches. Petitioner sent letters to respondents askingthem to cease using the light boxes and the discontinued use of the trademark “Poster

Ads”. Claiming that SMI and NEMI failed to meet its demand, petitioner filed a case for infringement of

trademark and copy right, unfair competition and damages. SMI maintained that it independently

developed its poster panels using commonly known techniques and available technology without notice

of or reference to P&D’s copyright. In addition, it said that registration of “Poster Ads” obtained by petitioner was only for stationeries such as letterheads, envelopes and the like. “Poster Ads” is a generic

term which cannot be appropriated as trademark, and, as such, registration of such mark is invalid. It also

stressed that P&D is not entitled to the reliefs sought because the advertising display units contained no

copyright notice as provided for by law.

RTC found SMI and NEMI jointly and severally liable for infringement of copyright and trademark. CA

reversed saying that it agreed with SMI that what was copyrighted was the technical drawings only and

not the light boxes. Light boxes cannot be considered as either prints, pictorial illustrations, advertising

copies, labels, tags or box wraps, to be properly classified as copyrightable class “O” work. In addition,

CA stressed that the protective mantle of the Trademark Law extends only to the goods used by the first

user as specified in its certificate of registration. The registration of the trademark “Poster Ads” covers

only stationeries such as letterheads, envelopes and calling cards and newsletter.

ISSUES: (1) If the engineering or technical drawings of an advertising display unit are granted copyright

protection is the light box depicted in such drawings ipso facto also protected by such copyright? (2)

Should the light box be registered separately? (3) Can the owner of the registered trademark legally

prevent others from using such mark if it is mere abbreviation of a term descriptive of his goods, services

or business?



Held:1.No. Copyright is purely statutory. As such, 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 the terms and

conditions specified in the statute. Accordingly, it can cover only the works falling within the statutory

enumeration or description. Petitioner secured copyright under classification class “O” work. Thus,

copyright protection extended only to the technical drawings and not to the light box itself because thelatter was not at all in the category of “prints, pictorial illustrations, advertising copies, labels, tags and

box wraps.

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 thelack 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”.

It must be noted that 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.

2.Yes. 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. 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 through disclosure. Ideas, once, disclosed to the public without

protection of a valid patent, are subject to appropriation without significant restraint.

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 patent is issued. Therefore, not having gone through the arduous

examination for patents, petitioner cannot exclude other s from the manufacture, sale or commercial use

of the light boxes on the sole basis of its copyright certificate over the technical drawings.

3.Court agrees with CA that the certificate of registration issued by the Director of Patents can confer 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.

Assuming arguendo that “Poster Ads” could validly qualify as a trademark, the failure of petitioner 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.

There is no evidence that petitioner’s use of “poster Ads” was distinctive or well-known. As noted by CA,

petitioner’s expert witness himself had testified that “Poster Ads” was not too generic a name. SO it was

difficult to identify it with any company. 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 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. PETITION WAS DENIED.

Facts:

Pearl and Dean is a corporation engaged in the manufacture of advertising display units simply referred to

as light boxes.Pearland Dean was able to secure a Certificate of Copyright Registration.Pearland Dean,

received reports that exact copies of its light boxes were installed at SM City and in the fastfood section

of SM Cubao. In the light of its discoveries,Pearland Dean sent a letter dated December 11, 1991 to both

SMI enjoining it 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”. 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.

Issue:

Whether or not there was copyright infringement.

Held:

The SC ruled in favor of the Shoemart Inc adopting the ruling of court of appeals and by coming up with

its own ruling. To wit:

“The records show thatPearland 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 covering the following products: stationeries such as letterheads, envelopes and calling cards and

newsletters.”

“Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, therights 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”

“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”

“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.”

The Supreme Court also distinguished Trademark, Copyright and Patents:

“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.

Habana vs Robles

On February 9, 2012

0 0

Intellectual Property – Law on Copyright – Infringement

Pacita Habana and two others were the authors of College English for Today Series 1 and 2 (CET). While

they were researching for books to assist them in updating their own book, they chanced upon the book of

Felicidad Robles entitled Developing English Proficiency Books 1 and 2 (DEP). They discovered further

that the book of Robles was strikingly similar to the contents, scheme of presentation, illustrations andillustrative examples of CET. They then sued Robles and her publisher (Goodwill Trading Co.) for

infringement and/or unfair competition with damages.

Robles, in her defense, alleged that her sources were from foreign books; that in their field similarity in

styles cannot be avoided since they come from the same background and orientation. The trial court as

well as the Court of Appeals ruled in favor of Robles.

ISSUE: Whether or not the Court of Appeals is correct.

HELD: No. A perusal of the records yields several pages of the book DEP that are similar if not identical

with the text of CET. In several other pages the treatment and manner of presentation of the topics of

DEP are similar if not a rehash of that contained in CET. 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? Robles’ act of lifting from the book of Habana et al substantial portions of discussions

and examples, and her failure to acknowledge the same in her book is an infringement of Habana et al’scopyrights.

The Supreme Court also elucidated that 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.

PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners, vs. FELICIDAD

C. ROBLES and GOODWILL TRADING CO., INC., respondents.

D E C I S I O N

PARDO, J .:

The case before us is a petition for review on certiorarii[1] to set aside the (a) decision of the Court of

Appealsii[2], and (b) the resolution denying petitioners’ motion for reconsideration,iii[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.

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 bookstoresto 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.

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”iv

[4] against private respondents.v[5]

In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially

familiar with the contents of petitioners’ works, and without securing their permission, lifted, copied,

plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of

CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of

particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and

the misrepresentations of respondent Robles that the same was her original work and concept adversely

affected and substantially diminished the sale of the petitioners’ book and caused them actual damages by

way of unrealized income.

Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked

the court to order the submission of all copies of the book DEP, together with the molds, plates and films

and other materials used in its printing destroyed, and for respondents to render an accounting of the

proceeds of all sales and profits since the time of its publication and sale.

Respondent Robles was impleaded in the suit because she authored and directly committed the acts of

infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher



and joint co-owner of the copyright certificates of registration covering the two books authored and

caused to be published by respondent Robles with obvious connivance with one another.

On July 27, 1988, respondent Robles filed a motion for a bill of particularsvi[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 foundtheir way into respondent’s book.

On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaintvii[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 viii[8], and denied the allegations of plagiarism

and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her

independent researches, studies and experiences, and was not a copy of any existing valid copyrighted

book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar

writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any

similarity between the respondents book and that of the petitioners was due to the orientation of the

authors to both works and standards and syllabus; and (3) the similarities may be due to the authors’exercise of the “right to fair use of copyrigthed materials, as guides.”

Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the

filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced

CET as the official textbook of the graduate studies department of the Far Eastern University.ix[9]

During the pre-trial conference, the parties agreed to a stipulation of factsx[10] and for the trial court to

first resolve the issue of infringement before disposing of the claim for damages.

After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus:

“WHEREFORE, premises considered, the court hereby orders that the complaint filed against

defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs

solidarily reimburse defendant Robles for P20,000.00 attorney’s fees and defendant Goodwill for

P5,000.00 attorney’s fees. Plaintiffs are liable for cost of suit.

IT IS SO ORDERED.

“Done in the City of Manila this 23rd day of April, 1993.

“(s/t) MARVIE R. ABRAHAM SINGSON

“Assisting Judge

“S. C. Adm. Order No. 124-92”xi[11]



On May 14, 1993, petitioners filed their notice of appeal with the trial courtxii[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.xiii

[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 notsubject to copyright. Petitioners also assailed the findings of the trial court that they were animated by

bad faith in instituting the complaint.xiv[14]

On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill

Trading Co., Inc. The relevant portions of the decision state:

“It must be noted, however, that similarity of the allegedly infringed work to the author’s or proprietor’s

copyrighted work does not of itself establish copyright infringement, especially if the similarity results

from the fact that both works deal with the same subject or have the same common source, as in this case.

Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have

been copied or lifted from foreign books. She has duly proven that most of the topics or materials

contained in her book, with particular reference to those matters claimed by appellants to have been

plagiarized were topics or matters appearing not only in appellants and her books but also in earlier books

on College English, including foreign books, e.i. Edmund Burke’s “Speech on Conciliation”, Boerigs’

“Competence in English” and Broughton’s, “Edmund Burke’s Collection.”

x x x

“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.”xv[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,xvi[16] however, the Court of Appeals

denied the same in a Resolutionxvii[17] dated November 25, 1997.

Hence, this petition.

In this appeal, petitioners submit that the appellate court erred in affirming the trial court’s decision.

Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and

sequential similarity between DEP and CET, respondents committed no copyright infringement; (2)

whether or not there was animus furandi on the part of respondent when they refused to withdraw thecopies 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. xviii[18]

We find the petition impressed with merit.

The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in

force. At present, all laws dealing with the protection of intellectual property rights have been



consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No.

8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under

Section 177. It provides for the copy or economic rights of an owner of a copyright as follows:

“Sec.177. Copy or Economic rights.—Subject to the provisions of chapter VIII, copyright or economic

rights shall consist of the exclusive right to carry out, authorize or prevent the following acts:

177.1 Reproduction of the work or substantial portion of the work;

177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of thework;

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”xix[19]

The law also provided for the limitations on copyright, thus:

“Sec. 184.1 Limitations on copyright.-- Notwithstanding the provisions of Chapter V, the following acts

shall not constitute infringement of copyright:

(a) the recitation or performance of a work, once it has been lawfully made accessible to the public,

if done privately and free of charge or if made strictly for a charitable or religious institution or society;

[Sec. 10(1), P.D. No. 49]

(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)

x x x x x x x x x x x x

(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;xx[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.xxi[21]



A perusal of the records yields several pages of the book DEP that are similar if not identical with the text

of CET.

On page 404 of petitioners’ Book 1 of College English for Today, the authors wrote:

Items in dates and addresses:

He died on Monday, April 15, 1975.

Miss Reyes lives in 214 Taft Avenue,

Manilaxxii[22]

On page 73 of respondents Book 1 Developing English Today, they wrote:

He died on Monday, April 25, 1975.

Miss Reyes address is 214 Taft Avenue Manilaxxiii[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, fomentedfrom 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.”xxiv[24]

On page 100 of the book DEPxxv[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 pagesxxvi[26] the treatment and manner of presentation of the topics of DEP are similar if

not a rehash of that contained in CET.

We believe that respondent Robles’ act of lifting from the book of petitioners substantial portions of

discussions and examples, and her failure to acknowledge the same in her book is an infringement of

petitioners’ copyrights.

When is there a substantial reproduction of a book? It does not necessarily require that the entire

copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the

original work is substantially diminished, there is an infringement of copyright and to an injurious extent,

the work is appropriated.xxvii[27]

In determining the question of infringement, the amount of matter copied from the copyrighted work is animportant 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.xxviii[28]



The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity

by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain

owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of

copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person,

without the consent of the owner of the copyright, of anything the sole right to do which is conferred bystatute on the owner of the copyright.xxix[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 jurisdictionunder 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:

x x x x x x x x x x x x

(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 wasnot his, and he copied at his peril.xxx[30]

The next question to resolve is to what extent can copying be injurious to the author of the book being

copied. Is it enough that there are similarities in some sections of the books or large segments of the

books are the same?

In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP

that more or less had the same contents. It may be correct that the books being grammar books may

contain materials similar as to some technical contents with other grammar books, such as the segment

about the “Author Card”. However, the numerous pages that the petitioners presented showing similarityin the style and the manner the books were presented and the identical examples can not pass as

similarities merely because of technical consideration.

The respondents claim that their similarity in style can be attributed to the fact that both of them were

exposed to the APCAS syllabus and their respective academic experience, teaching approach and

methodology are almost identical because they were of the same background.

However, we believe that even if petitioners and respondent Robles were of the same background interms 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.



withthe contents of petitioners' works, and without securing their permission, lifted,copied, plagiarized,

and/or transposed certain portions of their book CET. Thetextual contents and illustrations of CET were

literally reproduced in the bookDEP. The plagiarism, incorporation and reproductionof particular portions

of the bookCET in the book DEP, without the authority or consent of the petitioners, and

themisrepresentationons of respondent Robles that the same washer original work and concept adverselyaffected and substantially diminished thesale of the petitioners' book and caused them actual damages by

way ofunrealized income. Despite the demands of the petitioners for respondents to desistformcommitting further acts of infringement and for respondent to recall DEP fromthe market,

respondents refused. Petitioners asked the court to order the submission of allcopies of the book DEP,

together with the molds, plates and films and othermaterials used in itsprinting destroyed, and for

respondents to render an accounting of the proceeds ofall sales and profits since the time of its publication

and sale. Robles imploded in thesuit becauseshe authored and directly committed the acts of infringement

complained of, whileGoodwill Trading was imploded as the publisher and joint co-owner of the

copyrightcertificatesof registration covering that two books authored and caused to be published

byrespondent Robles with obvious connivance with one another.Respondent Robles filed her answer, and

denied allegations of plagiarism andcopying that petitioners claimed. Robles stressed that: 1) the book

DEP is theproduct of her independentresearches, studies and experiences, and was not a copy of any

existing validcopyrighted book; 2) DEP followed the scope and sequence or syllabus which arecommonto all Englishgrammar writers as recommended by the Association of Philippine Colleges of Artsand

Sciences (APCAS), so any similarity between the respondents book and that ofthe petitionersws due to

the orientation of the authors to both works and standards and syllabus; 3)the similarities may be due to

the authors' exercise of the "right to fair use ofcopyrighted materials, as guides".He interposed acounterclaim for damages on the ground that bad faith and maliceattended the filing of the complaint,

because petitioner Habana was professionally jealous and the book DEPreplaces CET as the official

textbook of the graduate studies department of the FEU.After trial based on the merits, the court

dismissed the complaint. Petitionersfiled appealed but CA rendered in favor of respondent Robles. Hence,

this petition.Issue: Whether despite the apparent textual, thematic and sequential similaritybetween DEP

and CET, respondents committed no copyright infringementHeld:The Supreme Court affirmed the

decision of the lower court. The respondent'sact of lifting format he book of petitioners substantial

portionsof discussions and examples, and her failure to acknowledge the same in her book isaninfringement of petitioners' copyrights. The measure of substantialreproduction of a book does not

necessarily require that the entire copyrighted work,or even a large portion of it be copied. If so much si

taken that the value of theoriginal work is substantially diminished, there is an infringement of right and

to aninjurious extent, the work is appropriated.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 maybe e correct that the books

being grammar books may contain materialssimilar as to some technical contents with other

grammarbooks, such as the segment about the "author card". However, the numerous pagesthat the

petitioners presented showing similarity in the style and the manner thebooks were presented andidenticalexamples can not pass as similarities merely because of technicalconsideration. And failure to

acknowledge original author produces "injurious effect".In cases of infringement,copying alone is notwhat is prohibited. The cpying must produce an injurious effect.Here, the injury consists in that

respondent robes lifted from petitioners' bookmaterials that were the resultof the latter's research work

and compilation and misrepresented thema s her own.She circulated the book DEP for commercial use

and did not acknowledgepetitioners as her source.



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xxxRepublic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. Nos. 76649-51 August 19, 1988

20TH CENTURY FOX FILM CORPORATION, petitioner,

vs.

COURT OF APPEALS, EDUARDO M. BARRETO, RAUL SAGULLO and

FORTUNE LEDESMA, respondents.

Siguion Reyna, Montecillo & Ongsiako Law Office for petitioner.

B.C. Salazar & Associates for respondents.

GUTIERREZ, JR., J.:

The petitioner questions the application of the constitutional provision against illegal

searches and seizures to raids conducted in connection with the government's anti-film

piracy campaign. The main issue hinges on whether or not the judge properly lifted the

search warrants he issued earlier upon the application of the National Bureau of

Investigation on the basis of the complaint filed by the petitioner.

In a letter-complaint dated August 26, 1985, petitioner 20th Century Fox Film

Corporation through counsel sought the National Bureau of Investigation's (NBI)

assistance in the conduct of searches and seizures in connection with the latter's anti-film

piracy campaign. Specifically, the letter-complaint alleged that certain videotape outlets

all over Metro Manila are engaged in the unauthorized sale and renting out of

copyrighted films in videotape form which constitute a flagrant violation of Presidential

Decree No. 49 (otherwise known as the Decree on the Protection of Intellectual



Property).

Acting on the letter-complaint, the NBI conducted surveillance and investigation of the

outlets pinpointed by the petitioner and subsequently filed three (3) applications for

search warrants against the video outlets owned by the private respondents. The

applications were consolidated and heard by the Regional Trial Court of Makati, Branch132.

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:

WHEREFORE, the Court hereby orders that Search Warrants Nos. SW-

85-024; issued against Eduardo M. Barreto of the Junction Video, etc.,

Paranaque, Metro Manila; SW No. 85-025, issued against Raul M. Sagullo

of South Video Bug Center, Inc., etc., also of No. 5355 Pres. Avenue BF

Homes, Parañaque, Metro Manila; and SW No. 85-026, issued against

Fortune A. Ledesma of Sonix Video Services of San Antonio Plaza, ForbesPark, Makati, Metro Manila, be lifted.

Consequently, the articles listed in the returns of the three search warrants

which could not be a basis of any criminal prosecution, now in the

possession of the National Bureau of Investigation which under the law

must be delivered to this Court, but which the NBI failed to do, are hereby

ordered to be returned to their owners through their lawyer, Atty. Benito

Salazar or his agents or representatives, against proper receipt, to be

forwarded to this Court for record purposes, as proof that said properties

have been returned to the possession of the rightful owners." (p. 34, Rollo)

The lower court denied a motion for reconsideration filed by the petitioner in its order

dated January 2, 1986.

The petitioner filed a petition for certiorari with the Court of Appeals to annul the

October 8, 1985 and January 2, 1986 orders of the lower court. The petition was

dismissed.



Hence, this petition.

The main issue hinges on the meaning of "probable cause" within the context of the

constitutional provision against illegal searches and seizures (Section 3, Article IV, 1973

Constitution, now, Section 2, Article Ill, 1987 Constitution.

The petitioner maintains that the lower court issued the questioned search warrants after

finding the existence of a probable cause justifying their issuance. According to the

petitioner, the lower court arrived at this conclusion on the basis of the depositions of

applicant NBI's two witnesses which were taken through searching questions and

answers by the lower court.

Section 2, Article III of the present Constitution which substantially reproduces Section

3, Article IV of the 1973 Constitution on illegal searches and seizures provides:

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 thecase of People v. Burgos (144 SCRA 1) citing Villanueva v. Querubin (48 SCRA 345)

why the right is so important:

It is deference to one's personality that lies at the core of this right, but it

could be also looked upon as a recognition of a constitutionally protected

area, primarily one's home, but not necessarily thereto confined. (Cf. Hoffa

v. United States, 385 US 293 119661) What is sought to be guarded is a

man's prerogative to choose who is allowed entry to his residence. In that

haven of refuge, his individuality can assert itself not only in the choice of

who shall be welcome but likewise in the kind of objects he wants aroundhim. There the state, however powerful, does not as such have access

except under the circumstances above noted, for in the traditional

formulation, his house, however humble, is his castle. Thus is outlawed any

unwarranted intrusion by government, which is called upon to refrain from

any invasion of his dwelling and to respect the privacies of his life. (Cf

Schmerber v. California, 384 US 757 [1966], Brennan, J. and Boyd v.

United States, 116 630 [1886]). In the same vein, Landynski in his



authoritative work (Search and Seizure and the Supreme Court [1966]),

could fitly characterize constitutional right as the embodiment of a

"spiritual concept: the belief that to value the privacy of home and person

and to afford its constitutional protection against the long reach of

government is no less than to value human dignity, and that his privacy

must not be disturbed except in case of overriding social need, and then

only under stringent procedural safeguards."(ibid , p. 74).

The government's right to issue search warrants against a citizen's papers and effects is

circumscribed by the requirements mandated in the searches and seizures provision of

the Constitution.

In the case of Burgos, Sr. v. Chief of Staff, AFP (133 SCRA 800), we defined probable

cause for a valid search "as such facts and circumstances which would lead a reasonably

discreet and prudent man to believe that an offense has been committed and that theobjects 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 itswitnesses 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 governmentand 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 notsupported 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 determinewhether 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.

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

as follows:

xxx xxx xxx



xxx xxx xxx

c) Television sets, Video Cassettes Recorders, rewinders, tape

head cleaners, accessories, equipments and other machines

used or intended to be used in the unlawful reproduction, sale,

rental/lease distribution of the above-mentioned video tapeswhich she is keeping and concealing in the premises above-

described." (p. 26, Rollo)

In the case of Burgos v. Chief of Staff, AFP supra, we stated:

xxx xxx xxx

Another factor which makes the search warrants under consideration

constitutionally objectionable is that they are in the nature of general

warrants. The search warrants describe the articles sought to be seized in

this wise:

l] All printing equipment, paraphernalia, paper, ink, photo equipment,

typewriters, cabinets, tables communications/recording equipment, tape

recorders, dictaphone and the like used and/or connected in the printing of

the 'WE FORUM' newspaper and any and all document/communications,

letters and facsimile of prints related to "WE FORUM" newspaper.

2] Subversive documents, pamphlets, leaflets, books, and other publicationsto promote the objectives and purposes of the subversive organizations

known as Movement for Free Philippines, Light-a-Fire Movement and

April 6 Movement; and

3] Motor vehicles used in the distribution/circulation of the 'WE FORUM

and other subversive materials and propaganda, more particularly,

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

2] DATSUN pick-up colored white with Plate No. NKV 969;

3] A delivery truck with Plate No. NBS 542;

4] TOYOTA-TAMARAW, colored white with Plate No. PBP

665;and,



5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 472

with marking "Bagong Silang."

In Stanford v. State of Texas (379 U.S. 476,13 L ed 2nd 431), the search

warrant which authorized the search for 'books, records, pamphlets, cards,

receipts, lists, memoranda, pictures, recordings and other writteninstruments 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 articlessought to be seized under the search warrants in question cannot be

characterized differently. (at pp. 814-815)

Undoubtedly, a similar conclusion can be deduced from the description of the articles

sought to be confiscated under the questioned search warrants.

Television sets, video cassette recorders, reminders and tape cleaners are articles which

can be found in a video tape store engaged in the legitimate business of lending or

renting out betamax tapes. In short, these articles and appliances are generally connected

with, or related to a legitimate business not necessarily involving piracy of intellectual property or infringement of copyright laws. Hence, including these articles without

specification and/or particularity that they were really instruments in violating an Anti-

Piracy law makes The search warrant too general which could result in the confiscation

of all items found in any video store. In fact, this actually happened in the instant case.

Thus, the lower court, in its questioned order dated October 8, 1985 said:

Although the applications and warrants themselves covered certain articles

of property usually found in a video store, the Court believes that the search

party should have confined themselves to articles that are according to

them, evidence constitutive of infringement of copyright laws or the piracy

of intellectual property, but not to other articles that are usually connected

with, or related to, a legitimate business, not involving piracy of intellectual

property, or infringement of copyright laws. So that a television set, a

rewinder, and a whiteboard listing Betamax tapes, video cassette cleaners

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 itlifted 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 asto 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 whimsicalexercise 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 thequestioned 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.

WHEREFORE, the instant petition is DISMISSED. The questioned decision andresolution of the Court of Appeals are AFFIRMED.

SO ORDERED.

Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur

EN BANC

[G.R. No. 110318. August 28, 1996]

COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT

PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM

CORPORATION, UNITED ARTISTS CORPORATION, UNIVERSAL CITY

STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROTHERS,

INC., petitioners, vs. COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and

DANILO A. PELINDARIO, respondents.

D E C I S I O N

REGALADO, J .:

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 equipmentand other machines and paraphernalia used or intended to be used in the unlawful

exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the

premises above described. In the hearing of the application, NBI Senior Agent Lauro C.

Reyes, upon questions by the court a quo, reiterated in substance his averments in his

affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar.

Atty. Rico V. Domingo’s deposition was also taken. On the basis of the affidavits and

depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V.

Domingo, Search Warrant No 87-053 for violation of Section 56 of PD No. 49, as

amended, was issued by the court a quo.

The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine

and/or their representatives. In the course of the search of the premises indicated in the

search warrant, the NBI Agents found and seized various video tapes of duly

copyrighted motion pictures/films owned or exclusively distributed by private

complainants, and machines, equipment, television sets, paraphernalia, materials,

accessories all of which were included in the receipt for properties accomplished by the

raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A.

Pelindario, registered owner-proprietor of Sunshine Home Video.

On December 16, 1987, a “Return of Search Warrant” was filed with the Court.

A “Motion To Lift the Order of Search Warrant” was filed but was later denied for lack

of merit (p. 280, Records).

A Motion for reconsideration of the Order of denial was filed. The court a quo granted

the said motion for reconsideration and justified it in this manner:

“It is undisputed that the master tapes of the copyrighted films from which the pirated

films were allegedly copies (sic), were never presented in the proceedings for theissuance 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 Philippine courts. In so challenging

petitioners’ personality to sue, private respondents point to the fact that petitioners arethe copyright owners or owners of exclusive rights of distribution in the Philippines of

copyrighted motion pictures or films, and also to the appointment of Atty. Rico V.

Domingo as their attorney-in-fact, as being constitutive of “doing business in the

Philippines” under Section 1(f) (1) and (2), Rule 1 of the Rules of the Board of

Investments. As foreign corporations doing business in the Philippines, Section 133 of

Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the

right to maintain a suit in Philippine courts in the absence of a license to do business.

Consequently, they have no right to ask for the issuance of a search warrant.[7]

In refutation, petitioners flatly deny that they are doing business in the Philippines,[8] and contend that private respondents have not adduced evidence to prove that petitioners

are doing such business here, as would require them to be licensed by the Securities and

Exchange Commission, other than averments in the quoted portions of petitioners’

“Opposition to Urgent Motion to Lift Order of Search Warrant” dated April 28, 1988

and Atty. Rico V. Domingo’s affidavit of December 14, 1987. Moreover, an exclusive

right to distribute a product or the ownership of such exclusive right does not

conclusively prove the act of doing business nor establish the presumption of doing

business.[9]

The Corporation Code provides:

Sec. 133. Doing business without a license. — No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be

permitted to maintain or intervene in any action, suit or proceeding in any court or

administrative agency of the Philippines; but such corporation may be sued or proceeded

against before Philippine courts or administrative tribunals on any valid cause of action

recognized under Philippine laws.



The obtainment of a license prescribed by Section 125 of the Corporation Code is not a

condition precedent to the maintenance of any kind of action in Philippine 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 not doing

business in the Philippines may maintain an action in our courts upon any cause of

action, provided that the subject matter and the defendant are within the jurisdiction of

the court. It is not the absence of the prescribed license but “doing business” in the

Philippines without such license which debars the foreign corporation from access to our

courts. In other words, although a foreign corporation is without license to transact

business in the Philippines, it does not follow that it has no capacity to bring an action.

Such license is not necessary if it is not engaged in business in the Philippines.[11]

Statutory provisions in many jurisdictions are determinative of what constitutes “doing

business” or “transacting business” within that forum, in which case said provisions are

controlling there. In others where no such definition or qualification is laid down

regarding acts or transactions 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 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) x x x; and the phrase “doing

business” shall include soliciting orders, purchases, service contracts, opening offices,

whether called “liaison” offices or branches; appointing representatives or distributorswho 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” toinclude 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 that extent the performance of acts or works, or the

exercise of some of the functions normally incident to, or in the progressive prosecution

of, commercial gain or of the purpose and object of the business organization.

Finally, Republic Act No. 7042[19] embodies such concept in this wise:

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 thecountry for a period or periods totalling one hundred eight(y) (180) days or more;

participating in the management, supervision or control of any domestic business, firm,

entity or corporation in the Philippines; and any other act or acts that imply a continuity

of commercial dealings or arrangements, and contemplate to that extent the performance

of acts or works, or the exercise of some of the functions normally incident to, and in

progressive prosecution of, commercial gain or of the purpose and object of the business

organization: Provided , however , That the phrase “doing business” shall not be deemed

to include mere investment as a shareholder by a foreign entity in domestic corporations

duly registered to do business, and/or the exercise of rights as such investors; nor havinga 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 actindicative 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 sue upon a cause of action in local

courts.

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

with express authority pursuant to a special power of attorney, inter alia —

To lay criminal complaints with the appropriate authorities and to provide evidence in

support of both civil and criminal proceedings against any person or persons involved in

the criminal infringement of copyright, or concerning the unauthorized importation,

duplication, exhibition or distribution of any cinematographic work(s) — films or video

cassettes — of which x x x is the owner of copyright or the owner of exclusive rights of

distribution in the Philippines pursuant to any agreement(s) between x x x and the

respective owners of copyright in such cinematographic work(s), to initiate and



prosecute on behalf of x x x 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 x x x is the owner of copyright or the owner of

exclusive rights of distribution in the Philippines pursuant to any agreement(s) between

x x x 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 aremade there or other business furthering its interests is transacted there by an alleged

agent, whether a corporation or a natural person, where such activities are not under the

direction and control of the foreign corporation but are engaged in by the alleged agent

as an independent business.[23]

It is generally held that sales made to customers in the State by an independent dealer

who has purchased and obtained title from the corporation to the products sold are not a

doing of business by the corporation.[24] Likewise, a foreign corporation which sells its

products to persons styled “distributing agents” in the State, for distribution by them, is

not doing business in the State so as to render it subject to service of process therein,where the contract with these purchasers is that they shall buy exclusively from the

foreign corporation such goods as it manufactures and shall sell them at trade prices

established by it.[25]

It has moreover been held that the act of a foreign corporation in engaging an attorney to

represent it in a Federal court sitting in a particular State is not doing business within the

scope of the minimum contact test.[26] With much more reason should this doctrine

apply to the mere retainer of Atty. Domingo for legal protection against contingent acts

of intellectual piracy.

In accordance with the rule that “doing business” imports only acts in furtherance of the

purposes for which a foreign corporation was organized, it is held that the mere

institution and prosecution or defense of a suit, particularly if the transaction which is

the basis of the suit took place out of the State, do not amount to the doing of business in

the State. The institution of a suit or the removal thereof is neither the making of a

contract nor the doing of business within a constitutional provision placing foreign



corporations licensed to do business in the State under the same regulations, limitations

and liabilities with respect to such acts as domestic corporations. Merely engaging in

litigation has been considered as not a sufficient minimum contact to warrant the

exercise of jurisdiction over a foreign corporation.[27]

As a consideration aside, we have perforce to comment on private respondents’ basis for arguing that petitioners are barred from maintaining suit in the Philippines. For

allegedly being foreign corporations doing business in the Philippines without a license,

private respondents repeatedly maintain in all their pleadings that petitioners have

thereby no legal personality to bring an action before Philippine courts.[28]

Among the grounds for a motion to dismiss under the Rules of Court are lack of legal

capacity to sue[29] and that the complaint states no cause of action.[30] Lack of legal

capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does

not have the necessary qualification to appear in the case, or does not have the character or representation he claims.[31] On the other hand, a case is dismissible for lack of

personality to sue upon proof that the plaintiff is not the real party-in-interest, hence

grounded on failure to state a cause of action.[32] The term “lack of capacity to sue”

should not be confused with the term “lack of personality to sue.” While the former

refers to a plaintiff’s general disability to sue, such as on account of minority, insanity,

incompetence, lack of juridical personality or any other general disqualifications of a

party, the latter refers to the fact that the plaintiff is not the real party- in-interest.

Correspondingly, the first can be a ground for a motion to dismiss based on the ground

of lack of legal capacity to sue;[33] whereas the second can be used as a ground for a

motion to dismiss based on the fact that the complaint, on the face thereof, evidentlystates no cause of action.[34]

Applying the above discussion to the instant petition, the ground available for barring

recourse to our courts by an unlicensed foreign corporation doing or transacting business

in the Philippines should properly be “lack of capacity to sue,” not “lack of personality

to sue.” Certainly, a corporation whose legal rights have been violated is undeniably

such, if not the only, real party-in-interest to bring suit thereon although, for failure to

comply with the licensing requirement, it is not capacitated to maintain any suit before

our courts.

Lastly, on this point, we reiterate this Court’s rejection of the common procedural tactics

of erring local companies which, when sued by unlicensed foreign corporations not

engaged in business in the Philippines, invoke the latter’s supposed lack of capacity to

sue. The doctrine of lack of capacity to sue based on failure to first acquire a local

license is based on considerations of public policy. It was never intended to favor nor

insulate from suit unscrupulous establishments or nationals in case of breach of valid



obligations or 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 presentcontroversy 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 Sections 3 and 4 of Rule 126. As of the time of theapplication for the search warrant in question, the controlling criterion for the finding of

probable cause was that enunciated in Burgos vs. Chief of Staff [37] stating that:

Probable cause for a search warrant is defined as such facts and circumstances which

would lead a reasonably 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, andwhich determination in fact led to the issuance and service on December 14, 1987 of

Search Warrant No. 87-053. It is further argued that any search warrant so issued in

accordance with all applicable legal requirements is valid, for the lower court could not

possibly have been expected to apply, as the basis for a finding of probable cause for the

issuance of a search warrant in copyright infringement cases involving videograms, a

pronouncement which was not existent at the time of such determination, on December

14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on

August 19, 1988, or over eight months later.

Private respondents predictably argue in support of the ruling of the Court of Appealssustaining the quashal of the search warrant by the lower court on the strength of that

20th Century Fox ruling which, they claim, goes into the very essence of probable cause.

At the time of the issuance of the search warrant involved here, although the 20th

Century Fox case had not yet been decided, Section 2, Article III of the Constitution and

Section 3, Rule 126 of the 1985 Rules on Criminal Procedure embodied the prevailing

and governing law on the matter. The ruling in 20th Century 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 resolution of private respondents’ motion for reconsideration seeking

the quashal of the search warrant for failure of the trial court to require presentation of

the master tapes prior to the issuance of the search warrant, would have constituted

grave abuse of discretion.[38]

Respondent court upheld the retroactive application of the 20th Century Fox ruling by

the trial court in resolving petitioners’ motion for reconsideration in favor of the quashal

of the search warrant, on this renovated thesis:

And whether this doctrine should apply retroactively, it must be noted that in the 20th

Century Fox case, the lower court quashed the earlier search warrant it issued. On

certiorari, the Supreme Court affirmed the quashal on the ground among others that the

master tapes or copyrighted films were not presented for comparison with the purchasedevidence of the video tapes to determine whether the latter is an unauthorized

reproduction of the former.

If the lower court in the Century Fox case did not quash the warrant, it is Our view that

the Supreme Court would have invalidated the warrant just the same considering the

very strict requirement set by the Supreme Court for the determination of ‘probable

cause’ in copyright infringement cases as enunciated in this 20th Century Fox case.

This is so because, as was stated by the Supreme Court in the said case, the master tapes

and the pirated tapes must be presented for comparison to satisfy the requirement of

‘probable cause.’ So it goes back to the very existence of probable cause. x x x[39]

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments

of fair play, it is our considered view that the 20th Century Fox ruling cannot be

retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-

053. Herein petitioners’ consistent position that the order of the lower court of

September 5, 1988 denying therein defendants’ motion to lift the order of search warrant

was properly issued, there having been satisfactory compliance with the then prevailing

standards under the law for determination of probable cause, is indeed well taken. The

lower court could not possibly have expected more evidence from petitioners in their

application for a search warrant other than what the law and jurisprudence, then existing

and judicially accepted , required with respect to the finding of probable cause.

Article 4 of the Civil Code provides that “(l)aws shall have no retroactive effect, unless

the contrary is provided. Correlatively, Article 8 of the same Code declares that

“(j)udicial decisions applying the laws or the Constitution shall form part of the legal

system of the Philippines.”



Jurisprudence, in our system of government, cannot be considered as an independent

source of law; it cannot create law.[40] While it is true that judicial decisions which

apply or interpret the Constitution or the laws are part of the legal system of the

Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless

evidence of what the laws mean, and it is for this reason that they are part of the legal

system of the Philippines.[41] Judicial decisions of the Supreme Court assume the same

authority as the statute itself.[42]

Interpreting the aforequoted correlated provisions of the Civil Code and in light of the

above disquisition, this Court emphatically declared in Co vs. Court of Appeals, et al .

[43] that the principle of prospectivity applies not only to original 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, 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. x x

x, but when a doctrine of this Court is overruled and a different view is adopted, the newdoctrine should be applied prospectively, and should not apply to parties who had relied

on the old doctrine and acted on the faith thereof . x x x. (Stress supplied).

This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al.,[45]

where the Court expounded:

x x x. 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. x x x.



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

lower court did not commit any error nor did it fail to comply with any legal requirement

for the valid issuance of search warrant.

x x x. (W)e believe that the lower court should be considered as having followed therequirements 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

x x x. 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 importsapplication 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. Itrevolved 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 necessaryas 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 unauthorizedreproduction of the former. This linkage of the copyrighted films to the pirated films

must be established to satisfy the requirements of probable cause. Mere allegations as to

the existence of the copyrighted films cannot serve as basis for the issuance of a search

warrant.

For a closer and more perspicuous appreciation of the factual antecedents of 20th

Century Fox, the pertinent portions of the decision therein are quoted hereunder, to wit:

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 comparisonsof 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 P.D. 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 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 theallegedly pirated tapes were not shown to the court during the application” (Italics 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 to 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 withinthe factual matrix of their parturition, otherwise a careless interpretation thereof could

unfairly fault the writer with the vice of overstatement and the reader with the fallacy of

undue generalization.

In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search

warrant with the lower court following a formal complaint lodged by petitioners,

judging from his affidavit[51] and his deposition,[52] did testify on matters within his

personal knowledge based on said complaint of petitioners as well as his own

investigation and surveillance of the private respondents’ video rental shop. Likewise,

Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his affidavit[53] andfurther expounded in his deposition[54] that he personally knew of the fact that private

respondents had never been authorized by his clients to reproduce, lease and possess for

the purpose of selling any of the copyrighted films.

Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C.

Baltazar, a private researcher retained by Motion Pictures Association of America, Inc.

(MPAA, Inc.), who was likewise presented as a witness during the search warrant

proceedings.[55] The records clearly reflect that the testimonies of the abovenamed

witnesses were straightforward and stemmed from matters within their personalknowledge. They displayed none of the ambivalence and uncertainty that the witnesses

in the 20th Century Fox case exhibited. This categorical forthrightness in their

statements, among others, was what initially and correctly convinced the trial court to

make a finding of the existence of probable cause.

There is no originality in the argument of private respondents against the validity of the

search warrant, obviously borrowed from 20th Century Fox, that petitioners’ witnesses



— NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo and Rene C. Baltazar — did not

have personal knowledge of the subject matter of their respective testimonies and that

said witnesses’ claim that the video tapes were pirated, without stating the manner by

which these were pirated, is a conclusion of fact without basis.[56] The difference, it

must be pointed out, is that the records in the present case reveal that (1) there is no

allegation of misrepresentation, much less a finding thereof by the lower court, on the

part of petitioners’ witnesses; (2) there is no denial on the part of private respondents

that the tapes seized were illegitimate copies of the copyrighted ones 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 copyright infringement cases, the presentation of master tapes of the copyrighted

films is always necessary to meet the requirement of probable cause and that, in the

absence thereof, there can be no finding of probable cause for the issuance of a search

warrant. It is true that such master tapes are object evidence, with the merit that in this

class of evidence the ascertainment of the controverted fact is made through

demonstrations involving the direct use of the senses of the presiding magistrate.[57]

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

documentary evidence, depositions, admissions or other classes of evidence tending to

prove the factum probandum,[58] especially where the production in court of object

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

evidentiary value.[59]

Of course, as a general rule, constitutional and statutory provisions relating to search

warrants prohibit their issuance except on a showing of probable cause, supported by

oath or affirmation. These provisions prevent the issuance of warrants on loose, vague,

or doubtful bases of fact, and emphasize the purpose to protect against all general

searches.[60] Indeed, Article III of our Constitution mandates in Sec. 2 thereof that no

search warrant shall issue except upon probable cause to be determined personally bythe 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 theform prescribed by these Rules.

The constitutional and statutory provisions of various jurisdictions requiring a showing

of probable cause before a search warrant can be issued are mandatory and must be

complied with, and such a showing has been held to be an unqualified condition

precedent to the issuance of a warrant. A search warrant not based on probable cause is

a nullity, or is void, and the issuance thereof is, in legal contemplation, arbitrary.[61] It

behooves us, then, to review the concept of probable cause, firstly, from representative

holdings in the American jurisdiction from which we patterned our doctrines on the

matter.

Although the term “probable cause” has been said to have a well-defined meaning in the

law, the term is exceedingly difficult to define, in this case, with any degree of precision;

indeed, no definition of it which would justify the issuance of a search warrant can be

formulated which would cover every state of facts which might arise, and no formula or

standard, or hard and fast rule, may be laid down which may be applied to the facts of

every situation.[62] As to what acts constitute probable cause seem incapable of

definition.[63] There is, of necessity, no exact test.[64]

At best, the term “probable cause” has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a

cautious man in the belief that the person accused is guilty of the offense with which he

is charged;[65] or the existence of such facts and circumstances as would excite an

honest belief in a reasonable mind acting on all the facts and circumstances within the

knowledge of the magistrate that the charge made by the applicant for the warrant is

true.[66]



Probable cause does not mean actual and positive cause, nor does it import absolute

certainty. The determination of the existence of probable cause is not concerned with

the question of whether the offense charged has been or is being committed in fact, or

whether the accused is guilty or innocent, but only whether the affiant has reasonable

grounds for his belief.[67] The requirement is less than certainty or proof, but more

than suspicion or possibility.[68]

In Philippine jurisprudence, probable cause has been uniformly defined as such facts and

circumstances which would lead a reasonable, discreet and prudent man to believe that

an offense has been committed, and that the objects sought in connection with the

offense are in the place sought to be searched.[69] It being the duty of the issuing officer

to issue, or refuse to issue, the warrant as soon as practicable after the application

therefor is filed,[70] the facts warranting the conclusion of probable cause must be

assessed at the time of such judicial determination by necessarily using legal standards

then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter .

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 of

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 tofashion standards of reasonableness for searches and seizures,[72] does not venture to

make such a definition or standard formulation of probable cause, nor categorize what

facts and circumstances make up the same, much less limit the determination thereof to

and within the circumscription of a particular class of evidence, all in deference to

judicial discretion and probity.[73]



Accordingly, to restrict the exercise of discretion by a judge by adding a particular

requirement (the presentation of master tapes, as intimated by 20th Century Fox) not

provided nor implied in the law for a finding of probable cause is beyond the realm of

judicial competence or statemanship. 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 issuances 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 videotapes 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 a 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 authorityof MPAA.

Given these facts, a probable cause exists. x x x.[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 —

x x x. 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 controlof 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 x x x in his motion to quash the search warrants

reveals the fact that they are not appropriate for quashing a warrant. They are matters of

defense which should be ventilated during the trial on the merits of the case. x x x

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 —

x x x. 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, 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, whichdetermination 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 thecopyright, 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 importantconsideration. 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 themaster 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. x x x.”[81]

On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al .,[82] instructs and

enlightens:

A search warrant may be said to particularly describe the things to be seized when thedescription 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). x x x. 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. x x x.

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:

x x x. 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 privatecomplainants 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 pirated video tapes is not to

be confused with the number of offenses charged. The search warrant herein issued

does not violate the one-specific-offense rule.

It is pointless for private respondents to insist on compliance with the registration and

deposit requirements under Presidential Decree No. 49 as prerequisites for invoking thecourt’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.

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 be 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 themfrom 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, arehereby 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. Treble costs are further assessed against

private respondents.

SO ORDERED.

Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza,

Francisco, Hermosisima, Jr., Panganiban, and Torres, Jr., JJ., concur.

Bellosillo, J., no part in deliberations.

Sony Music Philippines vs Judge Dolores Español et al

On February 12, 2012

0 0



Intellectual Property – Law on Copyright – Probable Cause

In 2000, Sony Music Philippines sought the assistance of National Bureau of

Investigation agent Lavin as they complained that Solid Laguna Corporation, together

with its officers were engaged in the replication, reproduction and distribution of

videograms without license and authority from Video Regulatory Board (violation of

P.D. 1987); that Solid Laguna was manufacturing, selling, and distributing various titles

of CDs in violation of Sony Music’s copyrights (violation of RA 8293). Agent Lavin, in

applying for a search warrant, stated before Judge Español that an unnamed person

provided them information as to the presence of pirated CDs in the premises of Solid

Laguna; that Lavin and other witnesses were accompanied by unnamed persons to enter

the premise and conduct further investigation. The judge then issued two corresponding

search warrants; one for probable violation of PD 1987 and the other for probable

violation of RA 8293.

The search warrants were subsequently enforced and items were seized from Solid

Laguna on the strength of the two warrants.

Solid Laguna thereafter presented a certification that they are actually authorized to

manufacture and sell CDs by the VRB at the same time it asked the court to quash the

search warrants and return the items seized. Judge Español then quashed the search

warrant issued for probable violation of PD 1987.

Judge Español later quashed the other warrant because of the fact that the items seizedas a result of the two warrants were commingled hence they cannot be examined

properly. Judge Español also ruled that the issuance of the warrant stemmed from the

intimation made by petitioners that Solid Laguna was not authorized to manufacture and

sell CDs but in fact they were authorized by the VRB. This being, the warrants are of no

force and effect because of the lack of probable cause.

ISSUE: Whether or not Judge Español is correct.

HELD: Yes. The issuance of the search warrant in question did not meet the

requirements of probable cause. Judge Español did not accordingly err in quashing thesame, let alone gravely abuse her discretion. It is also within her authority to quash the

said warrants based on her findings which were found to be valid by the Supreme Court.

Further, it cannot be overemphasized that not one of the applicants of the warrants

testified seeing the pirated discs being manufactured at Solid Laguna’s premises, they

merely relied on unnamed persons which is at best are hearsays.



The Supreme Court also noted that the lack of supporting evidence and documents in

applying for the search warrants on this infringement case does not mean that the master

tapes of the alleged copies being pirated should have been produced. It is true that the

Supreme Court, in 20th Century Fox Case, 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 in Columbia Pictures vs

CA “ such auxiliary procedure, however, does not rule out the use of testimonial or

documentary evidence, depositions, admissions or other classes of evidence xxx

especially where the production in court of object evidence would result in delay,

inconvenience or expenses out of proportion to its evidentiary value. What the Supreme

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.

Sony Music Entertainment vs. Judge Español

Facts:

Sony Music Entertainment is suing Judge Dolores Español nullifying the Petition for

Certiorari with application for injunctive relief and then denying reconsideration of the

said petition.

From the said petition, the respondents were private namely James Uy, David Chung,

Elena Lim and another officer of respondent Solid Laguna Corporation with violation

were engaged in the replication, reproduction and distribution of videograms without

license and authority from VRB. On Account of this and petitioner's own complaints for

copyright infringement. The National Bureau Investigation, through Agent Ferdinand

Lavin, presided by Judge Español, for the issuance of search warrants against private

respondents doing business under the name and style “Media Group” inside the factory

and production facility of SLC.

Agent Lavin and the witnesses conduct 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. The respondents prove before

the Department of Justice that they were licensed by VRB up to the time of search. DOJ

http://www.uberdigests.info/2012/02/columbia-pictures-entertainment-vs-court-of-appeals/






dismissed VRB's complaint. Respondents issued Quash Search Warrants.

Issue:

Whether or not Judge Español committed a grave abuse of her discretion regarding the

case.

Rulings:

No. Case, in fact, is lacking of evidence to prove that the respondents of the case were

not authorized reproducers of videograms. The fact that Agent Lavin do not have actual

knowledge about the cd he purchased was illegally reproduced, thus, he just havelearned it from unnamed person. The fact that the respondenmts do have a license form

VRB made them an authorized replicator and distributor of videograms.

The issuance of search warrant predicated on the sworn testimonies of persons without

personal knowledge of fact 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. The decision was fair and the

Judge did not abuse her discretion.

LIP Digest 2

Documents

Transcript of LIP Digest 2