LIP Cases Session 4

7/28/2019 LIP Cases Session 4

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THIRD DIVISION

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

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

D E C I S I O N

CORONA, J .:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner

Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision[1] of the Court of Appeals reversing

the October 31, 1996 decision[2] of the Regional Trial Court of Makati, Branch 133, in Civil Case No.92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc.(NEMI) liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals[3] contained a summary of this dispute:

―Plaintiff -appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of

advertising display units simply referred to as light boxes. These units utilize specially printed posterssandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to securea Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The

advertising light boxes were marketed under the trademark ―Poster Ads‖. The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer

on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufactureits advertising displays.

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for thelease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an a lternative, SM Makati and SM Cubao, to which Pearl and

Dean agreed. On September 11, 1985, Pearl and Dean‘s General Manager, Rodolfo Vergara, submittedfor signature the contracts covering SM Cubao and SM Makati to SMI‘s Advertising Promotions andPublicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was

returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract andreminding him that their agreement for installation of light boxes was not only for its SM Makati

branch, but also for SM Cubao. SMI did not bother to reply.

Instead, in a letter dated January 14, 1986, SMI‘s house counsel informed Pearl and Dean that it was

rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply datedFebruary 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In thesame letter, he pushed for the signing of the contract for SM Cubao.

Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean tofabricate its display units, offered to construct light boxes for Shoemart‘s chain of stores. SMI approved

the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD RainbowAdvertising Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were

delivered on a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at

SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out thataside from the two (2) reported SM branches, light boxes similar to those it manufactures were alsoinstalled in two (2) other SM stores. It further discovered that defendant-appellant North Edsa

Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMI‘s different branches. Pearland Dean noted that NEMI is a sister company of SMI.

In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the same from SMI‘sestablishments. It also demanded the discontinued use of the trademark ―Poster Ads,‖ and the payment

to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light

boxes and NEMI took down its advertisements for ―Poster Ads‖ from the lighted display units in SMI‘sstores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this

instant case for infringement of trademark and copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster

panels using commonly known techniques and available technology, without notice of or reference toPearl and Dean‘s copyright. SMI noted that the registration of the mark ―Poster Ads‖ was only for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word ―Poster

Ads‖ is a generic term which cannot be appropriated as a trademark, and, as such, registration of such

mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in itscomplaint since its advertising display units contained no copyright notice, in violation of Section 27 of

P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was purelyintended to malign SMI‘s good name. On this basis, SMI, aside from praying for the d ismissal of thecase, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and

Dean‘s Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificateof Trademark Registration No. 4165 dated September 12, 1988.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor

having engaged in the business of advertising. It repleaded SMI‘s averments, admissions and denialsand prayed for similar reliefs and counterclaims as SMI.‖

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

Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of

copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, andSections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed:

(1) to pay plaintiff the following damages:

(a) actual damages - P16,600,000.00,

representing profits

derived by defendants

as a result of infringe-

ment of plaintiff‘s copyright

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from 1991 to 1992

(b) moral damages - P1,000.000.00

(c) exemplary damages - P1,000,000.00

(d) attorney‘s fees - P1,000,000.00

plus

(e) costs of suit;

(2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI

which were fabricated by Metro Industrial Services and EYD RainbowAdvertising Corporation;

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark

―Poster Ads‖, for destruction; and

(4) to permanently refrain from infringing the copyright on plaintiff‘s light boxes and its

trademark ―Poster Ads‖.

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

SO ORDERED.[4]

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

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorialillustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable

class ―O‖ work, we have to agree with SMI when it posited that what was copyrighted were thetechnical drawings only, and not the light boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellant‘s will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a

copyright protection for a book entitled ―Selden‘s Condensed Ledger or Bookkeeping Simplified‖which purported to explain a new system of b ookkeeping. Included as part of the book were blank

forms and illustrations consisting of ruled lines and headings, specially designed for use in connectionwith the system explained in the work. These forms showed the entire operation of a day or a week or a

month on a single page, or on two p ages following each other. The defendant Baker then produced

forms which were similar to the forms illustrated in Selden‘s copyrighted books. The Court held thatexclusivity to the actual forms is not extended by a copyright. The reason was that ―to grant a monopolyin the underlying art when no examination of its novelty has ever been made would be a surprise and a

fraud upon the public; that is the province of letters patent, not of copyright.‖ And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by

conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F.

Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing

entitled ―Bridge Approach – the drawing showed a novel bridge approach to unsnarl traffic congestion‖.

The defendant constructed a bridge approach which was alleged to be an infringement of the new design

illustrated in plaintiff‘s drawings. In this case it was held that protection of the drawing does not extendto the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to

construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont , 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox,379 F. 2d 84, it was held that there is no copyright infringement when one who, without being

authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyrightdoes not extend to the structures themselves.

In fine, we cannot find SMI liable for infringing Pearl and Dean‘s cop yright over the technical drawingsof the latter‘s advertising display units.

xxx xxx xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in

the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166,as amended, otherwise known as the Trademark Law, which reads:

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a

mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant‘s

ownership of the mark or trade-name, and of the registrant‘s exclusive right to use the same inconnection with the goods, business or services specified in the certificate, subject to any conditions and

limitations stated therein.‖ (underscoring supplied )

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark

―Poster Ads‖ with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark wasrecorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering thefollowing products: stationeries such as letterheads, envelopes and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to the finding of liability on the part of thedefendants-appellants for their use of the words ―Poster Ads‖, in the advertising display units in suit.Jurisprudence has interpreted Section 20 of the Trademark Law as ―an implicit permission to a

manufacturer to venture into the production of goods and allow that producer to appropriate the b randname of the senior registr ant on goods other than those stated in th e certificate of registration.‖ TheSupreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice

Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, thena situation may arise whereby an applicant may be tempted to register a trademark on any and all goods

which his mind may conceive even if he had never intended to use the trademark for the said

goods. We believe that such omnibus registration is not contemplated by our Trademark Law.

While we do not discount the striking similarity between Pearl and Dean‘s registered trademark anddefendants-appellants‘ ―Poster Ads‖ design, as well as the pa rallel use by which said words were used

in the parties‘ respective advertising copies, we cannot find defendants-appellants liable for infringement of trademark. ―Poster Ads‖ was registered by Pearl and Dean for specific use in itsstationeries, in contrast to defendants-appellants who used the same words in their advertising display

units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But,having already done so, it must stand by the consequence of the registration which it had caused.

xxx xxx xxx







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We are constrained to adopt the view of defendants-appellants that the words ―Poster Ads‖ are a simple

contraction of the generic term poster advertising. In the absence of any convincing proof that ―Poster Ads‖ has acquired a secondary meaning in this jurisdiction, we find that Pearl and Dean‘s exclusiveright to the use of ―Poster Ads‖ is limited to what is written in its certificate of registration, namely,

stationeries.

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

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

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and

another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack of

merit.[5]

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

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO

COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTSSM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NOINFRINGEMENT OF PEARL & DEAN‘S TRADEMARK ―POSTER ADS‖WAS COMMITTED BY RESPONDENTS SM AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THEAWARD OF THE TRIAL COURT, DESPITE THE LATTER‘S FINDING,

NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM

WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING

CONTRACTS WITH PEARL & DEAN.

D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING

RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEY‘S FEES ANDCOSTS OF SUIT.[6]

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper

perspective four main concerns of intellectual property law — patents, copyrights, trademarks andunfair competition arising from infringement of any of the first three. We shall focus then on thefollowing issues:

(1) if the engineering or technical drawings of an advertising display unit (light box) aregranted copyright protection (copyright certificate of registration) by th e National Library,

is the light box depicted in such engineering drawings ipso facto also protected by suchcopyright?

(2) or should the light box be registered separately and protected by a patent issued by the

Bureau of Patents Trademarks and Technology Transfer (n ow Intellectual PropertyOffice) — in addition to the copyright of the engineering drawings?

(3) can the owner of a registered trademark legally prevent others from using such

trademark if it is a mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENTPetitioner P & D‘s complaint was that SMI infringed on its copyright over the light boxes when

SMI had the units manufactured by Metro and EYD Rainbow Advertising for its ownaccount. Obviously, petitioner‘s position was premised on its belief that its copyright over the

engineering drawings extended ipso facto to the light boxes depicted or illustrated in said drawings. Inruling that there was no copyright infringement, the Court of Appeals held that the copyright was

limited to the drawings alone and not to the light box itself. We agree with the appellate court.

First, petitioner‘s application for a copyright certificate — as well as Copyright Certificate No.

PD-R2588 issued by the National Library on January 20, 1981 — clearly stated that it was for a class―O‖ work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then

prevailing. Said Section 2 expressly enumerated the works subject to copyright:

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

any of the following works:

x x x x x x x x x

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

x x x x x x x x x

Although petitioner‘s copyright certificate was entitled ―Advertising Display Units‖ (whichdepicted the box-type electrical devices), its claim of copyright infringement cannot be sustained.

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

the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect tothe subjects and by the persons, and on terms and conditions specified in the statute .[7] Accordingly, it can cover only the works falling within the statutory enumeration or description.[8]

P & D secured its copyright under the classification class “O” work. This being so, petitioner‘s

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

box wraps.‖ Stated otherwise, even as we find that P & D indeed owned a valid copyright, the samecould have referred only to the technical drawings within the cate gory of ―pictorial illustrations.‖ Itcould not have possibly stretched out to include the underlying light box. The strict application[9] of the

law‘s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its

copyright certificate was entitled ―Advertising Display Units.‖ What the law does not include, itexcludes, and for the good reason: the light box was not a literary or artistic piece which could becopyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to

make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificateissued by the National Library as ―Advertising Display Units.‖

In fine, if SMI and NEMI reprinted P & D‘s technical drawings for sale to the public without

license from P & D, then no doubt they would have been guilty of copyright infringement. But this was























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not the case. SMI‘s and NEMI‘s acts complained of by P & D were to have units similar or identical to

the light box illustrated in the technical drawings manufactured by Metro and EYD RainbowAdvertising, for leasing out to different advertisers. Was this an infringement of petitioner‘s copyrightover the technical drawings? We do not think so.

During the trial, the president of P & D himself admitted that the light box was neither a literarynot an artistic work but an ―engineering or marketing invention.‖[10] Obviously, there appeared to besome confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and

trademarks. In the leading case of Kho vs. Court of Appeals ,[11] we ruled that these three legal rights a recompletely distinct and separate from one another, and the protection afforded by one cannot be usedinterchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchangedwith 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. Inrelation 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 originalintellectual creations in the literary and artistic domain protected fro m the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any

field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point: if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents cannot be held legally liable for infringementof P & D‘s copyright over its technical drawings of the said light boxes , should they be liable instead

for infringement of patent? We do not think so either.

For some reason or another, petitioner never secured a patent for the light boxes. It therefore

acquired no patent rights which could have protected its invention, if in fact it really was. And becauseit had no patent, petitioner could not legally prevent anyone from manufacturing or commercially usingthe contraption. In Creser Precision Systems, Inc. vs. Court of Appeals ,[12] we held that ―there can be noinfringement of a patent until a patent has been issued, since whatever right one has to the invention

covered by the patent arises alone from the grant of patent . x x x (A)n inventor has no common lawright to a monopoly of his invention. He has the right to make use of and vend his invention, but if hevoluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with

impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has

the exclusive right of making, selling or using the invention .[13] On the assumption that petitioner‘s

advertising units were patentable inventions, petitioner revealed them fully to the public by submittingthe engineering drawings thereof to the National Library.

To be able to effectively and legally preclude others from copying and profiting from the

invention, a patent is a primordial requirement. No patent, no protection. The ultimate goal of a patentsystem is to bring new designs and technologies into the public domain through disclosure.[14] Ideas,

once disclosed to the public without the protection of a valid patent, are subject to appropriation withoutsignificant restraint.[15]

On one side of the coin is the public which will benefit from new ideas; on the other are theinventors who must be protected. As held in Bauer & Cie vs. O’Donnel ,[16] ―The act secured to theinventor the exclusive right to make use, and vend the thing patented, and consequently to prevent

others from exercising like privileges without the consent of the patentee. It was passed for the purposeof encouraging useful invention and promoting new and useful inventions by the protection andstimulation given to inventive genius, and was intended to secure to the public, after the lapse of the

exclusive privileges granted the benefit of such inventions and improvements.‖

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

―(The p)atent system thus embodies a carefu lly crafted bargain for encouraging the creation and

disclosure of new useful and non-obvious advances in technology and design, in return for the exclusiveright to practice the invention for a number of years. The inventor may keep his invention secret and

reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to thecommunity, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon theexpiration of that period, the knowledge of the i nvention inures to the people, who are thus enabled to

practice it and profit by its use.‖[17]

The patent law has a three-fold purpose: ―first, patent law seeks to foster and reward invention;

second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protectionseek to ensure that ideas in the public domain remain there for the free use of the public.‖[18]

It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation is required because ―in rewarding a useful invention, the rights and welfare of thecommunity must be fairly dealt with and effectively guarded. To that end, the prerequisites to obtaining

a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally

strictly enforced. To begin with, a genuine invention or discovery must be demonstrated lest in theconstant demand for new appliances, the heavy hand of tribute be laid on each slight technologicaladvance in art.‖[19]

There is no such scrutiny in the case of copyrights nor any notice published before its grant to theeffect that a person is claiming the creation of a work. The law confers the copyright from the momentof creation[20] and the copyright certificate is issued upon registration with the National Library of a

sworn ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot

exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of itscopyright certificate over the technical drawings.

Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent

office (IPO) to scrutinize the light box‘s eligibility as a patentable invention. The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through thesimplified procedure of copyright-registration with the National Library — without undergoing the rigor

of defending the patentability of its invention before the IPO and the public — the petitioner would be protected for 50 years. This situation could not have been the intention of the law.

In the oft-cited case of Baker vs. Selden[21], the United States Supreme Court held that only the

expression of an idea is protected by copyright, not the idea itself . In that case, the plaintiff held thecopyright of a book which expounded on a new accounting system he had developed. The publicationillustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to

those illustrated in the plaintiff‘s copyrighted book. The US Supreme Court ruled that:

―There is no doubt that a work on the subject of book-keeping, though only explanatory of well known

systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is aclear distinction between the books, as such, and the art, which it is, intended to illustrate. The merestatement of the proposition is so evident that it requires hardly any argument to support it. The same

distinction may be predicated of every other art as well as that of bookkeeping. A treatise on thecomposition and use of medicines, be they old or new; on the construction and use of ploughs or

watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of co pyright; but no one would

contend that the copyright of the treatise would give the exclusive right to the art or manufacture




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described therein. The copyright of the book, if not pirated from other works, would be valid without

regard to the novelty or want of novelty of its subject matter. The novelty of the art or thing describedor explained has nothing to do with the validity of th e copyright. To give to the author of the book anexclusive property in the art described therein, when no examination of its novelty has ever beenofficially made, would be a surprise and a fraud upon the public. That is the province of letterspatent, not of copyright. The claim to an invention of discovery of an art or manufacture must besubjected to the examination of the Patent Office before an exclusive right therein can beobtained; and a patent from the government can only secure it.

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

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

The copyright of a book on perspective, no matter how many drawings and illustrations it may contain,

gives no exclusive right to the modes of drawing described, though they may never have been known or used before. By publishing the book without getting a patent for the art, the latter is given to the public.

x x x

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any person may p ractice and use the art itself which he has

described and illustrated therein. The use of the art is a totally different thing from a publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right tomake, sell and use account books prepared upon the plan set forth in such book. Whether the art might

or might not have been patented, is a question, which is not before us. It was not patented, and is openand free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art described in the books, which have been made thesubject of copyright. In describing the art, the illustrations and diagrams employed happened to

correspond more closely than usual with the actual work performed by the operator who uses th e

art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no

foundation for an exclusive claim to the art itself. The object of the one is explanation; the objectof the other is use. The former may be secured by copyright. The latter can only be secured, if itcan be secured at all, by letters patent.” (underscoring supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark ―Poster Ads‖ which petitioner‘s presidentsaid was a contraction of ―poster advertising.‖ P & D was able to secure a trademark certificate for it,

but one where the goods specified were ―stationeries such as letterheads, envelopes, calling cards and

newsletters.‖[22] Petitioner admitted it did not commercially engage in or market these goods. On thecontrary, it dealt in electrically operated backlit advertising units and the sale of advertising spacesthereon, which, however, were not at all specified in the trademark certificate.

Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court ,[23] where we, invoking Section 20 of the old Trademark Law, ruled that ―the certificate

of registration issued by the Director of Patents can confer (upon petitioner) the e xclusive right to use its

own symbol only to those goods specified in the certificate , subject to any conditions and limitations

specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of adifferent description.‖[24] Faberge, Inc. was correct and was in fact recently reiterated in Canon

Kabushiki Kaisha vs. Court of Appeals.[25]

Assuming arguendo that ―Poster Ads‖ could validly qualify as a trademark, the failure of P & Dto secure a trademark registration for specific use on the light boxes meant that there could not have

been any trademark infringement since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was

possible even if P & D had no registration.[26] However, while the petitioner‘s complaint in the RTC alsocited unfair competition, the trial court did not find private respondents liable therefor. Petitioner

did not appeal this particular point; hence, it cannot now revive its claim of unfair competition.

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

competition.

By the nature of things, there can be no unfair competition under the law on copyrights althoughit is applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation

as a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase

becomes associated with the business or product in the mind of the purchasing public), be entitled to protection against unfair competition.[27] In this case, there was no evidence that P & D‘s use of ―Poster

Ads‖ was distinctive or well-known. As noted by the Court of Appeals, petitioner‘s expert witnesseshimself had testified that ― ‗Poster Ads‘ was too generic a name. So it was difficult to identify it withany company, honestly speaking.‖[28] This crucial admission by its own expert witness that ―Poster Ads‖

could not be associated with P & D showed that, in the mind of the public, the goods and services

carrying the trademark ―Poster Ads‖ could not be distinguished from the goods and services of other entities.

This fact also prevented the application of the doctrine of secondary meaning. ―Poster Ads‖ was

generic and incapable of being used as a trademark because it was used in the field of poster advertising,the very business engaged in by petitioner. ―Secondary meaning‖ means that a word or phrase originallyincapable of exclusive appropriation with reference to an article in the market (because it is

geographically or otherwise descriptive) might nevertheless have been used for so long and soexclusively by one producer with reference to his article that, in the trade and to that branch of the

purchasing public, the word or phrase has come to mean that the article was his property.

[29]

Theadmission by petitioner‘s own expert witness that he himself could not associate ―Poster Ads‖ with petitioner P & D because it was ―too generic‖ definitely precluded the application of this exception.

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

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

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

SO ORDERED.

FIRST DIVISION










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6

[G.R. No. 131522. July 19, 1999]

PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners,vs.FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC., respondents.

D E C I S I O N

PARDO, J .:

The case before us is a petition for review on certiorar i[1] to set aside the (a) decision of the Courtof Appeals[2], and (b) the resolution denying petitioners‘ motion for reconsideration,[3] in which the

appellate court affirmed the trial court‘s dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorney‘s fees.

The facts are as follows:

Petitioners are authors and copyright owners of duly issued certificates of copyright registrationcovering 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 anddistributor/seller of another published work entitled ―DEVELOPING ENGLISH PROFICIENCY‖

(DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them.

In the course of revising their published works, petitioners scouted and looked around various

bookstores to check on other textbooks dealing with the same subject matter. By chance they came uponthe 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 intheir own book, CET.

After an itemized examination and comparison of the two books (CET and DEP), petitionersfound 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 theycease 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 withdamages‖[4]against private respondents.[5]

In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles beingsubstantially 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 contentsand illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation andreproduction 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 andconcept adversely affected and substantially diminished the sale of the petitioners‘ book and causedthem 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 askedthe court to order the submission of all copies of the book DEP, together with the molds, plates andfilms 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 theacts 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 booksauthored 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 particular s[6] which the trial courtapproved on August 17, 1988. Petitioners complied with the desired particularization, and furnishedrespondent 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

complaint[7] and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since

it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement between Goodwill and the respondent Robles thatRobles 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 soleresponsibility and held the publisher without any liability.

On November 28, 1988, respondent Robles filed her answer [8], and denied the allegations of

plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing validcopyrighted 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 andSciences (APCAS), so any similarity between the respondents book and that of the petitioners was dueto 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 maliceattended the filing of the complaint, because petitioner Habana was professionally jealous and the book

DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern

University.[9]

During the pre-trial conference, the parties agreed to a stipulation of facts[10] and for the trialcourt 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 againstdefendants 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

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7

―Assisting Judge

―S. C. Adm. Order No. 124-92‖[11]

On May 14, 1993, petitioners filed their notice of appeal with the trial cour t[12], and on July 19,1993, the court directed its branch clerk of court to forward all the records of the case to the Court of Appeals.[13]

In the appeal, petitioners argued that the trial court completely disregarded their evidence andfully 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 suchnot subject to copyright. Petitioners also assailed the findings of the trial court that they were animated

by bad faith in instituting the complaint.[14]

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

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

―It must be noted, however, that similarity of the allegedly infringed work to the author‘s or proprietor‘scopyrighted work does not of itself establish copyright infringement, especially if the similarity resultsfrom 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 materialscontained 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.‖[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 againstrespondents.

On July 12, 1997, petitioners filed a motion for reconsideration,[16]

however, the Court of Appealsdenied the same in a Resolution[17] dated November 25, 1997.

Hence, this petition.

In this appeal, petitioners submit that the appellate court erred in affirming the trial court‘sdecision.

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

and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2)whether or not there was animus furandi on the part of respondent when they refused to withdraw the

copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondentRobles abused a writer‘s right to fair use, in violation of Section 11 of Presidential Decree No. 49 .[18]

We find the petition impressed with merit.

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

was in force. At present, all laws dealing with the protection of intellectual property rights have beenconsolidated 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 economicrights 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 asound recording, a computer program, a compilation of data and other materials or a musical work ingraphic form, irrespective of the ownership of the original or the copy which is the subject of the rental;

(n)

177.5 Public display of the original or copy of the work;

177.6 Public performance of the work; and

177.7 Other communication to the public of the work ‖[19]

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

―Sec. 184.1 Limitations on copyright.-- Notwithstanding the provisions of Chapter V, the following actsshall 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 andthe 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: Provi ded, That the source and the

name of the author, if appearing i n the work i s mentioned ; [20]

In the above quoted provisions, ―work‖ has reference to literary and artistic creations and this

includes books and other literary, scholarly and scientific works.[21]















































8

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

with the text of CET.

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

Items in dates and addresses:

He died on Monday, April 15, 1975.

Miss Reyes lives in 214 Taft Avenue,

Manila[22]

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

He died on Monday, April 25, 1975.

Miss Reyes address is 214 Taft Avenue Manila[23]

On Page 250 of CET, there is this example on parallelism or repetition of sentence structures,thus:

―The proposition is peace. Not peace through the medium of war; not peace to be hunted through

the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord,fomented from principle, in all parts of the empire; not peace to depend on the juridicaldetermination of perplexing questions, or the precise marking of the boundary of a complex

government. It is simple peace; sought in its natural course, and in its ordinary haunts. It is

peace sought in the spirit of peace, and laid in principles purely pacific.

--- Edmund Burke, ― Speech on Criticism.‖[24]

On page 100 of the book DEP[25], also in the topic of parallel structure and repetition, the sameexample is found in toto. The only difference is that petitioners acknowledged the author Edmund

Burke, and respondents did not.

In several other pages[26] the treatment and manner of presentation of the topics of DEP are

similar if not a rehash of that contained in CET.

We believe that respondent Robles‘ act of lifting from the book of petitioners substantial portionsof 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 entirecopyrighted 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 injuriousextent, the work is appropriated.[27]

In determining the question of infringement, the amount of matter copied from the copyrightedwork 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 injuriousextent appropriated by another, that is sufficient in point of law to constitute piracy.[28]

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

its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, andinfringement 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 dowhich is conferred by statute on the owner of the copyright.[29]

The respondents‘ claim that the copied portions of the book CET are also found in foreign books

and other grammar books, and that the similarity between her style and that of petitioners can not beavoided since they come from the same background and orientation may be true. However, in this

jurisdiction under Sec 184 of Republic Act 8293 it is provided that:

Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall notconstitute 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, i f 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 wascopying was not his, and he copied a t his peril.[30]

The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some sections of the books or large segments of

the books are the same?

In the case at bar, there is no question that petitioners presented several pages of the books CETand 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 asthe segment about the ―Author Card‖. However, the numerous pages that the petitioners presentedshowing similarity in the style and the manner the books were presented and the identical examples can

not pass as similarities merely because of technica l 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 andmethodology are almost identical because they were of the same background.

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

in terms of teaching experience and orientation, it is not an excuse for them to be identical even inexamples 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 outfrom Goodwill bookstores the book DEP upon learning of petitioners‘ complaint while pharisaicallydenying petitioners‘ demand. It was further noted that when the book DEP was re-issued as a revised

version, all the pages cited by petitioners to contain portion of their book College English for Today

were eliminated.

In cases of infringement, copying alone is not what is prohibited. The copying must produce

an ―injurious effect‖. Here, the injury consists in that respondent Robles lifted from petitioners‘ book







































9

materials that were the result of the latter‘s research work and compilation and misrepresented them as

her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as her source.

Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent

Robles committed. Petitioners‘ work as authors is the product of their long and assiduous research andfor another to represent it as her own is injury enough. In copyrighting books the purpose is to give

protection to the intellectual product of an author. This is precisely what the law on copyright protected,

under Section 184.1 (b). Quotations from a published work if they are compatible with fair use andonly to the extent justified by the purpose, including quotations from newspaper articles and periodicalsin the form of press summaries are allowed provided that the source and the name of the author, if

appearing on the work, are mentioned.

In the case at bar, the least that respondent Robles could have done was to acknowledge

petitioners Habana et. al. as the source of the portions of DEP. The final product of an author‘s toil isher book. To allow another to copy the book without appropriate acknowledgment is injury enough.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of

Appeals in CA-G. R. CV No. 44053 are SET ASIDE . The case is ordered remanded to the trial court

for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it.

SO ORDERED.

Republic of the Philippines

SUPREME COURT Manila

THIRD DIVISION

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

20TH CENTURY FOX FILM CORPORATION, petitioner,vs.

COURT OF APPEALS, EDUARDO M. BARRETO, RAUL SAGULLO and FORTUNELEDESMA, 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 andseizures 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 theapplication 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 PresidentialDecree No. 49 (otherwise known as the Decree on the Prot ection 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 thevideo outlets owned by the private respondents. The applications were consolidated and heard by theRegional Trial Court of Makati, Branch 132.

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 videooutlets 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, MetroManila; SW No. 85-025, issued against Raul M. Sagullo of South Video Bug

Center, Inc., etc., also of No. 5355 Pres. Avenue BF Homes, Parañ aque, Metro

Manila; and SW No. 85-026, issued against Fortune A. Ledesma of Sonix VideoServices of San Antonio Plaza, Forbes Park, Makati, Metro Manila, be lifted.

Consequently, the articles listed in the returns of the three search warrants whichcould 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 thisCourt, but which the NBI failed to do, a re 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 andJanuary 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 q uestioned search warrants after finding theexistence 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 weretaken 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:



10

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 issueexcept upon probable cause to be determined personally by the judge after

examination under oath or affirmation of the complainant and the witnesses hemay produce, and particularly describing the place to be searched and the personsor things to be seized.

This constitutional right protects a citizen against wanton and unreasonable invasion of his p rivacy andliberty as to his person, papers and effects. We have explained in the case of People v. Burgos (144SCRA 1) citingVillanueva 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 bealso looked upon as a recognition of a constitutionally protected area, primarily

one's home, but not necessarily thereto confined. (Cf. Hoffa v. United States, 385US 293 119661) What is sought to be guarded is a man's prerogative to choose

who is allowed entry to his residence. In th at haven of refuge, his individualitycan assert itself not only in the choice of who shall be welcome but likewise inthe kind of objects he wants around h im. There the state, however powerful, does

not as such have access except under the circumstances above noted, for in thetraditional formulation, his house, however humble, is his castle. Thus isoutlawed 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 tovalue the privacy of home and p erson and to afford its constitutional protectionagainst the long reach of government is no less than to value human dignity, andthat 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 validsearch "as such facts and c ircumstances which would lead a reasonably discreet and prudent man to

believe that an offense has been committed and that the objects sought in connection with the offenseare 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 FirstInstance, 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 warrantsand 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 proceedin gs in the

application for the three search warrants testified of their own personalknowledge. 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 h e did not have personal knowledge of the

alleged piracy. The witness Bacani also said that the video cassettes were piratedwithout stating the manner it was pirated and that it was Atty. Domingo that hasknowledge of that fact.

On the part of Atty. Domingo, he said that the re-taping of the allegedly piratedtapes was from master tapes a llegedly 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. AlbinoReyes 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 h e madecomparisons of the tapes with those purchased by their man Bacani. Why themaster 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 ag ent 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 preceptthat 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 a llegation 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 th e probable cause hovers in that greydebatable 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 Cof 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 purchasedevidence of the video tapes allegedly pirated and those seized from respondents,there was no way to determine whether there really was piracy, or copying of the

film of the complainant Twentieth Century Fox." (pp. 37-39, Rollo)

xxx xxx xxx

The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probablecause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who actedas 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 wasalso a witness during the application for the issuance of the search warrants stated that he had personalknowledge 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



11

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 questionedsearch 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 werenot presented during the application for search warrants, thus leading it to conclude that it had b een"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 wereallegedly 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 andnot determinative of whether or not a p robable cause exists to justify the issuance of the search warrants

is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproducedfrom 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 thecopyrighted 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 thecopyrighted 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 asearch warrant.

Furthermore, we note that the search warrants d escribed the articles sought to be seized a s follows:

xxx xxx xxx

xxx xxx xxx

c) Television sets, Video Cassettes Recorders, rewinders,

tape head cleaners, accessories, equipments and other machines used or intended to be used in the unlawful

reproduction, sale, rental/lease distribution of the above-mentioned video tapes which she is keeping andconcealing 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 considerationconstitutionally 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, taperecorders, dictaphone and the like used and/or connected in the printing of the

'WE FORUM' newspaper and any and all d ocument/communications, letters and

facsimile of prints related to "WE FORUM" newspaper.

2] Subversive documents, pamphlets, leaflets, books, and other publications to promote the objectives and purposes of the subversive organizations known as

Movement for Free Philippines, Light-a-Fire Movement and April 6 Movement;and

3] Motor vehicles used in the distribution/circulation of the 'WE FORUM andother subversive materials and propaganda, more particularly,

1] Toyota-Corolla, colored yellow with Plate No. NKA892;

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

969;

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

4] TOYOTA-TAMARAW, colored white with Plate No.PBP 665;and,

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

472 with marking "Bagong Silang."

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

which authorized the search for 'books, records, pamphlets, cards, receipts, lists,memoranda, pictures, recordings and other written instruments concerning the

Communist Parties of Texas, and the operations of the Community Party inTexas," was declared void by the U.S. Supreme Court for being too general. Inlike manner, directions to "seize any evidence in connection with the violation of

SDC 13-3703 or otherwise' have been h eld too general, and that portion of a

search warrant which authorized the seizure of any "paraphernalia which could beused 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, andtherefore invalid (68 Am. Jur. 2d., pp. 736-737). The description of the articles

sought to be seized under the search warrants in question cannot be characterizeddifferently. (at pp. 814-815)

Undoubtedly, a similar conclusion can be deduced from the d escription of the articles sought to beconfiscated 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 notnecessarily 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 anAnti-Piracy law makes The search warran t too general which could result in the confiscation of all itemsfound in any video store. In fac t, 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



12

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, alegitimate business, not involving piracy of intellectual property, or infringementof copyright laws. So that a television set, a rewinder, and a whiteboard listing

Betamax tapes, video cassette cleaners video cassette recorders as reflected in theReturns of Search Warrants, are items of legitimate business engaged in the videotape industry, and which could not be the subject of seizure, The applicant and his

agents therefore exceeded their authority in seizing perfectly legitimate personal property usually found in a video cassette store or business establishment." (p. 33,

Rollo)

All in all, we find no grave abuse of discretion on the part of the lower court when it lifted the search

warrants it earlier issued against the private respondents. We agree with the appellate court's findings tothe 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 thatit 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 itserroneous findings as to the existence of probable cause and declared the searchand 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. Graveabuse of discretion' implies such capricious and whimsical exercise of judgment

as is equivalent to lack of jurisdiction, or, in other words, where the power isexercised in an arbitrary or despotic manner by reason of passion or personalhostility, 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 incontemplation of law.' But far from being despotic or arbitrary, the assailedorders were motivated by a noble desire of rectifying an error, much so when the

erroneous findings collided with the constitutional rights of the privaterespondents. In fact, the petitioner did not even contest the righteousness and

legality of the questioned orders but instead concentrated on the alleged denial of

due process of law." (pp. 44-45, Rollo)

The proliferation of pirated tapes of films not only deprives the government of much needed revenues but is also an indication of the widespread breakdown of national order and discipline. Courts shouldnot 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 p roblem of pirated filmscan be solved only by the use of unconstitutional shortcuts is to denigrate the long history andexperience 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 and resolution of the Courtof Appeals are AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT Manila

EN BANC

G.R. No. 110318 August 28, 1996

COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNTPICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION,UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALTDISNEY COMPANY, and WARNER BROTHERS, INC., petitioners,

vs.

COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A.PELINDARIO, respondents.

REGALADO, J.: p

Before us is a petition for review on certiorari of the decision of the Court of

Appeals1

promulgated on July 22, 1992 and its resolution2

of May 10, 1993 denying petitioners' motion for reconsideration, both of which sustained the order 3 of the RegionalTrial 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, a s 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 Bureauof Investigation for violation of PD No. 49, as amended, and sought its assistancein their anti-film piracy drive. Agents of the NBI and private researchers made

discreet surveillance on various video establishments in Metro Manila includingSunshine Home Video Inc. (Sunshine for brevity), owned and operated b y DaniloA. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro

Manila.

On November 14, 1987, NBI Senior Agent Lauro C. R eyes applied for a search

warrant with the courta 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 discrecordings equipment and other machines and paraphernalia used or intended to

be used in the unlawful exhibition, showing, reproduction, sale, lease or

disposition of videograms tapes in the premises above described. In the hearingof the application, NBI Senior Agent Lauro C. Reyes, upon qu estions by thecourt 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 anddepositions 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.



13

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 premisesindicated in the search warrant, the NBI Agents found and seized various videotapes 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 propertiesaccomplished by the raiding team. Copy of the receipt was furnished and/or

tendered to Mr. Danilo A. Pelindario, registered owner-proprietor of SunshineHome 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 deniedfor lack of merit (p. 280, Records).

A Motion for reconsideration of the Order of denial was filed. The court aquo granted the said motion for reconsideration and justified it in this manner:

It is undisputed that the master tapes of the copyrightedfilms from which the pirated films were allegedly copies( sic), were never presented in the proceedings for the

issuance of the search warrants in question. The orders of the Court granting the search warrants and denying theurgent motion to lift order of search warrants were,

therefore, issued in error. Consequently, they must be setaside. (p. 13, Appellant's Brief) 5

Petitioners thereafter appealed the order of the trial court granting private respondents'

motion for reconsideration, thus lifting the search warrant which it had theretofore issued, to

the Court of Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration thereof was denied. Hence, this petition was brought to this Court

particularly challenging the validity of respondent court's retroactive application of the rulingin 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 ac tion in Philippine courts. In so challenging petitioners'

personality to sue, private respondents point to the fact that petitioners are the copyrightowners 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 businessin 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 alicense 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 aredoing such business here, as would require them to be licensed by the Securities andExchange Commission, other than averments in the quoted portions of petitioners'

"Opposition to Urgent Motion to Lift Order of Search Warrant" dated April 28, 1988 andAtty. Rico V. Domingo's affidavit of December 14, 1987. Moreover, an exclusive right todistribute a product or the ownership of such exclusive right does not conclusively prove the

act of doing business nor establish the presumption of d oing 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 b y Section 125 of the Corporation Code is not a

condition precedent to the maintenance of any kind of action in Philippine courts by aforeign corporation. However, under the aforequoted p rovision, 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 withthe law intransacting business here, it shall not be p ermitted to maintain any suit in localcourts. 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 subjectmatter 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 foreigncorporation 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 arecontrolling there. In others where no such definition or qualification is laid down regardingacts or transactions failing within its purview, the question rests primarily on facts and intent.

It is thus held that all the combined acts of a foreign corporation in the State must beconsidered, 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 th eforeign 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 toanother. 14

As a general proposition upon which many authorities agree in principle, subject to suchmodifications as may be necessary in view of the particular issue or of the terms of thestatute 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 hasentered the State by its agents and is there engaged in carrying on and transacting throughthem some substantial part of its ordinary or customary business, usually continuous in the



14

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 thatextent, the performance of acts or works or the exercise of some of the functions normallyincident 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 beenadopted with some qualifications in various pieces of legislation in our jurisdiction.

For instance, Republic Act No. 5455 17 provides:

Sec. 1. Definitions and scope of this Act . — (1) . . . ; and the phrase "doing

business" shall include soliciting orders, purchases, service contracts, openingoffices, 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 contemplateto that extent the performance of acts or works, or the exercise of some of thefunctions normally incident to, and in progressive prosecution of, commercial

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

Presidential Decree No. 1789, 18 in Article 65 thereof, defines "doing business" to includesoliciting orders, purchases, service contracts, opening offices, whether called "liaison"

offices or branches; appointing representatives or distributors who are domiciled in th e

Philippines or who in any calendar year stay in the Philippines for a period or periodstotalling 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 functionsnormally incident to, and in progressive prosecution of, commercial gain or of the purposeand object of the business organization.

The implementing rules and regulations of said presidential decree conclude the enumerationof acts constituting "doing business" with a catch-all definition, thus:

Sec. 1(g). "Doing Business" shall be any act or combination of acts enumerated inArticle 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 businessorganization.

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; appointingrepresentatives or distributors domiciled in the Philippines or who in any calendar

year stay in the country for a period or periods totalling one hundred eight(y)(180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any

other act or acts that imply a continuity of commercial dealings or arrangements,

and contemplate to that extent the performance of acts or works, or the exerciseof 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 bedeemed to include mere investment as a shareholder by a foreign entity indomestic corporations duly registered to do business, and/or the exercise of rights

as such investor; nor having a nominee director or officer to represent its interestsin such corporation; nor appointing a representative or distributor domiciled inthe Philippines which transacts business in its own name and for its own account.

Based on Article 133 of the Corporation Code and gauged by such statutory standards, petitioners are not barred from maintaining the present action. There is no showing that,under our statutory or case law, petitioners are doing, transacting, engaging in or carrying on

business in the Philippines as would require obtention of a license before they can seek

redress from our courts. No evidence has been offered to show that petitioners have

performed any of the enumerated acts or any other specific act indicative of an intention toconduct 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 ascorporations 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 actionin the Philippines. Verily, no record of such registration by petitioners can be expected to befound 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 OmnibusInvestments Code lists, among others —

(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specificsolicitations 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 termsand conditions of sales or service contracts, regardless of where the contracts areactually reduced to writing, shall constitute doing business even if the enterprise

has no office or fixed place of business in the Philippines. The arrangementsagreed 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 themiddlemen 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 theones 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



15

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 inthe 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 wouldrequire 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, withexpress authority pursuant to a special power of a ttorney, 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 anycinematographic work(s) — films or video cassettes — of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines

pursuant to any agreement(s) between . . . and the respective owners of copyright

in such cinematographic work(s), to initiate and prosecute on behalf of . . .criminal or civil actions in the Philippines against any person or personsunlawfully distributing, exhibiting, selling or offering for sa le any films or video

cassettes of which . . . is the owner of copyright or the owner of exclusive rightsof distribution in the Philippines pursuant to any agreement(s) between . . . and

the respective owners of copyright in such works. 21

tantamount to doing business in the Philippines. We fail to see how exercising one's legaland property rights and taking steps for the vigilant protection of said rights, particularly theappointment 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 Statesimply 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 notdoing business in the State merely because sales of its product are made there or other

business furthering its interests is transacted there by an alleged agent, whether a corporation

or a natural person, where such activities are not under the direction and control of the

foreign corporation but are engaged in by the alleged agent as an independent business. 23

It is generally held that sales made to customers in the State by an independent dealer whohas 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 corporationsuch 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 torepresent it in a Federal court sitting in a particular State is not doing business within thescope 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 institutionand prosecution or defense of a suit, particularly if the transaction which is the basis of thesuit 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 nota 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, privaterespondents 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 Courtare 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 doesnot 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 r efers to a plaintiff's general disability tosue, such as on account of minority, insanity, incompetence, lack of juridical personality or

any other general disqualifications of a pa rty, the latter refers to the fact that the plaintiff isnot the real party in interest. Correspondingly, the first can be a ground for a motion todismiss based on the ground of lack of legal capacity to sue; 33 whereas the second can beused as a ground for a motion to dismiss based on the fact that the complaint, on the face

thereof, evidently states no cause of ac tion. 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 inthe 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 thelicensing 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 doctrineof lack of capacity to sue based on failure to first acquire a local license is based onconsiderations 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 violationof legal rights of unsuspecting foreign firms or entities simply because they are not licensedto do business in the country. 35

II

We now proceed to the main issue of the retroactive application to the present controversy of

the ruling in20th Century Fox Film Corporation vs. Court of Appeals, et al ., promulgated onAugust 19, 1988, 36 that for the determination of probable cause to support the issuance of a



16

search warrant in copyright infringement cases involving videograms, the production of the

master tape for comparison with the allegedly pirate copies is necessary.

Petitioners assert that the issuance of a search warrant is addressed to the discretion of thecourt subject to the determination of probable cause in accordance with the procedure

prescribed therefore under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in question, the controlling criterion for the finding of probable cause wasthat enunciated in Burgos vs. Chief of Staff 37 stating that:

Probable cause for a search warrant is defined as such facts and circumstanceswhich would lead a reasonably discreet and prudent man to believe that an

offense has been committed and that the objects sought in connection with theoffense are in the place sought to be searched.

According to petitioners, after complying with what the law then required, the lower court

determined that there was probable cause for the issuance of a search warrant, and whichdetermination in fact led to the issuance and service on December 14, 1987 of SearchWarrant 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 searchwarrant in copyright infringement cases involving videograms, a pronouncement which wasnot 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 eightmonths later.

Private respondents predictably argue in support of the ruling of the Court of Appeals

sustaining the quashal of the search warrant by the lower court on the strength of that 20thCentury Fox ruling which, they claim, goes into the very essence of p robable cause. At thetime 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 126of the 1985 Rules on Criminal Procedure embodied the prevailing and governing law on thematter. The ruling in 20th Century Fox was merely an application of the law on probable

cause. Hence, they posit that there was n o law that was retrospectively applied, since the lawhad 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 trialcourt 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 thesearch 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 itissued. On certiorari, the Supreme Court affirmed the quashal on the groundamong others that the master tapes or copyrighted films were not presented for

comparison with the purchased evidence of the video tapes to determine whether

the latter is an unauthorized reproduction of the former.

If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme Court would have invalidated the warrant just the sameconsidering 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 tothe very existence of probable

cause. . . . 39

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play, it is our considered view th at the 20th Century Fox ruling cannot be retroactively

applied to the instant case to justify the qu ashal of Search Warrant No. 87-053. Herein

petitioners' consistent position that the order of the lower court of September 5, 1988denying 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 possiblyhave 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 sha ll have no retroactive effect, unless thecontrary 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 thePhilippines."

Jurisprudence, in our system of government, cannot be considered a s an independent sourceof 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 notlaws. 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 Judicialdecisions 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 abovedisquisition, this Court emphatically declared in Co vs. Court of Appeals, et al . 43 that the

principle of prospectivity applies not only to original or amendatory statutes andadministrative rulings and circulars, but also, and properly so, to judicial decisions. Our

holding in the earlier case of People vs. Jabinal 44 echoes the rationale for this judicialdeclaration, viz .:

Decisions of this Court, although in themselves not laws, are neverthelessevidence 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 bythis Court constitutes, in a way, a part of the law as of the date that the law wasoriginally passed, since this Court's construction merely establishes the

contemporaneous legislative intent that the law thus construed intends toeffectuate. The settled rule supported by numerous authorities is a restatement of

the legal maxim "legis interpretatio legis vim obtinet " — the interpretation placedupon the written law by a competent court has the force of law. . . . , but when adoctrine of this Court is overruled and a different view is adopted, the new

doctrine should be applied prospectively, and should not apply to parties whohad relied on the old doctrine and acted on the faith thereof . . . . (Emphasissupplied).

This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al ., 45 where theCourt expounded:



17

. . . . But while our decisions form pa rt of the law of the land, they are also

subject to Article 4 of the Civil Code which provides that "laws shall have noretroactive effect unless the contrary is provided." This is expressed in thefamiliar legal maxim lex prospicit , non respicit , the law looks forward not

backward. The rationale against retroactivity is easy to perceive. The retroactiveapplication 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 rulingsgiving only prospective effect to decisions enunciating new doctrines. . . . .

The reasoning behind Senarillos vs. Hermosisima 46 that judicial interpretation of a statute

constitutes part of the law as of the date it was originally passed, since the Court's

construction merely establishes the contemporaneous legislative intent that the interpretedlaw 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 datethat 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 reversalthereof, the new doctrine should be applied prospectively and should not apply to partieswho 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 ., 164SCRA 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 applythe 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 searchingexamination questions of the applicant and his witnesses that "an offense h ad

been committed and that the objects sought in connection with the offense (were)

in the place sought to be search ed" (Burgos v. Chief of Staff, et al., 133 SCRA800). It is indisputable, therefore, that at the time of the application, or onDecember 14, 1987, the lower court did not commit any error nor did it fail to

comply with any legal requirement for the valid issuance of search warrant.

. . . (W)e believe that the lower court should be considered as having followed therequirements of the law in issuing Search Warrant No. 87 -053. The searchwarrant is therefore valid and binding. It must be noted that nowhere is it found i n

the allegations of the Respondents that the lower court failed to apply the law asthen interpreted in 1987 . Hence, we find it absurd that it is ( sic) should be seenotherwise, 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 tohave been complied with.

xxx xxx xxx

. . . If the lower court's reversal will be sustained, what encouragement can be

given to courts and litigants to respect the law and rules if they can expect with

reasonable certainty that upon the passage of a new rule, their conduct can still be

open to question? This certainly breeds instability in our system of d ispensing 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 ismost unfair that fealty to the rules and procedures then obtaining would bear butfruits of

injustice. 49

Withal, even the proposition that the prospectivity of judicial decisions imports applicationthereof not only to future cases but also to cases still ongoing or not yet f inal 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 theadded requirement in 20th Century Fox calling for the production of the master tapes of thecopyrighted 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 inanticipation of the filing of a case for the unauthorized sale or renting out of copyrighted

films in videotape format in violation of Presidential Decree No. 49. It revolved around themeaning of probable cause within the context of the constitutional provision against illegalsearches 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 warrantsagainst those who have in their possession the pirated films. The petitioner'sargument 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 natureand not determinative of whether or not a probable cause exists to justify theissuance of the search warrants is not meritorious. The court cannot presume that

duplicate or copied tapes were necessarily reproduced from master tapes that itowns.

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 substantialsimilarity of the purported pirated works to the copyrighted work. Hence, theapplicant 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 therequirements of probable cause. Mere allegations as to the existence of thecopyrighted films cannot serve as basis for the issuance of a search warrant.



18

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 warrantsagainst 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 misrepresentationsof 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 warrantstestified of their own personal knowledge. Yet, Atty.Albino Reyes of the NBI stated that the counsel or

representative of the Twentieth Century Fox Corporationwill testify on the video cassettes that were pirated, so that

he did not have personal knowledge of th e 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 thecomplaint for infringement was brought to the NBI, the

master tapes of the allegedly pirated tapes were shown tohim 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 notshown to the Court during the application gives some

misgivings as to the truth of that bare statement of the NBIagent on the witness stand.

Again as the application and search p roceedings is a prelude to the filing of criminal cases under PD 49, the

copyright infringement law, and although what is requiredfor the issuance thereof is merely the presence of probablecause, that probable cause must be satisfactory to theCourt, for it is a time-honored precept that proceedings to

put a man to task as an offender under our laws should beinterpreted 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 1973Constitution.

So that lacking in persuasive effect, the a llegation that

master tapes were viewed by the NBI and were comparedto the purchased and seized video tapes from therespondents' 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 tapementioned 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 fromrespondents, there was no way to determine whether therereally 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 theabsence 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'scounsel who was also a witness during the application for the issuance of the

search warrants stated that he had personal knowledge that the confiscated tapesowned by the private respondents were pirated tapes taken from master tapes

belonging to the petitioner. However, the lower court did not give much credenceto his testimony in view of the fac t that the master tapes of the allegedly piratedtapes were not shown to the court during the application (Emphasis ours).

The italicized passages readily expose the reason why the trial court therein required the presentation of the master tapes of the allegedly pirated films in order to convince itself of the existence of probable cause under the factual milieu peculiar to that case. In the case at

bar, respondent appellate court itself observed:

We feel that the rationale behind the aforequoted doctrine is that the piratedcopies as well as the master tapes, unlike the other types of personal propertieswhich 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 n o reason not the present them (Emphasis supplied ).50

In fine, the supposed pronunciamento in said case regarding the necessity for the

presentation of the master tapes of the copyrighted films for the validity of search warrants

should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement caseswhere there is doubt as to the true nexusbetween 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 h ardlyintended to be a sweeping and inflexible requirement in all or similar copyright infringementcases. Judicial dicta should always be construed within the factual matrix of their parturition,



19

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 searchwarrant 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 personalknowledge based on said complaint of petitioners as well as his own investigation andsurveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo,

in his capacity as attorney-in-fact, stated in his a ffidavit 53 and further expounded in his

deposition 54 that he personally knew of the fact that private respondents had never beenauthorized 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 straightforwardand stemmed from matters within their personal knowledge. They displayed none of theambivalence and uncertainty that the witnesses in the 20th Century Fox case exhibited. This

categorical forthrightness in their statements, among others, was what initially and correctlyconvinced 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 thesearch 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 saidwitnesses' claim that the video tapes were pirated, without stating the manner by which thesewere pirated, is a conclusion of fac t 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 copiesof the copyrighted ones not 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 surveillanceof the suspected area was undertaken by petitioners' witnesses sufficient to enable them toexecute 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 isalways 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 thatsuch master tapes are object evidence, with the merit that in this class of evidence theascertainment 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 notrule 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 outof proportion to its evidentiary value. 59

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

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

affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose to protect against all general searches. 60 Indeed,

Article III of our Constitution mandates in Sec. 2 thereof that no search warrant shall issue

except upon probable cause to be determined personally by the judge after examinationunder 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 beinadmissible 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 thecomplainant 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 issuingthe 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 a ttach to the record their sworn statementstogether with any affidavits submitted.

Sec. 5. Issuance and form of search warrant . — If the judge is thereuponsatisfied of the existence of fac ts upon which the application is based, or that

there is probable cause to believe that they exist, he must issue the warrant, whichmust be substantially in the form prescribed by these Rules.

The constitutional and statutory provisions of various jurisdictions requiring a showing of

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

with, and such a showing has been h eld to be an unqualified condition precedent to theissuance of a warrant. A search warrant not based on p robable cause is a nullity, or is void,and the issuance thereof is, in legal contemplation, arbitrary. 61 It behooves us, then, toreview 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 formulatedwhich 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 everysituation. 62 As to what acts constitute probable cause seem incapable of definition. 63 Thereis, of necessity, no exact test. 64

At best, the term "probable cause" has b een understood to mean a reasonable ground of

suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautiousman in the belief that the person accused is guilty of the offense with which he ischarged; 65 or the existence of such facts and circumstances as would excite an h onest belief

in a reasonable mind acting on all the facts and circumstances within the knowledge of themagistrate 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 thequestion of whether the offense ch arged 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



20

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 andcircumstances 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 inthe place sought to be searched. 69 It being the duty of the issuing officer to issue, or refuse toissue, 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 propriety of the issuance of a search warrant is to be

determined at the time of the application therefor, which in turn must not be too remote intime from the occurrence of the offense alleged to have been committed, the issuing judge, indetermining the existence of probable cause, can and should logically look to the touchstones

in the laws theretofore enacted and the decisions already promulgated at the time, and not tothose 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 asearch warrant in the absence of probable cause, such constitutional inhibition does notcommand the legislature to establish a definition or formula for determining what shallconstitute probable cause. 71 Thus, Congress, despite its broad authority to fashion standards

of reasonableness for searches and seizures, 72 does not venture to make such a definition or standard formulation of probable cause, nor categorize what facts and circumstances make

up the same, much less limit the determination thereof to an d within the circumscription of a particular class of evidence, all in deference to judicial discretion and probity. 73

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

requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statesmanship. It serves no purpose but to stultify and constrict the

judicious exercise of a court's prerogatives and to denigrate the judicial duty of determiningthe 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 bedetermined 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 Courtintended the statement in 20th Century Fox regarding master tapes as the dictum for allseasons and reasons in infringement cases.

Turning now to the case at ba r, it can be gleaned from the records that the lower courtfollowed the prescribed procedure for the issuance of a search warrant: (1) the examinationunder 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 personallyconducted 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 of this controversy:

In the instant case, the following facts h ave been established: (1) copyrightedvideo tapes bearing titles enumerated in Search Warrant No. 87-053 were being

sold, leased, distributed or circulated, or offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their video outlets,without the written consent of the private complainants or their assignee; (2)

recovered or confiscated from defendants' possession were video tapes containing

copyrighted motion picture films without the authority of the complainant; (3) thevideo 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 AgentLauro 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 videoestablishments 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 surveillanceoperations on said video establishments. Per information earlier gathered by Atty.Domingo, defendants were engaged in the illegal sale, rental, distribution,

circulation or public exhibition of copyrighted films of MPAA without its written

authority or its members. Knowing that defendant Sunshine Home Video and its

proprietor, Mr. Danilo Pelindario, were not authorized by MPAA to reproduce,lease, and possess for the purpose of selling any of its copyrighted motion

pictures, instructed his researcher, Mr. Rene Baltazar to rent two video cassettesfrom said defendants on October 21, 1987. Rene C. Baltazar proceeded toSunshine Home Video and rented tapes containing Little Shop of Horror. He wasissued rental slip No. 26362 dated October 21, 1987 for P10.00 with a deposit of

P100.00. Again, on December 11, 1987, the returned to Sunshine Home Video

and rented Robocop with rental slip No. 25271 also for P10.00: On the basis of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally went toSunshine Home Video at No. 6 Mayfair Center, Magallanes Commercial Center,

Makati. His last visit was on December 7, 1987. There, he found the video outletrenting, leasing, distributing video cassette tapes whose titles were copyrightedand without the authority of MPAA.

Given these facts, a probable cause exists. . . . 74

The lower court subsequently executed a volte-face, despite its prior detailed and

substantiated findings, by stating in its order of November 22, 1988 denying pe titioners'motion for reconsideration and quashing the search warrant that —

. . . The two (2) cases have a common factual milieu; both involve alleged pirated

copyrighted films of private complainants which were found in the possession or control of the defendants. Hence, the necessity of the presentation of the master tapes from which the pirated films were allegedly copied is necessary in the

instant case, to establish the existence of probable cause. 75

Being based solely on an unjustifiable and improper retroac tive application of the master

tape requirement generated by 20th Century Fox upon a factual situation completelydifferent from that in the case at bar, and without anything more, this later order c learlydefies elemental fair play and is a gross reversible error. In fact, this observation of the Court



21

in La Chemise Lacoste, S . A. vs. Fernandez , et al ., supra, may just as easily apply to the

present case:

A review of the grounds invoked . . . in his motion to quash the search warrantsreveals 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 thecase. . . .

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, onrealistic considerations, a strict application of said requirement militates against the elementsof 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 drawattention, unlike diminutive objects like video tapes which can be easily concealed. 76 Withhundreds of titles being pirated, this onerous and tedious imposition would be multiplied a

hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign jurisdictions.

Given the present international awareness and furor over violations in large scale of intellectual property rights, calling for transnational sanctions, it bears calling to mind the

Court's admonition also in La Chemise Lacoste, supra, that —

. . . . Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aidcounterfeiters and intellectual pirates, tie the hands of the law as it seeks to

protect the Filipino consuming public and frustrate executive and administrativeimplementation of solemn commitments pursuant to international conventionsand treaties.

III

The amendment to Section 56 of Presidential Decree No. 49 by Presidential Decree No.

1987, 77 which should here be publicized judicially, brought about the revision of its penaltystructure 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 a ssignee; (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 anyof 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 byanother 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 crimesindependently punishable under Presidential Decree No. 49, as amended, aside from t he actof 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 exerciseof 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 totechnicalities 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 copyrightis 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 theowner of the copyright, of anything the sole right to do which is conferred by statute on theowner of the copyright. 78

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, insuch cases, did not know what works he was indirectly copying, or did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his,

and he copied at his peril. In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement,it is not necessary that the whole or even a large portion of the work shall have been copied.

If so much is taken that the value of the original is sensibly diminished, or the labors of the

original author are substantially and to an injurious extent appropriated by another, that is

sufficient in point of law to constitute a piracy. 79 The question of whether there has been an actionable infringement of a literary,

musical, or artistic work in motion pictures, radio or television being one of fact, 80 it should properly be determined during the trial. That is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for the issuance of a searchwarrant wherein both lower courts erroneously require the master tapes.

In disregarding private respondent's argument that Search Warrant No. 87-053 is a generalwarrant, 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 a rticles used or intended to be u sed in the unlawful sale,lease and other unconcerted acts in violation of PD 49 as amended. . . . 81

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

A search warrant may be said to particularly describe the things to be seizedwhen the description therein is as specific as the circumstances will ordinarilyallow (People vs. Rubio, 57 Phil. 384); or when the description expresses aconclusion 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 thethings described are limited to those which bear direct relation to the offense for

which the warrant is being issued (Sec 2, Rule 126, Revised Rules of Court). . . .If the articles desired to be seized have any direct relation to an offensecommitted, the applicant must necessarily have some evidence, other than those

articles, to prove the said offense; and the articles subject of search and seizureshould come in handy merely to strengthen such evidence. . . .

On private respondents' averment that the sea rch warrant was made applicable to more thanone specific offense on the ground that there are as many offenses of infringement as thereare rights protected and, therefore, to i ssue one search warrant for all the movie titles



22

allegedly pirated violates the rule that a search warrant must be issued only in connection

with one specific offense, the lower court said:

. . . . As the face of the search warrant itself indicates, it was issued for violationof Section 56, PD 49 as amended only. The spec ifications therein (in Annex A)

merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, lease,distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. 83

That there were several counts of the offense of copyright infringement and the searchwarrant 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 notviolate 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 whohave complied with the requirements of deposit and notice (in other wordsregistration) under Sections 49 and 50 thereof. Absent such registration, as in this

case, there was no right crea ted, 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 b ack as December 12, 1978 in itsOpinion No. 191 of the then Secretary of Justice Vicente Abad Santos whichstated 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 beentitled to protection under the Decree, the creator can file action for infringement of its rights". He cannot demand, however, payment of damagesarising 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 proscribedacts 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. 4 9 reveals that even with respect toworks which are required under Section 26 thereof to be registered and with copies to

deposited with the National Library, such as books, including composite and cyclopedic

works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and

newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; andletters, the failure to comply with said requirements does n ot 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 isacquired 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 disseminationor 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 toavoid the penalty for non-compliance of the deposit of said two copies and inorder to recover damages in an infringement suit. 86

One distressing observation. This case has been fought on the basis of, and its resolutionlong 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 conducttheir 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'sinitial finding of probable cause. That private respondents are licensed by the VideogramRegulatory Board does not insulate them from criminal and civil liability for their unlawful

business practices. What is more deplorable is that the reprehensible acts of someunscrupulous 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 GeneralAgreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts mustnot 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, andnecessarily inclusive of the order of the lower court dated November 22, 1988, are hereby

REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholdingthe validity of Search Warrant No. 87-053 is hereby REINSTATED, and said court is

DIRECTED to take and expeditiously proceed with such appropriate proceedings a s may becalled for in this case. Treble costs are further assessed against private respondents.

SO ORDERED.

THIRD DIVISION

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

SONY MUSIC ENTERTAINMENT (PHILS.), INC. and IFPI (SOUTHEAST ASIA),LTD., petitioners, vs. OL OF THE REGIONAL TRIAL COURT, BRANCH 90,DASMARIÑAS, CAVITE, ELENA S. LIM, SUSAN L. TAN, DAVID S. LIM, JAMESH. UY, WILSON ALEJANDRO, JR., JOSEPH DE LUNA, MARIA A. VELA CRUZ,DAVID CHUNG, JAMES UY, JOHN DOES AND JANE DOES, AND SOLIDLAGUNA CORPORATION,HON. JUDGE DOLORES L. ESPAN respondents .



23

D E C I S I O N

GARCIA, J .:

Assailed and sought to be nullified in this petition for certiorari with application for injunctiverelief are the orders issued by the respondent judge on June 25, 2002[1] andJanuary 6, 2003,[2] the firstquashing Search Warrant No. 219-00, and the second, denying reconsideration of the first.

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

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

In a criminal complaint filed with the Department of Justice (DOJ), the Videogram RegulatoryBoard (VRB)[3] charged herein private respondents James Uy, David Chung, Elena Lim and another officer of respondent Solid Laguna Corporation (SLC) with violation of Presidential Decree (PD) No.

1987.[4] As alleged in the complaint, docketed as I.S. No. 2000-1576, the four (4) were engaged in the

replication, reproduction and distribution of videograms without license and authority from VRB. Onaccount of this and petitioners‘ own complaints for copyright infringement, the National B ureau of Investigation (NBI), through Agent Ferdinand M. Lavin, applied on September 18, 2000, with the

Regional Trial Court at Dasmariñas, Cavite, Branch 80, presided by the respondent judge, for theissuance of search warrants against private respondents David Chung, James Uy, John and Jane Does,doing business under the name and style ―Media Group‖ inside the factory and production facility of

SLC at Solid corner Camado Sts., Laguna International Industrial Park, Biñan, Laguna.[5]

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

Pedralvez, a deputized agent of VRB, and Rene C. Baltazar, an investigator retained by the lawfirm R.V. Domingo & Associates, petitioners‘ attorney-in-fact. In their sworn statements, the threestated that petitioners sought their assistance, complaining about the manufacture, sale and distributionof various titles of compact discs (CDs) in violation of petitioners‘ right as copyright owners; that acting

on the complaint, Agent Lavin and the witnesses conducted an investigation, in the course of which

unnamed persons informed them that allegedly infringing or pirated discs were being manufacturedsomewhere in an industrial park in Laguna; that in the process of their operation, they were able toenter, accompanied by another unnamed source, the premises of SLC and to see various replicatingequipment and stacks of CDs; and that they were told by their anonymous source that the discs were

being manufactured in the same premises. They also testified that private respondents were (1) engagedin the reproduction or replication of audio and video compacts discs without the requisite authorizationfrom VRB, in violation of Section 6 of PD No. 1987, presenting a VRB certification to such effect; and

(2) per petitioners‘ certification and a listing of Sony music titles, infringing on petitioners‘ copyrights

in violation of Section 208 of Republic Act (RA) No. 8293, otherwise known as Intellectual PropertyCode.[6]

On the basis of the foregoing sworn statements, the respondent judge issued Search WarrantNo. 219-00[7] for violation of Section 208 of R.A. No. 8293 and Search Warrant No. 220-00[8] for

violation of Section 6 of PD No. 1987.

The following day, elements of the Philippine National Police Criminal Investigation andDetection Group, led by PO2 Reggie Comandante, enforced both warrants and brought the seized itemsto a private warehouse of Carepak Moving and Storage at 1234 Villonco Road, Sucat, Paranaque City

and their custody turned over to VRB.[9] An inventory of seized items,[10] as well as a ―Return of SearchWarrant‖ were later filed with the respondent court.

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

Prosecutorial Service that, since 1998 and up to the time of the search, they were licensed by VRB tooperate as replicator and duplicator of videograms.

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

of videograms”, being “licensed to engage in reproduction in videograms under SLC in which they arethe officers and/or or officials”, the DOJ, via a resolution dated January 15, 2001,[11] dismissedVRB‘s complaint in I.S. No. 2000-1576.

On February 6, 2001, private respondents, armed with the DOJ resolution adverted to, moved toquash the search warrants thus issued.[12] VRB interposed an opposition for the reason that the DOJ hasyet to resolve the motion for r econsideration it filed in I.S. No. 2000-1576.

Eventually, the DOJ denied VRB‘s motion for reconsideration, prompting private respondents tomove anew for the quashal of the search warrants. In its supplement to motion, private respondents

attached copies of SLC‘s license as videogram duplicator and replicator.

In an order dated October 30, 2001,[13] the respondent judge, citing the January 15, 2001 DOJresolution in I.S. No. 2000-1576, granted private respondents‘ motion to quash, as sup plemented,

dispositively stating:

―Nonetheless, such being the case, the aforesaid Search Warrants are QUASHED‖

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

search warrants or to Search Warrant No. 220-00 alone, since it was the latter that was based on thecharge of violation of PD No. 1987.[14] The respondent judge, in a modificatory order dated January 29,

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

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

docketed thereat as I.S. No. 2001-1158, charging individual private respondents with copyrightinfringement in violation of Sections 172 and 208 in relation to other provisions of RA No.8293.[16] Attached to the affidavit-complaint were certain documents and records seized from SLC‘s

premises, such as production and delivery records.

Following their receipt of DOJ-issued subpoenas to file counter-affidavits, private respondentsmoved, in the search warrant case, that they be allowed to examine the seized items to enable them to

intelligently prepare their defense.[17] On January 30, 2002, respondent judge issued an order allowingthe desired examination, provided it is made under the supervision of the court‘s sheriff and in the― presence of the applicant of Search Warrant No. 219-00‖.[18]

On February 8, 2002, the parties, represented by their counsels, repaired to the Carepak warehouse. An NBI agent representing Agent Lavin appeared. The examination, however, did not pushthrough on account of petitioners‘ counsel insistence on Agent Lavin‘s physical presence .[19] Private

respondents were able to make an examination on the following scheduled setting, February 15, 2002,albeit it was limited, as the minutes of the inspection discloses, to inspecting only one (1) boxcontaining 35 assorted CDs, testing stampers, diskettes, a calendar, organizers and some folders and

documents. The minutes also contained an entry stating - ―Other items/machines were not examined

because they cannot be identified as they are not properly segregated from other items/machines in thewarehouse. The parties agreed to schedule another examination on (to be agreed by the parties) after the items/machines subject of the examination shall have been segregated from the other

items/machines by Carepak Moving and Storage , Inc .‖[20]

During the preliminary investigation conducted on February 26, 2002 in I.S. No. 2001-1158,however, petitioners‘ counsel objected to any further examination, claiming that such exercise was a

mere subterfuge to delay proceedings.[21]

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

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

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24

issuance of search warrant, it being inter alia alleged that the applicant and his witnesses lacked the

requisite personal knowledge to justify the valid issuance of a search warrant; that the warrant did notsufficiently describe the items to be seized; and that the warrant was improperly enforced .[22] To thismotion to quash, petitioners interposed an opposition dated May 7, 2002 predicated on four (4)

grounds.[23] On June 26, 2002, respondent SLC filed a Manifestation joining its co-respondents in, andadopting, their motion to quash.[24]

On June 25, 2002, the respondent judge issued the herein first assailed order quashing Search

Warrant No. 219-00 principally on the ground that the integrity of the seized items as evidence had been

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

Based on the report submitted, it appears that on February 15, 2002, an examination was actuallyconducted. Unfortunately, the alleged seized items were commingled with and not segregated fromthousands of other items stored in the warehouse. Only one box . . . were (sic) examined in the presence

of both parties with the sheriff, such that another date was set . . . . On February 22, 2002, during thehearing before the Department of Justice (DOJ), [petitioners‘ counsel] Atty. Arevalo manifested their

objection to the further examination on the alleged ground that all of the items subject of the DOJcomplaint have been examined.

Analyzing the report and the incidents relative thereto, it shows that the items subject of the questionedSearch Warrant were commingled with other items in the warehouse of Carepak resulting in the failureto identify the machines and other items subject of this Search Warrant, while the other items

enumerated in the said Inventory of Seized Items and Certification of Legality, Orderliness andRegularity in the Execution and enforcement of Search Warrants were not examined, hence, the charge

imputed against the respondents could not be established as the evidence to show such violation fails todetermine the culpability of said respondents, thus, violating their constitutional rights.[25]

Excepting, petitioners moved for reconsideration, arguing on the main that the quashal order waserroneously based on a ground outside the purview of a motion to quash .[26] To this motion, private

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

On January 6, 2003, respondent judge issued the second assailed order denying petitioners‘motion for reconsideration on the strength of the following premises:

Careful scrutiny of the records of the case reveals that the application of the above-entitled casestemmed from the application for Search Warrant alleging that the respondent was not licensed to

duplicate or replicate CDs and VCDs. The Court was misled when the applicants declared that SolidLaguna Corporation (SLC) is not licensed to engage in replicating/duplicating CDs and VCDs, when intruth and in fact, SLC was still a holder of a valid and existing VRB license. Considering the fact that

respondent was duly licensed which facts (sic) was not laid bare to this Court when the application for writ was filed by the private complainant through the National Bureau of Investigation, this Courthereby recalls and quashes the above writ.

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

VCDs, the issuance of search warrant was of no force and effect as there was absence of probable causeto justify said issuance. xxx[27]

Hence, petitioners‘ present recourse.

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

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

Petitioners ascribe on the respondent judge the commission of grave abuse of discretion

amounting to lack or in excess of ju risdiction in issuing the first assailed order in that:

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

respondents‘ failure to examine the seized items, which ground is extraneous to thedetermination of the validity of the issuance of the search warrant.

2. Public respondent, in effect, conducted a “preliminary investigation‖ that absolved the

private respondents from any liability for copyright infringement.

3. Public respondent recognized the motion to quash search warrant filed by persons who

did not have any standing to question the warran t.

Petitioners also deplore the issuance of the second assailed order which they tag as predicated ona ground immaterial to Search Warrant No. 219-00.

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

in the “Motion To Quash Search Warrant (And To Release Seized Properties)‖. Apart therefrom, they

aver that petitioners violated the rule on hierarchy of courts by filing the petition directly with thisCourt. As to be expected, petitioners‘ reply to comment traversed private respondents‘ position.

Owing to their inability to locate respondent David Chung, petitioners moved and the Courtsubsequently approved the dropping, without prejudice, of said respondent from the case.[29]

On February 20, 2004, private respondents filed their Rejoinder, therein inviting attention to petitioner IFPI‘s failure to execute the certification on non-forum shopping as required by Rule 7,Section 5 of the Rules of Court and questioning the validity of the Special Powers of Attorney of

petitioners‘ attorney-in-fact to file this case.

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

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

The underlying issue before Us revolves on the propriety of the quashal of Search Warrant No.219-00 which, in turn, resolves itself into question of the propriety of the warrant‘s issuance in the first

place.

It has repeatedly been said that one‘s house, however, humble is his castle where his person, papers and effects shall be secured and whence he shall enjoy undisturbed privacy except, to borrow

from Villanueva vs. Querubin,[30] “in case of overriding social need and then only under the stringent procedural safeguards.‖ The protection against illegal searches and seizure has found its way into our 1935 and 1973 Constitutions and is now embodied in Article III, Section 2 of the 1987 Constitution,

thus -

The right of the people to b e 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 warrantor warrant of arrest shall issue except upon probable cause to be determined personally by the judge

after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized,

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

Sec. 4. Requisites for issuing search warrant. – A search warrant shall not issue but upon probablecause . . . to be determined personally by the judge after examination under oath or affirmation of thecomplainant and the witnesses he may produce, and p articularly describing the place to be searched and

the things to be seized.







































25

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

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

personally examine in form of searching questions and answers, in writing and under oath, thecomplainant and any witnesses he may produce on fac ts personally known to them and attach to the

record their sworn statements together with any affidavits submitted.

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

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

postulate, the presumption of regularity is unavailing in aid of the search process when an officer undertakes to justify it.[31] For, the presumption juris tantum of regularity cannot, by itself, prevail

against the constitutionally protected rights of an individual because zeal in the pursuit of criminalscannot ennoble the use of arbitrary methods that the Constitution itself detests.[32]

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

―the existence of such facts and circumstances which would lead a reasonably discreet and prudent manto believe that an offense has been committed and that the objects sought in connection with the offenseare in the place to be searched ‖.[33] And when the law speaks of facts, the reference is to facts, data or

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

personal knowledge by the applicant or his witnesses of the facts upon which the issuance of a searchwarrant may be justified, the warrant is deemed not based on probable cause and is a nullity, its issuance

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

Appeals.[34] Testimony based on what is supposedly told to a witness, being patent hearsay and, as rule,of no evidentiary weight[35] or probative value, whether objected to or not,[36] would, alone, not suffice

under the law on the existence of probable cause.

In our view, the issuance of the search warrant in question did not meet the requirements of probable cause. The respondent judge did not accordingly err in quashing the same, let alone gravelyabuse her discretion.

Petitioners argue that the instant petition is on all fours with Columbia ,[37] wherein the enbanc Court upheld the validity of search warrants based on the testimonies of the applicant and hiswitnesses who conducted an investigation on the unlawful reproduction and distribution of video tapes

of copyrighted films.

We are not persuaded.

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

the fact of infringement. It was, however, determined by this Court that during the application hearing,therein petitioner‘s attorney-in-fact, a witness of the applicant, ― stated in his affidavit and further

expounded in his deposition that he personally knew of the fact that private respondents had never beenauthorized by his clients to reproduce, lease and possess for the purposes of selling any of thecopyrighted films.‖[38] Significantly, the Court, in upholding the validity of the writ issued upon

complaint of Columbia Pictures, Inc., et al ., stated that ―there is no allegation of misrepresentation,

much less finding thereof by the lower court, on the part of petitioners’ witnesses.‖[39]

Therein lies the difference with the instant ca se.

Here, applicant Agent Lavin and his witnesses, Pedralvez and Baltazar, when queried during theapplication hearing how they knew that audio and video compact discs were infringing or pirated, relied

for the most part on what alleged unnamed sources told them and/or on certifications or lists made by persons who were never presented as witnesses. In net effect, they testified under oath as to the truth of facts they had no personal knowledge of. The following excerpts of the depositions of applicant Lavin

and his witnesses suggest as much:

A. Deposition of Agent Lavin

28. Question: What happened next?

Answer: We then went to the Laguna Industrial Park, your Honor . . . We then verifiedfrom an informant that David Chung, James Uy . . . under the name and st yle MediaGroup were the ones replicating the infringing CDs.

xxx xxx xxx

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

indeed infringing?

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

also have with me the Complaint-Affidavit of Sony Music and IFPI that certifiedthat these are infringing copies, as well as the title list of Sony Music wherein someof the CDs purchased are indicated. (Annex ―10‖, Comment, Rollo, p. 841)

B. Deposition of Baltazar

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

Answer: We saw that they had in stock several infringing, pirated and unauthorized

CDs. They also had videograms without VRB labels, aside from artworks andlabels. John Doe gave us a ―Wholesome‖ CD while Jane Doe gave us ―KennyRogers Videoke‖ and ―Engelbert Humperdinck Videoke‖ which the informant told

us were being reproduced in that facility. The informant further showed us therooms where the replicating and/or stamping machine was located.

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

or unauthorized?

Answer: The Attorney-in-fact of Sony Music and IFPI certified in his Complaint-

Affidavit that they are unauthorized copies. I also have with me a listing of SonyMusic titles and some of the CDs I purchased are in that list .[40]

C. Deposition of Pedralvez

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

Answer: We were given some samples by John Doe and Jane Doe. These are Kenny

Rogers Videoke, Engelbert Humperdinck Videoke, and Andrew E. WholesomeCD. The informant told us that the said samples were being reproduced in thefacility.

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

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

Unlike their counterparts in Columbia who were found to be personally knowledgeable abouttheir facts , Agent Lavin and his witnesses, judging from their above quoted answers, had no personal











































26

knowledge that the discs they saw, purchased or received were, in fact, pirated or infringing on

petitioners‘ copyrights. To us, it is not enough that the applicant and his witnesses testify that they sawstacks of several allegedly infringing, pirated and unauthorized discs in the subject facility. The moredecisive consideration determinative of whether or not a probable cause obtains to justify the issuance

of a search warrant is that they had personal knowledge that the discs were actually infringing, piratedor unauthorized copies.[41]

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

had been established in this case.

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

application hearing, as private respondents, obviously having in mind the holding in 20th Century Fox Film Corp. vs. Court of Appeals,[42] would have this Court believe. It is true that the Court,in 20th Century Fox, underscored the necessity, in determining the existence of probable cause in

copyright infringement cases, of presenting the master tapes of the copyrighted work. But, asemphatically clarified in Columbia ― such auxiliary procedure, however, does not rule out the use of

testimonial or documentary evidence, depositions, admissions or other classes of evidence xxxespecially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value.[43] What this Court is saying is that any evidence

presented in lieu of the master tapes, if not readily available, in similar application proceedings must bereliable, and, if testimonial, it must, at the very least, be based on the witness‘ personal knowledge.

Petitioners argue, citing People v. Chua Uy,[44] that Agent Lavin‘s informants‘ testimonies are notindispensable as they would only be corroborative.[45] Like Columbia, ChuaUy is not a winning card for

petitioners, for, in the latter case, there was a reliable testimony to corroborate what the applicanttestified to, i.e., the testimony of the police poseur-buyer in a buy-bust operation involving prohibiteddrugs. The circumstances are different in this case wherein the applicant and his witnesses had no

personal knowledge that the discs they purchased were infringing or pirated copies. It cannot be

overemphasized that not one of them testified seeing the pirated discs being manufactured at SLC‘s premises. What they stated instead was that they were given copies of ― Kenny Rogers Videoke‖,

― Engelbert Humperdinck Videoke‖ and ― Andrew E. Wholesome CD‖ by two anonymous sources, whileyet another informant told them that the discs were man ufactured at said premises.

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

the issuance of a search warrant, if followed up personally by the recipient and validated ,[46] as whattranspired in Columbia. Unfortunately, the records show that such is not the case before us.

On the issue that the public respondent gravely abused her discretion in conducting what petitioners perceived amounted to a ― preliminary investigation‖, this Court has already ruled in Solid

Triangle Sales Corp. vs. Sheriff of RTC Quezon City , Branch 93,[47] that ―in the determination of probable cause, the court must necessarily resolve whether or not an offense exists to justify theissuance or quashal of the warrant”. In the exercise of this mandate - which we can allow as beingakin to conducting a preliminary investigation - abuse of discretion cannot plausibly be laid at the

doorstep of the issuing court on account of its prima facie holding that no offense has been committed,even if consequent to such holding a warrant is recalled and the private complainant is incidentally

deprived of vital evidence to prove his case. Solid Triangle succinctly explains why:

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

preliminary investigation before an authorized officer on the other, are proceedings entirely independentof each other. One is not bound by the other‘s finding as regards the existence of a crime. The first is todetermine whether a warrant should issue or be quashed, and the second, whether an information should

be filed in court.

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

offense has been committed, it does not interfere with or encroach upon the proceedings in the preliminary investigation. The court does not oblige the investigating officer not to file the informationfor the court‘s ruling that no crime exists is only of purposes of issuing or quashing the warrant. This

does not, as petitioners would like to believe, constitute a usurpation of the executive function. Indeed,to shirk from this duty would amount to an abdication of a constitutional obligation.[48]

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

functions, nonetheless, it remains that the order of quashal is entirely independent of the proceedings in

I.S. No. 2001-1158. And needless to stress, the DOJ is by no means concluded by the respondent judge‘s findings as regards the existence, or the non-existence, of a crime.

We can, to a point, accord merit to petitioners‘ lament that the basis of the first questioned order ,i.e., the mingling of the seized items with other items, is extraneous to the determination of the validity

of the issuance of th e search warrant. It is t o be pointed out, though, that public respondent corrected her error when it was raised in petitioners‘ motion for reconsideration. There can really be no serious

objection to a judge correcting or altogether altering his case disposition on a motion for reconsideration, it being the purpose of such recourse to provide the court an opportunity to cleanseitself of an error unwittingly committed, or, with like effect, to allow the aggrieved party the chance to

convince the court that its ruling is erroneous.[49] A motion for reconsideration before resortto certiorari is required precisely ―to afford the public respondent an opportunity to correct any actual or fancied error attributed to it by way of re-examination of the legal and factual aspects of the

case‖.[50]

Similarly, as to the matter of the respondent judge‘s recognizing the April 11, 2002 motion toquash search warrant[51] filed by the individual private respondents, instead of by SLC, as presumptiveowner of the seized items, such error was properly addressed when respondent SLC, representedthroughout the proceedings below by the same counsel of its co-respondents, formally manifested that it

was adopting the same motion as its own.[52]

It is apropos to point out at this juncture that petitioners have imputed on individual privaterespondents criminal liability, utilizing as tools of indictment the very articles and papers seized from

the premises of SLC. Be that as it may, petitioners should be deemed in estoppel to raise the personalityof individual private respondents to interpose a motion to quash. To be sure, it would be unsporting for

petitioners to prosecute individual private respondents on the basis of seized articles but on the same breath deny the latter standing to question the legality of the seizure on the postulate that only the partywhose rights have been impaired thereby, meaning SLC, can raise that challenge. There can be no

quibbling that individual private respondents stand to be prejudiced or at least be inconvenient by any judgment in any case based on the seized properties. In a very real sense, therefore, they are real parties

in interest who ought not to be prevented from assailing the validity of Search Warrant 219-00, albeitthey cannot plausibly asked for the release and appropriate as their own the seized articles.

Petitioners‘ related argument that SLC could not have validly adopted individual private

respondents‘ motion to quash due to laches is untenable.

The records show that the seizure in question was effected on September 19, 2000. Thecomplaint in I.S. No. 2000-1576 was filed against the officers of SLC, all of whom, except for one, are

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

2001 when the DOJ dismissed the complaint on the ground that SLC was, in fact, duly licensed by theVRB. Shortly thereafter, or on February 6, 2001, less than five (5) months after the seizure, privaterespondents moved to quash both search warrants.[53] The motion clearly indicates private respondents‘

desire for the return of the seized items, and there is nothing in the records showing that petitionersobjected to the motion on the ground that the movants had no standing to question the warrants.



















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

respondent SLC to be licensed by VRB to engage in the business of replicating or duplicatingvideograms.

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

immaterial to the charge of infringement. A scrutiny of the text of the said order, however, shows thatthe respondent judge denied petitioners‘ motion for reconsideration because she was misled by theapplicant‘s and his witnesses‘ testimony. It may be that a VRB license is no defense to a charge of

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

here is the validity of the warrant which applicant secured on the basis of, among others, hisrepresentation which turned out to be false.

As above discussed, the answers of Agent Lavin and his witnesses to the public respondent‘ssearching questions, particularly those relating to how they k new that the compact discs they purchased

or received were illegal, unauthorized or infringing, were based on certifications and not personalknowledge. The subject warrant, as well as Search Warrant No. 220-00, was issued nonetheless. It may

well have been that the issuing judge was, in the end, convinced to issue the warrants by means of theerroneous VRB certification presented during the joint application hearing, overriding whatever misgivings she may have had with the applicant‘s and his witnesses‘ other answers. This Court,

however, cannot engage in such speculation and sees no need to.

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

testimonies of persons without personal knowledge of facts they were testifying on and who relied on afalse certification issued by VRB. Based as it were on hearsay and false information, its issuance was

without probable cause and, therefore, invalid.

Given the foregoing perspective, the peripheral issues of (a) whether or not petitioner IFPI(South East Asia), Ltd. failed to comply with the rules requiring the filing of a certification on non-forum shopping; and (b) whether or not IFPI‘s board of directors ratified its conditional authorization

for its attorney-in-fact to represent IFPI in this petition, need not detain us long. In our review of therecords, R.V. Domingo & Associates, whose authority to represent the petitioners in this petitioncontinues, had duly executed the sworn certification on non- forum shopping.

In the same manner, this Court, having taken cognizance of this petition, need not belabor theissue of whether or not petitioners have cavalierly breached the rule on hierarchy of courts. Suffice it tostate that, while the Court looks with disfavor on utter disregard of its rules,[54] it is within its power to

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

requires, as here.

WHEREFORE, the instant petition is hereby DISMISSED and the temporary restraining order issued on February 19, 2 003 is consequently RECALLED.

Costs against petitioners.

SO ORDERED.





Documents

LIP Cases Session 4