Consolidated Cases in Intellectual Property Rights

Cases:

1. Columbia Pictures vs. CA2. Joaquin Jr. vs. Drilon

3. Filipino Society of Composers vs. Tan

4. Maglalang Santos vs. McCollough Printing

5. Habana vs. Robles

6. 20th Century Fox vs. CA

COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROTHERS, INC., petitioners, vs.COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A. PELINDARIO, respondents.

REGALADO, J.:p

Before us is a petition for review on certiorari of the decision of the Court of Appeals 1 promulgated on July 22, 1992 and its resolution 2 of May 10, 1993 denying petitioners' motion for reconsideration, both of which sustained the order 3 of the Regional Trial Court, Branch 133, Makati, Metro Manila, dated November 22, 1988 for the quashal of Search Warrant No. 87-053 earlier issued per its own order 4 on September 5, 1988 for violation of Section 56 of Presidential Decree No. 49, as amended, otherwise known as the "Decree on the Protection of Intellectual Property."

The material facts found by respondent appellate court are as follows:

Complainants thru counsel lodged a formal complaint with the National Bureau of Investigation for violation of PD No. 49, as amended, and sought its assistance in their anti-film piracy drive. Agents of the NBI and private researchers made discreet surveillance on various video establishments in Metro Manila including Sunshine Home Video Inc. (Sunshine for brevity), owned and operated by Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila.

On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a quo against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which were enumerated in a list attached to the application; and, television sets, video cassettes and/or laser disc recordings equipment and other machines and paraphernalia used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the premises above described. In the hearing of the application, NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo , reiterated in substance his averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar. Atty. Rico V. Domingo's deposition was also taken. On the basis of the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the court a quo .

The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine and/or their representatives. In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by private complainants, and machines, equipment, television sets, paraphernalia, materials, accessories all of which were included in the receipt for properties accomplished by the raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A. Pelindario, registered owner-proprietor of Sunshine Home Video.

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

A "Motion To Lift the Order of Search Warrant" was filed but was later denied for lack of merit (p. 280, Records).

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

It is undisputed that the master tapes of the copyrighted films from which the pirated films were allegedly copies ( sic), were never presented in the proceedings for the issuance of the search warrants in question. The orders of the Court granting the search warrants and denying the urgent motion to lift order of search warrants were, therefore, issued in error. Consequently, they must be set aside. (p. 13, Appellant's Brief) 5

Petitioners thereafter appealed the order of the trial court granting private respondents' motion for reconsideration, thus lifting the search warrant which it had theretofore issued, to the Court of Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration thereof was denied. Hence, this petition was brought to this Court particularly challenging the validity of respondent court's retroactive application of the ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., 6 in dismissing petitioners' appeal and upholding the quashal of the search warrant by the trial court.

I

Inceptively, we shall settle the procedural considerations on the matter of and the challenge to petitioners' legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines.

[1]

Private respondents aver that being foreign corporations, petitioners should have such license to be able to maintain an action in Philippine courts. In so challenging petitioners' personality to sue, private respondents point to the fact that petitioners are the copyright owners or owners of exclusive rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of "doing business in the Philippines" under Section 1 (f)(1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the issuance of a search warrant. 7

In refutation, petitioners flatly deny that they are doing business in the Philippines, 8 and contend that private respondents have not adduced evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange Commission, other than averments in the quoted portions of petitioners' "Opposition to Urgent Motion to Lift Order of Search Warrant" dated April 28, 1988 and Atty. Rico V. Domingo's affidavit of December 14, 1987. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of doing business nor establish the presumption of doing business. 9

The Corporation Code provides:

Sec. 133. Doing business without a license. — No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

The obtainment of a license prescribed by Section 125 of the Corporation Code is not a condition precedent to the maintenance of any kind of action in Philippine courts by a foreign corporation. However, under the aforequoted provision, no foreign corporation shall be permitted to transact business in the Philippines, as this phrase is understood under the Corporation Code, unless it shall have the license required by law, and until it complies with the law in transacting business here, it shall not be permitted to maintain any suit in local courts. 10 As thus interpreted, any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court. It is not the absence of the prescribed license but "doing business" in the Philippines without such license which debars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. Such license is not necessary if it is not engaged in business in the Philippines. 11

Statutory provisions in many jurisdictions are determinative of what constitutes "doing business" or "transacting business" within that forum, in which case said provisions are controlling there. In others where no such definition or qualification is laid down regarding acts or transactions failing within its purview, the question rests primarily on facts and intent. It is thus held that all the combined acts of a foreign corporation in the State must be considered, and every circumstance is material which indicates a purpose on the part of the corporation to engage in some part of its regular business in the State. 12

No general rule or governing principles can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged in the light of its own peculiar environmental circumstances. 13 The true tests, however, seem to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. 14

As a general proposition upon which many authorities agree in principle, subject to such modifications as may be necessary in view of the particular issue or of the terms of the statute involved, it is recognized that a foreign corporation is "doing," "transacting," "engaging in," or "carrying on" business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts. 15

The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has, however, held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and subject of its organization. 16

This traditional case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction.

For instance, Republic Act No. 5455 17 provides:

Sec. 1. Definitions and scope of this Act. — (1) . . . ; and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

Presidential Decree No. 1789, 18 in Article 65 thereof, defines "doing business" to include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

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

Sec. 1(g). "Doing Business" shall be any act or combination of acts enumerated in Article 65 of the Code. In particular "doing business" includes:

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[2]

(10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and object of the business organization.

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

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

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(d) the phrase "doing business shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

Based on Article 133 of the Corporation Code and gauged by such statutory standards, petitioners are not barred from maintaining the present action. There is no showing that, under our statutory or case law, petitioners are doing, transacting, engaging in or carrying on business in the Philippines as would require obtention of a license before they can seek redress from our courts. No evidence has been offered to show that petitioners have performed any of the enumerated acts or any other specific act indicative of an intention to conduct or transact business in the Philippines.

Accordingly, the certification issued by the Securities and Exchange Commission 20 stating that its records do not show the registration of petitioner film companies either as corporations or partnerships or that they have been licensed to transact business in the Philippines, while undeniably true, is of no consequence to petitioners' right to bring action in the Philippines. Verily, no record of such registration by petitioners can be expected to be found for, as aforestated, said foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to take recourse to our courts.

Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus Investments Code lists, among others —

(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, or by an agent of such foreign firm, not acting independently of the foreign firm amounting to negotiations or fixing of the terms and conditions of sales or service contracts, regardless of where the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. The arrangements agreed upon as to manner, time and terms of delivery of the goods or the transfer of title thereto is immaterial. A foreign firm which does business through the middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.

(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of a principal. Thus, where a foreign firm is represented in the Philippines by a person or local company which does not act in its name but in the name of the foreign firm, the latter is doing business in the Philippines.

as acts constitutive of "doing business," the fact that petitioners are admittedly copyright owners or owners of exclusive distribution rights in the Philippines of motion pictures or films does not convert such ownership into an indicium of doing business which would require them to obtain a license before they can sue upon a cause of action in local courts.

Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, with express authority pursuant to a special power of attorney, inter alia —

To lay criminal complaints with the appropriate authorities and to provide evidence in support of both civil and criminal proceedings against any person or persons involved in the criminal infringement of copyright or concerning the unauthorized importation, duplication, exhibition or distribution of any cinematographic work(s) — films or video cassettes — of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such cinematographic work(s), to initiate and prosecute on behalf of . . . criminal or civil actions in the Philippines against any person or persons unlawfully distributing, exhibiting, selling or offering for sale any films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such works. 21

tantamount to doing business in the Philippines. We fail to see how exercising one's legal and property rights and taking steps for the vigilant protection of said rights, particularly the appointment of an attorney-in-fact, can be deemed by and of themselves to be doing business here.

As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it enters into contracts with residents of the State, where such contracts are consummated outside the State. 22 In fact, a view is taken that a foreign corporation is not doing business in the State merely because sales of its product are made there or other business furthering its interests is transacted there by an alleged agent, whether a corporation or a natural person, where such activities are not under the direction and control of the foreign corporation but are engaged in by the alleged agent as an independent business. 23

It is generally held that sales made to customers in the State by an independent dealer who has purchased and obtained title from the corporation to the products sold are not a doing of business by the corporation. 24 Likewise, a foreign corporation which sells its products to persons styled "distributing agents" in the State, for distribution by them, is not doing business in the State so as to render it subject to service of process therein, where the contract with these purchasers is that they shall buy exclusively from the foreign corporation such goods as it manufactures and shall sell them at trade prices established by it. 25

[3]

It has moreover been held that the act of a foreign corporation in engaging an attorney to represent it in a Federal court sitting in a particular State is not doing business within the scope of the minimum contact test. 26 With much more reason should this doctrine apply to the mere retainer of Atty. Domingo for legal protection against contingent acts of intellectual piracy.

In accordance with the rule that "doing business" imports only acts in furtherance of the purposes for which a foreign corporation was organized, it is held that the mere institution and prosecution or defense of a suit, particularly if the transaction which is the basis of the suit took place out of the State, do not amount to the doing of business in the State. The institution of a suit or the removal thereof is neither the making of a contract nor the doing of business within a constitutional provision placing foreign corporations licensed to do business in the State under the same regulations, limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation. 27

As a consideration aside, we have perforce to comment on private respondents' basis for arguing that petitioners are barred from maintaining suit in the Philippines. For allegedly being foreign corporations doing business in the Philippines without a license, private respondents repeatedly maintain in all their pleadings that petitioners have thereby no legal personality to bring an action before Philippine Courts. 28

Among the grounds for a motion to dismiss under the Rules of 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 does not have the necessary qualification to appear in the case, or does not have the character or representation he claims. 31

On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party in interest, hence grounded on failure to state a cause of action. 32 The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party in interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; 33 whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. 34

Applying the above discussion to the instant petition, the ground available for barring recourse to our courts by an unlicensed foreign corporation doing or transacting business in the Philippines should properly be "lack of capacity to sue," not "lack of personality to sue." Certainly, a corporation whose legal rights have been violated is undeniably such, if not the only, real party in interest to bring suit thereon although, for failure to comply with the licensing requirement, it is not capacitated to maintain any suit before our courts.

Lastly, on this point, we reiterate this Court's rejection of the common procedural tactics of erring local companies which, when sued by unlicensed foreign corporations not engaged in business in the Philippines, invoke the latter's supposed lack of capacity to sue. The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of public policy. It was never intended to favor nor insulate from suit unscrupulous establishments or nationals in case of breach of valid obligations or violation of legal rights of unsuspecting foreign firms or entities simply because they are not licensed to do business in the country. 35

II

We now proceed to the main issue of the retroactive application to the present controversy of the ruling in 20th Century Fox Film Corporation vs . Court of Appeals, et al ., promulgated on August 19, 1988, 36 that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirate copies is necessary.

Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court subject to the determination of probable cause in accordance with the procedure prescribed therefore under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in question, the controlling criterion for the finding of probable cause was that enunciated in Burgos vs. Chief of Staff 37 stating that:

Probable cause for a search warrant is defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched.

According to petitioners, after complying with what the law then required, the lower court determined that there was probable cause for the issuance of a search warrant, and which determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No. 87-053. It is further argued that any search warrant so issued in accordance with all applicable legal requirements is valid, for the lower court could not possibly have been expected to apply, as the basis for a finding of probable cause for the issuance of a search warrant in copyright infringement cases involving videograms, a pronouncement which was not existent at the time of such determination, on December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on August 19, 1988, or over eight months later.

Private respondents predictably argue in support of the ruling of the Court of Appeals sustaining the quashal of the search warrant by the lower court on the strength of that 20th Century Fox ruling which, they claim, goes into the very essence of probable cause. At the time of the issuance of the search warrant involved here, although the 20th Century Fox case had not yet been decided, Section 2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules on Criminal Procedure embodied the prevailing and governing law on the matter. The ruling in 20th Century Fox was merely an application of the law on probable cause. Hence, they posit that there was no law that was retrospectively applied, since the law had been there all along. To refrain from applying the 20th Century Fox ruling, which had supervened as a doctrine promulgated at the time of the resolution of private respondents' motion for reconsideration seeking the quashal of the search warrant for failure of the trial court to require presentation of the master tapes prior to the issuance of the search warrant, would have constituted grave abuse of discretion. 38

Respondent court upheld the retroactive application of the 20th Century Fox ruling by the trial court in resolving petitioners' motion for reconsideration in favor of the quashal of the search warrant, on this renovated thesis:

And whether this doctrine should apply retroactively, it must be noted that in the 20th Century Fox case, the lower court quashed the earlier search warrant it issued. On certiorari, the Supreme Court affirmed the quashal on the ground among others that the master tapes or copyrighted films were not presented for comparison with the purchased evidence of the video tapes to determine whether the latter is an unauthorized reproduction of the former.

If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme Court would have invalidated the warrant just the same considering the very strict requirement set by the Supreme Court for the determination of "probable cause" in copyright infringement cases as enunciated in this 20th Century Fox case. This is so because, as was stated by the Supreme Court in the said case, the master tapes and the pirated tapes must be presented for comparison to satisfy the requirement of "probable cause." So it goes back to the very existence of probablecause. . . . 39

[4]

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play, it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-053. Herein petitioners' consistent position that the order of the lower court of September 5, 1988 denying therein defendants' motion to lift the order of search warrant was properly issued, there having been satisfactory compliance with the then prevailing standards under the law for determination of probable cause, is indeed well taken. The lower court could not possibly have expected more evidence from petitioners in their application for a search warrant other than what the law and jurisprudence, then existing and judicially accepted , required with respect to the finding of probable cause.

Article 4 of the Civil Code provides that "(l)aws shall have no retroactive effect, unless the contrary is provided. Correlatively, Article 8 of the same Code declares that "(j)udicial decisions applying the laws or the Constitution shall form part of the legal system of the Philippines."

Jurisprudence, in our system of government, cannot be considered as an independent source of law; it cannot create law. 40 While it is true that judicial decisions which apply or interpret the Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason that they are part of the legal system of the Philippines. 41

Judicial decisions of the Supreme Court assume the same authority as the statuteitself. 42

Interpreting the aforequoted correlated provisions of the Civil Code and in light of the above disquisition, this Court emphatically declared in Co vs. Court of Appeals, et al. 43 that the principle of prospectivity applies not only to original or amendatory statutes and administrative rulings and circulars, but also, and properly so, to judicial decisions. Our holding in the earlier case of People vs. Jabinal 44 echoes the rationale for this judicial declaration, viz.:

Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the reason why under Article 8 of the New Civil Code, "Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system." The interpretation upon a law by this Court constitutes, in a way, a part of the law as of the date that the law was originally passed, since this Court's construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate. The settled rule supported by numerous authorities is a restatement of the legal maxim " legis interpretatio legis vim obtinet" — the interpretation placed upon the written law by a competent court has the force of law. . . . , but when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof . . . . (Emphasis supplied).

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

. . . . But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. . . . .

The reasoning behind Senarillos vs. Hermosisima 46 that judicial interpretation of a statute constitutes part of the law as of the date it was originally passed, since the Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect, is all too familiar. Such judicial doctrine does not amount to the passage of a new law but consists merely of a construction or interpretation of a pre-existing one, and that is precisely the situation obtaining in this case.

It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. 4 7 To hold otherwise would be to deprive the law of its quality of fairness and justice then, if there is no recognition of what had transpired prior to such adjudication. 48

There is merit in petitioners' impassioned and well-founded argumentation:

The case of 20th Century Fox Film Corporation vs. Court of Appeals, et al., 164 SCRA 655 (August 19, 1988) (hereinafter 20th Century Fox) was inexistent in December of 1987 when Search Warrant 87-053 was issued by the lower court. Hence, it boggles the imagination how the lower court could be expected to apply the formulation of 20th Century Fox in finding probable cause when the formulation was yet non-existent.

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In short, the lower court was convinced at that time after conducting searching examination questions of the applicant and his witnesses that "an offense had been committed and that the objects sought in connection with the offense (were) in the place sought to be searched" (Burgos v. Chief of Staff, et al., 133 SCRA 800). It is indisputable, therefore, that at the time of the application, or on December 14, 1987, the lower court did not commit any error nor did it fail to comply with any legal requirement for the valid issuance of search warrant.

. . . (W)e believe that the lower court should be considered as having followed the requirements of the law in issuing Search Warrant No. 87-053. The search warrant is therefore valid and binding. It must be noted that nowhere is it found in the allegations of the Respondents that the lower court failed to apply the law as then interpreted in 1987. Hence, we find it absurd that it is (sic) should be seen otherwise, because it is simply impossible to have required the lower court to apply a formulation which will only be defined six months later.

Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements which are inexistent at the time they were supposed to have been complied with.

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. . . If the lower court's reversal will be sustained, what encouragement can be given to courts and litigants to respect the law and rules if they can expect with reasonable certainty that upon the passage of a new rule, their conduct can still be open to question? This certainly breeds instability in our system of dispensing justice. For Petitioners who took special effort to redress their grievances and to protect their property rights by resorting to the remedies provided by the law, it is most unfair that fealty to the rules and procedures then obtaining would bear but fruits ofinjustice. 49

[5]

Withal, even the proposition that the prospectivity of judicial decisions imports application thereof not only to future cases but also to cases still ongoing or not yet final when the decision was promulgated, should not be countenanced in the jural sphere on account of its inevitably unsettling repercussions. More to the point, it is felt that the reasonableness of the added requirement in 20th Century Fox calling for the production of the master tapes of the copyrighted films for determination of probable cause in copyright infringement cases needs revisiting and clarification.

It will be recalled that the 20th Century Fox case arose from search warrant proceedings in anticipation of the filing of a case for the unauthorized sale or renting out of copyrighted films in videotape format in violation of Presidential Decree No. 49. It revolved around the meaning of probable cause within the context of the constitutional provision against illegal searches and seizures, as applied to copyright infringement cases involving videotapes.

Therein it was ruled that —

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

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

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

For a closer and more perspicuous appreciation of the factual antecedents of 20th Century Fox, the pertinent portions of the decision therein are quoted hereunder, to wit:

In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2, 1986:

According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact.

On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him it is of his personal knowledge.

At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand.

Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time-honored precept that proceedings to put a man to task as an offender under our laws should be interpreted in strictissimi juris against the government and liberally in favor of the alleged offender.

xxx xxx xxx

This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution.

So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein.

But the glaring fact is that "Cocoon," the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record.) So, that lacking in the requisite presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox.

xxx xxx xxx

The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission of the offense by the private respondents . Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give

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much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application (Emphasis ours).

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

We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the master tapes, unlike the other types of personal properties which may be seized, were available for presentation to the court at the time of the application for a search warrant to determine the existence of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not the present them (Emphasis supplied ). 50

In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the pirated copies . An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. Judicial dicta should always be construed within the factual matrix of their parturition; otherwise a careless interpretation thereof could unfairly fault the writer with the vice of overstatement and the reader with the fallacy of undue generalization.

In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant with the lower court following a formal complaint lodged by petitioners, judging from his affidavit 51 and his deposition, 52 did testify on matters within his personal knowledge based on said complaint of petitioners as well as his own investigation and surveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his affidavit 53 and further expounded in his deposition 54 that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purpose of selling any of the copyrighted films.

Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C. Baltazar, a private researcher retained by Motion Pictures Association of America, Inc. (MPAA, Inc.), who was likewise presented as a witness during the search warrant proceedings. 55 The records clearly reflect that the testimonies of the abovenamed witnesses were straightforward and stemmed from matters within their personal knowledge. They displayed none of the ambivalence and uncertainty that the witnesses in the 20th Century Fox case exhibited. This categorical forthrightness in their statements, among others, was what initially and correctly convinced the trial court to make a finding of the existence of probable cause.

There is no originality in the argument of private respondents against the validity of the search warrant, obviously borrowed from 20th Century Fox, that petitioners' witnesses — NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo and Rene C. Baltazar — did not have personal knowledge of the subject matter of their respective testimonies and that said witnesses' claim that the video tapes were pirated, without stating the manner by which these were pirated, is a conclusion of fact without basis. 56 The difference, it must be pointed out, is that the records in the present case reveal that (1) there is no allegation of misrepresentation, much less a finding thereof by the lower court, on the part of petitioners' witnesses; (2) there is no denial on the part of private respondents that the tapes seized were illegitimate copies of the copyrighted ones not have they shown that they were given any authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the suspected area was undertaken by petitioners' witnesses sufficient to enable them to execute trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which they have personal knowledge.

It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in copyright infringement cases, the presentation of master tapes of the copyrighted films is always necessary to meet the requirement of probable cause and that, in the absence thereof, there can be no finding of probable cause for the issuance of a search warrant. It is true that such master tapes are object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact is made through demonstrations involving the direct use of the senses of the presiding magistrate. 57 Such auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence tending to prove the factum probandum, 58 especially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value. 59

Of course, as a general rule, constitutional and statutory provisions relating to search warrants prohibit their issuance except on a showing of probable cause, supported by oath or affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose to protect against all general searches. 60 Indeed, Article III of our Constitution mandates in Sec. 2 thereof that no search warrant shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized; and Sec. 3 thereof provides that any evidence obtained in violation of the preceding section shall be inadmissible for any purpose in any proceeding.

These constitutional strictures are implemented by the following provisions of Rule 126 of the Rules of Court:

Sec. 3. Requisites for issuing search warrant. — A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized.

Sec. 4. Examination of complainant; record. — The judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath the complainant and any witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with any affidavits submitted.

Sec. 5. Issuance and form of search warrant. — If the judge is thereupon satisfied of the existence of facts upon which the application is based, or that there is probable cause to believe that they exist, he must issue the warrant, which must be substantially in the form prescribed by these Rules.

The constitutional and statutory provisions of various jurisdictions requiring a showing of probable cause before a search warrant can be issued are mandatory and must be complied with, and such a showing has been held to be an unqualified condition precedent to the issuance of a warrant. A search warrant not based on probable cause is a nullity, or is void, and the issuance thereof is, in legal contemplation, arbitrary. 61 It behooves us, then, to review the concept of probable cause, firstly, from representative holdings in the American jurisdiction from which we patterned our doctrines on the matter.

Although the term "probable cause" has been said to have a well-defined meaning in the law, the term is exceedingly difficult to define, in this case, with any degree of precision; indeed, no definition of it which would justify the issuance of a search warrant can be formulated which would cover every state of facts which might arise, and no formula or standard, or hard and fast rule, may be laid down which may be applied to the facts of every situation. 62 As to what acts constitute probable cause seem incapable of definition. 63 There is, of necessity, no exact test. 64

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At best, the term "probable cause" has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is guilty of the offense with which he is charged; 65 or the existence of such facts and circumstances as would excite an honest belief in a reasonable mind acting on all the facts and circumstances within the knowledge of the magistrate that the charge made by the applicant for the warrant is true. 66

Probable cause does not mean actual and positive cause, nor does it import absolute certainty. The determination of the existence of probable cause is not concerned with the question of whether the offense charged has been or is being committed in fact, or whether the accused is guilty or innocent, but only whether the affiant has reasonable grounds for his belief. 6 7 The requirement is less than certainty or proof , but more than suspicion or possibility . 68

In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched. 69 It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is filed, 70

the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter .

As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et al., supra, vis-a-vis the provisions of Sections 3 and 4 of Rule 126, were the prevailing and controlling legal standards, as they continue to be, by which a finding of probable cause is tested. Since the propriety of the issuance of a search warrant is to be determined at the time of the application therefor, which in turn must not be too remote in time from the occurrence of the offense alleged to have been committed, the issuing judge, in determining the existence of probable cause, can and should logically look to the touchstones in the laws theretofore enacted and the decisions already promulgated at the time, and not to those which had not yet even been conceived or formulated.

It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable cause, obviously for the purpose of leaving such matter to the court's discretion within the particular facts of each case. Although the Constitution prohibits the issuance of a search warrant in the absence of probable cause, such constitutional inhibition does not command the legislature to establish a definition or formula for determining what shall constitute probable cause. 71 Thus, Congress, despite its broad authority to fashion standards of reasonableness for searches and seizures, 72 does not venture to make such a definition or standard formulation of probable cause, nor categorize what facts and circumstances make up the same, much less limit the determination thereof to and within the circumscription of a particular class of evidence, all in deference to judicial discretion and probity. 73

Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statesmanship. It serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or mechanical function. There is, to repeat, no law or rule which requires that the existence of probable cause is or should be determined solely by a specific kind of evidence. Surely, this could not have been contemplated by the framers of the Constitution, and we do not believe that the Court intended the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons in infringement cases.

Turning now to the case at bar, it can be gleaned from the records that the lower court followed the prescribed procedure for the issuance of a search warrant: (1) the examination under oath or affirmation of the complainant and his witnesses, with them particularly describing the place to be searched and the things to be seized; (2) an examination personally conducted by the judge in the form of searching questions and answers, in writing and under oath of the complainant and witnesses on facts personally known to them; and, (3) the taking of sworn statements, together with the affidavits submitted, which were duly attached to the records.

Thereafter, the court a quo made the following factual findings leading to the issuance of the search warrant now subject of this controversy:

In the instant case, the following facts have been established: (1) copyrighted video tapes bearing titles enumerated in Search Warrant No. 87-053 were being sold, leased, distributed or circulated, or offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their video outlets, without the written consent of the private complainants or their assignee; (2) recovered or confiscated from defendants' possession were video tapes containing copyrighted motion picture films without the authority of the complainant; (3) the video tapes originated from spurious or unauthorized persons; and (4) said video tapes were exact reproductions of the films listed in the search warrant whose copyrights or distribution rights were owned by complainants.

The basis of these facts are the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Atty. Rico V. Domingo, and Rene C. Baltazar. Motion Pictures Association of America, Inc. (MPAA) thru their counsel, Atty. Rico V. Domingo, filed a complaint with the National Bureau of Investigation against certain video establishments one of which is defendant, for violation of PD No. 49 as amended by PD No. 1988. Atty. Lauro C. Reyes led a team to conduct discreet surveillance operations on said video establishments. Per information earlier gathered by Atty. Domingo, defendants were engaged in the illegal sale, rental, distribution, circulation or public exhibition of copyrighted films of MPAA without its written authority or its members. Knowing that defendant Sunshine Home Video and its proprietor, Mr. Danilo Pelindario, were not authorized by MPAA to reproduce, lease, and possess for the purpose of selling any of its copyrighted motion pictures, instructed his researcher, Mr. Rene Baltazar to rent two video cassettes from said defendants on October 21, 1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented tapes containing Little Shop of Horror. He was issued rental slip No. 26362 dated October 21, 1987 for P10.00 with a deposit of P100.00. Again, on December 11, 1987, the returned to Sunshine Home Video and rented Robocop with rental slip No. 25271 also for P10.00: On the basis of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally went to Sunshine Home Video at No. 6 Mayfair Center, Magallanes Commercial Center, Makati. His last visit was on December 7, 1987. There, he found the video outlet renting, leasing, distributing video cassette tapes whose titles were copyrighted and without the authority of MPAA.

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

The lower court subsequently executed a volte-face, despite its prior detailed and substantiated findings, by stating in its order of November 22, 1988 denying petitioners' motion for reconsideration and quashing the search warrant that —

. . . The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films of private complainants which were found in the possession or control of the defendants. Hence, the necessity of the presentation of the master tapes from which the pirated films were allegedly copied is necessary in the instant case, to establish the existence of probable cause. 75

Being based solely on an unjustifiable and improper retroactive application of the master tape requirement generated by 20th Century Fox upon a factual situation completely different from that in the case at bar, and without anything more, this later order clearly defies elemental fair play and is a gross reversible error. In fact, this observation of the Court in La Chemise Lacoste, S.A. vs. Fernandez, et al., supra, may just as easily apply to the present case:

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A review of the grounds invoked . . . in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. . . .

As correctly pointed out by petitioners, a blind espousal of the requisite of presentation of the master tapes in copyright infringement cases, as the prime determinant of probable cause, is too exacting and impracticable a requirement to be complied with in a search warrant application which, it must not be overlooked, is only an ancillary proceeding. Further, on realistic considerations, a strict application of said requirement militates against the elements of secrecy and speed which underlie covert investigative and surveillance operations in police enforcement campaigns against all forms of criminality, considering that the master tapes of a motion picture required to be presented before the court consists of several reels contained in circular steel casings which, because of their bulk, will definitely draw attention, unlike diminutive objects like video tapes which can be easily concealed. 76 With hundreds of titles being pirated, this onerous and tedious imposition would be multiplied a hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign jurisdictions.

Given the present international awareness and furor over violations in large scale of intellectual property rights, calling for transnational sanctions, it bears calling to mind the Court's admonition also in La Chemise Lacoste, supra, that —

. . . . Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties.

III

The amendment to Section 56 of Presidential Decree No. 49 by Presidential Decree No. 1987, 77 which should here be publicized judicially, brought about the revision of its penalty structure and enumerated additional acts considered violative of said decree on intellectual property, namely, (1) directly or indirectly transferring or causing to be transferred any sound recording or motion picture or other audio-visual works so recorded with intent to sell, lease, publicly exhibit or cause to be sold, leased or publicly exhibited, or to use or cause to be used for profit such articles on which sounds, motion pictures, or other audio-visual works are so transferred without the written consent of the owner or his assignee; (2) selling, leasing, distributing, circulating, publicly exhibiting, or offering for sale, lease, distribution, or possessing for the purpose of sale, lease, distribution, circulation or public exhibition any of the abovementioned articles, without the written consent of the owner or his assignee; and, (3) directly or indirectly offering or making available for a fee, rental, or any other form of compensation any equipment, machinery, paraphernalia or any material with the knowledge that such equipment, machinery, paraphernalia or material will be used by another to reproduce, without the consent of the owner, any phonograph record, disc, wire, tape, film or other article on which sounds, motion pictures or other audio-visual recordings may be transferred, and which provide distinct bases for criminal prosecution, being crimes independently punishable under Presidential Decree No. 49, as amended, aside from the act of infringing or aiding or abetting such infringement under Section 29.

The trial court's finding that private respondents committed acts in blatant transgression of Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination can be reached even in the absence of master tapes by the judge in the exercise of sound discretion. The executive concern and resolve expressed in the foregoing amendments to the decree for the protection of intellectual property rights should be matched by corresponding judicial vigilance and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of guilt.

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 78

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know what works he was indirectly copying, or did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a piracy. 79 The question of whether there has been an actionable infringement of a literary, musical, or artistic work in motion pictures, radio or television being one of fact, 80 it should properly be determined during the trial. That is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for the issuance of a search warrant wherein both lower courts erroneously require the master tapes.

In disregarding private respondent's argument that Search Warrant No. 87-053 is a general warrant, the lower court observed that "it was worded in a manner that the enumerated seizable items bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or intended to be used in the unlawful sale, lease and other unconcerted acts in violation of PD 49 as amended. . . . 81

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

A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the description expresses a conclusion of fact — not of law — by which the warrant officer may be guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued (Sec 2, Rule 126, Revised Rules of Court). . . . If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely to strengthen such evidence. . . .

On private respondents' averment that the search warrant was made applicable to more than one specific offense on the ground that there are as many offenses of infringement as there are rights protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates the rule that a search warrant must be issued only in connection with one specific offense, the lower court said:

. . . . As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49 as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. 83

That there were several counts of the offense of copyright infringement and the search warrant uncovered several contraband items in the form of pirated video tapes is not to be confused with the number of offenses charged. The search warrant herein issued does not violate the one-specific-offense rule.

It is pointless for private respondents to insist on compliance with the registration and deposit requirements under Presidential Decree No. 49 as prerequisites for invoking the court's protective mantle in copyright infringement cases. As explained by the court below:

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Defendants-movants contend that PD 49 as amended covers only producers who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and 50 thereof. Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended. This is not well-taken.

As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic works and PD No. 49 "had done away with the registration and deposit of cinematographic works" and that "even without prior registration and deposit of a work which may be entitled to protection under the Decree, the creator can file action for infringement of its rights". He cannot demand, however, payment of damages arising from infringement. The same opinion stressed that "the requirements of registration and deposit are thus retained under the Decree, not as conditions for the acquisition of copyright and other rights, but as prerequisites to a suit for damages". The statutory interpretation of the Executive Branch being correct, is entitled (to) weight and respect.

xxx xxx xxx

Defendants-movants maintain that complainant and his witnesses led the Court to believe that a crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended, does not require registration and deposit for a creator to be able to file an action for infringement of his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the proscribed acts are shown to exist, an action for infringement may be initiated. 84

Accordingly, the certifications 85 from the Copyright Section of the National Library, presented as evidence by private respondents to show non-registration of some of the films of petitioners, assume no evidentiary weight or significance whatsoever.

Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to works which are required under Section 26 thereof to be registered and with copies to deposited with the National Library, such as books, including composite and cyclopedic works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; and letters, the failure to comply with said requirements does not deprive the copyright owner of the right to sue for infringement. Such non-compliance merely limits the remedies available to him and subjects him to the corresponding sanction.

The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of copyrightable works with the explicit statement that "the rights granted under this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works." This means that under the present state of the law, the copyright for a work is acquired by an intellectual creator from the moment of creation even in the absence of registration and deposit. As has been authoritatively clarified:

The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order to recover damages in an infringement suit. 86

One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners' copyrighted films immeasurably bolsters the lower court's initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the Philippines become an international pariah in the global intellectual community.

WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the lower court dated November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the validity of Search Warrant No. 87-053 is hereby REINSTATED, and said court is DIRECTED to take and expeditiously proceed with such appropriate proceedings as may be called for in this case. Treble costs are further assessed against private respondents.

SO ORDERED.

SECOND DIVISION

[G.R. No. 108946. January 28, 1999]

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

D E C I S I O N

MENDOZA, J.:

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

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

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

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

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

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

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

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

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

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

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

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

Non-Assignment of Error

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

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

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

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

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

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

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

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

Opinion of the Secretary of Justice

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

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

[11]

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

Presentation of Master Tape

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

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

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

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

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

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

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

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

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

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

“RHODA AND ME” “IT’S A DATE”

Set I Set I

a. Unmarried participant a. same

of one gender (searcher) appears on one side of a divider, while three (3) unmarried participants of the other gender are on the other side of the divider. This arrangement is done to ensure that the searcher does not see the searchees.

b. Searcher asks a question b. same

to be answered by each of the searchees. The purpose is to determine who among the searchees is the most compatible with the searcher.

c. Searcher speculates on the c. same

match to the searchee.

d. Selection is made by the d. Selection is

use of compute (sic) methods, based on the or by the way questions are answer of the answered, or similar methods. Searchees.

Set 2 Set 2

Same as above with the genders same

of the searcher and searchees interchanged.

[12]

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

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

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

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

(B) Periodicals, including pamphlets and newspapers;

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

(D) Letters;

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

(F) Musical compositions, with or without words;

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

(H) Reproductions of a work of art;

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

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

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

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

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

(N) Computer programs;

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

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

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

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

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

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

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

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

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

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

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

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

[13]

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

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

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

WHEREFORE, the petition is hereby DISMISSED.

G.R. No. L-36402 March 16, 1987

FILIPINO SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, INC., plaintiff-appellant, vs.BENJAMIN TAN, defendant-appellee.

Lichauco, Picazo & Agcaoili Law Office for plaintiff-appellant.

Ramon A. Nieves for defendant-appellee.

PARAS, J.:

An appeal was made to the Court of Appeals docketed as CA-G.R. No. 46373-R * entitled Filipino Society of Composers, Authors, Publishers, Inc., Plaintiff-Appellant v. Benjamin Tan, Defendant-Appellee, from the decision of the Court of First Instance of Manila, Branch VII in Civil Case No. 71222 ** "Filipino Society of Composers, Authors and Publishers, Inc., Plaintiff v. Benjamin Tan, Defendant," which had dismissed plaintiffs' complaint without special pronouncement as to costs.

The Court of Appeals, finding that the case involves pure questions of law, certified the same to the Supreme Court for final determination (Resolution, CA-G.R. No. 46373-R, Rollo, p. 36; Resolution of the Supreme Court of February 16, 1973 in L-36402, Rollo, p. 38).

The undisputed facts of this case are as follows:

Plaintiff-appellant is a non-profit association of authors, composers and publishers duly organized under the Corporation Law of the Philippines and registered with the Securities and Exchange Commission. Said association is the owner of certain musical compositions among which are the songs entitled: "Dahil Sa Iyo", "Sapagkat Ikaw Ay Akin," "Sapagkat Kami Ay Tao Lamang" and "The Nearness Of You."

On the other hand, defendant-appellee is the operator of a restaurant known as "Alex Soda Foundation and Restaurant" where a combo with professional singers, hired to play and sing musical compositions to entertain and amuse customers therein, were playing and singing the above-mentioned compositions without any license or permission from the appellant to play or sing the same. Accordingly, appellant demanded from the appellee payment of the necessary license fee for the playing and singing of aforesaid compositions but the demand was ignored.

Hence, on November 7, 1967, appellant filed a complaint with the lower court for infringement of copyright against defendant-appellee for allowing the playing in defendant-appellee's restaurant of said songs copyrighted in the name of the former.

Defendant-appellee, in his answer, countered that the complaint states no cause of action. While not denying the playing of said copyrighted compositions in his establishment, appellee maintains that the mere singing and playing of songs and popular tunes even if they are copyrighted do not constitute an infringement (Record on Appeal, p. 11; Resolution, CA-G.R. NO. 46373-R, Rollo, pp. 32-36) under the provisions of Section 3 of the Copyright Law (Act 3134 of the Philippine Legislature).

The lower court, finding for the defendant, dismissed the complaint (Record on Appeal, p. 25).

Plaintiff appealed to the Court of Appeals which as already stated certified the case to the Supreme Court for adjudication on the legal question involved. (Resolution, Court of Appeals, Rollo, p. 36; Resolution of the Supreme Court of February 18, 1973, Rollo, p. 38).

In its brief in the Court of Appeals, appellant raised the following Assignment of Errors:

I

THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE APPELLANT WERE IN THE NATURE OF PUBLIC PROPERTY WHEN THEY WERE COPYRIGHTED OR REGISTERED.

II

THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE APPELLANT WERE PLAYED AND SUNG IN THE SODA FOUNTAIN AND RESTAURANT OF THE APPELLEE BY INDEPENDENT CONTRACTORS AND ONLY UPON THE REQUEST OF CUSTOMERS.

III

THE LOWER COURT ERRED IN HOLDING THAT THE PLAYING AND SINGING OF COPYRIGHTED MUSICAL COMPOSITIONS IN THE SODA FOUNTAIN AND RESTAURANT OF THE APPELLEE ARE NOT PUBLIC PERFORMANCES FOR PROFIT OF THE SAID COMPOSITIONS WITHIN THE MEANING AND CONTEMPLATION OF THE COPYRIGHT LAW.

IV

[14]

THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPELLEE IS LIABLE TO THE APPELLANT FOR FOUR (4) SEPARATE INFRINGEMENTS. (Brief for Appellant, pp. A and B).

The petition is devoid of merit.

The principal issues in this case are whether or not the playing and signing of musical compositions which have been copyrighted under the provisions of the Copyright Law (Act 3134) inside the establishment of the defendant-appellee constitute a public performance for profit within the meaning and contemplation of the Copyright Law of the Philippines; and assuming that there were indeed public performances for profit, whether or not appellee can be held liable therefor.

Appellant anchors its claim on Section 3(c) of the Copyright Law which provides:

SEC. 3. The proprietor of a copyright or his heirs or assigns shall have the exclusive right:

xxx xxx xxx

(c) To exhibit, perform, represent, produce, or reproduce the copyrighted work in any manner or by any method whatever for profit or otherwise; if not reproduced in copies for sale, to sell any manuscripts or any record whatsoever thereof;

xxx xxx xxx

It maintains that playing or singing a musical composition is universally accepted as performing the musical composition and that playing and singing of copyrighted music in the soda fountain and restaurant of the appellee for the entertainment of the customers although the latter do not pay for the music but only for the food and drink constitute performance for profit under the Copyright Law (Brief for the Appellant, pp. 19-25).

We concede that indeed there were "public performances for profit. "

The word "perform" as used in the Act has been applied to "One who plays a musical composition on a piano, thereby producing in the air sound waves which are heard as music ... and if the instrument he plays on is a piano plus a broadcasting apparatus, so that waves are thrown out, not only upon the air, but upon the other, then also he is performing the musical composition." (Buck, et al. v. Duncan, et al.; Same Jewell La Salle Realty Co., 32F. 2d. Series 367).

In relation thereto, it has been held that "The playing of music in dine and dance establishment which was paid for by the public in purchases of food and drink constituted "performance for profit" within a Copyright Law." (Buck, et al. v. Russon No. 4489 25 F. Supp. 317). Thus, it has been explained that while it is possible in such establishments for the patrons to purchase their food and drinks and at the same time dance to the music of the orchestra, the music is furnished and used by the orchestra for the purpose of inducing the public to patronize the establishment and pay for the entertainment in the purchase of food and drinks. The defendant conducts his place of business for profit, and it is public; and the music is performed for profit ( Ibid, p. 319). In a similar case, the Court ruled that "The Performance in a restaurant or hotel dining room, by persons employed by the proprietor, of a copyrighted musical composition, for the entertainment of patrons, without charge for admission to hear it, infringes the exclusive right of the owner of the copyright." (Herbert v. Shanley Co.; John Church Co. v. Hillard Hotel Co., et al., 242 U.S. 590-591). In delivering the opinion of the Court in said two cases, Justice Holmes elaborated thus:

If the rights under the copyright are infringed only by a performance where money is taken at the door, they are very imperfectly protected. Performances not different in kind from those of the defendants could be given that might compete with and even destroy the success of the monopoly that the law intends the plaintiffs to have. It is enough to say that there is no need to construe the statute so narrowly. The defendants' performances are not eleemosynary. They are part of a total for which the public pays, and the fact that the price of the whole is attributed to a particular item which those present are expected to order is not important. It is true that the music is not the sole object, but neither is the food, which probably could be got cheaper elsewhere. The object is a repast in surroundings that to people having limited power of conversation or disliking the rival noise, give a luxurious pleasure not to be had from eating a silent meal. If music did not pay, it would be given up. If it pays, it pays out of the public's pocket. Whether it pays or not, the purpose of employing it is profit, and that is enough. ( Ibid., p. 594).

In the case at bar, it is admitted that the patrons of the restaurant in question pay only for the food and drinks and apparently not for listening to the music. As found by the trial court, the music provided is for the purpose of entertaining and amusing the customers in order to make the establishment more attractive and desirable (Record on Appeal, p. 21). It will be noted that for the playing and singing the musical compositions involved, the combo was paid as independent contractors by the appellant (Record on Appeal, p. 24). It is therefore obvious that the expenses entailed thereby are added to the overhead of the restaurant which are either eventually charged in the price of the food and drinks or to the overall total of additional income produced by the bigger volume of business which the entertainment was programmed to attract. Consequently, it is beyond question that the playing and singing of the combo in defendant-appellee's restaurant constituted performance for profit contemplated by the Copyright Law. (Act 3134 amended by P.D. No. 49, as amended).

Nevertheless, appellee cannot be said to have infringed upon the Copyright Law. Appellee's allegation that the composers of the contested musical compositions waived their right in favor of the general public when they allowed their intellectual creations to become property of the public domain before applying for the corresponding copyrights for the same (Brief for Defendant-Appellee, pp. 14-15) is correct.

The Supreme Court has ruled that "Paragraph 33 of Patent Office Administrative Order No. 3 (as amended, dated September 18, 1947) entitled 'Rules of Practice in the Philippines Patent Office relating to the Registration of Copyright Claims' promulgated pursuant to Republic Act 165, provides among other things that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within the (60) days if made elsewhere, failure of which renders such creation public property." (Santos v. McCullough Printing Company, 12 SCRA 324-325 [1964]. Indeed, if the general public has made use of the object sought to be copyrighted for thirty (30) days prior to the copyright application the law deems the object to have been donated to the public domain and the same can no longer be copyrighted.

A careful study of the records reveals that the song "Dahil Sa Iyo" which was registered on April 20, 1956 (Brief for Appellant, p. 10) became popular in radios, juke boxes, etc. long before registration (TSN, May 28, 1968, pp. 3-5; 25) while the song "The Nearness Of You" registered on January 14, 1955 (Brief for Appellant, p. 10) had become popular twenty five (25) years prior to 1968, (the year of the hearing) or from 1943 (TSN, May 28, 1968, p. 27) and the songs "Sapagkat Ikaw Ay Akin" and "Sapagkat Kami Ay Tao Lamang" both registered on July 10, 1966, appear to have been known and sang by the witnesses as early as 1965 or three years before the hearing in 1968. The testimonies of the witnesses at the hearing of this case on this subject were unrebutted by the appellant. (Ibid, pp. 28; 29 and 30).

Under the circumstances, it is clear that the musical compositions in question had long become public property, and are therefore beyond the protection of the Copyright Law.

[15]

PREMISES CONSIDERED, the appealed decision of the Court of First Instance of Manila in Civil Case No. 71222 is hereby AFFIRMED.

SO ORDERED.

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

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

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

PAREDES, J.:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

8. That said design has not been copyrighted;

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

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

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

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

It is the second right, i.e., the right to publish, republish, multiply and/or distribute copies of the intellectual creation which the state, through the enactment of the copyright law, seeks to protect. The author or his assigns or heirs may have the work copyrighted and once this is legally accomplished any infringement of the copyright will render the infringer liable to the owner of the copyright.

xxx xxx xxx

[16]

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

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

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

xxx xxx ;xxx

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

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

Under the established facts, We find that plaintiff is not entitled to a protection, the provision of the Civil Code, notwithstanding. Paragraph 33 of Patent Office Administrative Order No. 3 (as amended dated September 18, 1947) entitled "Rules of Practice in the Philippines Patent Office relating to the Registration of Copyright Claims" promulgated pursuant to Republic Act 165, provides, among others, that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within sixty (60) day's if made elsewhere, failure of which renders such creation public property. In the case at bar, even as of this moment, there is no copyright for the design in question. We are not also prepared to accept the contention of appellant that the publication of the design was a limited one, or that there was an understanding that only Ambassador Neri should, have absolute right to use the same. In the first place, if such were the condition then Ambassador Neri would be the aggrieved party, and not the appellant. In the second place, if there was such a limited publication or prohibition, the same was not shown on the face of the design. When the purpose is a limited publication, but the effect is general publication, irrevocable rights thereupon become vested in the public, in consequence of which enforcement of the restriction becomes impossible (Nutt vs. National Institute, 31 F [2d] 236). It has been held that the effect of offering for sale a dress, for example manufactured in accordance with an original design which is not protected by either a copyright or a patent, is to divest the owner of his common law rights therein by virtue of the publication of a 'copy' and thereafter anyone is free to copy the design or the dress (Fashion Originators Guild of America v. Federal Trade Commission, 114 F [2d] 80). When Ambassador Neri distributed 800 copies of the design in controversy, the plaintiff lost control of his design and the necessary implication was that there had been a general publication, there having been no showing of a clear indication that a limited publication was intended. The author of a literary composition has a light to the first publication thereof. He has a right to determine whether it shall be published at all, and if published, when, where, by whom, and in what form. This exclusive right is confined to the first publication. When once published, it is dedicated to the public, and the author loses the exclusive right to control subsequent publication by others, unless the work is placed under the protection of the copyright law. (See II Tolentino's Comments on the Civil Code, p. 433, citing Wright v. Eisle 83 N.Y. Supp. 887.)

CONFORMABLY WITH ALL THE FOREGOING, We find that the errors assigned have not been committed by the lower court. The decision appealed from, therefore, should be, as it is hereby affirmed. Costs taxed against plaintiff-appellant.

G.R. No. 131522 July 19, 1999

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

PARDO, J.:

The case before us is a petition for review on certiorari 1 to set aside the (a) decision or the Court of Appeals 2, and (b) the resolution denying petitioners' motion for reconsideration, 3 in which the appellate court affirmed the trial court's dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorney's fees.1âwphi1.nêt

The facts are as follows:

Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN ENGLISH, Series 1.

Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled "DEVELOPING ENGLISH PROFICIENCY" (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them.

In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET.

After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondent's book are similar, if not all together a copy of petitioners' book, which is a case of plagiarism and copyright infringement.

Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the general public the infringed copies of respondent Robles' works.

However, respondents ignored the demands, hence, on July 7, 1988; petitioners filed with the Regional Trial Court, Makati, a complaint for "Infringement and/or unfair competition with damages" 4 against private respondents. 5

[17]

In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the contents of petitioners' works, and without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely affected and substantially diminished the sale of the petitioners' book and caused them actual damages by way of unrealized income.

Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its publication and sale.

Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and caused to be published by respondent Robles with obvious connivance with one another.

On July 27, 1988, respondent Robles filed a motion for a bill of particulars 6 which the trial court approved on August 17, 1988. Petitioners complied with the desired particularization, and furnished respondent Robles the specific portions, inclusive of pages and lines, of the published and copyrighted books of the petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way into respondent's book.

On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint 7 and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and held the publisher without any liability.

On November 28, 1988, respondent Robles filed her answer 8, and denied the allegations of plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors' exercise of the "right to fair use of copyrigthed materials, as guides."

Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern University. 9

During the pre-trial conference, the parties agreed to a stipulation offacts 10 and for the trial court to first resolve the issue of infringement before disposing of the claim for damages.

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

WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for cost of suit.

IT IS SO ORDERED.

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

(s/t) MARVIE R. ABRAHAM SINGSON

Assisting Judge

S. C. Adm. Order No. 124-92 11

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

In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not subject to copyright. Petitioners also assailed the findings of the trial court that they were animated by bad faith in instituting the complaint. 14

On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision state:

It must be noted, however, that similarity of the allegedly infringed work to the author's or proprietor's copyrighted work does not of itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have the same common source, as in this case.

Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from foreign books. She has duly proven that most of the topics or materials contained in her book, with particular reference to those matters claimed by appellants to have been plagiarized were topics or matters appearing not only in appellants and her books but also in earlier books on College English, including foreign books, e.i. Edmund Burke's "Speech on Conciliation", Boerigs' "Competence in English" and Broughton's, "Edmund Burke's Collection."

xxx xxx xxx

Appellant's reliance on the last paragraph on Section II is misplaced. It must be emphasized that they failed to prove that their books were made sources by appellee. 15

[18]

The Court of Appeals was of the view that the award of attorneys' fees was not proper, since there was no bad faith on the part of petitioners Habana et al. in instituting the action against respondents.

On July 12, 1997, petitioners filed a motion for reconsideration, 16 however, the Court of Appeals denied the same in a Resolution 17 dated November 25, 1997.

Hence, this petition.

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

Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of respondent when they refused to withdraw the copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writer's right to fair use, in violation of Section 11 of Presidential Decree No. 49. 18

We find the petition impressed with merit.

The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows:

Sec. 177. Copy or Economic rights. — Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts:

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

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

177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;

177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; (n)

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

177.6 Public performance of the work; and

177.7 Other communication to the public of the work 19

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

Sec. 184.1 Limitations on copyright. — Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright:

(a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49]

(b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D. 49)

xxx xxx xxx

(e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of the author, if appearing in the work is mentioned; 20

In the above quoted provisions, "work" has reference to literary and artistic creations and this includes books and other literary, scholarly and scientific works. 21

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

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

Items in dates and addresses:

He died on Monday, April 15, 1975.

Miss Reyes lives in 214 Taft Avenue,

Manila 22

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

[19]

He died on Monday, April 25, 1975.

Miss Reyes address is 214 Taft Avenue Manila 23

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

The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific.

— Edmund Burke, "Speech on Criticism." 24

On page 100 of the book DEP 25, also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not.

In several other pages 26 the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET.

We believe that respondent Robles' act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners' copyrights.

When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished, there is an infringement of copyright and to an injurious extent, the work is appropriated. 27

In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy. 28

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 29

The respondents' claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec 184 of Republic Act 8293 it is provided that:

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

xxx xxx xxx

(c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned.

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. 30

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

In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the "Author Card". However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration.

The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background.

However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying?

We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners' complaint while pharisaically denying petitioners' demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated.

In cases of infringement, copying alone is not what is prohibited. The copying must produce an "injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners' book materials that were the result of the latter's research work and compilation and misrepresented them as her own. She circulated the book DEP for commercial use did not acknowledged petitioners as her source.

Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners' work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published work if they are

[20]

compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned.

In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The final product of an author's toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it.

SO ORDERED.

Kapunan and Ynares-Santiago, JJ., concur.

Davide, Jr., C.J., I dissent, please see dissenting opinion.

Melo, J., no part, personal reason.

_________________________________________________________________________________________________________________________

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

20TH CENTURY FOX FILM CORPORATION, petitioner, vs.COURT OF APPEALS, EDUARDO M. BARRETO, RAUL SAGULLO and FORTUNE LEDESMA, respondents.

Siguion Reyna, Montecillo & Ongsiako Law Office for petitioner.

B.C. Salazar & Associates for respondents.

GUTIERREZ, JR., J.:

The petitioner questions the application of the constitutional provision against illegal searches and seizures to raids conducted in connection with the government's anti-film piracy campaign. The main issue hinges on whether or not the judge properly lifted the search warrants he issued earlier upon the application of the National Bureau of Investigation on the basis of the complaint filed by the petitioner.

In a letter-complaint dated August 26, 1985, petitioner 20th Century Fox Film Corporation through counsel sought the National Bureau of Investigation's (NBI) assistance in the conduct of searches and seizures in connection with the latter's anti-film piracy campaign. Specifically, the letter-complaint alleged that certain videotape outlets all over Metro Manila are engaged in the unauthorized sale and renting out of copyrighted films in videotape form which constitute a flagrant violation of Presidential Decree No. 49 (otherwise known as the Decree on the Protection of Intellectual Property).

Acting on the letter-complaint, the NBI conducted surveillance and investigation of the outlets pinpointed by the petitioner and subsequently filed three (3) applications for search warrants against the video outlets owned by the private respondents. The applications were consolidated and heard by the Regional Trial Court of Makati, Branch 132.

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

Armed with the search warrants, the NBI accompanied by the petitioner's agents, raided the video outlets and seized the items described therein. An inventory of the items seized was made and left with the private respondents.

Acting on a motion to lift search warrants and release seized properties filed by the private respondents, the lower court issued an order dated October 8, 1985, lifting the three (3) search warrants issued earlier against the private respondents by the court. The dispositive portion of the order reads:

WHEREFORE, the Court hereby orders that Search Warrants Nos. SW- 85-024; issued against Eduardo M. Barreto of the Junction Video, etc., Paranaque, Metro Manila; SW No. 85-025, issued against Raul M. Sagullo of South Video Bug Center, Inc., etc., also of No. 5355 Pres. Avenue BF Homes, Parañaque, Metro Manila; and SW No. 85-026, issued against Fortune A. Ledesma of Sonix Video Services of San Antonio Plaza, Forbes Park, Makati, Metro Manila, be lifted.

Consequently, the articles listed in the returns of the three search warrants which could not be a basis of any criminal prosecution, now in the possession of the National Bureau of Investigation which under the law must be delivered to this Court, but which the NBI failed to do, are hereby ordered to be returned to their owners through their lawyer, Atty. Benito Salazar or his agents or representatives, against proper receipt, to be forwarded to this Court for record purposes, as proof that said properties have been returned to the possession of the rightful owners." (p. 34, Rollo)

The lower court denied a motion for reconsideration filed by the petitioner in its order dated January 2, 1986.

The petitioner filed a petition for certiorari with the Court of Appeals to annul the October 8, 1985 and January 2, 1986 orders of the lower court. The petition was dismissed.

Hence, this petition.

[21]

The main issue hinges on the meaning of "probable cause" within the context of the constitutional provision against illegal searches and seizures (Section 3, Article IV, 1973 Constitution, now, Section 2, Article Ill, 1987 Constitution.

The petitioner maintains that the lower court issued the questioned search warrants after finding the existence of a probable cause justifying their issuance. According to the petitioner, the lower court arrived at this conclusion on the basis of the depositions of applicant NBI's two witnesses which were taken through searching questions and answers by the lower court.

Section 2, Article III of the present Constitution which substantially reproduces Section 3, Article IV of the 1973 Constitution on illegal searches and seizures provides:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized.

This constitutional right protects a citizen against wanton and unreasonable invasion of his privacy and liberty as to his person, papers and effects. We have explained in the case of People v. Burgos (144 SCRA 1) citing Villanueva v. Querubin (48 SCRA 345) why the right is so important:

It is deference to one's personality that lies at the core of this right, but it could be also looked upon as a recognition of a constitutionally protected area, primarily one's home, but not necessarily thereto confined. (Cf. Hoffa v. United States, 385 US 293 119661) What is sought to be guarded is a man's prerogative to choose who is allowed entry to his residence. In that haven of refuge, his individuality can assert itself not only in the choice of who shall be welcome but likewise in the kind of objects he wants around him. There the state, however powerful, does not as such have access except under the circumstances above noted, for in the traditional formulation, his house, however humble, is his castle. Thus is outlawed any unwarranted intrusion by government, which is called upon to refrain from any invasion of his dwelling and to respect the privacies of his life. (Cf Schmerber v. California, 384 US 757 [1966], Brennan, J. and Boyd v. United States, 116 630 [1886]). In the same vein, Landynski in his authoritative work (Search and Seizure and the Supreme Court [1966]), could fitly characterize constitutional right as the embodiment of a "spiritual concept: the belief that to value the privacy of home and person and to afford its constitutional protection against the long reach of government is no less than to value human dignity, and that his privacy must not be disturbed except in case of overriding social need, and then only under stringent procedural safeguards."(ibid, p. 74).

The government's right to issue search warrants against a citizen's papers and effects is circumscribed by the requirements mandated in the searches and seizures provision of the Constitution.

In the case of Burgos, Sr. v. Chief of Staff, AFP (133 SCRA 800), we defined probable cause for a valid search "as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched." This constitutional provision also demands "no less than personal knowledge by the complainant or his witnesses of the facts upon which the issuance of a search warrant may be justified" in order to convince the judge, not the individual making the affidavit and seeking the issuance of the warrant, of the existence of a probable cause. (Alvarez v. Court of First Instance, 64 Phil. 33; Burgos, Sr. v. Chief of Staff, AFP, supra).

In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2,1986:

According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact.

On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him, it is of his personal knowledge.

At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand. "

Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time- honored precept that proceedings to put a man to task as an offender under our laws should be interpreted in strictissimi juris against the government and liberally in favor of the alleged offender.

xxx xxx xxx

This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution.

So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein.

But the glaring fact is that 'Cocoon,' the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record). So, that lacking in the requisite presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox." (pp. 37-39, Rollo)

xxx xxx xxx

The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission

[22]

of the offense by the private respondents. Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application.

All these factors were taken into consideration by the lower court when it lifted the three questioned search warrants. There is no truth, therefore, to the petitioner's allegation that the lower court based its January 2, 1986 order only "on the fact that the original or master copies of the copyrighted films were not presented during the application for search warrants, thus leading it to conclude that it had been "misled by the applicant and his witnesses." (p. 17, Rollo)

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

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

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

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

xxx xxx xxx

xxx xxx xxx

c) Television sets, Video Cassettes Recorders, rewinders, tape head cleaners, accessories, equipments and other machines used or intended to be used in the unlawful reproduction, sale, rental/lease distribution of the above-mentioned video tapes which she is keeping and concealing in the premises above-described." (p. 26, Rollo)

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

xxx xxx xxx

Another factor which makes the search warrants under consideration constitutionally objectionable is that they are in the nature of general warrants. The search warrants describe the articles sought to be seized in this wise:

l] All printing equipment, paraphernalia, paper, ink, photo equipment, typewriters, cabinets, tables communications/recording equipment, tape recorders, dictaphone and the like used and/or connected in the printing of the 'WE FORUM' newspaper and any and all document/communications, letters and facsimile of prints related to "WE FORUM" newspaper.

2] Subversive documents, pamphlets, leaflets, books, and other publications to promote the objectives and purposes of the subversive organizations known as Movement for Free Philippines, Light-a-Fire Movement and April 6 Movement; and

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

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

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

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

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

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

In Stanford v. State of Texas (379 U.S. 476,13 L ed 2nd 431), the search warrant which authorized the search for 'books, records, pamphlets, cards, receipts, lists, memoranda, pictures, recordings and other written instruments concerning the Communist Parties of Texas, and the operations of the Community Party in Texas," was declared void by the U.S. Supreme Court for being too general. In like manner, directions to "seize any evidence in connection with the violation of SDC 13-3703 or otherwise' have been held too general, and that portion of a search warrant which authorized the seizure of any "paraphernalia which could be used to violate Sec. 54-197 of the Connecticut General Statutes [the statute dealing with the crime of conspiracy]"' was held to be a general warrant, and therefore invalid (68 Am. Jur. 2d., pp. 736-737). The description of the articles sought to be seized under the search warrants in question cannot be characterized differently. (at pp. 814-815)

Undoubtedly, a similar conclusion can be deduced from the description of the articles sought to be confiscated under the questioned search warrants.

Television sets, video cassette recorders, reminders and tape cleaners are articles which can be found in a video tape store engaged in the legitimate business of lending or renting out betamax tapes. In short, these articles and appliances are generally connected with, or related to a legitimate business not necessarily involving piracy of intellectual property or infringement of copyright laws. Hence, including these articles without specification and/or particularity that they were really instruments in violating an Anti-Piracy law makes The search warrant too general which could result in the confiscation of all items found in any video store. In fact, this actually happened in the instant case. Thus, the lower court, in its questioned order dated October 8, 1985 said:

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Although the applications and warrants themselves covered certain articles of property usually found in a video store, the Court believes that the search party should have confined themselves to articles that are according to them, evidence constitutive of infringement of copyright laws or the piracy of intellectual property, but not to other articles that are usually connected with, or related to, a legitimate business, not involving piracy of intellectual property, or infringement of copyright laws. So that a television set, a rewinder, and a whiteboard listing Betamax tapes, video cassette cleaners video cassette recorders as reflected in the Returns of Search Warrants, are items of legitimate business engaged in the video tape industry, and which could not be the subject of seizure, The applicant and his agents therefore exceeded their authority in seizing perfectly legitimate personal property usually found in a video cassette store or business establishment." (p. 33, Rollo)

All in all, we find no grave abuse of discretion on the part of the lower court when it lifted the search warrants it earlier issued against the private respondents. We agree with the appellate court's findings to the effect that:

An assiduous examination of the assailed orders reveal that the main ground upon which the respondent Court anchored said orders was its subsequent findings that it was misled by the applicant (NBI) and its witnesses 'that infringement of copyright or a piracy of a particular film have been committed when it issued the questioned warrants.' Stated differently, the respondent Court merely corrected its erroneous findings as to the existence of probable cause and declared the search and seizure to be unreasonable. Certainly, such action is within the power and authority of the respondent Court to perform, provided that it is not exercised in an oppressive or arbitrary manner. Indeed, the order of the respondent Court declaring the existence of probable cause is not final and does not constitute res judicata.

A careful review of the record of the case shows that the respondent Court did not commit a grave abuse of discretion when it issued the questioned orders. Grave abuse of discretion' implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.' But far from being despotic or arbitrary, the assailed orders were motivated by a noble desire of rectifying an error, much so when the erroneous findings collided with the constitutional rights of the private respondents. In fact, the petitioner did not even contest the righteousness and legality of the questioned orders but instead concentrated on the alleged denial of due process of law." (pp. 44-45, Rollo)

The proliferation of pirated tapes of films not only deprives the government of much needed revenues but is also an indication of the widespread breakdown of national order and discipline. Courts should not impose any unnecessary roadblocks in the way of the anti-film piracy campaign. However, the campaign cannot ignore or violate constitutional safeguards. To say that the problem of pirated films can be solved only by the use of unconstitutional shortcuts is to denigrate the long history and experience behind the searches and seizures clause of the Bill of Rights. The trial court did not commit reversible error.

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

SO ORDERED.

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

The Lawphil Project - Arellano Law Foundation

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