Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-30774             January 29, 1929

PHILIPPINE EDUCATION COMPANY, INC., plaintiff-appellee, vs.VICENTE SOTTO and V. R. ALINDADA defendants. V. R. ALINDADA, appellant.

Vicente Sotto for appellant.Gibbs, and McDonough and Roman Ozaeta for appellee.

STATEMENT

Plaintiff alleges that it is a domestic corporation, with its principal office in the City of Manila, of which the defendants are also residents and of legal age; that it is the proprietor and publisher of the monthly magazine Philippine Education Magazine, which is published in the City of Manila and of general circulation in the Philippine Islands; that the defendant, Vicente Sotto, is the proprietor and publisher, and the defendant, V. R. Alindada, is the editor of a weekly newspaper known as The Independent, which is also published in the City of Manila and also of such general circulation; that in December, 1927, plaintiff contracted with Austin Craig for the preparation and publication of an original article to be written by him concerning Mrs. Jose Rizal, to be published exclusively in the Philippine Education Magazine, and that by virtue thereof, the said Craig prepared and wrote an original article entitled "The True Story of Mrs. Rizal," and delivered it to the plaintiff which paid him for it, and thereby became the exclusive owner of the article; that it printed and published the article in its issue of December, 1927, and that it was on the market for sale in the early part of that month; that as such owner the plaintiff has the exclusive right to print and publish the article in its magazine, and that it gave notice in that issue "that all rights thereto were reserved;" that the defendants unlawfully and without the knowledge or consent of the plaintiff appropriated, copied and reproduced and published the article in the weekly issues of The Independent of December 24th and December 31, 1927, without citing the source of its defendants; that upon such discovery, the plaintiff to the fact that the article in question was published "without permission or even the courtesy of an ordinary credit line," and requested that in his next issue that "you state in some prominent place that this article was taken from our magazine, and I request further that you refrain from similar thefts in the future," Also calling his attention to the fact that we have stated plainly "on the title page of our magazine that we reserve all rights, and you infringe on them at your peril." In answer to that latter, the editor protested against the use of the word "thefts," and advised the plaintiff in substance that it had not registered such right under the Copyright Law, and that "any newspaper can reprint the article of Professor Craig without permission from anybody. Will you appreciate this free lesson of law?" And the article as continued was again published in the next issue of The Independent. Plaintiff alleges that by reason of defendants' acts, it was damaged in the sum

of P5,000; that the defendants threaten to, and will continue appropriating and reproducing the article owned by the plaintiff, in voilation of its rights, unless restrained by the court, and plaintiff prays for judgment against the defendants for P5,000, and that they be perpetually enjoined from the publication of any further articles without the knowledge or consent of the plaintiff, and for such other and further relief as the court may deem just and equitable.

To this complaint, the defendants filed a general demurrer upon the ground that it did not state facts sufficient to constitute a cause of action, which was overruled. The defendants then answered in which they made a general and specific denial of all of the material allegations of the complaint, and as a special defense allege:

(a) That the defendant Vicente Sotto is not the owner of the magazine The Independent, nor has he any intervention in the publication of said magazine.

(b) That the plaintiff is not the owner of the article entitled "The True Story of Mrs. Rizal," because it is not registered in its name in the proper registry under Act No. 3134 and the regulation concerning the registration of intellectual property made by the Chief of the Philippine Library and Museum.

(c) That the defendant V. R. Alindada, as the editor of The Independent, published in said magazine the article entitled "The True Story of Mrs. Rizal," written by Austin Craig, in good faith and in the belief that such an interesting historical passage of the Philippines was published by the magazine Philippine Education Magazine for the information and propaganda of the ideas and patriotic feelings of the wife of the apostle of our country's liberties, without any intention to prejudice anybody in his property rights.

Wherefore, the defendants pray the court that the complaint be dismissed and the defendants absolved therefrom, with costs against the plaintiff.

The case was tried and submitted upon the following admitted facts:

(1) That the Philippine Education Co., Inc., is the corporation that contracted with Austin Craig for the preparation of the article "The True Story of Mrs. Rizal," for its exclusive publication in said magazine.

(2) That said article which was prepared by Mr. Austin Craig and published in the "Philippine Education Magazine" is not found registered in the Copyright Office, although in the same magazine, under letter A, on the third page containing the index, there may be read a note "All Rights Reserved."

(3) That the Philippine Education Co., Inc., paid Mr. Austin Craig a certain sum for the preparation of said article.

(4) That The Independent, which is edited under the management of Mr. V. R. Alindada, published the said article written by Austin Craig on December 24, 1927 and December

31st of the same year, making it appear in the heading of the article the name of the author, the first publication of which is marked as Exhibit B.

(5) That on December 23d when The Independent published it, the editor of The Philippine Education Magazine wrote to Mr. V. R. Alindada, editor of The Independent, the letter marked with letter C.

(6) That notwithstanding the letter Exhibit C, the publication of the said article was continued in the issue of The Independent of December 31st, marked Exhibit E, without citing the source of the article but making it appear therein the name of the author.

(7) That the purposes of the judgment that may be rendered in this case, in the event of adverse judgment, Mr. V. R. Alindada, one of the defendants, admits to be solely responsible civilly.

(8) That in relation to the admission just mentioned, the document, Exhibit F, is presented.

Mr. SOTTO. Before presenting our evidence, I request that the defendant Vicente Sotto be excluded from the complaint.

Mr. OZAETA. Without objection.

COURT. According to the petition of the defendant Mr. Vicente Sotto, which is concurred in by counsel for the plaintiff, the case is dismissed with respect to him, without costs.

Upon such issues the lower court rendered judgment against the defendant, V. R. Alindada, for P500, without costs, from which he appeals, contending, first, that the lower court erred in overruling the demurrer to the complaint, and second, in sentencing him to pay P500 to the plaintiff.

 

JOHNS, J.:

The question presented involves the legal construction of Act No. 3134 of the Philippine Legislature, which is entitled "An Act to protect intellectual property," and which is known as the Copyright Law of the Philippine Islands.

Section 2 of the Act defines and enumerates what may be copyrighted which, among other things, includes books, composite and cyclopedic works, manuscripts, commentaries and critical studies.

Section 4 provides:

For the purpose of this Act articles and other writings published without the names of the authors or under pseudonyms are considered as the property of the publishers.

And section 5 says:

Lines, passages, or paragraphs in a book or other copyrighted works may be qouted or cited or reproduced for comment, dissertation, or criticism.

News items, editorial paragraphs, and articles in periodicals may also be reproduced unless they contain a notice that their publication is reserved or a notice of copyright, but the source of the reproduction or original reproduced shall be cited. In case of musical works part of little extent may also be reproduced.

Hence, the real question involved is the construction which should be placed upon the second paragraph of section 5.

It is conceded that neither Professor Craig nor the palintiff applied for or obtained a copyright of the article in question under the terms and provisions of this Act. The defendants contends taht after the article was once published without a copyright in plaintiff's magazine, it then became public property, and that he had a legal right to publish it in his magazine, without giving "the source of the reproduction."

It must be conceded that after the Copyright Law of the United States, he would have that legal right. That is the construction which has been place upon that law by numerous decisions both state and federal of that nation. Be that as it may, we have carefully read and reread the Copyright Law of the United States, and the provisions contained in the second paragraph of section 5 of the Act No. 3134 are removed to be found in the Copyright Law of the United States. Neither does it contain any similar provision, and for want thereof, the decisions of those courts are not in point on the question involved here, and, as appellant says, the legal question presented on this appeal is one of first impression in this court, and the case is submitted without the citation of the decision of any court under the same or similar statute.

Section 4 specifically provides:

For the purpose of this Act articles and other writings published without the names of the authors or under pseudonyms are conidered as the property of the publishers.

The first paragraph of section 5 says:

Lines, passages, or paragraphs in book or other copyrighted works may be qouted or cited or reproduced for comment, dissertion, or criticism.

It is very apparent that this paragraph is confined and limited to a book or other copyrighted works, and, hence, that it does not apply to the publication of the article now in question. The second paragraph of this question is confined to news items, editorial paragraphs and articles in periodicals which may also be reproduced, "unless they contain a notice that their publication is reserved or a notice of copyright, but the source of the reproduction or original reproduce shall be cited." It is admitted that the plaintiff notified the defendant "that we reserve all rights and you

infringe on them at your peril," and that after receipt of the notice, the defendant published the article in question, without giving "the source of the reproduction."

If it had been the purpose and intent of the Legislature to limit the reproduction of "news items, editorial paragraphs, and articles in periodicals," to those which have a notice or copyright only, it never would have said if "they contain a notice that their publication is reserved."

Analyzing the language used, it says, first, that such news items, editorial paragraphs, and articles in periodicals may be reproduced, unless they contain a notice that their publication is reserved, or, second, that may also be reproduced, unless they contain a notice of copyright. But in either event, the law specifically provides that "the source of the reproduction or original reproduced shall be cited," and is not confined or limited to case in which there is "a notice of copyright," and specifically says that in either event "the source of the reproduction or original reproduced shall be cited." To give this section any other construction would be to nullify, eliminate and take from the paragraph the words "they contain a notice that their publication is reserved," and to say that the Legislature never intended to say what it did say. This court must construe the language found in the act. The language is plain, clear, define and certain, and this court has no legal right to say that the Legislature did not mean what it said when it used those words, which is all the more apparent by the use of the word "or" after the word "reserved." In the instant case, the plaintiff did not give notice of its copyright, for the simple reason that it did not have a copyright, but it did notify the defendant that in the publication of the article "we reserved all rights," which was legally equivalent to a notice "that their publication is reserved." To give that paragraph any other construction would eliminate, take from it, and wipe out, the words "that their publication is reserved," and this court has no legal right to do that. It was contended that this construction would nullify the use and value of the whole Copyright Law, but it will bbe notted that this exception is specifically confined and limited to "news items editorial paragraphs, and articles in periodicals," and hence could not be made to apply to any other provisions of the Copyright Law. It will also be noted that in the instant case, the defendant had the legal right to publish the article in question by giving "the source of the reproduction." The plaintiff bought and paid for the article and published it with the notice that "we reserve all rights," and the defendant published the article in question without citing "the source of the reproduction," and for aught that appeared in his paper, the article was purchase and paid for by the defendant.

We are clearly of the opinon that the language in question in the Copyright Law of the Philippine Islands, which is not found in the Copyright Law of the United States, was inserted for a specific purpose, and it was intended to prohibit the doing of the very thing which the defendant did in this case; otherwise, the use of all of those words is a nullity. This construction does not least impair the Copyright Law, except as to "news items, editorial paragraphs, and articles in periodicals," and it protects an enterprising newspaper or magazine that invests its money and pays for the right to publish an original article, and that was the reason why the Legislature saw fit to use the language in question.

Above and beyond all this, it would seem that upon the undisputed facts in this case, common courtesy among newspaper men would suggest that the defendant would give "the source of the reproduction." It would have been a very simple and an easy thing to do.

All things considered, we are clearly of the opinion that the judgment of the lower court should be affirmed, with costs. So ordered.

Malcolm, Ostrand, Romualdez and Villa-Real, JJ., concur.

Separate Opinions

VILLAMOR, J., concurring and dissenting:

I concur in the majority opinion as regards the matter of law, but believe the idemnity imposed by the trial court should be reduced, for lack of proof, to P200, in accordance with section 19 of Act No. 3134.

STREET, J., dissenting:

The effect of this decision is to create an anomalous right, not heretofore recognized by statute or decision, in matter published without copyright protection. The decision rests, as I conceive it, upon an erroneous interpretation of the second paragraph of section 5 of the Copyright Law (Act No. 3134).

It is rudimentary in copyright law that publictaion without copyright constitutes a dedication to the public and leaves any and everybody free to utilize the matter, with or without giving credit. In other words, publication without copyright terminates the literary property which the author had while the material was unpublished. This rule is universal. I here quote from the monographic article on copyright and literary property in Corpus Juris:

The owner of literary or intellectual property, like the owner of any other kind of property, may do what he will with his own; his right is absolute, and exclusive as against the word. Subject to the rule that a general publication operates as a dedication and terminates all private property rights, he is master of situation. If he chooses to keep his production unpublished and private, he may do so, and he has his remedies to prevent or to redress an unauthorized publication. He has the exclusive right to make first publication. (13 C. J., 949.)

Again, I quote from the title "Copyright" in Ruling Case Law:

. . . In other words, the author of a manuscript, so long as he does not publish it, may keep it as a private matter which he is not obliged to give to the world; and in it he has a special interest entitling him to prevent its publication. But this exclusive right is confined to the first publication. When once published it is dedicated to the public, and the author has not, at common law, any exclusive right to multiply copies of it or to control the subsequent issues of copies by others. Therefore a work which has been published by others in any form they may see fit, so far as the copyright law is concerned. (6 R. C. L., 1103.)

An intention radically to change the foundations of copyright law on the point now under consideration is not lightly to be attributed to our Legislature, and this consideration is especially cogent in dealing with an Act of the Philippine Legislature which, in all its more important provisions, is an embodiment of the American copyright law.

And what is the provision which is relied upon by the court as a justification of the present decision? Confronting the eye again with the text, we find that the section in question reads as follows:

SEC. 5. Lines, passages, or paragraphs in a book or other copyrighted works may be quoted or cited or reproduced for comment, dissertation, or criticism.

News items, editorial paragraphs, and articles in periodicals may also be reproduced unless they contain a notice that their publication is reserved or a notice of copyright, but the source of the reproduction or original reproduced shall be cited. In case of musical works parts of little extent may also be reproduced.

Upon this it will be noted that the first paragraph expressly refers to copyrighted matter, the purpose being to define the extent to which copyrighted matter may be quoted or reproduced for purposes of comment, dissertation, or criticism. The second paragraph also evidently deals with copyrighted matter, although the word "copyrighted" is not inserted before the word "periodicals." Nor was it necessary to repeat the word in this paragraph, because the subject matter of said paragraph and the form of expression in which the provision is moulded otherwise show clearly that the Legislature was here dealing with rights in copyrighted matter. Of course this paragraph should be interpreted in pari materia with the first paragraph for it was evidently intended to nulify in certain respects the rule stated in the first paragraph.

Again, it will be observed the the word "copyrighted" is not used before musical works, near the end of the second paragraph. Nevertheless, we imagine that no one would doubt that the Legislature there means copyrighted musical works. It is obvious that, inasmuch as the subject matter treated in section 5 was defined in first paragraph of said section as relating to copyrighted works, it was considered unnecessary to go on repeating the word "copyrighted" before "periodicals" and "musical works."

Furthermore upon comparing the two paragraphs of which section 5 is composed, it will be seen that the first paragraphs defines the right of reproduction of books and works like books, while the second deals with the right of reproduction of certain matter printed in periodicals and musical works. The two paragraphs together cover substantially the field of copyrightable matter; and the peculiarity of the second paragraph is merely that the law-making body there states a special rule with respect to the material with which this paragraph deals. Throughout the reference is clearly to copyrighted matter.

If we fix the attention still more closely upon the contents of the second paragraph, it will be noted that by this paragraph news items, editorial paragraphs, and articles in periodicals may be reproduced "unless they contain a notice that their publication is reserved or a notice of copyright." This perhaps gives a more extensive right of reproduction with respect to the matter

mentioned than is conferred by the first paragraph, subject always to the proviso contained in the clause introduced by the word "unless." By this priviso the statute permits the publisher of periodicals, meaning copyrighted periodicals, absolutely to prohibit the reproduction of news items, editorial paragraphs, and articles, If he gives the notice therein required. The expression "unless they contain a notice that their publication is reserved a notice of copyright" contemplates a reservation or notice of copyright in addition to the doing of the acts required by the statute to be done in order to effect legal copyright. In other words, where the periodical is copyrighted, it requires a special notice reservation or special notice of copyright to prevent reproduction to the extent therein permitted. The part of the paragraph which has caused difficulty in this case is apparently found in the words "or a notice of copyright" in the clause commencing with "unless." Without those words it could hardly be contended that the reservation of rights therein referred to would be effective upon uncopyrighted matter. But the ill-advised insertion of these words in the statute — if such it be — does not render the statute unintelligible, nor does it justify the decision made by the court; for as we have demonstrated, the second paragraph of section 5 is concerned only with copyrighted matter.

If we may be permitted to hazard a conjecture as to the reason why these words "or a notice of copyright" were inserted, an explanation might possibly be found in the reflection that the copyright of a signed article in the periodical may be vested in the author whose name is signed thereto, while the publisher of the periodical may have copyright only in the matter published in the periodical without the names of the authors or under pseudonyms, as indicated in section 4 of the Act. In view of the possibility of conflict between these two interest, it may have been considered desirable to express the clause in the form adopted in the statute.

The interpretation which the majority opinion now place upon this paragraph is such that the clause in question now has about the same meaning that it would have had if written thus: "unless they contain a notice that their publication is reserved, in case either of copyrighted or uncopyrighted matter, or a notice of copyright in case of copyrighted matter" (Emphasis ours). In other words a limiting clause has been so construed as to extend the purview of the general clause which it limits. This is a violent process.

Again, in no place does Act No. 3134 attempt to define the right of literary property in uncopyrighted matter. Its subject matter is copyright and means of acquiring copyright. But assuming that the Legislature designed to create the anomalous right which the court has deduced from the statute, is it not strange that it did not state the duration of this right? Under section 18 of the Act a copyright acquired in accordance with the provisions of the Act endures for thirty years. Does the new right which the court has now discovered have the same duration, or will it continue after copyright has expired?

Heretofore the only way of acquiring an exclusive right to reproduce published matter was to effect copyright. But under the interpretation which the court now place upon this law, there now is another way to acquire the same exclusive right, which is simply not to take copyright but merely to reserv the right of publication. I maintain that even under our statue exclusive rights can only be acquired by effecting copyright in the manner provided by law. This is the fundamental point that underlies all legislature on the subject. The judgment should, in my opinion, be reserved.

The Lawphil Project - Arellano Law Foundation

Sony Corp. of America v. Universal City Studios, IncSony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984)[1], also known as the "Betamax case", is a decision by the Supreme Court of the United States which ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement, but is fair use. The Court also ruled that the manufacturers of home video recording devices, such as Betamax or other VCRs (referred to as VTRs in the case), cannot be liable for infringement. The case was a boon to the home video market as it created a legal safe haven for the technology, which also significantly benefited the entertainment industry through the sale of pre-recorded movies.

The broader legal consequence of the Court's decision was its establishment of a general test for determining whether a device with copying or recording capabilities ran afoul of copyright law. This test has created some interpretative challenges to courts in applying the case to more recent file sharing technologies available for use on home computers and over the Internet

Background of the case

In the 1970s, Sony developed Betamax, a video tape recording format (VHS would later overtake Betamax). Universal Studios and the Walt Disney Company were among the film industry members who were wary of this development, but were also aware that the U.S. Congress was in the final stages of a major revision of U.S. copyright law, and would likely be hesitant to undertake any new protections for the film industry. The companies therefore opted to sue Sony and its distributors in the U.S. District Court for the Central District of California in 1976, alleging that because Sony was manufacturing a device that could potentially be used for copyright infringement, they were thus liable for any infringement that was committed by its purchasers. The complaint additionally included an unfair competition claim under the Lanham Act, but this was dismissed early in the course of the lawsuit.

Two years later, the District Court ruled for Sony, on the basis that noncommercial home use recording was considered fair use, that access to free public information is a First Amendment public interest served by this use. However, this ruling was reversed in part by the United States Court of Appeals for the Ninth Circuit, which held Sony liable for contributory infringement. The court also held that the Betamax was not a staple article because its main purpose was copying. It went on to suggest damages, injunctive relief and compulsory licenses in lieu of other relief.

The court's decision

Conflict within the Court

After hearing oral arguments in the case, the Supreme Court was conflicted as to the outcome. The papers of Justice Thurgood Marshall, released nearly a decade later, reveal that a majority of justices were initially inclined to affirm the Ninth Circuit. Justice Blackmun was assigned to write a majority opinion to that effect, while Justice John Paul Stevens drafted a dissenting opinion. Sensing that some members of the Court might be persuaded to change their votes, Stevens wrote a dissent that read like a majority opinion, and could be changed to one with the substitution of a few words.

Stevens, in his initial draft, expressed great concern with the possibility that an individual might be liable for copyright infringement for copying a single program in his own home, and for his own use. At the same time, Justice Brennan was wavering on affirming based on the presence of non-infringing uses of the technology—but Brennan was not prepared to say that making home copies for repeated personal use did not constitute an infringement. Justice White, noting Brennan's position, suggested that Stevens shift the basis of his opinion away from arguments about whether home-use was, in fact, an infringement. White pointed out that the issue need not be resolved, because the suit was not against home-users, but against the producers of the technology that enabled them.

Justice O'Connor, also initially inclined to affirm the Ninth Circuit, had concerns about the potential to shift the burden of proving harm away from the plaintiff. The District Court had found that the plaintiffs had failed to prove that they were harmed; O'Connor was unable to come to terms with Blackmun's reluctance to agree that the actual harm must be provable.

Stevens therefore adjusted his draft to accommodate the positions taken by Brennan and O'Connor. In so doing, he shifted the vote of the Court from a 6-3 majority for affirming the Ninth Circuit to a 5-4 majority for reversing the Ninth Circuit.

[edit] The majority opinion

The Court's 5-4 ruling to reverse the Ninth Circuit in favor of Sony hinged on the possibility that the technology in question had significant non-infringing uses, and that the plaintiffs were unable to prove otherwise.

On the question of whether Sony could be described as "contributing" to copyright infringement, the Court stated:

[There must be] a balance between a copyright holder's legitimate demand for effective - not merely symbolic - protection of the statutory monopoly, and the rights of others freely to engage in substantially unrelated areas of commerce. Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses....

The question is thus whether the Betamax is capable of commercially significant noninfringing uses ... one potential use of the Betamax plainly satisfies this standard, however it is understood: private, noncommercial time-shifting in the home. It does so both (A) because respondents have no right to prevent other copyright holders from authorizing it for their programs, and (B) because the District Court's factual findings reveal that even the unauthorized home time-shifting of respondents' programs is legitimate fair use….

If there are millions of owners of VTR's who make copies of televised sports events, religious broadcasts, and educational programs ... and if the proprietors of those programs welcome the practice, the business of supplying the equipment that makes such copying feasible should not be stifled simply because the equipment is used by some individuals to make unauthorized reproductions of respondents' works....

When one considers the nature of a televised copyrighted audiovisual work ... and that time-shifting merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact ... that the entire work is reproduced ... does not have its ordinary effect of militating against a finding of fair use.

Combined with the noncommercial, nonprofit nature of time-shifting, he concluded that it was indeed a fair use.

[edit] Blackmun's dissent

Justice Harry Blackmun dissented, joined by Justices Marshall, Powell, and Rehnquist. With regard to the issue of unauthorized time-shifting, he wrote:

Section 106 of the 1976 [Copyright Revision] Act grants the owner of a copyright a variety of exclusive rights in the copyrighted work, including ... the right "to reproduce the copyrighted work in copies or phonorecords." ... Although the word "copies" is in the plural in 107(1), there can be no question that under the Act the making of even a single unauthorized copy is prohibited....

The 1976 Act and its accompanying Reports specify in some detail the situations in which a single copy of a copyrighted work may be made without infringement concerns ... But neither the statute nor its legislative history suggests any intent to create a general exemption for a single copy made for personal or private use....

Fair use may be found when a work is used "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research." ... other examples may be found in the case law. Each of these uses, however, reflects a common theme: each is a productive use, resulting in some added benefit to the public beyond that produced by the first author's work....

It may be that an injunction prohibiting the sale of VTR's would harm the interests of copyright holders who have no objection to others making copies of their programs. But such concerns

should and would be taken into account in fashioning an appropriate remedy once liability has been found. Remedies may well be available that would not interfere with authorized time-shifting at all ... Sony may be able, for example, to build a VTR that enables broadcasters to scramble the signal of individual programs and "jam" the unauthorized recording of them....

The Court explains that a manufacturer of a product is not liable for contributory infringement as long as the product is "capable of substantial noninfringing uses" ... Such a definition essentially eviscerates the concept of contributory infringement. Only the most unimaginative manufacturer would be unable to demonstrate that an image-duplicating product is "capable" of substantial noninfringing uses. Surely Congress desired to prevent the sale of products that are used almost exclusively to infringe copyrights.

[edit] Subsequent developments

One commentator, Pamela Samuelson, has remarked, "...the Sony decision is the most significant legacy of Justice Stevens in the field of intellectual property law and its significance is likely to continue in mediating disputes between copyright industries and creative information technology developers and users of information technology."[2]

“Renting movies every day encourages [people] to go see them when they first come out

”—Film producer Jeff Lourie, 1987[3]

Immediately after their loss in the Supreme Court, the plaintiffs lobbied Congress to pass legislation that would protect them from the effects of home copying. However, in the eight years that had passed since the suit was initially filed, the use of home recording devices had become sufficiently widespread that Congress was not prepared to take any actions to the detriment of the significant population of VCR owners. The film industry lobbied Congress to impose a small statutory royalty on the sale of blank videotapes, but Congress would not do so, noting the increased profits for film studios in the home video rental and sales market.[4] Rather than destroying film studios videotape sales became increasingly important to their revenue. By 1985 sales of prerecorded tapes were about the same as box office revenue,[5] and by 1987 the VCR was credited with causing a "record box-office pace" as videotapes' popularity encouraged consumers' interest in film, thus "sending viewers back to the theaters".[3]

The DMCA modified the law that the Sony decision was based upon in several ways, and new interpretations are still being handed down. Many of the same points of law that were litigated in this case are still being argued in various cases, particularly in light of recent peer-to-peer lawsuits; for example, in A&M Records, Inc. v. Napster, Inc. 239 F.3d (9th Cir. 2001), the Ninth

Circuit Court of Appeals rejected a fair use "space shifting" argument raised as an analogy to the time-shifting argument that prevailed in Sony. The Ninth Circuit further distinguished the cases because the Napster defendants operated a system that allowed them to monitor and control the potentially infringing activities of its users.

In August 2004, in the case of MGM Studios, Inc. v. Grokster, Ltd. [1], the Ninth Circuit Court of Appeals ruled in Grokster's favor due to its "substantial noninfringing uses". The Supreme Court heard oral arguments in the case on March 29, 2005. The Supreme Court decision of June 27, 2005 reversed the decision of the Ninth Court of Appeals "Because substantial evidence supports MGM on all elements, summary judgment for the respondents was error. On remand, reconsideration of MGM's summary judgment motion will be in order." pp. 23–24 380 F.3d 1154, vacated and remanded. The Supreme Court unanimously concurred that Grokster could be liable for inducing copyright infringement. In the opinion, Justice Souter stated that "[t]he rule on inducement of infringement as developed in the early cases is no different today. [A]dvertising an infringing use or instructing how to engage in an infringing use, show an affirmative intent that the product be used to infringe, and a showing that infringement was encouraged overcomes the law's reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use…"

Facts of the Case: 

Sony Corporation of America manufactured and sold the "Betamax" home video tape recorder (VTR). Universal City Studios owned the copyrights to television programs broadcast on public airwaves. Universal sued Sony for copyright infringement, alleging that because consumers used Sony's Betamax to record Universal's copyrighted works, Sony was liable for the copyright infringement allegedly committed by those consumers in violation of the Copyright Act. Universal sought monetary damages, an equitable accounting of profits, and an injunction against the manufacturing and marketing of the VTR's. The District Court denied all relief, holding that the noncommercial home use recording of material broadcast over the public airwaves was a fair use of copyrighted works and did not constitute copyright infringement. Moreover, the court concluded that Sony could not be held liable as contributory infringers even if the home use of a VTR was considered an infringing use. In reversing, the Court of Appeals held Sony liable for contributory infringement.

Question: 

Does Sony's sale of "Betamax" video tape recorders to the general public constitute contributory infringement of copyrighted public broadcasts under the Copyright Act?

Conclusion: 

No. In a 5-4 opinion delivered by Justice John Paul Stevens, the Court held that "[t]he sale of the VTR's to the general public does not constitute contributory infringement of [Universal's] copyrights." The Court concluded that there was a significant likelihood that a substantial number of copyright holders who license their works for free public broadcasts would not object to having their broadcasts time-shifted by private viewers and that Universal failed to show that

time-shifting would cause non-minimal harm to the potential market for, or the value of, their copyrighted works. Justice Stevens wrote for the Court that "[t]he sale of copying equipment...does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial noninfringing uses." For the dissenting minority, Justice Blackmun expressed the views that taping a copyrighted television program is infringement and that the recorder manufacturers were guilty of inducing and materially contributing to the infringement.

Harper & Row, Publishers, Inc. v. Nation Enterprises

Facts of the Case: 

In 1977, former President Gerald Ford contracted with Harper & Row, Publishers, Inc. to publish his memoirs. Harper & Row negotiated a prepublication agreement with Time Magazine for the right to excerpt 7,500 words from Ford's account of his pardon of former President Richard Nixon. Before Time released its article, an unauthorized source provided The Nation Magazine with the unpublished Ford manuscript. Subsequently, The Nation, using approximately 300 words from the manuscript, scooped Time. Harper & Row sued The Nation, alleging violations of the Copyright Revision Act of 1976. The District Court held that The Nation's use of the copyrighted material constituted infringement. In reversing, the Court of Appeals held that Nation's use of the copyrighted material was sanctioned as a fair use.

Question: 

Did the Copyright Revision Act of 1976's fair use doctrine sanction The Nation's unauthorized use of quotations from former President Gerald Ford's unpublished manuscript?

Conclusion: 

No. In a 6-3 opinion delivered by Justice Sandra Day O'Connor, the Court held that The Nation's use of verbatim excerpts from the unpublished manuscript was not a fair use. The Court reasoned that the unpublished nature of a work is a key, though not necessarily determinative, factor tending to negate a defense of fair use. "Under ordinary circumstances, the author's right to control the first public appearance of his undisseminated expression will outweigh a claim of fair use," wrote Justice O'Connor. Accordingly, the Court concluded that the four statutory factors relevant to determining whether the use was fair were not satisfied. In his dissent, Justice William J. Brennan, Jr., argued that the Court was advancing the protection of the copyright owner's economic interest "through an exceedingly narrow definition of the scope of fair use."

Harper & Row v. Nation Enterprises, 471 U.S. 539 (1985)[1], was a United States Supreme Court decision that determined that fair use is not a defense to the appropriation of work by a famous political figure simply because of the public interest in learning of that political figure's account of an historic event.

Facts

In this case, former President Gerald Ford had written a memoir including an account of his decision to pardon Richard Nixon. Ford had licensed his publication rights to Harper & Row, which had contracted for excerpts of the memoir to be printed in TIME. Instead, The Nation magazine published 300 to 400 words of verbatim quotes from the 500-page book without the permission of Ford, Harper & Row, or Time Magazine. Based on this prior publication, Time withdrew from the contract (as it was permitted to by a clause therein), and Harper & Row filed a lawsuit against The Nation for copyright infringement. The Nation asserted as a defense that Ford was a public figure, and his reasons for pardoning Nixon were of vital interest, and that appropriation in such circumstances should qualify as a fair use.

A Federal trial judge ruled in favor of Harper & Row and awarded damages. The 2nd Circuit Court of Appeals reversed the ruling, finding that the Nation's actions in quoting the memoirs were protected by fair use privilege. Harper & Row appealed this ruling to the Supreme Court.

[edit] Issue

The issue before the Court was whether a fair use existed where the purported infringer published a public figure’s unpublished work on an important public event.

[edit] Opinion of the Court

The Court, in an opinion by Justice O'Connor noted that the right of first publication is a particularly strong right, and held that there was no 'public figure' exception to copyright protection, asserting that "the promise of copyright would be an empty one if it could be avoided merely by dubbing the infringement a fair use 'news report' of the book." The court applied the traditional four factor test to determine if the use was fair, and made the following findings:

1. The purpose or character of the use was commercial (to scoop a competitor), meaning that The Nation's use was not a good faith use of Fair Use in simply reporting news.

2. The nature of the copyrighted work was informative.

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole was great, as it constituted a substantial portion of the infringer's work. The Court noted that the infringer could not defend plagiarism by pointing to how much else they could have plagiarized, but did not.

4. The effect of the use on the potential market for the value of the copyrighted work was also great, because there was an actual harm – the cancelled contract.

Justice Brennan dissented, joined by Justice White and Justice Marshall. They felt that the importance of "the robust debate of public issues" outweighed the limited power of copyright ownership.

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.

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 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:

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.

[G.R. No. 111267.  September 20, 1996]

COLUMBIA PICTURES ENTERTAINMENT, INC., MGM ENTERTAINMENT CO., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORP., UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY and WARNER BROTHERS, INC., petitioners, vs. HONORABLE COURT OF APPEALS, 14TH DIVISION and JOSE B. JINGCO of SHOWTIME ENTERPRISES., INC., respondents.

D E C I S I O N

ROMERO, J.:

Petitioners Columbia Pictures Industries, Inc., MGM Entertainment Co., Orion Pictures Corporation, Paramount Pictures Corp., Universal City Studios, Inc., the Walt Disney Company and Warner Brothers, Inc. question the decisionof the Court of Appeals which affirmed the Order of the Regional Trial Court of Pasig, Branch 168, the dispositive portion of which states:

"WHEREFORE, finding that the issuance of the questioned warrants was not supported by probable cause, the 'Urgent Motion (To Lift Search Warrant [No. 23] and for the Return of Seized Articles)' is hereby GRANTED.

Accordingly, the Videogram Regulatory Board (VRB) and/or any Police Agency or other representatives of the VRB are hereby directed to return to the defendant/movant or his representative all articles/items in their possession seized under and by virtue of Search Warrant No. 23.

SO ORDERED."

The antecedent facts leading to the disputed Order are:

Alfredo G. Ramos, intelligence officer of the Videogram Regulatory Board (VRB), received information that private respondent Jose B. Jinco had in his possession pirated videotapes, posters, advertising materials and other items used or intended to be used for the purpose of sale, lease, distribution, circulation or public exhibition of the said pirated videotapes.  Ramos ascertained the information to be true and filed a verified Application for Search Warrant dated July 28, 1986 with prayer for the seizure of the properties described in the search warrant.

On the same date, a hearing was conducted by Judge Florentino A. Flor of the Regional Trial Court of Pasig, Branch 168, wherein Ramos and his two witnesses, Analie Jimenez and Rebecca Benitez-Cruz testified on the need for the issuance of search warrant.

On July 28, 1986, the prayer for the issuance of the search warrant was granted and, on the same date, Search Warrant No. 23 was issued.

On June 2, 1987, private respondent filed a Motion to Quash Search Warrant No. 23 on the grounds that the Search Warrant did not state a specific offense and that, even assuming it stated a specific offense, it covered more than one specific offense.  The VRB opposed the Motion to Quash stating that Search Warrant No. 23 was issued for a single specific offense namely,

violation of Section 56 and other related sections of Presidential Decree No. 49 as amended by Presidential Decree No. 1988.

On September 30, 1987, the trial court denied the Motion to Quash finding that the Search Warrant  was issued for one specific offense.  A Motion for Reconsideration was filed but the same was likewise denied.

Private respondent then filed an Urgent Motion to Lift the Search Warrant and For the Return of the Seized Articles alleging that Search Warrant No. 23 is a general warrant, and that it was issued without probable cause.

On May 22, 1989, the assailed order was issued by Judge Benjamin V. Pelayo, now presiding over Branch 168 of the Pasig RTC, granting the Motion to Quash and ordering the return of all seized articles to private respondent.

Petitioners appealed to the Court of Appeals, which affirmed the said Order in toto.

Hence, this petition.

In granting the Motion to Quash, the trial court relied on the Court's ruling in 20th Century Fox Film Corporation v. Court of Appeals, et al . which involved violation of Presidential Decree No. 49, (otherwise known as the Decree on the Protection of Intellectual Property).  In said case, video outlets were raided pursuant to search warrants issued by the Regional Trial Court of Makati.  However, the search warrants were later lifted by the same court on the ground of lack of probable cause because the master tapes of the alleged pirated tapes were never shown to the lower court.  The Court affirmed the lifting of the search warrants holding that the presentation of the master tapes was necessary for the validity of the search warrants against those who have the pirated films in their possession.

When the trial court granted the Motion to Quash Search Warrant No. 23 on May 22, 1989, it used as its justification the fact that, as the master copies were not presented to the court in its hearing of July 28, 1986, there was no probable cause to issue the said warrant, based on the pronouncements in 20th Century Fox.

Petitioners now question the retroactive application of the 20th Century Fox decision which had not yet been promulgated in 1986 when the search warrant was issued.  Petitioners further argue that, contrary to the trial court's finding, the search warrant was not a general warrant since the description of the items to be seized was specific enough.  It removed from the serving officer any discretion as to which items to seize inasmuch as it described only those items which had a direct relation to the offense for which the search warrant was issued.

The threshold issue that must first be determined is whether or not petitioners have the legal personality and standing to file the appeal.

Private respondent asserts that the proceedings for the issuance and/or quashal of a search warrant are criminal in nature.  Thus, the parties in such a case are the "People" as offended party

and the accused.  A private complainant is relegated to the role of a witness who does not have the right to appeal except where the civil aspect is deemed instituted with the criminal case.

Petitioners, on the other hand, argue that as the offended parties in the criminal case, they have the right to institute an appeal from the questioned order.

From the records it is clear that, as complainants, petitioners were involved in the proceedings which led to the issuance of Search Warrant No. 23.  In People v. Nano, the Court declared that while the general rule is that it is only the Solicitor General who is authorized to bring or defend actions on behalf of the People or the Republic of the Philippines once the case is brought before this Court or the Court of Appeals, if there appears to be grave error committed by the judge or a lack of due process, the petition will be deemed filed by the private complainants therein as if it were filed by the Solicitor General.  In line with this ruling, the Court gives this petition due course and will allow petitioners to argue their case against the questioned order in lieu of the Solicitor General.

As regards the issue of the validity of Search Warrant No. 23, there are two questions to be resolved: first, whether the 20th Century Fox decision promulgated on August 19, 1988 is applicable to the Motion to Quash Search Warrant No. 23 (issued on July 28, 1986).

We hold in the negative.

In the recent Columbia Pictures, et al . v. Court of Appeals, et al . case which resolved the same issue involving the same petitioners but with different respondents, the Court en banc held:

"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 defendant's 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.

       x x x                                x x x                                x x x

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.  (People v. Jabinal, L-30061, February 27, 1974, 55 SCRA 607; Unciano Paramedical College, Inc., et al. v. Court of Appeals, et al., G.R. No. 100335, April 7, 1993, 221 SCRA 285; Tanada, et al. v. Guingona, Jr., etc, et al., G.R. No. 113888, August 19, 1994, 235 SCRA 507).  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.  (De Agbayani v. Philippine National Bank, et al., L-23127, April 29, 1971, 38 SCRA 429)."

Likewise, the Court ruled therein that presentation of the master tapes in such cases is not an absolute requirement for a search warrant to issue:

"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.

       x x x                                x x x                                x x x

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

       x x x                                x x x                                x x x

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.  (City of Manila v. Cabangis, 10 Phil. 151 [1908]; Kabase v. State, 31 Ala. App. 77, 12 So. 2ND, 758, 764).  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 (See Phil. Movie Workers Association v. Premiere Productions, Inc., 92 Phil. 843 [1953]) especially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value.  (See 3 Jones on Evidence, Sec. 1400)."

The instant case also differs from 20th Century Fox in that what herein private respondent put in issue was the application of the ruling in that case, not the conduct of Judge Flor in the issuance of Search Warrant No. 23.  From the records, it is clear that Judge Flor observed all the requirements necessary before the search warrant was issued: he heard the testimonies and studied the despositions of the witnesses for the petitioners, namely Ms. Rebecca Benitez-Cruz, Ms. Analie I. Jimenez and the VRB's Intelligence Officer, Alfredo G. Ramos on the existence of probable cause before issuing the warrant.

Under Sec. 3 and 4, Rule 126 of the Rules of Court, the requirements for the issuance of a valid search warrant are:

"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 by the judge or such other responsible officer authorized by law 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."

Having satisfied these requirements, Judge Flor committed no grave abuse of discretion in issuing the warrant.

Private respondent contends that Search Warrant No. 23 also violates the constitutional requirements of particularity of the description of the warrant, being a general warrant and thus, is null and void.

In several cases, this Court has held that:

"To be valid, a search warrant must be supported by probable cause to be determined by the judge or some other authorized officer after examining the complainant and the witnesses he may produce.  No less important, there must be a specific description of the place to be searched and the things to be seized, to prevent arbitrary and indiscriminate use of the warrant.  (Sec. 3, Art. IV, 1974 Constitution, now Sec. 2, Art. III of the 1986 Constitution; Sec. 3, Rule 126 of the New Rules of Court; Stonehill v. Diokno, 20 SCRA 383; Lime v. Ponce de Leon, 66 SCRA 299; Uy Kheytin v. Villareal, 42 Phil. 886; People v. Veloso, 48 Phil. 169; People v. Rubio, 57 Phil. 384; Bache and Co., (Phil.) Inc. v. Ruiz, 37 SCRA 823; Roan v. Gonzales, 145 SCRA 687)." (Underscoring supplied)

When may a search warrant be deemed to satisfy the legal requirements of specificity?

In Bache and Co., (Phil.) Inc. v. Ruiz, we said:

"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 v. 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. . . . ."

An examination of Search Warrant No. 23 shows that it was worded in such a manner that the enumerated items to be seized bear a direct relation to the offense of violation of Sec. 56 of Presidential Decree No. 49, as amended, which states:

"(1) Transfer or cause to be transferred, directly or indirectly any sound recording or motion picture, or other audio-visual work that has been recorded on a phonograph record, disc, wire, tape, film or other article on which sounds, motion pictures, or other audio visual works are 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 article on which sounds, motion pictures, or other audio visual works are so transferred, WITHOUT THE WRITTEN CONSENT OF HIS ASSIGNEE; or

(2) Sell, lease, distribute, circulate, exhibit, offer for sale, lease, distribution, or possess for the purpose of sale, lease, distribution, circulation or public exhibition, any such article to which the sounds, motion pictures or audio-visual recordings thereon have been so transferred, without the written consent of the owner or his assignee; or

(3) Offer or make available for a fee, rental or any other form of compensation, directly or indirectly 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 owners any phonograph record, disc, wire, tape film or other article on which sound, motion pictures, or other audio-visual recordings may be transferred."

In other words, it authorized only the seizure of articles used or intended to be used in the unlawful sale, lease and other acts in violation of the said decree.  The search warrant ordered the seizure of the following properties:

"(a)  Pirated video tapes of the copyrighted motion pictures/films the titles of which are mentioned in the attached list;

(b)  Posters, advertising leaflets, brochures, invoices, journal, ledgers, and books of accounts bearing/or mentioning the pirated films with titles (as per attached list);

(c)  Television sets, video cassettes records, rewinders, tape head cleaners, accessories, equipment and other machines and paraphernalia or material used or intended to be used in the unlawful sale, lease, distribution, or possession for purpose of sale, lease, distribution, circulation or public exhibition of the above-mentioned pirated video tapes which he is keeping and concealing in the premises above-described."

Clearly, the above items could not be anymore specific as the circumstances will allow since they are all used or intended to be used in the unlawful sale or lease of pirated tapes.  Therefore,

the finding of the appellate court that Search Warrant No. 23 is a "general" warrant is devoid of basis.

WHEREFORE, the assailed decision and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the trial court dated May 22, 1989, are hereby REVERSED and SET ASIDE.  The order of the trial court dated July 28, 1986 upholding the validity of Search Warrant No. 23 is hereby REINSTATED.

Costs against private respondent.

SO ORDERED.

[G.R. No. 110318.  August 28, 1996]

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

D E C I S I O N

REGALADO, J.:

Before us is a petition for review on certiorari of the decision of the Court of Appeals promulgated on July 22, 1992 and its resolution of May 10, 1993 denying petitioners’ motion for reconsideration, both of which sustained the order 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 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)

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

I

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

Private respondents aver that being foreign corporations, petitioners should have such license to be able to maintain an action in Philippine courts.  In so challenging petitioners’ personality to

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

In refutation, petitioners flatly deny that they are doing business in the Philippines, 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.

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. 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.

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

circumstance is material which indicates a purpose on the part of the corporation to engage in some part of its regular business in the State.

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. The true tests, however, seem to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another.

As a general proposition upon which many authorities agree in principle, subject to such modifications as may be necessary in view of the particular issue or of the terms of the statute involved, it is recognized that a foreign corporation is “doing,” “transacting,” “engaging in,” or “carrying on” business in the State when, and ordinarily only when, it has entered the State by its 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.

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.

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 provides:

SECTION 1. Definitions and scope of this Act. — (1) x x x; and the phrase “doing business” shall include soliciting orders, purchases, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives or 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, in Article 65 thereof, defines “doing business” to include soliciting orders, purchases, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the

performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

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

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

xxx       xxx       xxx

(10)    Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to 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 embodies such concept in this wise:

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

xxx       xxx       xxx

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

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

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

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

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

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

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

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

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

of distribution in the Philippines pursuant to any agreement(s) between x x x and the respective owners of copyright in such works.

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. 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.

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. 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.

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. 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.

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.

Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue and that the complaint states no cause of action. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims. On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest, hence grounded on failure to state a cause of action. The term “lack of capacity to sue” should not be confused with the term “lack of personality to sue.”  While the former refers to a plaintiff’s general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party- in-interest.  Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action.

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

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

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, that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirated copies is necessary.

Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court subject to the determination of probable cause in accordance with the procedure prescribed therefor under Sections 3 and 4 of Rule 126.  As of the time of 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 stating that:

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

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

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 probable cause. x x x

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

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

Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the reason why under Article 8 of the New Civil Code, “Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system.” The interpretation upon a law by this Court constitutes, in a way, a part of the law as of the date that the law was originally passed, since this Court’s construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate.  The settled rule supported by numerous authorities is a restatement of the legal maxim “legis interpretation legis vim obtinet” — the interpretation placed upon the written law by a competent court has the force of law.  x x x, but when a doctrine of this Court is overruled and a different view is adopted, the 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. x x x. (Stress supplied).

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

x x x.  But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that “laws shall have no retroactive effect unless the contrary is provided.” This is expressed in the familiar legal maximum lex prospicit, non respicit, the law

looks forward not backward.  The rationale against retroactivity is easy to perceive.  The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).  The same consideration underlies our rulings giving only prospective effect to decisions enunciating new  doctrines. x x x.

The reasoning behind Senarillos vs. Hermosisima 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. 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.

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

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

xxx       xxx       xxx

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

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

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

xxx       xxx       xxx

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

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

xxx       xxx       xxx

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

“So that lacking in persuasive effect, the allegation that master tapes were  viewed  by  the  NBI  and were compared  to the purchased and seized video tapes from the respondents’ establishments, it should be dismissed as not supported by competent evidence and for that

matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein.

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

xxx       xxx       xxx

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

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

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

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 and his deposition, 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 and further expounded in his deposition that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the 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. 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. The difference, it must be pointed out, is that the records in the present case reveal that (1) there is no allegation of misrepresentation, much less a finding thereof by the lower court, on the part of petitioners’ witnesses; (2) there is no denial on the part of private respondents that the tapes seized were illegitimate copies of the copyrighted ones nor have they shown that they were given any authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the suspected area was undertaken by petitioner’s witnesses sufficient to enable them to execute trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which they have personal knowledge.

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

Of course, as a general rule, constitutional and statutory provisions relating to search warrants prohibit their issuance except on a showing of probable cause, supported by oath or affirmation. 

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

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. 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. As to what acts constitute probable cause seem incapable of definition. There is, of necessity, no exact test.

At best, the term “probable cause” has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is guilty of the offense with which he is charged; or the existence of such facts and circumstances as would excite an honest belief in a reasonable mind

acting on all the facts and circumstances within the knowledge of the magistrate that the charge made by the applicant for the warrant is true.

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

In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched. It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is filed, the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter.

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

It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable cause, obviously for the purpose of leaving such matter to the court’s discretion within the particular facts of each case.  Although the Constitution prohibits the issuance of a search warrant in the absence of probable cause, such constitutional inhibition does not command the legislature to establish a definition or formula for determining what shall constitute probable cause. Thus, Congress, despite its broad authority to fashion standards of reasonableness for searches and seizures, 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.

Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statemanship.  It serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or mechanical function.  There is, to repeat, no law or rule which requires that the existence of probable cause is or should be determined solely by a specific kind of evidence. 

Surely, this could not have been contemplated by the framers of the Constitution, and we do not believe that the Court intended the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons in infringement cases.

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

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

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

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

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

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

x x x.  The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films of private complainants which were found in the possession or 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.

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

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

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

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

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

III

The amendment of Section 56 of Presidential Decree No. 49 by Presidential Decree No. 1987, 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.

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. 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, 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.  x x x.”

On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al., 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).  x x x.  If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely  to  strengthen  such  evidence. x x x.

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

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

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

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

Defendants-movants contend that PD 49 as amended covers only producers who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and

50 thereof.  Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended.  This is not well-taken.

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

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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.

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

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

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

The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing

a copyright of the work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order to recover damages in an infringement suit.

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.