THIRD DIVISION

[G.R. No. 148222.  August 15, 2003]

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

D E C I S I O N

CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision[1] of the Court of Appeals reversing the October 31, 1996 decision[2] of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

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

“Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display units simply referred to as light boxes.  These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights.  Pearl and Dean was able to secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units.  The advertising light boxes were marketed under the trademark “Poster Ads”.  The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165.  From 1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufacture its advertising displays.

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa.  Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed.  On September 11, 1985, Pearl and Dean’s General Manager, Rodolfo Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SMI’s Advertising Promotions and Publicity Division Manager, Ramonlito Abano.  Only the contract for SM Makati, however, was returned signed.  On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him that their agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao.  SMI did not bother to reply.

Instead, in a letter dated January 14, 1986, SMI’s house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to non-performance of the terms thereof.  In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis.  In the same letter, he pushed for the signing of the contract for SM Cubao.

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

and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI.  After its contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes.  Some 300 units were fabricated in 1991.  These were delivered on a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and in the fastfood section of SM Cubao.  Upon investigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores.  It further discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMI’s different branches. Pearl and Dean noted that NEMI is a sister company of SMI.

In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the same from SMI’s establishments.  It also demanded the discontinued use of the trademark “Poster Ads,” and the payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and NEMI took down its advertisements for “Poster Ads” from the lighted display units in SMI’s stores.  Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this instant case for infringement of trademark and copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and available technology, without notice of or reference to Pearl and Dean’s copyright.  SMI noted that the registration of the mark “Poster Ads” was only for stationeries such as letterheads, envelopes, and the like.  Besides, according to SMI, the word “Poster Ads” is a generic term which cannot be appropriated as a trademark, and, as such, registration of such mark is invalid.  It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49.  SMI alleged that Pearl and Dean had no cause of action against it and that the suit was purely intended to malign SMI’s good name.  On this basis, SMI, aside from praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and Dean’s Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12, 1988.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged in the business of advertising.  It repleaded SMI’s averments, admissions and denials and prayed for similar reliefs and counterclaims as SMI.”

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

Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and Sections 23 and 24 of RA 166, as amended.  Accordingly, defendants are hereby directed:

(1)     to pay plaintiff the following damages:

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

representing profits

derived by defendants

as a result of infringe-

ment of plaintiff’s copyright

from 1991 to 1992

(b)          moral damages           -  P1,000.000.00

(c)          exemplary damages   -  P1,000,000.00

(d)          attorney’s fees                        -  P1,000,000.00

plus

(e)          costs of suit;

(2)     to deliver, under oath, for impounding in the National Library, all light boxes of SMI which were fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation;

(3)     to deliver, under oath, to the National Library, all filler-posters using the trademark “Poster Ads”, for destruction; and

(4)     to permanently refrain from infringing the copyright on plaintiff’s light boxes and its trademark “Poster Ads”.

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

SO ORDERED.[4]

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

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable class “O” work, we have to agree with SMI when it posited that what was copyrighted were the technical drawings only, and not the light boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellant’s will not extend to the actual object.  It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879).  In that case, Selden had obtained a copyright protection for a book entitled “Selden’s Condensed Ledger or Bookkeeping Simplified” which purported to explain a new system of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in connection with the system explained in the work.  These forms showed the entire operation of a day or a week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Selden’s copyrighted books.  The Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that “to grant a monopoly in the underlying art when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of copyright.” And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled “Bridge Approach – the drawing showed a novel bridge approach to unsnarl traffic congestion”. The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiff’s drawings.  In this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself.  It does not prevent one from using the drawings to construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure.  This is because the copyright does not extend to the structures themselves.

In fine, we cannot find SMI liable for infringing Pearl and Dean’s copyright over the technical drawings of the latter’s advertising display units.

xxx                xxx                   xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the Trademark Law, which reads:

SEC. 20.  Certification of registration prima facie evidence of validity.-  A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark or trade-name, and of the registrant’s exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein.” (underscoring supplied)

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark “Poster Ads” with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the following products:  stationeries such as letterheads, envelopes and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to the finding of liability on the part of the defendants-appellants for their use of the words “Poster Ads”, in the advertising display units in suit. Jurisprudence has interpreted Section 20 of the Trademark Law as “an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration.”  The Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods.  We believe that such omnibus registration is not contemplated by our Trademark Law.

While we do not discount the striking similarity between Pearl and Dean’s registered trademark and defendants-appellants’ “Poster Ads” design, as well as the parallel use by which said words were used in the parties’ respective advertising copies, we cannot find defendants-appellants liable for infringement of trademark. “Poster Ads” was registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants who used the same words in their advertising display units.  Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us.  But, having already done so, it must stand by the consequence of the registration which it had caused.

xxx                xxx                   xxx

We are constrained to adopt the view of defendants-appellants that the words “Poster Ads” are a simple contraction of the generic term poster advertising.  In the absence of any convincing proof that “Poster Ads” has acquired a secondary meaning in this jurisdiction, we find that Pearl and Dean’s exclusive right to the use of “Poster Ads” is limited to what is written in its certificate of registration, namely, stationeries.

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

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

xxx                xxx                   xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.[5]

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

A.      THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI;

B.      THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEAN’S TRADEMARK “POSTER ADS” WAS COMMITTED BY RESPONDENTS SM AND NEMI;

C.      THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT, DESPITE THE LATTER’S FINDING, NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.

D.      THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.[6]

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns of intellectual property law — patents, copyrights, trademarks and unfair competition arising from infringement of any of the first three.  We shall focus then on the following issues:

(1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright?

(2) or should the light box be registered separately and protected by a patent issued by the Bureau of Patents Trademarks and Technology Transfer (now Intellectual Property Office) — in addition to the copyright of the engineering drawings?

(3) can the owner of a registered trademark legally prevent others from using such trademark if it is a mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

Petitioner P & D’s complaint was that SMI infringed on its copyright over the light boxes when SMI had the units manufactured by Metro and EYD Rainbow Advertising for its own account.  Obviously, petitioner’s position was premised on its belief that its copyright over the engineering drawings extended ipso facto to the light boxes depicted or illustrated in said drawings.  In ruling that there was no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings alone and not to the light box itself.  We agree with the appellate court.

First, petitioner’s application for a copyright certificate — as well as Copyright Certificate No. PD-R2588 issued by the National Library on January 20, 1981 — clearly stated that it was for a class “O” work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then prevailing.  Said Section 2 expressly enumerated the works subject to copyright:

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

x x x x x x     x x x

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

x x x x x x     x x x

Although petitioner’s copyright certificate was entitled “Advertising Display Units” (which depicted the box-type electrical devices), its claim of copyright infringement cannot be sustained.

Copyright, in the strict sense of the term, is purely a statutory right.  Being a mere statutory grant, the rights are limited to what the statute confers.  It may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute. [7]  Accordingly, it can cover only the works falling within the statutory enumeration or description.[8]

P & D secured its copyright under the classification class “O” work.  This being so, petitioner’s copyright protection extended only to the technical drawings and not to the light box itself because the latter was not at all in the category of “prints, pictorial illustrations, advertising copies, labels, tags and box wraps.”  Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have referred only to the technical drawings within the category of “pictorial illustrations.”  It could not have possibly stretched out to include the underlying light box.  The strict application[9] of the law’s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its copyright certificate was entitled “Advertising Display Units.”  What the law does not include, it excludes, and for the good reason: the light box was not a literary or artistic piece which could be copyrighted under the copyright law.  And no less clearly, neither could the lack of statutory authority to make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by the National Library as “Advertising Display Units.”

In fine, if SMI and NEMI reprinted P & D’s technical drawings for sale to the public without license from P & D, then no doubt they would have been guilty of copyright infringement.  But this was not the case.  SMI’s and NEMI’s acts complained of by P & D were to have units similar or identical to the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing out to different advertisers.  Was this an infringement of petitioner’s copyright over the technical drawings?  We do not think so.

During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but an “engineering or marketing invention.”[10] Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and trademarks.  In the leading case of Kho vs. Court of Appeals,[11] we ruled that these three legal rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another.  A trademark is any visible sign capable of distinguishing the goods(trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation.  Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point:  if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents cannot be held legally liable for infringement of P & D’s copyright over its technical drawings of the said light boxes, should they be liable instead for infringement of patent? We do not think so either.

For some reason or another, petitioner never secured a patent for the light boxes.  It therefore acquired no patent rights which could have protected its invention, if in fact it really was.  And because it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially using the contraption.  In Creser Precision Systems, Inc. vs. Court of Appeals,[12] we held that “there can be no

infringement of a patent until a patent has been issued, since whatever right one has to the invention covered by the patentarises alone from the grant of patent. x x x (A)n inventor has no common law right to a monopoly of his invention. He has the right to make use of and vend his invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity.   A patent, however, gives the inventor the right to exclude all others.  As a patentee, he has the exclusive right of making, selling or using the invention.[13] On the assumption that petitioner’s advertising units were patentable inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the National Library.

To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement.  No patent, no protection.  The ultimate goal of a patent system is to bring new designs and technologies into the public domain through disclosure.[14] Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint.[15]

On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be protected.  As held in Bauer & Cie vs. O’Donnel,[16] “The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee.  It was passed for the purpose of encouraging useful invention and promoting new and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the exclusive privileges granted the benefit of such inventions and improvements.”

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

“(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances in technology and design, in return for the exclusive right to practice the invention for a number of years.  The inventor may keep his invention secret and reap its fruits indefinitely.  In consideration of its disclosure and the consequent benefit to the community, the patent is granted.  An exclusive enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus enabled to practice it and profit by its use.”[17]

The patent law has a three-fold purpose: “first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the free use of the public.”[18]

It is only after an exhaustive examination by the patent office that a patent is issued.  Such an in-depth investigation is required because “in rewarding a useful invention, the rights and welfare of the community must be fairly dealt with and effectively guarded.  To that end, the prerequisites to obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally strictly enforced.  To begin with, a genuine invention or discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight technological advance in art.”[19]

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

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the technical drawings.

Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize the light box’s eligibility as a patentable invention.  The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only.  But through the simplified procedure of copyright-registration with the National Library — without undergoing the rigor of defending the patentability of its invention before the IPO and the public — the petitioner would be protected for 50 years.  This situation could not have been the intention of the law.

In the oft-cited case of Baker vs. Selden[21], the United States Supreme Court held that only the expression of an idea is protected by copyright, not the idea itself .  In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed.  The publication illustrated blank forms of ledgers utilized in such a system.  The defendant reproduced forms similar to those illustrated in the plaintiff’s copyrighted book.  The US Supreme Court ruled that:

“There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x.  But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.  The mere statement of the proposition is so evident that it requires hardly any argument to support it.  The same distinction may be predicated of every other art as well as that of bookkeeping.  A treatise on the composition and use of medicines, be they old or new; on the construction and use of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would contend that the copyright of the treatise would give the exclusive right to the art or manufacture described therein.   The copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty of its subject matter.  The novelty of the art or thing described or explained has nothing to do with the validity of the copyright.  To give to the author of the book an exclusive property in the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public.  That is the province of letters patent, not of copyright.  The claim to an invention of discovery of an art or manufacture must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and a patent from the government can only secure it.The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated.  Take the case of medicines.  Certain mixtures are found to be of great value in the healing art.  If the discoverer writes and publishes a book on the subject (as regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public.  If he desires to acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter.  He may copyright his book, if he pleases; but that only secures to him the exclusive right of printing and publishing his book.  So of all other inventions or discoveries.The copyright of a book on perspective, no matter how many drawings and illustrations it may contain, gives no exclusive right to the modes of drawing described, though they may never have been known or used before.  By publishing the book without getting a patent for the art, the latter is given to the public.

x  x  x

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any person may practice and use the art itself which he has described and illustrated therein.  The use of the art is a totally different thing from a publication of the book explaining it.  The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books prepared upon the plan set forth in such book.  Whether the art might or might not have been patented, is a question, which is not before us.  It was not patented, and is open and free to the use of the public.  And, of course, in using the art, the ruled lines and headings of accounts must necessarily be used as incident to it.

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

closely than usual with the actual work performed by the operator who uses the art. x  x  x  The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself.  The object of the one is explanation; the object of the other is use.  The former may be secured by copyright.  The latter can only be secured, if it can be secured at all, by letters patent.” (underscoring supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark “Poster Ads” which petitioner’s president said was a contraction of “poster advertising.” P & D was able to secure a trademark certificate for it, but one where the goods specified were “stationeries such as letterheads, envelopes, calling cards and newsletters.”[22] Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate.

Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court,[23] where we, invoking Section 20 of the old Trademark Law, ruled that “the certificate of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use its own symbol  only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a different description.”[24] Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki Kaisha vs. Court of Appeals.[25]

Assuming arguendo that “Poster Ads” could validly qualify as a trademark, the failure of P & D to secure a trademark registration for specific use on the light boxes meant that there could not have been any trademark infringement since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was possible even if P & D had no registration.[26] However, while the petitioner’s complaint in the RTC also cited unfair competition, the trial court did not find private respondents liable therefor. Petitioner did  not appeal this particular point; hence, it cannot now revive its claim of unfair competition.

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

By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase becomes associated with the business or product in the mind of the purchasing public), be entitled to protection against unfair competition.[27] In this case, there was no evidence that P & D’s use of “Poster Ads” was distinctive or well-known. As noted by the Court of Appeals, petitioner’s expert witnesses himself had testified that “ ‘Poster Ads’ was too generic a name. So it was difficult to identify it with any company, honestly speaking.”[28] This crucial admission by its own expert witness that “Poster Ads” could not be associated with P & D showed that, in the mind of the public, the goods and services carrying the trademark “Poster Ads” could not be distinguished from the goods and services of other entities.

This fact also prevented the application of the doctrine of secondary meaning. “Poster Ads” was generic and incapable of being used as a trademark because it was used in the field of poster advertising, the very business engaged in by petitioner. “Secondary meaning” means that a word or phrase originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his property.[29] The admission by petitioner’s own expert witness that he himself could not associate “Poster Ads” with petitioner P & D because it was “too generic” definitely precluded the application of this exception.

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

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

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

SO ORDERED.

FIRST DIVISION

[G.R.  No. 131522.  July 19, 1999]

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

D E C I S I O N

PARDO, J.:

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

The facts are as follows:

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

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

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

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

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

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

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

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

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

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

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

On November 28, 1988, respondent Robles filed her answer[8], and denied the allegations of plagiarism and copying that petitioners claimed.  Respondent stressed that (1) the book DEP is the product

of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors’ exercise of the “right to fair use of copyrigthed materials, as guides.”

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

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

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

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

IT IS SO ORDERED.

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

      “(s/t) MARVIE R. ABRAHAM SINGSON

                                  “Assisting Judge

                    “S. C. Adm. Order No. 124-92”[11]

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

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

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

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

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

x x x

“Appellant’s reliance on the last paragraph on Section 11 is misplaced.  It must be emphasized that they failed to prove that their books were made sources by appellee.”[15]

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

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

Hence, this petition.

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

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

We find the petition impressed with merit.

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

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

177.1 Reproduction of the work or substantial portion of the work;177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work;

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

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

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

177.6 Public performance of the work; and

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

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

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

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

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

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

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

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

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

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

Items in dates and addresses:

He died on Monday, April 15, 1975.

Miss Reyes lives in 214 Taft Avenue,

Manila[22]

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

He died on Monday, April 25, 1975.

Miss Reyes address is 214 Taft Avenue Manila[23]

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

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

--- Edmund Burke, “ Speech on Criticism.”[24]

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

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

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

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

In determining the question of infringement, the amount of matter copied from the copyrighted work is

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

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

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

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

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

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

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

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

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

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

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

We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners’ complaint while pharisaically denying

petitioners’ demand.  It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated.

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

Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed.  Petitioners’ work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough.  In copyrighting books the purpose is to give protection to the intellectual product of an author.  This is precisely what the law on copyright protected, under Section 184.1 (b).  Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned.

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

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

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

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

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

Siguion Reyna, Montecillo & Ongsiako Law Office for petitioner.

B.C. Salazar & Associates for respondents.

 

GUTIERREZ, JR., J.:

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

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

Acting on the letter-complaint, the NBI conducted surveillance and investigation of the outlets pinpointed by the petitioner and subsequently filed three (3) applications for search warrants against the video outlets owned by the private respondents. The applications were consolidated and heard by the Regional Trial Court of Makati, 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) citingVillanueva v. Querubin (48 SCRA 345) why the right is so important:

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

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. 110318 August 28, 1996

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

 

REGALADO, J.:p

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

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

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

On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a quo against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which were enumerated in a list attached to the application; and, television sets, video

cassettes and/or laser disc recordings equipment and other machines and paraphernalia used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the premises above described. In the hearing of the application, NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo, reiterated in substance his averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar. Atty. Rico V. Domingo's deposition was also taken. On the basis of the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the court a quo.

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

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

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

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

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

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

I

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

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

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

The Corporation Code provides:

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

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

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

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

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

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

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

For instance, Republic Act No. 5455 17 provides:

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

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

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

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

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

xxx xxx xxx

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

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

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

xxx xxx xxx

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

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

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

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

(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a

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

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

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

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

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

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

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

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

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

In accordance with the rule that "doing business" imports only acts in furtherance of the purposes for which a foreign corporation was organized, it is held that the mere institution and prosecution or defense of a suit,

particularly if the transaction which is the basis of the suit took place out of the State, do not amount to the doing of business in the State. The institution of a suit or the removal thereof is neither the making of a contract nor the doing of business within a constitutional provision placing foreign corporations licensed to do business in the State under the same regulations, limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation. 27

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

Among the grounds for a motion to dismiss under the Rules of Courtare lack of legal capacity to sue 29 and that the complaint states no cause of action. 30 Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims.  31 On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party in interest, hence grounded on failure to state a cause of action. 32 The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party in interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; 33 whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. 34

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

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

II

We now proceed to the main issue of the retroactive application to the present controversy of the ruling in20th Century Fox Film Corporation vs. Court of Appeals, et al., promulgated on August 19, 1988, 36 that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirate copies is necessary.

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

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

According to petitioners, after complying with what the law then required, the lower court determined that there was probable cause for the issuance of a search warrant, and which determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No. 87-053. It is further argued that any search warrant so issued in accordance with all applicable legal requirements is valid, for the lower court could not

possibly have been expected to apply, as the basis for a finding of probable cause for the issuance of a search warrant in copyright infringement cases involving videograms, a pronouncement which was not existent at the time of such determination, on December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on August 19, 1988, or over eight months later.

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

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

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

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

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

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

Jurisprudence, in our system of government, cannot be considered as an independent source of law; it cannot create law. 40 While it is true that judicial decisions which apply or interpret the Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason that they are part of the legal system of the Philippines. 41 Judicial decisions of the Supreme Court assume the same authority as the statuteitself. 42

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

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

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

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

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

It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. 47 To hold otherwise would be to deprive the law of its quality of fairness and justice then, if there is no recognition of what had transpired prior to such adjudication. 48

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

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

xxx xxx xxx

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

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

Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements

which are inexistent at the time they were supposed to have been complied with.

xxx xxx xxx

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

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

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

Therein it was ruled that —

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

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

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

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

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

According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The

witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact.

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

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

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

xxx xxx xxx

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

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

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

xxx xxx xxx

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

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

We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the master tapes, unlike the other types of personal properties which may be seized, were available for presentation to the court at the time of the application for a search warrant  to determine the

existence of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not the present them (Emphasis supplied ). 50

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

In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant with the lower court following a formal complaint lodged by petitioners, judging from his affidavit  51 and his deposition, 52 did testify on matters within his personal knowledge based on said complaint of petitioners as well as his own investigation and surveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his affidavit 53 and further expounded in his deposition54 that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purpose of selling any of the copyrighted films.

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

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

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

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

describing the place to be searched and the things to be seized; and Sec. 3 thereof provides that any evidence obtained in violation of the preceding section shall be inadmissible for any purpose in any proceeding.

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

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

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

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

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

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

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

Probable cause does not mean actual and positive cause, nor does it import absolute certainty. The determination of the existence of probable cause is not concerned with the question of whether the offense charged has been or is being committed in fact, or whether the accused is guilty or innocent, but only whether the affiant has reasonable grounds for his belief. 67 The requirement is less than certainty or proof , but more than suspicion or possibility. 68

In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched. 69 It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is filed, 70 the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter.

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

even been conceived or formulated.

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

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

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

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

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

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

without the authority of MPAA.

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

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

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

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

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

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

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

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

III

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

amended, aside from the act of infringing or aiding or abetting such infringement under Section 29.

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

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

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

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

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

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

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

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

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

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

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

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

xxx xxx xxx

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

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

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

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

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

One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners' copyrighted films immeasurably bolsters the lower court's initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have

stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the Philippines become an international pariah in the global intellectual community.

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

SO ORDERED.

THIRD DIVISION

[G.R. No. 156804.  March 14, 2005]

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

D E C I S I O N

GARCIA, J.:

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

From the petition, the comment thereon of private respondents, their respective annexes, and other pleadings filed by the parties, the Court gathers the following relevant facts:

In a criminal complaint filed with the Department of Justice (DOJ), the Videogram Regulatory Board (VRB)[3]  charged herein private respondents James Uy, David Chung, Elena Lim and another officer of respondent Solid Laguna Corporation (SLC) with violation of Presidential Decree (PD) No. 1987.[4] As alleged in the complaint, docketed asI.S. No. 2000-1576, the four (4) were engaged in the replication, reproduction and distribution of videograms without license and authority from VRB. On account of this and petitioners’ own complaints for copyright infringement, the National Bureau of Investigation (NBI), through Agent Ferdinand M. Lavin, applied on September 18, 2000, with the Regional Trial Court at Dasmariñas, Cavite, Branch 80, presided by the respondent judge, for the issuance of search warrants against private respondents David Chung, James Uy, John and Jane Does, doing business under the name and style “Media Group” inside the factory and production facility of SLC at Solid corner Camado Sts., Laguna International Industrial Park, Biñan, Laguna.[5]

During the proceedings on the application, Agent Lavin presented, as witnesses, Rodolfo Pedralvez, a deputized agent of VRB, and Rene C. Baltazar, an investigator retained by the law firm  R.V. Domingo &

Associates, petitioners’ attorney-in-fact.  In their sworn statements, the three stated that petitioners sought their assistance, complaining about the manufacture, sale and distribution of various titles of compact discs (CDs) in violation of petitioners’ right as copyright owners; that acting on the complaint, Agent Lavin and the witnesses conducted an investigation, in the course of which unnamed persons informed them that allegedly infringing or pirated discs were being manufactured somewhere in an industrial park in Laguna; that in the process of their operation, they were able to enter, accompanied by another unnamed source, the premises of SLC and to see various replicating equipment and stacks of CDs; and that they were told by their anonymous source that the discs were being manufactured in the same premises.   They also testified that private respondents were (1) engaged in the reproduction or replication of audio and video compacts discs without the requisite authorization from VRB, in violation of Section 6 of PD No. 1987, presenting a VRB certification to such effect; and (2) per petitioners’ certification and a listing of Sony music titles, infringing on petitioners’ copyrights in violation of Section 208 of Republic Act (RA) No. 8293, otherwise known as Intellectual Property Code.[6]

On the basis of the foregoing sworn statements, the respondent judge issued Search Warrant No. 219-00[7] for violation of Section 208 of R.A. No. 8293 and Search Warrant No. 220-00[8] for violation of Section 6 of PD No. 1987.

The following day, elements of the Philippine National Police Criminal Investigation and Detection Group, led by PO2 Reggie Comandante, enforced both warrants and brought the seized items to a private warehouse of Carepak Moving and Storage at 1234 Villonco Road, Sucat, Paranaque City and their custody turned over to VRB.[9] An inventory of seized items,[10] as well as a “Return of Search Warrant” were later filed with the respondent court.

Meanwhile, the respondents in I.S. No. 2000-1576 belabored to prove before the DOJ Prosecutorial Service that, since 1998 and up to the time of the search, they were licensed by VRB to operate as replicator and duplicator of videograms.

On the stated finding that “respondents can not . . . be considered an unauthorized reproducers of videograms”, being “licensed to engage in reproduction in videograms under SLC in which they are the officers and/or or officials”, the DOJ, via a resolution dated January 15, 2001,[11] dismissed VRB’s complaint in I.S. No. 2000-1576.

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

Eventually, the DOJ denied VRB’s motion for reconsideration, prompting private respondents to move anew for the quashal of the search warrants. In its supplement to motion, private respondents attached copies of SLC’s license as videogram duplicator and replicator.

In an order dated October 30, 2001,[13] the respondent judge, citing the January 15, 2001 DOJ resolution in I.S. No. 2000-1576, granted private respondents’ motion to quash, as supplemented, dispositively stating:

“Nonetheless, such being the case, the aforesaid Search Warrants are QUASHED”

Petitioners forthwith sought clarification on whether or not the quashal order referred to both search warrants or to Search Warrant No. 220-00 alone, since it was the latter that was based on the charge of violation of PD No. 1987.[14] The respondent judge, in a modificatory order dated January 29, 2002,[15] clarified that her previous order quashed only Search Warrant No. 220-00.

Meanwhile, or on November 22, 2001, petitioners filed with the DOJ an affidavit-complaint, docketed thereat as I.S. No. 2001-1158, charging individual private respondents with copyright infringement in

violation of Sections 172 and 208 in relation to other provisions of RA No. 8293.[16] Attached to the affidavit-complaint were certain documents and records seized from SLC’s premises, such as production and delivery records.

Following their receipt of DOJ-issued subpoenas to file counter-affidavits, private respondents moved, in the search warrant case, that they be allowed to examine the seized items to enable them to intelligently prepare their defense.[17] On January 30, 2002, respondent judge issued an order allowing the desired examination, provided it is made under the supervision of the court’s sheriff and in the “presence of the applicant of Search Warrant No. 219-00”.[18]

On February 8, 2002, the parties, represented by their counsels, repaired to the Carepak warehouse. An NBI agent representing Agent Lavin appeared.  The examination, however, did not push through on account of petitioners’ counsel insistence on Agent Lavin’s physical presence.[19] Private respondents were able to make an examination on the following scheduled setting, February 15, 2002, albeit it was limited, as the minutes of the inspection discloses, to inspecting only one (1) box containing 35 assorted CDs, testing stampers, diskettes, a calendar, organizers and some folders and documents. The minutes also contained an entry stating -  “Other items/machines were not examined because they cannot be identified as they are not properly segregated from other items/machines in the warehouse. The  parties agreed to schedule another examination on (to be agreed by the parties) after the items/machines subject of the examination shall have been segregated from the other items/machines by Carepak Moving and Storage , Inc.”[20]

During the preliminary investigation conducted on February 26, 2002 in I.S. No. 2001-1158, however, petitioners’ counsel objected to any further examination, claiming that such exercise was a mere subterfuge to delay proceedings.[21]

On April 11, 2002, individual private respondents, through counsel, filed a “Motion To Quash Search Warrant (And To Release Seized Properties)” grounded on lack of probable cause to justify issuance of search warrant, it being inter alia alleged that the applicant and his witnesses lacked the requisite personal knowledge to justify the valid issuance of a search warrant; that the warrant did not sufficiently describe the items to be seized; and that the warrant was improperly enforced.[22] To this motion to quash, petitioners interposed an opposition dated May 7, 2002 predicated on four (4) grounds.[23] On June 26, 2002, respondent SLC filed a Manifestation joining its co-respondents in, and adopting, their motion to quash.[24]

On June 25, 2002, the respondent judge issued the herein first assailed order quashing Search Warrant No. 219-00 principally on the ground that the integrity of the seized items as evidence had been compromised, commingled as they were with other articles. Wrote the respondent judge:

Based on the report submitted, it appears that on February 15, 2002, an examination was actually conducted.  Unfortunately, the alleged seized items were commingled with and not segregated from thousands of other items stored in the warehouse.  Only one box . . . were (sic) examined in the presence of both parties with the sheriff, such that another date was set . . . . On February 22, 2002, during the hearing before the Department of Justice (DOJ), [petitioners’ counsel] Atty. Arevalo manifested their objection to the further examination on the alleged ground that all of the items subject of the DOJ complaint have been examined.

Analyzing the report and the incidents relative thereto, it shows that the items subject of the questioned Search Warrant were commingled with other items in the warehouse of Carepak resulting in the failure to identify the machines and other items subject of this Search Warrant, while the other items enumerated in the said Inventory of Seized Items and Certification of Legality, Orderliness and Regularity in the Execution and enforcement of Search Warrants were not examined, hence, the charge imputed against the respondents could not be established as the evidence to show such violation fails to determine the culpability of said respondents, thus, violating their constitutional rights.[25]

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

erroneously based on a ground outside the purview of a motion to quash.[26]To this motion, private respondents interposed an opposition, against which petitioners countered with a reply.

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

Careful scrutiny of the records of the case reveals that the application of the above-entitled case stemmed from the application for Search Warrant alleging that the respondent was not licensed to duplicate or replicate CDs and VCDs. The Court was misled when the applicants declared that Solid Laguna Corporation (SLC) is not licensed to engage in replicating/duplicating CDs and VCDs, when in truth and in fact, SLC was still a holder of a valid and existing VRB license.  Considering the fact that respondent was duly licensed which facts (sic) was not laid bare to this Court when the application for writ was filed by the private complainant through the National Bureau of Investigation, this Court hereby recalls and quashes the above writ.

Lastly, taking into account that respondents were licensed to engage in replicating/duplicating CDs and VCDs, the issuance of search warrant was of no force and effect as there was absence of probable cause to justify said issuance. xxx[27]

Hence, petitioners’ present recourse.

In a Resolution dated February 19, 2003,[28] the Court issued a temporary restraining order enjoining the respondents from implementing and enforcing the respondent judge’s questioned orders.

Petitioners ascribe on the respondent judge the commission of grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing the first assailed order in that:

1.  It was based on a ground that is not a basis for quashal of a search warrant, i.e., private respondents’ failure to examine the seized items, which ground is extraneous to the determination of the validity of the issuance of the search warrant.

2.  Public respondent, in effect, conducted a “preliminary investigation” that absolved the private respondents from any liability for copyright infringement.

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

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

Private respondents filed their Comment on May 13, 2003, essentially reiterating their arguments in the “Motion To Quash Search Warrant (And To Release Seized Properties)”. Apart therefrom, they aver that petitioners violated the rule on hierarchy of courts by filing the petition directly with this Court. As to be expected, petitioners’ reply to comment traversed private respondents’ position.

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

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

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

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

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

It has repeatedly been said that one’s house, however, humble is his castle where his person, papers and effects shall be secured and whence he shall enjoy undisturbed privacy except, to borrow from Villanueva vs. Querubin,[30] “in case of overriding social need and then only under the stringent procedural safeguards.” The protection against illegal searches and seizure has found its way into our 1935 and 1973 Constitutions and is now embodied in Article III, Section 2 of the 1987 Constitution, thus -

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

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

Sec. 4. Requisites for issuing search warrant. – A search warrant shall not issue but upon probable cause  . . . to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized.

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

SEC.  5.  Examination of the complainant; record. The judge must, before issuing the warrant, personally examine in form of searching questions and answers, in writing and under oath, the complainant and any witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with any affidavits submitted.

To prevent stealthy encroachment upon, or gradual depreciation of the right to privacy, a liberal construction in search and seizure cases is given in favor of the individual. Consistent with this postulate, the presumption of regularity is unavailing in aid of the search process when an officer undertakes to justify it.[31] For, the presumption juris tantumof regularity cannot, by itself, prevail against the constitutionally protected rights of an individual because zeal in the pursuit of criminals cannot ennoble the use of arbitrary methods that the Constitution itself detests.[32]

A core requisite before a warrant shall validly issue is the existence of a probable cause, meaning “the existence of such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place to be searched”.[33] And when the law speaks of facts, the reference is to facts, data or information personally known to the applicant and the witnesses he may present. Absent the element of personal knowledge by the applicant or his witnesses of the facts upon which the issuance of a search warrant may be justified, the warrant is deemed not based on probable cause and is a nullity, its issuance being, in legal contemplation, arbitrary, as held by us in Columbia Pictures, Inc. vs. Court of Appeals.[34] Testimony based on what is supposedly told to a witness, being patent hearsay and, as rule, of no evidentiary weight[35] or probative value, whether objected to or not,[36] would, alone, not suffice under the law on the existence of probable cause.

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

Petitioners argue that the instant petition is on all fours with Columbia,[37] wherein the en banc Court upheld the validity of search warrants based on the testimonies of the applicant and his witnesses who

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

We are not persuaded.

In Columbia, the issuing court probed the applicant’s and his witnesses’ personal knowledge of the fact of infringement.  It was, however, determined by this Court that during the application hearing, therein petitioner’s attorney-in-fact, a witness of the applicant, “stated in his affidavit and further expounded in his deposition that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purposes of selling any of the copyrighted films.”[38]Significantly, the Court, in upholding the validity of the writ issued upon complaint of Columbia Pictures, Inc., et al., stated that “there is no allegation of misrepresentation, much less finding thereof by the lower court, on the part of petitioners’ witnesses.”[39]

Therein lies the difference with the instant case.

Here, applicant Agent Lavin and his witnesses, Pedralvez and Baltazar, when queried during the application hearing how they knew that audio and video compact discs were infringing or pirated, relied for the most part on what alleged unnamed sources told them and/or on certifications or lists made by persons who were never presented as witnesses. In net effect, they testified under oath as to the truth of facts they had no personal knowledge of. The following excerpts of the depositions of applicant Lavin and his witnesses suggest as much:

A.    Deposition of Agent Lavin

28.  Question:  What happened next?

Answer:    We then went to the Laguna Industrial Park, your Honor . . . We then verified from an informant that David Chung, James Uy . . . under the name and style Media Group were the ones replicating the infringing CDs.

xxx                xxx                   xxx

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

Answer:    I have with me the VRB certification that the VCDs are unauthorized copies.  I also have with me the Complaint-Affidavit of Sony Music and IFPI that certified that these are infringing copies, as well as the title list of Sony Music wherein some of the CDs purchased are indicated. (Annex “10”, Comment, Rollo, p. 841)

B.   Deposition of Baltazar

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

Answer:    We saw that they had in stock several infringing, pirated and unauthorized CDs.  They also had videograms without VRB labels, aside from artworks and labels.  John Doe gave us a “Wholesome” CD while Jane Doe gave us “Kenny Rogers Videoke” and “Engelbert Humperdinck Videoke” which the informant told us were being reproduced in that facility.  The informant further showed us the rooms where the replicating and/or stamping machine was located.

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

Answer:    The Attorney-in-fact of Sony Music and IFPI certified in his Complaint-Affidavit that they are unauthorized copies.  I also have with me a listing of Sony Music titles and some of the CDs I purchased are in that list.[40]

C.  Deposition of Pedralvez

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

Answer:    We were given some samples by John Doe and Jane Doe.  These are Kenny Rogers Videoke, Engelbert Humperdinck Videoke, and Andrew E. Wholesome CD.  The informant told us that the said samples were being reproduced in the facility.

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

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

Unlike their counterparts in Columbia who were found to be personally knowledgeable about their facts, Agent Lavin and his witnesses, judging from their above quoted answers, had no personal knowledge that the discs they saw, purchased or received were, in fact, pirated or infringing on petitioners’ copyrights.  To us, it is not enough that the applicant and his witnesses testify that they saw stacks of several allegedly infringing, pirated and unauthorized discs in the subject facility. The more decisive consideration determinative of whether or not a probable cause obtains to justify the issuance of a search warrant is that they had personal knowledge that the discs were actually infringing, pirated or unauthorized copies.[41]

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

This is not to say that the master tapes should have been presented in evidence during the application hearing, as private respondents, obviously having in mind the holding in20th Century Fox Film Corp. vs. Court of Appeals,[42] would have this Court believe. It is true that the Court, in 20th Century Fox, underscored the necessity, in determining the existence of probable cause in copyright infringement cases, of presenting the master tapes of the copyrighted work. But, as emphatically clarified in Columbia “such auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence xxx especially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value.[43] What this Court is saying is that any evidence presented in lieu of the master tapes, if not readily available, in similar application proceedings must be reliable, and, if testimonial, it must, at the very least, be based on the witness’ personal knowledge.

Petitioners argue, citing People v. Chua Uy,[44] that Agent Lavin’s informants’ testimonies are not indispensable as they would only be corroborative.[45] Like Columbia,Chua Uy is not a winning card for petitioners, for, in the latter case, there was a reliable testimony  to corroborate what the applicant testified to, i.e., the testimony of the police poseur-buyer in a buy-bust operation involving prohibited drugs. The circumstances are different in this case wherein the applicant and his witnesses had no personal knowledge that the discs they purchased were infringing or pirated copies. It cannot be overemphasized that not one of them testified seeing the pirated discs being manufactured at SLC’s premises. What they stated instead was that they were given copies of “Kenny Rogers Videoke”, “Engelbert Humperdinck Videoke” and “Andrew E. Wholesome CD” by two anonymous sources, while yet another informant told them that the discs were manufactured at said premises.

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

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

On the issue that the public respondent gravely abused her discretion in conducting what petitioners perceived amounted to a “preliminary investigation”, this Court has already ruled in Solid Triangle Sales Corp. vs. Sheriff of RTC Quezon City ,   Branch 93 ,[47] that “in the determination of probable cause, the court must necessarily resolve whether or not an offense exists to justify the issuance or quashal of the warrant”.  In the exercise of this mandate - which we can allow as being akin to conducting a preliminary investigation - abuse of discretion cannot plausibly be laid at the doorstep of the issuing court on account of its prima facie holding that no offense has been committed, even if consequent to such holding a warrant is recalled and the private complainant is incidentally deprived of vital evidence to prove his case. Solid Triangle succinctly explains why:

The proceedings for the issuance/quashal of a search warrant before a court on the one hand, and the preliminary investigation before an authorized officer on the other, are proceedings entirely independent of each other. One is not bound by the other’s finding as regards the existence of a crime. The first is to determine whether a warrant should issue or be quashed, and the second, whether an information should be filed in court.

When the court, in determining probable cause for issuing or quashing a search warrant, finds that no offense has been committed, it does not interfere with or encroach upon the proceedings in the preliminary investigation. The court does not oblige the investigating officer not to file the information for the court’s ruling that no crime exists is only of purposes of issuing or quashing the warrant. This does not, as petitioners would like to believe, constitute a usurpation of the executive function. Indeed, to shirk from this duty would amount to an abdication of a constitutional obligation.[48]

While the language of the first questioned Order may be viewed as encroaching on executive functions, nonetheless, it remains that the order of quashal is entirely independent of the proceedings in I.S. No. 2001-1158. And needless to stress, the DOJ is by no means concluded by the respondent judge’s findings as regards the existence, or the non-existence, of a crime.

We can, to a point, accord merit to petitioners’ lament that the basis of the first questioned order , i.e., the mingling of the seized items with other items, is extraneous to the determination of the validity of the issuance of the search warrant. It is to be pointed out, though, that public respondent corrected her error when it was raised in petitioners’ motion for reconsideration.  There can really be no serious objection to a judge correcting or altogether altering his case disposition on a motion for reconsideration, it being the purpose of such recourse to provide the court an opportunity to cleanse itself of an error unwittingly committed, or, with like effect, to allow the aggrieved party the chance to convince the court that its ruling is erroneous.[49] A motion for reconsideration before resort to certiorari is required precisely “to afford the public respondent an opportunity to correct any actual or fancied error attributed to it by way of re-examination of the legal and factual aspects of the case”.[50]

Similarly, as to the matter of the respondent judge’s recognizing the April 11, 2002 motion to quash search warrant[51] filed by the individual private respondents, instead of by SLC, as presumptive owner of the seized items, such error was properly addressed when respondent SLC, represented throughout the proceedings below by the same counsel of its co-respondents, formally manifested that it was adopting the same motion as its own.[52]

It is apropos to point out at this juncture that petitioners have imputed on individual private respondents criminal liability, utilizing as tools of indictment the very articles and papers seized from the premises of SLC. Be that as it may, petitioners should be deemed in estoppel to raise the personality of individual private respondents to interpose a motion to quash. To be sure, it would be unsporting for petitioners to prosecute individual private respondents on the basis of seized articles but on the same breath deny the latter standing to question the legality of the seizure on the postulate that only the party whose rights have been impaired thereby, meaning SLC, can raise that challenge. There can be no quibbling that individual private respondents stand to be prejudiced or at least be inconvenient by any

judgment in any case based on the seized properties. In a very real sense, therefore, they are real parties in interest who ought not to be prevented from assailing the validity of Search Warrant 219-00, albeit they cannot plausibly asked for the release and appropriate as their own the seized articles.

Petitioners’ related argument that SLC could not have validly adopted individual private respondents’ motion to quash due to laches is untenable.

The records show that the seizure in question was effected on September 19, 2000. The complaint in I.S. No. 2000-1576 was filed against the officers of SLC, all of whom, except for one, are also private respondents in the instant petition.  I.S. No. 2000-1576 was only resolved on January 15, 2001 when the DOJ dismissed the complaint on the ground that SLC was, in fact, duly licensed by the VRB. Shortly thereafter, or on February 6, 2001, less than five (5) months after the seizure, private respondents moved to quash both search warrants.[53] The motion clearly indicates private respondents’ desire for the return of the seized items, and there is nothing in the records showing that petitioners objected to the motion on the ground that the movants had no standing to question the warrants.

This bring Us to the second assailed order. As earlier stated, DOJ, in I.S. No. 2000-1576, found respondent SLC to be licensed by VRB to engage in the business of replicating or duplicating videograms.

Petitioners would have the Court believe that the second questioned order was based on a ground immaterial to the charge of infringement.  A scrutiny of the text of the said order, however, shows that the respondent judge denied petitioners’ motion for reconsideration because she was misled by the applicant’s and his witnesses’ testimony. It may be that a VRB license is no defense to a charge of violating Section 208 of R.A. No. 8293.  It must be stressed in this regard, however, that the core issue here is the validity of the warrant which applicant secured on the basis of, among others, his representation which turned out to be false.

As above discussed, the answers of Agent Lavin and his witnesses to the public respondent’s searching questions, particularly those relating to how they knew that the compact discs they purchased or received were illegal, unauthorized or infringing, were based on certifications and not personal knowledge. The subject warrant, as well as Search Warrant No. 220-00, was issued nonetheless. It may well have been that the issuing judge was, in the end, convinced to issue the warrants by means of the erroneous VRB certification presented during the joint application hearing, overriding whatever misgivings she may have had with the applicant’s and his witnesses’ other answers.  This Court, however, cannot engage in such speculation and sees no need to.

Summing up, the issuance of Search Warrant No. 219-00 was, at bottom, predicated on the sworn testimonies of persons without personal knowledge of facts they were testifying on and who relied on a false certification issued by VRB. Based as it were on hearsay and false information, its issuance was without probable cause and, therefore, invalid.

Given the foregoing perspective, the peripheral issues of  (a)  whether or not petitioner IFPI (South East Asia), Ltd. failed to comply with the rules requiring the filing of a certification on non-forum shopping; and (b) whether or not IFPI’s board of directors ratified its conditional authorization for its attorney-in-fact to represent IFPI in this petition, need not detain us long. In our review of the records, R.V. Domingo & Associates, whose authority to represent the petitioners in this petition continues, had duly executed the sworn certification on non- forum shopping.

In the same manner, this Court, having taken cognizance of this petition, need not belabor the issue of whether or not petitioners have cavalierly breached the rule on hierarchy of courts. Suffice it to state that, while the Court looks with disfavor on utter disregard of its rules,[54] it is within its power to suspend its own rules or to except a particular case from its operation whenever the ends of justice so requires, as here.

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

on February 19, 2003 is consequently RECALLED.

Costs against petitioners.

SO ORDERED.