Copyright

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 147043

June 21, 2005

NBI - MICROSOFT CORPORATION & LOTUS DEVELOPMENT CORP., petitioners,

vs.
JUDY C. HWANG, BENITO KEH & YVONNE K. CHUA/BELTRON COMPUTER
PHILIPPINES INC., JONATHAN K. CHUA, EMILY K. CHUA, BENITO T. SANCHEZ, NANCY
I. VELASCO, ALFONSO CHUA, ALBERTO CHUA, SOPHIA ONG, DEANNA CHUA/TAIWAN
MACHINERY DISPLAY & TRADE CENTER, INC., and THE SECRETARY OF
JUSTICE, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari1 of the Resolutions2 of the Department of Justice dismissing for "lack of
merit and insufficiency of evidence" petitioner Microsoft Corporations complaint against respondents for
copyright infringement and unfair competition.
The Facts
Petitioner Microsoft Corporation ("Microsoft"), a Delaware, United States corporation, owns the
copyright and trademark to several computer software. 3 Respondents Benito Keh and Yvonne Keh are the
President/Managing Director and General Manager, respectively, of respondent Beltron Computer
Philippines, Inc. ("Beltron"), a domestic corporation. Respondents Jonathan K. Chua, Emily K. Chua,
Benito T. Sanchez, and Nancy I. Velasco are Beltrons Directors. On the other hand, respondents Alfonso
Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are the Directors of
respondent Taiwan Machinery Display & Trade Center, Inc. ("TMTC"), also a domestic corporation. 4
In May 1993, Microsoft and Beltron entered into a Licensing Agreement ("Agreement"). Under Section
2(a) of the Agreement, as amended in January 1994, Microsoft authorized Beltron, for a fee, to:
(i) xxx reproduce and install no more than one (1) copy of [Microsoft] software on each
Customer System hard disk or Read Only Memory ("ROM"); [and]
(ii) xxx distribute directly or indirectly and license copies of the Product (reproduced as per
Section 2(a)(i) and/or acquired from Authorized Replicator or Authorized Distributor) in object
code form to end users[.] xxxx5

The Agreement also authorized Microsoft and Beltron to terminate the contract if the other fails to
comply with any of the Agreements provisions. Microsoft terminated the Agreement effective 22 June
1995 for Beltrons non-payment of royalties.6
Afterwards, Microsoft learned that respondents were illegally copying and selling Microsoft software.
Consequently, Microsoft, through its Philippine agent,7 hired the services of Pinkerton Consulting
Services ("PCS"), a private investigative firm. Microsoft also sought the assistance of the National Bureau
of Investigation ("NBI"). On 10 November 1995, PCS employee John Benedic 8 Sacriz ("Sacriz") and NBI
agent Dominador Samiano, Jr. ("Samiano"), posing as representatives of a computer shop, 9 bought
computer hardware (central processing unit ("CPU") and computer monitor) and software (12 computer
disks ("CDs") in read-only memory ("ROM") format) from respondents. The CPU contained preinstalled10 Microsoft Windows 3.1 and MS-DOS software. The 12 CD-ROMs, encased in plastic
containers with Microsoft packaging, also contained Microsoft software. 11 At least two of the CD-ROMs
were "installers," so-called because they contain several software (Microsoft only or both Microsoft and
non-Microsoft).12 Sacriz and Samiano were not given the Microsoft end-user license agreements, users
manuals, registration cards or certificates of authenticity for the articles they purchased. The receipt
issued to Sacriz and Samiano for the CPU and monitor bore the heading "T.M.T.C. (PHILS.) INC.
BELTRON COMPUTER."13 The receipt for the 12 CD-ROMs did not indicate its source although the
name "Gerlie" appears below the entry "delivered by." 14
On 17 November 1995, Microsoft applied for search warrants against respondents in the Regional Trial
Court, Branch 23, Manila ("RTC").15 The RTC granted Microsofts application and issued two search
warrants ("Search Warrant Nos. 95-684 and 95-685"). 16 Using Search Warrant Nos. 95-684 and 95-685,
the NBI searched the premises of Beltron and TMTC and seized several computer-related hardware,
software, accessories, and paraphernalia. Among these were 2,831 pieces of CD-ROMs containing
Microsoft software.17
Based on the articles obtained from respondents, Microsoft and a certain Lotus Development Corporation
("Lotus Corporation") charged respondents before the Department of Justice ("DOJ") with copyright
infringement under Section 5(A) in relation to Section 29 of Presidential Decree No. 49, as amended,
("PD 49")18 and with unfair competition under Article 189(1)19 of the Revised Penal Code. In its
Complaint ("I.S. No. 96-193"), which the NBI indorsed, Microsoft alleged that respondents illegally
copied and sold Microsoft software.20
In their joint counter-affidavit, respondents Yvonne Keh ("respondent Keh") and Emily K. Chua
("respondent Chua") denied the charges against respondents. Respondents Keh and Chua alleged that: (1)
Microsofts real intention in filing the complaint under I.S. No. 96-193 was to pressure Beltron to pay its
alleged unpaid royalties, thus Microsoft should have filed a collection suit instead of a criminal
complaint; (2) TMTC bought the confiscated 59 boxes of MS-DOS CDs from a Microsoft dealer in
Singapore (R.R. Donnelly); (3) respondents are not the "source" of the Microsoft Windows 3.1 software
pre-installed in the CPU bought by Sacriz and Samiano, but only of the MS-DOS software; (4)
Microsofts alleged proof of purchase (receipt) for the 12 CD-ROMs is inconclusive because the receipt
does not indicate its source; and (5) respondents Benito Keh, Jonathan K. Chua, Alfonso Chua, Alberto
Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are stockholders of Beltron and TMTC in
name only and thus cannot be held criminally liable.21
The other respondents did not file counter-affidavits.
Meanwhile, respondents moved to quash Search Warrant Nos. 95-684 and 95-685. The RTC partially
granted their motion in its Order of 16 April 1996. Microsoft sought reconsideration but the RTC denied

Microsofts motion in its Order of 19 July 1996. Microsoft appealed to the Court of Appeals in CA-G.R.
CV No. 54600. In its Decision of 29 November 2001, the Court of Appeals granted Microsofts appeal
and set aside the RTC Orders of 16 April 1996 and 19 July 1996. The Court of Appeals Decision became
final on 27 December 2001.
The DOJ Resolutions
In the Resolution of 26 October 1999, DOJ State Prosecutor Jocelyn A. Ong ("State Prosecutor Ong")
recommended the dismissal of Microsofts complaint for lack of merit and insufficiency of evidence.
State Prosecutor Ong also recommended the dismissal of Lotus Corporations complaint for lack of
interest to prosecute and for insufficiency of evidence. Assistant Chief State Prosecutor Lualhati R.
Buenafe ("Assistant Chief State Prosecutor Buenafe") approved State Prosecutor Ongs
recommendations.22 The 26 October 1999 Resolution reads in part:
[T]wo (2) issues have to be resolved in this case, namely:
a) Whether or not Beltron Computer and/or its stockholders should be held liable for the offenses
charged.
b) Whether or not prima facie case exist[s] against Taiwan Machinery Display and Trade Center,
Inc. (TMTC) for violation of the offense charged.
Complainant had alleged that from the time the license agreement was terminated, respondent/s is/are no
longer authorized to copy/distribute/sell Microsoft products. However, respondent/s averred that the case
is civil in nature, not criminal, considering that the case stemmed only out of the desire of complainant to
collect from them the amount of US$135,121.32 and that the contract entered into by the parties cannot
be unilaterally terminated.
In the order of Honorable William Bayhon dated July 19, 1996 [denying reconsideration to the Order
partially quashing the search warrants], he observed the following:
"It is further argued by counsel for respondent that the act taken by private complainant is to spite revenge
against the respondent Beltron for the latter failed to pay the alleged monetary obligation in the amount of
US$135,121.32. That respondent has some monetary obligation to complainant which is not denied by the
complainant."
["]It appears therefore that prior to the issuance of the subject search warrants, complainant had some
business transactions with the respondent [Beltron] along the same line of products. Complainant failed to
reveal the true circumstances existing between the two of them as it now appears, indeed the search
warrant[s] xxx [are] being used as a leverage to secure collection of the money obligation which the Court
cannot allow."
From said order, it can be gleaned that the [RTC] xxx, had admitted that the search warrants applied for
by complainant were merely used as a leverage for the collection of the alleged monetary obligation of
the respondent/s.
From said order, it can be surmise (sic) that the obligations between the parties is civil in nature not
criminal.

Moreover, complainant had time and again harped that respondent/s is/are not authorized to
sell/copy/distribute Microsoft products at the time of the execution of the search warrants. Still, this office
has no power to pass upon said issue for one has then to interpret the provisions of the contract entered
into by the parties, which question, should be raised in a proper civil proceeding.
Accordingly, absen[t] a resolution from the proper court of (sic) whether or not the contract is still
binding between the parties at the time of the execution of the search warrants, this office cannot pass
upon the issue of whether respondent/s is or are liable for the offense charged.
As to the second issue, we find for the respondent/s. TMTC had provided sufficient evidence such as proforma invoice from R.R. Donnelley; Debt Advice of the Bank of Commerce; Official Receipts from the
Bureau of Customs; and Import Entry Declaration of the Bureau of Customs to prove that indeed the
Microsoft software in their possession were bought from Singapore.
Thus, respondent/s in this case has/have no intent to defraud the public, as provided under Article 189 of
the Revised Penal Code, for they bought said Microsoft MS-DOS 6.0 from an alleged licensee of
Microsoft in Singapore, with all the necessary papers. In their opinion, what they have are genuine
Microsoft software, therefore no unfair competition exist.
Moreover, violation of P.D. 49 does not exist, for respondent/s was/were not the manufacturers of the
Microsoft software seized and were selling their products as genuine Microsoft software, considering that
they bought it from a Microsoft licensee.
Complainant, on the other hand, considering that it has the burden of proving that the respondent/s is/are
liable for the offense charged, has not presented any evidence that the items seized namely the 59 boxes
of MS-DOS 6.0 software are counterfeit.
The certification issued on December 12, 1995 by Christopher Austin, Corporate Attorney of the
complainant, does not disclose this fact. For the term used by Mr. Austin was that the items seized were
unauthorized.
The question now, is whether the products were unauthorized because TMTC has no license to sell
Microsoft products, or is it unauthorized because R.R. Donnelley has no authority to sell said products
here in the Philippines.
Still, to determine the culpability of the respondents, complainant should present evidence that what is in
the possession of the respondent/s is/are counterfeit Microsoft products.
This it failed to do.23
Microsoft sought reconsideration and prayed for an ocular inspection of the articles seized from
respondents. However, in the Resolution of 3 December 1999, Assistant Chief State Prosecutor Buenafe,
upon State Prosecutor Ongs recommendation, denied Microsofts motion. 24
Microsoft appealed to the Office of the DOJ Secretary. In the Resolution of 3 August 2000, DOJ
Undersecretary Regis V. Puno dismissed Microsofts appeal. 25 Microsoft sought reconsideration but its
motion was denied in the Resolution of 22 December 2000. 26
Hence, this petition. Microsoft contends that:

I. THE DOJ ERRED IN RULING THAT THE LIABILITY OF RESPONDENTS WAS ONLY CIVIL IN
NATURE BY VIRTUE OF THE LICENSE AGREEMENT.
II. THE DOJ MISAPPRECIATED THE FACT THAT RESPONDENTS WERE ENGAGED IN THE
ILLEGAL IMPORTATION, SALE AND DISTRIBUTION OF COUNTERFEIT SOFTWARE AS
EVIDENCED BY THE ITEMS PURCHASED DURING THE TEST-BUY AND THE ITEMS SEIZED
FROM RESPONDENTS PREMISES.
III. THE DOJ MISAPPRECIATED THE LAW ON COPYRIGHT INFRINGEMENT AND UNFAIR
COMPETITION.
IV. ONLY TWO OUT OF THE NINE RESPONDENTS BOTHERED TO FILE COUNTERAFFIDAVITS; HENCE, THE CHARGES AGAINST SEVEN [RESPONDENTS] REMAIN
UNCONTROVERTED.27
In its Comment, filed by the Solicitor General, the DOJ maintains that it did not commit grave abuse of
discretion in dismissing Microsofts complaint.28
For their part, respondents allege in their Comment that Microsoft is guilty of forum-shopping because its
petition in CA-G.R. CV No. 54600 was filed ahead of, and has a "common interest" with, this petition.
On the merits, respondents reiterate their claims in their motion to quash Search Warrant Nos. 95-684 and
95-685 that the articles seized from them were either owned by others, purchased from legitimate sources,
or not produced by Microsoft. Respondents also insist that the Agreement entitled Beltron to "copy and
replicate or reproduce" Microsoft products. On the confiscated 2,831 CD-ROMs, respondents allege that
a certain corporation29 left the CD-ROMs with them for safekeeping. Lastly, respondents claim that there
is no proof that the CPU Sacriz and Samiano bought from them contained pre-installed Microsoft
software because the receipt for the CPU does not indicate "[s]oftware hard disk." 30
In its Reply, Microsoft counters that it is not liable for forum-shopping because its petition in CA-G.R.
CV No. 54600 involved the Orders of the RTC partially quashing Search Warrant Nos. 95-684 and 95-685
while this petition concerns the DOJ Resolutions dismissing its complaint against respondents for
copyright infringement and unfair competition. On the merits, Microsoft maintains that respondents
should be indicted for copyright infringement and unfair competition. 31
The Issues
The petition raises the following issues:
(1) Whether Microsoft engaged in forum-shopping; and
(2) Whether the DOJ acted with grave abuse of discretion in not finding probable cause to charge
respondents with copyright infringement and unfair competition.
The Ruling of the Court
The petition has merit.
Microsoft did not Engage in Forum-Shopping

Forum-shopping takes place when a litigant files multiple suits involving the same parties, either
simultaneously or successively, to secure a favorable judgment. 32 Thus, it exists where the elements
of litis pendentia are present, namely: (a) identity of parties, or at least such parties who represent the
same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded
on the same facts; and (c) the identity with respect to the two preceding particulars in the two cases is
such that any judgment that may be rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case.33 Forum-shopping is an act of malpractice because it
abuses court processes.34 To check this pernicious practice, Section 5, Rule 7 of the 1997 Rules of Civil
Procedure requires the principal party in an initiatory pleading to submit a certification against forumshopping.35 Failure to comply with this requirement is a cause for the dismissal of the case and, in case of
willful forum-shopping, for the imposition of administrative sanctions.
Here, Microsoft correctly contends that it is not liable for forum-shopping. What Microsoft appealed in
CA-G.R. CV No. 54600 were the RTC Orders partially quashing Search Warrant Nos. 95-684 and 95-685.
In the present case, Microsoft is appealing from the DOJ Resolutions dismissing its complaint against
respondents for copyright infringement and unfair competition. Thus, although the parties in CA-G.R. CV
No. 54600 and this petition are identical, the rights asserted and the reliefs prayed for are not such that the
judgment in CA-G.R. CV No. 54600 does not amount to res judicata in the present case. This renders
forum-shopping impossible here.
The DOJ Acted with Grave Abuse of Discretion
in not Finding Probable Cause to Charge Respondents with
Copyright Infringement and Unfair Competition
Generally, this Court is loath to interfere in the prosecutors discretion in determining probable cause 36
unless such discretion is shown to have been abused. 37 This case falls under the exception.
Unlike the higher quantum of proof beyond reasonable doubt required to secure a conviction, it is the
lower standard of probable cause which is applied during the preliminary investigation to determine
whether the accused should be held for trial. This standard is met if the facts and circumstances incite a
reasonable belief that the act or omission complained of constitutes the offense charged. As we explained
in Pilapil v. Sandiganbayan:38
The term [probable cause] does not mean "actual and positive cause" nor does it import absolute certainty.
It is merely based on opinion and reasonable belief. Thus, a finding of probable cause does not require an
inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed
that the act or omission complained of constitutes the offense charged. Precisely, there is a trial for the
reception of evidence of the prosecution in support of the charge.
PD 49 and Article 189(1)
Section 539 of PD 49 ("Section 5") enumerates the rights vested exclusively on the copyright owner.
Contrary to the DOJs ruling, the gravamen of copyright infringement is not merely the unauthorized
"manufacturing" of intellectual works but rather the unauthorized performance of any of the acts covered
by Section 5. Hence, any person who performs any of the acts under Section 5 without obtaining the
copyright owners prior consent renders himself civilly40 and criminally41 liable for copyright
infringement. We held in Columbia Pictures, Inc. v. Court of Appeals:42
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. (Emphasis supplied)
Significantly, under Section 5(A), a copyright owner is vested with the exclusive right to "copy, distribute,
multiply, [and] sell" his intellectual works.
On the other hand, the elements of unfair competition under Article 189(1) 43 of the Revised Penal Code
are:
(a) That the offender gives his goods the general appearance of the goods of another manufacturer
or dealer;
(b) That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of
their packages, or in the (3) device or words therein, or in (4) any other feature of their
appearance[;]
(c) That the offender offers to sell or sells those goods or gives other persons a chance or
opportunity to do the same with a like purpose[; and]
(d) That there is actual intent to deceive the public or defraud a competitor.44
The element of intent to deceive may be inferred from the similarity of the goods or their appearance. 45
On the Sufficiency of Evidence to
Support a Finding of Probable Cause
Against Respondents
In its pleadings filed with the DOJ, Microsoft invoked three clusters of evidence to support its complaint
against respondents, namely: (1) the 12 CD-ROMs containing Microsoft software Sacriz and Samiano
bought from respondents; (2) the CPU with pre-installed Microsoft software Sacriz and Samiano also
purchased from respondents; and (3) the 2,831 CD-ROMs containing Microsoft software seized from
respondents.46 The DOJ, on the one hand, refused to pass upon the relevance of these pieces of evidence
because: (1) the "obligations between the parties is civil and not criminal" considering that Microsoft
merely sought the issuance of Search Warrant Nos. 95-684 and 95-685 to pressure Beltron to pay its
obligation under the Agreement, and (2) the validity of Microsofts termination of the Agreement must
first be resolved by the "proper court." On the other hand, the DOJ ruled that Microsoft failed to present
evidence proving that what were obtained from respondents were counterfeit Microsoft products.
This is grave abuse of discretion.47
First. Being the copyright and trademark owner of Microsoft software, Microsoft acted well
within its rights in filing the complaint under I.S. No. 96-193 based on the incriminating evidence
obtained from respondents. Hence, it was highly irregular for the DOJ to hold, based on the RTC
Order of 19 July 1996, that Microsoft sought the issuance of Search Warrant Nos. 95-684 and 95685, and by inference, the filing of the complaint under I.S. No. 96-193, merely to pressure
Beltron to pay its overdue royalties to Microsoft. Significantly, in its Decision in CA-G.R. CV
No. 54600 dated 29 November 2001, the Court of Appeals set aside the RTC Order of 19 July
1996. Respondents no longer contested that ruling which became final on 27 December 2001.

Second. There is no basis for the DOJ to rule that Microsoft must await a prior "resolution from
the proper court of (sic) whether or not the [Agreement] is still binding between the parties."
Beltron has not filed any suit to question Microsofts termination of the Agreement. Microsoft can
neither be expected nor compelled to wait until Beltron decides to sue before Microsoft can seek
remedies for violation of its intellectual property rights.
Furthermore, some of the counterfeit CD-ROMs bought from respondents were "installer" CDROMs containing Microsoft software only or both Microsoft and non-Microsoft software. These
articles are counterfeit per se because Microsoft does not (and could not have authorized anyone
to) produce such CD-ROMs. The copying of the genuine Microsoft software to produce these
fake CD-ROMs and their distribution are illegal even if the copier or distributor is a Microsoft
licensee. As far as these installer CD-ROMs are concerned, the Agreement (and the alleged
question on the validity of its termination) is immaterial to the determination of respondents
liability for copyright infringement and unfair competition.
Lastly, Section 10(b)48 of the Agreement provides that Microsofts "rights and remedies" under
the contract are "not xxx exclusive and are in addition to any other rights and remedies provided
by law or [the] Agreement." Thus, even if the Agreement still subsists, Microsoft is not precluded
from seeking remedies under PD 49 and Article 189(1) of the Revised Penal Code to vindicate its
rights.
Third. The Court finds that the 12 CD-ROMs ("installer" and "non-installer") and the CPU with
pre-installed Microsoft software Sacriz and Samiano bought from respondents and the 2,831
Microsoft CD-ROMs seized from respondents suffice to support a finding of probable cause to
indict respondents for copyright infringement under Section 5(A) in relation to Section 29 of PD
49 for unauthorized copying and selling of protected intellectual works. The installer CD-ROMs
with Microsoft software, to repeat, are counterfeit per se.On the other hand, the illegality of the
"non-installer" CD-ROMs purchased from respondents and of the Microsoft software preinstalled in the CPU is shown by the absence of the standard features accompanying authentic
Microsoft products, namely, the Microsoft end-user license agreements, users manuals,
registration cards or certificates of authenticity.
On the 2,831 Microsoft CD-ROMs49 seized from respondents, respondent Beltron, the only respondent
who was party to the Agreement, could not have reproduced them under the Agreement as the Solicitor
General50 and respondents contend. Beltrons rights51 under the Agreement were limited to:
(1) the "reproduc[tion] and install[ation of] no more than one copy of [Microsoft] software on
each Customer System hard disk or Read Only Memory ("ROM")"; and
(2) the "distribut[ion] xxx and licens[ing of] copies of the [Microsoft] Product [as reproduced
above] and/or acquired from Authorized Replicator or Authorized Distributor) in object
code form to end users."
The Agreement defines an authorized replicator as "a third party approved by [Microsoft] which may
reproduce and manufacture [Microsoft] Product[s] for [Beltron] xxx." 52 An authorized distributor, on the
other hand, is a "third party approved by [Microsoft] from which [Beltron] may purchase
MED53 Product."54 Being a mere reproducer/installer of one Microsoft software copy on each customers
hard disk or ROM, Beltron could only have acquired the hundreds of Microsoft CD-ROMs found in
respondents possession from Microsoft distributors or replicators.

However, respondents makes no such claim. What respondents contend is that these CD-ROMs were left
to them for safekeeping. But neither is this claim tenable for lack of substantiation. Indeed, respondents
Keh and Chua, the only respondents who filed counter-affidavits, did not make this claim in the DOJ.
These circumstances give rise to the reasonable inference that respondents mass-produced the CD-ROMs
in question without securing Microsofts prior authorization.
The counterfeit "non-installer" CD-ROMs Sacriz and Samiano bought from respondents also suffice to
support a finding of probable cause to indict respondents for unfair competition under Article 189(1) of
the Revised Penal Code for passing off Microsoft products. From the pictures of the CD-ROMs
packaging,55 one cannot distinguish them from the packaging of CD-ROMs containing genuine Microsoft
software. Such replication, coupled with the similarity of content of these fake CD-ROMs and the CDROMs with genuine Microsoft software, implies intent to deceive.
Respondents contention that the 12 CD-ROMs Sacriz and Samiano purchased cannot be traced to them
because the receipt for these articles does not indicate its source is unavailing. The receipt in question
should be taken together with Microsofts claim that Sacriz and Samiano bought the CD-ROMs from
respondents.56 Together, these considerations point to respondents as the vendor of the counterfeit CDROMs. Respondents do not give any reason why the Court should not give credence to Microsofts claim.
For the same reason, the fact that the receipt for the CPU does not indicate "[s]oftware hard disk" does not
mean that the CPU had no pre-installed Microsoft software. Respondents Keh and Chua admit in their
counter-affidavit that respondents are the "source" of the pre-installed MS-DOS software.
WHEREFORE, we GRANT the petition. We SET ASIDE the Resolutions dated 26 October 1999, 3
December 1999, 3 August 2000, and 22 December 2000 of the Department of Justice.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

U.S. Supreme Court

Baker v. Selden, 101 U.S. 99 (1879)
Baker v. Selden
101 U.S. 99
APPEAL FROM THE CIRCUIT COURT OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF OHIO
Syllabus
1. A claim to the exclusive property in a peculiar system of bookkeeping cannot, under the law of
copyright, be maintained by the author of a treatise in which that system is exhibited and explained.
2. The difference between a copyright and letters patent stated and illustrated.
The facts are stated in the opinion of the Court.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
Charles Selden, the testator of the complainant in this case, in the year 1859 took the requisite steps for
obtaining the copyright
Page 101 U. S. 100
of a book, entitled "Selden's Condensed Ledger, or Bookkeeping Simplified," the object of which was to
exhibit and explain a peculiar system of bookkeeping. In 1860 and 1861, he took the copyright of several
other books, containing additions to and improvements upon the said system. The bill of complaint was
filed against the defendant, Baker, for an alleged infringement of these copyrights. The latter, in his
answer, denied that Selden was the author or designer of the books, and denied the infringement charged,
and contends on the argument that the matter alleged to be infringed is not a lawful subject of copyright.
The parties went into proofs, and the various books of the complainant, as well as those sold and used by
the defendant, were exhibited before the examiner, and witnesses were examined to both sides. A decree
was rendered for the complainant, and the defendant appealed.
The book or series of books of which the complainant claims the copyright consists of an introductory
essay explaining the system of bookkeeping referred to, to which are annexed certain forms or banks,
consisting of ruled lines, and headings, illustrating the system and showing how it is to be used and
carried out in practice. This system effects the same results as bookkeeping by double entry, but, by a
peculiar arrangement of columns and headings, presents the entire operation, of a day, a week, or a month
on a single page or on two pages facing each other, in an account book. The defendant uses a similar plan
so far as results are concerned, but makes a different arrangement of the columns, and uses different
headings. If the complainant's testator had the exclusive right to the use of the system explained in his
book, it would be difficult to contend that the defendant does not infringe it, notwithstanding the
difference in his form of arrangement; but if it be assumed that the system is open to public use, it seems

to be equally difficult to contend that the books made and sold by the defendant are a violation of the
copyright of the complainant's book considered merely as a book explanatory of the system. Where the
truths of a science or the methods of an art are the common property of the whole world, any author has
the right to express the one, or explain and use the other, in
Page 101 U. S. 101
his own way. As an author, Selden explained the system in a particular way. It may be conceded that
Baker makes and uses account books arranged on substantially the same system, but the proof fails to
show that he has violated the copyright of Selden's book, regarding the latter merely as an explanatory
work, or that he has infringed Selden's right in any way, unless the latter became entitled to an exclusive
right in the system.
The evidence of the complainant is principally directed to the object of showing that Baker uses the same
system as that which is explained and illustrated in Selden's books. It becomes important, therefore, to
determine whether, in obtaining the copyright of his books, he secured the exclusive right to the use of the
system or method of bookkeeping which the said books are intended to illustrate and explain. It is
contended that he has secured such exclusive right because no one can use the system without using
substantially the same ruled lines and headings which he was appended to his books in illustration of it. In
other words, it is contended that the ruled lines and headings, given to illustrate the system, are a part of
the book, and as such are secured by the copyright, and that no one can make or use similar ruled lines
and headings, or ruled lines and headings made and arranged on substantially the same system, without
violating the copyright. And this is really the question to be decided in this case. Stated in another form,
the question is whether the exclusive property in a system of bookkeeping can be claimed under the law
or copyright by means of a book in which that system is explained? The complainant's bill, and the case
made under it, are based on the hypothesis that it can be.
It cannot be pretended, and indeed it is not seriously urged, that the ruled lines of the complainant's
account book can be claimed under any special class of objects, other than books, named in the law of
copyright existing in 1859. The law then in force was that of 1831, and specified only books, maps,
charts, musical compositions, prints, and engravings. An account book, consisting of ruled lines and blank
columns, cannot be called by any of these names unless by that of a book.
There is no doubt that a work on the subject of bookkeeping,
Page 101 U. S. 102
though only explanatory of well known systems, may be the subject of a copyright, but then it is claimed
only as a book. Such a book may be explanatory either of old systems or of an entirely new system, and,
considered as a book, as the work of an author, conveying information on the subject of bookkeeping, and
containing detailed explanations of the art, it may be a very valuable acquisition to the practical
knowledge of the community. But there is a clear distinction between the book 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 or 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 it
can only be secured by a patent from the government.
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
Page 101 U. S. 103
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.
The fact that the art described in the book by illustrations of lines and figures which are reproduced in
practice in the application of the art makes no difference. Those illustrations are the mere language
employed by the author to convey his ideas more clearly. Had he used words of description instead of
diagrams (which merely stand in the place of words), there could not be the slightest doubt that others,
applying the art to practical use, might lawfully draw the lines and diagrams which were in the author's
mind, and which he thus described by words in his book.
The copyright of a work on mathematical science cannot give to the author an exclusive right to the
methods of operation which he propounds, or to the diagrams which he employs to explain them, so as to
prevent an engineer from using them whenever occasion requires. The very object of publishing a book
on science or the useful arts is to communicate to the world the useful knowledge which it contains. But
this object would be frustrated if the knowledge could not be used without incurring the guilt of piracy of
the book. And where the art it teaches cannot be used without employing the methods and diagrams used
to illustrate the book, or such as are similar to them, such methods and diagrams are to be considered as
necessary incidents to the art, and given therewith to the public -- not given for the purpose of publication
in other works explanatory of the art, but for the purpose of practical application.
Of course these observations are not intended to apply to ornamental designs or pictorial illustrations
addressed to the taste. Of these it may be said that their form is their essence,
Page 101 U. S. 104
and their object, the production of pleasure in their contemplation. This is their final end. They are as
much the product of genius and the result of composition as are the lines of the poet or the historian's
period. On the other hand, the teachings of science and the rules and methods of useful art have their final
end in application and use, and this application and use are what the public derive from the publication of
a book which teaches them. But as embodied and taught in a literary composition or book, their essence
consists only in their statement. This alone is what is secured by the copyright. The use by another of the

same methods of statement, whether in words or illustrations, in a book published for teaching the art
would undoubtedly be an infringement of the copyright.
Recurring to the case before us, we observe that Charles Selden, by his books, explained and described a
peculiar system of bookkeeping, and illustrated his method by means of ruled lines and blank columns,
with proper headings on a page or on successive pages. 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 happen to correspond more
closely than usual with the actual work performed by the operator who uses the art. Those illustrations
and diagrams consist of ruled lines and headings of accounts, and
Page 101 U. S. 105
it is similar ruled lines and headings of accounts which, in the application of the art, the bookkeeper
makes with his pen, or the stationer with his press, whilst in most other cases the diagrams and
illustrations can only be represented in concrete forms of wood, metal, stone, or some other physical
embodiment. But the principle is the same in all. 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.
The remarks of Mr. Justice Thompson in the circuit court in Clayton v. Stone & Hall, 2 Paine 392, in
which copyright was claimed in a daily price-current, are apposite and instructive. He says:
"In determining the true construction to be given to the act of Congress, it is proper to look at the
Constitution of the United States to aid us in ascertaining the nature of the property intended to be
protected. 'Congress shall have power to promote the progress of science and useful arts, by securing for
limited times to authors and inventors the exclusive right to their writings and discoveries.' The act in
question was passed in execution of the power here given, and the object, therefore, was the promotion of
science; and it would certainly be a pretty extraordinary view of the sciences to consider a daily or weekly
publication of the state of the market as falling within any class of them. They are of a more fixed,
permanent, and durable character. The term 'science' cannot with any propriety be applied to a work of so
fluctuating and fugitive a form as that of a newspaper or price-current, the subject matter of which is daily
changing, and is of mere temporary use. Although great praise may be due to the plaintiffs for their
industry and enterprise in publishing this paper, yet the law does not contemplate their being rewarded in
this way; it must seek patronage and protection from its utility to the public, and not a work of science.
The title of the act of Congress is, 'for the encouragement of learning,' and was not intended for the
encouragement of mere industry, unconnected with learning and the sciences. . . . We are accordingly of
opinion that the paper in question is not
Page 101 U. S. 106

a book the copyright to which can be secured under the act of Congress."
The case of Cobbett v. Woodward, Law Rep. 14 Eq. 407, was a claim to copyright in a catalogue of
furniture which the publisher had on sale in his establishment, illustrated with many drawings of furniture
and decorations. The defendants, being dealers in the same business, published a similar book, and copied
many of the plaintiff's drawings, though it was shown that they had for sale the articles represented
thereby.
The court held that these drawings were not subjects of copyright. Lord Romilly, M.R., said:
"This is a mere advertisement for the sale of particular articles which any one might imitate, and any one
might advertise for sale. If a man not being a vendor of any of the articles in question were to publish a
work for the purpose of informing the public of what was the most convenient species of articles for
household furniture, or the most graceful species of decorations for articles of home furniture, what they
ought to cost, and where they might be bought, and were to illustrate his work with designs of each article
he described -- such a work as this could not be pirated with impunity, and the attempt to do so would be
stopped by the injunction of the Court of Chancery; yet if it were done with no such object, but solely for
the purpose of advertising particular articles for sale, and promoting the private trade of the publisher by
the sale of articles which any other person might sell as well as the first advertiser, and if in fact it
contained little more than an illustrated inventory of the contents of a warehouse, I know of no law which,
while it would not prevent the second advertiser from selling the same articles, would prevent him from
using the same advertisement, provided he did not in such advertisement by any device suggest that he
was selling the works and designs of the first advertiser."
Another case, that of Page v. Wisden, 20 L.T.N.S. 435, which came before Vice-Chancellor Malins in
1869, has some resemblance to the present. There, a copyright was claimed in a cricket scoring sheet, and
the Vice-Chancellor held that it was not a fit subject for copyright, partly because it was not new, but also
because "to say that a particular
Page 101 U. S. 107
mode of ruling a book constituted an object for a copyright is absurd."
These cases, if not precisely in point, come near to the matter in hand, and, in our view, corroborate the
general proposition which we have laid down.
In Drury v. Ewing, 1 Bond, 540, which is much relied on by the complainant, a copyright was claimed in
a chart of patterns for cutting dresses and basques for ladies, and coats, jackets, &c., for boys. It is
obvious that such designs could only be printed and published for information, and not for use in
themselves. Their practical use could only be exemplified in cloth on the tailor's board and under his
shears -- in other words, by the application of a mechanical operation to the cutting of cloth in certain
patterns and forms. Surely the exclusive right to this practical use was not reserved to the publisher by his
copyright of the chart. Without undertaking to say whether we should or should not concur in the decision
in that case, we think it cannot control the present.
The conclusion to which we have come is that blank account books are not the subject of copyright, and
that the mere copyright of Selden's book did not confer upon him the exclusive right to make and use
account books, ruled and arranged as designated by him and described and illustrated in said book.

The decree of the circuit court must be reversed and the cause remanded with instructions to dismiss the
complainant's bill, and it is
So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11937

April 1, 1918

PEDRO SERRANO LAKTAW, plaintiff-appellant,

vs.
MAMERTO PAGLINAWAN, defendant-appellee.
Perfecto Gabriel for appellant.
Felix Ferrer and Crossfield and O'Brien for appellee.
ARAULLO, J.:
In the complaint presented in the Court of First Instance of the City of Manila on February 20, 1915, it
was alleged: (1) That the plaintiff was, according to the laws regulating literary properties, the registered
owner and author of a literary work entitled Diccionario Hispano-Tagalog (Spanish-Tagalog Dictionary)
published in the City of Manila in 1889 by the printing establishment La Opinion, and a copy of which
was attached to the complaint, as Exhibit A; (2) that the defendant, without the consent of the plaintiff,
reproduced said literary work, improperly copied the greater part thereof in the work published by him
and entitled Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), a copy of which was also
attached to the complaint as Exhibit B; (3) that said act of the defendant, which is a violation of article 7
of the Law of January 10, 1879, on Intellectual Property, caused irreparable injuries to the plaintiff, who
was surprised when, on publishing his new work entitled Diccionario Tagalog-Hispano (Tagalog-Spanish
Dictionary) he learned of the fact, and (4) that the damages occasioned to the plaintiff by the publication
of defendant's work amounted to $10,000. The plaintiff therefore prayed the court to order the defendant
to withdraw from sale all stock of the work herein identified as Exhibit B and to pay the plaintiff the sum
of $10,000, with costs.
The defendant in his answer denied generally each and every allegation of the complaint and prayed the
court to absolve him from the complaint. After trial and the introduction of evidence by both parties, the
court on August 20, 1915, rendered judgment, absolving the defendant from the complaint, but without
making any special pronouncement as to costs. The plaintiff moved for a new trial on the ground that the
judgment was against the law and the weight of the evidence. Said motion having been overruled,
plaintiff excepted to the order overruling it, and appealed the case to the Supreme Court upon a bill of
exceptions.
The ground of the decision appealed from is that a comparison of the plaintiff's dictionary with that of the
defendant does not show that the latter is an improper copy of the former, which has been published and
offered for sale by the plaintiff for about twenty-five years or more. For this reason the court held that the
plaintiff had no right of action and that the remedy sought by him could not be granted.
The appellant contends that court below erred in not declaring that the defendant had reproduced the
plaintiff's work and that the defendant had violated article 7 of the Law of January 10, 1879, on
Intellectual Property.
Said article provides:

Nobody may reproduce another person's work without the owner's consent, even merely to
annotate or add anything to it, or improve any edition thereof.
Therefore, in order that said article may be violated, it is not necessary, as the court below seems to have
understood, that a work should be an improper copy of another work previously published. It is enough
that another's work has been reproduced without the consent of the owner, even though it be only to
annotate, add something to it, or improve any edition thereof.
Upon making a careful and minute comparison of Exhibit A, the dictionary written and published by the
plaintiff, and Exhibit B, written and published by the defendant, and, taking into account the
memorandum (fols. 55 to 59) presented by the defendant, in which he enumerates the words and terms
which, according to him, are in his dictionary but not in that of that of the plaintiff, and viceversa, and the
equivalents or definitions given by the plaintiff, as well as the new Tagalog words which are in the
dictionary of the defendant but not in that of the plaintiff; and considering the notes, Exhibit C, first
series, presented by the plaintiff, in which the terms copied by the defendant from the plaintiff's dictionary
are enumerated in detail and in relation to each letter of the alphabet and which the plaintiff's own words
and terms are set forth, with a summary, at the foot of each group of letters, which shows the number of
initial Spanish words contained in the defendant's dictionary, the words that are his own and the fact that
the remaining ones are truly copied from the plaintiff's dictionary considering all of these facts, we
come to a conclusion completely different and contrary to that of the trial court, for said evidence clearly
shows:
1. That, of the Spanish words in the defendant's dictionary, Exhibit B, which correspond to each letter of
the alphabet, those that are enumerated below have been copied and reproduced from the plaintiff's
dictionary, with the exception of those that are stated to be defendant's own.
Letter

Words

Defendant's own

"A"

1,184

231

"B"

364

28

"C"

660

261

"CH"

76

10

"D"

874

231

"E"

880

301

"F"

383

152

"G"

302

111

"H"

57

64

"I"

814

328

"J"

113

25

"K"

11

11

"L"

502

94

"LL"

36

"M"

994

225

"N"

259

53

""

"O"

317

67

"P"

803

358

"Q"

84

11

"R"

847

140

"S"

746

118

"T"

591

147

"U"

107

15

"V"

342

96

"X"

"Y"

24

"Z"

73

17

______

_____

23,560

3,108

Therefore, of the 23,560 Spanish words in the defendant's dictionary, after deducting 17 words
corresponding to the letters K and X (for the plaintiff has no words corresponding to them), only 3,108
words are the defendant's own, or, what is the same thing, the defendant has added only this number of
words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452
words.

2. That the defendant also literally reproduced and copied for the Spanish words in his dictionary, the
equivalents, definitions and different meanings in Tagalog, given in plaintiff's dictionary, having
reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish
words, although as to some he made some additions of his own. Said copies and reproductions are
numerous as may be seen, by comparing both dictionaries and using as a guide or index the defendant's
memorandum and notes, first series, Exhibit C, in which, as to each word, the similarities and differences
between them are set forth in detail.
3. That the printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as
well as their equivalents in Tagalog are also reproduced, a fact which shows that the defendant, in
preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in
Tagalog from the plaintiff's dictionary.
The trial court has chosen at random, as is stated in the judgment appealed from, some words from said
dictionaries in making the comparison on which its conclusion is based, and consequently the conclusion
reached by it must be inaccurate and not well founded, because said comparison was not complete.
In said judgment some words of the defendant's dictionary are transcribed, the equivalents and meanings
of which in Tagalog are exactly the same as those that are given in the plaintiff's dictionary, with the
exception, as to some of them, of only one acceptation, which is the defendant's own production. And
with respect to the examples used by the defendant in his dictionary, which, according to the judgment,
are not copied from the plaintiff's the judgment referring to the preposition a (to), in Tagalog sa it
must be noted that the defendant, in giving in his dictionary an example of said preposition, uses the
expression "voy a Tayabas" (I am going to Tayabas) instead of "voy aBulacan" (I am going to Bulacan),
as the plaintiff does in his dictionary, or what is the same thing, that one speaks of Bulacan while the other
speaks of Tayabas. This does not show that there was no reproduction or copying by the defendant of the
plaintiffs work, but just the opposite, for he who intends to imitate the work of another, tries to make it
appear in some manner that there is some difference between the original and the imitation; and in the
example referred to, with respect to the preposition a (to), that dissimilarity as to the province designated
seems to effect the same purpose.
In the judgment appealed from, the court gives one to understand that the reproduction of another's
dictionary without the owner's consent does not constitute a violation of the Law of Intellectual Property
for the court's idea of a dictionary is stated in the decision itself, as follows:
Dictionaries have to be made with the aid of others, and they are improved by the increase of
words. What may be said of a pasture ground may be said also of a dictionary, i. e., that it should
be common property for all who may desire to write a new dictionary, and the defendant has
come to this pasture ground and taken whatever he needed from it in the exercise of a perfect
right.
Such idea is very erroneous, especially in relation to the Law of Intellectual Property. Danvilla y Collado
the author of the Law of January 10, 1879, on Intellectual Property, which was discussed and approved in
the Spanish Cortes, in his work entitled La Propiedad Intelectual (page 362, 1st ed.) states with respect to
dictionaries and in relation to article 7 of said law:
The protection of the law cannot be denied to the author of a dictionary, for although words are
not the property of anybody, their definitions, the example that explain their sense, and the
manner of expressing their different meanings, may constitute a special work. On this point, the
correctional court of the Seine held, on August 16, 1864, that a dictionary constitutes property,

although some of the words therein are explained by mere definitions expressed in a few lines
and sanctioned by usage, provided that the greater part of the other words contain new meanings;
new meanings which evidently may only belonged to the first person who published them.
Therefore, the plaintiff, Pedro Serrano, cannot be denied the legal protection which he seeks, and which is
based on the fact that the dictionary published by him in 1889 is his property said property right being
recognized and having been granted by article 7, in connection with article 2, of said law and on the
further fact that said work was reproduced by the defendant without his permission.
This law was published in the Gaceta de Madrid on January 12, 1879. It took effect in these Islands six
months after its promulgation or publication, as provided in article 56 thereof. The body of rules for the
execution of said law having been approved by royal decree of September 3, 1880, and published in the
Gaceta de Madrid on September 6, 1880 and extended to the Philippine Islands by royal decree of May 5,
1887, it was in turn published in the Gaceta de Manila, with the approval of the Governor-General of the
Islands, on June 15, 1887. Said law of January 10, 1879, and the rules for its application, were therefore
in force in these Islands when the plaintiff's dictionary was edited and published in 1889.
It appears from the evidence that although the plaintiff did not introduce at the trial the certificate of
registration of his property rights to said work which, according to said rules, was kept in the Central
Government of these Islands, and was issued to him in 1890, the same having been lost during the
revolution against Spain, and no trace relative to the issuance of said certificate being obtainable in the
Division of Archives of the Executive Bureau on account of the loss of the corresponding records, yet as
in the first page of said dictionary the property right of the plaintiff was reserved by means of the words
"Es propiedad del autor" (All rights reserved), taken in connection with the permission granted him by the
Governor-General on November 24, 1889, to print and publish said dictionary, after an examination
thereof by the permanent committee of censors, which examination was made, and the necessary license
granted to him, these facts constitute sufficient proof, under the circumstances of the case, as they have
not been overcome by any evidence on the part of the defendant, showing that said plaintiff did not
comply with the requirements of article 36 of said law, which was the prerequisite to the enjoyment of the
benefits thereof according to the preceding articles, among which is article 7, which is alleged in the
complaint to have been violated by the defendant.
Even considering that said Law of January 10, 1879, ceased to operate in these Islands, upon the
termination of Spanish sovereignty and the substitution thereof by that of the United States of America,
the right of the plaintiff to invoke said law in support of the action instituted by him in the present case
cannot be disputed. His property right to the work Diccionario Hispano-Tagalog (Spanish-Tagalog
Dictionary), published by him and edited in 1889, is recognized and sanctioned by said law, and by virtue
thereof, he had acquired a right of which he cannot be deprived merely because the law is not in force
now or is of no actual application. This conclusion is necessary to protect intellectual property rights
vested after the sovereignty of Spain was superseded by that of the United States. It was so held
superseded by that of the United States. It was so held in the Treaty of Paris of December 10, 1898,
between Spain and the United States, when it declared in article 13 thereof that the rights to literary,
artistic, and industrial properties acquired by the subject of Spain in the Island of Cuba and in Puerto Rico
and the Philippines and other ceded territories, at the time of the exchange of the ratification of said
Treaty, shall continue to be respect.
In addition to what has been said, according to article 428 of the Civil Code, the author of a literary,
scientific, or artistic work, has the right to exploit it and dispose thereof at will. In relation to this right,
there exists the exclusive right of the author, who is the absolute owner of his own work, to produce it,
according to article 2 of the Law of January 10, 1879, and consequently, nobody may reproduce it,

without his permission, not even to annotate or add something to it, or to improve any edition thereof,
according to article 7 of said law. Manresa, in his commentaries on article 429 of the Civil Code (vol. 3,
p. 633, 3d ed.) says that the concrete statement of the right to literary properties is found in the legal
doctrine according to which nobody may reproduce another person's work, without the consent of his
owner, or even to annotate or add something to it or to improve any edition thereof. And on page 616 of
said volume, Manresa says the following:
He who writes a book, or carves a statue, or makes an invention, has the absolute right to
reproduce or sell it, just as the owner of land has the absolute right to sell it or its fruits. But while
the owner of land, by selling it and its fruits, perhaps fully realizes all its economic value, by
receiving its benefits and utilities, which are presented, for example, by the price, on the other
hand the author of a book, statue or invention, does not reap all the benefits and advantages of
his own property by disposing of it, for the most important form of realizing the economic
advantages of a book, statue or invention, consists in the right to reproduce it in similar or like
copies, everyone of which serves to give to the person reproducing them all the conditions which
the original requires in order to give the author the full enjoyment thereof. If the author of a book,
after its publication, cannot prevent its reproduction by any person who may want to reproduce it,
then the property right granted him is reduced to a very insignificant thing and the effort made in
the production of the book is no way rewarded.
Indeed the property right recognized and protected by the Law of January 10, 1879, on Intellectual
Property, would be illusory if, by reason of the fact that said law is no longer in force as a consequence of
the change of sovereignty in these Islands, the author of a work, who has the exclusive right to reproduce
it, could not prevent another person from so doing without his consent, and could not enforce this right
through the courts of justice in order to prosecute the violator of this legal provision and the defrauder or
usurper of his right, for he could not obtain the full enjoyment of the book or other work, and his property
right thereto, which is recognized by law, would be reduced, as Manresa says, to an insignificant thing, if
he should have no more right than that of selling his work.
The reproduction by the defendant without the plaintiff's consent of the Diccionario HispanoTagalog (Spanish-Tagalog Dictionary), published and edited in the City of Manila in 1889, by the
publication of the Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), published in the same
city and edited in the press El Progreso in 1913, as appears from Exhibit B, which is attached to the
complaint, has caused the plaintiff, according to the latter, damages in the sum of $10,000. It is true that it
cannot be denied that the reproduction of the plaintiff's book by the defendant has caused damages to the
former, but the amount thereof has not been determined at the trial, for the statement of the plaintiff as to
the proceeds he would have realized if he had printed in 1913 the number of copies of his work which he
stated in his declaration a fact which he did not do because the defendant had reproduced it was not
corroborated in any way at the trial and is based upon mere calculations made by the plaintiff himself; for
which reason no pronouncement can be made in this decision as to the indemnification for damages
which the plaintiff seeks to recover.
The plaintiff having prayed, not for a permanent injunction against the defendant, as the plaintiff himself
in his brief erroneously states, but for a judgment ordering the defendant to withdraw from sale all stock
of his work Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), of which Exhibit B is a copy,
and the suit instituted by said plaintiff being proper, we reverse the judgment appealed from and order the
defendant to withdraw from sale, as prayed for in the complaint, all stock of his work above-mentioned,
and to pay the costs of first instance. We make no special pronouncement as to the costs of this instance.
So ordered.

Arellano, C. J., Torres, and Street, JJ., concur.

Carson, and Malcolm, JJ., concur in the result.

SECOND DIVISION

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

FRANCISCO G. JOAQUIN, JR., and BJ PRODUCTIONS, INC., petitioners, vs. FRANKLIN

DRILON GABRIEL ZOSA, WILLIAM ESPOSO, FELIPE MEDINA, JR., and CASEY
FRANCISCO, respondents.
DECISION
MENDOZA, J.:
This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice,
dated August 12, 1992, in Criminal Case No. Q-92-27854, entitled Gabriel Zosa, et al. v. City Prosecutor
of Quezon City and Francisco Joaquin, Jr., and its resolution, dated December 3, 1992, denying petitioner
Joaquins motion for reconsideration.
Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922,
dated January 28, 1971, of Rhoda and Me, a dating game show aired from 1970 to 1977.
On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of
copyright specifying the shows format and style of presentation.
On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw
on RPN Channel 9 an episode of Its a Date, which was produced by IXL Productions, Inc. (IXL). On July
18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL,
informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue
airing Its a Date.
In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and
requested a meeting to discuss a possible settlement. IXL, however, continued airing Its a Date,
prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand
and warned that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal
action.
Meanwhile, private respondent Zosa sought to register IXLs copyright to the first episode of Its a
Date for which it was issued by the National Library a certificate of copyright on August 14, 1991.
Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private
respondent Zosa together with certain officers of RPN Channel 9, namely, William Esposo, Felipe
Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as
Criminal Case No. 92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa
sought a review of the resolution of the Assistant City Prosecutor before the Department of Justice.
On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City
Prosecutors findings and directed him to move for the dismissal of the case against private respondents. [1]
Petitioner Joaquin filed a motion for reconsideration, but his motion was denied by respondent
Secretary of Justice on December 3, 1992. Hence, this petition. Petitioners contend that:

1. The public respondent gravely abused his discretion amounting to lack of jurisdiction when
he invoked non-presentation of the master tape as being fatal to the existence of probable
cause to prove infringement, despite the fact that private respondents never raised the same
as a controverted issue.
2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when
he arrogated unto himself the determination of what is copyrightable - an issue which is
exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding.
Both public and private respondents maintain that petitioners failed to establish the existence of
probable cause due to their failure to present the copyrighted master videotape of Rhoda and Me. They
contend that petitioner BJPIs copyright covers only a specific episode of Rhoda and Me and that the
formats or concepts of dating game shows are not covered by copyright protection under P. D. No. 49.

Non-Assignment of Error

Petitioners claim that their failure to submit the copyrighted master videotape of the television
show Rhoda and Me was not raised in issue by private respondents during the preliminary investigation
and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutors finding of
probable cause on this ground.
A preliminary investigation falls under the authority of the state prosecutor who is given by law the
power to direct and control criminal actions. [2] He is, however, subject to the control of the Secretary of
Justice. Thus, Rule 112, 4 of the Revised Rules of Criminal Procedure, provides:
SEC. 4. Duty of investigating fiscal. - If the investigating fiscal finds cause to hold the
respondent for trial, he shall prepare the resolution and corresponding information. He shall
certify under oath that he, or as shown by the record, an authorized officer, has personally
examined the complainant and his witnesses, that there is reasonable ground to believe that a
crime has been committed and that the accused is probably guilty thereof, that the accused was
informed of the complaint and of the evidence submitted against him and that he was given an
opportunity to submit controverting evidence. Otherwise, he shall recommend dismissal of the
complaint.
In either case, he shall forward the records of the case to the provincial or city fiscal or chief
state prosecutor within five (5) days from his resolution. The latter shall take appropriate action
thereon within ten (10) days from receipt thereof, immediately informing the parties of said
action.
No complaint or information may be filed or dismissed by an investigating fiscal without the
prior written authority or approval of the provincial or city fiscal or chief state prosecutor.
Where the investigating assistant fiscal recommends the dismissal of the case but his findings
are reversed by the provincial or city fiscal or chief state prosecutor on the ground that a probable
cause exists, the latter may, by himself, file the corresponding information against the respondent
or direct any other assistant fiscal or state prosecutor to do so, without conducting another
preliminary investigation.
If upon petition by a proper party, the Secretary of Justice reverses the resolution of the
provincial or city fiscal or chief state prosecutor, he shall direct the fiscal concerned to file the

corresponding information without conducting another preliminary investigation or to dismiss or

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

Opinion of the Secretary of Justice

Petitioners contend, however, that the determination of the question whether the format or mechanics
of a show is entitled to copyright protection is for the court, and not the Secretary of Justice, to make.
They assail the following portion of the resolution of the respondent Secretary of Justice:
[T]he essence of copyright infringement is the copying, in whole or in part, of copyrightable
materials as defined and enumerated in Section 2 of PD. No. 49. Apart from the manner in which it
is actually expressed, however, the idea of a dating game show is, in the opinion of this Office, a
non-copyrightable material. Ideas, concepts, formats, or schemes in their abstract form clearly do
not fall within the class of works or materials susceptible of copyright registration as provided in
PD. No. 49.[3] (Emphasis added.)
It is indeed true that the question whether the format or mechanics of petitioners television show is
entitled to copyright protection is a legal question for the court to make. This does not, however, preclude
respondent Secretary of Justice from making a preliminary determination of this question in resolving
whether there is probable cause for filing the case in court. In doing so in this case, he did not commit any
grave error.

Presentation of Master Tape

Petitioners claim that respondent Secretary of Justice gravely abused his discretion in ruling that the
master videotape should have been presented in order to determine whether there was probable cause for
copyright infringement. They contend that 20th Century Fox Film Corporation v. Court of Appeals,[4] on
which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is
inapplicable to the case at bar because in the present case, the parties presented sufficient evidence which
clearly establish linkages between the copyrighted show Rhoda and Me and the infringing TV show Its a
Date.[5]
The case of 20th Century Fox Film Corporation involved raids conducted on various videotape
outlets allegedly selling or renting out pirated videotapes. The trial court found that the affidavits of NBI
agents, given in support of the application for the search warrant, were insufficient without the master
tape. Accordingly, the trial court lifted the search warrants it had previously issued against the
defendants. On petition for review, this Court sustained the action of the trial court and ruled: [6]
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 petitioners argument to the effect that the presentation of the master tapes at the time of

application may not be necessary as these would be merely evidentiary in nature and not determinative of
whether or not a probable cause exists to justify the issuance of the search warrants is not
meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from
master tapes that it owns.
The application for search warrants was directed against video tape outlets which allegedly were engaged
in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D.
49.
The essence of a copyright infringement is the similarity or at least substantial similarity of the purported
pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted
films to compare them with the purchased evidence of the video tapes allegedly pirated to determine
whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to
the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to
the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.
This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals [7] in which it was
held:
In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the
master tapes of the copyrighted films for the validity of search warrants should at most be understood to
merely serve as a guidepost in determining the existence of probable cause in copyright infringement
cases where there is doubt as to the true nexus between the master tape and the pirated copies. An
objective and careful reading of the decision in said case could lead to no other conclusion than that said
directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright
infringement cases. . . .[8]
In the case at bar, during the preliminary investigation, petitioners and private respondents presented
written descriptions of the formats of their respective televisions shows, on the basis of which the
investigating prosecutor ruled:
As may [be] gleaned from the evidence on record, the substance of the television productions
complainants RHODA AND ME and Zosas ITS A DATE is that two matches are made between a male
and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the
expense of the show. The major concepts of both shows is the same. Any difference appear mere
variations of the major concepts.
That there is an infringement on the copyright of the show RHODA AND ME both in content and in the
execution of the video presentation are established because respondents ITS A DATE is practically an
exact copy of complainants RHODA AND ME because of substantial similarities as follows, to wit:
RHODA AND ME ITS A DATE
Set I Set I
a. Unmarried participant a. same
of one gender (searcher) appears on one side of a divider, while three (3) unmarried participants of
the other gender are on the other side of the divider. This arrangement is done to ensure that the
searcher does not see the searchees.

b. Searcher asks a question b. same

to be answered by each of the searchees. The
purpose is to determine who
among the searchees is the most
compatible with the searcher.
c. Searcher speculates on the c. same
match to the searchee.
d. Selection is made by the d. Selection is
use of compute (sic) methods, based on the
or by the way questions are answer of the
answered, or similar methods. Searchees.
Set 2 Set 2
Same as above with the genders same
of the searcher and searchees
interchanged.[9]
Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus
entitled to copyright protection. It is their position that the presentation of a point-by-point comparison of
the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the
existence of probable cause for copyright infringement. Such being the case, they did not have to produce
the master tape.
To begin with, the format of a show is not copyrightable. Section 2 of P.D. No. 49, [10] otherwise
known as the DECREE ON INTELLECTUAL PROPERTY, enumerates the classes of work entitled to
copyright protection, to wit:
Section 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to
any of the following classes of works:
(A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers;
(B) Periodicals, including pamphlets and newspapers;
(C) Lectures, sermons, addresses, dissertations prepared for oral delivery;
(D) Letters;
(E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb
shows, the acting form of which is fixed in writing or otherwise;
(F) Musical compositions, with or without words;

(G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art;
models or designs for works of art;
(H) Reproductions of a work of art;
(I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and
other works of applied art;
(J) Maps, plans, sketches, and charts;
(K) Drawings or plastic works of a scientific or technical character;
(L) Photographic works and works produced by a process analogous to photography; lantern slides;
(M) Cinematographic works and works produced by a process analogous to cinematography or any
process for making audio-visual recordings;
(N) Computer programs;
(O) Prints, pictorial illustrations advertising copies, labels, tags, and box wraps;
(P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary,
musical or artistic works or of works of the Philippine government as herein defined, which shall be
protected as provided in Section 8 of this Decree.
(Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree
which by reason of the selection and arrangement of their contents constitute intellectual creations, the
same to be protected as such in accordance with Section 8 of this Decree.
(R) Other literary, scholarly, scientific and artistic works.
This provision is substantially the same as 172 of the INTELLECTUAL PROPERTY CODE OF
THE PHILIPPINES (R.A. No. 8293).[11] The format or mechanics of a television show is not included in
the list of protected works in 2 of P.D. No. 49. For this reason, the protection afforded by the law cannot
be extended to cover them.
Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right
granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory grant,
the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the
subjects and by the persons, and on terms and conditions specified in the statute. [12]
Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only
for a work falling within the statutory enumeration or description. [13]
Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no
copyright except that which is both created and secured by act of Congress . . . .[14]
P.D. No. 49, 2, in enumerating what are subject to copyright, refers to finished works and not to
concepts. The copyright does not extend to an idea, procedure, process, system, method of operation,

concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or
embodied in such work.[15] Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES
provides:
Sec. 175. Unprotected Subject Matter. - Notwithstanding the provisions of Sections 172 and 173, no
protection shall extend, under this law, to any idea, procedure, system, method or operation, concept,
principle, discovery or mere data as such, even if they are expressed, explained, illustrated or embodied in
a work; news of the day and other miscellaneous facts having the character of mere items of press
information; or any official text of a legislative, administrative or legal nature, as well as any official
translation thereof.
What then is the subject matter of petitioners copyright? This Court is of the opinion that petitioner
BJPIs copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within the
class of works mentioned in P.D. 49, 2(M), to wit:
Cinematographic works and works produced by a process analogous to cinematography or any process
for making audio-visual recordings;
The copyright does not extend to the general concept or format of its dating game show. Accordingly, by
the very nature of the subject of petitioner BJPIs copyright, the investigating prosecutor should have the
opportunity to compare the videotapes of the two shows.
Mere description by words of the general format of the two dating game shows is insufficient; the
presentation of the master videotape in evidence was indispensable to the determination of the existence
of probable cause. As aptly observed by respondent Secretary of Justice:
A television show includes more than mere words can describe because it involves a whole spectrum
of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by
merely describing the general copyright/format of both dating game shows. [16]
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
Puno, Quisumbing, and Buena, JJ., concur.
Bellosillo, J., (Chairman), no part due to relation to one of the parties.

Related Right
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 154491

November 14, 2008

COCA-COLA BOTTLERS, PHILS., INC. (CCBPI), Naga Plant, petitioner,

vs.
QUINTIN J. GOMEZ, a.k.a. "KIT" GOMEZ and DANILO E. GALICIA, a.k.a. "DANNY
GALICIA",respondents.
DECISION
BRION, J.:
Is the hoarding of a competitor's product containers punishable as unfair competition under the
Intellectual Property Code (IP Code, Republic Act No. 8293) that would entitle the aggrieved party to a
search warrant against the hoarder? This is the issue we grapple with in this petition for review
on certiorari involving two rival multinational softdrink giants; petitioner Coca-Cola Bottlers, Phils., Inc.
(Coca-Cola) accuses Pepsi Cola Products Phils., Inc. (Pepsi), represented by the respondents, of hoarding
empty Coke bottles in bad faith to discredit its business and to sabotage its operation in Bicolandia.
BACKGROUND
The facts, as culled from the records, are summarized below.
On July 2, 2001, Coca-Cola applied for a search warrant against Pepsi for hoarding Coke empty bottles in
Pepsi's yard in Concepcion Grande, Naga City, an act allegedly penalized as unfair competition under the
IP Code. Coca-Cola claimed that the bottles must be confiscated to preclude their illegal use, destruction
or concealment by the respondents.1 In support of the application, Coca-Cola submitted the sworn
statements of three witnesses: Naga plant representative Arnel John Ponce said he was informed that one
of their plant security guards had gained access into the Pepsi compound and had seen empty Coke
bottles; acting plant security officer Ylano A. Regaspi said he investigated reports that Pepsi was
hoarding large quantities of Coke bottles by requesting their security guard to enter the Pepsi plant and he
was informed by the security guard that Pepsi hoarded several Coke bottles; security guard Edwin
Lirio stated that he entered Pepsi's yard on July 2, 2001 at 4 p.m. and saw empty Coke bottles inside
Pepsi shells or cases.2
Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City, after taking the joint
deposition of the witnesses, issued Search Warrant No. 2001-01 3 to seize 2,500 Litro and 3,000 eight and
12 ounces empty Coke bottles at Pepsi's Naga yard for violation of Section 168.3 (c) of the IP Code. 4 The

local police seized and brought to the MTC's custody 2,464 Litro and 4,036 eight and 12 ounces empty
Coke bottles, 205 Pepsi shells for Litro, and 168 Pepsi shells for smaller (eight and 12 ounces) empty
Coke bottles, and later filed with the Office of the City Prosecutor of Naga a complaint against two Pepsi
officers for violation of Section 168.3 (c) in relation to Section 170 of the IP Code. 5The named
respondents, also the respondents in this petition, were Pepsi regional sales manager Danilo E.
Galicia (Galicia) and its Naga general manager Quintin J. Gomez, Jr. (Gomez).
In their counter-affidavits, Galicia and Gomez claimed that the bottles came from various Pepsi retailers
and wholesalers who included them in their return to make up for shortages of empty Pepsi bottles; they
had no way of ascertaining beforehand the return of empty Coke bottles as they simply received what had
been delivered; the presence of the bottles in their yard was not intentional nor deliberate; Ponce and
Regaspi's statements are hearsay as they had no personal knowledge of the alleged crime; there is no
mention in the IP Code of the crime of possession of empty bottles; and that the ambiguity of the law,
which has a penal nature, must be construed strictly against the State and liberally in their favor. Pepsi
security guards Eduardo E. Miral and Rene Acebuche executed a joint affidavit stating that per their
logbook, Lirio did not visit or enter the plant premises in the afternoon of July 2, 2001.
The respondents also filed motions for the return of their shells and to quash the search warrant. They
contended that no probable cause existed to justify the issuance of the search warrant; the facts charged
do not constitute an offense; and their Naga plant was in urgent need of the shells.
Coca-Cola opposed the motions as the shells were part of the evidence of the crime, arguing that Pepsi
used the shells in hoarding the bottles. It insisted that the issuance of warrant was based on probable cause
for unfair competition under the IP Code, and that the respondents violated R.A. 623, the law regulating
the use of stamped or marked bottles, boxes, and other similar containers.
THE MTC RULINGS
On September 19, 2001, the MTC issued the first assailed order 6 denying the twin motions. It explained
there was an exhaustive examination of the applicant and its witnesses through searching questions and
that the Pepsi shells are prima facie evidence that the bottles were placed there by the respondents.
In their motion for reconsideration, the respondents argued for the quashal of the warrant as the MTC did
not conduct a probing and exhaustive examination; the applicant and its witnesses had no personal
knowledge of facts surrounding the hoarding; the court failed to order the return of the "borrowed" shells;
there was no crime involved; the warrant was issued based on hearsay evidence; and the seizure of the
shells was illegal because they were not included in the warrant.
On November 14, 2001, the MTC denied the motion for reconsideration in the second assailed
order,7 explaining that the issue of whether there was unfair competition can only be resolved during trial.
The respondents responded by filing a petition for certiorari under Rule 65 of the Revised Rules of Court
before the Regional Trial Court (RTC) of Naga City on the ground that the subject search warrant was
issued without probable cause and that the empty shells were neither mentioned in the warrant nor the
objects of the perceived crime.
THE RTC RULINGS

On May 8, 2002, the RTC voided the warrant for lack of probable cause and the non-commission of the
crime of unfair competition, even as it implied that other laws may have been violated by the respondents.
The RTC, though, found no grave abuse of discretion on the part of the issuing MTC judge. 8 Thus,
Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the Honorable Judge Julian C.
Ocampo III on July 2, 2001 is ANNULLED and SET ASIDE. The Orders issued by the Pairing
Judge of Br. 1, MTCC of Naga City dated September 19, 2001 and November 14, 2001 are also
declared VOID and SET ASIDE. The City Prosecutor of Naga City and SPO1 Ernesto Paredes
are directed to return to the Petitioner the properties seized by virtue of Search Warrant No. 200102. No costs.
SO ORDERED.9
In a motion for reconsideration, which the RTC denied on July 12, 2002, the petitioner stressed that the
decision of the RTC was contradictory because it absolved Judge Ocampo of grave abuse of discretion in
issuing the search warrant, but at the same time nullified the issued warrant. The MTC should have
dismissed the petition when it found out that Judge Ocampo did not commit any grave abuse of
discretion.
Bypassing the Court of Appeals, the petitioner asks us through this petition for review on certiorariunder
Rule 45 of the Rules of Court to reverse the decision of the RTC. Essentially, the petition raises questions
against the RTC's nullification of the warrant when it found no grave abuse of discretion committed by
the issuing judge.
THE PETITION and
THE PARTIES' POSITIONS
In its petition, the petitioner insists the RTC should have dismissed the respondents' petition for certiorari
because it found no grave abuse of discretion by the MTC in issuing the search warrant. The petitioner
further argues that the IP Code was enacted into law to remedy various forms of unfair competition
accompanying globalization as well as to replace the inutile provision of unfair competition under Article
189 of the Revised Penal Code. Section 168.3(c) of the IP Code does not limit the scope of protection on
the particular acts enumerated as it expands the meaning of unfair competition to include "other acts
contrary to good faith of a nature calculated to discredit the goods, business or services of another." The
inherent element of unfair competition is fraud or deceit, and that hoarding of large quantities of a
competitor's empty bottles is necessarily characterized by bad faith. It claims that its Bicol bottling
operation was prejudiced by the respondents' hoarding and destruction of its empty bottles.
The petitioner also argues that the quashal of the search warrant was improper because it complied with
all the essential requisites of a valid warrant. The empty bottles were concealed in Pepsi shells to prevent
discovery while they were systematically being destroyed to hamper the petitioner's bottling operation
and to undermine the capability of its bottling operations in Bicol.
The respondents counter-argue that although Judge Ocampo conducted his own examination, he gravely
erred and abused his discretion when he ignored the rule on the need of sufficient evidence to establish
probable cause; satisfactory and convincing evidence is essential to hold them guilty of unfair
competition; the hoarding of empty Coke bottles did not cause actual or probable deception and confusion
on the part of the general public; the alleged criminal acts do not show conduct aimed at deceiving the
public; there was no attempt to use the empty bottles or pass them off as the respondents' goods.

The respondents also argue that the IP Code does not criminalize bottle hoarding, as the acts penalized
must always involve fraud and deceit. The hoarding does not make them liable for unfair competition as
there was no deception or fraud on the end-users.
THE ISSUE
Based on the parties' positions, the basic issue submitted to us for resolution is whether the Naga MTC
was correct in issuing Search Warrant No. 2001-01 for the seizure of the empty Coke bottles from Pepsi's
yard for probable violation of Section 168.3 (c) of the IP Code. This basic issue involves two sub-issues,
namely, the substantive issue of whether the application for search warrant effectively charged an offense,
i.e., a violation of Section 168.3 (c) of the IP Code; and the procedural issue of whether the MTC
observed the procedures required by the Rules of Court in the issuance of search warrants.
OUR RULING
We resolve to deny the petition for lack of merit.
We clarify at the outset that while we agree with the RTC decision, our agreement is more in the result
than in the reasons that supported it. The decision is correct in nullifying the search warrant because it
was issued on an invalid substantive basis - the acts imputed on the respondents do not violate Section
168.3 (c) of the IP Code. For this reason, we deny the present petition.
The issuance of a search warrant10 against a personal property11 is governed by Rule 126 of the Revised
Rules of Court whose relevant sections state:
Section 4. Requisites for issuing search warrant. - A search warrant shall not issue except
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 which
may be anywhere in the Philippines.
Section 5. 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 the witnesses he may produce on facts personally known to
them and attach to the record their sworn statements together with the affidavits submitted.
Section 6. Issuance and form of search warrant. - If the judge is satisfied of the existence of facts
upon which the application is based or that there is probable cause to believe that they exist, he
shall issue the warrant, which must be substantially in the form prescribed by these Rules.
[Emphasis supplied]
To paraphrase this rule, a search warrant may be issued only if there is probable cause in connection with
a specific offense alleged in an application based on the personal knowledge of the applicant and his or
her witnesses. This is the substantive requirement in the issuance of a search warrant. Procedurally, the
determination of probable cause is a personal task of the judge before whom the application for search
warrant is filed, as he has to examine under oath or affirmation the applicant and his or her witnesses in
the form of "searching questions and answers" in writing and under oath. The warrant, if issued, must
particularly describe the place to be searched and the things to be seized.

We paraphrase these requirements to stress that they have substantive and procedural aspects. Apparently,
the RTC recognized this dual nature of the requirements and, hence, treated them separately; it approved
of the way the MTC handled the procedural aspects of the issuance of the search warrant but found its
action on the substantive aspect wanting. It therefore resolved to nullify the warrant, without however
expressly declaring that the MTC gravely abused its discretion when it issued the warrant applied for. The
RTC's error, however, is in the form rather than the substance of the decision as the nullification of the
issued warrant for the reason the RTC gave was equivalent to the declaration that grave abuse of
discretion was committed. In fact, we so rule as the discussions below will show.
Jurisprudence teaches us that probable cause, as a condition for the issuance of a search warrant, is such
reasons supported by facts and circumstances as will warrant a cautious man in the belief that his action
and the means taken in prosecuting it are legally just and proper. Probable cause requires facts and
circumstances that would lead a reasonably prudent man to believe that an offense has been committed
and the objects sought in connection with that offense are in the place to be searched. 12 Implicit in this
statement is the recognition that an underlying offense must, in the first place, exist. In other words, the
acts alleged, taken together, must constitute an offense and that these acts are imputable to an offender in
relation with whom a search warrant is applied for.
In the context of the present case, the question is whether the act charged - alleged to be hoarding of
empty Coke bottles - constitutes an offense under Section 168.3 (c) of the IP Code. Section 168 in its
entirety states:
SECTION 168. Unfair Competition, Rights, Regulation and Remedies. 168.1. A person who has identified in the mind of the public the goods he manufactures or deals
in, his business or services from those of others, whether or not a registered mark is employed,
has a property right in the goodwill of the said goods, business or services so identified, which
will be protected in the same manner as other property rights.
168.2. Any person who shall employ deception or any other means contrary to good faith by
which he shall pass off the goods manufactured by him or in which he deals, or his business, or
services for those of the one having established such goodwill, or who shall commit any acts
calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an
action therefor.
168.3. In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods
of another manufacturer or dealer, either as to the goods themselves or in the wrapping of
the packages in which they are contained, or the devices or words thereon, or in any other
feature of their appearance, which would be likely to influence purchasers to believe that
the goods offered are those of a manufacturer or dealer, other than the actual
manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall
deceive the public and defraud another of his legitimate trade, or any subsequent vendor
of such goods or any agent of any vendor engaged in selling such goods with a like
purpose;

(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of another
who has identified such services in the mind of the public; or
(c) Any person who shall make any false statement in the course of trade or who shall
commit any other act contrary to good faith of a nature calculated to discredit the goods,
business or services of another.
168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis. (Sec.
29, R.A. No. 166a)
The petitioner theorizes that the above section does not limit the scope of protection on the particular acts
enumerated as it expands the meaning of unfair competition to include "other acts contrary to good faith
of a nature calculated to discredit the goods, business or services of another." Allegedly, the respondents'
hoarding of Coca Cola empty bottles is one such act.
We do not agree with the petitioner's expansive interpretation of Section 168.3 (c).
"Unfair competition," previously defined in Philippine jurisprudence in relation with R.A. No. 166 and
Articles 188 and 189 of the Revised Penal Code, is now covered by Section 168 of the IP Code as this
Code has expressly repealed R.A. No. 165 and R.A. No. 166, and Articles 188 and 189 of the Revised
Penal Code.
Articles 168.1 and 168.2, as quoted above, provide the concept and general rule on the definition of unfair
competition. The law does not thereby cover every unfair act committed in the course of business; it
covers only acts characterized by "deception or any other means contrary to good faith" in the passing
off of goods and services as those of another who has established goodwill in relation with these goods or
services, or any other act calculated to produce the same result.
What unfair competition is, is further particularized under Section 168.3 when it provides specifics of
what unfair competition is "without in any way limiting the scope of protection against unfair
competition." Part of these particulars is provided under Section 168.3(c) which provides the general
"catch-all" phrase that the petitioner cites. Under this phrase, a person shall be guilty of unfair
competition "who shall commit any other act contrary to good faith of a nature calculated to discredit the
goods, business or services of another."
From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting
to pass off upon the public the goods or business of one person as the goods or business of another with
the end and probable effect of deceiving the public. It formulated the "true test" of unfair competition:
whether the acts of defendant are such as are calculated to deceive the ordinary buyer making his
purchases under the ordinary conditions which prevail in the particular trade to which the controversy
relates.13 One of the essential requisites in an action to restrain unfair competition is proof of fraud; the
intent to deceive must be shown before the right to recover can exist. 14 The advent of the IP Code has not
significantly changed these rulings as they are fully in accord with what Section 168 of the Code in its
entirety provides. Deception, passing off and fraud upon the public are still the key elements that must be
present for unfair competition to exist.
The act alleged to violate the petitioner's rights under Section 168.3 (c) is hoarding which we gather to be
the collection of the petitioner's empty bottles so that they can be withdrawn from circulation and thus
impede the circulation of the petitioner's bottled products. This, according to the petitioner, is an act

contrary to good faith - a conclusion that, if true, is indeed an unfair act on the part of the respondents.
The critical question, however, is not the intrinsic unfairness of the act of hoarding; what is critical for
purposes of Section 168.3 (c) is to determine if the hoarding, as charged, "is of a nature calculated to
discredit the goods, business or services" of the petitioner.
We hold that it is not. Hoarding as defined by the petitioner is not even an act within the contemplation of
the IP Code.
The petitioner's cited basis is a provision of the IP Code, a set of rules that refer to a very specific subject
- intellectual property. Aside from the IP Code's actual substantive contents (which relate specifically to
patents, licensing, trademarks, trade names, service marks, copyrights, and the protection and
infringement of the intellectual properties that these protective measures embody), the coverage and
intent of the Code is expressly reflected in its "Declaration of State Policy" which states:
Section 2. Declaration of State Policy. - The State recognizes that an effective intellectual and
industrial property system is vital to the development of domestic and creative activity, facilitates
transfer of technology, attracts foreign investments, and ensures market access for our products. It
shall protect and secure the exclusive rights of scientists, inventors, artists and other gifted
citizens to their intellectual property and creations, particularly when beneficial to the people, for
such periods as provided in this Act.
The use of intellectual property bears a social function. To this end, the State shall promote the
diffusion of knowledge and information for the promotion of national development and progress
and the common good.
It is also the policy of the State to streamline administrative procedures of registering patents,
trademarks and copyright, to liberalize the registration on the transfer of technology, and to
enhance the enforcement of intellectual property rights in the Philippines. (n)
"Intellectual property rights" have furthermore been defined under Section 4 of the Code to consist of: a)
Copyright and Related Rights; b) Trademarks and Service Marks; c) Geographic Indications; d)
IndustrialDesigns; e) Patents; f) Layout-Designs (Topographies) of Integrated Circuits; and g)Protection
of Undisclosed Information.
Given the IP Code's specific focus, a first test that should be made when a question arises on whether a
matter is covered by the Code is to ask if it refers to an intellectual property as defined in the Code. If it
does not, then coverage by the Code may be negated.
A second test, if a disputed matter does not expressly refer to an intellectual property right as defined
above, is whether it falls under the general "unfair competition" concept and definition under Sections
168.1 and 168.2 of the Code. The question then is whether there is "deception" or any other similar act in
"passing off" of goods or services to be those of another who enjoys established goodwill.
Separately from these tests is the application of the principles of statutory construction giving particular
attention, not so much to the focus of the IP Code generally, but to the terms of Section 168 in particular.
Under the principle of "noscitur a sociis," when a particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct construction may be made clear and specific by
considering the company of words in which it is found or with which it is associated. 15

As basis for this interpretative analysis, we note that Section 168.1 speaks of a person who has earned
goodwill with respect to his goods and services and who is entitled to protection under the Code, with or
without a registered mark. Section 168.2, as previously discussed, refers to the general definition of
unfair competition. Section 168.3, on the other hand, refers to the specific instances of unfair
competition, with Section 168.1 referring to the sale of goods given the appearance of the goods of
another; Section 168.2, to the inducement of belief that his or her goods or services are that of another
who has earned goodwill; while the disputed Section 168.3 being a "catch all" clause whose coverage the
parties now dispute.
Under all the above approaches, we conclude that the "hoarding" - as defined and charged by the
petitioner - does not fall within the coverage of the IP Code and of Section 168 in particular. It does not
relate to any patent, trademark, trade name or service mark that the respondents have invaded, intruded
into or used without proper authority from the petitioner. Nor are the respondents alleged to be
fraudulently "passing off" their products or services as those of the petitioner. The respondents are not
also alleged to be undertaking any representation or misrepresentation that would confuse or tend to
confuse the goods of the petitioner with those of the respondents, or vice versa. What in fact the petitioner
alleges is an act foreign to the Code, to the concepts it embodies and to the acts it regulates; as alleged,
hoarding inflicts unfairness by seeking to limit the opposition's sales by depriving it of the bottles it can
use for these sales.
In this light, hoarding for purposes of destruction is closer to what another law - R.A. No. 623 - covers, to
wit:
SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling or selling of
soda water, mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles,
boxes, casks, kegs, or barrels, and other similar containers, with their names or the names of their
principals or products, or other marks of ownership stamped or marked thereon, may register with
the Philippine Patent Office a description of the names or are used by them, under the same
conditions, rules, and regulations, made applicable by law or regulation to the issuance of
trademarks.
SECTION 2. It shall be unlawful for any person, without the written consent of the manufacturer,
bottler or seller who has successfully registered the marks of ownership in accordance with the
provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, or other
similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy, or
traffic in, or wantonly destroy the same, whether filled or not, or to use the same for drinking
vessels or glasses or for any other purpose than that registered by the manufacturer, bottler or
seller. Any violation of this section shall be punished by a fine or not more than one hundred
pesos or imprisonment of not more than thirty days or both.
As its coverage is defined under Section 1, the Act appears to be a measure that may overlap or be
affected by the provisions of Part II of the IP Code on "The Law on Trademarks, Service Marks and Trade
Names." What is certain is that the IP Code has not expressly repealed this Act. The Act appears, too, to
have specific reference to a special type of registrants - the manufacturers, bottlers or sellers of soda
water, mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks,
kegs, or barrels, and other similar containers - who are given special protection with respect to the
containers they use. In this sense, it is in fact a law of specific coverage and application, compared with
the general terms and application of the IP Code. Thus, under its Section 2, it speaks specifically of
unlawful use of containers and even of the unlawfulness of their wanton destruction - a matter that

escapes the IP Code's generalities unless linked with the concepts of "deception" and "passing off" as
discussed above.
Unfortunately, the Act is not the law in issue in the present case and one that the parties did not consider
at all in the search warrant application. The petitioner in fact could not have cited it in its search warrant
application since the "one specific offense" that the law allows and which the petitioner used was Section
168.3 (c). If it serves any purpose at all in our discussions, it is to show that the underlying factual
situation of the present case is in fact covered by another law, not by the IP Code that the petitioner cites.
Viewed in this light, the lack of probable cause to support the disputed search warrant at once becomes
apparent.
Where, as in this case, the imputed acts do not violate the cited offense, the ruling of this Court penned by
Mr. Justice Bellosillo is particularly instructive:
In the issuance of search warrants, the Rules of Court requires a finding of probable cause in
connection with one specific offense to be determined personally by the judge after examination
of the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the things to be seized. Hence, since there is no crime to speak of, the search
warrant does not even begin to fulfill these stringent requirements and is therefore defective
on its face. The nullity of the warrant renders moot and academic the other issues raised in
petitioners' Motion to Quash and Motion for Reconsideration. Since the assailed search warrant is
null and void, all property seized by virtue thereof should be returned to petitioners in accordance
with established jurisprudence.16
Based on the foregoing, we conclude that the RTC correctly ruled that the petitioner's search warrant
should properly be quashed for the petitioner's failure to show that the acts imputed to the respondents do
not violate the cited offense. There could not have been any probable cause to support the issuance of a
search warrant because no crime in the first place was effectively charged. This conclusion renders
unnecessary any further discussion on whether the search warrant application properly alleged that the
imputed act of holding Coke empties was in fact a "hoarding" in bad faith aimed to prejudice the
petitioner's operations, or whether the MTC duly complied with the procedural requirements for the
issuance of a search warrant under Rule 126 of the Rules of Court.
WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we confirm that Search
Warrant No. 2001-01, issued by the Municipal Trial Court, Branch 1, Naga City, is NULL and VOID.
Costs against the petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
G.R. No. L-36402 March 16, 1987
FILIPINO SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, INC., plaintiffappellant,
vs.
BENJAMIN TAN, defendant-appellee.
Lichauco, Picazo & Agcaoili Law Office for plaintiff-appellant.
Ramon A. Nieves for defendant-appellee.
PARAS, J.:
An appeal was made to the Court of Appeals docketed as CA-G.R. No. 46373-R * entitled Filipino
Society of Composers, Authors, Publishers, Inc., Plaintiff-Appellant v. Benjamin Tan, DefendantAppellee, from the decision of the Court of First Instance of Manila, Branch VII in Civil Case No.
71222 ** "Filipino Society of Composers, Authors and Publishers, Inc., Plaintiff v. Benjamin Tan,
Defendant," which had dismissed plaintiffs' complaint without special pronouncement as to costs.
The Court of Appeals, finding that the case involves pure questions of law, certified the same to the
Supreme Court for final determination (Resolution, CA-G.R. No. 46373-R, Rollo, p. 36; Resolution of the
Supreme Court of February 16, 1973 in L-36402, Rollo, p. 38).
The undisputed facts of this case are as follows:
Plaintiff-appellant is a non-profit association of authors, composers and publishers duly organized under
the Corporation Law of the Philippines and registered with the Securities and Exchange Commission.
Said association is the owner of certain musical compositions among which are the songs entitled: "Dahil
Sa Iyo", "Sapagkat Ikaw Ay Akin," "Sapagkat Kami Ay Tao Lamang" and "The Nearness Of You."
On the other hand, defendant-appellee is the operator of a restaurant known as "Alex Soda Foundation
and Restaurant" where a combo with professional singers, hired to play and sing musical compositions to
entertain and amuse customers therein, were playing and singing the above-mentioned compositions
without any license or permission from the appellant to play or sing the same. Accordingly, appellant
demanded from the appellee payment of the necessary license fee for the playing and singing of aforesaid
compositions but the demand was ignored.
Hence, on November 7, 1967, appellant filed a complaint with the lower court for infringement of
copyright against defendant-appellee for allowing the playing in defendant-appellee's restaurant of said
songs copyrighted in the name of the former.
Defendant-appellee, in his answer, countered that the complaint states no cause of action. While not
denying the playing of said copyrighted compositions in his establishment, appellee maintains that the
mere singing and playing of songs and popular tunes even if they are copyrighted do not constitute an

infringement (Record on Appeal, p. 11; Resolution, CA-G.R. NO. 46373-R, Rollo, pp. 32-36) under the
provisions of Section 3 of the Copyright Law (Act 3134 of the Philippine Legislature).
The lower court, finding for the defendant, dismissed the complaint (Record on Appeal, p. 25).
Plaintiff appealed to the Court of Appeals which as already stated certified the case to the Supreme Court
for adjudication on the legal question involved. (Resolution, Court of Appeals, Rollo, p. 36; Resolution of
the Supreme Court of February 18, 1973, Rollo, p. 38).
In its brief in the Court of Appeals, appellant raised the following Assignment of Errors:
I
THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE
APPELLANT WERE IN THE NATURE OF PUBLIC PROPERTY WHEN THEY WERE
COPYRIGHTED OR REGISTERED.
II
THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE
APPELLANT WERE PLAYED AND SUNG IN THE SODA FOUNTAIN AND RESTAURANT OF
THE APPELLEE BY INDEPENDENT CONTRACTORS AND ONLY UPON THE REQUEST OF
CUSTOMERS.
III
THE LOWER COURT ERRED IN HOLDING THAT THE PLAYING AND SINGING OF
COPYRIGHTED MUSICAL COMPOSITIONS IN THE SODA FOUNTAIN AND RESTAURANT OF
THE APPELLEE ARE NOT PUBLIC PERFORMANCES FOR PROFIT OF THE SAID
COMPOSITIONS WITHIN THE MEANING AND CONTEMPLATION OF THE COPYRIGHT LAW.
IV
THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPELLEE IS LIABLE TO THE
APPELLANT FOR FOUR (4) SEPARATE INFRINGEMENTS. (Brief for Appellant, pp. A and B).
The petition is devoid of merit.
The principal issues in this case are whether or not the playing and signing of musical compositions
which have been copyrighted under the provisions of the Copyright Law (Act 3134) inside the
establishment of the defendant-appellee constitute a public performance for profit within the meaning and
contemplation of the Copyright Law of the Philippines; and assuming that there were indeed public
performances for profit, whether or not appellee can be held liable therefor.
Appellant anchors its claim on Section 3(c) of the Copyright Law which provides:
SEC. 3. The proprietor of a copyright or his heirs or assigns shall have the exclusive
right:

xxx xxx xxx

(c) To exhibit, perform, represent, produce, or reproduce the copyrighted work in any
manner or by any method whatever for profit or otherwise; if not reproduced in copies for
sale, to sell any manuscripts or any record whatsoever thereof;
xxx xxx xxx
It maintains that playing or singing a musical composition is universally accepted as performing the
musical composition and that playing and singing of copyrighted music in the soda fountain and
restaurant of the appellee for the entertainment of the customers although the latter do not pay for the
music but only for the food and drink constitute performance for profit under the Copyright Law (Brief
for the Appellant, pp. 19-25).
We concede that indeed there were "public performances for profit. "
The word "perform" as used in the Act has been applied to "One who plays a musical composition on a
piano, thereby producing in the air sound waves which are heard as music ... and if the instrument he
plays on is a piano plus a broadcasting apparatus, so that waves are thrown out, not only upon the air, but
upon the other, then also he is performing the musical composition." (Buck, et al. v. Duncan, et al.; Same
Jewell La Salle Realty Co., 32F. 2d. Series 367).
In relation thereto, it has been held that "The playing of music in dine and dance establishment which was
paid for by the public in purchases of food and drink constituted "performance for profit" within a
Copyright Law." (Buck, et al. v. Russon No. 4489 25 F. Supp. 317). Thus, it has been explained that while
it is possible in such establishments for the patrons to purchase their food and drinks and at the same time
dance to the music of the orchestra, the music is furnished and used by the orchestra for the purpose of
inducing the public to patronize the establishment and pay for the entertainment in the purchase of food
and drinks. The defendant conducts his place of business for profit, and it is public; and the music is
performed for profit (Ibid, p. 319). In a similar case, the Court ruled that "The Performance in a restaurant
or hotel dining room, by persons employed by the proprietor, of a copyrighted musical composition, for
the entertainment of patrons, without charge for admission to hear it, infringes the exclusive right of the
owner of the copyright." (Herbert v. Shanley Co.; John Church Co. v. Hillard Hotel Co., et al., 242 U.S.
590-591). In delivering the opinion of the Court in said two cases, Justice Holmes elaborated thus:
If the rights under the copyright are infringed only by a performance where money is
taken at the door, they are very imperfectly protected. Performances not different in kind
from those of the defendants could be given that might compete with and even destroy
the success of the monopoly that the law intends the plaintiffs to have. It is enough to say
that there is no need to construe the statute so narrowly. The defendants' performances are
not eleemosynary. They are part of a total for which the public pays, and the fact that the
price of the whole is attributed to a particular item which those present are expected to
order is not important. It is true that the music is not the sole object, but neither is the
food, which probably could be got cheaper elsewhere. The object is a repast in
surroundings that to people having limited power of conversation or disliking the rival
noise, give a luxurious pleasure not to be had from eating a silent meal. If music did not
pay, it would be given up. If it pays, it pays out of the public's pocket. Whether it pays or
not, the purpose of employing it is profit, and that is enough. (Ibid., p. 594).

In the case at bar, it is admitted that the patrons of the restaurant in question pay only for the food and
drinks and apparently not for listening to the music. As found by the trial court, the music provided is for
the purpose of entertaining and amusing the customers in order to make the establishment more attractive
and desirable (Record on Appeal, p. 21). It will be noted that for the playing and singing the musical
compositions involved, the combo was paid as independent contractors by the appellant (Record on
Appeal, p. 24). It is therefore obvious that the expenses entailed thereby are added to the overhead of the
restaurant which are either eventually charged in the price of the food and drinks or to the overall total of
additional income produced by the bigger volume of business which the entertainment was programmed
to attract. Consequently, it is beyond question that the playing and singing of the combo in defendantappellee's restaurant constituted performance for profit contemplated by the Copyright Law. (Act 3134
amended by P.D. No. 49, as amended).
Nevertheless, appellee cannot be said to have infringed upon the Copyright Law. Appellee's allegation
that the composers of the contested musical compositions waived their right in favor of the general public
when they allowed their intellectual creations to become property of the public domain before applying
for the corresponding copyrights for the same (Brief for Defendant-Appellee, pp. 14-15) is correct.
The Supreme Court has ruled that "Paragraph 33 of Patent Office Administrative Order No. 3 (as
amended, dated September 18, 1947) entitled 'Rules of Practice in the Philippines Patent Office relating to
the Registration of Copyright Claims' promulgated pursuant to Republic Act 165, provides among other
things that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in
Manila, or within the (60) days if made elsewhere, failure of which renders such creation public
property." (Santos v. McCullough Printing Company, 12 SCRA 324-325 [1964]. Indeed, if the general
public has made use of the object sought to be copyrighted for thirty (30) days prior to the copyright
application the law deems the object to have been donated to the public domain and the same can no
longer be copyrighted.
A careful study of the records reveals that the song "Dahil Sa Iyo" which was registered on April 20, 1956
(Brief for Appellant, p. 10) became popular in radios, juke boxes, etc. long before registration (TSN, May
28, 1968, pp. 3-5; 25) while the song "The Nearness Of You" registered on January 14, 1955 (Brief for
Appellant, p. 10) had become popular twenty five (25) years prior to 1968, (the year of the hearing) or
from 1943 (TSN, May 28, 1968, p. 27) and the songs "Sapagkat Ikaw Ay Akin" and "Sapagkat Kami Ay
Tao Lamang" both registered on July 10, 1966, appear to have been known and sang by the witnesses as
early as 1965 or three years before the hearing in 1968. The testimonies of the witnesses at the hearing of
this case on this subject were unrebutted by the appellant. (Ibid, pp. 28; 29 and 30).
Under the circumstances, it is clear that the musical compositions in question had long become public
property, and are therefore beyond the protection of the Copyright Law.
PREMISES CONSIDERED, the appealed decision of the Court of First Instance of Manila in Civil Case
No. 71222 is hereby AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
First Division
EN BANC
G.R. No. 175769-70

January 19, 2009

ABS-CBN BROADCASTING CORPORATION, Petitioners,

vs.
PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG
BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M.
COLAYCO, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari1 assails the July 12, 2006 Decision2 of the Court of Appeals in CAG.R. SP Nos. 88092 and 90762, which affirmed the December 20, 2004 Decision of the Director-General
of the Intellectual Property Office (IPO) in Appeal No. 10-2004-0002. Also assailed is the December 11,
2006 Resolution3 denying the motion for reconsideration.
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the Republic of
the Philippines to engage in television and radio broadcasting. 4 It broadcasts television programs by
wireless means to Metro Manila and nearby provinces, and by satellite to provincial stations through
Channel 2 on Very High Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The
programs aired over Channels 2 and 23 are either produced by ABS-CBN or purchased from or licensed
by other producers.
ABS-CBN also owns regional television stations which pattern their programming in accordance with
perceived demands of the region. Thus, television programs shown in Metro Manila and nearby provinces
are not necessarily shown in other provinces.
Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream Broadcasting System.
It delivers digital direct-to-home (DTH) television via satellite to its subscribers all over the Philippines.
Herein individual respondents, Cesar G. Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and
Aloysius M. Colayco, are members of PMSIs Board of Directors.
PMSI was granted a legislative franchise under Republic Act No. 8630 5 on May 7, 1998 and was given a
Provisional Authority by the National Telecommunications Commission (NTC) on February 1, 2000 to
install, operate and maintain a nationwide DTH satellite service. When it commenced operations, it
offered as part of its program line-up ABS-CBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5,
GMA Channel 7, RPN Channel 9, and IBC Channel 13, together with other paid premium program
channels.
However, on April 25, 2001,6 ABS-CBN demanded for PMSI to cease and desist from rebroadcasting
Channels 2 and 23. On April 27, 2001,7 PMSI replied that the rebroadcasting was in accordance with the
authority granted it by NTC and its obligation under NTC Memorandum Circular No. 4-08-88, 8 Section

6.2 of which requires all cable television system operators operating in a community within Grade A or
B contours to carry the television signals of the authorized television broadcast stations. 9
Thereafter, negotiations ensued between the parties in an effort to reach a settlement; however, the
negotiations were terminated on April 4, 2002 by ABS-CBN allegedly due to PMSIs inability to ensure
the prevention of illegal retransmission and further rebroadcast of its signals, as well as the adverse effect
of the rebroadcasts on the business operations of its regional television stations. 10
On May 13, 2002, ABS-CBN filed with the IPO a complaint for Violation of Laws Involving Property
Rights, with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction, which was docketed as IPV No. 10-2002-0004. It alleged that PMSIs unauthorized
rebroadcasting of Channels 2 and 23 infringed on its broadcasting rights and copyright.
On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBNs application for a
temporary restraining order. On July 12, 2002, PMSI suspended its retransmission of Channels 2 and 23
and likewise filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP
No. 71597.
Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to the must-carry rule
under Memorandum Circular No. 04-08-88. It also submitted a letter dated December 20, 2002 of then
NTC Commissioner Armi Jane R. Borje to PMSI stating as follows:
This refers to your letter dated December 16, 2002 requesting for regulatory guidance from this
Commission in connection with the application and coverage of NTC Memorandum Circular No. 4-0888, particularly Section 6 thereof, on mandatory carriage of television broadcast signals, to the direct-tohome (DTH) pay television services of Philippine Multi-Media System, Inc. (PMSI).
Preliminarily, both DTH pay television and cable television services are broadcast services, the only
difference being the medium of delivering such services (i.e. the former by satellite and the latter by
cable). Both can carry broadcast signals to the remote areas, thus enriching the lives of the residents
thereof through the dissemination of social, economic, educational information and cultural programs.
The DTH pay television services of PMSI is equipped to provide nationwide DTH satellite services.
Concededly, PMSIs DTH pay television services covers very much wider areas in terms of carriage of
broadcast signals, including areas not reachable by cable television services thereby providing a better
medium of dissemination of information to the public.
In view of the foregoing and the spirit and intent of NTC memorandum Circular No. 4-08-88,
particularly section 6 thereof, on mandatory carriage of television broadcast signals, DTH pay
television services should be deemed covered by such NTC Memorandum Circular.
For your guidance. (Emphasis added)11
On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a letter dated July
24, 2003 from the NTC enjoining strict and immediate compliance with the must-carry rule under
Memorandum Circular No. 04-08-88, to wit:
Dear Mr. Abellada:

Last July 22, 2003, the National Telecommunications Commission (NTC) received a letter dated July 17,
2003 from President/COO Rene Q. Bello of the International Broadcasting Corporation (IBC-Channel 13)
complaining that your company, Dream Broadcasting System, Inc., has cut-off, without any notice or
explanation whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment of the
public.
We were told that, until now, this has been going on.
Please be advised that as a direct broadcast satellite operator, operating a direct-to-home (DTH)
broadcasting system, with a provisional authority (PA) from the NTC, your company, along with
cable television operators, are mandated to strictly comply with the existing policy of NTC on
mandatory carriage of television broadcast signals as provided under Memorandum Circular No.
04-08-88, also known as the Revised Rules and Regulations Governing Cable Television System in
the Philippines.
This mandatory coverage provision under Section 6.2 of said Memorandum Circular, requires all
cable television system operators, operating in a community within the Grade A or B contours
to must-carry the television signals of the authorized television broadcast stations, one of which is
IBC-13. Said directive equally applies to your company as the circular was issued to give consumers
and the public a wider access to more sources of news, information, entertainment and other
programs/contents.
This Commission, as the governing agency vested by laws with the jurisdiction, supervision and control
over all public services, which includes direct broadcast satellite operators, and taking into consideration
the paramount interest of the public in general, hereby directs you to immediately restore the signal of
IBC-13 in your network programs, pursuant to existing circulars and regulations of the Commission.
For strict compliance. (Emphasis added)12
Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-10-2003, entitled
Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and
Direct Broadcast Satellite (DBS) Services to Promote Competition in the Sector. Article 6, Section 8
thereof states:
As a general rule, the reception, distribution and/or transmission by any CATV/DBS operator of any
television signals without any agreement with or authorization from program/content providers are
prohibited.
On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular No. 04-08-88, the
NTC explained to PMSI in a letter dated November 3, 2003 that:
To address your query on whether or not the provisions of MC 10-10-2003 would have the effect of
amending the provisions of MC 4-08-88 on mandatory carriage of television signals, the answer is in the
negative.
xxxx
The Commission maintains that, MC 4-08-88 remains valid, subsisting and enforceable.

Please be advised, therefore, that as duly licensed direct-to-home satellite television service provider
authorized by this Commission, your company continues to be bound by the guidelines provided for
under MC 04-08-88, specifically your obligation under its mandatory carriage provisions, in
addition to your obligations under MC 10-10-2003. (Emphasis added)
Please be guided accordingly.13
On December 22, 2003, the BLA rendered a decision14 finding that PMSI infringed the broadcasting
rights and copyright of ABS-CBN and ordering it to permanently cease and desist from rebroadcasting
Channels 2 and 23.
On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of the IPO which was
docketed as Appeal No. 10-2004-0002. On December 23, 2004, it also filed with the Court of Appeals a
Motion to Withdraw Petition; Alternatively, Memorandum of the Petition for Certiorari in CA-G.R. SP
No. 71597, which was granted in a resolution dated February 17, 2005.
On December 20, 2004, the Director-General of the IPO rendered a decision 15 in favor of PMSI, the
dispositive portion of which states:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. Accordingly, Decision No.
2003-01 dated 22 December 2003 of the Director of Bureau of Legal Affairs is hereby REVERSED and
SET ASIDE.
Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs for appropriate
action, and the records be returned to her for proper disposition. The Documentation, Information and
Technology Transfer Bureau is also given a copy for library and reference purposes.
SO ORDERED.16
Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary restraining order and
writ of preliminary injunction with the Court of Appeals, which was docketed as CA-G.R. SP No. 88092.
On July 18, 2005, the Court of Appeals issued a temporary restraining order. Thereafter, ABS-CBN filed a
petition for contempt against PMSI for continuing to rebroadcast Channels 2 and 23 despite the
restraining order. The case was docketed as CA- G.R. SP No. 90762.
On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R. SP Nos. 88092 and
90762.
In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the findings of the DirectorGeneral of the IPO and dismissed both petitions filed by ABS-CBN. 17
ABS-CBNs motion for reconsideration was denied, hence, this petition.
ABS-CBN contends that PMSIs unauthorized rebroadcasting of Channels 2 and 23 is an infringement of
its broadcasting rights and copyright under the Intellectual Property Code (IP Code); 18that Memorandum
Circular No. 04-08-88 excludes DTH satellite television operators; that the Court of Appeals
interpretation of the must-carry rule violates Section 9 of Article III 19 of the Constitution because it allows
the taking of property for public use without payment of just compensation; that the Court of Appeals

erred in dismissing the petition for contempt docketed as CA-G.R. SP No. 90762 without requiring
respondents to file comment.
Respondents, on the other hand, argue that PMSIs rebroadcasting of Channels 2 and 23 is sanctioned by
Memorandum Circular No. 04-08-88; that the must-carry rule under the Memorandum Circular is a valid
exercise of police power; and that the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since
it found no need to exercise its power of contempt.
After a careful review of the facts and records of this case, we affirm the findings of the Director-General
of the IPO and the Court of Appeals.
There is no merit in ABS-CBNs contention that PMSI violated its broadcasters rights under Section 211
of the IP Code which provides in part:
Chapter XIV
BROADCASTING ORGANIZATIONS
Sec. 211. Scope of Right. - Subject to the provisions of Section 212, broadcasting organizations shall
enjoy the exclusive right to carry out, authorize or prevent any of the following acts:
211.1. The rebroadcasting of their broadcasts;
xxxx
Neither is PMSI guilty of infringement of ABS-CBNs copyright under Section 177 of the IP Code which
states that copyright or economic rights shall consist of the exclusive right to carry out, authorize or
prevent the public performance of the work (Section 177.6), and other communication to the public of the
work (Section 177.7).20
Section 202.7 of the IP Code defines broadcasting as the transmission by wireless means for the public
reception of sounds or of images or of representations thereof; such transmission by satellite is also
broadcasting where the means for decrypting are provided to the public by the broadcasting organization
or with its consent.
On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise known as
the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, 21 is the
simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting
organization.
The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting and thus
cannot be considered to have infringed ABS-CBNs broadcasting rights and copyright, thus:
That the Appellants [herein respondent PMSI] subscribers are able to view Appellees [herein petitioner
ABS-CBN] programs (Channels 2 and 23) at the same time that the latter is broadcasting the same is
undisputed. The question however is, would the Appellant in doing so be considered engaged in
broadcasting. Section 202.7 of the IP Code states that broadcasting means

the transmission by wireless means for the public reception of sounds or of images or of representations
thereof; such transmission by satellite is also broadcasting where the means for decrypting are provided
to the public by the broadcasting organization or with its consent.
Section 202.7 of the IP Code, thus, provides two instances wherein there is broadcasting, to wit:
1. The transmission by wireless means for the public reception of sounds or of images or
of representations thereof; and
2. The transmission by satellite for the public reception of sounds or of images or of
representations thereof where the means for decrypting are provided to the public by the
broadcasting organization or with its consent.
It is under the second category that Appellants DTH satellite television service must be examined since it
is satellite-based. The elements of such category are as follows:
1. There is transmission of sounds or images or of representations thereof;
2. The transmission is through satellite;
3. The transmission is for public reception; and
4. The means for decrypting are provided to the public by the broadcasting organization
or with its consent.
It is only the presence of all the above elements can a determination that the DTH is broadcasting and
consequently, rebroadcasting Appellees signals in violation of Sections 211 and 177 of the IP Code, may
be arrived at.
Accordingly, this Office is of the view that the transmission contemplated under Section 202.7 of the IP
Code presupposes that the origin of the signals is the broadcaster. Hence, a program that is broadcasted is
attributed to the broadcaster. In the same manner, the rebroadcasted program is attributed to the
rebroadcaster.
In the case at hand, Appellant is not the origin nor does it claim to be the origin of the programs
broadcasted by the Appellee. Appellant did not make and transmit on its own but merely carried the
existing signals of the Appellee. When Appellants subscribers view Appellees programs in Channels 2
and 23, they know that the origin thereof was the Appellee.
Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster transmits, the signals are
scattered or dispersed in the air. Anybody may pick-up these signals. There is no restriction as to its
number, type or class of recipients. To receive the signals, one is not required to subscribe or to pay any
fee. One only has to have a receiver, and in case of television signals, a television set, and to tune-in to the
right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is
wireless, all the more supports this discussion. Apparently, the undiscriminating dispersal of signals in the
air is possible only through wireless means. The use of wire in transmitting signals, such as cable
television, limits the recipients to those who are connected. Unlike wireless transmissions, in wire-based
transmissions, it is not enough that one wants to be connected and possesses the equipment. The service
provider, such as cable television companies may choose its subscribers.

The only limitation to such dispersal of signals in the air is the technical capacity of the transmitters and
other equipment employed by the broadcaster. While the broadcaster may use a less powerful transmitter
to limit its coverage, this is merely a business strategy or decision and not an inherent limitation when
transmission is through cable.
Accordingly, the nature of broadcasting is to scatter the signals in its widest area of coverage as possible.
On this score, it may be said that making public means that accessibility is undiscriminating as long as it
[is] within the range of the transmitter and equipment of the broadcaster. That the medium through which
the Appellant carries the Appellees signal, that is via satellite, does not diminish the fact that it operates
and functions as a cable television. It remains that the Appellants transmission of signals via its DTH
satellite television service cannot be considered within the purview of broadcasting. x x x
xxxx
This Office also finds no evidence on record showing that the Appellant has provided decrypting means to
the public indiscriminately. Considering the nature of this case, which is punitive in fact, the burden of
proving the existence of the elements constituting the acts punishable rests on the shoulder of the
complainant.
Accordingly, this Office finds that there is no rebroadcasting on the part of the Appellant of the Appellees
programs on Channels 2 and 23, as defined under the Rome Convention. 22
Under the Rome Convention, rebroadcasting is the simultaneous broadcasting by one broadcasting
organization of the broadcast of another broadcasting organization. The Working Paper 23 prepared by the
Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting
organizations as entities that take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted content. 24 Evidently, PMSI would not qualify as a
broadcasting organization because it does not have the aforementioned responsibilities imposed upon
broadcasting organizations, such as ABS-CBN.
ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the viewers
receive in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in
Channels 2 and 23. Likewise, it does not pass itself off as the origin or author of such programs. Insofar
as Channels 2 and 23 are concerned, PMSI merely retransmits the same in accordance with Memorandum
Circular 04-08-88. With regard to its premium channels, it buys the channels from content providers and
transmits on an as-is basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting
organization; thus, it cannot be said that it is engaged in rebroadcasting Channels 2 and 23.
The Director-General of the IPO and the Court of Appeals also correctly found that PMSIs services are
similar to a cable television system because the services it renders fall under cable retransmission, as
described in the Working Paper, to wit:
(G) Cable Retransmission
47. When a radio or television program is being broadcast, it can be retransmitted to new audiences by
means of cable or wire. In the early days of cable television, it was mainly used to improve signal
reception, particularly in so-called shadow zones, or to distribute the signals in large buildings or
building complexes. With improvements in technology, cable operators now often receive signals from
satellites before retransmitting them in an unaltered form to their subscribers through cable.

48. In principle, cable retransmission can be either simultaneous with the broadcast over-the-air or
delayed (deferred transmission) on the basis of a fixation or a reproduction of a fixation. Furthermore,
they might be unaltered or altered, for example through replacement of commercials, etc. In general,
however, the term retransmission seems to be reserved for such transmissions which are both
simultaneous and unaltered.
49. The Rome Convention does not grant rights against unauthorized cable retransmission. Without such a
right, cable operators can retransmit both domestic and foreign over the air broadcasts simultaneously to
their subscribers without permission from the broadcasting organizations or other rightholders and
without obligation to pay remuneration.25 (Emphasis added)
Thus, while the Rome Convention gives broadcasting organizations the right to authorize or prohibit the
rebroadcasting of its broadcast, however, this protection does not extend to cable retransmission. The
retransmission of ABS-CBNs signals by PMSI which functions essentially as a cable television does
not therefore constitute rebroadcasting in violation of the formers intellectual property rights under the IP
Code.
It must be emphasized that the law on copyright is not absolute. The IP Code provides that:
Sec. 184. Limitations on Copyright. 184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement
of copyright:
xxxx
(h) The use made of a work by or under the direction or control of the Government, by the National
Library or by educational, scientific or professional institutions where such use is in the public interest
and is compatible with fair use;
The carriage of ABS-CBNs signals by virtue of the must-carry rule in Memorandum Circular No. 04-0888 is under the direction and control of the government though the NTC which is vested with exclusive
jurisdiction to supervise, regulate and control telecommunications and broadcast services/facilities in the
Philippines.26 The imposition of the must-carry rule is within the NTCs power to promulgate rules and
regulations, as public safety and interest may require, to encourage a larger and more effective use of
communications, radio and television broadcasting facilities, and to maintain effective competition among
private entities in these activities whenever the Commission finds it reasonably feasible. 27 As correctly
observed by the Director-General of the IPO:
Accordingly, the Must-Carry Rule under NTC Circular No. 4-08-88 falls under the foregoing category
of limitations on copyright. This Office agrees with the Appellant [herein respondent PMSI] that the
Must-Carry Rule is in consonance with the principles and objectives underlying Executive Order No.
436,28 to wit:
The Filipino people must be given wider access to more sources of news, information, education, sports
event and entertainment programs other than those provided for by mass media and afforded television
programs to attain a well informed, well-versed and culturally refined citizenry and enhance their socioeconomic growth:

WHEREAS, cable television (CATV) systems could support or supplement the services provided by
television broadcast facilities, local and overseas, as the national information highway to the
countryside.29
The Court of Appeals likewise correctly observed that:
[T]he very intent and spirit of the NTC Circular will prevent a situation whereby station owners and a few
networks would have unfettered power to make time available only to the highest bidders, to
communicate only their own views on public issues, people, and to permit on the air only those with
whom they agreed contrary to the state policy that the (franchise) grantee like the petitioner, private
respondent and other TV station owners, shall provide at all times sound and balanced programming and
assist in the functions of public information and education.
This is for the first time that we have a structure that works to accomplish explicit state policy goals. 30
Indeed, intellectual property protection is merely a means towards the end of making society benefit from
the creation of its men and women of talent and genius. This is the essence of intellectual property laws,
and it explains why certain products of ingenuity that are concealed from the public are outside the pale
of protection afforded by the law. It also explains why the author or the creator enjoys no more rights than
are consistent with public welfare.31
Further, as correctly observed by the Court of Appeals, the must-carry rule as well as the legislative
franchises granted to both ABS-CBN and PMSI are in consonance with state policies enshrined in the
Constitution, specifically Sections 9,32 17,33 and 2434 of Article II on the Declaration of Principles and
State Policies.35
ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1 of which
authorizes it to construct, operate and maintain, for commercial purposes and in the public interest,
television and radio broadcasting in and throughout the Philippines x x x. Section 4 thereof mandates
that it shall provide adequate public service time to enable the government, through the said
broadcasting stations, to reach the population on important public issues; provide at all times sound and
balanced programming; promote public participation such as in community programming; assist in the
functions of public information and education x x x.
PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4 of which
similarly states that it shall provide adequate public service time to enable the government, through the
said broadcasting stations, to reach the population on important public issues; provide at all times sound
and balanced programming; promote public participation such as in community programming; assist in
the functions of public information and education x x x. Section 5, paragraph 2 of the same law provides
that the radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a
privilege conferred upon the grantee by the State and may be withdrawn anytime, after due process.
In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC, 36 the Court held that a franchise is a mere
privilege which may be reasonably burdened with some form of public service. Thus:
All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave
frequencies have to be allocated as there are more individuals who want to broadcast than there are
frequencies to assign. A franchise is thus a privilege subject, among other things, to amendment by
Congress in accordance with the constitutional provision that any such franchise or right granted . . .
shall be subject to amendment, alteration or repeal by the Congress when the common good so requires.

xxxx
Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and
television broadcast stations and, until the present case was brought, such provisions had not been thought
of as taking property without just compensation. Art. XII, 11 of the Constitution authorizes the
amendment of franchises for the common good. What better measure can be conceived for the common
good than one for free air time for the benefit not only of candidates but even more of the public,
particularly the voters, so that they will be fully informed of the issues in an election? [I]t is the right of
the viewers and listeners, not the right of the broadcasters, which is paramount.
Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free
air time. Even in the United States, there are responsible scholars who believe that government controls
on broadcast media can constitutionally be instituted to ensure diversity of views and attention to public
affairs to further the system of free expression. For this purpose, broadcast stations may be required to
give free air time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of
Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes:
xxxx
In truth, radio and television broadcasting companies, which are given franchises, do not own the
airwaves and frequencies through which they transmit broadcast signals and images. They are merely
given the temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the
privilege may reasonably be burdened with the performance by the grantee of some form of public
service. x x x37
There is likewise no merit to ABS-CBNs claim that PMSIs carriage of its signals is for a commercial
purpose; that its being the countrys top broadcasting company, the availability of its signals allegedly
enhances PMSIs attractiveness to potential customers; 38 or that the unauthorized carriage of its signals by
PMSI has created competition between its Metro Manila and regional stations.
ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for profit; or that such
carriage adversely affected the business operations of its regional stations. Except for the testimonies of
its witnesses,[39] no studies, statistical data or information have been submitted in evidence.
Administrative charges cannot be based on mere speculation or conjecture. The complainant has the
burden of proving by substantial evidence the allegations in the complaint. 40 Mere allegation is not
evidence, and is not equivalent to proof.41
Anyone in the country who owns a television set and antenna can receive ABS-CBNs signals for free.
Other broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-5, and IBC-13
can likewise be accessed for free. No payment is required to view the said channels 42 because these
broadcasting networks do not generate revenue from subscription from their viewers but from airtime
revenue from contracts with commercial advertisers and producers, as well as from direct sales.
In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it
offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV,
and AXN, among others, thus allowing its customers to go beyond the limits of Free TV and Cable
TV.43 It does not advertise itself as a local channel carrier because these local channels can be viewed
with or without DTH television.

Relevantly, PMSIs carriage of Channels 2 and 23 is material in arriving at the ratings and audience share
of ABS-CBN and its programs. These ratings help commercial advertisers and producers decide whether
to buy airtime from the network. Thus, the must-carry rule is actually advantageous to the broadcasting
networks because it provides them with increased viewership which attracts commercial advertisers and
producers.
On the other hand, the carriage of free-to-air signals imposes a burden to cable and DTH television
providers such as PMSI. PMSI uses none of ABS-CBNs resources or equipment and carries the signals
and shoulders the costs without any recourse of charging. 44 Moreover, such carriage of signals takes up
channel space which can otherwise be utilized for other premium paid channels.
There is no merit to ABS-CBNs argument that PMSIs carriage of Channels 2 and 23 resulted in
competition between its Metro Manila and regional stations. ABS-CBN is free to decide to pattern its
regional programming in accordance with perceived demands of the region; however, it cannot impose
this kind of programming on the regional viewers who are also entitled to the free-to-air channels. It must
be emphasized that, as a national broadcasting organization, one of ABS-CBNs responsibilities is to
scatter its signals to the widest area of coverage as possible. That it should limit its signal reach for the
sole purpose of gaining profit for its regional stations undermines public interest and deprives the viewers
of their right to access to information.
Indeed, television is a business; however, the welfare of the people must not be sacrificed in the pursuit of
profit. The right of the viewers and listeners to the most diverse choice of programs available is
paramount.45 The Director-General correctly observed, thus:
The Must-Carry Rule favors both broadcasting organizations and the public. It prevents cable television
companies from excluding broadcasting organization especially in those places not reached by signal.
Also, the rule prevents cable television companies from depriving viewers in far-flung areas the
enjoyment of programs available to city viewers. In fact, this Office finds the rule more burdensome on
the part of the cable television companies. The latter carries the television signals and shoulders the costs
without any recourse of charging. On the other hand, the signals that are carried by cable television
companies are dispersed and scattered by the television stations and anybody with a television set is free
to pick them up.
With its enormous resources and vaunted technological capabilities, Appellees [herein petitioner ABSCBN] broadcast signals can reach almost every corner of the archipelago. That in spite of such capacity, it
chooses to maintain regional stations, is a business decision. That the Must-Carry Rule adversely
affects the profitability of maintaining such regional stations since there will be competition between
them and its Metro Manila station is speculative and an attempt to extrapolate the effects of the rule. As
discussed above, Appellants DTH satellite television services is of limited subscription. There was not
even a showing on part of the Appellee the number of Appellants subscribers in one region as compared
to non-subscribing television owners. In any event, if this Office is to engage in conjecture, such
competition between the regional stations and the Metro Manila station will benefit the public as such
competition will most likely result in the production of better television programs. 46
All told, we find that the Court of Appeals correctly upheld the decision of the IPO Director-General that
PMSI did not infringe on ABS-CBNs intellectual property rights under the IP Code. The findings of facts
of administrative bodies charged with their specific field of expertise, are afforded great weight by the
courts, and in the absence of substantial showing that such findings are made from an erroneous
estimation of the evidence presented, they are conclusive, and in the interest of stability of the
governmental structure, should not be disturbed.47

Moreover, the factual findings of the Court of Appeals are conclusive on the parties and are not
reviewable by the Supreme Court. They carry even more weight when the Court of Appeals affirms the
factual findings of a lower fact-finding body,48 as in the instant case.
There is likewise no merit to ABS-CBNs contention that the Memorandum Circular excludes from its
coverage DTH television services such as those provided by PMSI. Section 6.2 of the Memorandum
Circular requires all cable television system operators operating in a community within Grade A or B
contours to carry the television signals of the authorized television broadcast stations. 49 The rationale
behind its issuance can be found in the whereas clauses which state:
Whereas, Cable Television Systems or Community Antenna Television (CATV) have shown their ability
to offer additional programming and to carry much improved broadcast signals in the remote areas,
thereby enriching the lives of the rest of the population through the dissemination of social, economic,
educational information and cultural programs;
Whereas, the national government supports the promotes the orderly growth of the Cable Television
industry within the framework of a regulated fee enterprise, which is a hallmark of a democratic society;
Whereas, public interest so requires that monopolies in commercial mass media shall be regulated or
prohibited, hence, to achieve the same, the cable TV industry is made part of the broadcast media;
Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the National
Telecommunications Commission the authority to set down rules and regulations in order to protect the
public and promote the general welfare, the National Telecommunications Commission hereby
promulgates the following rules and regulations on Cable Television Systems;
The policy of the Memorandum Circular is to carry improved signals in remote areas for the good of the
general public and to promote dissemination of information. In line with this policy, it is clear that DTH
television should be deemed covered by the Memorandum Circular. Notwithstanding the different
technologies employed, both DTH and cable television have the ability to carry improved signals and
promote dissemination of information because they operate and function in the same way.
In its December 20, 2002 letter,50 the NTC explained that both DTH and cable television services are of a
similar nature, the only difference being the medium of delivering such services. They can carry broadcast
signals to the remote areas and possess the capability to enrich the lives of the residents thereof through
the dissemination of social, economic, educational information and cultural programs. Consequently,
while the Memorandum Circular refers to cable television, it should be understood as to include DTH
television which provides essentially the same services.
In Eastern Telecommunications Philippines, Inc. v. International Communication Corporation, 51 we held:
The NTC, being the government agency entrusted with the regulation of activities coming under its
special and technical forte, and possessing the necessary rule-making power to implement its objectives,
is in the best position to interpret its own rules, regulations and guidelines. The Court has consistently
yielded and accorded great respect to the interpretation by administrative agencies of their own rules
unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly
conflicting with the letter and spirit of the law.52
With regard to the issue of the constitutionality of the must-carry rule, the Court finds that its resolution is
not necessary in the disposition of the instant case. One of the essential requisites for a successful judicial

inquiry into constitutional questions is that the resolution of the constitutional question must be necessary
in deciding the case.53 In Spouses Mirasol v. Court of Appeals,54 we held:
As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on
other grounds. The policy of the courts is to avoid ruling on constitutional questions and to presume that
the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To
doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the
measure had first been carefully studied by the legislative and executive departments and found to be in
accord with the Constitution before it was finally enacted and approved. 55
The instant case was instituted for violation of the IP Code and infringement of ABS-CBNs broadcasting
rights and copyright, which can be resolved without going into the constitutionality of Memorandum
Circular No. 04-08-88. As held by the Court of Appeals, the only relevance of the circular in this case is
whether or not compliance therewith should be considered manifestation of lack of intent to commit
infringement, and if it is, whether such lack of intent is a valid defense against the complaint of
petitioner.56
The records show that petitioner assailed the constitutionality of Memorandum Circular No. 04-08-88 by
way of a collateral attack before the Court of Appeals. In Philippine National Bank v. Palma,57 we ruled
that for reasons of public policy, the constitutionality of a law cannot be collaterally attacked. A law is
deemed valid unless declared null and void by a competent court; more so when the issue has not been
duly pleaded in the trial court.58
As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if not
raised in the pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court, it will
not be considered on appeal.59 In Philippine Veterans Bank v. Court of Appeals,60 we held:
We decline to rule on the issue of constitutionality as all the requisites for the exercise of judicial review
are not present herein. Specifically, the question of constitutionality will not be passed upon by the
Court unless, at the first opportunity, it is properly raised and presented in an appropriate case,
adequately argued, and is necessary to a determination of the case, particularly where the issue of
constitutionality is the very lis mota presented.x x x61
Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in order.
Indirect contempt may either be initiated (1) motu proprio by the court by issuing an order or any other
formal charge requiring the respondent to show cause why he should not be punished for contempt or (2)
by the filing of a verified petition, complying with the requirements for filing initiatory pleadings. 62
ABS-CBN filed a verified petition before the Court of Appeals, which was docketed CA G.R. SP No.
90762, for PMSIs alleged disobedience to the Resolution and Temporary Restraining Order, both dated
July 18, 2005, issued in CA-G.R. SP No. 88092. However, after the cases were consolidated, the Court of
Appeals did not require PMSI to comment on the petition for contempt. It ruled on the merits of CA-G.R.
SP No. 88092 and ordered the dismissal of both petitions.
ABS-CBN argues that the Court of Appeals erred in dismissing the petition for contempt without having
ordered respondents to comment on the same. Consequently, it would have us reinstate CA-G.R. No.
90762 and order respondents to show cause why they should not be held in contempt.

It bears stressing that the proceedings for punishment of indirect contempt are criminal in nature. The
modes of procedure and rules of evidence adopted in contempt proceedings are similar in nature to those
used in criminal prosecutions. 63 While it may be argued that the Court of Appeals should have ordered
respondents to comment, the issue has been rendered moot in light of our ruling on the merits. To order
respondents to comment and have the Court of Appeals conduct a hearing on the contempt charge when
the main case has already been disposed of in favor of PMSI would be circuitous. Where the issues have
become moot, there is no justiciable controversy, thereby rendering the resolution of the same of no
practical use or value.64
WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of Appeals in CAG.R. SP Nos. 88092 and 90762, sustaining the findings of the Director-General of the Intellectual
Property Office and dismissing the petitions filed by ABS-CBN Broadcasting Corporation, and the
December 11, 2006 Resolution denying the motion for reconsideration, are AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19439

October 31, 1964

MAURO MALANG SANTOS, plaintiff-appellant,

vs.
MCCULLOUGH PRINTING COMPANY, defendant-appellee.
Taada Teehankee & Carreon for plaintiff-appellant.
Esposo & Usison for defendant-appellee.
PAREDES, J.:
This is an action for damages based on the provisions of Articles 721 and 722 of the Civil Code of the
Philippines, allegedly on the unauthorized use, adoption and appropriation by the defendant company of
plaintiff's intellectual creation or artistic design for a Christmas Card. The design depicts "a Philippine
rural Christmas time scene consisting of a woman and a child in a nipa hut adorned with a star-shaped
lantern and a man astride a carabao, beside a tree, underneath which appears the plaintiff's pen name,
Malang."
The complaint alleges that plaintiff Mauro Malang Santos designed for former Ambassador Felino Neri,
for his personal Christmas Card greetings for the year 1959, the artistic motif in question. The following
year the defendant McCullough Printing Company, without the knowledge and authority of plaintiff,
displayed the very design in its album of Christmas cards and offered it for sale, for a price. For such
unauthorized act of defendant, plaintiff suffered moral damages to the tune of P16,000.00, because it has
placed plaintiff's professional integrity and ethics under serious question and caused him grave
embarrassment before Ambassador Neri. He further prayed for the additional sum of P3,000.00 by way of
attorney's fee.
Defendant in answer to the complaint, after some denials and admissions, moved for a dismissal of the
action claiming that
(1) The design claimed does not contain a clear notice that it belonged to him and that he
prohibited its use by others;
(2) The design in question has been published but does not contain a notice of copyright, as in
fact it had never been copyrighted by the plaintiff, for which reason this action is barred by the
Copyright Law;
(3) The complaint does not state a cause of action.
The documentary evidence submitted were the Christmas cards, as originally designed by plaintiff, the
design as printed for Ambassador Neri, and the subsequent reprints ordered by other parties. The case was
submitted an a "Stipulation of Fact" the pertinent portions of which are hereunder reproduced:

1. That the plaintiff was the artist who created the design shown in Exhibit A, ...
2. That the design carries the pen name of plaintiff, MALANG, on its face ... and indicated in
Exhibit A, ...
3. That said design was created by plaintiff in the latter part of 1959 for the personal use of
former Ambassador Felino Neri; ...
4. That former Ambassador Neri had 800 such cards ... printed by the defendant company in
1959, ... which he distributed to his friends in December, 1959;
5. That defendant company utilized plaintiff's design in the year 1960 in its album of Christmas
card samples displayed to its customers ... .
6. That the Sampaguita Pictures, Inc., placed an order with defendant company for 700 of said
cards ... while Raul Urra & Co. ordered 200 ..., which cards were sent out by them to their
respective correspondent, clients and friends during the Christmas season of 1960;
7. That defendant company's use of plaintiff's design was without knowledge, authority or
consent of plaintiff;
8. That said design has not been copyrighted;
9. That plaintiff is an artist of established name, good-will and reputation. ... .
Upon the basis of the facts stipulated, the lower court rendered judgment on December 1, 1961, the
pertinent portions of which are recited below:
As a general proposition, there can be no dispute that the artist acquires ownership of the product
of his art. At the time of its creation, he has the absolute dominion over it. To help the author
protect his rights the copyright law was enacted.
In intellectual creations, a distinction must be made between two classes of property rights; the
fact of authorship and the right to publish and/or distribute copies of the creation. With regard to
the first, i.e. the fact of authorship, the artist cannot be divested of the same. In other words, he
may sell the right to print hundred of his work yet the purchaser of said right can never be the
author of the creation.
It is the second right, i.e., the right to publish, republish, multiply and/or distribute copies of the
intellectual creation which the state, through the enactment of the copyright law, seeks to protect.
The author or his assigns or heirs may have the work copyrighted and once this is legally
accomplished any infringement of the copyright will render the infringer liable to the owner of
the copyright.
xxx

xxx

xxx

The plaintiff in this case did not choose to protect his intellectual creation by a copyright. The fact
that the design was used in the Christmas card of Ambassador Neri who distributed eight hundred

copies thereof among his friends during the Christmas season of 1959, shows that the, same was
published.
Unless satisfactorily explained a delay in applying for a copyright, of more than thirty days from
the date of its publication, converts the property to one of public domain.
Since the name of the author appears in each of the alleged infringing copies of the intellectual
creation, the defendant may not be said to have pirated the work nor guilty of plagiarism
Consequently, the complaint does not state a cause of action against the defendant.
xxx

xxx

;xxx

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

In his appeal to this Court, plaintiff-appellant pointed five (5) errors allegedly committed by the trial
court, all of which bring to the fore, the following propositions: (1) whether plaintiff is entitled to
protection, notwithstanding the, fact that he has not copyrighted his design; (2) whether the publication is
limited, so as to prohibit its use by others, or it is general publication, and (3) whether the provisions of
the Civil Code or the Copyright Law should apply in the case. We will undertake a collective discussion
of these propositions.
Under the established facts, We find that plaintiff is not entitled to a protection, the provision of the Civil
Code, notwithstanding. Paragraph 33 of Patent Office Administrative Order No. 3 (as amended dated
September 18, 1947) entitled "Rules of Practice in the Philippines Patent Office relating to the
Registration of Copyright Claims" promulgated pursuant to Republic Act 165, provides, among others,
that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila,
or within sixty (60) day's if made elsewhere, failure of which renders such creation public property. In the
case at bar, even as of this moment, there is no copyright for the design in question. We are not also
prepared to accept the contention of appellant that the publication of the design was a limited one, or that
there was an understanding that only Ambassador Neri should, have absolute right to use the same. In the
first place, if such were the condition then Ambassador Neri would be the aggrieved party, and not the
appellant. In the second place, if there was such a limited publication or prohibition, the same was not
shown on the face of the design. When the purpose is a limited publication, but the effect is general
publication, irrevocable rights thereupon become vested in the public, in consequence of which
enforcement of the restriction becomes impossible (Nutt vs. National Institute, 31 F [2d] 236). It has been
held that the effect of offering for sale a dress, for example manufactured in accordance with an original
design which is not protected by either a copyright or a patent, is to divest the owner of his common law
rights therein by virtue of the publication of a 'copy' and thereafter anyone is free to copy the design or the
dress (Fashion Originators Guild of America v. Federal Trade Commission, 114 F [2d] 80). When
Ambassador Neri distributed 800 copies of the design in controversy, the plaintiff lost control of his
design and the necessary implication was that there had been a general publication, there having been no
showing of a clear indication that a limited publication was intended. The author of a literary composition
has a light to the first publication thereof. He has a right to determine whether it shall be published at all,
and if published, when, where, by whom, and in what form. This exclusive right is confined to the first
publication. When once published, it is dedicated to the public, and the author loses the exclusive right to
control subsequent publication by others, unless the work is placed under the protection of the copyright
law. (See II Tolentino's Comments on the Civil Code, p. 433, citing Wright v. Eisle 83 N.Y. Supp. 887.)

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