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 CA-G.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 PMSI’s Board of
Directors.

PMSI was granted a legislative franchise under Republic Act No. 86305 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 PMSI’s
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 PMSI’s
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-CBN’s 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.
4-08-88, particularly Section 6 thereof, on mandatory carriage of television broadcast signals, to
the direct-to-home (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, PMSI’s 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 decision15 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
Director-General of the IPO and dismissed both petitions filed by ABS-CBN.17

ABS-CBN’s motion for reconsideration was denied, hence, this petition.

ABS-CBN contends that PMSI’s 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
III19 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 PMSI’s 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-CBN’s contention that PMSI violated its broadcaster’s 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-CBN’s 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-CBN’s broadcasting rights and copyright, thus:

That the Appellant’s [herein respondent PMSI] subscribers are able to view Appellee’s [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 Appellant’s 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 Appellee’s 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 Appellant’s subscribers view Appellee’s 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 Appellee’s signal, that is
via satellite, does not diminish the fact that it operates and functions as a cable television. It
remains that the Appellant’s 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
Appellee’s 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
Paper23 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 PMSI’s
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-CBN’s signals by PMSI – which functions
essentially as a cable television – does not therefore constitute rebroadcasting in violation of the
former’s 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-CBN’s signals by virtue of the must-carry rule in Memorandum Circular
No. 04-08-88 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 NTC’s 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 socio-economic 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-CBN’s claim that PMSI’s carriage of its signals is for a
commercial purpose; that its being the country’s top broadcasting company, the availability of its
signals allegedly enhances PMSI’s 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-CBN’s 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
channels42 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, PMSI’s 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-CBN’s 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-CBN’s argument that PMSI’s 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-CBN’s 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, Appellee’s [herein petitioner
ABS-CBN] 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, Appellant’s DTH satellite television
services is of limited subscription. There was not even a showing on part of the Appellee the
number of Appellant’s 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-CBN’s 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-CBN’s 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-CBN’s
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 PMSI’s 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
CA-G.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.

ACONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes
1
Rollo, pp. 65-178.
2
Id. at 8-43.
3
Id. at 54-57.
4
ABS-CBN was granted a franchise under Republic Act No. 7966, entitled AN ACT
GRANTING THE ABS-CBN BROADCASTING CORPORATION A FRANCHISE TO
CONSTRUCT, INSTALL, OPERATE AND MAINTAIN TELEVISION AND RADIO
BROADCASTING STATIONS IN THE PHILIPPINES, AND FOR OTHER
PURPOSES.
5
AN ACT GRANTING THE PHILIPPINE MULTI-MEDIA SYSTEM, INC., A
FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND
MAINTAIN RADIO AND TELEVISION STATIONS IN THE PHILIPPINES.
6
Rollo, p. 316.
7
Id. at 317.
8
Revised Rules and Regulations Governing Cable Television Systems in the Philippines.
9
6.2. Mandatory Coverage

6.2.1. A cable TV system operating in a community which is within the Grade A

or Grade B contours of an authorized TV broadcast station or stations must carry
the TV signals of these stations.
10
Rollo, p. 322.
11
Id. at 852.
12
Id. at 853-854.
13
Id. at 857.
14
Id. at 567-590. Penned by Estrellita Beltran-Abelardo, Director, Bureau of Legal
Affairs.
15
Id at 793-811. Penned by Director-General Emma C. Francisco.
16
Id. at 811.
17
Id. at 43.
18
Republic Act No. 8923, effective January 1, 1998.
19
Article III, Section 9 provides: “Private property shall not be taken for public use
without just compensation.”
20
Sec. 177. Copy or Economic Rights. - Subject to the provisions of Chapter VIII,
copyright or economic rights shall consist of the exclusive right to carry out, authorize or
prevent the following acts:

xxxx

177.6. Public performance of the work; and

177.7. Other communication to the public of the work (Sec. 5, P. D. No. 49a)
21
Entered into force on September 25, 1984. source:
http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=17.
22
Rollo, pp. 805-809.
23
Eighth Session, Geneva, November 4-8, 2002.
24
Id.at paragraph 58, page 12.
25
Id. at paragraphs 47-49, page 10.
26
E.O. No. 546, Sec. 15. Functions of the Commission. The Commission shall exercise
the following functions:

a. Issue Certificate of Public Convenience for the operation of communications

utilities and services, radio communications systems, wire or wireless telephone
or telegraph systems, radio and television broadcasting system and other similar
public utilities;
 b. Establish, prescribe and regulate areas of operation of particular operators of
public service communications; and determine and prescribe charges or rates
pertinent to the operation of such public utility facilities and services except in
cases where charges or rates are established by international bodies or
associations of which the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper arbiter of such charges or
rates;

c. Grant permits for the use of radio frequencies for wireless telephone and
telegraph systems and radio communication systems including amateur radio
stations and radio and television broadcasting systems;

d. Sub-allocate series of frequencies of bands allocated by the International

Telecommunications Union to the specific services;

e. Establish and prescribe rules, regulations, standards, specifications in all cases

related to the issued Certificate of Public Convenience and administer and enforce
the same;

f. Coordinate and cooperate with government agencies and other entities

concerned with any aspect involving communications with a view to continuously
improve the communications service in the country;

g. Promulgate such 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;

h. Supervise and inspect the operation of radio stations and telecommunications

facilities;

i. Undertake the examination and licensing of radio operators;

j. Undertake, whenever necessary, the registration of radio transmitters and

transceivers; and

k. Perform such other functions as may be prescribed by law.

27
Id. Section 15 (g).
28
PRESCRIBING POLICY GUIDELINES TO GOVERN THE OPERATIONS OF
CABLE TELEVISION IN THE PHILIPPINES.
29
Rollo, p. 810.
30
Id. at 42.
31
Fr. Ranhillo Callangan Aquino, Intellectual Property Law: Comments and Annotations,
2003, p. 5.
32
SEC. 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through
policies that provide adequate social services, promote full employment, a rising standard
of living, and an improved quality of life for all.
33
SEC. 17. The State shall give priority to education, science and technology, arts,
culture, and sports to foster patriotism and nationalism, accelerate social progress, and
promote total human liberation and development.
34
SEC. 24. The State recognizes the vital role of communication and information in
nation-building.
35
Rollo, p. 40.
36
352 Phil. 153 (1998).
37
Id. at 171-174.
38
Rollo, pp. 129-130.
39
Id. at 134.
40
Artuz v. Court of Appeals, 417 Phil. 588, 597 (2001).
41
Navarro v. Clerk of Court, A.M. No. P-05-1962, February 17, 2005, 451 SCRA 626,
629.
42
Rollo, Comment, p. 1249.
43
http://www.dreamsatellite.com/about.htm
44
Rollo, p. 810.
45
Telecom. & Broadcast Attys. of the Phils., Inc v. COMELEC, 352 Phil. 153, 173
(1998).
46
Rollo, pp. 810-811.
47
Ocampo v. Salalila, 382 Phil. 522, 532 (2000).
48
Gala v. Ellice Agro-Industrial Corporation, G.R. No. 156819, December 11, 2003, 418
SCRA 431, 444.
49
Supra note 9.
50
Supra note 11.
51
G.R. No. 135992, January 31, 2006, 481 SCRA 163.
52
Id. at 166-167.
53
Meralco v. Secretary of Labor, 361 Phil. 845, 867 (1999).
54
403 Phil. 760 (2001).
55
Id. at 774.
56
Rollo, p. 41; citing the Decision of the Director-General of the IPO.
57
G.R. No. 157279, August 9, 2005, 466 SCRA 307.
58
Id. at 322-323.
59
Joaquin G. Bernas, The 1987 Constitution of the Republic of the Philippines: A
Commentary, p. 858 (1996), citing People v. Vera, 65 Phil. 56 (1937).
60
G.R. No. 132561, June 30, 2005, 462 SCRA 336.
61
Id. at 349.
62
Montenegro v. Montenegro, G.R. No. 156829, June 8, 2004.
63
Soriano v. Court of Appeals, G.R. No. 128938, June 4, 2004, 431 SCRA 1, 7-8
64
Delgado v. Court of Appeals, G.R. No. 137881, August 19, 2005, 467 SCRA 418, 428.
 FIRST DIVISION

MANLY SPORTWEAR G.R. No. 165306

MANUFACTURING, INC.,
Petitioner, Present:
Davide, Jr., C.J. (Chairman),
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
DADODETTE ENTERPRISES
AND/OR HERMES SPORTS Promulgated:
CENTER,
Respondents. September 20, 2005

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari[1] under Rule 45 of the Revised Rules of Civil
Procedure assails the July 13, 2004 decision[2] of the Court of Appeals[3] in CA-G.R. SP No.
79887 and its September 15, 2004 resolution[4] denying reconsideration thereof.

The facts are as follows:

On March 14, 2003, Special Investigator Eliezer P. Salcedo of the National Bureau of
Investigation (NBI) applied for a search warrant before the Regional Trial Court (RTC) of
Quezon City, based on the information that Dadodette Enterprises and/or Hermes Sports Center
were in possession of goods, the copyright of which belonged to Manly Sportswear Mfg., Inc.
(MANLY).[5]

After finding reasonable grounds that a violation of Sections 172 and 217 of Republic
Act (RA) No. 8293[6] has been committed, Judge Estrella T. Estrada of RTC-Quezon City,
Branch 83, issued on March 17, 2003 Search Warrant No. 4044(03).[7]
 Respondents thereafter moved to quash and annul the search warrant contending that the
same is invalid since the requisites for its issuance have not been complied with. They insisted
that the sporting goods manufactured by and/or registered in the name of MANLY are ordinary
and common hence, not among the classes of work protected under Section 172 of RA 8293.

On June 10, 2003, the trial court granted the motion to quash and declared Search
Warrant No. 4044(03) null and void based on its finding that the copyrighted products of
MANLY do not appear to be original creations and were being manufactured and distributed by
different companies locally and abroad under various brands, and therefore unqualified for
protection under Section 172 of RA 8293. Moreover, MANLYs certificates of registrations were
issued only in 2002, whereas there were certificates of registrations for the same sports articles
which were issued earlier than MANLYs, thus further negating the claim that its copyrighted
products were original creations.[8]

On August 11, 2003, the trial court denied[9] MANLYs motion for reconsideration. Hence
it filed a petition for certiorari[10] before the Court of Appeals which was denied for lack of merit.
The appellate court found that the trial court correctly granted the motion to quash and that its
ruling in the ancillary proceeding did not preempt the findings of the intellectual property court
as it did not resolve with finality the status or character of the seized items.

After denial of its motion for reconsideration on September 15, 2004, MANLY filed the
instant petition for review on certiorari raising the sole issue of whether or not the Court of
Appeals erred in finding that the trial court did not gravely abuse its discretion in declaring in the
hearing for the quashal of the search warrant that the copyrighted products of MANLY are not
original creations subject to the protection of RA 8293.

We deny the petition.

The power to issue search warrants is exclusively vested with the trial judges in the
exercise of their judicial function.[11] As such, the power to quash the same also rests solely with
them. After the judge has issued a warrant, he is not precluded to subsequently quash the same, if
he finds upon reevaluation of the evidence that no probable cause exists.

Our ruling in Solid Triangle Sales Corp. v. Sheriff, RTC, Q.C., Br. 93[12] is instructive,
thus:
 Inherent in the courts power to issue search warrants is the power to quash
warrants already issued. In this connection, this Court has ruled that the motion to
quash should be filed in the court that issued the warrant unless a criminal case
has already been instituted in another court, in which case, the motion should be
filed with the latter. The ruling has since been incorporated in Rule 126 of the
Revised Rules of Criminal Procedure[.]

In the instant case, we find that the trial court did not abuse its discretion when it
entertained the motion to quash considering that no criminal action has yet been instituted when
it was filed. The trial court also properly quashed the search warrant it earlier issued after finding
upon reevaluation of the evidence that no probable cause exists to justify its issuance in the first
place. As ruled by the trial court, the copyrighted products do not appear to be original creations
of MANLY and are not among the classes of work enumerated under Section 172 of RA 8293.
The trial court, thus, may not be faulted for overturning its initial assessment that there was
probable cause in view of its inherent power to issue search warrants and to quash the same. No
objection may be validly posed to an order quashing a warrant already issued as the court must
be provided with the opportunity to correct itself of an error unwittingly committed, or, with like
effect, to allow the aggrieved party the chance to convince the court that its ruling is erroneous.

Moreover, the trial court was acting within bounds when it ruled, in an ancillary
proceeding, that the copyrighted products of petitioner are not original creations. This is because
in the determination of the existence of probable cause for the issuance or quashal of a warrant, it
is inevitable that the court may touch on issues properly threshed out in a regular proceeding. In
so doing, it does not usurp the power of, much less preclude, the court from making a final
judicial determination of the issues in a full-blown trial. Consequently, MANLYs assertion that
the trial courts order quashing the warrant preempted the finding of the intellectual property
court has no legal basis.

As pertinently held in Solid Triangle Sales Corp. v. Sheriff, RTC, Q.C., Br. 93:[13]

When the court, in determining probable cause for issuing or quashing a

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

... The finding by the court that no crime exists does not preclude the authorized
officer conducting the preliminary investigation from making his own
determination that a crime has been committed and that probable cause exists for
purposes of filing the information.

As correctly observed by the Court of Appeals, the trial courts finding that the seized
products are not copyrightable was merely preliminary as it did not finally and permanently
adjudicate on the status and character of the seized items. MANLY could still file a separate
copyright infringement suit against the respondents because the order for the issuance or quashal
of a warrant is not res judicata.

Thus, in Vlasons Enterprises Corporation v. Court of Appeals[14] we held that:

The proceeding for the seizure of property in virtue of a search warrant

does not end with the actual taking of the property by the proper officers and its
delivery, usually constructive, to the court. The order for the issuance of the
warrant is not a final one and cannot constitute res judicata. Such an order does
not ascertain and adjudicate the permanent status or character of the seized
property. By its very nature, it is provisional, interlocutory. It is merely the first
step in the process to determine the character and title of the property. That
determination is done in the criminal action involving the crime or crimes in
connection with which the search warrant was issued. Hence, such a criminal
action should be prosecuted, or commenced if not yet instituted, and prosecuted.
The outcome of the criminal action will dictate the disposition of the seized
property

We have also ruled in Ching v. Salinas, Sr., et al.[15] that:

The RTC had jurisdiction to delve into and resolve the issue whether the
petitioners utility models are copyrightable and, if so, whether he is the owner of a
copyright over the said models. It bears stressing that upon the filing of the
application for search warrant, the RTC was duty-bound to determine whether
probable cause existed, in accordance with Section 4, Rule 126 of the Rules of
Criminal Procedure[.]

Further, the copyright certificates issued in favor of MANLY constitute merely prima
facie evidence of validity and ownership. However, no presumption of validity is created where
other evidence exist that may cast doubt on the copyright validity. Hence, where there is
sufficient proof that the copyrighted products are not original creations but are readily available
in the market under various brands, as in this case, validity and originality will not be presumed
and the trial court may properly quash the issued warrant for lack of probable cause.

Besides, no copyright accrues in favor of MANLY despite issuance of the certificates of

registration and deposit[16] pursuant to Section 2, Rule 7 of the Copyrights Safeguards and
Regulations[17] which states:

Sec. 2 Effects of Registration and Deposit of Work. The registration and

deposit of the work is purely for recording the date of registration and deposit of
the work and shall not be conclusive as to copyright ownership or the term of the
copyrights or the rights of the copyright owner, including neighboring rights.

At most, the certificates of registration and deposit issued by the National Library and the
Supreme Court Library serve merely as a notice of recording and registration of the work but do
not confer any right or title upon the registered copyright owner or automatically put his work
under the protective mantle of the copyright law. It is not a conclusive proof of copyright
ownership. As it is, non-registration and deposit of the work within the prescribed period only
makes the copyright owner liable to pay a fine.[18]

WHEREFORE, the petition is DENIED. The July 13, 2004 decision of the Court of
Appeals in CA-G.R. SP No. 79887 and resolution dated September 15, 2004, areAFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO

Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions
in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

[1]
Rollo, pp. 13-46.
[2]
CA Rollo, pp. 381-388.
[3]
Decision penned by Associate Justice Jose Catral Mendoza and concurred in by Associate
Justices Godardo A. Jacinto and Edgardo P. Cruz.
[4]
Rollo, pp. 9-10.
[5]
CA Rollo, pp. 68-70.
[6]
The Intellectual Property Code of the Philippines.
[7]
CA Rollo, pp. 101-102.
[8]
Id. at 59-62.
[9]
Id. at 51-54.
[10]
Id. at 2-50.
[11]
Section 2, Article III, 1987 Constitution.
[12]
422 Phil. 72, 83 [2001].
[13]
Id. at 86-87.
[14]
No. L-61688, 28 October 1987, 155 SCRA 186, 191.
[15]
G.R. No. 161295, 29 June 2005.
[16]
Section 191, RA No. 8293 provides:
Sec. 191. Registration and Deposit with National Library and the Supreme Court
Library After the first public dissemination of performance by authority of the
copyright owner of a work falling under Subsections 172.1, 172.2 and 172.3 of
this Act, there shall, for the purpose of completing the records of the National
Library and the Supreme Court Library, within three (3) weeks, be registered and
deposited with it, by personal delivery or by registered mail, two (2) complete
copies or reproductions of the work in such form as the directors of said libraries
may prescribe. A certificate of deposit shall be issued for which the prescribed fee
shall be collected and the copyright owner shall be exempt from making
additional deposit of the works with the National Library and the Supreme Court
Library under other laws. If, within three (3) weeks after receipt by the copyright
owner of a written demand from the directors for such deposit, the required copies
or reproductions are not delivered and the fee is not paid, the copyright owner
shall be liable to pay a fine equivalent to the required fee per month of delay and
to pay to the National Library and the Supreme Court Library the amount of the
retail price of the best edition of the work. Only the above mentioned classes of
work shall be accepted for deposit by the National Library and the Supreme Court
Library.
[17]
Issued on 13 August 1999 pursuant to Sec. 228 of RA No. 8293 which provides:
Sec. 228. Public Records The section or division of the National Library
charged with receiving copies and instruments deposited and with keeping records
required under this Act and everything in it shall be open to public inspection.
The Director of the National Library is empowered to issue such safeguards and
regulations as may be necessary to implement this Section and other provisions of
this Act.
[18]
Section 3, Rule 7, Copyrights Safeguards and Regulations.
 G.R. No. 166337. March 7, 2005]

BAYANIHAN MUSIC vs. BMG

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated MAR 7 2005.

G.R. No. 166337 (Bayanihan Music Philippines, Inc. vs. BMG Records (Pilipinas) and Jose
Mari Chan, et al.)

Subject of this petition for review on certiorari is the Decision dated December 14, 2004[1] of
the Court of Appeals in CA-G.R. SP No. 69626, upholding the Order dated August 24, 2001 of
the Regional Trial Court at Quezon City, Branch 90, which found no merit in petitioner's
application for the issuance of a writ of preliminary injunction, along with the Order dated
January 10, 2002, which denied petitioner's motion for reconsideration.

On July 16, 1973, private respondent Jose Mari Chan (Chan) entered into a contract with
petitioner Bayanihan Music Philippines, Inc. (Bayanihan), whereunder the former assigned to
the latter all his rights, interests and participation over his musical composition "Can We Just
Stop and Talk A While". On March 11, 1976, the parties entered into a similar contract over
Chan's other musical composition entitled "Afraid For Love To Fade".

On the strength of the abovementioned contracts, Bayanihan applied for and was granted by the
National Library a Certificate of Copyright Registration for each of the two musical
compositions, thus: November 19, 1973, for the song "Can We Just Stop and Talk A While" and
on May 21, 1980, for the song "Afraid for Love To Fade."

Apparently, without the knowledge and consent of petitioner Bayanihan, Chan authorized his co-
respondent BMG Records (Pilipinas) [BMG] to record and distribute the aforementioned musical
compositions in a then recently released album of singer Lea Salonga.

In separate letters both dated December 7, 1999, petitioner Bayanihan informed respondents
Chan and BMG of its existing copyrights over the subject musical compositions and the alleged
violation of such right by the two. Demands were made on both to settle the matter with
Bayanihan. However no settlement was reached by the parties.

Hence, on August 8, 2000, Bayanihan filed with the Regional Trial Court at Quezon City a
complaint against Chan and BMG for violation of Section 216 of Republic Act No. 8293,
otherwise known as theIntellectual Property Code of the Philippines, with a prayer for the
issuance of Temporary Restraining Order (TRO) and/or writ of preliminary injunction, enjoining
respondent BMG from further recording and distributing the subject musical compositions in
whatever form of musical products, and Chan from further granting any authority to record and
distribute the same musical compositions.
In its answer, BMG contended, among others, that: (1) the acts of recording and publication
sought to be enjoined had already been consummated, thereby rendering moot Bayanihan's
prayer for TRO and/or preliminary injunction; and (2) there is no clear showing that petitioner
Bayanihan would be greatly damaged by the refusal of the prayed for TRO and/or preliminary
injunction. BMG also pleaded a cross-claim against its co-respondent Chan for violation of his
warranty that his musical compositions are free from claims of third persons, and a counterclaim
for damages against petitioner Bayanihan.

Chan, for his part, filed his own answer to the complaint, thereunder alleging that: (1) it was
never his intention to divest himself of all his rights and interest over the musical compositions in
question; (2) the contracts he entered into with Bayanihan are mere music publication
agreements giving Bayanihan, as assignee, the power to administer his copyright over his two
songs and to act as the exclusive publisher thereof; (3) he was not cognizant of the application
made by and the subsequent grant of copyrights to Bayanihan; and (4) Bayanihan was remissed
in its obligations under the contracts because it failed to effectively advertise his musical
compositions for almost twenty (20) years, hence, he caused the rescission of said contracts in
1997. Chan also included in his answer a counterclaim for damages against Bayanihan.

After hearing the parties, the lower court came out with an order denying Bayanihan's prayer for
TRO, saying, thus:

After carefully considering the arguments and evaluating the evidence presented by counsels,
this Court finds that the plaintiff has not been able to show its entitlement to the relief of TRO as
prayed for in its verified complaint (see Section 4, Rule 58 of the 1997 Rules of Civil Procedure,
as amended), hence, this Court is of the considered and humble view that the ends of justice shall
be served better if the aforecited application is denied.

IN VIEW OF THE FOREGOING, the aforecited application or prayer for the issuance of a TRO
is denied.

SO ORDERED.

Thereafter, the same court, in its subsequent Order dated August 24, 2001,[2]cralaw likewise
denied Bayanihan's prayer for a writ of preliminary injunction, to wit:

After carefully going over the pleadings and the pertinent portions of the records insofar as they
are pertinent to the issue under consideration, this Court finds that the plaintiff has not been able
to show its entitlement to the relief of preliminary injunction as prayed for in its verified
complaint (see Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended), hence, this
Court is of the considered and humble view that the ends of justice shall be served better if the
aforecited application is denied, (see also Order dated July 16, 2001).

IN VIEW OF THE FOREGOING, the application or prayer for the issuance of a writ of
preliminary injunction is denied.

SO ORDERED.
Its motion for a reconsideration of the same order having been likewise denied by the trial court
in its next Order of January 10, 2002,[3]cralaw petitioner Bayanihan then went to the Court of
Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 69626, imputing grave
abuse of discretion on the part of the trial court in issuing the Orders of August 24, 2001 and
January 10, 2001, denying its prayers for a writ of preliminary injunction and motion for
reconsideration, respectively.

In the herein assailed Decision dated December 14, 2004, the Court of Appeals upheld the
challenged orders of the trial court and accordingly dismissed Bayanihan petition, thus:

WHEREFORE, finding neither flaw of jurisdiction nor taint of grave abuse of discretion in the
issuance of the assailed Orders of the respondent court dated August 24, 2001 and January 10,
2002, the instant petition is DISMISSED. No costs.

SO ORDERED.[4]cralaw

Hence, Bayanihan's present recourse.

It is petitioner's submission that the appellate court committed reversible error when it dismissed
its petition for certiorari and upheld the trial court's denial of its application for a writ of
preliminary injunction. Petitioner insists that as assignee of the copyrights over the musical
compositions in question, it has a clear legal right to a writ of preliminary injunction; that
respondents BMG and Chan violated its copyrights over the same musical compositions; that
despite knowledge by respondent BMG of petitioner's copyrights over the said musical
compositions, BMG continues to record and distribute the same, to petitioner's great and
irreparable injury.

We DENY.

We have constantly reminded courts that there is no power, the exercise of which is more
delicate and requires greater caution, deliberation and sound discretion, or which is more
dangerous in a doubtful case, than the issuance of an injunction. A court should, as much as
possible, avoid issuing the writ which would effectively dispose of the main case without trial.

Here, nothing is more evident than the trial court's abiding awareness of the extremely difficult
balancing act it had to perform in dealing with petitioner's prayer for injunctive reliefs.
Conscious, as evidently it is, of the fact that there is manifest abuse of discretion in the issuance
of an injunctive writ if the following requisites provided for by law are not present: (1) there
must be a right in esse or the existence of a right to be protected; and (2) the act against which
the injunction is to be directed is a violation of such right,[5]cralaw the trial court threaded the
correct path in denying petitioner's prayer therefor. For, such a writ should only be granted if a
party is clearly entitled thereto.[6]cralaw

Of course, while a clear showing of the right to an injunctive writ is necessary albeit its existence
need not be conclusively established,[7]cralaw as the evidence required therefor need not be
conclusive or complete, still, for an applicant, like petitioner Bayanihan, to be entitled to the writ,
he is required to show that he has the ostensible right to the final relief prayed for in its
complaint.[8]cralaw Here, the trial court did not find ample justifications for the issuance of the
writ prayed for by petitioner.

Unquestionably, respondent Chan, being undeniably the composer and author of the lyrics of the
two (2) songs, is protected by the mere fact alone that he is the creator thereof, conformably with
Republic Act No. 8293, otherwise known as the Intellectual Property Code, Section 172.2 of
which reads:

172.2. Works are protected by the sole fact of their creation, irrespective of their mode or form of
expression, as well as of their content, quality and purpose.

An examination of petitioner's verified complaint in light of the two (2) contracts sued upon and
the evidence it adduced during the hearing on the application for preliminary injunction, yields
not the existence of the requisite right protectable by the provisional relief but rather a lingering
doubt on whether there is or there is no such right. The two contracts between petitioner and
Chan relative to the musical compositions subject of the suit contain the following identical
stipulations:

7. It is also hereby agreed to by the parties herein that in the event the PUBLISHER
[petitioner herein] fails to use in any manner whatsoever within two (2) years any of the
compositions covered by this contract, then such composition may be released in favor of the
WRITER and excluded from this contract and the PUBLISHER shall execute the necessary
release in writing in favor of the WRITER upon request of the WRITER;

xxx xxx xxx

9. This contract may be renewed for a period of two-and-one-half (2 1/2) years at the option
of the PUBLISHER. Renewal may be made by the PUBLISHER by advising the WRITER of
such renewal in writing at least five (5) days before the expiration of this contract.[9]cralaw

It would thus appear that the two (2) contracts expired on October 1, 1975 and March 11, 1978,
respectively, there being neither an allegation, much less proof, that petitioner Bayanihan ever
made use of the compositions within the two-year period agreed upon by the parties.

Anent the copyrights obtained by petitioner on the basis of the selfsame two (2) contracts, suffice
it to say 'that such purported copyrights are not presumed to subsist in accordance with Section
218[a] and [b], of the Intellectual Property Code,[10]cralaw because respondent Chan had put in
issue the existence thereof.

It is noted that Chan revoked and terminated said contracts, along with others, on July 30, 1997,
or almost two years before petitioner Bayanihan wrote its sort of complaint/demand letter dated
December 7, 1999 regarding the recent "use/recording of the songs 'Can We Just Stop and Talk A
While' and 'Afraid for Love to Fade,'" or almost three (3) years before petitioner filed its
complaint on August 8, 2000, therein praying, inter alia, for injunctive relief. By then, it would
appear that petitioner had no more right that is protectable by injunction.
Lastly, petitioner's insinuation that the trial court indulged in generalizations and was rather
skimpy in dishing out its reasons for denying its prayer for provisional injunctive relief, the same
deserves scant consideration. For sure, the manner by which the trial court crafted its challenged
orders is quite understandable, lest it be subjected to a plausible suspicion of having prejudged
the merits of the main case.

WHEREFORE, petition is hereby DENIED.

SO ORDERED.

Very truly yours,

(Sgd.) LUCITA ABJELINA-SORIANO

Clerk of Court

Endnotes:
[1]cralaw Penned by Associate Justice Salvador J. Valdez, Jr. and concurred in by Associate
Justices Juan Q. Enriquez, Jr. and Vicente Q. Roxas; Rollo, pp. 49-62.
[2]cralaw Rollo, p. 148.
[3]cralaw Rollo, p. 162.
[4]cralaw Rollo, pp. 49-63.
[5]cralaw
Cagayan de Oro City Landless Residents Association, Inc. v. Court of Appeals, G.R.
No. 106043, March 4, 1996 citing Sales v. Securities and Exchange Commission, 169 SCRA 109
[1989].
[6]cralaw Lopez v. Court of Appeals, 322 SCRA 686, [2000].
[7]cralaw Developers Group of Companies, Inc. vs. Court of Appeals, 219 SCRA 715, March 8,
1993.
[8]cralaw Ibid.
[9]cralaw Rollo, pp. 58-59.
[10]cralaw Section 218. 2. In an action under this Chapter:
(a) Copyright shall be presumed to subsist in the work or other subject matter to which the action
relates if the defendant does not put in issue the question whether copyright subsist in the work
or subject matter; and

(b) Where the subsistence of the copyright is established, the plaintiff shall be presumed to be the
owner of the copyright if he claims to be the owner of the copyright and the defendant does not
put in issue the question of his ownership;