G.R. No. 108946 January 28, 1999 FRANCISCO G. JOAQUIN, JR., and BJ PRODUCTIONS, INC., petitioners, vs.

HONORABLE FRANKLIN DRILON, GABRIEL ZOSA, WILLIAM ESPOSO, FELIPE MEDINA, JR., and CASEY FRANCISCO, respondents. MENDOZA, J.: This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice, dated August 12, 1992, in Criminal Case No. Q-92-27854, entitled "Gabriel Zosa, et al. v. City Prosecutor of Quezon City and Francisco Joaquin, Jr.," and its resolution, dated December 3, 1992, denying petitioner Joaquin's motion for reconsideration. Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922, dated January 28, 1971, of Rhoda and Me, a dating game show aired from 1970 to 1977. On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of copyright specifying the show's format and style of presentation. On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw on RPN Channel 9 an episode of It's a Date, which was produced by IXL Productions, Inc. (IXL). On July 18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL, informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue airing It's a Date. In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and requested a meeting to discuss a possible settlement. IXL, however, continued airing It's a Date, prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand and warned that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal action. Meanwhile, private respondent Zosa sought to register IXL's copyright to the first episode of It's a Date for which it was issued by the National Library a certificate of copyright August 14, 1991. Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private respondent Zosa together with certain officers of RPN Channel 9, namely, William Esposo, Felipe Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as Criminal Case No. 92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa sought a review of the resolution of the Assistant City Prosecutor before the Department of Justice. On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City Prosecutor's findings and directed him to move for the dismissal of the case against private respondents. 1 Petitioner Joaquin filed a motion for reconsideration, but his motion denied by respondent Secretary of Justice on December 3, 1992. Hence, this petition. Petitioners contend that: 1. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he invoked non-presentation of the master tape as being fatal to the existence of probable cause to prove infringement, despite the fact that private respondents never raised the same as a controverted issue. 2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he arrogated unto himself the determination of what is copyrightable an issue which is exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding. Both public and private respondents maintain that petitioners failed to establish the existence of probable cause due to their failure to present the copyrighted master videotape of Rhoda and Me. They contend that petitioner BJPI's copyright covers only a specific episode of Rhoda and Me and that the formats or concepts of dating game shows are not covered by copyright protection under P.D. No. 49. Non-Assignment of Error. Petitioners claim that their failure to submit the copyrighted master videotape of the television show Rhoda and Me was not raised in issue by private respondents during the preliminary investigation and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutor's finding of probable cause on this ground. A preliminary investigation falls under the authority of the state prosecutor who is given by law the power to direct and control criminal actions. 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

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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 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 predented 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 "linkage between the copyright show "Rhoda and Me" and the infringing TV show "It's a Date." 5 The case of 20th Century Fox Film Corporation involved raids conducted on various videotape outlets allegedlly 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 petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns.
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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 printed 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 complainant's "RHODA AND ME" and Zosa's "IT'S A DATE" is that two matches are made between a male and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the expense of the show. The major concepts of both shows is the same. Any difference appear mere variations of the major concepts. That there is an infringement on the copyright of the show "RHODA AND ME" both in content and in the execution of the video presentation are established because respondent's "IT'S A DATE" is practically an exact copy of complainant's "RHODA AND ME" because of substantial similarities as follows, to wit: RHODA AND ME "IT'S A DATE" Set 1 Set 1 a. Unmarried participant of one gender (searcher) appears on a. same 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 to be answered by each of the b. same searchees. The purpose is to determine who among the searchees is the most compatible with the searcher. c. Searcher speculates on the match to the searchee. c. same d. Selection is made by the use of compute (sic) methods, or d. Selection is based on the answer of the Searchees. by the way questions are answered, or similar methods. Set 2 Set 2 Same as above with the genders of the searcher and searchees same 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: Sec. 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:

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(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; (I) 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 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. 15Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides: Sec. 175. Unprotected Subject Matter. Notwithstanding the provisions of Sections 172 and 173, no protection shall extend, under this law, to any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated or embodied in a work; news of the day and other miscellaneous facts having the character of mere items of press information; or any official text of a legislative, administrative or legal nature, as well as any official translation thereof. What then is the subject matter of petitioners' copyright? This Court is of the opinion that petitioner BJPI's copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within the class of works mentioned in P.D. 49, 2(M), to wit: Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; The copyright does not extend to the general concept or format of its dating game show. Accordingly, by the very nature of the subject of petitioner BJPI's copyright, the investigating prosecutor should have the opportunity to compare the videotapes of the two shows.
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Mere description by words of the general format of the two dating game shows is insufficient; the presentation of the master videotape in evidence was indispensable to the determination of the existence of probable cause. As aptly observed by respondent Secretary of Justice: A television show includes more than mere words can describe because it involves a whole spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by merely describing the general copyright/format of both dating game shows. WHEREFORE, the petition is hereby DISMISSED SO ORDERED.1wphi1.nt [G.R. No. 131522. July 19, 1999] PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners, vs. FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC.,respondents. DECISION PARDO, J.: The case before us is a petition for review on certiorari[1] to set aside the (a) decision of the Court of Appeals[2], and (b) the resolution denying petitioners motion for reconsideration, [3] in which the appellate court affirmed the trial courts dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorneys fees. The facts are as follows: Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN ENGLISH, Series 1. Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled DEVELOPING ENGLISH PROFICIENCY (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them. In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET. After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondents book are similar, if not all together a copy of petitioners book, which is a case of plagiarism and copyright infringement. Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the general public the infringed copies of respondent Robles works. However, respondents ignored the demands, hence, on July 7, 1988, petitioners filed with the Regional Trial Court, Makati, a complaint for Infringement and/or unfair competition with damages[4] against private respondents.[5] In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the contents of petitioners works, and without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely affected and substantially diminished the sale of the petitioners book and caused them actual damages by way of unrealized income. Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its publication and sale. Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and caused to be published by respondent Robles with obvious connivance with one another. On July 27, 1988, respondent Robles filed a motion for a bill of particulars [6] which the trial court approved on August 17, 1988. Petitioners complied with the desired particularization, and furnished respondent Robles the specific portions, inclusive of pages and lines, of the published and copyrighted books of the petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way into respondents book.

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On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint[7] and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and held the publisher without any liability. On November 28, 1988, respondent Robles filed her answer [8], and denied the allegations of plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors exercise of the right to fair use of copyrigthed materials, as guides. Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern University. [9] During the pre-trial conference, the parties agreed to a stipulation of facts [10] and for the trial court to first resolve the issue of infringement before disposing of the claim for damages. After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus: WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorneys fees and defendant Goodwill for P5,000.00 attorneys fees. Plaintiffs are liable for cost of suit. IT IS SO ORDERED. Done in the City of Manila this 23rd day of April, 1993. (s/t) MARVIE R. ABRAHAM SINGSON Assisting Judge S. C. Adm. Order No. 124-92[11] On May 14, 1993, petitioners filed their notice of appeal with the trial court [12], and on July 19, 1993, the court directed its branch clerk of court to forward all the records of the case to the Court of Appeals. [13] In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not subject to copyright. Petitioners also assailed the findings of the trial court that they were animated by bad faith in instituting the complaint.[14] On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision state: It must be noted, however, that similarity of the allegedly infringed work to the authors or proprietors copyrighted work does not of itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have the same common source, as in this case. Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from foreign books. She has duly proven that most of the topics or materials contained in her book, with particular reference to those matters claimed by appellants to have been plagiarized were topics or matters appearing not only in appellants and her books but also in earlier books on College English, including foreign books, e.i. Edmund Burkes Speech on Conciliation, Boerigs Competence in English and Broughtons, Edmund Burkes Collection. xxx Appellants reliance on the last paragraph on Section 11 is misplaced. It must be emphasized that they failed to prove that their books were made sources by appellee.[15] The Court of Appeals was of the view that the award of attorneys fees was not proper, since there was no bad faith on the part of petitioners Habana et al. in instituting the action against respondents. On July 12, 1997, petitioners filed a motion for reconsideration, [16] however, the Court of Appeals denied the same in a Resolution[17] dated November 25, 1997. Hence, this petition. In this appeal, petitioners submit that the appellate court erred in affirming the trial courts decision. Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of respondent when they refused to withdraw the copies of CET from

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the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writers right to fair use, in violation of Section 11 of Presidential Decree No. 49. [18] We find the petition impressed with merit. The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows: Sec.177. Copy or Economic rights.Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts: 177.1 Reproduction of the work or substantial portion of the work; 177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work; 177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership; 177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; (n) 177.5 Public display of the original or copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work[19] The law also provided for the limitations on copyright, thus: Sec. 184.1 Limitations on copyright.-- Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: (a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49] (b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D.49) xxxx xxxx xxxx (e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of the author, if appearing in the work is mentioned;[20] In the above quoted provisions, work has reference to literary and artistic creations and this includes books and other literary, scholarly and scientific works. [21] A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET. On page 404 of petitioners Book 1 of College English for Today, the authors wrote: Items in dates and addresses: He died on Monday, April 15, 1975. Miss Reyes lives in 214 Taft Avenue, Manila[22] On page 73 of respondents Book 1 Developing English Today, they wrote: He died on Monday, April 25, 1975. Miss Reyes address is 214 Taft Avenue Manila[23] On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus: The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific. --- Edmund Burke, Speech on Criticism.[24] On page 100 of the book DEP[25], also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not. In several other pages[26] the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET.

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We believe that respondent Robles act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners copyrights. When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished, there is an infringement of copyright and to an injurious extent, the work is appropriated.[27] In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy.[28] The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright.[29] The respondents claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec 184 of Republic Act 8293 it is provided that: Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright: xxxx xxxx xxxx (c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned. A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril.[30] The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some sections of the books or large segments of the books are the same? In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the Author Card. However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration. The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background. However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying? We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners complaint while pharisaically denying petitioners demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated. In cases of infringement, copying alone is not what is prohibited. The copying must produce an injurious effect. Here, the injury consists in that respondent Robles lifted from petitioners book materials that were the result of the latters research work and compilation and misrepresented them as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as her source. Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1

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(b). Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned. In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The final product of an authors toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it. SO ORDERED. 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 pre-installed10 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

Page10

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 CDROMs 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.

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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 pro-forma 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 COUNTER-AFFIDAVITS; 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:

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(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 forum-shopping.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

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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 95-685, 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" CD-ROMs 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 preinstalled 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 pre-installed 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 CD-ROMs 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 CD-ROMs. 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. ABS-CBN BROADCASTING G.R. Nos. 175769-70 CORPORATION, Petitioner, Present: Ynares-Santiago, J. (Chairperson), Austria-Martinez, Chico-Nazario, Nachura, and Leonardo-De Castro,* JJ. PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, Promulgated: AND ALOYSIUS M. COLAYCO, Respondents. January 19, 2009 - versus x ---------------------------------------------------------------------------------------- x DECISION YNARES-SANTIAGO, J.:

This petition for review on certiorari[1] assails the July 12, 2006 Decision[2] 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 Resolution[3] 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
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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.
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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 MultiMedia 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

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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 10-102003. (Emphasis added) Please be guided accordingly.[13]

On December 22, 2003, the BLA rendered a decision[14] 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.
Page17

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 Director-General 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);[18]that 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.
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After a careful review of the facts and records of this case, we affirm the findings of the DirectorGeneral 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.

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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 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.

2.

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. 2. 3. 4. There is transmission of sounds or images or of representations thereof; The transmission is through satellite; The transmission is for public reception; and 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

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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 ABSCBN.

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 overthe-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.

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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. 0408-88 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 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 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]
Page22

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 24[34] 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:

Page23

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 x[37]

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
Page24

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

Page25

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 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, 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

Page26

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] InSpouses 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
Page27

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. InPhilippine 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 x[61]

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
Page28

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.

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