Tag: Software Piracy

Copyright Infringement: Selling Pirated Software Violates Intellectual Property Rights

The Supreme Court held that the mere act of selling pirated computer software constitutes copyright infringement, regardless of whether the seller directly copied or reproduced the software. This decision clarifies that distributing and selling copyrighted material without the owner’s consent is a violation of intellectual property rights. The ruling reinforces the protection afforded to copyright owners and deters the proliferation of counterfeit software in the market, safeguarding the interests of copyright holders and promoting fair competition.

Digital Piracy Under Scrutiny: Can Selling Software Alone Infringe Copyright?

The case of Microsoft Corporation v. Rolando D. Manansala revolves around the issue of copyright infringement concerning Microsoft software. Microsoft filed a complaint against Manansala for selling unauthorized copies of its software programs. The Department of Justice (DOJ) initially dismissed the charge, arguing that there was no proof Manansala was the one who copied the software. The Court of Appeals (CA) upheld the DOJ’s decision, leading Microsoft to elevate the case to the Supreme Court. The central legal question is whether the mere act of selling pirated software constitutes copyright infringement under Philippine law, specifically Section 29 of Presidential Decree No. 49, also known as the Decree on Intellectual Property.

The Supreme Court emphasized that the determination of probable cause by the public prosecutor is generally not subject to judicial scrutiny, unless it is tainted with grave abuse of discretion. Here, the Court found that the DOJ committed grave abuse of discretion in dismissing the copyright infringement charge. This abuse stemmed from the public prosecutor’s disregard for the evidence, which clearly indicated that the crime of copyright infringement had been committed, and that Manansala was likely responsible. Central to the Court’s reasoning was Section 5 of Presidential Decree No. 49, which defines copyright as an exclusive right:

Section 5. Copyright shall consist in the exclusive right; (A) To print, reprint, publish, copy, distribute, multiply, sell, and make photographs, photo-engravings, and pictorial illustrations of the works…

The Court highlighted that any unauthorized commission of the acts mentioned in Section 5 constitutes actionable copyright infringement. The Court referenced Columbia Pictures, Inc. v. Court of Appeals, underscoring that copyright infringement is a trespass on the copyright owner’s private domain. Moreover, in NBI-Microsoft Corporation v. Hwang, the Supreme Court clarified that the essence of copyright infringement lies in the unauthorized performance of any acts covered by Section 5, not just the unauthorized manufacturing of intellectual works. Therefore, selling pirated software without the copyright owner’s consent makes one liable for copyright infringement.

The Court of Appeals had interpreted Section 5(a) of Presidential Decree No. 49 to mean that all the enumerated acts must be present and proven to hold a person liable for copyright infringement. However, the Supreme Court rejected this interpretation, emphasizing that such a reading would lead to absurd and unreasonable consequences. It explained that the conjunctive word “and” should not be taken in its ordinary sense but should be construed like the disjunctive “or” if the literal interpretation would pervert or obscure the legislative intent. To illustrate, the Court noted that certain violations listed in Section 5(a), such as making photographs or photo-engravings, cannot be applied to all classes of works enumerated in Section 2 of Presidential Decree No. 49, which includes computer programs. This interpretation would lead to the nonsensical requirement that computer programs be photographed or photo-engraved before copyright infringement could be established.

The Supreme Court found that the mere sale of illicit copies of software programs was sufficient to establish probable cause for copyright infringement. It was unnecessary for Microsoft to prove who specifically copied, replicated, or reproduced the software programs. By dismissing the charge for lack of evidence, the public prosecutor and the DOJ acted whimsically and arbitrarily, disregarding established legal principles for determining probable cause. The following table contrasts the Court of Appeals’ interpretation with that of the Supreme Court:

Court of Appeals’ Interpretation	Supreme Court’s Interpretation
All acts in Section 5(a) must be present and proven for liability.	Any unauthorized act in Section 5(a) constitutes infringement.
“And” in Section 5(a) requires simultaneous occurrence of all listed acts.	“And” can be interpreted as “or” to avoid absurd results.
Proof of copying or reproduction by the seller is essential.	Mere sale of illicit copies establishes probable cause.

The Supreme Court’s decision carries significant implications for the enforcement of intellectual property rights in the Philippines. It clarifies that those engaged in selling pirated software can be held liable for copyright infringement, regardless of their direct involvement in the copying or reproduction process. This ruling serves as a deterrent to the proliferation of counterfeit software and protects the rights of copyright owners. Moreover, it underscores the importance of interpreting laws in a manner that aligns with legislative intent and avoids absurd outcomes. The decision also reaffirms the principle that public prosecutors must exercise sound judgment and avoid arbitrary actions when determining probable cause in criminal cases.

FAQs

What was the key issue in this case?	The key issue was whether the mere act of selling pirated software constitutes copyright infringement under Philippine law, even if the seller did not directly copy the software.
What did the Supreme Court decide?	The Supreme Court ruled that selling pirated software does constitute copyright infringement, regardless of whether the seller was involved in the actual copying process.
Why did the DOJ initially dismiss the case?	The DOJ dismissed the case because it believed there was no proof that the seller was the one who copied the software programs.
What is Section 5 of Presidential Decree No. 49?	Section 5 defines copyright as the exclusive right to print, reprint, publish, copy, distribute, multiply, sell, and make photographs of the works, among other things.
What was the Court of Appeals’ interpretation of Section 5(a)?	The Court of Appeals interpreted Section 5(a) to mean that all acts enumerated therein must be present and proven to hold a person liable for copyright infringement.
Why did the Supreme Court disagree with the Court of Appeals?	The Supreme Court disagreed because such an interpretation would lead to absurd and unreasonable consequences, such as requiring computer programs to be photographed before infringement could be established.
What does this ruling mean for software vendors?	This ruling strengthens the protection of their intellectual property rights and provides a legal basis to pursue those who sell unauthorized copies of their software.
What is the significance of the word “and” in Section 5(a)?	The Supreme Court clarified that “and” can be interpreted as “or” to avoid absurd results, ensuring that copyright protection is effectively enforced.

This landmark decision serves as a reminder of the importance of protecting intellectual property rights in the digital age. By clarifying the scope of copyright infringement, the Supreme Court has provided a clear legal framework for combating software piracy in the Philippines, safeguarding the interests of copyright holders and promoting a fair and competitive marketplace.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Microsoft Corporation v. Manansala, G.R. No. 166391, October 21, 2015

June 27, 2016

Upholding Search Warrants in Copyright Infringement Cases: Balancing Rights and Due Process

The Supreme Court held that search warrants issued to seize illegally reproduced software were valid, reversing the Court of Appeals’ decision. This ruling emphasizes the importance of probable cause in intellectual property rights enforcement, while also clarifying the application of the three-day notice rule in motion hearings. The decision underscores the judiciary’s role in protecting copyright holders’ rights and promoting a fair marketplace.

Cracking Down on Counterfeit Software: When Probable Cause Justifies a Search

Microsoft Corporation and Adobe Systems Incorporated sought to enforce their copyrights against New Fields (Asia Pacific), Inc., suspecting the company of using unlicensed software. The case began when petitioners received information that New Fields was unlawfully reproducing and using unlicensed versions of their software. Acting on this information, petitioners engaged Orion Support, Inc. (OSI) to investigate. Two OSI Market Researchers, Norma L. Serrano and Michael A. Moradoz, were tasked with confirming the tip and were trained to identify unauthorized copies of Adobe and Microsoft software.

On March 26, 2010, Police Senior Inspector Ernesto V. Padilla, along with Serrano and Moradoz, visited New Fields’ office under the guise of legitimate business. During the visit, they accessed two computers owned by New Fields and gathered information about the installed software. This investigation revealed that multiple computers were using the same product identification numbers for Microsoft and Adobe software, suggesting unauthorized duplication. Serrano and Moradoz stated in their joint affidavit that this commonality of product IDs indicated unlicensed or illegally copied software, as each installation should have a unique identifier unless an Open License Agreement is in place.

Based on the gathered evidence, Padilla applied for search warrants before Judge Amor Reyes of the Regional Trial Court (RTC). On May 20, 2010, Judge Reyes issued Search Warrant Nos. 10-15912 and 10-15913. The warrants were executed on May 24, 2010, resulting in the seizure of several items, including CD installers and computers containing unauthorized copies of Microsoft and Adobe software.

New Fields filed a motion to quash Search Warrant No. 10-15912 on June 6, 2010, arguing against its validity. The RTC, however, on June 29, 2010, issued an Order quashing both warrants, directing the return of all seized items. The RTC reasoned that the petitioners should have identified specific computers with pirated software. The RTC also dismissed the petitioners’ argument regarding non-compliance with the three-day notice rule, emphasizing that personal notification had been given.

The petitioners moved for reconsideration, but the RTC denied this motion on August 27, 2010. Aggrieved, the petitioners elevated the matter to the Court of Appeals (CA) via a petition for certiorari under Rule 65, alleging grave abuse of discretion by the RTC. The Court of Appeals, however, denied the petition, upholding the RTC’s decision to quash the search warrants. The CA stated that although the three-day notice rule was not strictly followed, the petitioners were given an opportunity to present their case.

The Supreme Court addressed two key issues: compliance with the three-day notice rule and the existence of probable cause for issuing the search warrants. Regarding the three-day notice rule, the Court acknowledged that strict compliance could be relaxed if the adverse party had a reasonable opportunity to study the motion and present their opposition. Citing Anama v. Court of Appeals,^[29] the Court reiterated that the purpose of the rule is to safeguard due process rights, which were satisfied when the RTC allowed the petitioners to submit their comment on the motion to quash.

The more substantive issue was whether probable cause existed to justify the issuance of the search warrants. The Court emphasized that while it generally defers to the lower courts’ evaluation of evidence, it can overturn factual findings if there was grave abuse of discretion. In this case, the Supreme Court found that the RTC and CA erred in their appreciation of facts, leading them to wrongly quash the warrants.

The CA had reasoned that the witnesses lacked personal knowledge of the facts justifying the warrants, relying instead on screen shots from a confidential informant. The Supreme Court disagreed, pointing to the affidavit of Police Senior Inspector Padilla, who personally verified the informant’s tip. Padilla had observed the Product Keys or Product Identification Numbers of the Adobe and Microsoft software installed on the computers at New Fields. Moreover, Padilla, trained to identify illegally reproduced software, concluded that the software was unauthorized due to the common product identification numbers across multiple computers.

“At the time that I was inside the office premises of the NEW FIELDS, I saw the Product Keys or Product Identification Numbers of the ADOBE and MICROSOFT computer software programs installed in some of the computer units. Ms. Serrano and Mr. Moradoz were able to pull up these data since they were allowed to use some of the computers of the target companies in line with the pretext that we used to gain entry into NEW FIELDS. I actively read and attentively observed the information reflected from the monitor display unit of the computers that Ms. Serrano and Mr. Moradoz were able to use. x x x.”^[40]

The Supreme Court found that the applicant and witnesses verified the information obtained from their confidential source and there was probable cause for the issuance of a search warrant, satisfying the requirement of personal knowledge.

“Initial hearsay information or tips from confidential informants could very well serve as basis for the issuance of a search warrant, if followed up personally by the recipient and validated.”^[39]

The Supreme Court’s decision reinforces the protection of intellectual property rights and clarifies the standards for obtaining search warrants in copyright infringement cases. This ruling clarifies that personal verification of information from confidential sources is sufficient to establish probable cause, upholding the validity of the search warrants. By emphasizing the importance of probable cause and upholding the warrants, the Supreme Court aims to deter copyright infringement and promote a fair marketplace for software developers.

FAQs

What was the key issue in this case?	The key issue was whether there was probable cause to issue search warrants for copyright infringement, and whether the three-day notice rule was properly applied. The Supreme Court focused on whether the evidence presented by Microsoft and Adobe was sufficient to establish probable cause.
What is the three-day notice rule?	The three-day notice rule requires that a motion be served at least three days before the hearing. However, this rule can be relaxed if the adverse party has an opportunity to respond to the motion.
What constitutes probable cause for a search warrant in this context?	Probable cause exists when there is sufficient evidence to lead a reasonable person to believe that a crime has been committed. In this case, common product identification numbers and the investigators’ observations provided probable cause.
Why did the Court of Appeals initially quash the search warrants?	The Court of Appeals initially quashed the search warrants because they believed the witnesses lacked personal knowledge. They relied on the fact that the information was initially gathered from a confidential informant.
What evidence did the Supreme Court find persuasive in reversing the CA’s decision?	The Supreme Court found the affidavit of Police Senior Inspector Padilla persuasive, as he personally verified the informant’s tip. Padilla observed the Product Keys and Identification Numbers of the Adobe and Microsoft software installed on the computers at New Fields.
What is the significance of common product identification numbers?	Common product identification numbers across multiple computers suggest that the software was illegally copied or unlicensed. Legitimate software installations typically have unique product identification numbers.
What was the role of OSI Market Researchers in this case?	The OSI Market Researchers, Norma L. Serrano and Michael A. Moradoz, were engaged by petitioners to investigate New Fields. They were trained to detect unauthorized copies of Adobe and Microsoft software and were able to gather information from the computers at New Fields.
What are the practical implications of this ruling for copyright holders?	This ruling strengthens the ability of copyright holders to protect their intellectual property through search warrants. It provides clarity on the requirements for establishing probable cause in software piracy cases.
How does this case affect the use of confidential informants in obtaining search warrants?	This case clarifies that initial tips from confidential informants can serve as a basis for search warrants. However, they must be followed up and personally validated by law enforcement or investigators.

The Supreme Court’s decision in Microsoft Corporation v. Samir Farajallah provides important guidance on the requirements for obtaining and executing search warrants in copyright infringement cases. This ruling confirms that personal verification of information from confidential sources is sufficient to establish probable cause, thereby supporting copyright holders’ efforts to protect their intellectual property rights. The decision underscores the importance of balancing the rights of copyright holders with the constitutional rights of individuals and corporations.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

September 10, 2014

Safeguarding Software: Upholding Copyright in the Digital Age

In the digital age, protecting intellectual property is paramount. The Supreme Court’s decision in NBI – Microsoft Corporation & Lotus Development Corp. v. Judy C. Hwang, et al. underscores the importance of upholding copyright laws, especially concerning software. The Court found that the Department of Justice (DOJ) committed grave abuse of discretion when it dismissed Microsoft’s complaint against respondents for copyright infringement and unfair competition. This ruling reinforces the rights of copyright owners to protect their intellectual property from unauthorized copying and distribution, ensuring that those who violate these rights are held accountable.

Pirated Programs: When Software Sales Lead to Copyright Claims

The case began when Microsoft, suspecting illegal copying and sales of its software by Beltron Computer Philippines, Inc. and Taiwan Machinery Display & Trade Center, Inc., sought assistance from the National Bureau of Investigation (NBI). An NBI agent and a private investigator purchased computer hardware and software from the respondents, discovering pre-installed Microsoft software and CD-ROMs without proper licenses. This led to a search warrant, the seizure of numerous CD-ROMs containing Microsoft software, and a subsequent complaint filed with the DOJ for copyright infringement and unfair competition. The DOJ initially dismissed the complaint, prompting Microsoft to elevate the matter to the Supreme Court.

At the heart of this case is the interpretation and application of Presidential Decree No. 49 (PD 49), as amended, particularly Section 5, which outlines the exclusive rights of a copyright owner. The Court emphasized that copyright infringement extends beyond merely manufacturing unauthorized copies; it encompasses any unauthorized act covered by Section 5, including copying, distributing, multiplying, and selling copyrighted works. This broad interpretation is critical in protecting intellectual property rights in an era where digital reproduction and distribution are rampant.

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.

The Court found that the DOJ acted with grave abuse of discretion in dismissing Microsoft’s complaint. The DOJ had reasoned that the matter was civil in nature and that the validity of the termination of a licensing agreement between Microsoft and Beltron needed to be resolved first. However, the Supreme Court clarified that Microsoft’s rights and remedies under the copyright law were independent of any contractual agreements and that the evidence presented, including the unauthorized CD-ROMs and pre-installed software, was sufficient to establish probable cause for copyright infringement.

Moreover, the Court addressed the issue of unfair competition under Article 189(1) of the Revised Penal Code. The elements of unfair competition include giving goods the general appearance of another manufacturer’s goods, with the intent to deceive the public. The Court noted that the counterfeit CD-ROMs purchased from the respondents were nearly indistinguishable from genuine Microsoft products, implying an intent to deceive and further supporting the charge of unfair competition.

A significant aspect of the Court’s decision was its assessment of the evidence presented by Microsoft. The Court found that the 12 CD-ROMs and the CPU with pre-installed Microsoft software purchased from the respondents, as well as the 2,831 Microsoft CD-ROMs seized, were sufficient to support a finding of probable cause for copyright infringement. The absence of standard features accompanying authentic Microsoft products, such as end-user license agreements and certificates of authenticity, further indicated the illegality of the products.

The Court also addressed the respondents’ argument that the CD-ROMs were left with them for safekeeping. It found this claim untenable, noting that the respondents had not raised this defense in their initial counter-affidavits. The Court concluded that the circumstances surrounding the possession and sale of the counterfeit software strongly suggested that the respondents were engaged in unauthorized copying and distribution.

Building on this principle, the Supreme Court emphasized that copyright owners are entitled to seek remedies under PD 49 and Article 189(1) of the Revised Penal Code to protect their intellectual property rights. The Court rejected the DOJ’s argument that Microsoft should await a resolution from a proper court regarding the validity of the terminated agreement. Instead, the Court affirmed that Microsoft acted within its rights in filing the complaint based on the incriminating evidence obtained from the respondents.

This approach contrasts with the DOJ’s initial stance, which favored delaying legal action until contractual issues were resolved. The Supreme Court’s decision underscores the importance of proactive enforcement of copyright laws to prevent further infringement and protect the rights of copyright owners. The ruling clarifies that the presence of counterfeit software and the unauthorized distribution of copyrighted material are sufficient grounds for pursuing criminal charges, regardless of any existing contractual agreements.

In light of the Court’s decision, it is essential for businesses and individuals to respect intellectual property rights and refrain from engaging in activities that infringe upon copyrights. This includes avoiding the purchase and distribution of counterfeit software, as well as ensuring that all software used is properly licensed. Failure to comply with these requirements can result in severe legal consequences, including criminal charges and financial penalties.

FAQs

What was the key issue in this case?	The key issue was whether the Department of Justice (DOJ) acted with grave abuse of discretion in dismissing Microsoft’s complaint against the respondents for copyright infringement and unfair competition.
What is copyright infringement according to the law?	Copyright infringement involves performing any unauthorized act that violates the exclusive rights of the copyright owner, such as copying, distributing, multiplying, or selling copyrighted works.
What evidence did Microsoft present in this case?	Microsoft presented evidence including 12 CD-ROMs containing Microsoft software, a CPU with pre-installed Microsoft software, and 2,831 seized CD-ROMs.
What is unfair competition according to the Revised Penal Code?	Unfair competition involves selling goods that resemble those of another manufacturer or dealer, with the intent to deceive the public. This includes similarities in packaging and appearance.
What was the Court’s ruling on the DOJ’s dismissal of the case?	The Court ruled that the DOJ committed grave abuse of discretion in dismissing Microsoft’s complaint, finding that the evidence was sufficient to establish probable cause for copyright infringement and unfair competition.
What is the significance of the seized CD-ROMs in the case?	The 2,831 seized CD-ROMs, along with other evidence, supported the claim that the respondents were engaged in unauthorized copying and distribution of Microsoft software, thereby infringing on Microsoft’s copyright.
What are the implications of this ruling for businesses?	The ruling emphasizes the importance of respecting intellectual property rights and avoiding the use or distribution of counterfeit software, as such actions can lead to severe legal consequences.
How does this case affect the enforcement of copyright laws in the Philippines?	This case reinforces the importance of proactive enforcement of copyright laws and clarifies that the presence of counterfeit software is sufficient grounds for pursuing criminal charges.

The Supreme Court’s decision in this case serves as a strong reminder of the importance of protecting intellectual property rights in the digital age. By upholding the rights of copyright owners and holding infringers accountable, the Court has reaffirmed the rule of law and promoted a fair and competitive marketplace. This decision is a victory for innovation and creativity, ensuring that those who invest in developing new technologies and software are protected from unauthorized exploitation.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: NBI – Microsoft Corporation & Lotus Development Corp. v. Judy C. Hwang, et al., G.R. No. 147043, June 21, 2005

June 21, 2005