G.R. No.

147043               June 21, 2005 Display & Trade Center, Inc. ("TMTC"), also a domestic
corporation.4
NBI - MICROSOFT CORPORATION & LOTUS DEVELOPMENT
CORP., petitioners, In May 1993, Microsoft and Beltron entered into a Licensing
vs. Agreement ("Agreement"). Under Section 2(a) of the Agreement,
JUDY C. HWANG, BENITO KEH & YVONNE K. as amended in January 1994, Microsoft authorized Beltron, for a
CHUA/BELTRON COMPUTER PHILIPPINES INC., JONATHAN fee, to:
K. CHUA, EMILY K. CHUA, BENITO T. SANCHEZ, NANCY I.
VELASCO, ALFONSO CHUA, ALBERTO CHUA, SOPHIA (i) xxx reproduce and install no more than one (1) copy of
ONG, DEANNA CHUA/TAIWAN MACHINERY DISPLAY & [Microsoft] software on each Customer System hard disk
TRADE CENTER, INC., and THE SECRETARY OF or Read Only Memory ("ROM"); [and]
JUSTICE, respondents.
(ii) xxx distribute directly or indirectly and license copies of
DECISION the Product (reproduced as per Section 2(a)(i) and/or
acquired from Authorized Replicator or Authorized
CARPIO, J.: Distributor) in object code form to end users[.] xxxx5

The Case The Agreement also authorized Microsoft and Beltron to

terminate the contract if the other fails to comply with any of the
This is a petition for certiorari1 of the Resolutions2 of the Agreement’s provisions. Microsoft terminated the Agreement
Department of Justice dismissing for "lack of merit and effective 22 June 1995 for Beltron’s non-payment of royalties.6
insufficiency of evidence" petitioner Microsoft Corporation’s
complaint against respondents for copyright infringement and Afterwards, Microsoft learned that respondents were illegally
unfair competition. copying and selling Microsoft software. Consequently, Microsoft,
through its Philippine agent,7 hired the services of Pinkerton
The Facts Consulting Services ("PCS"), a private investigative firm.
Microsoft also sought the assistance of the National Bureau of
Petitioner Microsoft Corporation ("Microsoft"), a Delaware, United Investigation ("NBI"). On 10 November 1995, PCS employee
States corporation, owns the copyright and trademark to several John Benedic8 Sacriz ("Sacriz") and NBI agent Dominador
computer software.3 Respondents Benito Keh and Yvonne Keh Samiano, Jr. ("Samiano"), posing as representatives of a
are the President/Managing Director and General Manager, computer shop,9 bought computer hardware (central processing
respectively, of respondent Beltron Computer Philippines, Inc. unit ("CPU") and computer monitor) and software (12 computer
("Beltron"), a domestic corporation. Respondents Jonathan K. disks ("CDs") in read-only memory ("ROM") format) from
Chua, Emily K. Chua, Benito T. Sanchez, and Nancy I. Velasco respondents. The CPU contained pre-installed10 Microsoft
are Beltron’s Directors. On the other hand, respondents Alfonso Windows 3.1 and MS-DOS software. The 12 CD-ROMs, encased
Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, and in plastic containers with Microsoft packaging, also contained
Deanna Chua are the Directors of respondent Taiwan Machinery Microsoft software.11 At least two of the CD-ROMs were
"installers," so-called because they contain several software dealer in Singapore (R.R. Donnelly); (3) respondents are not the
(Microsoft only or both Microsoft and non-Microsoft).12 Sacriz and "source" of the Microsoft Windows 3.1 software pre-installed in
Samiano were not given the Microsoft end-user license the CPU bought by Sacriz and Samiano, but only of the MS-DOS
agreements, user’s manuals, registration cards or certificates of software; (4) Microsoft’s alleged proof of purchase (receipt) for
authenticity for the articles they purchased. The receipt issued to the 12 CD-ROMs is inconclusive because the receipt does not
Sacriz and Samiano for the CPU and monitor bore the heading indicate its source; and (5) respondents Benito Keh, Jonathan K.
"T.M.T.C. (PHILS.) INC. BELTRON COMPUTER."13 The receipt Chua, Alfonso Chua, Alberto Chua, Judy K. Chua Hwang, Sophia
for the 12 CD-ROMs did not indicate its source although the Ong, and Deanna Chua are stockholders of Beltron and TMTC in
name "Gerlie" appears below the entry "delivered by."14 name only and thus cannot be held criminally liable.21

On 17 November 1995, Microsoft applied for search warrants The other respondents did not file counter-affidavits.
against respondents in the Regional Trial Court, Branch 23,
Manila ("RTC").15 The RTC granted Microsoft’s application and Meanwhile, respondents moved to quash Search Warrant Nos.
issued two search warrants ("Search Warrant Nos. 95-684 and 95-684 and 95-685. The RTC partially granted their motion in its
95-685").16 Using Search Warrant Nos. 95-684 and 95-685, the Order of 16 April 1996. Microsoft sought reconsideration but the
NBI searched the premises of Beltron and TMTC and seized RTC denied Microsoft’s motion in its Order of 19 July 1996.
several computer-related hardware, software, accessories, and Microsoft appealed to the Court of Appeals in CA-G.R. CV No.
paraphernalia. Among these were 2,831 pieces of CD- 54600. In its Decision of 29 November 2001, the Court of Appeals
ROMs containing Microsoft software.17 granted Microsoft’s appeal and set aside the RTC Orders of 16
April 1996 and 19 July 1996. The Court of Appeals’ Decision
Based on the articles obtained from respondents, Microsoft and a became final on 27 December 2001.
certain Lotus Development Corporation ("Lotus Corporation")
charged respondents before the Department of Justice ("DOJ") The DOJ Resolutions
with copyright infringement under Section 5(A) in relation to
Section 29 of Presidential Decree No. 49, as amended, ("PD In the Resolution of 26 October 1999, DOJ State Prosecutor
49")18 and with unfair competition under Article 189(1)19 of the Jocelyn A. Ong ("State Prosecutor Ong") recommended the
Revised Penal Code. In its Complaint ("I.S. No. 96-193"), which dismissal of Microsoft’s complaint for lack of merit and
the NBI indorsed, Microsoft alleged that respondents illegally insufficiency of evidence. State Prosecutor Ong also
copied and sold Microsoft software.20 recommended the dismissal of Lotus Corporation’s complaint for
lack of interest to prosecute and for insufficiency of evidence.
In their joint counter-affidavit, respondents Yvonne Keh Assistant Chief State Prosecutor Lualhati R. Buenafe ("Assistant
("respondent Keh") and Emily K. Chua ("respondent Chua") Chief State Prosecutor Buenafe") approved State Prosecutor
denied the charges against respondents. Respondents Keh and Ong’s recommendations.22 The 26 October 1999 Resolution
Chua alleged that: (1) Microsoft’s real intention in filing the reads in part:
complaint under I.S. No. 96-193 was to pressure Beltron to pay
its alleged unpaid royalties, thus Microsoft should have filed a [T]wo (2) issues have to be resolved in this case, namely:
collection suit instead of a criminal complaint; (2) TMTC bought
the confiscated 59 boxes of MS-DOS CDs from a Microsoft
 a) Whether or not Beltron Computer and/or its From said order, it can be gleaned that the [RTC] xxx, had
stockholders should be held liable for the offenses admitted that the search warrants applied for by complainant
charged. were merely used as a leverage for the collection of the alleged
monetary obligation of the respondent/s.
b) Whether or not prima facie case exist[s] against
Taiwan Machinery Display and Trade Center, Inc. (TMTC) From said order, it can be surmise (sic) that the obligations
for violation of the offense charged. between the parties is civil in nature not criminal.

Complainant had alleged that from the time the license Moreover, complainant had time and again harped that
agreement was terminated, respondent/s is/are no longer respondent/s is/are not authorized to sell/copy/distribute Microsoft
authorized to copy/distribute/sell Microsoft products. However, products at the time of the execution of the search warrants. Still,
respondent/s averred that the case is civil in nature, not criminal, this office has no power to pass upon said issue for one has then
considering that the case stemmed only out of the desire of to interpret the provisions of the contract entered into by the
complainant to collect from them the amount of US$135,121.32 parties, which question, should be raised in a proper civil
and that the contract entered into by the parties cannot be proceeding.
unilaterally terminated.
Accordingly, absen[t] a resolution from the proper court of (sic)
In the order of Honorable William Bayhon dated July 19, 1996 whether or not the contract is still binding between the parties at
[denying reconsideration to the Order partially quashing the the time of the execution of the search warrants, this office cannot
search warrants], he observed the following: pass upon the issue of whether respondent/s is or are liable for
the offense charged.
"It is further argued by counsel for respondent that the act taken
by private complainant is to spite revenge against the respondent As to the second issue, we find for the respondent/s. TMTC had
Beltron for the latter failed to pay the alleged monetary obligation provided sufficient evidence such as pro-forma invoice from R.R.
in the amount of US$135,121.32. That respondent has some Donnelley; Debt Advice of the Bank of Commerce; Official
monetary obligation to complainant which is not denied by the Receipts from the Bureau of Customs; and Import Entry
complainant." Declaration of the Bureau of Customs to prove that indeed the
Microsoft software in their possession were bought from
["]It appears therefore that prior to the issuance of the subject Singapore.
search warrants, complainant had some business transactions
with the respondent [Beltron] along the same line of products. Thus, respondent/s in this case has/have no intent to defraud the
Complainant failed to reveal the true circumstances existing public, as provided under Article 189 of the Revised Penal Code,
between the two of them as it now appears, indeed the search for they bought said Microsoft MS-DOS 6.0 from an alleged
warrant[s] xxx [are] being used as a leverage to secure collection licensee of Microsoft in Singapore, with all the necessary papers.
of the money obligation which the Court cannot allow." 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 but its motion was denied in the Resolution of 22 December
was/were not the manufacturers of the Microsoft software seized 2000.26
and were selling their products as genuine Microsoft software,
considering that they bought it from a Microsoft licensee. Hence, this petition. Microsoft contends that:

Complainant, on the other hand, considering that it has the I. THE DOJ ERRED IN RULING THAT THE LIABILITY OF
burden of proving that the respondent/s is/are liable for the RESPONDENTS WAS ONLY CIVIL IN NATURE BY VIRTUE OF
offense charged, has not presented any evidence that the items THE LICENSE AGREEMENT.
seized namely the 59 boxes of MS-DOS 6.0 software are
counterfeit. II. THE DOJ MISAPPRECIATED THE FACT THAT
RESPONDENTS WERE ENGAGED IN THE ILLEGAL
The certification issued on December 12, 1995 by Christopher IMPORTATION, SALE AND DISTRIBUTION OF COUNTERFEIT
Austin, Corporate Attorney of the complainant, does not disclose SOFTWARE AS EVIDENCED BY THE ITEMS PURCHASED
this fact. For the term used by Mr. Austin was that the items DURING THE TEST-BUY AND THE ITEMS SEIZED FROM
seized were unauthorized. RESPONDENTS’ PREMISES.

The question now, is whether the products were unauthorized III. THE DOJ MISAPPRECIATED THE LAW ON COPYRIGHT
because TMTC has no license to sell Microsoft products, or is it INFRINGEMENT AND UNFAIR COMPETITION.
unauthorized because R.R. Donnelley has no authority to sell
said products here in the Philippines. IV. ONLY TWO OUT OF THE NINE RESPONDENTS
BOTHERED TO FILE COUNTER-AFFIDAVITS; HENCE, THE
Still, to determine the culpability of the respondents, complainant CHARGES AGAINST SEVEN [RESPONDENTS] REMAIN
should present evidence that what is in the possession of the UNCONTROVERTED.27
respondent/s is/are counterfeit Microsoft products.
In its Comment, filed by the Solicitor General, the DOJ maintains
This it failed to do.23 that it did not commit grave abuse of discretion in dismissing
Microsoft’s complaint.28
Microsoft sought reconsideration and prayed for an ocular
inspection of the articles seized from respondents. However, in For their part, respondents allege in their Comment that Microsoft
the Resolution of 3 December 1999, Assistant Chief State is guilty of forum-shopping because its petition in CA-G.R. CV No.
Prosecutor Buenafe, upon State Prosecutor Ong’s 54600 was filed ahead of, and has a "common interest" with, this
recommendation, denied Microsoft’s motion.24 petition. On the merits, respondents reiterate their claims in their
motion to quash Search Warrant Nos. 95-684 and 95-685 that the
Microsoft appealed to the Office of the DOJ Secretary. In the articles seized from them were either owned by others,
Resolution of 3 August 2000, DOJ Undersecretary Regis V. Puno purchased from legitimate sources, or not produced by Microsoft.
dismissed Microsoft’s appeal.25 Microsoft sought reconsideration 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 in both actions; (b) identity of rights asserted and relief prayed for,
corporation29 left the CD-ROMs with them for safekeeping. Lastly, the relief being founded on the same facts; and (c) the identity
respondents claim that there is no proof that the CPU Sacriz and with respect to the two preceding particulars in the two cases is
Samiano bought from them contained pre-installed Microsoft such that any judgment that may be rendered in the pending
software because the receipt for the CPU does not indicate case, regardless of which party is successful, would amount
"[s]oftware hard disk." 30 to res judicata in the other case.33 Forum-shopping is an act of
malpractice because it abuses court processes.34 To check this
In its Reply, Microsoft counters that it is not liable for forum- pernicious practice, Section 5, Rule 7 of the 1997 Rules of Civil
shopping because its petition in CA-G.R. CV No. 54600 involved Procedure requires the principal party in an initiatory pleading to
the Orders of the RTC partially quashing Search Warrant Nos. submit a certification against forum-shopping.35 Failure to comply
95-684 and 95-685 while this petition concerns the DOJ with this requirement is a cause for the dismissal of the case and,
Resolutions dismissing its complaint against respondents for in case of willful forum-shopping, for the imposition of
copyright infringement and unfair competition. On the merits, administrative sanctions.
Microsoft maintains that respondents should be indicted for
copyright infringement and unfair competition.31 Here, Microsoft correctly contends that it is not liable for forum-
shopping. What Microsoft appealed in CA-G.R. CV No. 54600
The Issues were the RTC Orders partially quashing Search Warrant Nos. 95-
684 and 95-685. In the present case, Microsoft is appealing from
The petition raises the following issues: 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
(1) Whether Microsoft engaged in forum-shopping; and
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
(2) Whether the DOJ acted with grave abuse of discretion not amount to res judicata in the present case. This renders
in not finding probable cause to charge respondents with forum-shopping impossible here.
copyright infringement and unfair competition.
The DOJ Acted with Grave Abuse of Discretion
The Ruling of the Court in not Finding Probable Cause to Charge Respondents with
Copyright Infringement and Unfair Competition
The petition has merit.
Generally, this Court is loath to interfere in the prosecutor’s
Microsoft did not Engage in Forum-Shopping discretion in determining probable cause36 — unless such
discretion is shown to have been abused. 37 This case falls under
Forum-shopping takes place when a litigant files multiple suits the exception.
involving the same parties, either simultaneously or successively,
to secure a favorable judgment.32 Thus, it exists where the Unlike the higher quantum of proof beyond reasonable doubt
elements of litis pendentia are present, namely: (a) identity of required to secure a conviction, it is the lower standard of
parties, or at least such parties who represent the same interests probable cause which is applied during the preliminary
investigation to determine whether the accused should be held for Significantly, under Section 5(A), a copyright owner is vested with
trial. This standard is met if the facts and circumstances incite a the exclusive right to "copy, distribute, multiply, [and] sell" his
reasonable belief that the act or omission complained of intellectual works.
constitutes the offense charged. As we explained in Pilapil v.
Sandiganbayan:38 On the other hand, the elements of unfair competition under
Article 189(1)43 of the Revised Penal Code are:
The term [probable cause] does not mean "actual and positive
cause" nor does it import absolute certainty. It is merely based on (a) That the offender gives his goods the general
opinion and reasonable belief. Thus, a finding of probable cause appearance of the goods of another manufacturer or
does not require an inquiry into whether there is sufficient dealer;
evidence to procure a conviction. It is enough that it is believed
that the act or omission complained of constitutes the offense (b) That the general appearance is shown in the (1)
charged. Precisely, there is a trial for the reception of evidence of goods themselves, or in the (2) wrapping of their
the prosecution in support of the charge. packages, or in the (3) device or words therein, or in (4)
any other feature of their appearance[;]
PD 49 and Article 189(1)
(c) That the offender offers to sell or sells those goods or
Section 539 of PD 49 ("Section 5") enumerates the rights vested gives other persons a chance or opportunity to do the
exclusively on the copyright owner. Contrary to the DOJ’s ruling, same with a like purpose[; and]
the gravamen of copyright infringement is not merely the
unauthorized "manufacturing" of intellectual works but rather the (d) That there is actual intent to deceive the public or
unauthorized performance of any of the acts covered by Section defraud a competitor.44
5. Hence, any person who performs any of the acts under Section
5 without obtaining the copyright owner’s prior consent renders
The element of intent to deceive may be inferred from the
himself civilly40 and criminally41 liable for copyright infringement.
similarity of the goods or their appearance.45
We held in Columbia Pictures, Inc. v. Court of Appeals:42
On the Sufficiency of Evidence to
Infringement of a copyright is a trespass on a private domain
Support a Finding of Probable Cause
owned and occupied by the owner of the copyright, and,
Against Respondents
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 In its pleadings filed with the DOJ, Microsoft invoked three
copyright, of anything the sole right to do which is conferred by clusters of evidence to support its complaint against respondents,
statute on the owner of the copyright. (Emphasis supplied) 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 Furthermore, some of the counterfeit CD-ROMs bought
these pieces of evidence because: (1) the "obligations between from respondents were "installer" CD-ROMs containing
the parties is civil and not criminal" considering that Microsoft Microsoft software only or both Microsoft and non-
merely sought the issuance of Search Warrant Nos. 95-684 and Microsoft software. These articles are counterfeit per
95-685 to pressure Beltron to pay its obligation under the se because Microsoft does not (and could not have
Agreement, and (2) the validity of Microsoft’s termination of the authorized anyone to) produce such CD-ROMs. The
Agreement must first be resolved by the "proper court." On the copying of the genuine Microsoft software to produce
other hand, the DOJ ruled that Microsoft failed to present these fake CD-ROMs and their distribution are illegal
evidence proving that what were obtained from respondents were even if the copier or distributor is a Microsoft licensee. As
counterfeit Microsoft products. far as these installer CD-ROMs are concerned, the
Agreement (and the alleged question on the validity of its
This is grave abuse of discretion.47 termination) is immaterial to the determination of
respondents’ liability for copyright infringement and unfair
First. Being the copyright and trademark owner of competition.
Microsoft software, Microsoft acted well within its rights in
filing the complaint under I.S. No. 96-193 based on the Lastly, Section 10(b)48 of the Agreement provides that
incriminating evidence obtained from respondents. Microsoft’s "rights and remedies" under the contract are
Hence, it was highly irregular for the DOJ to hold, based "not xxx exclusive and are in addition to any other rights
on the RTC Order of 19 July 1996, that Microsoft sought and remedies provided by law or [the] Agreement." Thus,
the issuance of Search Warrant Nos. 95-684 and 95-685, even if the Agreement still subsists, Microsoft is not
and by inference, the filing of the complaint under I.S. No. precluded from seeking remedies under PD 49 and Article
96-193, merely to pressure Beltron to pay its overdue 189(1) of the Revised Penal Code to vindicate its rights.
royalties to Microsoft. Significantly, in its Decision in CA-
G.R. CV No. 54600 dated 29 November 2001, the Court Third. The Court finds that the 12 CD-ROMs ("installer"
of Appeals set aside the RTC Order of 19 July 1996. and "non-installer") and the CPU with pre-installed
Respondents no longer contested that ruling which Microsoft software Sacriz and Samiano bought from
became final on 27 December 2001. respondents and the 2,831 Microsoft CD-ROMs seized
from respondents suffice to support a finding of probable
Second. There is no basis for the DOJ to rule that cause to indict respondents for copyright infringement
Microsoft must await a prior "resolution from the proper under Section 5(A) in relation to Section 29 of PD 49 for
court of (sic) whether or not the [Agreement] is still unauthorized copying and selling of protected intellectual
binding between the parties." Beltron has not filed any suit works. The installer CD-ROMs with Microsoft software, to
to question Microsoft’s termination of the Agreement. repeat, are counterfeit per se. On the other hand, the
Microsoft can neither be expected nor compelled to wait illegality of the "non-installer" CD-ROMs purchased from
until Beltron decides to sue before Microsoft can seek respondents and of the Microsoft software pre-installed in
remedies for violation of its intellectual property rights. the CPU is shown by the absence of the standard
features accompanying authentic Microsoft products,
namely, the Microsoft end-user license agreements,
 user’s manuals, registration cards or certificates of The counterfeit "non-installer" CD-ROMs Sacriz and Samiano
authenticity. bought from respondents also suffice to support a finding of
probable cause to indict respondents for unfair competition under
On the 2,831 Microsoft CD-ROMs49 seized from respondents, Article 189(1) of the Revised Penal Code for passing off Microsoft
respondent Beltron, the only respondent who was party to the products. From the pictures of the CD-ROMs’ packaging,55 one
Agreement, could not have reproduced them under the cannot distinguish them from the packaging of CD-ROMs
Agreement as the Solicitor General50 and respondents contend. containing genuine Microsoft software. Such replication, coupled
Beltron’s rights51 under the Agreement were limited to: with the similarity of content of these fake CD-ROMs and the CD-
ROMs with genuine Microsoft software, implies intent to deceive.
(1) the "reproduc[tion] and install[ation of] no more
than one copy of [Microsoft] software on each Customer Respondents’ contention that the 12 CD-ROMs Sacriz and
System hard disk or Read Only Memory ("ROM")"; and Samiano purchased cannot be traced to them because the
receipt for these articles does not indicate its source is unavailing.
(2) the "distribut[ion] xxx and licens[ing of] copies of the The receipt in question should be taken together with Microsoft’s
[Microsoft] Product [as reproduced above] and/or claim that Sacriz and Samiano bought the CD-ROMs from
acquired from Authorized Replicator or Authorized respondents.56 Together, these considerations point to
Distributor) in object code form to end users." respondents as the vendor of the counterfeit CD-ROMs.
Respondents do not give any reason why the Court should not
give credence to Microsoft’s claim. For the same reason, the fact
The Agreement defines an authorized replicator as "a third party
that the receipt for the CPU does not indicate "[s]oftware hard
approved by [Microsoft] which may reproduce and manufacture
disk" does not mean that the CPU had no pre-installed Microsoft
[Microsoft] Product[s] for [Beltron] xxx."52 An authorized
software. Respondents Keh and Chua admit in their counter-
distributor, on the other hand, is a "third party approved by
affidavit that respondents are the "source" of the pre-installed
[Microsoft] from which [Beltron] may purchase
MS-DOS software.
MED53 Product."54 Being a mere reproducer/installer of one
Microsoft software copy on each customer’s hard disk or ROM,
Beltron could only have acquired the hundreds of Microsoft CD- WHEREFORE, we GRANT the petition. We SET ASIDE the
ROMs found in respondents’ possession from Microsoft Resolutions dated 26 October 1999, 3 December 1999, 3 August
distributors or replicators. 2000, and 22 December 2000 of the Department of Justice.

However, respondents makes no such claim. What respondents SO ORDERED.

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 Microsoft’s prior authorization.