Title
Microsoft Corp. vs. Farajallah
Case
G.R. No. 205800
Decision Date
Sep 10, 2014
U.S. software firms Microsoft and Adobe accused Philippine company New Fields of using unlicensed software. Supreme Court upheld search warrants, finding probable cause for piracy.
search warrant
probable cause
relaxation of notice rule
A

Case Summary (G.R. No. 120915)

Factual Background and Allegations

Petitioners received information in September 2009 that New Fields was allegedly reproducing and using unlicensed Microsoft and Adobe software. Petitioners engaged OSI to verify the tip; OSI assigned two trained market researchers (Serrano and Moradoz) to investigate and detect unauthorized copies. On 17 March 2010 petitioners’ counsel filed a letter-complaint with the PNP CIDG, and the matter was assigned to PSI Padilla.

Investigative Actions and On-Site Verification

On 26 March 2010 Padilla and the two market researchers entered New Fields’ office under a legitimate business pretext, obtained access to two company computers, and observed displayed product identification/serial numbers for installed Microsoft and Adobe software. Padilla and the OSI staff noted identical initial sequences in Product ID numbers across the two machines for Microsoft Windows XP Pro and Microsoft Office Word 2007, and identical serials for Adobe Acrobat, which the investigators interpreted as indicative of software installations originating from a single installer rather than individually licensed copies. Investigators also observed some 90 computers with Microsoft software in the premises and no Certificates of Authenticity.

Affidavits, Certifications, and Warrant Application

Padilla, Serrano, and Moradoz executed affidavits stating their observations and conclusions; Padilla, who was trained to distinguish original from counterfeit software, swore to personal observation of the product keys on the monitor displays. Petitioners issued certifications that they had not authorized New Fields to copy or reproduce their software. Based on these averments, Padilla applied for Search Warrant Nos. 10-15912 and 10-15913 on 20 May 2010 before the Executive Judge of the RTC; both warrants were issued that same date.

Execution of Warrants and Seizures

The warrants were served on 24 May 2010. The search, witnessed by New Fields employees, resulted in the seizure of 17 CD installers and 83 computers alleged to contain unauthorized copies of Microsoft and/or Adobe software. New Fields promptly filed a motion to quash one of the warrants (Search Warrant No. 10-15912) on 6 June 2010.

RTC Proceedings and Orders

The RTC scheduled hearing on the motion to quash and ordered petitioners to file a Comment/Opposition by 21 June 2010. Petitioners objected to respondents’ failure to comply with the three-day notice rule under the Rules of Court, asserting they received the motion only one day before the hearing. Nevertheless, on 29 June 2010 the RTC issued an Order quashing both warrants and directing return of all seized items. The RTC’s reasoning included that petitioners should have identified which specific computer contained pirated software, that seized items had been held without filing of criminal charges, and the court rejected petitioners’ claim regarding noncompliance with the three-day rule on the ground petitioners had been personally notified. Petitioners filed motions for reconsideration, which were denied by RTC Order dated 27 August 2010, and the items were returned.

Court of Appeals Ruling

Petitioners elevated the matter to the Court of Appeals via certiorari under Rule 65, arguing grave abuse of discretion by the RTC for quashing the warrants despite the three-day notice violation and the existence of probable cause and personal knowledge by the warrant applicant. The CA denied relief, reasoning that the RTC’s directive for petitioners to submit their comment effectively provided petitioners their day in court and thus satisfied the purpose of the three-day notice rule despite nonstrict observance.

Issue Presented to the Supreme Court

The sole legal issue presented for review was whether the Court of Appeals erred in ruling that the RTC did not commit grave abuse of discretion in quashing the warrants and ordering the immediate release of seized items, despite pending appellate proceedings. Petitioners sought reversal of the CA’s decision and reinstatement and validation of Search Warrant Nos. 10-15912 and 10-15913.

Supreme Court’s Analysis — Three-Day Notice Rule

The Supreme Court recognized its prior holding in Anama v. Court of Appeals that the three-day notice rule is not absolute: its purpose is to safeguard due process, and strict compliance may be dispensed with if the adverse party was given a reasonable opportunity to study and oppose the motion. The Court agreed with the CA that petitioners had been afforded such opportunity when the RTC ordered the filing of comments rather than immediately ruling on the motion to quash, and therefore relaxed strict enforcement of the three-day rule in this case.

Supreme Court’s Analysis — Probable Cause and Personal Knowledge

The Court addressed the dispositive question of probable cause. It reiterated the settled principle (citing Microsoft v. Maxicorp) that the existence of probable cause is a question of fact, generally entitled to deference to the judge who conducted the examination because that judge had the opportunity to question the applicant and witnesses. Nevertheless, the Supreme Court recognized circumstances warranting review of factual findings and set forth the specific instances when appellate review of factual findings is appropriate (e.g., contradictory findings, conclusions founded on speculation, grave abuse in appreciation of facts, findings premised on absence of evidence contradicted by the record, etc.). Applying these stan

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