Case Summary (G.R. No. 147043)
Petitioners
• Microsoft Corporation
• Lotus Development Corporation
Respondents
• Judy C. Hwang, Benito Keh, Yvonne Keh, Jonathan K. Chua, Emily K. Chua, Benito T. Sanchez, Nancy I. Velasco, Alfonso Chua, Alberto Chua, Sophia Ong, Deanna Chua, Beltron Computer Philippines, Inc., Taiwan Machinery Display & Trade Center, Inc., and the Secretary of Justice
Key Dates
• May 1993 – Microsoft and Beltron execute the Licensing Agreement.
• January 1994 – Agreement amended to clarify reproduction and distribution rights.
• June 22, 1995 – Microsoft terminates the Agreement for nonpayment of royalties.
• November 10, 1995 – Test-buy yields infringing software and hardware.
• November 17, 1995 – Search warrants issued and executed on Beltron and TMTC premises.
• October 26, 1999; December 3, 1999; August 3, 2000; December 22, 2000 – Department of Justice dismisses complaints at various levels.
• June 21, 2005 – Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution (post-1990 cases)
• Presidential Decree No. 49 (as amended) – Sections 5(A) and 29 on copyright infringement
• Revised Penal Code – Article 189(1) on unfair competition
• 1997 Rules of Civil Procedure – Rule 65 (certiorari), Rule 7 Section 5 (anti-forum shopping)
Petition for Certiorari
Microsoft sought certiorari relief from DOJ resolutions dismissing its complaint for copyright infringement and unfair competition against respondents. The petition challenged the DOJ’s finding of no probable cause and its characterization of the dispute as purely civil.
Licensing Agreement and Termination
Under the May 1993 Agreement, Beltron was authorized to reproduce one copy of Microsoft software per customer system and to distribute licensed copies acquired from authorized replicators or distributors. Microsoft validly terminated the Agreement on June 22, 1995, due to Beltron’s failure to pay royalties.
Test-Buy Operation and Seizure
In November 1995, agents from Pinkerton and the NBI purchased a CPU with pre-installed Windows 3.1 and MS-DOS, plus 12 CD-ROMs labeled as containing Microsoft software, from respondents. Search warrants executed shortly thereafter yielded 2,831 CD-ROMs and various hardware and packaging materials.
Department of Justice Resolutions
The DOJ dismissed Microsoft’s complaint on grounds that (1) the dispute was civil in nature, involving contractual obligations, and (2) there was insufficient evidence to prove counterfeit products or intent to defraud. Lotus’s complaint was also dismissed for lack of interest and evidence. Microsoft’s motions for reconsideration were denied up to the DOJ Secretary level.
Issues Presented
- Whether Microsoft engaged in impermissible forum-shopping.
- Whether the DOJ gravely abused its discretion in finding no probable cause for criminal charges of copyright infringement and unfair competition.
Forum-Shopping Analysis
The Supreme Court held that Microsoft did not forum-shop. The appeal in the Court of Appeals challenged RTC orders quashing search warrants, whereas the certiorari petition contested DOJ resolutions dismissing criminal charges. The issues, reliefs prayed for, and procedural postures differ such that res judicata does not apply.
Probable Cause Standard
Probable cause requires a reasonable belief, based on facts and circumstances, that an offense has been committed. It does not demand proof beyond reasonable doubt or conclusive evidence of guilt.
Copyright Infringement Liability
Under PD 49 Section 5(A), copyright infringement includes any unauthorized exercise of rights such as copying or distribution. The Supreme Court emphasized that infringement does not depend on manufacturing role but on unauthorized acts covered by Section 5.
Unfair Competition Liability
Article 189(1) of the Revised Penal Code penalizes passing of
Case Syllabus (G.R. No. 147043)
Procedural Context
- Petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
- Assailed DOJ Resolutions dated 26 October 1999, 3 December 1999, 3 August 2000, and 22 December 2000 dismissing criminal complaint.
- Complaint against respondents for copyright infringement (PD 49, Sec. 5(A) in relation to Sec. 29) and unfair competition (RPC, Art. 189(1)).
- Parallel appeal in CA-G.R. CV No. 54600 concerned RTC orders quashing search warrants; this petition concerns DOJ’s dismissal of the complaint.
Parties
- Petitioner Microsoft Corporation: Delaware corporation owning copyrights and trademarks for Windows 3.1, Windows 95, Excel, Word, Access, Works, PowerPoint, Office, Flight Simulator, FoxPro, etc.
- Petitioner Lotus Development Corporation: initially co-complainant before DOJ, later desisted.
- Respondent Beltron Computer Philippines, Inc.: domestic corporation; Benito Keh (President/Managing Director), Yvonne Keh (General Manager), Jonathan K. Chua, Emily K. Chua, Benito T. Sanchez, Nancy I. Velasco (Directors).
- Respondent Taiwan Machinery Display & Trade Center, Inc.: domestic corporation; Alfonso Chua, Alberto Chua, Judy C. Chua Hwang, Sophia Ong, Deanna Chua (Directors).
- Respondent Secretary of Justice.
Licensing Agreement
- May 1993: Microsoft and Beltron entered into a Licensing Agreement.
- Section 2(a) (as amended Jan. 1994): Beltron entitled to (i) reproduce/install one copy per Customer System and (ii) distribute/license reproduced or acquired copies in object-code form.
- Termination clause: either party may terminate for breach; Microsoft terminated effective 22 June 1995 for non-payment of royalties.
- Post-termination obligations: return unpaid copies, cease use of trademarks, accelerate unpaid commitments; certain support copies may be retained; specified provisions survive termination.
Undercover Purchase and Seizure
- Microsoft engaged Pinkerton Consulting Services (PCS) and NBI for investigation.
- 10 November 1995: PCS employee Sacriza and NBI agent Samiano posed as computer-shop reps; bought one CPU with pre-installed Windows 3.1 and MS-DOS and 12 CD-ROMs labeled with Microsoft packaging.
- Purchased items lacked end-user licenses, manuals, registration cards, certificates of authenticity.
- Receipts: CPU/monitor receipt bore heading “T.M.T.C. (PHILS.) INC. BELTRON COMPUTER”; CD-ROM receipt lacked source, showed name “Gerlie.”
- 17 November 1995: Microsoft obtained RTC searc