G.R. No. 168662 - Sanrio Co. Ltd. vs. Lim

Case Summary (G.R. No. 168662)

Factual Background

Sanrio Company Limited owned copyright in animated characters including Hello Kitty and others and distributed its products in the Philippines through its exclusive distributor, Gift Gate Incorporated (GGI). Due to widespread counterfeiting, GGI engaged IP Manila Associates (IPMA) to conduct market research and test-buys in 2001. IPMA agents reported that Orignamura Trading, the business of Edgar C. Lim, sold suspected imitations of petitioner’s products.

Search and Seizure

IPMA agents executed a joint affidavit dated May 29, 2000, which was forwarded to the National Bureau of Investigation. The NBI sought and obtained Search Warrant No. 00-1616 from the Executive Judge of the Regional Trial Court of Manila on May 30, 2000. NBI agents executed the warrant the same day and seized various Sanrio-branded merchandise from Orignamura Trading.

Filing with the DOJ and Charges

On April 4, 2002, Sanrio Company Limited, through its attorney-in-fact, filed a complaint-affidavit with the TAPP of the Department of Justice alleging violations of Sec. 217 of the Intellectual Property Code in relation to Secs. 177 and 178. Sec. 217.3 was relied upon for possession of infringing copies with the requisite knowledge or purpose to sell, distribute or exhibit for trade.

Respondent’s Defense and Documentary Evidence

Edgar C. Lim denied reproduction or manufacture of copyrighted items and asserted that he acted only as a retailer. He produced photocopies of official receipts from JC Lucas Creative Products, Inc., Paper Line Graphics, Inc., and Melawares Manufacturing Corporation to show that his purchases came from legitimate sources. He contended that reliance on representations of those suppliers negated the requisite knowledge of infringement.

TAPP Resolution

On September 25, 2002, the TAPP dismissed the complaint for insufficiency of evidence. The TAPP found that respondent purchased his merchandise from legitimate manufacturers and distributors, that some seized items were not among those expressly authorized for production by GGI, but that respondent reasonably relied on the representations of his suppliers and did not know nor ought to have known that the items were infringing copies.

Administrative Appeal to the Office of the Chief State Prosecutor

Petitioner moved for reconsideration before the Office of the Chief State Prosecutor. By resolution dated August 29, 2003, the Office affirmed the TAPP dismissal and denied the petition for lack of reversible error. Further motions for reconsideration were denied.

Petition to the Court of Appeals

Petitioner sought judicial review in the Court of Appeals. The CA dismissed the petition on the ground of prescription and, alternatively, upheld the DOJ’s dismissal on the merits. The CA relied on Act 3326 and concluded that because no criminal information was filed in court within two years of the alleged commission of the offense, the action had prescribed.

Court of Appeals’ Findings on Prescription and Merits

The CA interpreted Act 3326, Section 1 and Section 2, to mean that prescription starts from the day of the commission of the violation and is interrupted by institution of proceedings against the accused. The CA held that prescription had run because judicial proceedings were not instituted within the applicable prescriptive period. On the merits, the CA agreed that the elements of Sec. 217.3 require both possession of an infringing copy and knowledge or suspicion of its infringing character, and it found insufficient proof that respondent had the requisite knowledge.

Issues Presented to the Supreme Court

In its petition under Rule 45, petitioner alleged that the CA erred in finding prescription and in upholding the DOJ’s dismissal. Petitioner argued that the filing of the complaint with the TAPP interrupted and tolled prescription and that respondent remained criminally liable because he sold counterfeit goods even if he procured them from legitimate sources.

The Supreme Court’s Analysis on Prescription

The Court examined Act 3326, Section 2, which provides that prescription begins from the day of the commission of the violation and is interrupted when proceedings are instituted against the guilty person. The Court followed its prior decision in Brillantes v. Court of Appeals (G.R. Nos. 118757 & 121571, October 19, 2004) and concluded that the filing of a complaint for purposes of a preliminary investigation interrupts the running of prescription. Because Sanrio filed its complaint-affidavit with the TAPP on April 4, 2002, within the prescriptive period measured from the May 30, 2000 seizure, the Court held that the prescriptive period was tolled by the timely filing before the TAPP.

The Supreme Court’s Analysis on Prosecutorial Discretion and Probable Cause

The Court reiterated that a preliminary investigation is an inquiry to determine whether there is probable cause, as defined in Rule 112, Sec. 1, and that the public prosecutor has broad discretion to determine sufficiency of evidence to file an information or dismiss a complaint. Judicial interference is permitted only upon a clear showing of grave abuse of discretion, which requires arbitrary or capricious action amounting to evasion of a positive duty. The Court found that the prosecutors conducted a careful evaluation of the evidence, that they were in the best position to assess credibility and sufficiency, and that petitioner did not establish grave abuse of discretion.

Case Syllabus (G.R. No. 168662)

Parties and Procedural Posture

SANRIO COMPANY LIMITED is a Japanese corporation owning copyrights in animated characters and acting through its exclusive Philippine distributor Gift Gate Incorporated for local sales.
EDGAR C. LIM, doing business as Orignamura Trading, is the respondent alleged to have sold imitations of petitioner's copyrighted products in Tutuban Center, Manila.
Petitioner filed a complaint-affidavit docketed as IS No. 2002-205 with the Task-Force on Anti-Intellectual Property Piracy (TAPP) of the Department of Justice on April 4, 2002 through its attorney-in-fact Teodoro Y. Kalaw IV.
The TAPP and the Office of the Chief State Prosecutor dismissed the complaint for insufficiency of evidence and those dismissals were affirmed administratively, whereupon petitioner sought relief in the Court of Appeals and then in the Supreme Court by way of a petition for review on certiorari under Rule 45, Rules of Court.

Key Facts

Gift Gate Incorporated licensed local manufacturers JC Lucas Creative Products, Inc., Paper Line Graphics, Inc. and Melawares Manufacturing Corporation to produce certain Sanrio-branded products for the local market.
IP Manila Associates conducted market research and executed a joint affidavit on May 29, 2000 identifying Orignamura Trading as selling imitations of petitioner's products.
The NBI secured search warrant No. 00-1616 dated May 30, 2000 and seized various Sanrio products from respondent's premises.
Respondent produced receipts from JC Lucas and Melawares and relied on a certification by Ma. Angela S. Garcia that those establishments were authorized to produce certain Sanrio products.
The TAPP found that although some seized items were not among those expressly authorized, respondent purchased the items from legitimate sources and relied on the manufacturers' representations; therefore, the TAPP concluded respondent did not possess the requisite awareness that the items were infringing.

Statutory Framework

Section 217 of the Intellectual Property Code prescribes criminal penalties for infringement and for possession of infringing copies with knowledge or suspicion of their infringing character.
Sections 177 and 178 of the Intellectual Property Code define copy or economic rights and rules on copyright ownership, respectively.
Act 3326 prescribes the prescriptive periods for offenses penalized by special acts and provides that prescription is interrupted by institution of proceedings against the accused.
Rule 112, Sec. 1, Rules of Court defines preliminary investigation as an inquiry to determine whether there is sufficient ground to engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof.

Procedural History

NBI agents executed a search and seizure at respondent's premises on May 30, 2000 pursuant to a search warrant issued by the Executive Judge of the Regional Trial Court of Manila.
Petitioner filed a complaint-affidavit with TAPP on April 4, 2002, which the TAPP dismissed on September 25, 2002 for insufficiency of evidence.