G.R. No.

118295

May 2, 1997

WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the

Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as
members of the House of Representatives and as taxpayers; NICANOR P. PERLAS
and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL
ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE
DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC.,
PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG
MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in
representation of various taxpayers and as non-governmental organizations,
petitioners,
vs.
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON
ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO
HERRERA, JOSE LINA, GLORIA. MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS
OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO
TATAD and FREDDIE WEBB, in their respective capacities as members of the
Philippine Senate who concurred in the ratification by the President of the
Philippines of the Agreement Establishing the World Trade Organization; SALVADOR
ENRIQUEZ, in his capacity as Secretary of Budget and Management; CARIDAD
VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in his
capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as
Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of
Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and
TEOFISTO T. GUINGONA, in his capacity as Executive Secretary, respondents.

PANGANIBAN, J.:

The emergence on January 1, 1995 of the World Trade Organization, abetted by the
membership thereto of the vast majority of countries has revolutionized
international business and economic relations amongst states. It has irreversibly
propelled the world towards trade liberalization and economic globalization.
Liberalization, globalization, deregulation and privatization, the third-millennium
buzz words, are ushering in a new borderless world of business by sweeping away

as mere historical relics the heretofore traditional modes of promoting and

protecting national economies like tariffs, export subsidies, import quotas,
quantitative restrictions, tax exemptions and currency controls. Finding market
niches and becoming the best in specific industries in a market-driven and exportoriented global scenario are replacing age-old "beggar-thy-neighbor" policies that
unilaterally protect weak and inefficient domestic producers of goods and services.
In the words of Peter Drucker, the well-known management guru, "Increased
participation in the world economy has become the key to domestic economic
growth and prosperity."

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second World
War, plans for the establishment of three multilateral institutions inspired by that
grand political body, the United Nations were discussed at Dumbarton Oaks and
Bretton Woods. The first was the World Bank (WB) which was to address the
rehabilitation and reconstruction of war-ravaged and later developing countries; the
second, the International Monetary Fund (IMF) which was to deal with currency
problems; and the third, the International Trade Organization (ITO), which was to
foster order and predictability in world trade and to minimize unilateral protectionist
policies that invite challenge, even retaliation, from other states. However, for a
variety of reasons, including its non-ratification by the United States, the ITO, unlike
the IMF and WB, never took off. What remained was only GATT the General
Agreement on Tariffs and Trade. GATT was a collection of treaties governing access
to the economies of treaty adherents with no institutionalized body administering
the agreements or dependable system of dispute settlement.

After half a century and several dizzying rounds of negotiations, principally the
Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally gave
birth to that administering body the World Trade Organization with the signing
of the "Final Act" in Marrakesh, Morocco and the ratification of the WTO Agreement
by its members. 1

Like many other developing countries, the Philippines joined WTO as a founding
member with the goal, as articulated by President Fidel V. Ramos in two letters to
the Senate (infra), of improving "Philippine access to foreign markets, especially its
major trading partners, through the reduction of tariffs on its exports, particularly
agricultural and industrial products." The President also saw in the WTO the opening

of "new opportunities for the services sector . . . , (the reduction of) costs and
uncertainty associated with exporting . . . , and (the attraction of) more investments
into the country." Although the Chief Executive did not expressly mention it in his
letter, the Philippines and this is of special interest to the legal profession will
benefit from the WTO system of dispute settlement by judicial adjudication through
the independent WTO settlement bodies called (1) Dispute Settlement Panels and
(2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through
negotiations where solutions were arrived at frequently on the basis of relative
bargaining strengths, and where naturally, weak and underdeveloped countries
were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines "to place nationals and
products of member-countries on the same footing as Filipinos and local products"
and (2) that the WTO "intrudes, limits and/or impairs" the constitutional powers of
both Congress and the Supreme Court, the instant petition before this Court assails
the WTO Agreement for violating the mandate of the 1987 Constitution to "develop
a self-reliant and independent national economy effectively controlled by Filipinos . .
. (to) give preference to qualified Filipinos (and to) promote the preferential use of
Filipino labor, domestic materials and locally produced goods."

Simply stated, does the Philippine Constitution prohibit Philippine participation in

worldwide trade liberalization and economic globalization? Does it proscribe
Philippine integration into a global economy that is liberalized, deregulated and
privatized? These are the main questions raised in this petition for certiorari,
prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the
nullification, on constitutional grounds, of the concurrence of the Philippine Senate
in the ratification by the President of the Philippines of the Agreement Establishing
the World Trade Organization (WTO Agreement, for brevity) and (2) for the
prohibition of its implementation and enforcement through the release and
utilization of public funds, the assignment of public officials and employees, as well
as the use of government properties and resources by respondent-heads of various
executive offices concerned therewith. This concurrence is embodied in Senate
Resolution No. 97, dated December 14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department
of Trade and Industry (Secretary Navarro, for brevity), representing the Government
of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act
Embodying the Results of the Uruguay Round of Multilateral Negotiations (Final Act,
for brevity).

By signing the Final Act, 2 Secretary Navarro on behalf of the Republic of the
Philippines, agreed:

(a)
to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities, with a view to seeking approval of the Agreement
in accordance with their procedures; and

(b)

to adopt the Ministerial Declarations and Decisions.

On August 12, 1994, the members of the Philippine Senate received a letter dated
August 11, 1994 from the President of the Philippines, 3 stating among others that
"the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence
pursuant to Section 21, Article VII of the Constitution."

On August 13, 1994, the members of the Philippine Senate received another letter
from the President of the Philippines 4 likewise dated August 11, 1994, which stated
among others that "the Uruguay Round Final Act, the Agreement Establishing the
World Trade Organization, the Ministerial Declarations and Decisions, and the
Understanding on Commitments in Financial Services are hereby submitted to the
Senate for its concurrence pursuant to Section 21, Article VII of the Constitution."

On December 9, 1994, the President of the Philippines certified the necessity of the
immediate adoption of P.S. 1083, a resolution entitled "Concurring in the Ratification
of the Agreement Establishing the World Trade Organization." 5

On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which
"Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in
the ratification by the President of the Philippines of the Agreement Establishing the

World Trade Organization." 6 The text of the WTO Agreement is written on pages
137 et seq. of Volume I of the 36-volume Uruguay Round of Multilateral Trade
Negotiations and includes various agreements and associated legal instruments
(identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively
referred to as Multilateral Trade Agreements, for brevity) as follows:

ANNEX 1

Annex 1A:

Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994

Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of he
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating
Measures
Agreement on Safeguards

Annex 1B:

General Agreement on Trade in Services and Annexes

Annex 1C:

Agreement on Trade-Related Aspects of Intellectual

Property Rights

ANNEX 2

Understanding on Rules and Procedures Governing

the Settlement of Disputes

ANNEX 3

Trade Policy Review Mechanism

On December 16, 1994, the President of the Philippines signed 7 the Instrument of
Ratification, declaring:

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of

the Philippines, after having seen and considered the aforementioned Agreement
Establishing the World Trade Organization and the agreements and associated legal
instruments included in Annexes one (1), two (2) and three (3) of that Agreement
which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do
hereby ratify and confirm the same and every Article and Clause thereof.

To emphasize, the WTO Agreement ratified by the President of the Philippines is

composed of the Agreement Proper and "the associated legal instruments included
in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts
thereof."

On the other hand, the Final Act signed by Secretary Navarro embodies not only the
WTO Agreement (and its integral annexes aforementioned) but also (1) the
Ministerial Declarations and Decisions and (2) the Understanding on Commitments
in Financial Services. In his Memorandum dated May 13, 1996, 8 the Solicitor
General describes these two latter documents as follows:

The Ministerial Decisions and Declarations are twenty-five declarations and

decisions on a wide range of matters, such as measures in favor of least developed
countries, notification procedures, relationship of WTO with the International
Monetary Fund (IMF), and agreements on technical barriers to trade and on dispute
settlement.

The Understanding on Commitments in Financial Services dwell on, among other

things, standstill or limitations and qualifications of commitments to existing nonconforming measures, market access, national treatment, and definitions of nonresident supplier of financial services, commercial presence and new financial
service.

On December 29, 1994, the present petition was filed. After careful deliberation on
respondents' comment and petitioners' reply thereto, the Court resolved on
December 12, 1995, to give due course to the petition, and the parties thereafter
filed their respective memoranda. The court also requested the Honorable Lilia R.
Bautista, the Philippine Ambassador to the United Nations stationed in Geneva,
Switzerland, to submit a paper, hereafter referred to as "Bautista Paper," 9 for
brevity, (1) providing a historical background of and (2) summarizing the said
agreements.

During the Oral Argument held on August 27, 1996, the Court directed:

(a)
the petitioners to submit the (1) Senate Committee Report on the matter in
controversy and (2) the transcript of proceedings/hearings in the Senate; and

(b)
the Solicitor General, as counsel for respondents, to file (1) a list of Philippine
treaties signed prior to the Philippine adherence to the WTO Agreement, which
derogate from Philippine sovereignty and (2) copies of the multi-volume WTO
Agreement and other documents mentioned in the Final Act, as soon as possible.

After receipt of the foregoing documents, the Court said it would consider the case
submitted for resolution. In a Compliance dated September 16, 1996, the Solicitor
General submitted a printed copy of the 36-volume Uruguay Round of Multilateral
Trade Negotiations, and in another Compliance dated October 24, 1996, he listed
the various "bilateral or multilateral treaties or international instruments involving
derogation of Philippine sovereignty." Petitioners, on the other hand, submitted their
Compliance dated January 28, 1997, on January 30, 1997.

The Issues

In their Memorandum dated March 11, 1996, petitioners summarized the issues as
follows:

A.
Whether the petition presents a political question or is otherwise not
justiciable.

B.
Whether the petitioner members of the Senate who participated in the
deliberations and voting leading to the concurrence are estopped from impugning
the validity of the Agreement Establishing the World Trade Organization or of the
validity of the concurrence.

C.
Whether the provisions of the Agreement Establishing the World Trade
Organization contravene the provisions of Sec. 19, Article II, and Secs. 10 and 12,
Article XII, all of the 1987 Philippine Constitution.

D.
Whether provisions of the Agreement Establishing the World Trade
Organization unduly limit, restrict and impair Philippine sovereignty specifically the
legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is
"vested in the Congress of the Philippines";

E.
Whether provisions of the Agreement Establishing the World Trade
Organization interfere with the exercise of judicial power.

F.
Whether the respondent members of the Senate acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when they voted for
concurrence in the ratification of the constitutionally-infirm Agreement Establishing
the World Trade Organization.

G.
Whether the respondent members of the Senate acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when they concurred only in
the ratification of the Agreement Establishing the World Trade Organization, and not
with the Presidential submission which included the Final Act, Ministerial Declaration
and Decisions, and the Understanding on Commitments in Financial Services.

On the other hand, the Solicitor General as counsel for respondents "synthesized
the several issues raised by petitioners into the following": 10

1.
Whether or not the provisions of the "Agreement Establishing the World Trade
Organization and the Agreements and Associated Legal Instruments included in
Annexes one (1), two (2) and three (3) of that agreement" cited by petitioners
directly contravene or undermine the letter, spirit and intent of Section 19, Article II
and Sections 10 and 12, Article XII of the 1987 Constitution.

2.
Whether or not certain provisions of the Agreement unduly limit, restrict or
impair the exercise of legislative power by Congress.

3.
Whether or not certain provisions of the Agreement impair the exercise of
judicial power by this Honorable Court in promulgating the rules of evidence.

4.
Whether or not the concurrence of the Senate "in the ratification by the
President of the Philippines of the Agreement establishing the World Trade
Organization" implied rejection of the treaty embodied in the Final Act.

By raising and arguing only four issues against the seven presented by petitioners,
the Solicitor General has effectively ignored three, namely: (1) whether the petition
presents a political question or is otherwise not justiciable; (2) whether petitioner-

members of the Senate (Wigberto E. Taada and Anna Dominique Coseteng) are
estopped from joining this suit; and (3) whether the respondent-members of the
Senate acted in grave abuse of discretion when they voted for concurrence in the
ratification of the WTO Agreement. The foregoing notwithstanding, this Court
resolved to deal with these three issues thus:

(1)
The "political question" issue being very fundamental and vital, and being
a matter that probes into the very jurisdiction of this Court to hear and decide this
case was deliberated upon by the Court and will thus be ruled upon as the first
issue;

(2)
The matter of estoppel will not be taken up because this defense is waivable
and the respondents have effectively waived it by not pursuing it in any of their
pleadings; in any event, this issue, even if ruled in respondents' favor, will not cause
the petition's dismissal as there are petitioners other than the two senators, who are
not vulnerable to the defense of estoppel; and

(3)
The issue of alleged grave abuse of discretion on the part of the respondent
senators will be taken up as an integral part of the disposition of the four issues
raised by the Solicitor General.

During its deliberations on the case, the Court noted that the respondents did not
question the locus standi of petitioners. Hence, they are also deemed to have
waived the benefit of such issue. They probably realized that grave constitutional
issues, expenditures of public funds and serious international commitments of the
nation are involved here, and that transcendental public interest requires that the
substantive issues be met head on and decided on the merits, rather than skirted or
deflected by procedural matters. 11

To recapitulate, the issues that will be ruled upon shortly are:

(1)
DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE
STATED, DOES THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS
COURT HAS NO JURISDICTION?

(2)
DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES
CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE
PHILIPPINE CONSTITUTION?

(3)
DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT,
RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS?

(4)
DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF
JUDICIAL POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?

(5)
WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS
ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE
FINAL ACT, MINISTERIAL DECLARATIONS AND DECISIONS, AND THE
UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?

The First Issue:

Does the Court

Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it

contravenes the Constitution, the petition no doubt raises a justiciable controversy.
Where an action of the legislative branch is seriously alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute. "The question thus posed is judicial rather than political. The duty
(to adjudicate) remains to assure that the supremacy of the Constitution is upheld."
12 Once a "controversy as to the application or interpretation of a constitutional
provision is raised before this Court (as in the instant case), it becomes a legal issue
which the Court is bound by constitutional mandate to decide." 13

The jurisdiction of this Court to adjudicate the matters 14 raised in the petition is
clearly set out in the 1987 Constitution, 15 as follows:

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
government.

The foregoing text emphasizes the judicial department's duty and power to strike
down grave abuse of discretion on the part of any branch or instrumentality of
government including Congress. It is an innovation in our political law. 16 As
explained by former Chief Justice Roberto Concepcion, 17 "the judiciary is the final
arbiter on the question of whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction or so capriciously
as to constitute an abuse of discretion amounting to excess of jurisdiction. This is
not only a judicial power but a duty to pass judgment on matters of this nature."

As this Court has repeatedly and firmly emphasized in many cases, 18 it will not
shirk, digress from or abandon its sacred duty and authority to uphold the
Constitution in matters that involve grave abuse of discretion brought before it in
appropriate cases, committed by any officer, agency, instrumentality or department
of the government.

As the petition alleges grave abuse of discretion and as there is no other plain,
speedy or adequate remedy in the ordinary course of law, we have no hesitation at
all in holding that this petition should be given due course and the vital questions
raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari,
prohibition and mandamus are appropriate remedies to raise constitutional issues
and to review and/or prohibit/nullify, when proper, acts of legislative and executive
officials. On this, we have no equivocation.

We should stress that, in deciding to take jurisdiction over this petition, this Court
will not review the wisdom of the decision of the President and the Senate in
enlisting the country into the WTO, or pass upon the merits of trade liberalization as
a policy espoused by said international body. Neither will it rule on the propriety of
the government's economic policy of reducing/removing tariffs, taxes, subsidies,
quantitative restrictions, and other import/trade barriers. Rather, it will only exercise
its constitutional duty "to determine whether or not there had been a grave abuse
of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in
ratifying the WTO Agreement and its three annexes.

Second Issue:

The WTO Agreement

and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.

Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution
mandating "economic nationalism" are violated by the so-called "parity provisions"
and "national treatment" clauses scattered in various parts not only of the WTO
Agreement and its annexes but also in the Ministerial Decisions and Declarations
and in the Understanding on Commitments in Financial Services.

Specifically, the "flagship" constitutional provisions referred to are Sec 19, Article II,
and Secs. 10 and 12, Article XII, of the Constitution, which are worded as follows:

Article II

DECLARATION OF PRINCIPLES
AND STATE POLICIES

xxx

xxx

xxx

Sec. 19.
The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.

xxx

xxx

Article XII

xxx

NATIONAL ECONOMY AND PATRIMONY

xxx

xxx

xxx

Sec. 10.
. . . The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.

xxx

xxx

xxx

Sec. 12.
The State shall promote the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt measures that help make them
competitive.

Petitioners aver that these sacred constitutional principles are desecrated by the
following WTO provisions quoted in their memorandum: 19

a)
In the area of investment measures related to trade in goods (TRIMS, for
brevity):

Article 2

National Treatment and Quantitative Restrictions.

1.
Without prejudice to other rights and obligations under GATT 1994, no
Member shall apply any TRIM that is inconsistent with the provisions of Article II or
Article XI of GATT 1994.

2.
An illustrative list of TRIMS that are inconsistent with the obligations of
general elimination of quantitative restrictions provided for in paragraph I of Article
XI of GATT 1994 is contained in the Annex to this Agreement." (Agreement on TradeRelated Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p. 22121,
emphasis supplied).

The Annex referred to reads as follows:

ANNEX

Illustrative List

1.
TRIMS that are inconsistent with the obligation of national treatment provided
for in paragraph 4 of Article III of GATT 1994 include those which are mandatory or
enforceable under domestic law or under administrative rulings, or compliance with
which is necessary to obtain an advantage, and which require:

(a)
the purchase or use by an enterprise of products of domestic origin or from
any domestic source, whether specified in terms of particular products, in terms of
volume or value of products, or in terms of proportion of volume or value of its local
production; or

(b)
that an enterprise's purchases or use of imported products be limited to an
amount related to the volume or value of local products that it exports.

2.
TRIMS that are inconsistent with the obligations of general elimination of
quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994
include those which are mandatory or enforceable under domestic laws or under
administrative rulings, or compliance with which is necessary to obtain an
advantage, and which restrict:

(a)
the importation by an enterprise of products used in or related to the local
production that it exports;

(b)
the importation by an enterprise of products used in or related to its local
production by restricting its access to foreign exchange inflows attributable to the
enterprise; or

(c)
the exportation or sale for export specified in terms of particular products, in
terms of volume or value of products, or in terms of a preparation of volume or
value of its local production. (Annex to the Agreement on Trade-Related Investment
Measures, Vol. 27, Uruguay Round Legal Documents, p. 22125, emphasis supplied).

The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:

The products of the territory of any contracting party imported into the territory of
any other contracting party shall be accorded treatment no less favorable than that
accorded to like products of national origin in respect of laws, regulations and
requirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use, the provisions of this paragraph shall not prevent the application
of differential internal transportation charges which are based exclusively on the
economic operation of the means of transport and not on the nationality of the
product." (Article III, GATT 1947, as amended by the Protocol Modifying Part II, and
Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to paragraph
1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round,
Legal Instruments p. 177, emphasis supplied).

(b)
In the area of trade related aspects of intellectual property rights (TRIPS, for
brevity):

Each Member shall accord to the nationals of other Members treatment no less
favourable than that it accords to its own nationals with regard to the protection of
intellectual property. . . (par. 1 Article 3, Agreement on Trade-Related Aspect of
Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments, p. 25432
(emphasis supplied)

(c)

In the area of the General Agreement on Trade in Services:

National Treatment

1.
In the sectors inscribed in its schedule, and subject to any conditions and
qualifications set out therein, each Member shall accord to services and service
suppliers of any other Member, in respect of all measures affecting the supply of
services, treatment no less favourable than it accords to its own like services and
service suppliers.

2.
A Member may meet the requirement of paragraph I by according to services
and service suppliers of any other Member, either formally suppliers of any other
Member, either formally identical treatment or formally different treatment to that it
accords to its own like services and service suppliers.

3.
Formally identical or formally different treatment shall be considered to be
less favourable if it modifies the conditions of completion in favour of services or
service suppliers of the Member compared to like services or service suppliers of
any other Member. (Article XVII, General Agreement on Trade in Services, Vol. 28,
Uruguay Round Legal Instruments, p. 22610 emphasis supplied).

It is petitioners' position that the foregoing "national treatment" and "parity

provisions" of the WTO Agreement "place nationals and products of member
countries on the same footing as Filipinos and local products," in contravention of
the "Filipino First" policy of the Constitution. They allegedly render meaningless the
phrase "effectively controlled by Filipinos." The constitutional conflict becomes more
manifest when viewed in the context of the clear duty imposed on the Philippines as
a WTO member to ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed agreements. 20
Petitioners further argue that these provisions contravene constitutional limitations
on the role exports play in national development and negate the preferential
treatment accorded to Filipino labor, domestic materials and locally produced
goods.

On the other hand, respondents through the Solicitor General counter (1) that such
Charter provisions are not self-executing and merely set out general policies; (2)

that these nationalistic portions of the Constitution invoked by petitioners should

not be read in isolation but should be related to other relevant provisions of Art. XII,
particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do
not conflict with Constitution; and (4) that the WTO Agreement contains sufficient
provisions to protect developing countries like the Philippines from the harshness of
sudden trade liberalization.

We shall now discuss and rule on these arguments.

Declaration of Principles
Not Self-Executing

By its very title, Article II of the Constitution is a "declaration of principles and state
policies." The counterpart of this article in the 1935 Constitution 21 is called the
"basic political creed of the nation" by Dean Vicente Sinco. 22 These principles in
Article II are not intended to be self-executing principles ready for enforcement
through the courts. 23 They are used by the judiciary as aids or as guides in the
exercise of its power of judicial review, and by the legislature in its enactment of
laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato, 24 the
principles and state policies enumerated in Article II and some sections of Article XII
are not "self-executing provisions, the disregard of which can give rise to a cause of
action in the courts. They do not embody judicially enforceable constitutional rights
but guidelines for legislation."

In the same light, we held in Basco vs. Pagcor 25 that broad constitutional principles
need legislative enactments to implement the, thus:

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12

(Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII
and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it
to state also that these are merely statements of principles and policies. As such,
they are basically not self-executing, meaning a law should be passed by Congress
to clearly define and effectuate such principles.

In general, therefore, the 1935 provisions were not intended to be self-executing

principles ready for enforcement through the courts. They were rather directives
addressed to the executive and to the legislature. If the executive and the
legislature failed to heed the directives of the article, the available remedy was not
judicial but political. The electorate could express their displeasure with the failure
of the executive and the legislature through the language of the ballot. (Bernas, Vol.
II, p. 2).

The reasons for denying a cause of action to an alleged infringement of board

constitutional principles are sourced from basic considerations of due process and
the lack of judicial authority to wade "into the uncharted ocean of social and
economic policy making." Mr. Justice Florentino P. Feliciano in his concurring opinion
in Oposa vs. Factoran, Jr., 26 explained these reasons as follows:

My suggestion is simply that petitioners must, before the trial court, show a more
specific legal right a right cast in language of a significantly lower order of
generality than Article II (15) of the Constitution that is or may be violated by the
actions, or failures to act, imputed to the public respondent by petitioners so that
the trial court can validly render judgment grating all or part of the relief prayed for.
To my mind, the court should be understood as simply saying that such a more
specific legal right or rights may well exist in our corpus of law, considering the
general policy principles found in the Constitution and the existence of the
Philippine Environment Code, and that the trial court should have given petitioners
an effective opportunity so to demonstrate, instead of aborting the proceedings on
a motion to dismiss.

It seems to me important that the legal right which is an essential component of a

cause of action be a specific, operable legal right, rather than a constitutional or
statutory policy, for at least two (2) reasons. One is that unless the legal right
claimed to have been violated or disregarded is given specification in operational
terms, defendants may well be unable to defend themselves intelligently and
effectively; in other words, there are due process dimensions to this matter.

The second is a broader-gauge consideration where a specific violation of law or

applicable regulation is not alleged or proved, petitioners can be expected to fall
back on the expanded conception of judicial power in the second paragraph of
Section 1 of Article VIII of the Constitution which reads:

Sec. 1.

...

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Emphasis supplied)

When substantive standards as general as "the right to a balanced and healthy

ecology" and "the right to health" are combined with remedial standards as broad
ranging as "a grave abuse of discretion amounting to lack or excess of jurisdiction,"
the result will be, it is respectfully submitted, to propel courts into the uncharted
ocean of social and economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim to special
technical competence and experience and professional qualification. Where no
specific, operable norms and standards are shown to exist, then the policy making
departments the legislative and executive departments must be given a real
and effective opportunity to fashion and promulgate those norms and standards,
and to implement them before the courts should intervene.

Economic Nationalism Should Be Read with

Other Constitutional Mandates to Attain
Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down
general principles relating to the national economy and patrimony, should be read
and understood in relation to the other sections in said article, especially Secs. 1
and 13 thereof which read:

Sec. 1.
The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all especially the
underprivileged.

The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. . . .

xxx

xxx

xxx

Sec. 13.
The State shall pursue a trade policy that serves the general welfare
and utilizes all forms and arrangements of exchange on the basis of equality and
reciprocity.

As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national
economic development, as follows:

1.

A more equitable distribution of opportunities, income and wealth;

2.
A sustained increase in the amount of goods and services provided by the
nation for the benefit of the people; and

3.
An expanding productivity as the key to raising the quality of life for all
especially the underprivileged.

With these goals in context, the Constitution then ordains the ideals of economic
nationalism (1) by expressing preference in favor of qualified Filipinos "in the grant
of rights, privileges and concessions covering the national economy and patrimony"
27 and in the use of "Filipino labor, domestic materials and locally-produced goods";
(2) by mandating the State to "adopt measures that help make them competitive;

28 and (3) by requiring the State to "develop a self-reliant and independent national
economy effectively controlled by Filipinos." 29 In similar language, the Constitution
takes into account the realities of the outside world as it requires the pursuit of "a
trade policy that serves the general welfare and utilizes all forms and arrangements
of exchange on the basis of equality ad reciprocity"; 30 and speaks of industries
"which are competitive in both domestic and foreign markets" as well as of the
protection of "Filipino enterprises against unfair foreign competition and trade
practices."

It is true that in the recent case of Manila Prince Hotel vs. Government Service
Insurance System, et al., 31 this Court held that "Sec. 10, second par., Art. XII of the
1987 Constitution is a mandatory, positive command which is complete in itself and
which needs no further guidelines or implementing laws or rule for its enforcement.
From its very words the provision does not require any legislation to put it in
operation. It is per se judicially enforceable." However, as the constitutional
provision itself states, it is enforceable only in regard to "the grants of rights,
privileges and concessions covering national economy and patrimony" and not to
every aspect of trade and commerce. It refers to exceptions rather than the rule.
The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-executing
or not. Rather, the issue is whether, as a rule, there are enough balancing provisions
in the Constitution to allow the Senate to ratify the Philippine concurrence in the
WTO Agreement. And we hold that there are.

All told, while the Constitution indeed mandates a bias in favor of Filipino goods,
services, labor and enterprises, at the same time, it recognizes the need for
business exchange with the rest of the world on the bases of equality and
reciprocity and limits protection of Filipino enterprises only against foreign
competition and trade practices that are unfair. 32 In other words, the Constitution
did not intend to pursue an isolationist policy. It did not shut out foreign
investments, goods and services in the development of the Philippine economy.
While the Constitution does not encourage the unlimited entry of foreign goods,
services and investments into the country, it does not prohibit them either. In fact, it
allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair.

WTO Recognizes Need to

Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in
advantages to protect weak and developing economies, which comprise the vast
majority of its members. Unlike in the UN where major states have permanent seats
and veto powers in the Security Council, in the WTO, decisions are made on the
basis of sovereign equality, with each member's vote equal in weight to that of any
other. There is no WTO equivalent of the UN Security Council.

WTO decides by consensus whenever possible, otherwise, decisions of the

Ministerial Conference and the General Council shall be taken by the majority of the
votes cast, except in cases of interpretation of the Agreement or waiver of the
obligation of a member which would require three fourths vote. Amendments would
require two thirds vote in general. Amendments to MFN provisions and the
Amendments provision will require assent of all members. Any member may
withdraw from the Agreement upon the expiration of six months from the date of
notice of withdrawals. 33

Hence, poor countries can protect their common interests more effectively through
the WTO than through one-on-one negotiations with developed countries. Within the
WTO, developing countries can form powerful blocs to push their economic agenda
more decisively than outside the Organization. This is not merely a matter of
practical alliances but a negotiating strategy rooted in law. Thus, the basic
principles underlying the WTO Agreement recognize the need of developing
countries like the Philippines to "share in the growth in international trade
commensurate with the needs of their economic development." These basic
principles are found in the preamble 34 of the WTO Agreement as follows:

The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic endeavour should
be conducted with a view to raising standards of living, ensuring full employment
and a large and steadily growing volume of real income and effective demand, and
expanding the production of and trade in goods and services, while allowing for the
optimal use of the world's resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to
enhance the means for doing so in a manner consistent with their respective needs
and concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to ensure that
developing countries, and especially the least developed among them, secure a
share in the growth in international trade commensurate with the needs of their
economic development,

Being desirous of contributing to these objectives by entering into reciprocal and

mutually advantageous arrangements directed to the substantial reduction of tariffs
and other barriers to trade and to the elimination of discriminatory treatment in
international trade relations,

Resolved, therefore, to develop an integrated, more viable and durable multilateral

trading system encompassing the General Agreement on Tariffs and Trade, the
results of past trade liberalization efforts, and all of the results of the Uruguay
Round of Multilateral Trade Negotiations,

Determined to preserve the basic principles and to further the objectives underlying
this multilateral trading system, . . . (emphasis supplied.)

Specific WTO Provisos

Protect Developing Countries

So too, the Solicitor General points out that pursuant to and consistent with the
foregoing basic principles, the WTO Agreement grants developing countries a more
lenient treatment, giving their domestic industries some protection from the rush of
foreign competition. Thus, with respect to tariffs in general, preferential treatment is
given to developing countries in terms of the amount of tariff reduction and the
period within which the reduction is to be spread out. Specifically, GATT requires an
average tariff reduction rate of 36% for developed countries to be effected within a
period of six (6) years while developing countries including the Philippines are
required to effect an average tariff reduction of only 24% within ten (10) years.

In respect to domestic subsidy, GATT requires developed countries to reduce

domestic support to agricultural products by 20% over six (6) years, as compared to
only 13% for developing countries to be effected within ten (10) years.

In regard to export subsidy for agricultural products, GATT requires developed

countries to reduce their budgetary outlays for export subsidy by 36% and export
volumes receiving export subsidy by 21% within a period of six (6) years. For
developing countries, however, the reduction rate is only two-thirds of that
prescribed for developed countries and a longer period of ten (10) years within
which to effect such reduction.

Moreover, GATT itself has provided built-in protection from unfair foreign
competition and trade practices including anti-dumping measures, countervailing
measures and safeguards against import surges. Where local businesses are
jeopardized by unfair foreign competition, the Philippines can avail of these
measures. There is hardly therefore any basis for the statement that under the
WTO, local industries and enterprises will all be wiped out and that Filipinos will be
deprived of control of the economy. Quite the contrary, the weaker situations of
developing nations like the Philippines have been taken into account; thus, there
would be no basis to say that in joining the WTO, the respondents have gravely
abused their discretion. True, they have made a bold decision to steer the ship of
state into the yet uncharted sea of economic liberalization. But such decision cannot
be set aside on the ground of grave abuse of discretion, simply because we
disagree with it or simply because we believe only in other economic policies. As
earlier stated, the Court in taking jurisdiction of this case will not pass upon the
advantages and disadvantages of trade liberalization as an economic policy. It will
only perform its constitutional duty of determining whether the Senate committed
grave abuse of discretion.

Constitution Does Not

Rule Out Foreign Competition

Furthermore, the constitutional policy of a "self-reliant and independent national

economy" 35 does not necessarily rule out the entry of foreign investments, goods
and services. It contemplates neither "economic seclusion" nor "mendicancy in the
international community." As explained by Constitutional Commissioner Bernardo
Villegas, sponsor of this constitutional policy:

Economic self-reliance is a primary objective of a developing country that is keenly

aware of overdependence on external assistance for even its most basic needs. It

does not mean autarky or economic seclusion; rather, it means avoiding

mendicancy in the international community. Independence refers to the freedom
from undue foreign control of the national economy, especially in such strategic
industries as in the development of natural resources and public utilities. 36

The WTO reliance on "most favored nation," "national treatment," and "trade
without discrimination" cannot be struck down as unconstitutional as in fact they
are rules of equality and reciprocity that apply to all WTO members. Aside from
envisioning a trade policy based on "equality and reciprocity," 37 the fundamental
law encourages industries that are "competitive in both domestic and foreign
markets," thereby demonstrating a clear policy against a sheltered domestic trade
environment, but one in favor of the gradual development of robust industries that
can compete with the best in the foreign markets. Indeed, Filipino managers and
Filipino enterprises have shown capability and tenacity to compete internationally.
And given a free trade environment, Filipino entrepreneurs and managers in
Hongkong have demonstrated the Filipino capacity to grow and to prosper against
the best offered under a policy of laissez faire.

Constitution Favors Consumers,

Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any business
or enterprise, nor does it contain any specific pronouncement that Filipino
companies should be pampered with a total proscription of foreign competition. On
the other hand, respondents claim that WTO/GATT aims to make available to the
Filipino consumer the best goods and services obtainable anywhere in the world at
the most reasonable prices. Consequently, the question boils down to whether
WTO/GATT will favor the general welfare of the public at large.

Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to
reality?

Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will
as promised by its promoters expand the country's exports and generate more
employment?

Will it bring more prosperity, employment, purchasing power and quality products at
the most reasonable rates to the Filipino public?

The responses to these questions involve "judgment calls" by our policy makers, for
which they are answerable to our people during appropriate electoral exercises.
Such questions and the answers thereto are not subject to judicial pronouncements
based on grave abuse of discretion.

Constitution Designed to Meet

Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the Constitution was
drafted and ratified in 1987. That does not mean however that the Charter is
necessarily flawed in the sense that its framers might not have anticipated the
advent of a borderless world of business. By the same token, the United Nations
was not yet in existence when the 1935 Constitution became effective. Did that
necessarily mean that the then Constitution might not have contemplated a
diminution of the absoluteness of sovereignty when the Philippines signed the UN
Charter, thereby effectively surrendering part of its control over its foreign relations
to the decisions of various UN organs like the Security Council?

It is not difficult to answer this question. Constitutions are designed to meet not only
the vagaries of contemporary events. They should be interpreted to cover even
future and unknown circumstances. It is to the credit of its drafters that a
Constitution can withstand the assaults of bigots and infidels but at the same time
bend with the refreshing winds of change necessitated by unfolding events. As one
eminent political law writer and respected jurist 38 explains:

The Constitution must be quintessential rather than superficial, the root and not the
blossom, the base and frame-work only of the edifice that is yet to rise. It is but the
core of the dream that must take shape, not in a twinkling by mandate of our
delegates, but slowly "in the crucible of Filipino minds and hearts," where it will in
time develop its sinews and gradually gather its strength and finally achieve its
substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown
from the brow of the Constitutional Convention, nor can it conjure by mere fiat an
instant Utopia. It must grow with the society it seeks to re-structure and march

apace with the progress of the race, drawing from the vicissitudes of history the
dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing,
living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that "(e)ach Member shall ensure the conformity of
its laws, regulations and administrative procedures with its obligations as provided
in the annexed Agreements." 39 Petitioners maintain that this undertaking "unduly
limits, restricts and impairs Philippine sovereignty, specifically the legislative power
which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in the
Congress of the Philippines. It is an assault on the sovereign powers of the
Philippines because this means that Congress could not pass legislation that will be
good for our national interest and general welfare if such legislation will not conform
with the WTO Agreement, which not only relates to the trade in goods . . . but also
to the flow of investments and money . . . as well as to a whole slew of agreements
on socio-cultural matters . . . 40

More specifically, petitioners claim that said WTO proviso derogates from the power
to tax, which is lodged in the Congress. 41 And while the Constitution allows
Congress to authorize the President to fix tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts, such authority is subject
to "specified limits and . . . such limitations and restrictions" as Congress may
provide, 42 as in fact it did under Sec. 401 of the Tariff and Customs Code.

Sovereignty Limited by
International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners
stressed their arguments on this issue. However, while sovereignty has traditionally
been deemed absolute and all-encompassing on the domestic level, it is however
subject to restrictions and limitations voluntarily agreed to by the Philippines,
expressly or impliedly, as a member of the family of nations. Unquestionably, the
Constitution did not envision a hermit-type isolation of the country from the rest of
the world. In its Declaration of Principles and State Policies, the Constitution "adopts
the generally accepted principles of international law as part of the law of the land,

and adheres to the policy of peace, equality, justice, freedom, cooperation and
amity, with all nations." 43 By the doctrine of incorporation, the country is bound by
generally accepted principles of international law, which are considered to be
automatically part of our own laws. 44 One of the oldest and most fundamental
rules in international law is pacta sunt servanda international agreements must
be performed in good faith. "A treaty engagement is not a mere moral obligation
but creates a legally binding obligation on the parties . . . A state which has
contracted valid international obligations is bound to make in its legislations such
modifications as may be necessary to ensure the fulfillment of the obligations
undertaken." 45

By their inherent nature, treaties really limit or restrict the absoluteness of

sovereignty. By their voluntary act, nations may surrender some aspects of their
state power in exchange for greater benefits granted by or derived from a
convention or pact. After all, states, like individuals, live with coequals, and in
pursuit of mutually covenanted objectives and benefits, they also commonly agree
to limit the exercise of their otherwise absolute rights. Thus, treaties have been
used to record agreements between States concerning such widely diverse matters
as, for example, the lease of naval bases, the sale or cession of territory, the
termination of war, the regulation of conduct of hostilities, the formation of
alliances, the regulation of commercial relations, the settling of claims, the laying
down of rules governing conduct in peace and the establishment of international
organizations. 46 The sovereignty of a state therefore cannot in fact and in reality
be considered absolute. Certain restrictions enter into the picture: (1) limitations
imposed by the very nature of membership in the family of nations and (2)
limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, "Today,
no nation can build its destiny alone. The age of self-sufficient nationalism is over.
The age of interdependence is here." 47

UN Charter and Other Treaties

Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter
members, it consented to restrict its sovereign rights under the "concept of
sovereignty as auto-limitation." 47-A Under Article 2 of the UN Charter, "(a)ll
members shall give the United Nations every assistance in any action it takes in
accordance with the present Charter, and shall refrain from giving assistance to any
state against which the United Nations is taking preventive or enforcement action."
Such assistance includes payment of its corresponding share not merely in

administrative expenses but also in expenditures for the peace-keeping operations

of the organization. In its advisory opinion of July 20, 1961, the International Court
of Justice held that money used by the United Nations Emergency Force in the
Middle East and in the Congo were "expenses of the United Nations" under Article
17, paragraph 2, of the UN Charter. Hence, all its members must bear their
corresponding share in such expenses. In this sense, the Philippine Congress is
restricted in its power to appropriate. It is compelled to appropriate funds whether it
agrees with such peace-keeping expenses or not. So too, under Article 105 of the
said Charter, the UN and its representatives enjoy diplomatic privileges and
immunities, thereby limiting again the exercise of sovereignty of members within
their own territory. Another example: although "sovereign equality" and "domestic
jurisdiction" of all members are set forth as underlying principles in the UN Charter,
such provisos are however subject to enforcement measures decided by the
Security Council for the maintenance of international peace and security under
Chapter VII of the Charter. A final example: under Article 103, "(i)n the event of a
conflict between the obligations of the Members of the United Nations under the
present Charter and their obligations under any other international agreement, their
obligation under the present charter shall prevail," thus unquestionably denying the
Philippines as a member the sovereign power to make a choice as to which of
conflicting obligations, if any, to honor.

Apart from the UN Treaty, the Philippines has entered into many other international
pacts both bilateral and multilateral that involve limitations on Philippine
sovereignty. These are enumerated by the Solicitor General in his Compliance dated
October 24, 1996, as follows:

(a)
Bilateral convention with the United States regarding taxes on income, where
the Philippines agreed, among others, to exempt from tax, income received in the
Philippines by, among others, the Federal Reserve Bank of the United States, the
Export/Import Bank of the United States, the Overseas Private Investment
Corporation of the United States. Likewise, in said convention, wages, salaries and
similar remunerations paid by the United States to its citizens for labor and personal
services performed by them as employees or officials of the United States are
exempt from income tax by the Philippines.

(b)
Bilateral agreement with Belgium, providing, among others, for the avoidance
of double taxation with respect to taxes on income.

(c)
Bilateral convention with the Kingdom of Sweden for the avoidance of double
taxation.

(d)
Bilateral convention with the French Republic for the avoidance of double
taxation.

(e)
Bilateral air transport agreement with Korea where the Philippines agreed to
exempt from all customs duties, inspection fees and other duties or taxes aircrafts
of South Korea and the regular equipment, spare parts and supplies arriving with
said aircrafts.

(f)
Bilateral air service agreement with Japan, where the Philippines agreed to
exempt from customs duties, excise taxes, inspection fees and other similar duties,
taxes or charges fuel, lubricating oils, spare parts, regular equipment, stores on
board Japanese aircrafts while on Philippine soil.

(g)
Bilateral air service agreement with Belgium where the Philippines granted
Belgian air carriers the same privileges as those granted to Japanese and Korean air
carriers under separate air service agreements.

(h)
Bilateral notes with Israel for the abolition of transit and visitor visas where
the Philippines exempted Israeli nationals from the requirement of obtaining transit
or visitor visas for a sojourn in the Philippines not exceeding 59 days.

(i)
Bilateral agreement with France exempting French nationals from the
requirement of obtaining transit and visitor visa for a sojourn not exceeding 59
days.

(j)
Multilateral Convention on Special Missions, where the Philippines agreed that
premises of Special Missions in the Philippines are inviolable and its agents can not
enter said premises without consent of the Head of Mission concerned. Special
Missions are also exempted from customs duties, taxes and related charges.

(k)
Multilateral convention on the Law of Treaties. In this convention, the
Philippines agreed to be governed by the Vienna Convention on the Law of Treaties.

(l)
Declaration of the President of the Philippines accepting compulsory
jurisdiction of the International Court of Justice. The International Court of Justice
has jurisdiction in all legal disputes concerning the interpretation of a treaty, any
question of international law, the existence of any fact which, if established, would
constitute a breach "of international obligation."

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise
of its sovereign powers of taxation, eminent domain and police power. The
underlying consideration in this partial surrender of sovereignty is the reciprocal
commitment of the other contracting states in granting the same privilege and
immunities to the Philippines, its officials and its citizens. The same reciprocity
characterizes the Philippine commitments under WTO-GATT.

International treaties, whether relating to nuclear disarmament, human rights, the

environment, the law of the sea, or trade, constrain domestic political sovereignty
through the assumption of external obligations. But unless anarchy in international
relations is preferred as an alternative, in most cases we accept that the benefits of
the reciprocal obligations involved outweigh the costs associated with any loss of
political sovereignty. (T)rade treaties that structure relations by reference to
durable, well-defined substantive norms and objective dispute resolution procedures
reduce the risks of larger countries exploiting raw economic power to bully smaller
countries, by subjecting power relations to some form of legal ordering. In addition,
smaller countries typically stand to gain disproportionately from trade liberalization.
This is due to the simple fact that liberalization will provide access to a larger set of
potential new trading relationship than in case of the larger country gaining
enhanced success to the smaller country's market. 48

The point is that, as shown by the foregoing treaties, a portion of sovereignty may
be waived without violating the Constitution, based on the rationale that the
Philippines "adopts the generally accepted principles of international law as part of
the law of the land and adheres to the policy of . . . cooperation and amity with all
nations."

Fourth Issue:The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic
Principles of the Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS) 49 intrudes on the power of the Supreme Court to promulgate rules
concerning pleading, practice and procedures. 50

To understand the scope and meaning of Article 34, TRIPS, 51 it will be fruitful to
restate its full text as follows:

Article 34

Process Patents:

Burden of Proof

1.
For the purposes of civil proceedings in respect of the infringement of the
rights of the owner referred to in paragraph 1 (b) of Article 28, if the subject matter
of a patent is a process for obtaining a product, the judicial authorities shall have
the authority to order the defendant to prove that the process to obtain an identical
product is different from the patented process. Therefore, Members shall provide, in
at least one of the following circumstances, that any identical product when
produced without the consent of the patent owner shall, in the absence of proof to
the contrary, be deemed to have been obtained by the patented process:

(a)

if the product obtained by the patented process is new;

(b)
if there is a substantial likelihood that the identical product was made by the
process and the owner of the patent has been unable through reasonable efforts to
determine the process actually used.

2.
Any Member shall be free to provide that the burden of proof indicated in
paragraph 1 shall be on the alleged infringer only if the condition referred to in
subparagraph (a) is fulfilled or only if the condition referred to in subparagraph (b) is
fulfilled.

3.
In the adduction of proof to the contrary, the legitimate interests of
defendants in protecting their manufacturing and business secrets shall be taken
into account.

From the above, a WTO Member is required to provide a rule of disputable (not the
words "in the absence of proof to the contrary") presumption that a product shown
to be identical to one produced with the use of a patented process shall be deemed
to have been obtained by the (illegal) use of the said patented process, (1) where
such product obtained by the patented product is new, or (2) where there is
"substantial likelihood" that the identical product was made with the use of the said
patented process but the owner of the patent could not determine the exact process
used in obtaining such identical product. Hence, the "burden of proof" contemplated
by Article 34 should actually be understood as the duty of the alleged patent
infringer to overthrow such presumption. Such burden, properly understood,
actually refers to the "burden of evidence" (burden of going forward) placed on the
producer of the identical (or fake) product to show that his product was produced
without the use of the patented process.

The foregoing notwithstanding, the patent owner still has the "burden of proof"
since, regardless of the presumption provided under paragraph 1 of Article 34, such
owner still has to introduce evidence of the existence of the alleged identical
product, the fact that it is "identical" to the genuine one produced by the patented
process and the fact of "newness" of the genuine product or the fact of "substantial
likelihood" that the identical product was made by the patented process.

The foregoing should really present no problem in changing the rules of evidence as
the present law on the subject, Republic Act No. 165, as amended, otherwise known
as the Patent Law, provides a similar presumption in cases of infringement of
patented design or utility model, thus:

Sec. 60.
Infringement. Infringement of a design patent or of a patent for
utility model shall consist in unauthorized copying of the patented design or utility
model for the purpose of trade or industry in the article or product and in the
making, using or selling of the article or product copying the patented design or
utility model. Identity or substantial identity with the patented design or utility
model shall constitute evidence of copying. (emphasis supplied)

Moreover, it should be noted that the requirement of Article 34 to provide a

disputable presumption applies only if (1) the product obtained by the patented
process in NEW or (2) there is a substantial likelihood that the identical product was
made by the process and the process owner has not been able through reasonable
effort to determine the process used. Where either of these two provisos does not
obtain, members shall be free to determine the appropriate method of
implementing the provisions of TRIPS within their own internal systems and
processes.

By and large, the arguments adduced in connection with our disposition of the third
issue derogation of legislative power will apply to this fourth issue also. Suffice
it to say that the reciprocity clause more than justifies such intrusion, if any actually
exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it
is with due process and the concept of adversarial dispute settlement inherent in
our judicial system.

So too, since the Philippine is a signatory to most international conventions on

patents, trademarks and copyrights, the adjustment in legislation and rules of
procedure will not be substantial. 52

Fifth Issue:

Concurrence Only in the WTO Agreement and

Not in Other Documents Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its
annexes but not in the other documents referred to in the Final Act, namely the
Ministerial Declaration and Decisions and the Understanding on Commitments in
Financial Services is defective and insufficient and thus constitutes abuse of
discretion. They submit that such concurrence in the WTO Agreement alone is
flawed because it is in effect a rejection of the Final Act, which in turn was the
document signed by Secretary Navarro, in representation of the Republic upon
authority of the President. They contend that the second letter of the President to
the Senate 53 which enumerated what constitutes the Final Act should have been
the subject of concurrence of the Senate.

"A final act, sometimes called protocol de cloture, is an instrument which records
the winding up of the proceedings of a diplomatic conference and usually includes a

reproduction of the texts of treaties, conventions, recommendations and other acts

agreed upon and signed by the plenipotentiaries attending the conference." 54 It is
not the treaty itself. It is rather a summary of the proceedings of a protracted
conference which may have taken place over several years. The text of the "Final
Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations"
is contained in just one page 55 in Vol. I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as
representative of the Republic of the Philippines undertook:

(a)
to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities with a view to seeking approval of the Agreement
in accordance with their procedures; and

(b)

to adopt the Ministerial Declarations and Decisions.

The assailed Senate Resolution No. 97 expressed concurrence in exactly what the
Final Act required from its signatories, namely, concurrence of the Senate in the
WTO Agreement.

The Ministerial Declarations and Decisions were deemed adopted without need for
ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT
which provides that representatives of the members can meet "to give effect to
those provisions of this Agreement which invoke joint action, and generally with a
view to facilitating the operation and furthering the objectives of this Agreement."
56

The Understanding on Commitments in Financial Services also approved in

Marrakesh does not apply to the Philippines. It applies only to those 27 Members
which "have indicated in their respective schedules of commitments on standstill,
elimination of monopoly, expansion of operation of existing financial service
suppliers, temporary entry of personnel, free transfer and processing of information,
and national treatment with respect to access to payment, clearing systems and
refinancing available in the normal course of business." 57

On the other hand, the WTO Agreement itself expresses what multilateral
agreements are deemed included as its integral parts, 58 as follows:

Article II

Scope of the WTO

1.
The WTO shall provide the common institutional frame-work for the conduct
of trade relations among its Members in matters to the agreements and associated
legal instruments included in the Annexes to this Agreement.

2.
The Agreements and associated legal instruments included in Annexes 1, 2,
and 3, (hereinafter referred to as "Multilateral Agreements") are integral parts of
this Agreement, binding on all Members.

3.
The Agreements and associated legal instruments included in Annex 4
(hereinafter referred to as "Plurilateral Trade Agreements") are also part of this
Agreement for those Members that have accepted them, and are binding on those
Members. The Plurilateral Trade Agreements do not create either obligation or rights
for Members that have not accepted them.

4.
The General Agreement on Tariffs and Trade 1994 as specified in annex 1A
(hereinafter referred to as "GATT 1994") is legally distinct from the General
Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act
adopted at the conclusion of the Second Session of the Preparatory Committee of
the United Nations Conference on Trade and Employment, as subsequently rectified,
amended or modified (hereinafter referred to as "GATT 1947").

It should be added that the Senate was well-aware of what it was concurring in as
shown by the members' deliberation on August 25, 1994. After reading the letter of
President Ramos dated August 11, 1994, 59 the senators
of the Republic minutely dissected what the Senate was concurring in, as follows: 60

THE CHAIRMAN:
Yes. Now, the question of the validity of the submission came up
in the first day hearing of this Committee yesterday. Was the observation made by

Senator Taada that what was submitted to the Senate was not the agreement on
establishing the World Trade Organization by the final act of the Uruguay Round
which is not the same as the agreement establishing the World Trade Organization?
And on that basis, Senator Tolentino raised a point of order which, however, he
agreed to withdraw upon understanding that his suggestion for an alternative
solution at that time was acceptable. That suggestion was to treat the proceedings
of the Committee as being in the nature of briefings for Senators until the question
of the submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a new . . . is he

making a new submission which improves on the clarity of the first submission?

MR. ROMULO:
Mr. Chairman, to make sure that it is clear cut and there should
be no misunderstanding, it was his intention to clarify all matters by giving this
letter.

THE CHAIRMAN:

Thank you.

Can this Committee hear from Senator Taada and later on Senator Tolentino since
they were the ones that raised this question yesterday?

Senator Taada, please.

SEN. TAADA:

Thank you, Mr. Chairman.

Based on what Secretary Romulo has read, it would now clearly appear that what is
being submitted to the Senate for ratification is not the Final Act of the Uruguay
Round, but rather the Agreement on the World Trade Organization as well as the
Ministerial Declarations and Decisions, and the Understanding and Commitments in
Financial Services.

I am now satisfied with the wording of the new submission of President Ramos.

SEN. TAADA.

. . . of President Ramos, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino?
And after him Senator Neptali Gonzales and Senator Lina.

SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually
transmitted to us but I saw the draft of his earlier, and I think it now complies with
the provisions of the Constitution, and with the Final Act itself . The Constitution
does not require us to ratify the Final Act. It requires us to ratify the Agreement
which is now being submitted. The Final Act itself specifies what is going to be
submitted to with the governments of the participants.

In paragraph 2 of the Final Act, we read and I quote:

By signing the present Final Act, the representatives agree: (a) to submit as
appropriate the WTO Agreement for the consideration of the respective competent
authorities with a view to seeking approval of the Agreement in accordance with
their procedures.

In other words, it is not the Final Act that was agreed to be submitted to the
governments for ratification or acceptance as whatever their constitutional
procedures may provide but it is the World Trade Organization Agreement. And if
that is the one that is being submitted now, I think it satisfies both the Constitution
and the Final Act itself .

Thank you, Mr. Chairman.

THE CHAIRMAN.

Thank you, Senator Tolentino, May I call on Senator Gonzales.

SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of
record. And they had been adequately reflected in the journal of yesterday's session
and I don't see any need for repeating the same.

Now, I would consider the new submission as an act ex abudante cautela.

THE CHAIRMAN.
Thank you, Senator Gonzales. Senator Lina, do you want to
make any comment on this?

SEN. LINA. Mr. President, I agree with the observation just made by Senator
Gonzales out of the abundance of question. Then the new submission is, I believe,
stating the obvious and therefore I have no further comment to make.

Epilogue

In praying for the nullification of the Philippine ratification of the WTO Agreement,
petitioners are invoking this Court's constitutionally imposed duty "to determine
whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction" on the part of the Senate in giving its concurrence therein via
Senate Resolution No. 97. Procedurally, a writ of certiorari grounded on grave abuse
of discretion may be issued by the Court under Rule 65 of the Rules of Court when it
is amply shown that petitioners have no other plain, speedy and adequate remedy
in the ordinary course of law.

By grave abuse of discretion is meant such capricious and whimsical exercise of

judgment as is equivalent to lack of jurisdiction. 61 Mere abuse of discretion is not
enough. It must be grave abuse of discretion as when the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and must be
so patent and so gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law. 62
Failure on the part of the petitioner to show grave abuse of discretion will result in
the dismissal of the petition. 63

In rendering this Decision, this Court never forgets that the Senate, whose act is
under review, is one of two sovereign houses of Congress and is thus entitled to
great respect in its actions. It is itself a constitutional body independent and
coordinate, and thus its actions are presumed regular and done in good faith. Unless
convincing proof and persuasive arguments are presented to overthrow such
presumptions, this Court will resolve every doubt in its favor. Using the foregoing
well-accepted definition of grave abuse of discretion and the presumption of
regularity in the Senate's processes, this Court cannot find any cogent reason to
impute grave abuse of discretion to the Senate's exercise of its power of
concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the
Constitution. 64

It is true, as alleged by petitioners, that broad constitutional principles require the

State to develop an independent national economy effectively controlled by
Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials
and locally produced goods. But it is equally true that such principles while
serving as judicial and legislative guides are not in themselves sources of causes
of action. Moreover, there are other equally fundamental constitutional principles
relied upon by the Senate which mandate the pursuit of a "trade policy that serves
the general welfare and utilizes all forms and arrangements of exchange on the
basis of equality and reciprocity" and the promotion of industries "which are
competitive in both domestic and foreign markets," thereby justifying its acceptance
of said treaty. So too, the alleged impairment of sovereignty in the exercise of
legislative and judicial powers is balanced by the adoption of the generally accepted
principles of international law as part of the law of the land and the adherence of
the Constitution to the policy of cooperation and amity with all nations.

That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave
its consent to the WTO Agreement thereby making it "a part of the law of the land"
is a legitimate exercise of its sovereign duty and power. We find no "patent and
gross" arbitrariness or despotism "by reason of passion or personal hostility" in such
exercise. It is not impossible to surmise that this Court, or at least some of its
members, may even agree with petitioners that it is more advantageous to the
national interest to strike down Senate Resolution No. 97. But that is not a legal
reason to attribute grave abuse of discretion to the Senate and to nullify its
decision. To do so would constitute grave abuse in the exercise of our own judicial
power and duty. Ineludably, what the Senate did was a valid exercise of its authority.
As to whether such exercise was wise, beneficial or viable is outside the realm of
judicial inquiry and review. That is a matter between the elected policy makers and
the people. As to whether the nation should join the worldwide march toward trade
liberalization and economic globalization is a matter that our people should

determine in electing their policy makers. After all, the WTO Agreement allows
withdrawal of membership, should this be the political desire of a member.

The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an
Asian Renaissance 65 where "the East will become the dominant region of the world
economically, politically and culturally in the next century." He refers to the "free
market" espoused by WTO as the "catalyst" in this coming Asian ascendancy. There
are at present about 31 countries including China, Russia and Saudi Arabia
negotiating for membership in the WTO. Notwithstanding objections against
possible limitations on national sovereignty, the WTO remains as the only viable
structure for multilateral trading and the veritable forum for the development of
international trade law. The alternative to WTO is isolation, stagnation, if not
economic self-destruction. Duly enriched with original membership, keenly aware of
the advantages and disadvantages of globalization with its on-line experience, and
endowed with a vision of the future, the Philippines now straddles the crossroads of
an international strategy for economic prosperity and stability in the new
millennium. Let the people, through their duly authorized elected officers, make
their free choice.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 175769-70

January 19, 2009

ABS-CBN BROADCASTING CORPORATION, Petitioners,

vs.
PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA
(ANG BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M.
COLAYCO, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari1 assails the July 12, 2006 Decision2 of the Court
of Appeals in CA-G.R. SP Nos. 88092 and 90762, which affirmed the December 20,
2004 Decision of the Director-General of the Intellectual Property Office (IPO) in
Appeal No. 10-2004-0002. Also assailed is the December 11, 2006
Resolution3 denying the motion for reconsideration.

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws

of the Republic of the Philippines to engage in television and radio broadcasting. 4 It
broadcasts television programs by wireless means to Metro Manila and nearby
provinces, and by satellite to provincial stations through Channel 2 on Very High
Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The programs aired
over Channels 2 and 23 are either produced by ABS-CBN or purchased from or
licensed by other producers.
ABS-CBN also owns regional television stations which pattern their programming in
accordance with perceived demands of the region. Thus, television programs shown
in Metro Manila and nearby provinces are not necessarily shown in other provinces.
Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream
Broadcasting System. It delivers digital direct-to-home (DTH) television via satellite
to its subscribers all over the Philippines. Herein individual respondents, Cesar G.
Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and Aloysius M. Colayco,
are members of PMSIs Board of Directors.
PMSI was granted a legislative franchise under Republic Act No. 8630 5 on May 7,
1998 and was given a Provisional Authority by the National Telecommunications
Commission (NTC) on February 1, 2000 to install, operate and maintain a nationwide
DTH satellite service. When it commenced operations, it offered as part of its
program line-up ABS-CBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5, GMA
Channel 7, RPN Channel 9, and IBC Channel 13, together with other paid premium
program channels.
However, on April 25, 2001,6 ABS-CBN demanded for PMSI to cease and desist from
rebroadcasting Channels 2 and 23. On April 27, 2001, 7 PMSI replied that the
rebroadcasting was in accordance with the authority granted it by NTC and its
obligation under NTC Memorandum Circular No. 4-08-88, 8 Section 6.2 of which
requires all cable television system operators operating in a community within
Grade A or B contours to carry the television signals of the authorized television
broadcast stations.9
Thereafter, negotiations ensued between the parties in an effort to reach a
settlement; however, the negotiations were terminated on April 4, 2002 by ABS-CBN
allegedly due to PMSIs inability to ensure the prevention of illegal retransmission
and further rebroadcast of its signals, as well as the adverse effect of the
rebroadcasts on the business operations of its regional television stations. 10
On May 13, 2002, ABS-CBN filed with the IPO a complaint for Violation of Laws
Involving Property Rights, with Prayer for the Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction, which was docketed as IPV No. 102002-0004. It alleged that PMSIs unauthorized rebroadcasting of Channels 2 and 23
infringed on its broadcasting rights and copyright.

On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBNs
application for a temporary restraining order. On July 12, 2002, PMSI suspended its
retransmission of Channels 2 and 23 and likewise filed a petition for certiorari with
the Court of Appeals, which was docketed as CA-G.R. SP No. 71597.
Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to
the must-carry rule under Memorandum Circular No. 04-08-88. It also submitted a
letter dated December 20, 2002 of then NTC Commissioner Armi Jane R. Borje to
PMSI stating as follows:
This refers to your letter dated December 16, 2002 requesting for regulatory
guidance from this Commission in connection with the application and coverage of
NTC Memorandum Circular No. 4-08-88, particularly Section 6 thereof, on
mandatory carriage of television broadcast signals, to the direct-to-home (DTH) pay
television services of Philippine Multi-Media System, Inc. (PMSI).
Preliminarily, both DTH pay television and cable television services are broadcast
services, the only difference being the medium of delivering such services (i.e. the
former by satellite and the latter by cable). Both can carry broadcast signals to the
remote areas, thus enriching the lives of the residents thereof through the
dissemination of social, economic, educational information and cultural programs.
The DTH pay television services of PMSI is equipped to provide nationwide DTH
satellite services. Concededly, PMSIs DTH pay television services covers very much
wider areas in terms of carriage of broadcast signals, including areas not reachable
by cable television services thereby providing a better medium of dissemination of
information to the public.
In view of the foregoing and the spirit and intent of NTC memorandum
Circular No. 4-08-88, particularly section 6 thereof, on mandatory carriage
of television broadcast signals, DTH pay television services should be
deemed covered by such NTC Memorandum Circular.
For your guidance. (Emphasis added)11
On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a
letter dated July 24, 2003 from the NTC enjoining strict and immediate compliance
with the must-carry rule under Memorandum Circular No. 04-08-88, to wit:
Dear Mr. Abellada:
Last July 22, 2003, the National Telecommunications Commission (NTC) received a
letter dated July 17, 2003 from President/COO Rene Q. Bello of the International
Broadcasting Corporation (IBC-Channel 13) complaining that your company, Dream
Broadcasting System, Inc., has cut-off, without any notice or explanation
whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment
of the public.

We were told that, until now, this has been going on.
Please be advised that as a direct broadcast satellite operator, operating a
direct-to-home (DTH) broadcasting system, with a provisional authority
(PA) from the NTC, your company, along with cable television operators,
are mandated to strictly comply with the existing policy of NTC on
mandatory carriage of television broadcast signals as provided under
Memorandum Circular No. 04-08-88, also known as the Revised Rules and
Regulations Governing Cable Television System in the Philippines.
This mandatory coverage provision under Section 6.2 of said Memorandum
Circular, requires all cable television system operators, operating in a
community within the Grade A or B contours to must-carry the
television signals of the authorized television broadcast stations, one of
which is IBC-13. Said directive equally applies to your company as the
circular was issued to give consumers and the public a wider access to
more sources of news, information, entertainment and other
programs/contents.
This Commission, as the governing agency vested by laws with the jurisdiction,
supervision and control over all public services, which includes direct broadcast
satellite operators, and taking into consideration the paramount interest of the
public in general, hereby directs you to immediately restore the signal of IBC-13 in
your network programs, pursuant to existing circulars and regulations of the
Commission.
For strict compliance. (Emphasis added)12
Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-102003, entitled Implementing Rules and Regulations Governing Community
Antenna/Cable Television (CATV) and Direct Broadcast Satellite (DBS) Services to
Promote Competition in the Sector. Article 6, Section 8 thereof states:
As a general rule, the reception, distribution and/or transmission by any CATV/DBS
operator of any television signals without any agreement with or authorization from
program/content providers are prohibited.
On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular
No. 04-08-88, the NTC explained to PMSI in a letter dated November 3, 2003 that:
To address your query on whether or not the provisions of MC 10-10-2003 would
have the effect of amending the provisions of MC 4-08-88 on mandatory carriage of
television signals, the answer is in the negative.
xxxx

The Commission maintains that, MC 4-08-88 remains valid, subsisting and

enforceable.
Please be advised, therefore, that as duly licensed direct-to-home satellite
television service provider authorized by this Commission, your company
continues to be bound by the guidelines provided for under MC 04-08-88,
specifically your obligation under its mandatory carriage provisions, in
addition to your obligations under MC 10-10-2003. (Emphasis added)
Please be guided accordingly.13
On December 22, 2003, the BLA rendered a decision 14 finding that PMSI infringed
the broadcasting rights and copyright of ABS-CBN and ordering it to permanently
cease and desist from rebroadcasting Channels 2 and 23.
On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of
the IPO which was docketed as Appeal No. 10-2004-0002. On December 23, 2004, it
also filed with the Court of Appeals a Motion to Withdraw Petition; Alternatively,
Memorandum of the Petition for Certiorari in CA-G.R. SP No. 71597, which was
granted in a resolution dated February 17, 2005.
On December 20, 2004, the Director-General of the IPO rendered a decision 15 in
favor of PMSI, the dispositive portion of which states:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED.
Accordingly, Decision No. 2003-01 dated 22 December 2003 of the Director of
Bureau of Legal Affairs is hereby REVERSED and SET ASIDE.
Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs
for appropriate action, and the records be returned to her for proper disposition. The
Documentation, Information and Technology Transfer Bureau is also given a copy for
library and reference purposes.
SO ORDERED.16
Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary
restraining order and writ of preliminary injunction with the Court of Appeals, which
was docketed as CA-G.R. SP No. 88092.
On July 18, 2005, the Court of Appeals issued a temporary restraining order.
Thereafter, ABS-CBN filed a petition for contempt against PMSI for continuing to
rebroadcast Channels 2 and 23 despite the restraining order. The case was docketed
as CA- G.R. SP No. 90762.
On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R.
SP Nos. 88092 and 90762.

In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the
findings of the Director-General of the IPO and dismissed both petitions filed by ABSCBN.17
ABS-CBNs motion for reconsideration was denied, hence, this petition.
ABS-CBN contends that PMSIs unauthorized rebroadcasting of Channels 2 and 23 is
an infringement of its broadcasting rights and copyright under the Intellectual
Property Code (IP Code);18that Memorandum Circular No. 04-08-88 excludes DTH
satellite television operators; that the Court of Appeals interpretation of the mustcarry rule violates Section 9 of Article III19 of the Constitution because it allows the
taking of property for public use without payment of just compensation; that the
Court of Appeals erred in dismissing the petition for contempt docketed as CA-G.R.
SP No. 90762 without requiring respondents to file comment.
Respondents, on the other hand, argue that PMSIs rebroadcasting of Channels 2
and 23 is sanctioned by Memorandum Circular No. 04-08-88; that the must-carry
rule under the Memorandum Circular is a valid exercise of police power; and that
the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since it found no
need to exercise its power of contempt.
After a careful review of the facts and records of this case, we affirm the findings of
the Director-General of the IPO and the Court of Appeals.
There is no merit in ABS-CBNs contention that PMSI violated its broadcasters rights
under Section 211 of the IP Code which provides in part:
Chapter XIV
BROADCASTING ORGANIZATIONS
Sec. 211. Scope of Right. - Subject to the provisions of Section 212, broadcasting
organizations shall enjoy the exclusive right to carry out, authorize or prevent any of
the following acts:
211.1. The rebroadcasting of their broadcasts;
xxxx
Neither is PMSI guilty of infringement of ABS-CBNs copyright under Section 177 of
the IP Code which states that copyright or economic rights shall consist of the
exclusive right to carry out, authorize or prevent the public performance of the work
(Section 177.6), and other communication to the public of the work (Section
177.7).20
Section 202.7 of the IP Code defines broadcasting as the transmission by wireless
means for the public reception of sounds or of images or of representations thereof;

such transmission by satellite is also broadcasting where the means for decrypting
are provided to the public by the broadcasting organization or with its consent.
On the other hand, rebroadcasting as defined in Article 3(g) of the International
Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations, otherwise known as the 1961 Rome Convention, of
which the Republic of the Philippines is a signatory, 21 is the simultaneous
broadcasting by one broadcasting organization of the broadcast of another
broadcasting organization.
The Director-General of the IPO correctly found that PMSI is not engaged in
rebroadcasting and thus cannot be considered to have infringed ABS-CBNs
broadcasting rights and copyright, thus:
That the Appellants [herein respondent PMSI] subscribers are able to view
Appellees [herein petitioner ABS-CBN] programs (Channels 2 and 23) at the same
time that the latter is broadcasting the same is undisputed. The question however
is, would the Appellant in doing so be considered engaged in broadcasting. Section
202.7 of the IP Code states that broadcasting means
the transmission by wireless means for the public reception of sounds or of images
or of representations thereof; such transmission by satellite is also broadcasting
where the means for decrypting are provided to the public by the broadcasting
organization or with its consent.
Section 202.7 of the IP Code, thus, provides two instances wherein there is
broadcasting, to wit:
1. The transmission by wireless means for the public reception of sounds or of
images or of representations thereof; and
2. The transmission by satellite for the public reception of sounds or of images or of
representations thereof where the means for decrypting are provided to the public
by the broadcasting organization or with its consent.
It is under the second category that Appellants DTH satellite television service must
be examined since it is satellite-based. The elements of such category are as
follows:
1. There is transmission of sounds or images or of representations thereof;
2. The transmission is through satellite;
3. The transmission is for public reception; and
4. The means for decrypting are provided to the public by the broadcasting
organization or with its consent.

It is only the presence of all the above elements can a determination that the DTH is
broadcasting and consequently, rebroadcasting Appellees signals in violation of
Sections 211 and 177 of the IP Code, may be arrived at.
Accordingly, this Office is of the view that the transmission contemplated under
Section 202.7 of the IP Code presupposes that the origin of the signals is the
broadcaster. Hence, a program that is broadcasted is attributed to the broadcaster.
In the same manner, the rebroadcasted program is attributed to the rebroadcaster.
In the case at hand, Appellant is not the origin nor does it claim to be the origin of
the programs broadcasted by the Appellee. Appellant did not make and transmit on
its own but merely carried the existing signals of the Appellee. When Appellants
subscribers view Appellees programs in Channels 2 and 23, they know that the
origin thereof was the Appellee.
Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster
transmits, the signals are scattered or dispersed in the air. Anybody may pick-up
these signals. There is no restriction as to its number, type or class of recipients. To
receive the signals, one is not required to subscribe or to pay any fee. One only has
to have a receiver, and in case of television signals, a television set, and to tune-in
to the right channel/frequency. The definition of broadcasting, wherein it is required
that the transmission is wireless, all the more supports this discussion. Apparently,
the undiscriminating dispersal of signals in the air is possible only through wireless
means. The use of wire in transmitting signals, such as cable television, limits the
recipients to those who are connected. Unlike wireless transmissions, in wire-based
transmissions, it is not enough that one wants to be connected and possesses the
equipment. The service provider, such as cable television companies may choose its
subscribers.
The only limitation to such dispersal of signals in the air is the technical capacity of
the transmitters and other equipment employed by the broadcaster. While the
broadcaster may use a less powerful transmitter to limit its coverage, this is merely
a business strategy or decision and not an inherent limitation when transmission is
through cable.
Accordingly, the nature of broadcasting is to scatter the signals in its widest area of
coverage as possible. On this score, it may be said that making public means that
accessibility is undiscriminating as long as it [is] within the range of the transmitter
and equipment of the broadcaster. That the medium through which the Appellant
carries the Appellees signal, that is via satellite, does not diminish the fact that it
operates and functions as a cable television. It remains that the Appellants
transmission of signals via its DTH satellite television service cannot be considered
within the purview of broadcasting. x x x
xxxx

This Office also finds no evidence on record showing that the Appellant has provided
decrypting means to the public indiscriminately. Considering the nature of this case,
which is punitive in fact, the burden of proving the existence of the elements
constituting the acts punishable rests on the shoulder of the complainant.
Accordingly, this Office finds that there is no rebroadcasting on the part of the
Appellant of the Appellees programs on Channels 2 and 23, as defined under the
Rome Convention.22
Under the Rome Convention, rebroadcasting is the simultaneous broadcasting by
one broadcasting organization of the broadcast of another broadcasting
organization. The Working Paper23 prepared by the Secretariat of the Standing
Committee on Copyright and Related Rights defines broadcasting organizations as
entities that take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted content. 24 Evidently, PMSI
would not qualify as a broadcasting organization because it does not have the
aforementioned responsibilities imposed upon broadcasting organizations, such as
ABS-CBN.
ABS-CBN creates and transmits its own signals; PMSI merely carries such signals
which the viewers receive in its unaltered form. PMSI does not produce, select, or
determine the programs to be shown in Channels 2 and 23. Likewise, it does not
pass itself off as the origin or author of such programs. Insofar as Channels 2 and 23
are concerned, PMSI merely retransmits the same in accordance with Memorandum
Circular 04-08-88. With regard to its premium channels, it buys the channels from
content providers and transmits on an as-is basis to its viewers. Clearly, PMSI does
not perform the functions of a broadcasting organization; thus, it cannot be said
that it is engaged in rebroadcasting Channels 2 and 23.
The Director-General of the IPO and the Court of Appeals also correctly found that
PMSIs services are similar to a cable television system because the services it
renders fall under cable retransmission, as described in the Working Paper, to wit:
(G) Cable Retransmission
47. When a radio or television program is being broadcast, it can be retransmitted
to new audiences by means of cable or wire. In the early days of cable television, it
was mainly used to improve signal reception, particularly in so-called shadow
zones, or to distribute the signals in large buildings or building complexes. With
improvements in technology, cable operators now often receive signals from
satellites before retransmitting them in an unaltered form to their subscribers
through cable.
48. In principle, cable retransmission can be either simultaneous with the broadcast
over-the-air or delayed (deferred transmission) on the basis of a fixation or a
reproduction of a fixation. Furthermore, they might be unaltered or altered, for

example through replacement of commercials, etc. In general, however, the

term retransmission seems to be reserved for such transmissions which
are both simultaneous and unaltered.
49. The Rome Convention does not grant rights against unauthorized cable
retransmission. Without such a right, cable operators can retransmit both domestic
and foreign over the air broadcasts simultaneously to their subscribers without
permission from the broadcasting organizations or other rightholders and without
obligation to pay remuneration.25 (Emphasis added)
Thus, while the Rome Convention gives broadcasting organizations the right to
authorize or prohibit the rebroadcasting of its broadcast, however, this protection
does not extend to cable retransmission. The retransmission of ABS-CBNs signals
by PMSI which functions essentially as a cable television does not therefore
constitute rebroadcasting in violation of the formers intellectual property rights
under the IP Code.
It must be emphasized that the law on copyright is not absolute. The IP Code
provides that:
Sec. 184. Limitations on Copyright. 184.1. Notwithstanding the provisions of Chapter V, the following acts shall not
constitute infringement of copyright:
xxxx
(h) The use made of a work by or under the direction or control of the Government,
by the National Library or by educational, scientific or professional institutions
where such use is in the public interest and is compatible with fair use;
The carriage of ABS-CBNs signals by virtue of the must-carry rule in Memorandum
Circular No. 04-08-88 is under the direction and control of the government though
the NTC which is vested with exclusive jurisdiction to supervise, regulate and control
telecommunications and broadcast services/facilities in the Philippines. 26 The
imposition of the must-carry rule is within the NTCs power to promulgate rules and
regulations, as public safety and interest may require, to encourage a larger and
more effective use of communications, radio and television broadcasting facilities,
and to maintain effective competition among private entities in these activities
whenever the Commission finds it reasonably feasible. 27 As correctly observed by
the Director-General of the IPO:
Accordingly, the Must-Carry Rule under NTC Circular No. 4-08-88 falls under the
foregoing category of limitations on copyright. This Office agrees with the Appellant
[herein respondent PMSI] that the Must-Carry Rule is in consonance with the
principles and objectives underlying Executive Order No. 436, 28 to wit:

The Filipino people must be given wider access to more sources of news,
information, education, sports event and entertainment programs other than those
provided for by mass media and afforded television programs to attain a well
informed, well-versed and culturally refined citizenry and enhance their socioeconomic growth:
WHEREAS, cable television (CATV) systems could support or supplement the
services provided by television broadcast facilities, local and overseas, as the
national information highway to the countryside. 29
The Court of Appeals likewise correctly observed that:
[T]he very intent and spirit of the NTC Circular will prevent a situation whereby
station owners and a few networks would have unfettered power to make time
available only to the highest bidders, to communicate only their own views on
public issues, people, and to permit on the air only those with whom they agreed
contrary to the state policy that the (franchise) grantee like the petitioner, private
respondent and other TV station owners, shall provide at all times sound and
balanced programming and assist in the functions of public information and
education.
This is for the first time that we have a structure that works to accomplish explicit
state policy goals.30
Indeed, intellectual property protection is merely a means towards the end of
making society benefit from the creation of its men and women of talent and
genius. This is the essence of intellectual property laws, and it explains why certain
products of ingenuity that are concealed from the public are outside the pale of
protection afforded by the law. It also explains why the author or the creator enjoys
no more rights than are consistent with public welfare. 31
Further, as correctly observed by the Court of Appeals, the must-carry rule as well
as the legislative franchises granted to both ABS-CBN and PMSI are in consonance
with state policies enshrined in the Constitution, specifically Sections 9, 32 17,33 and
2434 of Article II on the Declaration of Principles and State Policies. 35
ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1
of which authorizes it to construct, operate and maintain, for commercial purposes
and in the public interest, television and radio broadcasting in and throughout the
Philippines x x x. Section 4 thereof mandates that it shall provide adequate public
service time to enable the government, through the said broadcasting stations, to
reach the population on important public issues; provide at all times sound and
balanced programming; promote public participation such as in community
programming; assist in the functions of public information and education x x x.

PMSI was likewise granted a legislative franchise under Republic Act No. 8630,
Section 4 of which similarly states that it shall provide adequate public service
time to enable the government, through the said broadcasting stations, to reach the
population on important public issues; provide at all times sound and balanced
programming; promote public participation such as in community programming;
assist in the functions of public information and education x x x. Section 5,
paragraph 2 of the same law provides that the radio spectrum is a finite resource
that is a part of the national patrimony and the use thereof is a privilege conferred
upon the grantee by the State and may be withdrawn anytime, after due process.
In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC, 36 the Court held that a
franchise is a mere privilege which may be reasonably burdened with some form of
public service. Thus:
All broadcasting, whether by radio or by television stations, is licensed by the
government. Airwave frequencies have to be allocated as there are more individuals
who want to broadcast than there are frequencies to assign. A franchise is thus a
privilege subject, among other things, to amendment by Congress in accordance
with the constitutional provision that any such franchise or right granted . . . shall
be subject to amendment, alteration or repeal by the Congress when the common
good so requires.
xxxx
Indeed, provisions for COMELEC Time have been made by amendment of the
franchises of radio and television broadcast stations and, until the present case was
brought, such provisions had not been thought of as taking property without just
compensation. Art. XII, 11 of the Constitution authorizes the amendment of
franchises for the common good. What better measure can be conceived for the
common good than one for free air time for the benefit not only of candidates but
even more of the public, particularly the voters, so that they will be fully informed of
the issues in an election? [I]t is the right of the viewers and listeners, not the right
of the broadcasters, which is paramount.
Nor indeed can there be any constitutional objection to the requirement that
broadcast stations give free air time. Even in the United States, there are
responsible scholars who believe that government controls on broadcast media can
constitutionally be instituted to ensure diversity of views and attention to public
affairs to further the system of free expression. For this purpose, broadcast stations
may be required to give free air time to candidates in an election. Thus, Professor
Cass R. Sunstein of the University of Chicago Law School, in urging reforms in
regulations affecting the broadcast industry, writes:
xxxx

In truth, radio and television broadcasting companies, which are given franchises,
do not own the airwaves and frequencies through which they transmit broadcast
signals and images. They are merely given the temporary privilege of using them.
Since a franchise is a mere privilege, the exercise of the privilege may reasonably
be burdened with the performance by the grantee of some form of public service. x
x x37
There is likewise no merit to ABS-CBNs claim that PMSIs carriage of its signals is for
a commercial purpose; that its being the countrys top broadcasting company, the
availability of its signals allegedly enhances PMSIs attractiveness to potential
customers;38 or that the unauthorized carriage of its signals by PMSI has created
competition between its Metro Manila and regional stations.
ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for
profit; or that such carriage adversely affected the business operations of its
regional stations. Except for the testimonies of its witnesses,[39] no studies,
statistical data or information have been submitted in evidence.
Administrative charges cannot be based on mere speculation or conjecture. The
complainant has the burden of proving by substantial evidence the allegations in
the complaint.40 Mere allegation is not evidence, and is not equivalent to proof. 41
Anyone in the country who owns a television set and antenna can receive ABSCBNs signals for free. Other broadcasting organizations with free-to-air signals such
as GMA-7, RPN-9, ABC-5, and IBC-13 can likewise be accessed for free. No payment
is required to view the said channels 42 because these broadcasting networks do not
generate revenue from subscription from their viewers but from airtime revenue
from contracts with commercial advertisers and producers, as well as from direct
sales.
In contrast, cable and DTH television earn revenues from viewer subscription. In the
case of PMSI, it offers its customers premium paid channels from content providers
like Star Movies, Star World, Jack TV, and AXN, among others, thus allowing its
customers to go beyond the limits of Free TV and Cable TV. 43 It does not advertise
itself as a local channel carrier because these local channels can be viewed with or
without DTH television.
Relevantly, PMSIs carriage of Channels 2 and 23 is material in arriving at the
ratings and audience share of ABS-CBN and its programs. These ratings help
commercial advertisers and producers decide whether to buy airtime from the
network. Thus, the must-carry rule is actually advantageous to the broadcasting
networks because it provides them with increased viewership which attracts
commercial advertisers and producers.
On the other hand, the carriage of free-to-air signals imposes a burden to cable and
DTH television providers such as PMSI. PMSI uses none of ABS-CBNs resources or

equipment and carries the signals and shoulders the costs without any recourse of
charging.44 Moreover, such carriage of signals takes up channel space which can
otherwise be utilized for other premium paid channels.
There is no merit to ABS-CBNs argument that PMSIs carriage of Channels 2 and 23
resulted in competition between its Metro Manila and regional stations. ABS-CBN is
free to decide to pattern its regional programming in accordance with perceived
demands of the region; however, it cannot impose this kind of programming on the
regional viewers who are also entitled to the free-to-air channels. It must be
emphasized that, as a national broadcasting organization, one of ABS-CBNs
responsibilities is to scatter its signals to the widest area of coverage as possible.
That it should limit its signal reach for the sole purpose of gaining profit for its
regional stations undermines public interest and deprives the viewers of their right
to access to information.
Indeed, television is a business; however, the welfare of the people must not be
sacrificed in the pursuit of profit. The right of the viewers and listeners to the most
diverse choice of programs available is paramount. 45 The Director-General correctly
observed, thus:
The Must-Carry Rule favors both broadcasting organizations and the public. It
prevents cable television companies from excluding broadcasting organization
especially in those places not reached by signal. Also, the rule prevents cable
television companies from depriving viewers in far-flung areas the enjoyment of
programs available to city viewers. In fact, this Office finds the rule more
burdensome on the part of the cable television companies. The latter carries the
television signals and shoulders the costs without any recourse of charging. On the
other hand, the signals that are carried by cable television companies are dispersed
and scattered by the television stations and anybody with a television set is free to
pick them up.
With its enormous resources and vaunted technological capabilities, Appellees
[herein petitioner ABS-CBN] broadcast signals can reach almost every corner of the
archipelago. That in spite of such capacity, it chooses to maintain regional stations,
is a business decision. That the Must-Carry Rule adversely affects the profitability
of maintaining such regional stations since there will be competition between them
and its Metro Manila station is speculative and an attempt to extrapolate the effects
of the rule. As discussed above, Appellants DTH satellite television services is of
limited subscription. There was not even a showing on part of the Appellee the
number of Appellants subscribers in one region as compared to non-subscribing
television owners. In any event, if this Office is to engage in conjecture, such
competition between the regional stations and the Metro Manila station will benefit
the public as such competition will most likely result in the production of better
television programs.46

All told, we find that the Court of Appeals correctly upheld the decision of the IPO
Director-General that PMSI did not infringe on ABS-CBNs intellectual property rights
under the IP Code. The findings of facts of administrative bodies charged with their
specific field of expertise, are afforded great weight by the courts, and in the
absence of substantial showing that such findings are made from an erroneous
estimation of the evidence presented, they are conclusive, and in the interest of
stability of the governmental structure, should not be disturbed. 47
Moreover, the factual findings of the Court of Appeals are conclusive on the parties
and are not reviewable by the Supreme Court. They carry even more weight when
the Court of Appeals affirms the factual findings of a lower fact-finding body, 48 as in
the instant case.
There is likewise no merit to ABS-CBNs contention that the Memorandum Circular
excludes from its coverage DTH television services such as those provided by PMSI.
Section 6.2 of the Memorandum Circular requires all cable television system
operators operating in a community within Grade A or B contours to carry the
television signals of the authorized television broadcast stations. 49 The rationale
behind its issuance can be found in the whereas clauses which state:
Whereas, Cable Television Systems or Community Antenna Television (CATV) have
shown their ability to offer additional programming and to carry much improved
broadcast signals in the remote areas, thereby enriching the lives of the rest of the
population through the dissemination of social, economic, educational information
and cultural programs;
Whereas, the national government supports the promotes the orderly growth of the
Cable Television industry within the framework of a regulated fee enterprise, which
is a hallmark of a democratic society;
Whereas, public interest so requires that monopolies in commercial mass media
shall be regulated or prohibited, hence, to achieve the same, the cable TV industry
is made part of the broadcast media;
Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the
National Telecommunications Commission the authority to set down rules and
regulations in order to protect the public and promote the general welfare, the
National Telecommunications Commission hereby promulgates the following rules
and regulations on Cable Television Systems;
The policy of the Memorandum Circular is to carry improved signals in remote areas
for the good of the general public and to promote dissemination of information. In
line with this policy, it is clear that DTH television should be deemed covered by the
Memorandum Circular. Notwithstanding the different technologies employed, both
DTH and cable television have the ability to carry improved signals and promote
dissemination of information because they operate and function in the same way.

In its December 20, 2002 letter,50 the NTC explained that both DTH and cable
television services are of a similar nature, the only difference being the medium of
delivering such services. They can carry broadcast signals to the remote areas and
possess the capability to enrich the lives of the residents thereof through the
dissemination of social, economic, educational information and cultural programs.
Consequently, while the Memorandum Circular refers to cable television, it should
be understood as to include DTH television which provides essentially the same
services.
In Eastern Telecommunications Philippines, Inc. v. International Communication
Corporation,51 we held:
The NTC, being the government agency entrusted with the regulation of activities
coming under its special and technical forte, and possessing the necessary rulemaking power to implement its objectives, is in the best position to interpret its own
rules, regulations and guidelines. The Court has consistently yielded and accorded
great respect to the interpretation by administrative agencies of their own rules
unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of
discretion clearly conflicting with the letter and spirit of the law. 52
With regard to the issue of the constitutionality of the must-carry rule, the Court
finds that its resolution is not necessary in the disposition of the instant case. One of
the essential requisites for a successful judicial inquiry into constitutional questions
is that the resolution of the constitutional question must be necessary in deciding
the case.53 In Spouses Mirasol v. Court of Appeals,54 we held:
As a rule, the courts will not resolve the constitutionality of a law, if the controversy
can be settled on other grounds. The policy of the courts is to avoid ruling on
constitutional questions and to presume that the acts of the political departments
are valid, absent a clear and unmistakable showing to the contrary. To doubt is to
sustain. This presumption is based on the doctrine of separation of powers. This
means that the measure had first been carefully studied by the legislative and
executive departments and found to be in accord with the Constitution before it was
finally enacted and approved.55
The instant case was instituted for violation of the IP Code and infringement of ABSCBNs broadcasting rights and copyright, which can be resolved without going into
the constitutionality of Memorandum Circular No. 04-08-88. As held by the Court of
Appeals, the only relevance of the circular in this case is whether or not compliance
therewith should be considered manifestation of lack of intent to commit
infringement, and if it is, whether such lack of intent is a valid defense against the
complaint of petitioner.56
The records show that petitioner assailed the constitutionality of Memorandum
Circular No. 04-08-88 by way of a collateral attack before the Court of Appeals.
In Philippine National Bank v. Palma, 57 we ruled that for reasons of public policy, the

constitutionality of a law cannot be collaterally attacked. A law is deemed valid

unless declared null and void by a competent court; more so when the issue has not
been duly pleaded in the trial court.58
As a general rule, the question of constitutionality must be raised at the earliest
opportunity so that if not raised in the pleadings, ordinarily it may not be raised in
the trial, and if not raised in the trial court, it will not be considered on appeal. 59 In
Philippine Veterans Bank v. Court of Appeals, 60 we held:
We decline to rule on the issue of constitutionality as all the requisites for the
exercise of judicial review are not present herein. Specifically, the question of
constitutionality will not be passed upon by the Court unless, at the first
opportunity, it is properly raised and presented in an appropriate case,
adequately argued, and is necessary to a determination of the case,
particularly where the issue of constitutionality is the very lis mota
presented.x x x61
Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in
order.
Indirect contempt may either be initiated (1) motu proprio by the court by issuing
an order or any other formal charge requiring the respondent to show cause why he
should not be punished for contempt or (2) by the filing of a verified petition,
complying with the requirements for filing initiatory pleadings. 62
ABS-CBN filed a verified petition before the Court of Appeals, which was docketed
CA G.R. SP No. 90762, for PMSIs alleged disobedience to the Resolution and
Temporary Restraining Order, both dated July 18, 2005, issued in CA-G.R. SP No.
88092. However, after the cases were consolidated, the Court of Appeals did not
require PMSI to comment on the petition for contempt. It ruled on the merits of CAG.R. SP No. 88092 and ordered the dismissal of both petitions.
ABS-CBN argues that the Court of Appeals erred in dismissing the petition for
contempt without having ordered respondents to comment on the same.
Consequently, it would have us reinstate CA-G.R. No. 90762 and order respondents
to show cause why they should not be held in contempt.
It bears stressing that the proceedings for punishment of indirect contempt are
criminal in nature. The modes of procedure and rules of evidence adopted in
contempt proceedings are similar in nature to those used in criminal
prosecutions. 63 While it may be argued that the Court of Appeals should have
ordered respondents to comment, the issue has been rendered moot in light of our
ruling on the merits. To order respondents to comment and have the Court of
Appeals conduct a hearing on the contempt charge when the main case has already
been disposed of in favor of PMSI would be circuitous. Where the issues have

become moot, there is no justiciable controversy, thereby rendering the resolution

of the same of no practical use or value.64
WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of
Appeals in CA-G.R. SP Nos. 88092 and 90762, sustaining the findings of the
Director-General of the Intellectual Property Office and dismissing the petitions filed
by ABS-CBN Broadcasting Corporation, and the December 11, 2006 Resolution
denying the motion for reconsideration, are AFFIRMED.
SO ORDERED.

G.R. No. 147043

June 21, 2005

NBI - MICROSOFT CORPORATION & LOTUS DEVELOPMENT CORP., petitioners,

vs.
JUDY C. HWANG, BENITO KEH & YVONNE K. CHUA/BELTRON COMPUTER
PHILIPPINES INC., JONATHAN K. CHUA, EMILY K. CHUA, BENITO T. SANCHEZ,
NANCY I. VELASCO, ALFONSO CHUA, ALBERTO CHUA, SOPHIA ONG,
DEANNA CHUA/TAIWAN MACHINERY DISPLAY & TRADE CENTER, INC., and
THE SECRETARY OF JUSTICE, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari1 of the Resolutions2 of the Department of Justice
dismissing for "lack of merit and insufficiency of evidence" petitioner Microsoft
Corporations complaint against respondents for copyright infringement and unfair
competition.
The Facts
Petitioner Microsoft Corporation ("Microsoft"), a Delaware, United States
corporation, owns the copyright and trademark to several computer
software.3 Respondents Benito Keh and Yvonne Keh are the President/Managing
Director and General Manager, respectively, of respondent Beltron Computer
Philippines, Inc. ("Beltron"), a domestic corporation. Respondents Jonathan K. Chua,
Emily K. Chua, Benito T. Sanchez, and Nancy I. Velasco are Beltrons Directors. On
the other hand, respondents Alfonso Chua, Alberto Chua, Judy K. Chua Hwang,
Sophia Ong, and Deanna Chua are the Directors of respondent Taiwan Machinery
Display & Trade Center, Inc. ("TMTC"), also a domestic corporation. 4

In May 1993, Microsoft and Beltron entered into a Licensing Agreement

("Agreement"). Under Section 2(a) of the Agreement, as amended in January 1994,
Microsoft authorized Beltron, for a fee, to:
(i) xxx reproduce and install no more than one (1) copy of [Microsoft] software on
each Customer System hard disk or Read Only Memory ("ROM"); [and]
(ii) xxx distribute directly or indirectly and license copies of the Product (reproduced
as per Section 2(a)(i) and/or acquired from Authorized Replicator or Authorized
Distributor) in object code form to end users[.] xxxx 5
The Agreement also authorized Microsoft and Beltron to terminate the contract if
the other fails to comply with any of the Agreements provisions. Microsoft
terminated the Agreement effective 22 June 1995 for Beltrons non-payment of
royalties.6
Afterwards, Microsoft learned that respondents were illegally copying and selling
Microsoft software. Consequently, Microsoft, through its Philippine agent, 7 hired the
services of Pinkerton Consulting Services ("PCS"), a private investigative firm.
Microsoft also sought the assistance of the National Bureau of Investigation ("NBI").
On 10 November 1995, PCS employee John Benedic 8 Sacriz ("Sacriz") and NBI agent
Dominador Samiano, Jr. ("Samiano"), posing as representatives of a computer
shop,9 bought computer hardware (central processing unit ("CPU") and computer
monitor) and software (12 computer disks ("CDs") in read-only memory ("ROM")
format) from respondents. The CPU contained pre-installed 10 Microsoft Windows 3.1
and MS-DOS software. The 12 CD-ROMs, encased in plastic containers with Microsoft
packaging, also contained Microsoft software.11 At least two of the CD-ROMs were
"installers," so-called because they contain several software (Microsoft only or both
Microsoft and non-Microsoft).12 Sacriz and Samiano were not given the Microsoft
end-user license agreements, users manuals, registration cards or certificates of
authenticity for the articles they purchased. The receipt issued to Sacriz and
Samiano for the CPU and monitor bore the heading "T.M.T.C. (PHILS.) INC. BELTRON
COMPUTER."13 The receipt for the 12 CD-ROMs did not indicate its source although
the name "Gerlie" appears below the entry "delivered by." 14
On 17 November 1995, Microsoft applied for search warrants against respondents in
the Regional Trial Court, Branch 23, Manila ("RTC"). 15 The RTC granted Microsofts
application and issued two search warrants ("Search Warrant Nos. 95-684 and 95685").16 Using Search Warrant Nos. 95-684 and 95-685, the NBI searched the
premises of Beltron and TMTC and seized several computer-related hardware,
software, accessories, and paraphernalia. Among these were 2,831 pieces of CDROMs containing Microsoft software.17
Based on the articles obtained from respondents, Microsoft and a certain Lotus
Development Corporation ("Lotus Corporation") charged respondents before the
Department of Justice ("DOJ") with copyright infringement under Section 5(A) in

relation to Section 29 of Presidential Decree No. 49, as amended, ("PD 49") 18 and
with unfair competition under Article 189(1)19 of the Revised Penal Code. In its
Complaint ("I.S. No. 96-193"), which the NBI indorsed, Microsoft alleged that
respondents illegally copied and sold Microsoft software. 20
In their joint counter-affidavit, respondents Yvonne Keh ("respondent Keh") and
Emily K. Chua ("respondent Chua") denied the charges against respondents.
Respondents Keh and Chua alleged that: (1) Microsofts real intention in filing the
complaint under I.S. No. 96-193 was to pressure Beltron to pay its alleged unpaid
royalties, thus Microsoft should have filed a collection suit instead of a criminal
complaint; (2) TMTC bought the confiscated 59 boxes of MS-DOS CDs from a
Microsoft dealer in Singapore (R.R. Donnelly); (3) respondents are not the "source"
of the Microsoft Windows 3.1 software pre-installed in the CPU bought by Sacriz and
Samiano, but only of the MS-DOS software; (4) Microsofts alleged proof of purchase
(receipt) for the 12 CD-ROMs is inconclusive because the receipt does not indicate
its source; and (5) respondents Benito Keh, Jonathan K. Chua, Alfonso Chua, Alberto
Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are stockholders of
Beltron and TMTC in name only and thus cannot be held criminally liable. 21
The other respondents did not file counter-affidavits.
Meanwhile, respondents moved to quash Search Warrant Nos. 95-684 and 95-685.
The RTC partially granted their motion in its Order of 16 April 1996. Microsoft sought
reconsideration but the RTC denied Microsofts motion in its Order of 19 July 1996.
Microsoft appealed to the Court of Appeals in CA-G.R. CV No. 54600. In its Decision
of 29 November 2001, the Court of Appeals granted Microsofts appeal and set
aside the RTC Orders of 16 April 1996 and 19 July 1996. The Court of Appeals
Decision became final on 27 December 2001.
The DOJ Resolutions
In the Resolution of 26 October 1999, DOJ State Prosecutor Jocelyn A. Ong ("State
Prosecutor Ong") recommended the dismissal of Microsofts complaint for lack of
merit and insufficiency of evidence. State Prosecutor Ong also recommended the
dismissal of Lotus Corporations complaint for lack of interest to prosecute and for
insufficiency of evidence. Assistant Chief State Prosecutor Lualhati R. Buenafe
("Assistant Chief State Prosecutor Buenafe") approved State Prosecutor Ongs
recommendations.22 The 26 October 1999 Resolution reads in part:
[T]wo (2) issues have to be resolved in this case, namely:
a) Whether or not Beltron Computer and/or its stockholders should be held liable for
the offenses charged.
b) Whether or not prima facie case exist[s] against Taiwan Machinery Display and
Trade Center, Inc. (TMTC) for violation of the offense charged.

Complainant had alleged that from the time the license agreement was terminated,
respondent/s is/are no longer authorized to copy/distribute/sell Microsoft products.
However, respondent/s averred that the case is civil in nature, not criminal,
considering that the case stemmed only out of the desire of complainant to collect
from them the amount of US$135,121.32 and that the contract entered into by the
parties cannot be unilaterally terminated.
In the order of Honorable William Bayhon dated July 19, 1996 [denying
reconsideration to the Order partially quashing the search warrants], he observed
the following:
"It is further argued by counsel for respondent that the act taken by private
complainant is to spite revenge against the respondent Beltron for the latter failed
to pay the alleged monetary obligation in the amount of US$135,121.32. That
respondent has some monetary obligation to complainant which is not denied by
the complainant."
["]It appears therefore that prior to the issuance of the subject search warrants,
complainant had some business transactions with the respondent [Beltron] along
the same line of products. Complainant failed to reveal the true circumstances
existing between the two of them as it now appears, indeed the search warrant[s]
xxx [are] being used as a leverage to secure collection of the money obligation
which the Court cannot allow."
From said order, it can be gleaned that the [RTC] xxx, had admitted that the search
warrants applied for by complainant were merely used as a leverage for the
collection of the alleged monetary obligation of the respondent/s.
From said order, it can be surmise (sic) that the obligations between the parties is
civil in nature not criminal.
Moreover, complainant had time and again harped that respondent/s is/are not
authorized to sell/copy/distribute Microsoft products at the time of the execution of
the search warrants. Still, this office has no power to pass upon said issue for one
has then to interpret the provisions of the contract entered into by the parties,
which question, should be raised in a proper civil proceeding.
Accordingly, absen[t] a resolution from the proper court of (sic) whether or not the
contract is still binding between the parties at the time of the execution of the
search warrants, this office cannot pass upon the issue of whether respondent/s is
or are liable for the offense charged.
As to the second issue, we find for the respondent/s. TMTC had provided sufficient
evidence such as pro-forma invoice from R.R. Donnelley; Debt Advice of the Bank of
Commerce; Official Receipts from the Bureau of Customs; and Import Entry

Declaration of the Bureau of Customs to prove that indeed the Microsoft software in
their possession were bought from Singapore.
Thus, respondent/s in this case has/have no intent to defraud the public, as
provided under Article 189 of the Revised Penal Code, for they bought said Microsoft
MS-DOS 6.0 from an alleged licensee of Microsoft in Singapore, with all the
necessary papers. 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 was/were not the
manufacturers of the Microsoft software seized and were selling their products as
genuine Microsoft software, considering that they bought it from a Microsoft
licensee.
Complainant, on the other hand, considering that it has the burden of proving that
the respondent/s is/are liable for the offense charged, has not presented any
evidence that the items seized namely the 59 boxes of MS-DOS 6.0 software are
counterfeit.
The certification issued on December 12, 1995 by Christopher Austin, Corporate
Attorney of the complainant, does not disclose this fact. For the term used by Mr.
Austin was that the items seized were unauthorized.
The question now, is whether the products were unauthorized because TMTC has no
license to sell Microsoft products, or is it unauthorized because R.R. Donnelley has
no authority to sell said products here in the Philippines.
Still, to determine the culpability of the respondents, complainant should present
evidence that what is in the possession of the respondent/s is/are counterfeit
Microsoft products.
This it failed to do.23
Microsoft sought reconsideration and prayed for an ocular inspection of the articles
seized from respondents. However, in the Resolution of 3 December 1999, Assistant
Chief State Prosecutor Buenafe, upon State Prosecutor Ongs recommendation,
denied Microsofts motion.24
Microsoft appealed to the Office of the DOJ Secretary. In the Resolution of 3 August
2000, DOJ Undersecretary Regis V. Puno dismissed Microsofts appeal. 25 Microsoft
sought reconsideration but its motion was denied in the Resolution of 22 December
2000.26
Hence, this petition. Microsoft contends that:
I. THE DOJ ERRED IN RULING THAT THE LIABILITY OF RESPONDENTS WAS ONLY CIVIL
IN NATURE BY VIRTUE OF THE LICENSE AGREEMENT.

II. THE DOJ MISAPPRECIATED THE FACT THAT RESPONDENTS WERE ENGAGED IN THE
ILLEGAL IMPORTATION, SALE AND DISTRIBUTION OF COUNTERFEIT SOFTWARE AS
EVIDENCED BY THE ITEMS PURCHASED DURING THE TEST-BUY AND THE ITEMS
SEIZED FROM RESPONDENTS PREMISES.
III. THE DOJ MISAPPRECIATED THE LAW ON COPYRIGHT INFRINGEMENT AND UNFAIR
COMPETITION.
IV. ONLY TWO OUT OF THE NINE RESPONDENTS BOTHERED TO FILE COUNTERAFFIDAVITS; HENCE, THE CHARGES AGAINST SEVEN [RESPONDENTS] REMAIN
UNCONTROVERTED.27
In its Comment, filed by the Solicitor General, the DOJ maintains that it did not
commit grave abuse of discretion in dismissing Microsofts complaint. 28
For their part, respondents allege in their Comment that Microsoft is guilty of forumshopping because its petition in CA-G.R. CV No. 54600 was filed ahead of, and has a
"common interest" with, this petition. On the merits, respondents reiterate their
claims in their motion to quash Search Warrant Nos. 95-684 and 95-685 that the
articles seized from them were either owned by others, purchased from legitimate
sources, or not produced by Microsoft. 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 corporation 29 left the
CD-ROMs with them for safekeeping. Lastly, respondents claim that there is no proof
that the CPU Sacriz and Samiano bought from them contained pre-installed
Microsoft software because the receipt for the CPU does not indicate "[s]oftware
hard disk." 30
In its Reply, Microsoft counters that it is not liable for forum-shopping because its
petition in CA-G.R. CV No. 54600 involved the Orders of the RTC partially quashing
Search Warrant Nos. 95-684 and 95-685 while this petition concerns the DOJ
Resolutions dismissing its complaint against respondents for copyright infringement
and unfair competition. On the merits, Microsoft maintains that respondents should
be indicted for copyright infringement and unfair competition. 31
The Issues
The petition raises the following issues:
(1) Whether Microsoft engaged in forum-shopping; and
(2) Whether the DOJ acted with grave abuse of discretion in not finding probable
cause to charge respondents with copyright infringement and unfair competition.
The Ruling of the Court
The petition has merit.

Microsoft did not Engage in Forum-Shopping

Forum-shopping takes place when a litigant files multiple suits involving the same
parties, either simultaneously or successively, to secure a favorable
judgment.32 Thus, it exists where the elements of litis pendentia are present,
namely: (a) identity of parties, or at least such parties who represent the same
interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity with respect to the two
preceding particulars in the two cases is such that any judgment that may be
rendered in the pending case, regardless of which party is successful, would amount
to res judicata in the other case.33Forum-shopping is an act of malpractice because
it abuses court processes.34 To check this pernicious practice, Section 5, Rule 7 of
the 1997 Rules of Civil Procedure requires the principal party in an initiatory
pleading to submit a certification against forum-shopping. 35 Failure to comply with
this requirement is a cause for the dismissal of the case and, in case of willful
forum-shopping, for the imposition of administrative sanctions.
Here, Microsoft correctly contends that it is not liable for forum-shopping. What
Microsoft appealed in CA-G.R. CV No. 54600 were the RTC Orders partially quashing
Search Warrant Nos. 95-684 and 95-685. In the present case, Microsoft is appealing
from 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 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 not amount to res
judicata in the present case. This renders forum-shopping impossible here.
The DOJ Acted with Grave Abuse of Discretion
in not Finding Probable Cause to Charge Respondents with
Copyright Infringement and Unfair Competition
Generally, this Court is loath to interfere in the prosecutors discretion in
determining probable cause 36 unless such discretion is shown to have been
abused.37 This case falls under the exception.
Unlike the higher quantum of proof beyond reasonable doubt required to secure a
conviction, it is the lower standard of probable cause which is applied during the
preliminary investigation to determine whether the accused should be held for trial.
This standard is met if the facts and circumstances incite a reasonable belief that
the act or omission complained of constitutes the offense charged. As we explained
in Pilapil v. Sandiganbayan:38
The term [probable cause] does not mean "actual and positive cause" nor does it
import absolute certainty. It is merely based on opinion and reasonable belief. Thus,
a finding of probable cause does not require an inquiry into whether there is
sufficient evidence to procure a conviction. It is enough that it is believed that the

act or omission complained of constitutes the offense charged. Precisely, there is a

trial for the reception of evidence of the prosecution in support of the charge.
PD 49 and Article 189(1)
Section 539 of PD 49 ("Section 5") enumerates the rights vested exclusively on the
copyright owner. Contrary to the DOJs ruling, the gravamen of copyright
infringement is not merely the unauthorized "manufacturing" of intellectual works
but rather the unauthorized performance of any of the acts covered by Section 5.
Hence, any person who performs any of the acts under Section 5 without obtaining
the copyright owners prior consent renders himself civilly 40 and criminally41 liable
for copyright infringement. We held in Columbia Pictures, Inc. v. Court of
Appeals:42
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.
(Emphasis supplied)
Significantly, under Section 5(A), a copyright owner is vested with the exclusive
right to "copy, distribute, multiply, [and] sell" his intellectual works.
On the other hand, the elements of unfair competition under Article 189(1) 43 of the
Revised Penal Code are:
(a) That the offender gives his goods the general appearance of the goods of
another manufacturer or dealer;
(b) That the general appearance is shown in the (1) goods themselves, or in the (2)
wrapping of their packages, or in the (3) device or words therein, or in (4) any other
feature of their appearance[;]
(c) That the offender offers to sell or sells those goods or gives other persons a
chance or opportunity to do the same with a like purpose[; and]
(d) That there is actual intent to deceive the public or defraud a competitor. 44
The element of intent to deceive may be inferred from the similarity of the goods or
their appearance.45
On the Sufficiency of Evidence to
Support a Finding of Probable Cause
Against Respondents
In its pleadings filed with the DOJ, Microsoft invoked three clusters of evidence to
support its complaint against respondents, 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
these pieces of evidence because: (1) the "obligations between the parties is civil
and not criminal" considering that Microsoft merely sought the issuance of Search
Warrant Nos. 95-684 and 95-685 to pressure Beltron to pay its obligation under the
Agreement, and (2) the validity of Microsofts termination of the Agreement must
first be resolved by the "proper court." On the other hand, the DOJ ruled that
Microsoft failed to present evidence proving that what were obtained from
respondents were counterfeit Microsoft products.
This is grave abuse of discretion.47
First. Being the copyright and trademark owner of Microsoft software, Microsoft
acted well within its rights in filing the complaint under I.S. No. 96-193 based on the
incriminating evidence obtained from respondents. Hence, it was highly irregular for
the DOJ to hold, based on the RTC Order of 19 July 1996, that Microsoft sought the
issuance of Search Warrant Nos. 95-684 and 95-685, and by inference, the filing of
the complaint under I.S. No. 96-193, merely to pressure Beltron to pay its overdue
royalties to Microsoft. Significantly, in its Decision in CA-G.R. CV No. 54600 dated 29
November 2001, the Court of Appeals set aside the RTC Order of 19 July 1996.
Respondents no longer contested that ruling which became final on 27 December
2001.
Second. There is no basis for the DOJ to rule that Microsoft must await a prior
"resolution from the proper court of (sic) whether or not the [Agreement] is still
binding between the parties." Beltron has not filed any suit to question Microsofts
termination of the Agreement. Microsoft can neither be expected nor compelled to
wait until Beltron decides to sue before Microsoft can seek remedies for violation of
its intellectual property rights.
Furthermore, some of the counterfeit CD-ROMs bought from respondents were
"installer" CD-ROMs containing Microsoft software only or both Microsoft and nonMicrosoft software. These articles are counterfeit per se because Microsoft does not
(and could not have authorized anyone to) produce such CD-ROMs. The copying of
the genuine Microsoft software to produce these fake CD-ROMs and their
distribution are illegal even if the copier or distributor is a Microsoft licensee. As far
as these installer CD-ROMs are concerned, the Agreement (and the alleged question
on the validity of its termination) is immaterial to the determination of respondents
liability for copyright infringement and unfair competition.
Lastly, Section 10(b)48 of the Agreement provides that Microsofts "rights and
remedies" under the contract are "not xxx exclusive and are in addition to any other
rights and remedies provided by law or [the] Agreement." Thus, even if the

Agreement still subsists, Microsoft is not precluded from seeking remedies under PD
49 and Article 189(1) of the Revised Penal Code to vindicate its rights.
Third. The Court finds that the 12 CD-ROMs ("installer" and "non-installer") and the
CPU with pre-installed Microsoft software Sacriz and Samiano bought from
respondents and the 2,831 Microsoft CD-ROMs seized from respondents suffice to
support a finding of probable cause to indict respondents for copyright infringement
under Section 5(A) in relation to Section 29 of PD 49 for unauthorized copying and
selling of protected intellectual works. The installer CD-ROMs with Microsoft
software, to repeat, are counterfeit per se. On the other hand, the illegality of the
"non-installer" CD-ROMs purchased from respondents and of the Microsoft software
pre-installed in the CPU is shown by the absence of the standard features
accompanying authentic Microsoft products, namely, the Microsoft end-user license
agreements, users manuals, registration cards or certificates of authenticity.
On the 2,831 Microsoft CD-ROMs49 seized from respondents, respondent Beltron, the
only respondent who was party to the Agreement, could not have reproduced them
under the Agreement as the Solicitor General 50 and respondents contend. Beltrons
rights51 under the Agreement were limited to:
(1) the "reproduc[tion] and install[ation of] no more than one copy of [Microsoft]
software on each Customer System hard disk or Read Only Memory ("ROM")"; and
(2) the "distribut[ion] xxx and licens[ing of] copies of the [Microsoft] Product [as
reproduced above] and/or acquired from Authorized Replicator or
Authorized Distributor) in object code form to end users."
The Agreement defines an authorized replicator as "a third party approved by
[Microsoft] which may reproduce and manufacture [Microsoft] Product[s] for
[Beltron] xxx."52 An authorized distributor, on the other hand, is a "third party
approved by [Microsoft] from which [Beltron] may purchase MED 53 Product."54 Being
a mere reproducer/installer of one Microsoft software copy on each customers hard
disk or ROM, Beltron could only have acquired the hundreds of Microsoft CD-ROMs
found in respondents possession from Microsoft distributors or replicators.
However, respondents makes no such claim. What respondents 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 Microsofts prior authorization.
The counterfeit "non-installer" CD-ROMs Sacriz and Samiano bought from
respondents also suffice to support a finding of probable cause to indict respondents
for unfair competition under Article 189(1) of the Revised Penal Code for passing off
Microsoft products. From the pictures of the CD-ROMs packaging, 55 one cannot

distinguish them from the packaging of CD-ROMs containing genuine Microsoft

software. Such replication, coupled with the similarity of content of these fake CDROMs and the CD-ROMs with genuine Microsoft software, implies intent to deceive.
Respondents contention that the 12 CD-ROMs Sacriz and Samiano purchased
cannot be traced to them because the receipt for these articles does not indicate its
source is unavailing. The receipt in question should be taken together with
Microsofts claim that Sacriz and Samiano bought the CD-ROMs from
respondents.56Together, these considerations point to respondents as the vendor of
the counterfeit CD-ROMs. Respondents do not give any reason why the Court should
not give credence to Microsofts claim. For the same reason, the fact that the
receipt for the CPU does not indicate "[s]oftware hard disk" does not mean that the
CPU had no pre-installed Microsoft software. Respondents Keh and Chua admit in
their counter-affidavit that respondents are the "source" of the pre-installed MS-DOS
software.
WHEREFORE, we GRANT the petition. We SET ASIDE the Resolutions dated 26
October 1999, 3 December 1999, 3 August 2000, and 22 December 2000 of the
Department of Justice.
SO ORDERED.

Pearl and Dean Inc. v Shoemart Inc. GR No. 148222, August 15, 2003

Facts:

Plaintiff P and D is engaged in manufacturing advertising display units called as light

boxes. These are specialty printed posters with plastic sheets and illuminated back
lights that are mainly used as stationeries. They secure copyright registration over
these advertising light boxes and marketed using the trademark poster ads. They
applied for the registration of trademark before the Bureau of Patents, Trademark
and Technology Transfer which was approved on September 12, 1988. P and
D negotiated with the defendant Shoemart for the lease and installation of the light
boxes in SM City North Edsa but was given an alternative to have them leased to SM
Makati and SM Cubao while the said branch was under construction. Only the
contract with SM Makati was returned with signature. In 1986 the counsel of
Shoemart informed P and D that it is rescinding its contract for SM Makati due to
non-performance of the terms thereof. Two years later, the Metro Industrial Services,
the same company contracted by the plaintiff to fabricate their display units offered

to construct light boxes for the Shoemart chain of stores wherein 10 light boxes
were created for them. Upon the termination of contract with Metro Industrial
Service, SM hired EYD Rainbow Advertising Co. to make light boxes. When P and
D knew about the exact copies of its light boxes installed at SM City branches in
1989, it investigated and found out that North Edsa Marketing Inc (NEMI), sister
company of SM was primarily selling ad space in lighted display units. P and D sent
letter to both NEMI and SM enjoining them to cease from using the subject light
boxes and remove them from SM establishments. It also demanded to discontinue
the use of its trademark poster ads with compensatory damages of 20M. SM
suspended the lease of light boxes in its branches while NEMI took down its
advertisement for poster ads. Claiming both failed to meet its demand P and D filed
a case for infringement of trademark, copyright, unfair competition and damages.

SM denied the charges against it and noted that the registration of mark poster
ads is limited to stationeries like letterhead and envelope. It further stresses that it
independently develop its own poster panels using techniques and available
technology without notice to P and Dcopyright. It further contends that poster ads
is a generic name that cannot be appropriated for a trademark and that P and Ds
advertising display units contained no copyright notice in violation of Section 27 of
P.D. 49. NEMI likewise repleaded the averments of SM and denied to have
manufactured, installed or advertised the display units. The RTC decided in favor of
P and D but on appeal the Court of Appeals reversed its decision. In its judgment its
stand is that the copyright of the plaintiff is limited to its technical drawings only
and not the light boxes itself. When a drawing is technical, the copyright over the
drawing does not extend to actual object. Thus the CA is constrained to adopt the
view of the respondents that the poster ads is a generic poster term ads and in
the absence of convincing proof that such wording acquired secondary meaning, the
P and Ds exclusive right to use poster ads is limited to what is written on its
certificate of registration which is stationaries.

Issue:

Whether or not there is patent infringement

Ruling:

It held that the petitioner never secured patent for the light boxes. Without any
acquired rights to protect its invention it cannot legally prevent anyone from
manufacturing the same. There can be no infringement of a patent until a patent
has been issued, since whatever right one has to the invention covered by the
patent arises alone from the grant of patent. Inventors have no common law right
to monopoly of his work. He has the right to invent but once he voluntarily discloses
it the world is free to copy and use it. A patent gives the inventor the exclusive right
to make, sell, use and exclude others from using his invention. Assuming the
petitioners ad units were patentable, he made them public by submitting its
engineering drawings to the National Library. To legally preclude others from
copying and profiting from ones invention, patent is a primary requirement. The
ultimate goal of a patent system is to bring new designs and technologies into the
public domain through disclosure. Ideas, once disclosed to the public without the
protection of a valid patent, are subject to appropriation without significant
restraint. Therefore, without any patent secured to protect ones work, there is no
protection against its use by the public. Petitioner mainly secured copyright in which
its design is classified as class O limited to box wraps, pictorial illustration, labels
and tags. Thus its copyright is covered only the works falling within this category.
Moreover, the term poster ads is generic and incapable to be used as trademark
thus the respondents are not held guilty of the charges against them.

Manly Sportswear Manufacturing, Inc vs. Dadodette Enterprise

G.R. No. 165306
September 20, 2005

FACTS:

On March 17, 2003, RTC- Quezon City, Branch 83 issued a search warrant
against Dadodette Enterprises and/or Hermes Sports Center after finding reasonable
grounds that respondents violated Sections 172 and 217 of Republic Act (RA) No.
8293. Respondents then moved to quash and annul the search warrant claiming
that the sporting goods manufactured by and/or registered in the name MANLY are
ordinary hence, not among the classes protected under Sec. 172 of RA 8293.
On June 10, 2003 the trial court granted the motion to quash and declared the
search warrant issued as null and void. MANLY filed a motion for reconsideration on
August 11, 2003, but was later on denied for lack of merit.

After denial of the motion for reconsideration, MANLY filed a petition for review of
certiorari in the Court of Appeals but was later on denied.

ISSUE:

W/N the copyrighted products of MANLY are original creations subject to

the protection of RA 8293.

RULING:

No. The copyright certificates issued in favor of MANLY constitute a prima

facie evidence of validity and ownership. However, presumption of validity is not
created when a sufficient proof or evidence exist that may cast a doubt on the
copyright validity. In the case at bar, validity and originality will not be presumed
since the copyrighted products of MANLY are not original creations considering that
these products are readily available in the market under various brands. Moreover,
no copyright accrues in favor of MANLY despite the issuance of the copyright
certificate this purely serves as a notice of recording and registration of the work
and is not a conclusive proof of copyright ownership as provided in Sec. 2, Rule 7 of
the Copyrights Safeguards and Regulations.

PHOENIX PUBLISHING HOUSE, INC., petitioner

vs.
JOSE T. RAMOS AND SOCORRO C. RAMOS, doing business as National Book
Store, and COURT OF APPEALS, respondents.

PARAS, J.:
This petition originated in an action for damages arising from an alleged
infringement of petitioner's copyright for two books entitled "General Science Today
for Philippine Schools, First Year" and "General Science Today for Philippine Schools,

Second Year," both authored by Gilman, Van Houten and Cornista and first published
in 1961. Named plaintiffs as "copyright proprietors of said books" were Phoenix
Publishing House, Inc., Purita Dancel-Cornista, Phil N. Gilman, and L.F. Van Houten.
The complaint charged that defendants, now herein private respondents 'reprinted,
published, distributed and sold said books in gross violation of the Copyright Law
and of plaintiffs' rights to their damage and prejudice" and prayed for actual, moral
and exemplary damages as well as for attorney's fees and expenses of litigation.
After trial, judgment was rendered, the dispositive portion of which is as follows
WHEREFORE, judgment is hereby rendered, dismissing plaintiff's action. Instead,
judgment is (sic) hereby rendered in favor of the defendants and against the
plaintiff (sic), and orders the latter to pay the defendants by way of damages as and
for attorney's fees the amount of P5,000.00. The writ of preliminary injunction is
hereby dissolved, and the copies of General Science Today mentioned in Exhibits M
and M-1 are hereby ordered returned to the defendants against proper receipt. (p.
54, Rollo)
From the aforesaid judgment, petitioner Phoenix Publishing House, Inc. appealed to
the Court of Appeals (under CA-G.R. No. 39498-R) on the grounds that the lower
court erred
1. In not holding that appellees had lost their right to interpose the defense of
illegality or irregularity of appellant's copyright;
2. In holding that appellant's copyright is not entitled to protection for allegedly not
having been validly obtained;
3. In holding that the evidence presented was insufficient to establish that the
books seized from appellees were spurious;
4. In holding that appellees were not liable for damages because they had no
knowledge that the books they sold were pirated or spurious; and
5. In dismissing the complaint and sentencing appellant to pay attorney's fees. (p.
54, Rollo)
In a Decision of the Court of Appeals promulgated on June 8, 1970 (penned by
Justice Hermogenes Concepcion, Jr. and concurred in by Justices Eulogio S. Serrano
and Lourdes P. San Diego), the lower court's judgment was affirmed.
Against this Decision, petitioner filed the instant petition for review assigning
several errors to have been allegedly committed by respondent court.
In a Resolution dated August 25, 1970 the petition was given due course "but only
insofar as the award of attorney's fees is concerned."

On this issue, petitioner contends that respondent court erred in assigning

attorney's fees against petitioner for no other apparent reason than for losing its
case, contrary to the fundamental rules settled by jurisprudence that a penalty
should not be set on the right to litigate (Tan Ti v. Alvear, 26 Phil. 566) nor should
counsel's fees be awarded everytime a party wins a lawsuit (Jimenez v. Bucoy, 103
Phil. 40) unless it appears, which does not in petitioner's case, that the suit
instituted by the losing party was clearly unfounded (Peralta et al. v. Alipio, 97 Phil.
719) and, at all events, the court must state the reason for the award of attorney's
fees (Buan v. Camaganacan, 16 SCRA 321) which reason the decision in question
does not indicate (pp. 11-12, Rollo).
The law limits the instances in which attomey's fees may be recovered. Thus, the
Civil Code provides:
ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers laborers and skilled
workers;
(8) In actions for indemnity under workmen's compensation and employer's liability
laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) In any other case where the court deems it just and equitable that attorney's
fees and expenses of litigation should be recovered;
In all cases, the attorney's fees and expenses of litigation must be reasonable.
Obviously, this case cannot fall under pars. 1, 2, 3, 5, 6, 7, 8, 9 & 10 of the
aforequoted article. If at all, award is under either pars. 4 or 11 thereof.
The evidence on record however, shows that petitioner secured the corresponding
copyrights ( Exhs. U and V) for its books. These copyrights were found to be all right

by the Copyright Office and petitioner was always conceded to be the real owner
thereof. It was on the strength of these facts that petitioner filed the complaint
against respondents. Through a proper search warrant (Exh. "M") obtained after
petitioner was convinced that respondents were selling spurious copies of its
copyrighted books, the books were seized from respondents and were Identified to
be spurious. In the face of these facts, it cannot be said that the case is clearly an
unfounded civil action or proceeding (par. 4. Art. 2208).
The lower court justified its award as follows:
It is obvious, however, that the defendants had to get the services of counsel to
vindicate themselves before the Court and those watching for the ultimate decision
in the instant case. Considering the professional standing of defendant's counsel,
and the nature and volume of the work performed by said counsel and discernible
from the records of the instant case, and considering, further, that plaintiff itself
assesses the services of its own counsel fee for defendants' attorneys in the amount
of P5,000.00 would not be unconscionable. (p. 95, Record on Appeal)
We do not find this as enough justification for such an award under par. 11 of Article
2208.
In a long line of decisions, We have consistently ruled that it is not sound policy to
place a penalty on the right to litigate.
WHEREFORE, the decision of respondent Court of Appeals is MODIFIED by deleting
therefrom the award of attorney's fees against petitioner.
SO ORDERED.