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NBI-Microsoft Corporation vs. Judy Hwang, G.R. No.

147043, 21 June 2005 (supra:elements

unfair comp)

In May 1993, Microsoft Corporation and Beltron Computer Philippines, Inc. entered into a
Licensing Agreement. Under Section 2(a) of the Agreement, Microsoft authorized Beltron, for a
fee, to:
1. Reproduce and install no more than one copy of Windows on each Customer System hard disk;
2. Distribute directly or indirectly and license copies of Windows (reproduced as per Section 2 of
the Agreement and/or acquired from an Authorized Replicator or Authorized Distributor .

Their agreement allowed either party to terminate if one fails to comply with their respective
obligations. Microsoft terminated the Agreement in June 1995 by reason of Beltrons non-
payment of royalties. Later, Microsoft learned that Beltron was illegally copying and selling
copies of Windows. Microsoft then sought the assistance of the National Bureau of Investigation.
NBI agents made some purchase from Beltron where they acquired a computer unit pre-installed
with Windows, 12 windows installer CDs packed as Microsoft products. The agents were not
given the end-user license agreements, user manuals, and certificates of authenticity for the
products purchased. They were given a receipt which has a header of T.M.T.C. (Phils) Inc.
BELTRON COMPUTER. TMTC stands for Taiwan Machinery Display and Trade Center.

A search warrant was subsequently issued where 2,831 CDs of Windows installers, among
others, were seized. Based on the items seized from Beltron, Microsoft filed a case of copyright
infringement against Beltron and TMTC as well as their officers (Judy Hwang et al) before the
Department of Justice (DOJ). Beltron, in its counter-affidavit, argued the following:

1. That Microsofts issue with Beltron was really just to have leverage in forcing Beltron to pay
the unpaid royalties; and that Microsoft should have filed a collection suit.
2. That the computer unit allegedly purchased by the NBI agents from them cannot be decisively
traced as coming from Beltron because the receipt issued to the agents did not list the computer
unit as one of the items bought.
3. That the 12 installers purchased by the agents which are actually listed in the receipt were not
manufactured by Beltron but rather they were genuine copies purchased by TMTC from an
authorized Microsoft seller in Singapore.
4. That the 2,831 installers seized from them were not a property of Beltron but rather they were
left to them by someone for safekeeping.

The DOJ secretary agreed with Beltron and dismissed the case. The Secretary ruled that the issue
of the authority of Beltron to copy and sell Microsoft products should first be resolved in a civil
suit. Microsoft appealed the decision of the DOJ secretary before the Supreme Court.
Meanwhile, Beltron filed a motion to quash the search warrant before the RTC that issued the
same. The RTC partially granted the quashal. The Court of Appeals reversed the RTC. Hwang et
al did not appeal the CA decision.

ISSUE: Whether the DOJ acted with grave abuse of discretion in not finding probable cause to
charge respondents with copyright infringement and unfair competition.
HELD: Yes. Section 5 of Presidential Decree 49 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 and criminally liable for copyright infringement.

ofthecopyright,and,therefore,protectedbylaw,and infringementofcopyright,orpiracy,

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) 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.
The element of intent to deceive may be inferred from the similarity of the goods or their

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.
Being the copyright and trademark owner of Microsoft software, Microsoft acted well within its
rights in filing the complaint before DOJ on the incriminating evidence obtained from Beltron.
Hence, it was highly irregular for the DOJ to hold that Microsoft sought the issuance of the
search warrants and the filing of the complaint merely to pressure Beltron to pay its overdue
royalties to Microsoft.
There is no basis for the DOJ to rule that Microsoft must await a prior resolution from the
proper court of 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, the articles seized from Beltron are counterfeit per se because Microsoft does not
(and could not have authorized anyone to) produce such CD installers The copying of the
genuine Microsoft software to produce these fake CDs 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 Beltrons liability for copyright infringement and unfair
competition. Beltrons defense that the box of CD installers found in their possession was only
left to them for safekeeping is not tenable.