NBI MICROSOFT CORPORATION & LOTUS DEVELOPMENT CORP. vs. JUDY C.

HWANG, BENITO KEH &

YVONNE K. CHUA/BELTRON COMPUTER PHILIPPINES INC., et.al

G.R. No. 147043. June 21, 2005

FACTS: Petitioner Microsoft Corporations, a corporation based in the United States, owns the copyright
and trademark to several software. The respondents are the officials of a domestic corporation Beltron
Computer Philippines, Inc. The two entered into a Licensing Agreement that Beltron, for a fee, to
reproduce and install no more than one copy of software on each Customer System hard disk in object
code form to end users.
However, Microsoft terminated the agreement for non-payment of royalties. Afterwards, Microsoft
learned that respondents were illegally copying and selling Microsoft software. For this reason, Microsoft
hired a private investigator with the assistance of NBI. Two persons pose as representatives of a
computer shop, bought computer hardware and software from respondents. The CPU contained
pre-installed Microsoft Windows 3.1 and MS-DOS software. 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.

On Nov. 17 1995, Microsoft applied for search warrants against respondents. After approval, 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 CD-ROMs containing Microsoft
software. The respondents Keh and Chua denied the charges against them. Nevertheless, DOJ State
Prosecutor Ong recommended the dismissal of the complaint for lack of merit and insufficiency of
evidence.

Microsoft filed a petition for certiorari for the resolution of Department of Justice, dismissing the case for
lack of merit against respondents for copyright infringement and unfair competition.

ISSUE: Whether or not the respondents are liable for copyright infringement and unfair competition

RULING: Yes, sect. 5 of PD 49 enumerates the rights vested exclusively on the copyright owner. Contrary
to the DOJs ruling, copyright infringement is not merely the unauthorized manufacturing of intellectual
works but rather the unauthorized performance of any of the acts covered by sect 5. Therefore, any
person who performs any of the acts under sect. 5 without obtaining the copyright owners prior consent
renders himself civilly and criminally liable for copyright infringement. Being the copyright and trademark
owner of Microsoft software, Microsoft acted well within its rights in filing the complaint based on the
evidence obtained from respondents.

Furthermore, some of the counterfeit CD-ROMs bought from respondents were installer CD-ROMs
containing Microsoft software only or both Microsoft and non-Microsoft 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. 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 is enough to support a
finding of probable cause to indict respondents for copyright infringement. 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.