IP Views

An Analysis of the Proportionality Principle in the IP Code of the Philippines

As highlighted by ABS-CBN v. Gozon, et al.
By: Joseph Christopher C. Balagtas & Jonathan Peter A. Gregorio

Background of the Case

ABS-CBN conducted live audio-video coverage of, and broadcasted the arrival of Angelo dela Cruz at NAIA and the subsequent press conference. ABS-CBN allowed Reuters Television to air the footage under a special embargo agreement, where no other Philippine subscriber of Reuters would be allowed to air the footage without ABS-CBN’s consent. As a Reuters subscriber, GMA-7 received a live video feed of dela Cruz’s arrival and immediately aired it live in its program Flash Report. ABS-CBN filed a Complaint for copyright infringement against Gozon, et al. Assistant Prosecutor Venturanza found probable cause to indict Dela Peña-Reyes and Manalastas. On the other hand, DOJ Secretary Gonzalez ruled in favor of Dela Peña-Reyes and Manalastas and held that good faith is a defense.

DOJ Acting Secretary Agra reversed Gonzalez and found probable cause to indict Dela Peña and Manalastas. The other respondents, Gozon, Duavit Jr., Flores, and Soho were also indicted for copyright infringement. The Court of Appeals reversed and set aside DOJ Secretary Agra’s resolution. The CA found that good faith exculpates the Respondents from criminal liability under the IP Code.

The Supreme Court ordered RTC to continue with the criminal proceedings against Dela Peña-Reyes and Manalastas, due to copyright infringement. Gozon, Duavit Jr., Flores, and Soho were not held liable because mere membership in GMA-7 Board of Directors does not mean they directly participated or exercised moral ascendancy over Dela Peña-Reyes and Manalastas. The SC further provided that Philippine laws on copyright infringement are mala prohibita. Criminal intent or mens rea is not required. Good faith is not a defense because it is the commission of the act that results in criminal liability.

ABS-CBN v Gozon, et al. vis-à-vis Willful Trademark Counterfeiting or Copyright Piracy on a Commercial Scale

Article 611 of the TRIPS Agreement requires member states to provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright piracy on a commercial scale. For other cases of infringement however, member states have discretion in providing for criminal procedures and penalties.2 Thus, for infringement that is not willful or not committed on a commercial scale, criminal procedures and penalties are not required by Article 61.3

The principle highlighted by ABS-CBN v Gozon, et al.4 is that cases of copyright infringement are mala prohibita, meaning knowledge or criminal intent are not required. Willfulness need not be proven, and good faith cannot be used as a defense, as the fact of commission of the crime is sufficient.

Thus, in providing for criminal procedures and penalties to trademark infringement and copyright piracy without requiring willfulness or it being done on a commercial scale, the IP Code is not only at par with Article 61, but is also fully compliant Article 1 of the TRIPS Agreement, which states that:

Members shall give effect to the provisions of this Agreement. Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement. Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.

The Proportionality of Criminal Procedure under the Philippine IP Code

Article 615 of the TRIPS Agreement provides that “[r]emedies available [for willful trademark counterfeiting or copyright piracy on a commercial scale] shall include imprisonment and/or monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity.”

The Principle of Proportionality in the Philippine legal system is encapsulated by Article II, Section 19 of the 1987 Philippine Constitution, which provides that excessive fines shall not be imposed, nor cruel, degrading, or inhuman punishment inflicted.6 A fine is deemed excessive when it is disproportionate to the offense committed.

Cruel, degrading, or inhuman punishment, on the other hand, means that the punishment must not be fragrantly or plainly oppressive, or wholly disproportionate to the nature of the offense, such as to shock the moral sense of the community.7 Merely because a statute provides a severe punishment does not make it cruel and unusual. The US provides certain guidelines to determine when a punishment is cruel and unusual.8 The punishment must not be so severe to be degrading to the dignity of human beings.9 It must not be applied arbitrarily.10 It must be acceptable to contemporary society.11 It must not be excessive, such that it must serve a penal purpose more effectively than a less severe punishment would.12

Article 41 (5)13 of the TRIPS Agreement provides that there is no obligation to put in place a judicial system for the enforcement of intellectual property rights distinct from that for the enforcement of law in general. Nor does it affect the capacity of members to enforce their laws in general.14 The Philippines’ criminal laws provide that special laws are generally considered mala prohibita. Therefore, the country’s TRIPs Agreement obligation does not require a departure from the application of local criminal laws.

As a special law, the IP Code is generally considered mala prohibita. Absent any provision providing that intent is necessary to constitute an offense, the mere commission of the act leads to criminal liability. The legislature therefore intended that criminal intent is not necessary to punish intellectual property rights violations. As highlighted by ABS-CBN v. Gozon, et al.,15 the airing of the live feed coverage for 5 seconds was enough to constitute a violation, regardless of the presence of good faith.

Given what the 1987 Philippine Constitution defines as proportional punishment and what the legislature intended in drafting the IP Code, the criminal procedure and penalties provided for are proportional. The mere fact that the IP Code provides for strict liability does not make the punishment cruel nor unusual. The punishment cannot be deemed to be fragrantly or plainly oppressive, or wholly disproportionate to the nature of the offense, considering that the legislature intended that the mere commission of the act constitutes criminal liability.

Furthermore, the IP Code contains nuances that further bolster the proportionality of penalties. Section 21716 provides for greater culpability given to repeat offenders for copyright infringement. The punishment becomes more severe for second, third, and subsequent offenses. The repetition highlights the willingness on the part of the violator to commit the infringement and the proportionality of the law in punishing the violation.17 Proportionality is also evident in cases of unfair competition in trademarks, where Section 16818 requires bad faith or fraudulent intent to render one criminally liable. It can be said that there is willingness or intent on the part of the violator because of the presence of bad faith or fraudulent intent. Proportionality is based on the presence of bad faith to render one criminally liable.19

The criminal procedure under the IP Code is in consonance with the TRIPs Agreement, in providing for a proportional penalty, in line with the gravity of the offense. However, other countries provide for a different set of standards to make one liable for intellectual property violations. These standards provide a threshold in determining the criminal liability of a violator. Comparing these thresholds from various jurisdictions may prove instructive in determining the proportionality principle in relation to the enforcement of our country’s IP Code.

Criminal Procedure for IP Enforcement in the United States:

The US also adheres to the generally accepted maxim of criminal law that ignorance of the law is no defense.20 However, justification for criminal liability is illusory when the activity proscribed is less reprehensible or not as universally condemned.21 Notably, the US Supreme Court has never addressed whether copyright infringement is a public welfare offense, and copyright infringement is not akin to the types of offenses the Court has found to be public welfare offenses.22

The US Supreme Court has held that a heightened standard of willfulness is required in highly technical statutes that apply to a broad range of individuals, and that this heightened mental state standard is appropriate in cases involving highly technical statutes because they present the danger of ensnaring average individuals engaged in apparently innocent conduct.23 The Copyright Act of the US is a highly technical statute which applies to all individuals in the society.24 There exists a clear danger of ensnaring people engaged in apparently innocent conduct.25

In a US District Court case entitled US v Moran,26 defendant Moran, a police officer for over twenty-two years, admitted to copying copyrighted motion pictures on video cassettes and then renting those copies to the public through his movie rental business. Mr. Moran testified that he believed that his actions were legal because he purchased the video cassettes from which he made the copies, he did not make multiple copies of any one tape he had purchased, and he did not try to rent both the purchased tape and the duplicate he made. After exploring the interpretation of willfulness in both the civil and criminal copyright contexts, Magistrate Judge Richard G. Kopf came to the conclusion that the standard enunciated by the Supreme Court in Cheek v. US27 should be applied. In Cheek, the Supreme Court held that showing willfulness requires proof that the defendant was aware of the duty at issue and also requires negating a defendant’s claim of either ignorance of the law or a good-faith belief in the lawfulness of the activity at issue. This negation is part of the government’s burden “because one cannot be aware that the law imposes a duty upon him and yet . . . believe that the duty does not exist.” The Court in US v Moran also held that the general rule is that ignorance of the law or mistake of the law is no defense to a criminal prosecution; but however, when the term "willfully" is used in complex statutory schemes, the term "willful" means a "voluntary, intentional violation of a known legal duty."

Criminal Procedure for IP Enforcement in the People’s Republic of China:

Because Article 6128 of the TRIPs agreement provides that criminal penalties must be available for infringements on a commercial scale, China has developed a threshold requiring a level of commercial activity before a violator may be held criminally liable.29 According to WTO panel reports, commercial pertains to buying and selling.30

Article 213 of the Chinese Criminal Law provides for criminal penalties in trademark infringement when the circumstances are serious.31 The threshold for seriousness requires that the illegal business operation volume of not less than 50,000 Yuan or the amount of illegal gains of at least 30,000 Yuan.32

Article 217 of the Chinese Criminal Law provides for penalties for violations for copyright infringement when the amount of illegal gains is relatively large or other serious circumstances.33 Judicial interpretation has defined this to mean at least 50,000 Yuan or the reproduction or distribution of at least 500 copies.34

As a country known for committing intellectual property infringement, China’s problem lies in local judicial protectionism, a problem in obtaining evidence, small damage awards, and a bias against foreign firms.35 However, China has reformed its IP laws to expand admissible evidence and increase damages in violations. It has also reformed legal structures and implemented new systems to limit protectionism and bias against foreign companies.36 Furthermore, to prevent local judicial protectionism, specialized intellectual property tribunals were launched as first instance courts, in Nanjing, Suzhou, Chengdu, and Wuhan in 2017 to ensure a fair trial and as a means to provide judges and technical investigators with specialized expertise, given the complex nature of intellectual property. 37

Criminal Procedure for IP Enforcement in Thailand:

Like the Philippines, under Thailand’s Copyright Act, liability for direct infringement is determined regardless of the intent of the infringer. Although Thai courts have never held that copyright infringement is a strict liability,38 under Thailand’s Copyright Act, one is already committing “simple” copyright infringement if there is a reproduction or adaptation, or a communication to the public of a copyrighted work without the permission of the copyright owner.39 Penalties for “simple” copyright infringement range from twenty thousand Baht up to two hundred thousand Baht.40 If, however, the offence is committed with a commercial purpose, the infringer shall be inflicted with imprisonment for a term from six months up to four years or a fine from one hundred thousand Baht up to eight hundred thousand Baht or both imprisonment and fine.41

Although both Thailand and the Philippines do not require intent or willfulness in making one criminally liable for copyright infringement, in Thailand the penalty for “simple” copyright infringement is merely punishable by a fine, and only if the offense is committed for a commercial purpose would the penalty be imprisonment plus a fine. On the other hand, in the Philippines, any form of copyright infringement, whether it be for a commercial purpose or not, automatically results in both imprisonment and a fine.

Criminal Procedure for IP Enforcement in Germany:

According to Germany’s Copyright Act of 1965 (as last amended by Article 1 of the September 1, 2017 Act), the copyright holders can sue the direct infringer and anybody who induces or contributes to an infringement. Claims for damages however require evidence of intent or negligence.42

In cases of willful copyright violations, a copyright holder can also press criminal charges against the infringer. The intentional infringement of copyright or neighbouring rights constitutes a criminal offence. Punishment is either a fine or imprisonment of up to three years, or in the event of commercial infringement (gewerbsmäßig), up to five years. Attempted infringement is an offence as well, however, instigation of criminal proceedings requires application by the rights holder or a public interest in the prosecution.43 Thus in Germany, for there to be criminal liability, the infringement must be willful or intentional.

Criminal Procedure for IP Enforcement in Japan

Under the Copyright Law of Japan, only intentional infringement is considered a criminal offence.44 Those criminally liable for copyright infringement shall be punishable by imprisonment for a term not exceeding ten years or a fine not exceeding ten million Yen, or both.

Fundamentally, Japanese copyright law is similar to the copyright laws of the United States.45 Thus, like in the United States, Japan requires intent or willfulness before one could be criminally liable for copyright infringement.

Conclusion

The criminal procedure under the Philippine IP Code complies with Article 61 of the TRIPs Agreement, in having a penalty at least for willful copyright and trademark infringement in a commercial scale, as well as providing for penalties proportional to the gravity of the offense defined under the IP Code. However, other countries, such as the USA and China, have provided for intellectual property policies that uphold a certain standard or threshold before a violator may be held criminally liable.

As opposed to the Philippines’ designation of intellectual property violations as generally mala prohibita, where intent is irrelevant, the US has centered criminal liability on intent to commit such violation. The US acknowledges that intellectual property is highly technical. Therefore, willfulness is essential for one to be held criminally liable. Likewise, criminal procedure in Germany and Japan can only be initiated if the infringement is willful or intentional. And in China, the threshold for criminal liability is only whether serious circumstances are present, determined through a commercial scale. The case of Thailand is also noteworthy in that “single” infringement may only result in a fine, but if the infringement is committed with a commercial purpose, it may result in imprisonment, a fine, or both.

It is also to be noted that in other countries, civil liability is always a strict liability offense, where good faith is not a defense; it is only in imposing criminal sanctions where good faith is an available defense--as opposed to the Philippine IP Code where strict liability is enforced both in civil and criminal infringement.

By requiring that willfulness be present and/or a threshold on the commercial scale of the violation, the criminal prosecution under the Philippine IP Code will provide for proportionality not just in the Philippine setting, but at par with international standards. These added requisites provide a progressive outlook on the gravity of intellectual property violations.

Also, in the case of ABS-CBN v Gozon, et al., Justice Leonen cited Lydia Pallas Loren’s Digitization, Commodification, Criminalization: The Evolution of Criminal Copyright Infringement and the Importance of the Willfulness Requirement46 to emphasize the purpose of the US Copyright Act’s main purpose: the promotion of knowledge and learning. The same article however stated that:

Criminal sanctions and the threat of criminal sanctions are extremely chilling, even to activity that does not cross the line into criminal activity, but only comes near it. This chilling effect creates a dilemma in the context of the Copyright Act, which seeks to encourage use of copyrighted works while simultaneously providing protection for copyright owners that results in the incentive to create these works. One way to assure that the activities which are close to the borderline of infringement are not chilled is to require proof of an intentional violation of a known legal duty for a criminal conviction, with a good-faith belief in the lawfulness of the activity negating willfulness.47

The article finally said that “Imposing criminal sanctions on those who cross the line, without requiring proof of a heightened mens rea, may result in an over-deterrence of the types of legal activities that approach the border between infringement and non-infringement.”48

It is thus odd that this article was cited by Justice Leonen to justify the denial of a good faith defense and the imposition of criminal penalties in ABS-CBN v Gozon, et al. for the inadvertent rebroadcasting for 5 seconds of ABS-CBN’s copyrighted broadcast.

Furthermore, in WIPO: The Enforcement Of Intellectual Property Rights By Means Of Criminal Sanctions: An Assessment, Honorable Justice Louis Harms, Judge of Appeal of the Supreme Court of South Africa, assessed the enforcement of intellectual property rights by means of criminal sanctions.49 He asserts that the criminal enforcement of IP rights usually concerns infringing trademark rights and copyright.50 These are equated to counterfeiting, which is a species of fraud and a form of deceit.51 Therefore, intent is essential to render one criminally liable.52 The act must be willful. Justice Harms claims that one may infringe IP rights and that will render civil liability.53 But to be held criminally liable, the infringement must equate to counterfeiting.54 Intent then becomes essential for criminal liability.

Thus, it can be argued that because counterfeiting implies fraud, intent is necessary to render one criminally liable for trademark and copyright infringement, even though these are punished by a special law in the Philippines.

The criminal prosecution of IP infringement in the Philippines has unparalleled effects today, as compared to previous years. The evolution of the online world has made information more accessible. WIPO described the internet as the world’s biggest copy machine.55 An unlimited number of copies can be made, without a degradation in quality.56 These copies can also be accessible and transmitted anywhere in the world in a matter of moments.57 In the Philippines then, the mere commission of infringement, regardless of the lack of intent, will render one criminally liable. This goes against the mindset of users that have no intent to commit a crime or may have accidentally accessed information.

Ultimately, applying the ABS-CBN case to internet users, the mere commission of the infringement, regardless of intent, would render one criminally liable. Good faith would not be a defense. This opposes the typical mindset of the user that everything online is free and merely opening a tab would not result in liability. This would result in a propensity towards committing infringement unknowingly. Strict liability would result in a chilling effect, in this digital age, that will inevitably progress as time goes by. Thus there is a need to temper criminal liability for online infringement.

As opposed to the ruling in ABS-CBN, unknowingly infringing activity should not render one criminally liable. Intent becomes indispensable to render one criminally liable for counterfeiting, as defined by Justice Harms. Regardless of criminal liability, the internet infringer would be civilly liable for the loss suffered by the IP rights owner.

With regard to the increase in infringement online, M Jansen, in The protection of copyright works on the internet - an overview, ascribes this to the simplicity of digital production, the ease and speed of digital transmission, and the ease in manipulating a work.58 Digitization makes works accessible to all users and can lead to one unknowingly infringing IP rights.59

In order to combat the prevalence of copyright infringement, the WIPO Copyright Treaty in 1996 contains a prohibition on circumvention. “Contracting Parties shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors…” The circumvention against the effective technological measures used by authors adds another layer of protection for works online. These can range from passwords, encryption, and the like, to protect the work.

Fortunately, Sec 216.1 of RA 10372 provided for an amendment to the IP Code, adding a prohibition on circumvention, applying a three layered protection to the Philippines. The work is protected by law, then by technology, and the protection measure itself is protected by law against circumvention.60 It is important to highlight that the law against circumvention provides that intent is necessary to render one criminally liable.61 A violator must willfully circumvent the password or the encryption.

The law against circumvention provides another layer of protection that can contribute to deterring the prevalence of online infringement in the digital world. In the Philippines, it further bolsters the necessity for standards, such as willfulness and a commercial threshold, in order to render an infringer criminally liable.

The TRIPS Agreement allows Member states to (1) craft their own laws that provide for a more extensive protection62 and (2) enforce its laws in accordance with how it enforces its own and other laws.63 Currently, the IP Code, being a special law, is mala prohibita. Therefore, the general rule is that intent or willfulness is not necessary. There is no violation with the covenant within the TRIPS Agreement. However, there are nuances that provide for more severe punishment for repeat offenders in copyright infringement or that recognize bad faith and deceit in unfair competition in trademarks.

Criminal procedures under the IP Code provide for proportional penalties, in line with the gravity of the offense, as defined by law. However, by amending the IP Code, requiring willingness and/or a commercial threshold will create an intellectual property policy at par with international standards. Hence, by requiring these, more teeth with be given to the enforcement of intellectual property in the Philippines. Furthermore, this policy will temper with the growing advancement and evolution of the internet in everyday life and the risks in the accessibility of information. The mere commission of the act will not automatically render a user criminally liable. The presence of intent and a commercial threshold will be in consonance with justice and equity in IP infringement violations.

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