TL;DR

A forged Deed of Assignment cannot legally transfer copyright ownership, even if registered with the National Library. The Supreme Court affirmed that unauthorized reproduction, importation, and sale of copyrighted textbooks constitute copyright infringement. This means businesses must rigorously verify the authenticity of copyright assignments before dealing with copyrighted material, as registration alone does not validate a fraudulent transfer. Companies that import and sell copyrighted works based on forged documents will be held liable for infringement, regardless of whether they were aware of the forgery.

The Case of the Counterfeit Copyright: When a Signature Undermines Intellectual Property Rights

This case revolves around a dispute between M.Y. Intercontinental Trading Corporation (MYITC) and St. Mary’s Publishing Corporation (St. Mary’s) concerning copyright ownership of educational textbooks. St. Mary’s, the original copyright holder, claimed MYITC infringed on their copyright by importing and selling textbooks. MYITC countered, asserting they legitimately acquired copyright through a Deed of Assignment from St. Mary’s. The core legal battleground became the authenticity of this Deed of Assignment, and whether its registration validated MYITC’s copyright claim despite allegations of forgery.

The facts unfolded with a business relationship turned sour. St. Mary’s engaged MYITC for printing services in China, incurring significant debt. To settle this debt, MYITC presented a Deed of Assignment, purportedly signed by St. Mary’s president, Jerry Catabijan, transferring copyright to MYITC. Relying on this document, MYITC registered the copyright and began selling the textbooks. However, Catabijan vehemently denied signing the Deed, claiming forgery. Forensic analysis supported Catabijan’s claim, revealing significant discrepancies between his genuine signature and the one on the Deed. Despite MYITC’s copyright registration, the lower courts and ultimately the Supreme Court sided with St. Mary’s, finding the Deed of Assignment to be a forgery and thus invalid.

The Supreme Court emphasized that consent is paramount in contract formation, especially for copyright assignments. A forged signature negates consent, rendering the Deed of Assignment void from the beginning. Consequently, MYITC never legally acquired copyright, despite obtaining registration certificates. The Court clarified that copyright registration is merely prima facie evidence of ownership, rebuttable by contrary evidence, such as proof of forgery. Registration does not create rights; it only serves as notice. The true source of copyright ownership remains the valid transfer or original creation, neither of which MYITC could legitimately claim.

Furthermore, the Court addressed MYITC’s reliance on a previous declaratory relief case that recognized them as an unpaid seller with a lien on the textbooks. The Supreme Court clarified that the declaratory relief case did not grant MYITC copyright ownership or the right to sell the books in a manner that infringed on St. Mary’s copyright. The rights of an unpaid seller, such as lien and resale, are distinct from copyright ownership and cannot override intellectual property rights. The Court highlighted the fundamental principle of copyright law: exclusive economic rights belong to the copyright owner, and unauthorized exploitation of these rights constitutes infringement.

In analyzing the copyright infringement claim, the Court reiterated the two key elements: (1) ownership of a valid copyright, and (2) infringement of copyright by the respondent. St. Mary’s clearly established their valid copyright. MYITC, Allianz (who marketed and sold the books), and Fujian (the Chinese printer who authorized MYITC’s sales) were found to have infringed by engaging in unauthorized importation, marketing, and selling of St. Mary’s copyrighted textbooks. The Court underscored that lack of intent to infringe is not a defense in copyright infringement cases, highlighting the strict liability nature of intellectual property rights violations.

Regarding damages, the Supreme Court upheld the award of actual damages (calculated as 20% of gross sales), moral damages, exemplary damages, and attorney’s fees. The Court found bad faith on MYITC’s part due to the forged Deed of Assignment, justifying the moral and exemplary damages. The Court reasoned that those who benefit from a forged document are presumed to be responsible for the forgery, especially when they fail to present evidence to the contrary. This presumption, coupled with the established forgery, supported the finding of bad faith and the consequential damage awards.

Finally, the Supreme Court addressed MYITC’s compulsory counterclaim for unpaid debt from St. Mary’s. The Court ruled that the lower courts erred in dismissing this counterclaim. It clarified that compulsory counterclaims, arising from the same transaction as the main claim, must be addressed in the same case. The Court remanded the case back to the trial court to resolve MYITC’s counterclaims, acknowledging the intertwined nature of the debt and the copyright dispute. This aspect of the ruling emphasizes procedural efficiency and the importance of resolving all related issues within a single legal action.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
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