Sanrio Company Limited vs. Lim

A public prosecutor's finding of no probable cause will not be disturbed absent a clear showing of grave abuse of discretion, which is absent where the prosecutor rationally finds the accused lacked knowledge of the goods' infringing nature due to sourcing them from authorized manufacturers.

Sanrio Company Limited, a Japanese corporation owning copyrights to characters such as Hello Kitty, distributes its products in the Philippines through exclusive distributor Gift Gate Inc. (GGI). GGI licensed local manufacturers—JC Lucas Creative Products, Inc., Paper Line Graphics, Inc., and Melawares Manufacturing Corporation—to produce Sanrio items for the local market. Counterfeit products flooding the market prompted GGI to hire IP Manila Associates (IPMA), which identified respondent Edgar Lim's Orignamura Trading as a retailer of fake Sanrio items. IPMA agents executed a joint affidavit, leading the NBI to secure a search warrant and seize Sanrio merchandise from respondent's premises on May 30, 2000.

• Copyright Ownership and Distribution: Sanrio owns the copyrights to various animated characters. GGI acts as its exclusive local distributor and licensed specific local manufacturers to produce Sanrio items.
• Discovery of Counterfeits: IPMA conducted test-buys and identified respondent's Orignamura Trading as selling counterfeit Sanrio products. This led to the execution of a search warrant on May 30, 2000, and the seizure of various Sanrio items.
• Criminal Complaint: On April 4, 2002, almost two years after the search, petitioner filed a complaint-affidavit charging respondent with violation of Section 217 (in relation to Sections 177 and 178) of the Intellectual Property Code.
• Respondent's Defense: Respondent asserted he was a mere retailer who did not reproduce or manufacture the copyrighted items. He claimed he purchased his merchandise from authorized manufacturers—JC Lucas, Paper Line Graphics, and Melawares—supported by official receipts.
• Prosecutorial Findings: The TAPP and the Office of the Chief State Prosecutor found that respondent bought the items from legitimate sources and relied on the manufacturers' representations that the goods were genuine. Consequently, the prosecutors determined respondent did not possess the requisite knowledge that the items were infringing copies and dismissed the complaint.

• Prescription: Petitioner argued that the CA erred in concluding the offense had prescribed, asserting that the pendency of a preliminary investigation suspends the running of the prescriptive period.
• Grave Abuse of Discretion: Petitioner contended the DOJ committed grave abuse of discretion in dismissing the complaint, maintaining that respondent is liable for copyright infringement even if he obtained the merchandise from legitimate sources because he sold counterfeit goods.

• No Criminal Liability: Respondent countered that he committed no violation of the IPC because he was only a retailer and did not reproduce or manufacture the copyrighted items, thus not transgressing petitioner's economic rights.
• Lack of Knowledge: Respondent maintained that he obtained his merchandise from authorized manufacturers of petitioner's products and relied on their representations, negating the knowledge or suspicion required for criminal liability under Section 217.3 of the IPC.

• Prescription: Whether the alleged violation of the Intellectual Property Code had prescribed due to the lapse of time before the filing of the information in court.
• Grave Abuse of Discretion: Whether the DOJ committed grave abuse of discretion in finding no probable cause against respondent, notwithstanding respondent's claim of having sourced the goods from legitimate manufacturers.

• Prescription: The offense had not prescribed. The prescriptive period for violations of special laws is interrupted by the institution of proceedings against the accused. The timely filing of the complaint-affidavit for preliminary investigation tolled the running of the prescriptive period under Section 2 of Act 3326, rendering the CA's ruling on prescription erroneous.
• Grave Abuse of Discretion: No grave abuse of discretion attended the DOJ's dismissal of the complaint. Probable cause is determined by the public prosecutor, who is afforded wide latitude of discretion in evaluating evidence. The prosecutors consistently and rationally found no probable cause because respondent demonstrated he sourced the goods from legitimate manufacturers and lacked knowledge of their infringing nature. Absent any arbitrary, capricious, or whimsical exercise of discretion, the prosecutor's factual findings are binding and not subject to judicial review.

• Interruption of Prescriptive Period by Preliminary Investigation — The filing of a complaint for preliminary investigation interrupts the prescriptive period of criminal responsibility for offenses penalized by special laws. Prescription begins to run again only if the proceedings are dismissed for reasons not constituting jeopardy.
• Judicial Non-Interference with Prosecutorial Discretion — Courts generally do not interfere with a public prosecutor's determination of probable cause and the decision to file or dismiss a criminal information. Judicial review via certiorari is an exception, permitted only upon a clear showing of grave abuse of discretion, defined as an arbitrary, capricious, whimsical, or despotic exercise of discretion amounting to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law.

• "Because a public prosecutor is the one conducting a preliminary investigation, he determines the existence of probable cause. Consequently, the decision to file a criminal information in court or to dismiss a complaint depends on his sound discretion."
• "judicial review is allowed where respondent has clearly established that the prosecutor committed grave abuse of discretion... when the prosecutor has exercised his discretion in an arbitrary, capricious, whimsical or despotic manner by reason of passion or personal hostility, patent and gross enough to amount to an evasion of a positive duty or virtual refusal to perform a duty enjoined by law."

• Brillantes v. Court of Appeals, G.R. Nos. 118757 & 121571, 19 October 2004 — Followed as controlling precedent affirming that the filing of a complaint for preliminary investigation interrupts the period of prescription of criminal responsibility.
• People v. Olarte, 125 Phil. 895 (1967) — Cited as the original basis for the rule that preliminary investigation tolls the prescriptive period.
• Glaxosmithkline Philippines, Inc. v. Khalid Mehmood Malik, G.R. No. 166924, 17 August 2006 — Followed for the doctrine that courts generally do not interfere with preliminary investigations and that judicial review is an exception available only upon a showing of grave abuse of discretion.
• Baviera v. Paglinawan, G.R. No. 170602, 8 February 2007 — Cited for the definition of probable cause and the principle that the prosecutor alone determines the sufficiency of evidence to establish probable cause.

• Section 217 (in relation to Sections 177 and 178), Republic Act No. 8293 (Intellectual Property Code): Defines criminal penalties for copyright infringement and establishes liability for possessing infringing copies with knowledge, or reason to know, of their infringing nature for purposes of sale or distribution. The DOJ dismissed the complaint because the requisite knowledge was absent.
• Sections 1 and 2, Act No. 3326: Prescribes the periods for the prescription of offenses penalized by special acts and provides that prescription is interrupted when proceedings are instituted against the guilty person. Applied to correct the CA's finding of prescription, as the filing of the complaint tolled the period.
• Rule 112, Section 1, Rules of Court: Defines preliminary investigation as an inquiry to determine whether there is sufficient ground to engender a well-founded belief that a crime has been committed and the respondent is probably guilty. Cited to emphasize the prosecutor's role in determining probable cause.

Reynato S. Puno (C.J.), Angelina Sandoval-Gutierrez, Adolfo S. Azcuna, Teresita J. Leonardo-De Castro.