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Does a forged deed of assignment confer rights?

01 January 2024

Does a forged deed of assignment confer rights?

A forged deed of assignment, even if registered with the relevant government office, does not confer rights to the assignee due to lack of consent of the copyright owner, as held by the Philippine Supreme Court in the case of M.Y. Intercontinental Trading Corporation, Tedwin T. Uy and Allianz Marketing and Publishing Corporation v. St. Mary’s Publishing Corporation and Jerry Vicente S. Catabijan (G.R. No. 249715, dated April 12, 2023, published only on December 12, 2023). Samples of the current copyrighted works of St. Mary’s are shown below:

Commercializing intellectual property rights such as that in a copyrighted work is clearly for the purpose of obtaining financial gain, and can be done mainly by any of the following means: use, assign or license. Just like in any business transaction, both the copyright owner and the assignee have to know what rights are being obtained or given up, and the parties must be in good faith. The facts of the case follow.

The transaction. Respondent St. Mary Publishing Corporation (SMPC) was in the publishing business, and was able to secure accreditation from the Department of Education, authorizing it to sell the textbooks to government offices without going thru the required public bidding. It needed funds for printing Pagpapaunlad ng Kasanayan sa Pagbasa (Binagong Edisyon) 1 to 6 and Developing Reading Power Enhanced-Combined Edition 1 to 6 (subject textbooks), written by its in-house author and managing editor who executed an absolute deed of assignment of the copyright over said books to SMPC which secured copyright registrations in its name over the same.

In 2005, SMPC entered into a financing agreement with Petitioners M.Y. Intercontinental Trading Corporation and owner Tedwin Uy (MITC collectively), sole agent of Fujian New Technology Color Making and Printing Company, based in China. Under the said agreement, MITC would lend SMPC P76,748,494.68 (about US$1.4 million) with 2% monthly interest to cover the printing costs of the subject textbooks. To draw against this loan, SMPC would issue purchase orders for printing to MITC and issue postdated checks in favour of MITC as payment of the loan. MITC would then confirm that funds are available and SMPC would issue authorization to print to Fujian which would then print the textbooks. The agreement allowed for additional orders, as well as penalty for late payment. Payment of the loan principal was to start from June 2009 up to June 2010. In 2009, SMPC issued additional purchase orders in the amount of P11,346,781.08 covering a total of 301,000 copies of new titles.

SMPC’s default. SMPC, however, started defaulting on its obligations, so Fujian did not deliver the books. To address the problem, several contracts were executed by SMPC with MITC: (i) a declaration of pledge of SMPC’s real properties with a promissory note, (ii) SMPC’s collectibles from its sale of various books were pledged to settle unpaid 2008, 2009 obligations to MITC, (iii) inventory of stocks of textbooks were likewise pledged, and (iv) to ensure payment by SMPC, the latter opened its books of accounts for inspection by MITC. Still more of SMPC’s checks bounced for insufficient funds, and to save their relationship, the parties entered into a memorandum of agreement (MOA) whereby the parties will open a joint bank account where all of SMPC’s collectibles for 2009 and 2010 would be deposited. Seventy percent of the amount collected would be applied to SMPC’s obligations with MITC, but if the amount is not sufficient, the deficiency could be applied to the 30 percent due SMPC.

Action of MITC. In October 2010, MITC filed a petition for declaratory relief before the Regional Trial Court of Mandaluyong (RTC Mandaluyong) for the purpose of determining the rights and obligations of the parties under their contracts. This court treated the contract with MITC as a sale of future goods, with MITC as the seller, and SMPC the buyer, and declared MITC as an unpaid seller with lien on the subject textbooks covered by the December 2009 purchase order. As an unpaid seller, RTC Mandaluyong ruled that MITC has the right to resell the textbooks, without copyright infringement, and the right to rescind the contract to print with SMPC, and that by virtue of the first sale doctrine, and considering its default, SMPC was declared as having lost all rights to control the sale of said textbooks, including the copyright thereof, and since the textbooks were printed and kept in China, the right to import the same.

Action of SMPC. In 2012, SMPC was able to confirm that MITC appointed Allianz to import, market and sell the subject texbooks, which it did, to the Department of Education, Zamboanga City, Municipality of Matnog, in Sorsogon, and the Municipality of Cabuyao Laguna using a purported copyright registration under SMPC’s name.

SMPC sued MITC, Fujian and Allianz before RTC Makati City (the trial court) for copyright infringement and prayed for actual, moral damages and attorneys’ fees amounting to P130.3 million (about US$2.4 Million). In its defense, petitioners MITC, Fujian and Allianz presented Uy, MITC’s president, who testified on SMPC’s failure to pay and that he received a signed deed of assignment of copyright from SMPC’s president Catabijan in 2010 which was notarized on March 29, 2010, and applied for copyright registration based on said deed nearly two years later, on January 18, 2012, in the name of MITC.

Catabijan denied executing the deed of assignment of copyright, claiming that his signature was forged, and presented reports from the Quezon City Police District and the National Bureau of Investigation with both finding that the signature on said deed of assignment is not the same as Catabijan’s authentic signature.

The trial court ruled in favor of SMPC and held that: (i) Fujian committed copyright infringement by authorizing MTIC to sell SMPC’s books since at that time SMPC was copyright owner, and used the long arm of the Berne convention to make Fujian liable, (ii) Allianz committed copyright infringement by printing, publishing and selling SMPC textbooks, (iv) ordered the petitioners to desist from copying, printing, using, importing, distributing, promoting and selling copies of said textbooks, as well as its revised editions in any format. Having examined the signatures on the deed and the reports of the police authorities, it declared that the deed was forged. The trial court further awarded damages to SMPC. Petitioners appealed to the Court of Appeals which was denied, hence, the appeal to the Supreme Court.

The Supreme Court rulings:

  • On MITC’s copyright registration: Copyright registration does not vest ownership of the copyright. “Petitioners’ rights as assignee originate from the deed of assignment. Its subsequent deposit and issuance of certificates of registration do not give them rights beyond what was assigned  in the contract. More importantly, the prima facie stated in the certificates of registration have been destroyed with the finding of forgery in Catabijan’s signature.” A certificate of registration creates no rebuttable presumption of copyright validity where other evidence in the record casts doubt on the question. In such a case, validity will not be presumed (Ching v. Salinas, 500 Phil 628, 2005).  The Supreme Court ordered the IPOPHL to cancel the copyright registrations issued under the name of petitioner M.Y. Intercontinental Trading Corporation.
  • On copyright infringement: There is copyright infringement when 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 the statute  on the owner of the copyright.” Petitioners did not dispute the acts committed. Without a valid deed of assignment, petitioners had no right to import or sell said books, infringing upon the exclusive economic rights of SMPC under Section 177 of the IP Code. Petitioners committed copyright infringement.
  • Nature of the contract between SMPC and MTIC: Contrary to the declaratory relief case, the contract between SMPC and MTIC is primarily a loan with payment of interest for printing services. It was also a contract for a piece of work and not a contract for the sale of goods. There was nothing in the parties’ contract that allowed the petitioners and their principal to sell the printed books due to default in payment. Citing Article 1731 of the Civil Code, an unpaid contractor has a right to retain the subject of the work by way of a pledge until payment. There is no right to resell the books by mere operation of law, otherwise the exclusive economic rights of the copyright owner will be prejudiced.
  • Award of civil damages: The Supreme Court found the award for reasonable damages, in lieu of actual damages, moral and exemplary damages, attorney’s fees and cost of litigation with basis, given that forgery has been established and that the presumption that responsibility for it falls on those who used and benefitted from the forged instrument, which are the petitioners.
  • Compulsory counterclaims: The Supreme Court, however, found that the trial court should not have ignored the claims of the petitioners against SMPC for its unpaid obligations, and thus remanded the case to RTC Makati to determine the propriety of the compulsory counterclaims.

About the author

 Editha R.  Hechanova

Editha R. Hechanova

leads the HECHANOVA Group’s intellectual property law practice. The Hechanova Group is made up of Hechanova & Co., Inc. an intellectual property consulting firm handling trademark and patent prosecution, copyright, searches and other non-contentious aspect of intellectual property, where she is President/CEO. The contentious IP practice is handled by the other member firm, Hechanova Bugay Vilchez & Andaya-Racadio, Lawyers which specialize in enforcement, litigation, ADR, licensing corporate, immigration law and taxation. Editha graduated from the University of the East with a business degree, major in Accounting, magna cum laude, and is a Certified Public Accountant. She is currently the President of the APP, an association of professionals who passed the patent agent qualifying examination (PAQE).  

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