G.R. No. 188933

G.R. No. 188933, February 21, 2023,
♦ Decision, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Zalameda, [J]
♦ Concurring Opinion, Singh, [J]

PHILIPPINE HOME CABLE HOLDINGS, INC., PETITIONER, VS. FILIPINO SOCIETY OF COMPOSERS, AUTHORS & PUBLISHERS, INC., RESPONDENT.

When a cable television system operator transmits a musical composition fixed in an audiovisual derivative work over a channel they control and operate, the operator is making that work accessible to members of the public from a place or time individually chosen by them. This is the essence of the "communication to the public" right in the Intellectual Property Code.

This resolves a Petition for Review1 under Rule 45 of the Rules of Court, assailing the February 27, 2009 Decision2 and July 21, 2009 Resolution3 of the Court of Appeals, Manila, in CA-G.R. CV No. 81083. The Court of Appeals affirmed, with modification, the October 20, 2003 Decision4 of the Regional Trial Court of Quezon City, Branch 90, finding Philippine Home Cable Holdings, Inc. civilly liable for copyright infringement.

Philippine Home Cable Holdings, Inc. (Home Cable) is a domestic corporation engaged primarily in the business of installing, operating, and maintaining a community antennae television system, commonly known as "cable television." As part of its business as a cable television system operator, it enters into channel distribution agreements with international broadcasters or originators. The international broadcasters or originators' channels are thus shown to Home Cable's fee-paying subscribers. Particularly, Home Cable had a channel distribution agreement with Satellite Television Asian Region Limited (Star TV) for VIVA Cinema, a 24-hour Tagalog movie channel,5 and a cable TV service affiliation agreement with Cable Box Office Shows and Systems (Cable Box) for "HBO service, WB television series/mini-series/animation, Hollywood Channel service, ESPN service, CNN International & TNT Cartoon Network services, CNBC & NBC services, MTV Asia service and MGM GOLD NETWORK."6

In 1995, Home Cable—then operating as Singing Makulay, Inc.—executed a Memorandum of Agreement with Precision Audio Video Service, Inc. (Precision Audio), a domestic corporation that produced and distributed videoke laser disc recordings.7 Based on the agreement, Home Cable purchased 24 volumes of laser discs containing videoke materials from Precision Audio.8 The contents of these laser discs would be made available on Home Cable's channel 38 for approximately five hours per day, excluding time allotted for advertising. Precision Audio was given 60 seconds of airtime for its own advertisements, while Home Cable reserved the right to air other paid advertisements on the channel.9 Under the terms of this agreement, Home Cable was responsible for and in control of operating channel 38, including providing the equipment such as laser disc and VHS players.10 In turn, Precision Audio guaranteed that it had full copyright over all the laser discs and that it had already acquired all necessary permits from relevant government agencies for the laser discs.11

A year later, Home Cable again executed a Memorandum of Agreement12 with Precision Audio, this time for the operation of channels 22, 32, and 52. This agreement also provided for Home Cable's responsibility and control over the three channels, content for which were to be provided by Precision Audio's videoke laser discs.13 As such, from 1997 to 1998, Home Cable carried Home Pinoy Karaoke on channel 22, playing Filipino songs, and Home English Karaoke on channel 32, which played English songs.14

The Filipino Society of Composers, Authors, and Publishers, Inc. (Filscap) is a non-stock and non-profit domestic association of Filipino composers, authors, and publishers.15 As found by the Regional Trial Court:

.... It had acquired by assignment, mandate, grant or by any other means, the representation and performance rights, mechanical reproduction and film synchronization rights into the musical compositions and/or literary works written and/or published by composers, authors and/or publishers affiliated to it as a society and/or to similar affiliated musical societies existing in foreign countries, like the American Society of Composers, Authors and Publishers, Inc. (ASCAP), Broadcast Music, Inc. (BMI), Performing Right Society Limited (PRSL), Australasian Performing Right Association Limited and Gesselschaft für Musikalische of Germany..... [Filscap] is representing or has represented practically [all] Filipino composers and has forty-five (45) foreign reciprocal agreements. It is granting or has granted licenses and is collecting or has collected royalties for the mechanical [production] of the above-mentioned compositions and works and is allotting and distributing or has allotted and distributed such royalties to their respective composers, authors and publishers. It has brought legal action for the protection of composers, authors and publishers of musical works against piracies of any kind, among other things[.]16

In July 1997, Filscap monitored Home Cable and found that its members' and foreign affiliates' musical compositions were being played on channels 22 and 32.17 It sent letters to Home Cable advising that Home Cable obtain a license from Filscap and pay the license fees for the continued use of its musical compositions on Home Cable's channels,18 but Home Cable did not respond.19 Then, on January 12 and 13, 1998, Filscap monitored channels 22 and 32 and again found that Home Cable continued to play its members' musical compositions despite not securing a license from Filscap.20

Thus, on February 16, 1998, Filscap filed with the Regional Trial Court a Complaint for injunction and damages21 against Home Cable. In its Complaint, it alleged that Home Cable "has been playing or otherwise performing or communicating to the public musical works included in the Filscap repertoire and despite full knowledge and nature of [Filscap's] existing right and ownership of the public performance right and the communication to the public right of said musical works in the Philippines[.]"22 As a result of Home Cable's alleged infringement of Filscap's copyright over the musical works, Filscap demanded at least PHP 1,000,000.00 in actual damages in the form of recovery of unpaid license fees from August 16, 1997 until the filing of the Complaint,23 as well as exemplary damages and attorney's fees.24

In its Answer to the Complaint, Home Cable argued that Filscap was not the real party in interest; that its secondary transmission of channels 22 and 32 was not public performance under copyright law; that Filscap's rights did not include the right of communication of the work to the public; and that Filscap or its principals had already been paid for Home Cable's use of the copyrighted materials.25

Following a trial, the Regional Trial Court issued its Decision26 finding Home Cable liable for copyright infringement. The dispositive portion of the Decision stated:

Upon appeal, the Court of Appeals modified the Regional Trial Court's Decision. While it affirmed the trial court's finding of copyright infringement, it reduced the damages awarded to Filscap. The Court of Appeals found that the award of actual damages did not have any basis; thus, Filscap was entitled only to PHP 500,000.00 in moderate damages.28 It also reduced the exemplary damages to PHP 500,000.0029 and the attorney's fees to PHP 100,000.00.30 The dispositive portion of the Court of Appeals' Decision stated:

WHEREFORE, in view of the foregoing, the Decision, dated October 20, 2003, of Branch 90 of the Regional Trial Court of Quezon City in Civil Case No. Q-98-33511 is hereby MODIFIED so that the amount of ₱1,000,000.00 as actual damages is DELETED and in lieu thereof, temperate damages in the amount of ₱500,000.00 is awarded. Further, the amount of ₱1,000,000.00 as exemplary damages is also REDUCED to ₱500,000.00 and the award of attorney's fees is likewise REDUCED to ₱100,000.00. In all other respects, said judgment is hereby AFFIRMED.

On September 14, 2009, Home Cable filed before this Court a Petition for Review on Certiorari33 under Rule 45 of the Rules of Court, assailing the Decision and Resolution of the Court of Appeals.

In its Petition for Review, Home Cable argues the following: First, that this Court should apply its ruling in the January 19, 2009 case of ABS-CBN Broadcasting Corp. v. Philippine Multi-Media System, Inc.34; second, that Home Cable's retransmission of channels 22 and 32 were retransmissions that did not constitute copyright infringement; third, that Filscap did not hold the communication to the public rights over its principals' musical compositions; and finally, that Home Cable, as a cable television systems operator, does not exercise financial or editorial responsibility over the content of programs it retransmits.

According to Home Cable, it was a cable television system operator which functions were limited by its mandate and the National Telecommunications Commission's rules and regulations for cable television services.35 It points out that in ABS-CBN Broadcasting Corp. v. Phil. MultiMedia System, Inc., this Court had held that retransmission by a broadcast service did not constitute copyright infringement.36 Home Cable argues that in light of the "must-carry" provision in National Telecommunications Commission's Memorandum Circular No. 4-08-88, liability for copyright infringement lies with broadcasting organizations and other off-air television channels should they broadcast Filscap's materials without a license or sans compensation, not with entities like Home Cable.37

Further, Home Cable claims that Precision Audio should have been impleaded as an indispensable party. It points out that in their Memoranda of Agreement, Precision Audio guaranteed the full copyright of laser disc materials.38 For the same reasons, Star TV and Cable Box must likewise be impleaded as indispensable parties.39

Moreover, it argues that Filscap did not have a cause of action against it, because 10 copyright owners40 did not assign to Filscap the "right to communicate to the public" in their Deeds of Assignment.41 To Home Cable, Filscap's authority was limited only to enforcing these copyright owners' "performing rights," namely the right to perform the work in public, to broadcast the work, and to cause the work to be transmitted to subscribers to a diffusion service.42 Similarly, the reciprocal agreements with foreign societies did not expressly mention the enforcement of rights against cable services.43 Hence, Filscap did not have the capacity to enforce the present action against Home Cable.

Finally, Home Cable claims that Precision Audio was the broadcasting party that provided materials to Home Cable's videoke channels 38, 22, 32, and 52, and that it only provided the medium for the transmission.44 It claims that its control only extended to operating the equipment used for transmitting the broadcast signals, such as the music camp karaoke and laser disc materials.45 According to Home Cable:

Petitioner has no control over the contents of materials which it may transmit through the videoke channels because the laser disc materials from Precision already contain a compilation of songs per volume. Petitioner received videoke laser disc materials consisting of volumes of songs and never represented itself as the origin or author of these volumes of copyrighted works. Only Precision has control and selection of the songs which appear in all the volumes subject of the agreement. In fact, the very same MOAs grant videoke programming exclusivity to Precision to the exclusion of any other person or entity engaged in the same programming concept as Precision.46

Filscap filed its Comment47 on January 6, 2010. First, it argues that ABS-CBN Broadcasting Corp. v. Philippine Multi-Media System, Inc. could not be applied retroactively; second, Home Cable's retransmission was a broadcast or rebroadcast that was a public performance or a communication to the public under the Intellectual Property Code; third, Home Cable was liable for copyright infringement because it had control over the content of the programs it broadcast, notwithstanding the "must carry" rule; and fourth, Filscap was the real party in interest as it represented the copyright owners and foreign societies.

According to Filscap, while Section 177 of Republic Act No. 8293 does not use the term "broadcasting right," its equivalent is either or both the "public performance" and "communication to the public" rights.48 Home Cable's retransmission of works through the simultaneous relay of broadcast signals exercised both these exclusive rights, without the consent or authority granted by the copyright holder over those works.49

Filscap also points out that Home Cable's witnesses all admit that Home Cable's retransmission "(a) gives [it] the power to choose which program provider to deal with and thus, control the broadcast content being shown through its cable facilities; (b) makes works available to the general public by wire and in effect, transmits sounds and images or programs broadcast; (c) allows the public to access said works from a place and time individually chosen by them; (d) creates additional audience and (e) earns it profit."50

Further, Filscap argues that it has proved that it may represent Filipino composers and music publishers based on the provisions of the deeds of assignments executed with them.51 To Filscap, the "do all acts" clause in these deeds grants it the power to license the composers' and music publishers' works, and to do other acts to administer and enforce their performing rights, including filing complaints such as the one in this case.52 These deeds of assignment all define "performing rights" as "the right to perform a work in public, to broadcast such a work or to include such a work in a cable programme service."53 Filscap claims that the reason why "communication to the public" was not a right included in the definition in the deeds of assignment is because this right was not included in Presidential Decree No. 49, the copyright law in force at the time these deeds were executed. Nonetheless, it argues that the assignment of the right to "cause the work to be transmitted to subscriber[s] to a diffusion service" in the deeds is analogous to the "communication to the public" right.54

Home Cable filed its Reply55 on February 15, 2010, arguing that its retransmission did not constitute control and management over program content. Because it had acted in compliance with the National Telecommunications Commission's "must carry" rule, its actions were a statutory limitation on copyright and did not constitute copyright infringement.56

Home Cable also argues that only performing rights under Section 203 of the Intellectual Property Code were assigned by composers and music publishers to Filscap; hence, it cannot sue on their behalf over alleged infringement of the economic rights under Section 177.57

The issue to be resolved in this case is whether or not Philippine Home Cable Holdings, Inc. committed copyright infringement.

Article II, Section 17 of the Constitution mandates that the State give priority to education, science and technology, arts, culture, and sports:

SECTION 17. The State shall give priority to education, science and technology, arts, culture, and sports to foster patriotism and nationalism accelerate social progress, and promote total human liberation and development.

In relation to this, Article XIV, Section 13 provides for the protection and security of intellectual property and creations:

SECTION 13. The State shall protect and secure the exclusive rights of scientists, inventors, artists, and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such period as may be provided by law.

An important aspect of intellectual property rights is that their protection subsists only "for such period as may be provided by law."58 As with other intellectual property rights, the metes and bounds of protection for works covered by copyright are defined and governed by existing law. In Joaquin v. Drilon:59

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a preexisting right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute.60

An early system for the protection of creative works through copyright was established in Act No. 3134, the Copyright Law of the Philippine Islands. This law was superseded by Presidential Decree No. 49, the Decree on Intellectual Property. Later, in 1996, Congress passed Republic Act No. 8293, otherwise known as the Intellectual Property Code, which consolidated the then-disparate laws and decrees on various intellectual property rights, including copyright. Amendments were made to the Intellectual Property Code in succeeding years to be responsive to technological developments and public policies.61

Under the Intellectual Property Code, "original intellectual creations in the literary and artistic domain" or literary and artistic works are protected from the moment of their creation:

The type of work subject of the case must be identified. This Court has previously denied the protections of copyright law to works which fall outside the exclusive enumeration in Subsection 172.1, such as dating game show formats,63 light boxes,64 and utility models, all of which were not works of applied art.65 The Intellectual Property Code also has provisions which apply only to certain types of works, such as writings,66 audiovisual works,67 works of architecture,68 or computer programs.69

In this case, videoke may appear to be an audiovisual work under Subsection 172.1(l), in line with the word being a portmanteau of "video" and "karaoke." Yet a typical videoke of a song is not one single object, having discrete components: a set of moving images, the song's lyrics superimposed over the moving images, and a musical composition in instrumental format synchronized to the superimposed lyrics. Each of these components may be separately protected by copyright: the moving images as a cinematographic work in Subsection 172.1(l), the lyrics as writing in Subsection 172.1(a), and the musical composition in Subsection 172.1(f). The videoke itself is a form of audiovisual derivative work, also protected by copyright by virtue of Subsection 173.1(a).70 Additionally, if a laser disc contains a collection of videoke, the collection may be a derivative work if the originality requirements of Subsection 173.1(b) are met.71 Yet, it must be noted that derivative works do not affect the force of or extend any subsisting copyright on the original works used in the derivate work, and the copyright protection over the derivative works does not imply by itself the right to use the original works.72 Moreover, the videoke itself is distinct from the laser disc in which it is fixed.73

Here, respondent claims that the subject works were musical works,74 or musical compositions under Subsection 172.1(f). Consequently, this Court confines its discussion to the subject musical compositions, the identification and copyright subsistence of which are uncontested.

The Intellectual Property Code enumerates in Section 177 the economic rights that comprise copyright:

Should any person, without the consent or authority of the copyright holder, exercise any of these economic rights, they may be liable for copyright infringement. This expands the scope of copyright infringement from merely the unauthorized duplication of a literary, artistic, or scientific work to the unauthorized performance of the acts in Section 177.75 In Habana v. Robles:76

.... Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists 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 statute on the owner of the copyright.77

To uphold a copyright infringement claim, the following must be proved: first, the complainant or plaintiff's ownership of a validly copyrighted material, and second, the defendant or respondent's exercise of any the enumerated economic rights without the consent of the copyright owner or holder.78 For the second element, it must further be shown that the exercise of the economic right was inconsistent with any of the limitations on copyright79 and permissible unauthorized reproductions and importations.80 Alternatively, the defendant or respondent may prove that its exercise of the economic right falls within fair use.81

As to the first element, petitioner does not make any claim as to the invalidity of copyright subsisting in the subject musical compositions. Instead, what petitioner challenges is respondent's right to sue it for alleged unauthorized "public performance" or "communication to the public" of works which "performing rights"82 were assigned to respondent.

Section 180 of the Intellectual Property Code states that copyright may be assigned, in whole or in party, and within the assignment's scope, the assignee is entitled to all the assignor's rights and remedies.83 Moreover, copyright owners may designate a society to enforce on their behalf their copyright and moral rights.84

This Court has recognized respondent's legal standing to sue for copyright infringement, noting that the Intellectual Property Office of the Philippines has accredited it as a collective management organization:85

Being the government-accredited CMO for music creators/copyright owners, FILSCAP assists music users in getting the necessary authorization to publicly play, broadcast and stream copyrighted local and foreign songs in the Philippines. It is created exactly for the purpose of protecting the intellectual property rights of its members by licensing performances of their copyright music. With [Filscap], the individual composer would have a difficult time enforcing their rights against an infringer, not to mention the expenses and time involved in pursuing such cases. But [Filscap] eases this burden away by handling these concerns. In addition, [Filscap], acts as an agency for the composers who deal with any party who desires to obtain public performance rights and privileges.

The mechanics behind [Filscap's] role is plain and simple. Copyright holders assign their rights to [Filscap]. Filscap enters into reciprocal agreements with foreign societies such as the American society of Composers, Authors and Publishers (ASCAP), BMI, Australian Performing Right Association (APRA), Performing Right Society Limited (PRS) of the United Kingdom and Foreningen Svenska Tonsattares Internationella Muskibyra (STIM) of Sweden, whose roles are similar to [Filscap] Being the assignee of the copyright, it then collects royalties through the form of license fees from anyone who intends to publicly play, broadcast, stream, and to a certain extent (reproduce) any copyrighted local and international music of its members and the members of its affiliate foreign societies. In return, [Filscap] does an accounting of all license fees collected and then distributes them to its members and the members of its affiliate foreign societies.86

Petitioner's contention that what the composers and music publishers assigned to respondent were "neighboring rights" in Section 203 is erroneous. Considering the type of works involved, their authors, and the phrasing of the deeds of assignment, it is evident that economic rights under Section 177 were assigned to respondent.

Section 203 of the Intellectual Property Code enumerates the rights of performers:

Performers are defined in Subsection 202.1 as "actors, singers, musicians, dancers, and other persons who act sing declaim, play in, interpret, or otherwise perform literary and artistic work." For purposes of Chapter XII on the rights of performers, producers of sound recordings and broadcasting organizations, these performers have rights over their performances separate from the right to perform or publicly communicate the literary or artistic work, which is vested in the author of the work. Hence:

Developments in technology, including the process of preserving once ephemeral works and disseminating them, resulted in the need to provide a new kind of protection as distinguished from copyright. The designation "neighboring rights" was abbreviated from the phrase "rights neighboring to copyright." Neighboring or related rights are of equal importance with copyright as established in the different conventions covering both kinds of rights.87

Here, respondent does not represent performers of the subject musical compositions. Consistent with its mandate, it is a collective management organization for composers, authors, and publishers in the field of musical compositions. This is clear based on the definition of "copyright work" in the deed of assignment it enters into with its affiliates or members:

a) the expression "copyright work" shall mean any musical work whether now or existing hereafter composed and such words as are associated with any musical works and shall include the vocal and instrumental music in any cinematographic film, the words and/or music of any monologue having a musical introduction and/or accompaniment, the musical accompaniment of any non-musical play, and any part of any such work, words, music, or accompaniment as aforesaid.88

That respondent pertains to rights under Section 177 of the Intellectual Property Code and not the neighboring rights in Section 203 is also apparent in the scope of "performance" that respondent's affiliates and members have assigned respondent to administer or enforce:

c) the expression "performance" includes, unless otherwise stated, any mode of acoustic presentation, including any such presentation by means [of] broadcasting or cause of a work to be transmitted to subscribers to a diffusion service, or by the exhibition of a cinematographic film, or by the use of a sound recording, or by any other means, and references to "perform" and "performing" shall be construed accordingly.89

Respondent claims that the lack of explicit reference to the right to communicate the work to the public is because, at the time when the deeds were written, the prevailing copyright law was Presidential Decree No. 49, which enumeration of economic rights predated many technological developments that may have an effect on literary, artistic, and scientific works:

In this regard, Section 239.3 of the Intellectual Property Code extended its provisions to works in which copyright protection was obtained prior to its effectivity and which copyright is still subsisting:

239.3. The provisions of this Act shall apply to works in which copyright protection obtained prior to the effectivity of this Act is subsisting: Provided, That the application of this Act shall not result in the diminution of such protection.

Moreover, the wording of the deeds of assignments indicates that among the rights assigned to respondent by the copyright holders was the right to broadcast or cause a work to be transmitted to subscribers to a diffusion service. Even without the use of the specific phrase "communication to the public," respondent is plainly the assignee who may authorize others who wish to do these acts with respect to the copyright holders' musical compositions, or demand compensation in case these acts were done without their consent or authority.

In respondent's Complaint, it alleged that petitioner has been "playing or otherwise performing or communicating to the public" the subject musical compositions. Both the Regional Trial Court91 and the Court of Appeals92 determined that petitioner did both when it cablecast—engaged in program origination of—the two karaoke channels. But the application of Section 177 is inexact. Based on petitioner's acts complained of, only an infringement of the "communication to the public" right has been committed.

Our country's early law on copyright, Act No. 3134, granted to copyright holders a broad exclusive performance right, without limitation as to manner, method, or intent to or actual profit. Thus, Section 3(c) stated:

Then, on August 1, 1951, the Philippines' accession to the 1948 revision to the Berne Convention for the Protection of Literary and Artistic Works became effective.93 Known as the Brussels Act, the 1948 revision included a provision on the exclusive right of an author of a dramatic, dramatico-musical, or musical work to its public presentation and public performance, and the public distribution thereof:

Article 11bis of the Brussels Act, meanwhile, provided for the parameters of the exclusive right to the communication to the public by wire or wireless means of a literary or artistic work:

Later, the Berne Convention was revised in the Paris Act of 1971. Article 11 of the Paris Act separated the public performance and communication to the public of the performance rights:

Further, Article 11bis of the Paris Act refined the communication to the public right introduced in the Brussels Act:

In 1972, at a time when the Philippines' accession to the Berne Convention was still only to the Brussels Act, the Philippines again modified its law on copyright through Presidential Decree No. 49. Section 5 thereof substantially retained Section 3 of Act No. 3134:

On April 14, 1980, the Philippines acceded to the Paris Act. The treaty entered into force on July 16, 1980, with the declaration that the accession would not apply to Articles 1 to 21 and the Appendix of the Paris Act.96

Following a 1993 bilateral agreement with the United States of America in order to remove the Philippines from the "Special 301" priority watch list,97 the Philippines agreed to submit amendments to its copyright law in the areas of sound recordings and computer programs, among others, and to begin the process of accession to the substantive portions of the Paris Act.98 On March 18, 1997, the Philippines finally extended its accession to Articles 1 to 21 and the Appendix of the Paris Act, with those articles entering into force on June 18, 1997.99

Consequently, Republic Act No. 8293 in 1997 for the first time statutorily recognized the Philippines' obligations in accordance with international conventions, treaties, and other agreements100 involving intellectual property, transforming101 relevant provisions of the Paris Act and including amendments to strengthen copyright protection in the Philippines according to the United States' recommendations.

Notably, the modern formulation of the "communication to the public" right—including the distinct "making available" right—in international intellectual property law102 was formalized in the World Intellectual Property Organization (WIPO) Copyright Treaty, which sought to make copyright protections responsive to the advent of new technologies,103 and the WIPO Performances and Phonograms Treaty, which sought to protect the rights of performers and producers of phonograms.104 In particular, Article 8 of the WIPO Copyright Treaty stated:

Without prejudice to the provisions of Articles 11(l)(ii), 11bis(l)(i) and (ii), 11ter(l)(ii), 14(l)(ii) and 14bis(l) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.

Both treaties were concluded in 1996. Although the Philippines acceded to the WIPO Copyright Treaty105 and the WIPO Performances and Phonograms Treaty106 only on July 4, 2002, it had already, in a sense, unilaterally integrated these treaties' contemplation of a "communication to the public" in domestic legislation via Section 171.3 of the Intellectual Property Code.

As a result, in a divergence from both Act No. 3134 and Presidential Decree No. 49, Republic Act No. 8293 not only modified the scope of the performance right into the "public performance" right, but also granted the "communication to the public" among the Code's new economic rights, by way of the distinct "making available" formulation.

Here, petitioner's act of cablecasting the karaoke channels cannot be considered an exercise of the public performance rights over the subject musical compositions. Concededly, the works were performed by means of certain processes, and because the musical compositions were fixed in sound recordings in a videoke format, they were made audible "at a place or at places where persons outside the normal circle of a family and that family's closest social acquaintances are or can be present, irrespective of whether they are or can be present at the same place and at the same time, or at different places and/or at different times." However, the fact that "performance" of the musical composition requires the process described in Subsection 171.3—using wireless means to make the musical compositions available to the members of the public in such a way they may access these compositions from a place and time individually chosen by them—in order to be perceived places the act complained of outside Subsection 171.6.

It must be noted that a later amendment to the Intellectual Property Code, in Republic Act No. 10372, further expanded the scope of "communication to the public" to include broadcasting, rebroadcasting, retransmitting by cable, and retransmitting by satellite:

'Communication to the public' or 'communicate to the public' means any communication to the public, including broadcasting, rebroadcasting, retransmitting by cable, and retransmitting by satellite, and includes the making of a work available to the public by wire or wireless means in such a way that members of the public may access these works from a place and time individually chosen by them.107

Nonetheless, even prior to the amendment, playing a musical composition, fixed in an audiovisual derivative work, over cable television to paying subscribers is making that work accessible to members of the public from a place or time individually chosen by them. This is the essence of the "communication to the public" right.

To evade liability, petitioner argues that its transmission of the subject musical compositions is not an infringing act. It anchors its theory on ABS-CBN Broadcasting Corp. v. Phil. Multi-Media System, Inc.,108 decided after the promulgation of the Court of Appeals' Decision, in which this Court held that the carriage by cable television systems of other broadcasters' free-to-air signals was not copyright infringement.109

Petitioner's contention has no merit. The dissimilarity between the facts in this case and ABS-CBN Broadcasting Corp. v. Phil. Multi-Media System, Inc. must lead this Com1 to different conclusions.

Section 6 of the National Telecommunications Commission Memorandum Circular No. 4-08-88110 states the "must carry" rule:

Section 2.3 of Memorandum Circular No. 4-08-88 defines a television broadcast station as "any television broadcast station authorized to operate on a channel regularly allocated to a community."

In ABS-CBN Broadcasting Corp. v. Phil. Multi-Media System, Inc., this Court stated that, when cable television systems comply with the "must carry" rule, they do not rebroadcast the free-to-air signals and do not act as broadcasting organizations:

At the outset, petitioner is not acting in compliance with the National Telecommunication Commission's "must carry" rule when it distributes channels from entities such as Star TV and Cable Boss. Petitioner's obligation to carry these channels is not pursuant to the requirements of Memorandum Circular No. 4-08-88, but because of contracts it entered into where it pays to transmit Star TV and Cable Boss' channels on its system. Those channels are not the "television broadcast stations" contemplated in Section 6.2.1 of Memorandum Circular No. 4-08-88, especially because they are not free-to-air TV signals like the ones subject of the case in ABS-CBN Broadcasting Corp. v. Phil. Multi-Media, Inc.

More accurately, the Star TV and Cable Boss channels are akin to "premium channels" that are bought from channel providers and transmitted on an as-is basis to its viewers.112 Notwithstanding the lack of regulatory obligation such as the "must carry" rule, it is evident from petitioner's distribution agreements with Star TV and Cable Boss that petitioner merely retransmits signals that these entities provide and is prohibited from modifying those programs.113 In that regard, ABS-CBN Broadcasting Corp. v. Phil. Multi-Media Inc.'s concept of "retransmission" applies to the situation with the Star TV and Cable Boss channels that petitioner carries.

However, this reasoning does not apply to channels 22 and 32, the videoke channels on Home Cable's lineup. An examination of the agreements with Precision Audio shows that Precision Audio was only obliged to sell videoke laser discs to petitioner, and petitioner has responsibility and control over the channels:

1. The FIRST PARTY agrees to sell, and the SECOND PARTY agrees to purchase on cash basis the new releases of videoke laser disc materials of TWO THOUSAND PESOS (P2,000.00), Philippine Currency. Further, the SECOND PARTY shall make available to FIRST PARTY the Channels mentioned below free of program fee charges the promotion solely of the FIRST PARTY's products.

2. The SECOND PARTY shall be responsible for and in control of the operation of Channels 22 [PINOY KTV], 32 [ENGLISH KTV], and 52 [CHINESE KTV]. It shall be responsible for providing the equipment (music camp karaoke and laser disc materials) necessary for the satisfactory operation of the above mentioned Channels.114

Thus, unlike other channels which it merely retransmits to its subscribers such as CNN (Cable News Network), BBC (British Broadcasting Corporation), HBO (Home Box Office), Cinemax, Discovery, and National Geographic and the like, the [petitioner] operated and controlled the karaoke channels from which it played or "cablecasted" the videoke laser disc materials which it had brought. In effects, the [petitioner] was acting as a broadcaster in the case at bar. Hence its argument that it is merely retransmitting programs and is, thus, not liable for copyright infringement does not apply to the particular circumstances of the case at bar.115

Consistent with Section 181 of the Intellectual Property Code, petitioner's purchase of the laser discs from Precision Audio as part of their agreements116 did not by itself transfer or assign the copyright of the fixed musical compositions in those laser discs. Assuming that Precision Audio's production and distribution of the videoke laser discs was with the copyright holders' consent, only the economic rights to adapt the musical compositions to videoke format, reproduce the fixation in laser disc, and sell the laser discs were granted to Precision Audio, unless the terms of the license state that additional rights were included.

Moreover, if the licenses for the musical compositions did include any public performance or communication to the public rights, those rights were not for Precision Audio to sublicense to a third party such as petitioner unless expressly allowed by the copyright holder or licensor. If these were the case with the laser discs here, then petitioner failed to allege and prove it.

To emphasize, copyright over an original work is unaffected even when that work is used in a derivative work. And the grant of copyright protection to the derivative work does not by itself make the use of the original work, or any part of it, lawful absent the copyright holder's consent. Precision Audio may warrant that it holds the copyrights to the videoke works fixed in the laser discs purchased by petitioner, and it may license or assign any of the videoke's economic rights to petitioner as part of the sale, but that does not affect the copyright over the underlying musical composition which is a component of the videoke. At most, Precision Audio validly granted to petitioner the right to publicly perform or communicate to the public the videoke, but not the composite original works which economic rights were held by others, such as the composers, authors, or publishers that respondent represents.

Precision Audio is not an indispensable party to this case. The Rules of Court provide:

Rule 3, SEC.7. Compulsory Joinder of Indispensable Parties. — Parties-in-interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.

Petitioner's liability for copyright infringement is separate and distinct from Precision Audio's, if there is any. As stated above, the economic right that petitioner infringed is the right to communicate the subject musical compositions to the public, and this finding is in no way affected or altered by any act or omission of Precision Audio. Petitioner's liability can be determined without need to implead Precision Audio. With regard to the warranties made by Precision Audio in the Memoranda of Agreement, the Court of Appeals correctly held that "[i]f any, the said guarantee merely gives the defendant-appellant the right to go after Precision Audio Video Services, Inc., for possible reimbursement."119

No other limitation to copyright exists in this case. Petitioner has also not raised the defense of fair use. Therefore, its unauthorized exercise of the copyright holders' communication to the public rights as a result of cablecasting the two karaoke channels is copyright infringement.

We affirm the Court of Appeals' modification of the award of damages, though it must be noted that the trial court did not award "actual damages" but "just damages in lieu of actual damages"120 as stated in Section 216.1(b). Just damages may pertain to temperate or moderate damages, when actual or compensatory damages are not sufficiently proven. Under Section 216.1(b), a court is given the discretion as to the amount and kind of damages it can impose. Nonetheless, there is no reason to disturb the Court of Appeals' modified award of temperate damages. Article 2224 of the Civil Code provides:

Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.

For although the exact amount of damage or loss can not be determined with reasonable certainty, the fact that there was infringement means they suffered losses for which they are entitled to moderate damages.122

The award of exemplary damages and attorney's fees are also proper and reasonable under the circumstances.

However, the interest to be imposed on the monetary award in favor of respondent must be adjusted in view of this Court's Resolution in Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc.,123 the relevant portions of which state:

All intellectual property rights are not mere economic exercises. Our Constitution and laws recognize their social function and benefit to the common good. Copyright, in particular, is linked with culture:

.... Copyright is profoundly intertwined with culture. Many, if not all, copyrighted works can and do shape identities of persons, groups, communities, and nations. Copyright is not merely economic; it also embodies "discursive power—the right to create, and control, cultural meanings." The State recognizes this not just with copyright law, but also with laws that promote and protect art, literature, culture workers, and the preservation and development of national cultural heritage. So-called "factual works" are part of the expression, speech, and the press explicitly protected in our Bill of Rights, while artistic creations enjoy State patronage and constitute cultural treasures.125

To encourage the creation, proliferation, and innovation of literary, artistic, and scientific works, our laws have designed a regime of protection that balances the incentives to an individual for disclosing their works and the eventual benefit to the public once the protections lapse and these works become freely available.126 An essential component of this balance is certainty of enforcing creators' rights against unauthorized trespass:

Intellectual property rights, such as copyright and the neighboring right against rebroadcasting, establish an artificial and limited monopoly to reward creativity. Without these legally enforceable rights, creators will have extreme difficulty recovering their costs and capturing the surplus or profit of their works as reflected in their markets. This, in turn, is based on the theory that the possibility of gain due to creative work creates an incentive which may improve efficiency or simply enhance consumer welfare or utility...

These, however, depend on the certainty of enforcement. Creativity, by its very nature, is vulnerable to the free rider problem. It is easily replicated despite the costs to and efforts of the original creator. The more useful the creation is in the market, the greater the propensity that it will be copied. The most creative and inventive individuals are usually those who are unable to recover on their creations.127

Awareness of, and compliance with, intellectual property laws is the obligation of all. persons, natural or juridical. To attain the advantages provided by society's scientists, inventors, artists, and other gifted citizens, there must first be respect for and enforcement of their rights.

ACCORDINGLY, the Petition for Review on Certiorari is DENIED. The Decision and Resolution of the Court of Appeals, Manila, in CA-G.R. CV No. 81083 are AFFIRMED WITH MODIFICATION. Philippine Home Cable Holdings, Inc. is ordered to pay Filipino Society of Composers, Authors & Publishers, Inc. PHP 500,000.00 as temperate damages, PHP 500,000.00 as exemplary damages, and PHP 100,000.00 in attorney's fees. Interest at the rate of six percent (6%) per annum shall be imposed on the sum of the monetary awards from October 20, 2003, the date of the Regional Trial Court Decision, until full payment.

Gesmundo, C. J., Hernando, Inting, M. Lopez, Gaerlan, Rosario, J. Lopez, Dimaampao, Marquez, and Kho, Jr., JJ., concur.