Unfair Competition Probable Cause: Supreme Court on Counterfeit Goods Evidence

The Supreme Court's 2014 ruling in Unilever Philippines, Inc. v. Michael Tan (G.R. No. 179367) clarifies an important point for businesses protecting their brands: probable cause for unfair competition does not require proof of warehouse ownership or direct participation. The Court reversed the dismissal of a criminal complaint for unfair competition, finding that substantial circumstantial evidence was enough to warrant indictment.

The Facts of the Case

In January 2002, NBI agents applied for search warrants against Michael Tan a.k.a. Paul D. Tan, alleging he possessed counterfeit Unilever shampoo products in violation of Section 168, in relation to Section 170, of the Intellectual Property Code (R.A. No. 8293). The search warrants were issued, and agents seized over 1,200 counterfeit shampoo sachets from Tan's office and hundreds of boxes from a warehouse in Marikina City.

The NBI filed a complaint with the Department of Justice (DOJ). However, the State Prosecutor dismissed it for insufficiency of evidence, finding no proof that Tan owned the warehouse or directly participated in the offense. The Acting Secretary of Justice affirmed this dismissal. The Court of Appeals (CA) upheld the DOJ's ruling, prompting Unilever to elevate the case to the Supreme Court.

The Issue

The central question was whether the CA committed reversible error in upholding the DOJ's finding that there was no probable cause to indict Tan for unfair competition.

The Supreme Court's Ruling

The Supreme Court granted Unilever's petition, annulling the CA's decision and ordering the State Prosecutor to file the appropriate Information against Tan.

Probable cause is an executive function, but not absolute. The Court acknowledged that determining probable cause for filing an information is primarily an executive function lodged with public prosecutors and the Secretary of Justice. Courts generally do not interfere with this discretion. However, the Constitution allows judicial intervention when there is grave abuse of discretion amounting to lack or excess of jurisdiction.

Grave abuse of discretion was present. The Court found that the dismissal of the complaint, despite ample evidence, constituted grave error warranting correction. The Court identified several overlooked pieces of evidence:

• The seizure of 1,238 counterfeit Unilever products from Tan's office — a volume and location that belied his claim of personal consumption
• The NBI's joint affidavits and the striking similarities between genuine and counterfeit sachets
• Statements from laborers at the warehouse confirming it was operated by Probest International Trading
• The subsequent seizure of counterfeit Unilever products from Tan's warehouse in Antipolo City

Ownership of the warehouse is not an element of unfair competition. The Court emphasized that proof of warehouse ownership is not crucial to a finding of probable cause. What matters is whether there is a reasonable belief, based on evidence, that the respondent committed acts constituting unfair competition.

Probable cause requires only probability of guilt. The Court reiterated that probable cause does not require clear and convincing evidence or absolute certainty. It is merely a reasonable ground for belief that a crime was committed and the accused was its author. The validity of defenses and admissibility of evidence are matters for trial, not preliminary investigation.

Practical Takeaways

• Probable cause is a low threshold. For businesses seeking to prosecute counterfeiters, the standard is probability of guilt, not proof beyond reasonable doubt. Substantial circumstantial evidence can suffice.
• Ownership of premises is not decisive. Even if a suspect does not own the warehouse or office where counterfeit goods are found, other evidence linking them to the goods can establish probable cause.
• Volume and location of goods matter. Large quantities of counterfeit products found in a business office, rather than a home, can rebut claims of personal use.
• Courts will intervene in clear cases of grave abuse. While prosecutors have wide discretion, courts will correct dismissals that ignore substantial evidence supporting probable cause.
• Preliminary investigation is not a trial. The prosecution need not present its full case at this stage; evidentiary questions are reserved for trial.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.