ASG Law

Tag: Retailer Liability

  • Retailer Beware: Product Standards Compliance and Liability in the Philippines

    Navigating Product Standard Compliance: Retailer Liability Under Philippine Law

    G.R. No. 264196, May 28, 2024

    Imagine a small business owner carefully stocking shelves, confident that the products are safe and compliant. Now, picture that same owner facing hefty fines and product seizures because of a hidden defect – a missing license number on a product’s certification mark. This is the reality for retailers in the Philippines, where compliance with product standards is not just the manufacturer’s responsibility, but a shared burden.

    In the case of Robinsons Appliances Corporation vs. Department of Trade and Industry, the Supreme Court clarified the liability of retailers concerning products lacking proper Philippine Standard (PS) markings. This decision emphasizes the importance of due diligence by retailers to ensure that all products they sell comply with mandatory certification requirements.

    Understanding Philippine Product Standards and Retailer Obligations

    The Philippines, through the Department of Trade and Industry (DTI), enforces strict product standards to protect consumers and ensure fair trade. These standards are outlined in Republic Act No. 4109 and Republic Act No. 7394, and further detailed in Department Administrative Orders (DAOs) like DAO No. 2-2007 and DAO No. 4-2008.

    At the heart of these regulations is the Philippine Standard (PS) mark, a symbol indicating that a product has undergone testing and meets the required safety and quality standards. However, simply bearing the PS mark isn’t enough. The PS mark must also include a license number, as specified in DAO No. 4-2008 and its Implementing Rules and Regulations (IRR).

    DAO No. 2-2007 Section 3.5 explicitly instructs retailers, among others, to only sell products that comply with the Philippine National Standard (PNS) and bear the required PS Mark, or a valid Import Commodity Clearance (ICC) for imported goods. Section 6.1.1.1 further clarifies that a product found in a retailer’s premises is “presumed for sale or offered for sale”. This means retailers cannot simply claim ignorance of product compliance.

    For example, a hardware store selling electrical extension cords must ensure that each cord bears not only the PS mark, but also the correct license number. Similarly, a toy store offering imported dolls must verify the ICC markings. Failure to do so opens them up to potential penalties.

    Specifically, Section 4 of the IRR of DAO No. 4-2008 provides, “The PS Certification Mark License No. shall be indicated at the bottom of the PS Mark. See illustration at Annex C.”

    The Robinsons Appliances Case: A Retailer’s Compliance Journey

    The story begins with a routine inspection by the DTI-Fair Trade and Enforcement Bureau (FTEB) at a Robinsons Appliances store. Inspectors discovered 15 Hanabishi flat irons bearing the PS mark, but lacking the required PS License Number. This led to a formal charge against Robinsons Appliances for violating DAO No. 2-2007 and DAO No. 4-2008.

    Robinsons Appliances argued that they were merely retailers, relying on the manufacturer, Fortune Buddies Corporation, to ensure product compliance. They also questioned the DTI-FTEB’s authority to conduct the inspection.

    However, the DTI-FTEB ruled against Robinsons Appliances, imposing a PHP 25,000 fine and ordering the forfeiture of the flat irons. The DTI-FTEB emphasized that retailers are explicitly liable under DAO No. 2-2007 and that the inspection was legally permissible. This decision was upheld by the DTI Secretary and subsequently by the Court of Appeals (CA).

    The CA initially dismissed Robinson’s Petition for Certiorari, stating that the appropriate recourse was a petition for review under Rule 43 of the Rules of Court. The CA also noted that even if the petition was treated as one filed under Rule 43, it was filed beyond the 15-day reglementary period.

    The Supreme Court affirmed the CA’s decision, emphasizing the importance of retailers taking responsibility for the products they sell. Here are some key quotes from the Supreme Court’s decision:

    • “Administrative regulations enacted by administrative agencies to implement and interpret the law which they are entrusted to enforce have the force of law and are entitled to respect.”
    • “[I]mporters, distributors, wholesalers, retailers and those who offer for sale a product covered by mandatory product certification [to] sell, or offer for sale only such products that complied with the requisite PNS and with the required PS Mark…”

    Practical Takeaways: Retailers, Take Note!

    This case serves as a wake-up call for retailers in the Philippines. It clarifies that ignorance of product standards is not a valid defense. Retailers must actively ensure that the products they sell comply with all relevant regulations.

    For example, a clothing boutique selling imported garments should not only check for proper labeling but also verify that the importer has secured the necessary certifications. Similarly, an online gadget store must diligently check for proper PS marks and license numbers on every electronic device they offer.

    Key Lessons:

    • Conduct Due Diligence: Verify that all products bear the required PS mark and license number.
    • Know the Regulations: Familiarize yourself with DAO No. 2-2007, DAO No. 4-2008, and other relevant DTI issuances.
    • Document Everything: Maintain records of your efforts to ensure compliance.
    • Communicate with Suppliers: Work closely with your suppliers to ensure they are providing compliant products.

    Frequently Asked Questions

    Q: Am I, as a retailer, really responsible if the manufacturer provides non-compliant products?

    A: Yes, Philippine law holds retailers responsible for ensuring that the products they sell comply with mandatory standards. You cannot simply rely on the manufacturer’s assurance.

    Q: What specific markings should I look for on products?

    A: Look for the Philippine Standard (PS) mark and ensure it includes the PS Certification Mark License Number at the bottom. For imported goods, check for the Import Commodity Clearance (ICC) mark.

    Q: What happens if I sell non-compliant products?

    A: You could face fines, product seizure, and even legal action.

    Q: Where can I find information about product standards?

    A: The DTI-Bureau of Philippine Standards (BPS) website provides information on product standards and certification requirements.

    Q: What should I do if I suspect a product is non-compliant?

    A: Immediately remove the product from sale and report your concerns to the DTI.

    Q: Does this ruling apply to online retailers?

    A: Yes, the ruling applies to all retailers, including those operating online.

    ASG Law specializes in regulatory compliance and business law. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • Copyright Infringement: Retailer’s Liability and the Limits of Due Diligence

    The Supreme Court held that a retailer selling counterfeit goods is not automatically liable for copyright infringement if they reasonably believed the goods were genuine, having acquired them from apparently authorized sources. This decision clarifies the scope of liability for retailers in intellectual property cases, emphasizing the importance of proving the retailer’s knowledge of the infringing nature of the goods. It highlights the balance between protecting intellectual property rights and ensuring fair trade practices.

    “Hello, Retailer?” Navigating Copyright Risks in the World of Counterfeit Goods

    This case arose from a complaint filed by Sanrio Company Limited, the owner of iconic characters like “Hello Kitty,” against Edgar C. Lim, doing business as Orignamura Trading. Sanrio alleged that Lim was selling counterfeit Sanrio products in his store. The central question was whether Lim, as a retailer, could be held liable for copyright infringement under the Intellectual Property Code (IPC), specifically Section 217.3, even if he claimed to have purchased the goods from authorized manufacturers. This inquiry delves into the responsibilities and potential liabilities of retailers in the complex landscape of intellectual property law.

    The facts revealed that Sanrio’s exclusive distributor, Gift Gate Incorporated (GGI), had licensed several local companies to manufacture Sanrio products. IP Manila Associates (IPMA), hired by GGI, discovered that Orignamura Trading was selling imitations of Sanrio products. A search warrant was issued, leading to the seizure of various Sanrio products from Lim’s store. Sanrio then filed a complaint against Lim for violating Section 217 of the IPC, which outlines the criminal penalties for copyright infringement. Lim defended himself by arguing that he was merely a retailer who purchased his merchandise from authorized manufacturers and distributors.

    The Task-Force on Anti-Intellectual Property Piracy (TAPP) initially dismissed the complaint, stating that Lim had bought his merchandise from legitimate sources. The TAPP resolution emphasized that Lim relied on the representations of these manufacturers and distributors that the items they sold were genuine. The Office of the Chief State Prosecutor affirmed this resolution, leading Sanrio to file a petition for certiorari in the Court of Appeals (CA). The CA dismissed the petition, citing prescription and concluding that Sanrio failed to prove that Lim knew the merchandise he sold was counterfeit. This brings us to the nuances of copyright law and the retailer’s role in preventing infringement.

    The Supreme Court (SC) addressed two key issues: first, whether the prescriptive period for the alleged violation had lapsed; and second, whether the Department of Justice (DOJ) committed grave abuse of discretion in dismissing the complaint. The SC clarified that the filing of the complaint in the DOJ tolled the prescriptive period, meaning the period was suspended during the preliminary investigation. The Court cited the case of Brillantes v. Court of Appeals, affirming that the filing of a complaint for preliminary investigation interrupts the period of prescription of criminal responsibility. However, this did not automatically translate to a victory for Sanrio.

    Addressing the core issue of liability, the SC emphasized the importance of proving the retailer’s knowledge of the infringing nature of the goods. The court highlighted that under Section 217.3 of the IPC, a person must possess an article they know, or ought to know, is an infringing copy for the purpose of selling or distributing it. The key phrase here is “know, or ought to know,” which implies a level of awareness or reasonable suspicion. This element was missing in Sanrio’s case against Lim.

    The Court considered the evidence presented by Lim, which showed that he had indeed purchased the goods from manufacturers authorized by GGI. This evidence supported Lim’s claim that he reasonably believed the goods were genuine. The SC recognized that retailers cannot be expected to verify the authenticity of every product they sell, especially when dealing with reputable suppliers. The court affirmed the DOJ’s finding that Sanrio failed to prove Lim’s knowledge of the counterfeit nature of the goods, stating that it found no grave abuse of discretion in the DOJ’s dismissal of the complaint.

    The Intellectual Property Code (IPC) provides the legal framework for copyright protection in the Philippines. Section 217, in particular, addresses criminal penalties for copyright infringement. The relevant portions of this section are as follows:

    Section 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:

    (a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (P50,000) to One hundred fifty thousand pesos (P150,000) for the first offense.

    (b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (P150,000) to Five hundred thousand pesos (P500,000) for the second offense.

    (c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from Five hundred thousand pesos (P500,000) to One million five hundred thousand pesos (P1,500,000) for the third and subsequent offenses.

    217.3. Any person who at the time when copyright subsists in a work has in his possession an article which he knows, or ought to know, to be an infringing copy of the work for the purpose of:

    (a) Selling, letting for hire, or by way of trade offering or exposing for sale, or hire, the article;

    This case highlights the importance of due diligence for retailers. While they are not expected to be experts in intellectual property, retailers should take reasonable steps to ensure the goods they sell are genuine. This may include verifying the authenticity of the goods with the copyright owner, obtaining warranties from suppliers, and being vigilant for signs of counterfeiting.

    The Supreme Court’s decision underscores the need for a balanced approach to copyright enforcement. While protecting intellectual property rights is crucial, it is equally important to avoid imposing undue burdens on legitimate businesses. Retailers who act in good faith and take reasonable precautions should not be held liable for copyright infringement unless they have actual or constructive knowledge that the goods they sell are counterfeit. The decision also reinforces the principle that factual findings of the DOJ in preliminary investigations will generally not be disturbed absent grave abuse of discretion.

    This ruling is particularly relevant in the context of the Philippines, where counterfeit goods remain a significant problem. It provides guidance for retailers on how to minimize their risk of liability for copyright infringement and clarifies the standard of proof required to establish such liability.

    The decision in Sanrio Company Limited v. Edgar C. Lim reflects the complexities of copyright law in a commercial context. It clarifies the responsibilities of retailers in ensuring the authenticity of the products they sell and reinforces the importance of proving knowledge of infringement. This decision provides valuable guidance for businesses navigating the challenges of intellectual property rights in the marketplace.

    FAQs

    What was the key issue in this case? The key issue was whether a retailer could be held liable for copyright infringement for selling counterfeit goods, even if they claimed to have purchased the goods from authorized manufacturers and reasonably believed they were genuine.
    What did the Supreme Court decide? The Supreme Court ruled that the retailer was not liable for copyright infringement because Sanrio failed to prove that the retailer knew or ought to have known that the goods were counterfeit. The Court emphasized the importance of proving the retailer’s knowledge of the infringing nature of the goods.
    What is Section 217.3 of the Intellectual Property Code? Section 217.3 of the IPC imposes criminal penalties on anyone who possesses an article they know, or ought to know, is an infringing copy of a copyrighted work, for the purpose of selling or distributing it. This section requires proof of knowledge or reasonable suspicion of infringement.
    What is the significance of “tolling” the prescriptive period? “Tolling” the prescriptive period means suspending the running of the time limit for filing a legal action. In this case, the filing of the complaint with the DOJ suspended the prescriptive period, preventing the claim from being time-barred.
    What is the role of due diligence for retailers in copyright cases? Retailers are expected to exercise due diligence by taking reasonable steps to ensure the goods they sell are genuine. This may include verifying authenticity with copyright owners, obtaining warranties from suppliers, and being vigilant for signs of counterfeiting.
    What evidence did the retailer present in his defense? The retailer presented receipts and other documents showing that he had purchased the goods from manufacturers authorized by Sanrio’s exclusive distributor. This evidence supported his claim that he reasonably believed the goods were genuine.
    What does grave abuse of discretion mean in the context of this case? Grave abuse of discretion refers to an act that is so arbitrary, capricious, whimsical, or despotic as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. The Court found no such abuse in the DOJ’s dismissal of the complaint.
    What are the practical implications of this ruling for retailers? This ruling provides guidance for retailers on how to minimize their risk of liability for copyright infringement. Retailers who act in good faith and take reasonable precautions should not be held liable unless they have actual or constructive knowledge that the goods they sell are counterfeit.

    This case underscores the importance of balancing intellectual property rights with the realities of commercial transactions. Retailers should remain vigilant and exercise due diligence, but they cannot be held to an impossible standard of verifying the authenticity of every product they sell. The key is to act reasonably and in good faith.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.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.
    Source: Sanrio Company Limited vs. Edgar C. Lim, G.R. No. 168662, February 19, 2008