When Trademark Protection Doesn’t Equal Ownership: The Case of Branded Bottles

DISTILLERIA WASHINGTON, INC. OR WASHINGTON DISTILLERY, INC., VS. THE HONORABLE COURT OF APPEALS AND LA TONDEÑA DISTILLERS, INC., G.R. No. 120961, October 17, 1996

Imagine a small distillery, proudly producing its gin, only to be embroiled in a legal battle over the empty bottles it uses. This seemingly simple dispute highlights a crucial intersection between trademark law and property rights. Who truly owns those branded containers after the product is sold?

This case examines the extent of trademark protection afforded to manufacturers of beverages in marked containers, specifically whether such protection extends to ownership of the containers themselves after the product has been sold and consumed. The Supreme Court clarifies the distinction between trademark rights and ownership rights, providing valuable guidance for businesses using branded containers.

Understanding Republic Act No. 623 and Trademark Rights

Republic Act No. 623, as amended, protects manufacturers who register their marked bottles and containers with the Philippine Patent Office. This law aims to prevent unauthorized use, sale, or destruction of these containers, safeguarding the manufacturer’s brand identity and goodwill.

A trademark is a symbol, design, or phrase legally registered to represent a company or product. It gives the owner exclusive rights to use the mark, preventing others from using similar marks that could confuse consumers. Trademark protection extends to the containers used to package and sell products, provided they are duly registered. The key provision of R.A. 623 is:

“SECTION 1.  Persons engaged or licensed to engage in the manufacture, bottling, or selling of soda water, mineral or aerated waters, cider, milk, cream or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers, or in the manufacture, compressing or selling of gases such as oxygen, acetylene, nitrogen, carbon dioxide, ammonia, hydrogen, chloride, helium, sulphur dioxide, butane, propane, freon, methyl chloride or similar gases contained in steel cylinders, tanks, flasks, accumulators or similar containers, with their names or the names of their principals or products, or other marks of ownership stamped or marked thereon, may register with the Philippines Patent Office a description of the names or marks, and the purpose for which the containers so marked are used by them, under the same conditions, rules, and regulations, made applicable by law or regulation to the issuance of trademarks.”

For example, a soft drink company that registers its uniquely shaped bottle with its logo gains the right to prevent competitors from using a similar bottle design. This helps consumers easily identify the authentic product.

The Bottle Battle: Distilleria Washington vs. La Tondeña

The case began when La Tondeña Distillers, Inc. (LTDI), the maker of Ginebra San Miguel, sought to recover 18,157 empty bottles bearing its blown-in marks from Distilleria Washington, Inc. (Washington), which was using them for its own “Gin Seven” products. LTDI argued that as the owner and registrant of the bottles, it had the right to prevent Washington from using them without permission.

Washington countered that R.A. No. 623 did not apply to alcoholic beverages like gin and that ownership of the bottles transferred to buyers upon the sale of the gin. The trial court initially sided with Washington, ordering LTDI to return the seized bottles or pay their value. However, the Court of Appeals reversed this decision, ruling in favor of LTDI’s right to possess the bottles.

The Supreme Court then stepped in to resolve the dispute. The procedural journey of the case was:

• LTDI filed a suit for manual delivery with damages (replevin) against Washington.
• The trial court initially ruled in favor of Washington.
• LTDI appealed to the Court of Appeals, which reversed the trial court’s decision.
• Washington then appealed to the Supreme Court.

The Supreme Court emphasized the distinction between trademark rights and ownership rights, stating:

“The incorporeal right, however, is distinct from the property in the material object subject to it.  Ownership in one does not necessarily vest ownership in the other.  Thus, the transfer or assignment of the intellectual property will not necessarily constitute a conveyance of the thing it covers, nor would a conveyance of the latter imply the transfer or assignment of the intellectual right.”

The Court acknowledged that industry practices in the sale of gin often involve the transfer of ownership of the containers to the consumer, even though LTDI’s sales invoices stated that the sale did not include the bottles. The Court further elaborated on the limitations on the use of registered containers:

“The statement in Section 5 of R.A. 623 to the effect that the “sale of beverage contained in the said containers shall not include the sale of the containers unless specifically so provided” is not a rule of proscription.  It is a rule of construction that, in keeping with the spirit and intent of the law, establishes at best a presumption (of non-conveyance of the container) and which by no means can be taken to be either interdictive or conclusive in character.”

Practical Implications for Businesses and Consumers

This ruling clarifies that while trademark registration provides protection against unauthorized use of marked containers, it doesn’t automatically equate to ownership of those containers after the product is sold. The specific circumstances of the sale, including industry practices and any explicit agreements, determine the transfer of ownership.

For businesses, this means that they cannot simply seize empty containers bearing their trademarks without considering whether ownership has been transferred to the consumer. On the other hand, the Court did not allow Distilleria Washington to recover the bottles, and instead required LTDI to compensate the company for the seized bottles. The Court reasoned that it saw no other logical purpose for petitioner’s insistence to keep the bottles, except for such continued use.

Key Lessons

• Trademark registration protects against unauthorized use of marked containers but doesn’t guarantee ownership after sale.
• Industry practices and sales agreements determine the transfer of ownership.
• Businesses should clearly define container ownership in their sales terms.

Hypothetical Example: A small brewery sells its craft beer in uniquely designed bottles with its logo. If the brewery explicitly states in its sales terms that the bottles remain its property and requires a deposit for their return, it can likely enforce its ownership rights. However, if it sells the beer without any such conditions, it may be difficult to prevent consumers from using the bottles for other purposes.

Frequently Asked Questions (FAQs)

Q: Does registering a trademark on a bottle automatically mean I own the bottle forever?

A: Not necessarily. Trademark registration protects against unauthorized use, but ownership of the physical bottle can transfer to the consumer upon sale, depending on the terms of the sale and industry practices.

Q: Can I prevent someone from using my branded bottles for other purposes?

A: If you retain ownership of the bottles (e.g., through a deposit system or clear sales terms), you can likely prevent their unauthorized use. Otherwise, it may be difficult to enforce such restrictions.

Q: What should my business do to protect its rights in branded containers?

A: Clearly define the ownership of containers in your sales terms, consider implementing a deposit system, and actively monitor and address any unauthorized use of your branded containers.

Q: Does R.A. 623 apply to all types of beverages?

A: Yes, R.A. 623 applies to all lawful beverages, including alcoholic beverages like gin.

Q: What happens if someone uses my registered bottles without my permission?

A: You may be able to pursue legal action for trademark infringement and seek damages or an injunction to stop the unauthorized use.

Q: How does this ruling affect businesses that recycle bottles?

A: Businesses that recycle bottles should ensure they are not using registered bottles in a way that infringes on the trademark rights of the original manufacturer.

Q: What is the difference between trademark rights and ownership rights?

A: Trademark rights protect the brand identity associated with a product, while ownership rights pertain to the physical possession and control of the item itself. One does not automatically imply the other.

ASG Law specializes in Trademark Law and Intellectual Property. Contact us or email hello@asglawpartners.com to schedule a consultation.