G.R. No. 120961 , October 2, 1997.
DISTILLERIA WASHINGTON, INC. OR WASHINGTON DISTILLERY, INC., petitioner, vs. LA TONDEÑA DISTILLERS, INC. and THE HONORABLE COURT OF APPEALS, respondents.

FACTS

La Tondeña Distillers, Inc. (LTDI) filed a replevin action before the Regional Trial Court against Distilleria Washington, Inc. to recover 18,157 empty bottles bearing LTDI’s blown-in marks (“La Tondeña Inc.” and “Ginebra San Miguel”). LTDI alleged that Distilleria Washington was using these bottles for its own “Gin Seven” products without LTDI’s consent, in violation of Republic Act No. 623 . The trial court dismissed the complaint, ruling that a purchaser of liquor pays a single price for both the liquor and the bottle, with no obligation to return the bottle. The Court of Appeals reversed this decision, holding that under R.A. 623, the use of marked bottles by any person other than the registered manufacturer without written consent is unlawful, and the marks on the bottles serve as sufficient notice of LTDI’s ownership. On October 17, 1996, the Supreme Court rendered a decision modifying the Court of Appeals’ decision by ordering LTDI to pay Distilleria Washington just compensation of P18,157.00 for the seized bottles, instead of returning them, citing trademark protection for the registrant. Distilleria Washington filed a second motion for reconsideration, arguing that as the owner of the bottles, it should be given possession, and questioning whether its use would violate LTDI’s trademark protection.

ISSUE

The primary issue is whether Distilleria Washington, having acquired ownership of the marked bottles through purchase, is entitled to their possession and use, or whether such possession and use without LTDI’s written consent is unlawful under R.A. 623, thereby justifying LTDI’s replevin action.

RULING

The Supreme Court granted the second motion for reconsideration, reversed its Decision of October 17, 1996, and reinstated the trial court’s decision dismissing LTDI’s complaint. The Court held that R.A. 623 does not prohibit the sale or transfer of ownership of marked bottles. When LTDI sold its gin products, ownership of the bottles, along with all its attributes (jus utendi, jus abutendi, jus fruendi, jus disponendi), passed to the buyer. Consequently, the transferee has the right to possession of the bottles unless they are used in violation of the original owner’s registered trademark or incorporeal rights. The Court found it incongruous and unjust to allow LTDI to retain possession of the seized bottles via replevin after having transferred ownership. It emphasized that the prima facie presumption of illegal use under Section 3 of R.A. 623 does not apply when ownership has been transferred, as contemplated under Section 5 of the same law. The Court also noted that holding buyers liable for mere possession of empty bottles after consumption would expose countless consumers to criminal prosecution, which is manifestly unjust. Furthermore, the Court recognized the economic role of small industries like Distilleria Washington and aimed to maintain a balance between protecting small businesses and large-scale industries.