Distilleria Washington Inc. vs.

The Honorable Court of Appeals and La Tondena Distillers

Inc.

PARTY INVOLVED
 Distilleria Washington Inc. is engaged in the manufacture and vending of gin products.
 La Tondena Distillers Inc. (founders of Ginebra San Miguel) is engaged in the same
business.

HOW THE CASE STARTED

 Distilleria Washington, being engaged in the same business as LTDI, used the bottles of
LTDI in the sale of their “Gin Seven” products
 LTDI then filed a case for recovery of its white flint bottles bearing the mark of “La
Tondena Inc.” or “Ginebra San Miguel.” The white flint bottles amounted to 18,157
pieces.
 LTDI averred that Washington was using the bottles for its own "Gin Seven"
products without the consent of LDTI in violation of Republic Act 623.
 However, Washington countered saying that Republic Act 623 pertains only to
“soda water, mineral water, ciders, milks, cream, and other lawful beverages,
therefore not applicable in this case.

RULINGS OF THE LOWER COURTS

 The Trial Court ruled that a buyer of liquor only needs to pay once for him to obtain the
ownership of the liquor and its container. The Trial Court dismissed the complaint.
Accordingly, it ordered LTDI to return the seized bottles.
 The Court of Appeals reversed the decision of the RTC. It ruled that LTDI is the owner of
the bottles since it is registered in its name and therefore authorized to retain possession
of the bottles.

HENCE THIS PETITION

 Washington claims that he is the lawful owner of the personal properties.
 Washington also claims that Republic Act 623 does not apply to this case.

ISSUE:
WON the seized bottles should remain in the possession of LDTI. REPUBLIC ACT 623

Sec. 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 Philippine 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.

Sec. 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler, or seller, who has successfully registered the marks of ownership
in accordance with the provisions of the next preceding section, to fill such bottles, boxes,
kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other similar containers so marked
or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or wantonly destroy
the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes,
foundation pipes, for any other purpose than that registered by the manufacturer, bottler or
seller. Any violation of this section shall be punished by a fine of not more than one thousand
pesos or imprisonment of not more than one year or both.

YES. THE SEIZED BOTTLES SHOULD BE POSSESSED BY LDTI

 It is to be pointed out that a trademark refers to a word, name, symbol, emblem, sign or
device or any combination thereof adopted and used by a merchant to identify, and
distinguish from others, his goods of commerce. It is basically an intellectual creation
that is susceptible to ownership and, consistently therewith, gives rise to its own
elements of jus posidendi, jus utendi, jus fruendi, jus disponendi, and jus abutendi, along
with the applicable jus lex, comprising that ownership. 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. (Bottles exclusive from the incorporeal
right in using the bottle)
 (Not in the case) Applying Paragraph 2 of Article 428 of the New Civil Code, LTDI than
has a right of action against the holder and possessor of the thing (bottles) in order to
recover it.

WHEREFORE, the decision of the appellate court is MODIFIED by ordering LTDI to pay
petitioner just compensation for the seized bottles.

Hanover Star Milling Co. v. Metcalf

240 U.S. 403, 36 S. Ct. 357 (1916)

RULE:
The redress that is accorded in trademark cases is based upon the party's right to be protected
in the goodwill of a trade or business. The primary and proper function of a trademark is to
identify the origin or ownership of the article to which it is affixed.

Where a party has been in the habit of labeling his goods with a distinctive mark, so that
purchasers recognize goods thus marked as being of his production, others are debarred from
applying the same mark to goods of the same description, because to do so would in effect
represent their goods to be of his production and would tend to deprive him of the profit he
might make through the sale of the goods which the purchaser intended to buy.

The courts afford redress or relief upon the ground that a party has a valuable interest in the
goodwill of his trade or business, and in the trademarks adopted to maintain and extend it. The
essence of the wrong consists in the sale of the goods of one manufacturer or vendor for those
of another.
This essential element is the same in trademark cases as in cases of unfair competition
unaccompanied with trademark infringement. In fact, the common law of trademarks is but a
part of the broader law of unfair competition.

FACTS:

Two cases were argued together and were disposed of in a single opinion. Plaintiff
manufacturers, who had markets in different parts of the United States, sold flour under the
trade name "tea rose." Each asserted that defendants, rival manufacturers, had infringed their
trademark. The district court granted plaintiffs' request for a temporary injunction, restraining
defendants use of the trademark. The circuit court of appeals reversed the injunctions and
dismissed the bills. On certiorari, the court held that plaintiff manufacturer who had built up an
extensive trade for flour labeled "tea rose" was entitled to enjoin the sales of defendant rival
manufacturer.

ISSUE:

Did plaintiff manufacturer who first appropriated words as a trademark in a limited territory lose
its right to enjoin the use of the trademark by rival manufacturers who had in good faith built up
an extensive clientele in other territories?

ANSWER:
Yes.

CONCLUSION:
The court found that there was a strong indication of a fraudulent intent to palm off its flour upon
customers as being the same as the flour made by plaintiff. However, the court found that
plaintiff manufacturer who first appropriated the words "tea rose" as a trademark in a limited
territory lost its right to enjoin the use of the trademark by rival manufacturers who had in good
faith built up an extensive clientele in other territories such that the trademark had come to
mean its flour.

Champion Spark Plug Co. v. Sanders

331 U.S. 125 (1947)
April 28, 1947

SUMMARY:
Respondents are engaged in the business of repairing used spark plugs and reselling them
without removing the original trademarks of Champion. Champion filed a suit against them and
the trial court found that respondents had infringed the trademark but that there had been no
fraud or palming off. There was a conflict in the decision of the trial court and the appellate court
as the latter held that the provision requiring that the trademark be removed from the
reconditioned plugs be eliminated. Issue now lies whether or not adequate remedy was given by
the appellate court. SC held that equities of this case are satisfied by a decree requiring that the
word "repaired" or "used" be plainly and durably stamped on each plug and that the containers
and printed matter used in connection with the sales clearly show that the plugs are used and
reconditioned by respondents, giving their names and address -- even though the decree does
not require that the trademarks be removed. The court stated that full disclosure will give the
manufacturer the protection that is needed.

FACTS:
  Petitioner is a manufacturer of spark plugs which it sells under the trademark
"Champion."
 Respondents (Sanders) collect the used plugs, repair and recondition them, and resell
them. Respondents retain the word “Champion” on the reconditioned plugs and use a
box or carton that has the word "Champion," stamped on it, the plugs are packed
together with the letter and figure denoting the particular style or type.
 They also have printed on them "Perfect Process Spark Plugs Guaranteed Dependable"
and "Perfect Process Renewed Spark Plugs." Each carton contains smaller boxes in
which the plugs are individually packed. These inside boxes also carry legends
indicating that the plug has been renewed.
 Respondent company's business name or address is not printed on the cartons. It
supplies customers with petitioner's charts containing recommendations for the use of
Champion plugs. On each individual plug is stamped in small letters, blue on black, the
word "Renewed," which at time is almost illegible.
 Petitioner brought this suit in the District Court, charging infringement of its trademark
and unfair competition.
 DISTRICT COURT DECISION: The District Court found that respondents had infringed
the trademark. It enjoined them from offering or selling any of petitioner's plugs which
had been reconditioned unless:
o (a) the trademark and type and style marks were removed (MOST IMPT)
o (b) the plugs were repainted with a durable grey, brown, orange, or green paint
o (c) the word "Repaired" was stamped into the plug in letters in white
o (d) the cartons in which the plugs were packed contain a legend that it was used
spark plugs originally made by petitioner and repaired and made fit for use up to
10,000 miles by respondent company.
 The District Court denied an accounting.
 CIRCUIT COURT OF APPEALS DECISION: Held that respondents not only had
infringed petitioner's trademark, but also were guilty of unfair competition. It likewise
denied an accounting, but modified the decree in the following respects:
o (a) it eliminated the provision requiring the trademark and type and style marks to
be removed from the repaired or reconditioned plugs
o (b) it substituted for the requirement that the word "Repaired" be stamped into
the plug, etc., a provision that the word "Repaired" or "Used" be stamped and
baked in a contrasting color
o (c) it eliminated the provision specifying the precise legend to be printed on the
cartons, and substituted for a more general one.
 The case reached the US Supreme Court because of the apparent conflict between the
decision below and Champion Spark Plug Co. v. Reich decided by the Circuit Court of
Appeals for the Eighth Circuit.

ISSUE: Whether or not there was adequate relief granted, particularly the refusal of the
Circuit Court to require respondents to remove the word “Champion” from the repaired
or reconditioned plugs?

HELD: The word "repaired" or "used" be plainly and durably stamped on each plug, and that the
containers and printed matter used in connection with the sales clearly show that the plugs are
used and reconditioned by respondents, giving their names and address -- even though the
decree does not require that the trademarks be removed.

RATIO:
  There is no doubt that there has been infringement and unfair competition. The question
is the relief granted.
 We put to one side the case of a manufacturer or distributor who markets new or used
spark plugs of one make under the trademark of another. Equity then steps in to
prohibit defendant's use of the mark which symbolizes plaintiff's goodwill and
"stakes the reputation of the plaintiff upon the character of the goods.”
 These are second-hand goods. The spark plugs, though used, are nevertheless
Champion plugs and not those of another make. There is evidence to support what one
would suspect -- that a used spark plug which has been repaired or reconditioned does
not measure up to the specifications of a new one. But the same would be true of a
second-hand Ford or Chevrolet car. SC does not suppose that one could be enjoined
from selling a car whose valves had been reground and whose piston rings had been
replaced unless he removed the name Ford or Chevrolet.
 Prestonettes, Inc. v. Coty, was a case where toilet powders had as one of their
ingredients a powder covered by a trademark and where perfumes which were
trademarked were rebottled and sold in smaller bottles.
 The Court sustained a decree denying an injunction where the prescribed labels told the
truth. Mr. Justice Holmes stated, "A trademark only gives the right to prohibit the use
of it so far as to protect the owner's goodwill against the sale of another's product
as his. . . . When the mark is used in a way that does not deceive the public, we
see no such sanctity in the word as to prevent its being used to tell the truth. It is
not taboo”
 Cases may be imagined where the reconditioning or repair would be so extensive or so
basic that it would be a misnomer to call the article by its original name, even though the
words "used" or "repaired" were added. But no such practice is involved here. The repair
or reconditioning of the plugs does not give them a new design. It is no more than a
restoration, so far as possible, of their original condition. (Case goes on to say that there
is similarity of the thread size, cylinder hole and heat range to the original one)
 Inferiority is expected in most second-hand articles and generally cost the customer less.
Inferiority is immaterial, so long as the article is clearly and distinctively sold as repaired
or reconditioned, rather than as new. The result is that the second-hand dealer gets
some advantage from the trademark. But, under the rule of Prestonettes, Inc. v. Coty,
supra, that is wholly permissible so long as the manufacturer is not identified with the
inferior qualities of the product resulting from wear and tear or the reconditioning by the
dealer. Full disclosure gives the manufacturer all the protection to which he is
entitled.
 The decree by the Circuit Court of Appeals is fashioned to serve the requirements of
full disclosure. But unlike the Prestonettes case, this involves unfair competition as well
as trademark infringement, and that, where unfair competition is established, any doubts
as to the adequacy of the relief are generally resolved against the transgressor.
 But here there was no showing of fraud or palming off. Their absence, of course, does
not undermine the finding of unfair competition. But the character of the conduct giving
rise to the unfair competition is relevant to the remedy which should be afforded. SC
cannot say that the conduct of respondents in this case, or the nature of the article
involved and the characteristics of the merchandising methods used to sell it, called for
more stringent controls than the Circuit Court of Appeals provided.
ADDITIONAL ON ACCOUNTING (FYI lang, no accounting if injunction will satisfy equity)
 Mishawaka Rubber & Woolen Mfg. Co. Kresge Co states the rule governing an
accounting of profits where a trademark has been infringed and where there is a basis
for finding damage to the plaintiff and profit to the infringer. But it does not stand for the
 proposition that an accounting will be ordered merely because there has been an
infringement.
 Under the Trade Mark Act of 1905, an accounting has been denied where an injunction
will satisfy the equities of the case. The same is true in case of unfair competition. Here
there has been no showing of fraud or palming off. For several years, respondents
apparently endeavored to comply with a cease and desist order of the Federal Trade
Commission requiring them to place on the plugs and on the cartons a label revealing
that the plugs were used or second-hand.
 Moreover, as stated by the Circuit Court of Appeals, the likelihood of damage to
petitioner or profit to respondents due to any misrepresentation seems slight.

Mirpuri vs CA, GR No. 114508, 19 November 1999, 318 SCRA 516

FACTS

Lolita Escobar applied with the Bureau of Patents for the registration of the trademark
“Barbizon”, alleging that she had been manufacturing and selling these products since 1970.
private respondent Barbizon Corp opposed the application in IPC No. 686. The Bureau granted
the application and a certificate of registration was issued for the trademark “Barbizon”. Escobar
later assigned all her rights and interest over the trademark to petitioner Mirpuri. In 1979,
Escobar failed to file with the Bureau the Affidavit of Use of the trademark. Due to his failure, the
Bureau cancelled the certificate of registration. Escobar reapplied and Mirpuri also applied and
this application was also opposed by private respondent in IPC No. 2049, claiming that it
adopted said trademark in 1933 and has been using it. It obtained a certificate from the US
Patent Office in 1934. Then in 1991, DTI cancelled petitioner’s registration and declared private
respondent the owner and prior user of the business name “Barbizon International”.

ISSUE

Whether or not the treaty (Paris Convention) affords protection to a foreign corporation
against a Philippine applicant for the registration of a similar trademark.

HELD

The Court held in the affirmative. RA 8293 defines trademark as any visible sign capable of
distinguishing goods. The Paris Convention is a multilateral treaty that seeks to protect industrial
property consisting of patents, utility models, industrial designs, trademarks, service marks,
trade names and indications of source or appellations of origin, and at the same time aims to
repress unfair competition. In short, foreign nationals are to be given the same treatment in
each of the member countries as that country makes available to its own citizens. Nationals of
the various member nations are thus assured of a certain minimum of international protection of
their industrial property.