Danone loses trademark case against Chinese partner

In a ruling that may have implications for the Wadias' ongoing dispute with Danone SA, a Chinese court has rejected an appeal by the French conglomerate in a legal battle with estranged partner Hangzhou Wahaha Group over ownership of the "Wahaha" trademark, China's best-known soft-drink brand.

Wahaha said the ruling affirmed its rights to the trademark, but Danone charged that the court had failed to conduct a substantive review of the case and vowed to take the matter to the relevant superior judicial authorities in China.

The dispute between the two firms, which had formed the joint venture in 1996, emerged a decade later in April 2007, when Danone publicly accused Wahaha of setting up parallel businesses outside their joint ventures that illegally sell competing Wahaha-branded products.

The French group has accused Zong Qinghou, Wahaha's founder, of setting up copycat operations outside its joint ventures with Danone to sell competing Wahaha-branded products, and of failing to transfer ownership of the Wahaha trademark to the joint venture as required under their joint venture agreement.

In response, Zong claims Danone reneged on its joint venture agreement by acquiring rival businesses in China. He recently called for a "divorce" between the two companies. (See: After Britannia, Danone locks horns with its Chinese partner)

Since last year, the two companies have been trading accusations and lawsuits, with legal battles waged in China, the US, Sweden and the British Virgin Islands. Last year, Danone filed its first lawsuit against Wahaha on 9 May in Stockholm, and on 4 June, Danone filed another lawsuit in Los Angeles against two Wahaha-related companies and two individuals.

The food giant is locked in a similar battle with India's Britannia regarding the branding of Tiger biscuits. (See: Britannia moves Singapore court against Danone over Tiger brand)

In the latest ruling, the Hangzhou Intermediate People's Court rejected Danone's appeal against a Hangzhou Arbitration Commission decision in favour of Wahaha last December.

Danone Group argued that the Hangzhou arbitration commission's ruling had "distorted the facts of the case, intentionally and maliciously misinterpreted and misapplied the laws of the People's Republic of China, and was an award that completely ignored the facts and law".

Danone had also said it hoped the Hangzhou court would carry out the substantive review, apart from the procedural review, of the legality of the arbitral procedures.

In its latest statement, Danone said, "The Hangzhou court only carried out a procedural review for this case (specifically, the Hangzhou court failed to conduct a substantive review of the accuracy and legality of the determination of facts and application of law) and rendered its ruling based on a procedural review only."

Although the Hangzhou court ruling is final, Danone said it would report the matter to the appropriate superior judicial authorities in China. It also said the arbitration proceedings in Stockholm would begin hearing in January.

"Danone will continue to pursue all legal options to protect its contractual rights and financial interests," the French company said.

Wahaha said that the ruling was a major step forward for the company in its legal proceedings. "After a year-long dispute, the 'Wahaha' trademark has finally ended up in Wahaha's hands under the law," it said.

Danone said yesterday that, regardless of decisions by the Chinese courts, the joint venture and trademark license agreements between Danone and Wahaha gave their ventures, 51 per cent owned by Danone, exclusive and irrevocable rights to use all Wahaha trademarks.

Danone also reiterated its charge, now under consideration at the Arbitration Institute of the Stockholm Chamber of Commerce, that Wahaha breached those agreements.