Click to read the original article for details

Deep in Trademark Dispute: Why Are North and South Lulu at Odds?

The trademark dispute over "Lulu" that began in 2015 has new progress. The day before yesterday, the trademark case filed by Shantou High-tech Zone Lulu South Co., Ltd. (hereinafter "Lulu South") against Hebei Chengde Lulu Co., Ltd. ("Chengde Lulu") came to light through an announcement disclosed by Chengde Lulu.

On August 10, Chengde Lulu issued an announcement stating that on August 8, it learned that the court had accepted the trademark licensing contract dispute case. In response to Chengde Lulu's announcement, Lulu South responded on the 13th, saying that North and South Lulu are originally one family, and the two have cooperated in a division of labor for over 20 years, which is legal, reasonable, open, and transparent.

Are North and South Lulu One Family?

"First there was Shantou Lulu, then Chengde Lulu. North and South Lulu are originally one family. Shantou Lulu has always had the legitimate right to use the Lulu trademark and patents. The two have cooperated in a division of labor for over 20 years, which is legal, reasonable, open, and transparent." The day before yesterday, Lulu South issued a statement responding to Chengde Lulu's announcement, saying that Shantou Lulu and Chengde Lulu both originated from Lulu Group, and are two holding subsidiaries successively established by Lulu Group. The relationship between Shantou Lulu and Chengde Lulu can be described as two sons born to the same father.

The right to use the "Lulu" trademark and patents was granted to Shantou Lulu by Lulu Group at its inception. The exclusive production and sales rights for the southern eight provinces market and Tetra Pak products nationwide were the "family property" allocated to Shantou Lulu upon the "division of the family" with the joint confirmation of the relevant "Lulu family" enterprises. These are legitimate rights that Shantou Lulu has enjoyed for over 20 years.

In its August 8 announcement, Chengde Lulu stated that the reason for the lawsuit was that in 2015, when the company was planning a refinancing, it obtained two documents, the "Memorandum" and "Supplementary Memorandum," signed by four parties: Lulu Group Co., Ltd. (renamed Linlin Group Co., Ltd., hereinafter "Lulu Group"), Hebei Chengde Lulu Co., Ltd., Shantou High-tech Zone Lulu South Co., Ltd., and Hong Kong Feida Enterprise Company.

The "Memorandum" was signed on December 27, 2001, by Wang Baolin, then chairman of Chengde Lulu, Wang Qiumin, general manager, and representatives of relevant parties. The "Supplementary Memorandum" was signed on March 28, 2002, by then-chairman Wang Baolin and representatives of relevant parties.

However, Chengde Lulu has always refused to recognize the authenticity and legality of these two documents. The reason is that the signing of the memorandums did not go through any legal procedures, and it claims that the signing violated multiple relevant regulations such as the Company Law, Securities Law, Articles of Association, and Stock Listing Rules.

Therefore, in June 2015, Chengde Lulu filed a civil lawsuit with the People's Court of Shuangqiao District, Chengde City, Hebei Province, against Linlin Group Co., Ltd., Lulu South, and Hong Kong Feida Enterprise Company regarding the dispute over the validity of the intangible asset licensing contract, requesting a judgment that the "Memorandum" and "Supplementary Memorandum" be invalid and immediately terminated, but to no avail.

Lulu South Executive Emphasizes the "Statement" Is True

In this announcement by Chengde Lulu, Nandu reporters saw that since 2017, Chengde Lulu has been "encircling" Lulu South, including its distributor channels, over trademark issues.

Nandu reporters found in scattered reports about Lulu South the relationship between Lulu South and Chengde Lulu. Before Chengde Lulu sued Lulu South in 2015, media reports in 2014 indicated that Chengde Lulu, when receiving institutional research, had said that Lulu South's business would expire in 2016 and it would consider acquiring it.

It is understood that Lulu South was established in 1995, before Chengde Lulu's restructuring and listing, as a joint venture between Lulu Group Co., Ltd. and Hong Kong Feida Enterprise Company. Its main business was determined at establishment to be the production and sale of almond milk.

The purpose of establishing the company by the group was mainly to accelerate the development and expansion of the markets in Guangdong, Guangxi, Guizhou, and Hunan provinces, collectively known as the southern market. Nandu reporters learned from Tianyancha that Hong Kong Feida Enterprise Company remains the major shareholder with 85% shares. The business term underwent a change in 2015; before the change, it expired on March 29, 2016, and after the change, it expires on March 29, 2036.

Additionally, data shows that in 2003, Lulu Group transferred its 67.405 million state-owned shares in Chengde Lulu to Shenzhen Wanxiang Investment Co., Ltd. (later renamed Shenzhen Tonglian Investment Co., Ltd., referred to as Tonglian Investment) at 4 yuan per share, totaling approximately 270 million yuan. In 2004, Tonglian Investment transferred these 67.405 million shares of Chengde Lulu to Wanxiang Sannong.

After multiple share reforms, by April 2006, Wanxiang Group's campaign to acquire Lulu shares finally came to an end, becoming the largest capital force behind it and replacing the original parent company, Lulu Group.

A senior executive surnamed Chen from Lulu South said yesterday that the company is currently following legal procedures with Chengde Lulu on a business-to-business basis and has not yet had contact with the Lu Guanqiu family, who actually controls Chengde Lulu. The relevant content has been clearly explained in the "Statement," and "these contents are all true." When asked about future negotiations with Chengde Lulu to resolve the dispute, the executive said it is not easy to answer this topic at the moment.

Meanwhile, Nandu reporters also attempted to contact the relevant person in charge of Chengde Lulu Group to interview them about their views on Lulu South's statement. The phone at the board secretary's office was unanswered multiple times, and a staff member at the company's official website phone said they were not convenient to accept an interview.

Lawyer's View

The Key Is Whether Shantou "Lulu" Has the Right to Use the Trademark

Regarding this lawsuit, Yin Xueqian, a Guangdong intellectual property expert and lawyer, said in an interview with Nandu reporters that from the lawsuit, the facts relied upon by South Lulu are the memorandums. It is unclear whether the memorandums are contracts or additional documents to agreements. If the memorandums are recognized as valid, South Lulu's trademark usage rights can be implemented. "The memorandums relied upon by South Lulu are from 2001. Currently, it seems that the memorandums span two cycles of trademark exclusive rights, with one cycle being ten years.

Entering the second cycle, a new contract should have been signed. Obviously, South Lulu did not sign a licensing agreement for the second cycle, so it is claiming rights based on the memorandums."

"This case is a typical another Wang Laoji case," he believes. Such disputes are normal; the licensor did not foresee such successful market development and now wants to monopolize it.

It is unknown whether the licensee's memorandums include a priority licensing memorandum for renewing the trademark exclusive rights. If so, South Lulu could also obtain a favorable judgment.

Nandu reporters also interviewed intellectual property lawyer Dai Jinliang about this matter. Lawyer Dai believes that the key to this case is whether Shantou Lulu has the right to use the "Lulu" trademark. Lawyer Dai stated that the statement issued by Shantou Lulu explains the historical background of trademark use but does not strongly prove that it legally owns the right to use the trademark. The Trademark Law clearly stipulates that using a trademark identical or similar to a registered trademark on identical or similar products without the consent of the trademark owner constitutes infringement. Public information shows that Chengde Lulu is the registrant of the "Lulu" trademark.

Source: Southern Metropolis Daily -END-