Danone fails to obtain transfer of WAHAHA trademark

The Hangzhou Arbitration Commission has held that the trademark transfer agreement under which Wahaha Group was to transfer the famous beverage trademark WAHAHA to a group of joint ventures it had set up with Groupe Danone expired in 1999 when the China Trademark Office refused to record the assignment. Therefore, the WAHAHA trademark belonged to Wahaha.

This episode represents an important chapter in the battle between Danone and Wahaha over the WAHAHA mark.

In 1996 Danone entered into joint ventures with Wahaha, taking up a 51% stake in a total of 39 joint ventures. It paid several million US dollars to Wahaha to have the WAHAHA trademark assigned to the joint venture group. Under the trademark transfer agreement, Wahaha was to assign the WAHAHA trademark to the joint venture group. The joint venture group, one of the largest beverage companies in China, was very successful, recording sales of $1.5 billion in 2006. However, relations between the joint venture partners turned sour, and Danone and Wahaha have been battling over the WAHAHA trademark since the middle of 2007.

In May 2007 Danone commenced arbitration proceedings in Stockholm. In June Danone filed a lawsuit in Los Angeles against certain companies set up by family members of the chairman of Wahaha, alleging that the companies engaged in the sale of WAHAHA products which were manufactured outside the joint ventures. Danone obtained court orders freezing the assets of these companies.

In June 2007 Wahaha commenced proceedings over the trademark transfer before the Hangzhou Arbitration Commission, claiming that the WAHAHA trademark was never formally and legally transferred to the joint venture group. It also commenced proceedings before the Guilin Intermediate People's Court alleging that certain Danone executives had breached company law or damaged the interests of the joint venture group by serving on the boards of several companies that competed with the joint venture group. Wahaha obtained judgment in its favour in November 2007 and Danone appealed to the Higher People's Court.

Reacting to Wahaha’s request for arbitration in Hangzhou, in August 2007 Danone filed suit with the Beijing First Intermediate People's Court against the China Trademark Office for refusing to approve the application to transfer the WAHAHA mark from Wahaha to the joint venture group. However, Danone withdrew the case in November 2007.

A few days after the Hangzhou arbitration decision was rendered, the trade union of Wahaha filed suit against Danone with the Shangdong Intermediate People's Court, alleging that Danone had damaged the interests of Wahaha workers by appointing executives of the joint venture to serve on the board of companies that were in competition with the joint venture. The trade union claimed damages in the sum of Rmb10 million ($1.35 million).

The dispute between Danone Wahaha has escalated into an international crisis. The dispute was on the agenda for discussion when French President Nicolas Sarkozy visited China in November 2007. However, 10 days after the Hangzhou arbitration decision was issued, Danone and Wahaha issued a joint press statement declaring that in accordance with the wishes of the French and Chinese governments, the two groups had agreed to end antagonism and return to the negotiation table.

Rebecca Lo, Rebecca Lo & Co, Hong Kong