Background

These days, more and more focus is on the dispute between Hang Zhou Wahaha Group Co., Ltd.（herein after refer to as “Wahaha”） and Danone China (herein after refer to as “Danone”). The two companies have cooperated with each other for 10 years. Now the biggest dispute between them is the trademark named “娃哈哈”. Both parties want to get the ownership of the trademark and prevent the other from using it. Wahaha believes to be the first one to apply this trademark and therefore has the ownership of the trademark, while Danone claims that it is the rightful user of the trademark due to a license agreement entered into by both parties. But the fact is that at first, both parties have signed a trademark transfer agreement, but when they send it to Trademark Office of P.R.C. for registration, the Office did not give any written reply (regardless if approved or dismissed). However, both parties did also sign two separate trademark license agreements, one that was sent for record in Trademark Office of P.R.C. and the other was kept by the parties. So this brings the conflict between both parties now. Danone has brought this issue before the arbitration court in Stockholm, Sweden and a suit in USA, and at the same time, Wahaha brought the case before arbitration court in Hang Zhou, P.R.C.

This case surfaces several legal questions as elaborated on below:

Legal questions

1.         Why did the Trademark Office of P.R.C. not give any reply for a trademark transfer?

2.         If the trademark license agreement has not been recorded in Trademark Office of P.R.C., does it have a legal effect?

3.         If both parties sign two trademark license agreements, one of them has been registered and not the second one, which one has the legal effect?

Our opinion

1.       According to Article 39 of the present Trademark Law of P.R.C., “to assign a registered trademark, the assignor and the assignee shall sign an assignment agreement and jointly file an application with the Trademark Office. The assignee shall guarantee the quality of the goods on which the registered trademark is used. After that assignment of a registered trademark is approved, it shall be announced. The assignee shall enjoy the exclusive right to the use of the trademark starting from the date the announcement is made.” Please also see Article 24 of Regulation for the Implementation of the Trademark Law of P.R.C., “…if no approval is granted, the applicant shall be notified in writing and the reasons therefore shall be given.” So, according to the present laws and regulations, Trademark Office shall give a written reply to the applicant, no matter approval or dismissal notice. But ten years ago, Trademark Office did not give any written reply, and if we interpret this case according to the present law, this act is incorrect.

2.       According to Article 19 of Explanation of Supreme Court of P.R.C. while hearing trademark civil cases, the question whether if the agreement is recorded or not, does not have any effect on validity of the agreement. But if the agreement has not been recorded in Trademark Office, the parties can not use the agreement to confront any third party in good faith.

3.       If both parties sign two trademark license agreements, the recorded one could be used to confront any third party (like abovementioned), but there are different opinions about the legal effect of the  unrecorded agreement. Some legal practitioner thinks both of the agreements shall be obeyed by both parties, since they have both entered into them. The unrecorded agreement is the supplement of the recorded one, and if there are some conflicts between the two agreements, the recorded one shall prevail. But others think we shall try to find what the both parties’ true will is, the agreement that really displays both parties’ true will, that one should prevail. The current laws and regulations, can not give us a clear answer to this question. So we can only wait for the result of the case. Maybe it will bring us some pleasant surprise.

Conclusion

We can learn a lot from this dispute. No matter who wins in the end, Wahaha or Danone, the result is not important. Trying to find right answers to some of the legal issues will help us to deeply understand and consider some deficiency of the current laws and regulations. Hopefully, with quick development of China’s economic, the legal environment of China will develop as the same speed as economic.