Danone's legal pursuit of Wahaha a sign of the times

As economies throughout the world have become more global over the past decade, so too have their legal battles.

The ongoing international litigation between French food giant Groupe Danone SA and China's Wahaha Group is one of the best examples of this phenomenon.

Since May 2007, focusing on controlling the $2.4 billion Chinese brand of Wahaha beverages, Danone, as the business partner of Wahaha and the world's leading food maker, has filed over 21 lawsuits in several different countries, including the British Virgin Islands, Sweden, France, Italy and the United States.

However, Danone has won no victories in the group of fights.

The latest ruling from a California Superior Court said that Danone's claims should be pursued back in China's courts.

"China is a more suitable place for the lawsuit, focusing on the trademark right of Wahaha brand and Danone's claims against the wife and daughter of Wahaha Group Chairman Zong Qinghou," said the California judge.

Similar judgments from other overseas courts have been handed down, pushing the legal battle back to the Chinese mainland.

Although Danone's claims in overseas courts keep losing, the company has declined to dismiss its claim against Wahaha.

Danone called the latest ruling procedural in natural and said it did not address the underlying case between Danone and Wahaha.

The 13-year cooperation

Danone established its venture with Wahaha in 1996, for producing bottled water, tea and other juices under the Wahaha brand.

Wahaha Group agreed to share ownership of the Wahaha trademark with its partner.

However, in the following years, riding on the fast development of Wahaha's products, the Hangzhou-based beverage maker established 40 branches across the country that were all outside of the joint venture with Danone.

"The key issue of the legal battle between Danone and Wahaha was just focusing on the large sales of Wahaha's products out of the joint venture," said Zhao Zhongcheng, a partner of the international trademark department of Unitalen law firm. Essentially, Danone alleged that Wahaha was illegally manufacturing and selling Wahaha products without sharing the sales with Danone.

Wahaha said it would continue to own the trademark, having won an earlier lawsuit in a Chinese court for owing the brand of Wahaha.

According to Wahaha Group spokesman Shan Qining, soon after Wahaha signed the agreement to transfer its brand to the joint venture, the Chinese government had already rejected the plan of sharing the "national" trademark.

Profit competition

"The huge profit is the major driving force for Danone's continuous efforts at controlling the trademark of Wahaha," an expert inside the case said recently, refusing to give his name.

According to him, since the cooperation between the two companies started in 1996, Danone had invested a total 1.4 billion yuan in the joint venture. However, the remarkable profit returned to Danone was over 3.544 billion yuan.

In the following years, Wahaha promoted a group of high-end and high-profit products in the domestic market, such as the Nutrition Express Milk Juice products, which were outside the joint venture with Danone.

In addition, the expert added, for Danone Group, China was its third-largest market, after France and Spain, before the struggle with Wahaha was highlighted in 2007.

After Danone started the battle with Wahaha and stopped the sales from their joint venture in the second half of 2007, Danone's sales in the Asian market fell over 30 percent, according to Danone's report.

"Danone is seen not fully understand the risk of using the national well-known trademark of Wahaha during the cooperation with Wahaha," lawyer Zhao said.

Zong, as Wahaha Group chairman, said under the increasing trend of business globalization, Chinese manufacturing companies should realize the significance of holding the whole chain of both manufacturing and managing works.

"Especially after viewing the current global business competition, for better economic safety for both a company and the country, domestic companies should pay attention to intellect property rights and trademark rights," Zong said.

(China Daily 03/16/2009 page11)