As the countdown to the implementation of the Foreign Investment Law enters, the revision of the Patent Law, another urgently needed law to deepen market-oriented reforms and expand high-level opening up, is expected to be completed within the year. But at the same time, in recent years, trademark disputes have become a “legacy issue from history” that Chinese brands often face when moving forward.

From the Wong Lao Jia Duobao dispute, to last year’s dispute between China’s Red Bull and Thailand’s Tencel, to the dispute between North and South Lulu, to the recent dispute over Changyu’s trademark and patent ownership, trademarks and patents, etc. Disputes over intellectual property issues have almost become the "Sword of Damocles" hanging over the heads of many well-known companies. Judging from many cases, if this relationship cannot be handled well, it can easily become a huge obstacle to the company's forward development.

We can see from many brand disputes that when a brand is founded, the early cooperation agreements signed by the brand owner and the actual operator usually cannot predict the changes in the market situation, competitive environment and legal policies. , the commercial benefits generated by the brand often greatly exceed the expectations of both parties. However, both parties are often overly immersed in deepening cooperation and making the pie bigger, while ignoring the changes in each other's mentality, the ebb and flow of game power, the strength of control, and their respective reconsiderations of the distribution of interests during the cooperation process. A thousand-mile dike collapses in an ant nest. It is precisely because the avoidance of a series of potential conflicts will continue to worsen the differences between the two parties. When the cooperation period is about to expire or other emergencies occur, conflicts will erupt.

The bottom layer of the dispute

Let’s take the Red Bull dispute that attracted much attention at the end of last year as an example.

According to the existing judgment documents and public information, the dispute between China Red Bull and Thailand Tencel can be divided into three stages. The first stage is the dispute between the two parties regarding intellectual property rights, specifically including trademark licensing disputes. , trademark infringement disputes, unfair competition disputes and trademark ownership disputes. Public information shows that the trademark ownership dispute case filed by China Red Bull and Thai Tencel at the Dongcheng District People’s Court of Beijing has temporarily come to an end with the withdrawal of the plaintiff, China Red Bull. , other lawsuits related to intellectual property rights have not yet been pronounced and are temporarily suspended.

The second stage involves disputes over the operation of the joint venture between the two parties, including disputes over requests to change company registration, disputes over liability for damage to the company's interests, disputes over confirmation of the validity of company resolutions, disputes over confirmation of shareholder qualifications, and disputes over distribution of company earnings. On December 29, 2018, the International Commercial Court of the Supreme People's Court accepted a series of dispute cases between China Red Bull and Thailand's Tencel regarding company operations. The final outcome of the case is yet to be adjudicated by the Supreme People's Court.

However, while the outside world mainly focuses on the disputes in the first two stages, we believe that the dispute between the two parties should have a third stage, that is, the dispute between the two parties regarding the content of the investment cooperation, specifically regarding the various aspects of the joint venture company. Disputes over the cooperation period specified in the cooperation agreement signed by both parties. The two parties initially had a desire for long-term cooperation, and Reignwood Group advocated a 50-year cooperation period. However, due to the legal environment at the time, certain compromises were made in actual operation, which led to a series of disputes between the two parties now. Reignwood Group believes that both parties should abide by the 50-year cooperation agreement originally signed, while Thai Tencel believes that the 20-year operating period registered with the Chinese industrial and commercial department should prevail. So, is the cooperation period between the two parties twenty years or fifty years? It may be necessary to further explore the true intentions of both parties at the time of signing the contract, and combine it with the existing evidence materials for final confirmation by the judicial department.

The focus of the dispute between China Red Bull and Thailand's Tencel lies in how to understand and clarify the specific content of investment cooperation, especially the period of cooperation. Public information shows that the initial investment cooperation agreement signed by the two parties more than 20 years ago was relatively simple, and in view of the foreign investment environment and legal environment at that time, the two parties made some compromises with reality during the specific joint venture operation. In the later period, there were major changes in the market situation and the development trend of the Red Bull brand, and the laws related to foreign investment were also significantly revised. These greatly exceeded the expectations at the beginning of the cooperation between the two parties, resulting in a series of lawsuits.

Public information shows that Thai Tencel is the holder of the Red Bull trademark, that is, the brand owner, while Reignwood Group is the operator of the Red Bull brand in mainland China and the actual operator of Red Bull in China. Thai Tencel has entered the Chinese market by granting a series of rights such as trademark use rights to joint ventures. Reignwood Group has used its own marketing and channel advantages to explore and develop the Chinese market.

Now that China's Red Bull operation has stabilized, how should Reignwood Group's historical role as the actual operator of the brand be evaluated? This is an unavoidable practical problem, not to mention that there are major differences in the understanding of the cooperation period between the two parties. The investment in various aspects of the market has been based on their respective understandings, which further complicates the problem.

Return to business intentions

At present, simple legal litigation is not the best way to solve the problems between the two parties. Litigation between the two parties is time-consuming and labor-intensive, and it is likely to bring harm to similar competing brands. It provides market opportunities, which will hurt both sides in the long run. Therefore, both parties to the dispute should maintain the most basic rationality in decision-making and look at the current dispute from a longer-term perspective.

First of all, the initial content, true intentions, and respective rights and obligations of the investment cooperation agreement between the two parties should be clarified through legal means, and the judicial authorities should be requested to explain, supplement, and confirm any unclear aspects of the agreement. Secondly, both parties should use the judicial ruling results as the starting point to re-consider issues such as cost and benefit, competitive environment, and benefit distribution in subsequent cooperation, so as to reduce market losses, maximize commercial interests, and objectively bring benefits to consumers.

Legal litigation can only solve historical problems, and commercial negotiations based on this can solve future problems. Operators should respect the ownership rights of brands, and brands should also see the operators' historical contributions and actual control over the market, and fully estimate replacement costs and market replacement costs. As long as both parties can seek common ground while reserving differences, cooperate sincerely, and seek truth from facts. , you can naturally explore the wisdom to solve problems.

In fact, some of the costs and benefits of the business process are visible, and some are invisible. Invisible costs and benefits often only appear after a long time, which requires decision-makers to have business knowledge. Great wisdom, this is the greatest inspiration for Chinese enterprises.

Incomplete Contract

Some legal and economist scholars have realized that the contract document signed in business practice is actually an incomplete contract. No matter how perfect the contract is, it has certain flaws. omitted. This is not only because language expression is naturally limited. Both parties to the contract cannot write all their business intentions into the contract. Some implicit terms and implied terms will gradually arise and deepen during the execution of the contract; the information is also vague at the beginning. , Business cooperation is continuous, dynamic, and changing. A thorough understanding of the real process of business cooperation is the primary issue before entrepreneurs and lawyers. This requires Chinese enterprises to use greater wisdom in business practice. Facing these challenges also requires lawyers standing behind entrepreneurs to be more pragmatic and rational.

my country's commercial legislation is still in the static cognitive stage, ignoring the dynamic changes in commercial operations. The current legal regulations are not very clear on how the rights and interests of commercial entities arising from dynamic business changes should be vested, and the gray level is too great. Most of them are left to the parties to agree. But what should we do if the parties do not agree? In fact, it is not uncommon for there to be no agreement. When a dispute arises without an agreement, the parties do not know how to handle it, and it is difficult for the judicial authorities to adjudicate. For example, business cooperation between brand owners and brand operators, manufacturers and operators is complex and changeable. During the historical cooperation between the two parties, many commercial interests will be accumulated, such as the accumulation of goodwill, channel network, distribution resources, core team and other key elements that have a significant impact on the continued operation of the brand. Some of these commercial rights and interests can be clearly defined in law, while others are difficult to classify in existing laws, but they are of great significance in specific business practices.

This requires that legislation should go deep into business practice, study and summarize some frequently occurring political issues, make some principled provisions, or produce judicial precedents. The brand and trademark disputes between Red Bull, Wong Lo Kat, and North and South Lulu have further highlighted the urgency of this reality. China has been reforming and opening up for more than 40 years, and similar brand disputes will continue to occur. We hope that the legislative and judicial agencies will pay high attention to this focus on.

(The author is a senior partner of Beijing Runlang Law Firm) Corporate Trademark Registration Corporate Trademark