Danone/Wahaha: Danone Loses in China Courts (Part 7)
When Danone enlisted President Sarkozy’s support to help resolve its legal disputes with its Chinese partner, it must have known that it was having some trouble in the courts, particularly those in China. Sure enough, as reported in the International Herald Tribune on December 10:
Hangzhou Wahaha, embroiled in a trademark dispute with Groupe Danone, said Monday that it won a lawsuit on claims of unfair competition filed in China against a Danone executive.
François Caquelin, appointed by Danone to sit on the board of a joint venture with Wahaha, participated in unfair competition because he also sat on the boards of rivals, Wahaha said Monday in a statement, citing a court judgment.
The Guilin Intermediate People’s Court will consider similar claims against Danone Asia’s president, Emmanuel Faber, and the firm’s China president, Qin Peng, Wahaha said.
Danone, which formed ventures with Wahaha in 1996, has accused companies linked to the chairman of its Chinese partner of unauthorized use of the Wahaha trademark.
Wahaha’s chairman, Zong Qinghou, claims the agreement giving Danone control of the brand violated Chinese law and that rights to the trademark remain with Wahaha.
An arbitration court in Hangzhou also found in favor of Wahaha, ruling that the trademark used to sell bottled water, tea and other beverages remains with the Chinese company, Caijing Magazine reported Sunday, citing Zong. Danone still has the right to appeal the decision, it said.
As evidenced by the above excerpts, the legal aspects of the Danone/Wahaha dispute are very complicated. It is impossible for me, or, I would argue, anyone who isn’t intimately familiar with all of the details of the case, to judge whether the above judicial decisions by the Chinese courts are fair or unfair. The point is, that once negotiations stop in China, and a dispute enters the legal arena, avenues to resolving the dispute in any other way, other than through the legal system, are closed.
Prior to legal action being taken, the local, provincial or central governments in China may be persuaded to play a role in bringing two parties together. That is when an appeal by President Nicolas Sarkozy to President Hu Jintao would have had maximum impact. Once the dispute gets into the court system, however, government officials, no matter how senior, will be very reluctant to interfere. Now that one or two decisions have gone against Danone, I don’t see Divine Intervention having any chance of success.
The obvious lesson in all of this is that all means should be used to resolve disputes in China outside the court system, and that legal action should be taken only as a last resort. In developed countries, court proceedings can be an excellent way to gain leverage and bring an opposing party to the negotiating table. In my experience, that approach seldom works in China.
Previous posts on the Danone/Wahaha dispute:
Danone/Wahaha: Just the Facts, We Think (Part 1)
Danone/Wahaha: A Breakdown in Mutual Trust (Part 2)
Danone/Wahaha: Failure to Create a Common Vision (Part 3)
Danone/Wahaha: Dispute Resolution in China (Part 4)
