Lulu from the south and the north has "fought" again, who is the authentic "almond dew"?

(Image source: Panorama Vision)

Economic Observer reporter Li Huaqing "Since the second half of 2015, due to the friendly attitude of Chengde Lulu and the two sides for more than 20 years, it has begun to frequently launch unreasonable lawsuits and attacks against Shantou Lulu, resulting in a sharp market decline in the past three years (shantou Lulu), and sales in 2017 fell by about 30% compared with 2015. Chen Wen, general manager of Shantou High-tech Zone Lulu South Co., Ltd., introduced to the Economic Observer reporter.

Chengde Lulu (000848. SZ) in the August 10 announcement, described some of the measures taken against Shantou Lulu: in August 2017, a civil lawsuit was filed with the Intellectual Property Court to sue Shantou Lulu and Beijing Wal-Mart Department Store Jianguo Road Branch for infringement of the company's patent rights, the court ruled to dismiss the lawsuit, but Chengde Lulu filed an administrative lawsuit with the court again last month, and the administrative case has been accepted; since October 2017, Chengde Lulu has sent lawyer letters to more than 80 supermarkets (e-commerce) and their headquarters, including Carrefour, RT-Mart, Hualian Supermarket, etc. Since 2018, Chengde Lulu has published a "Solemn Statement" on the infringement of the company's trademark rights and patent rights in a number of media; in February 2018, Chengde Lulu sued Nanfang Lulu and Beijing Rongcheng Wenhua Supermarket for infringement of the company's trademark rights, and the case is currently under trial.

Chengde Lulu is a lulu series of beverages as the main industry of the enterprise, is the largest domestic almond dew production enterprises, for many years the production and sales of almond dew market share of more than 90%, Shantou Lulu also produces almond dew beverages. The dispute between the north and south Lulu arose over the "Lulu" trademark and patent rights. At present, the trademark and patent of "Lulu" are owned by Chengde Lulu, who claims that Lulu Shantou is an infringing product.

But Shantou Lulu had another opinion. Shantou Lulu proposed that both parties were initially holding subsidiaries of Lulu Group (which was renamed "Linlin Group" in March 2011, hereinafter referred to as the original Lulu Group), and that for more than 20 years of friendly cooperation, at the end of 2001 and early 2002, the original Lulu Group (the original Lulu Group owned the intangible assets such as "Lulu" trademarks, patents, domain names, bar codes, etc., transferred these intangible assets to Chengde Lulu for 301 million yuan in 2006, and completed the transfer procedures for intangible assets in 2008), Chengde Lulu, Lulu Shantou and Hong Kong Feida Company (the current controlling shareholder of Lulu Shantou, who established Lulu Shantou as a joint venture with the original Lulu Group in that year) signed the Memorandum of Understanding and the Supplementary Memorandum, and according to these two documents, Lulu Shantou did not infringe.

At present, the full text of the Memorandum and supplementary Memorandum cannot be seen by the outside world, but Lulu Shantou has made a partial introduction to the agreement, including "respecting and acknowledging the history of Shantou Lulu Company before the establishment of the joint-stock company (i.e. Chengde Lulu), as well as the relevant joint venture contract and articles of association clauses"; "Lulu Group and Lulu Co., Ltd. of Shantou confirm that Lulu Shantou Company continues to use the registered trademark and patented technology for a fee", and the right to use "shall remain valid in the case of any transfer of registered trademark and patented technology", Shantou Lulu "Conditions for the use of rights, responsibilities and obligations with reference to Lulu AG" etc.

However, Chengde Lulu does not consider the two documents legal. Chengde Lulu's current management said that it accidentally obtained the two documents only unexpectedly when the company was planning to refinance in 2015, and in June 2015, Chengde Lulu filed a lawsuit with the court to rule that these two documents were invalid, but at the end of 2017, Chengde Lulu withdrew the lawsuit. Chengde Lulu said that the withdrawal of the lawsuit was due to the lack of some evidence, but Shantou Lulu speculated that it was because Chengde Lulu was afraid that the court would rule that the two documents were valid. For this speculation, the Economic Observer reporter asked Chengde Lulu for verification, and as of press time, Chengde Lulu did not reply.

The legality and validity of these two documents has become the focus and root cause of the dispute between North and South Lulu. In July 2018, Lulu Shantou sued Chengde Lulu in court, demanding that it fulfill the requirements of these two documents and compensate 500,000 yuan for economic losses. The case will open on September 18, 2018.

Legitimacy of core documents

Chengde Lulu argued that the signing of the two documents did not perform the procedures of the board of directors, the board of supervisors, the independent directors and the shareholders' meeting of the listed company, nor did it perform the information disclosure procedures of the listed company. However, it is worth pointing out that the ownership of the "Lulu" trademark at that time belonged to the original Lulu Group.

A lawyer from a law firm in Guangdong analyzed to the Economic Observer that if the trademark is owned by the original Lulu Group, it is only authorized for Chengde Lulu to use, and it is not an exclusive authorization, the original Lulu Group has the right to dispose of the use of the trademark without the consent of Chengde Lulu. The secretary of the board of directors of a listed company in Guangdong also pointed out to the Economic Observer reporter that if the authorization of the trademark owner to the listed company is not exclusive, how the trademark owner disposes of the trademark does not need to go through the procedures of the listed company. "I prefer to think about this from the perspective of whether it is consistent with preventing competition from the same industry." The secretary of the board said. In the current regulatory environment, there can be no competition between the related party enterprises of the listed company and the listed company, and if so, it is necessary to use asset restructuring, equity replacement, business adjustment and other methods to rectify within a certain period of time.

Measuring the practice of the original Lulu Group at the time of signing the document, the original Lulu Group was the controlling shareholder of the two Lulu enterprises, and Shantou Lulu had been spun off from Chengde Lulu, and the two Lulu enterprises produced almond dew drinks. However, at present, the original Lulu Group is no longer a shareholder of the two enterprises, and as early as 2000, involving state-owned enterprises (the original Lulu Group belonged to state-owned enterprises), the prevention of inter-industry competition is generally not strict enough, in 2013, the SASAC and the CsrC also jointly issued the "Guiding Opinions on Promoting State-Owned Shareholders and Controlled Listed Companies to Solve The Inter-industry Competition Regulated Related Party Transactions".

Chengde Lulu argued that the identities of The signatories of the two documents, Wang Baolin and Wang Qiumin, were not suitable, and at that time Wang Baolin was both the chairman of Chengde Lulu, the chairman of the original Lulu Group and Shantou Lulu, and Wang Qiumin was both the general manager of Chengde Lulu and the director of the original Lulu Group and Shantou Lulu. However, Shantou Lulu believes that at that time, the two companies were the holding subsidiaries of the original Lulu Group, and the signing of the document was the "separation" decision made by the original Lulu Group to the big and small "sons", and it was difficult to avoid a relationship.

If the relationship between the original Lulu Group, Chengde Lulu and Shantou Lulu remains unchanged, there will probably be no current situation in which the north and south Lulu are fighting each other. Over time, the tripartite relationship has changed dramatically.

In 2006, the overall restructuring of the original Lulu Group, the split of shares and the share repurchase of Chengde Lulu were carried out simultaneously, Chengde Lulu repurchased all the shares of Chengde Lulu held by the original Lulu Group, after completion, the original Lulu Group completely withdrew from Chengde Lulu as the largest shareholder, Wanxiang Sannong Co., Ltd. (now renamed "Wanxiang Sannong Group Co., Ltd.") became the largest shareholder, and the original Lulu Group, which is now the associated enterprise of Chengde Lulu, was disclosed in the 2018 semi-annual report of Chengde Lulu. 30% of the original Lulu Group. The original Lulu Group has now also withdrawn from Shantou Lulu, and Tianyan's investigation shows that Hong Kong Feida Enterprise Company accounts for 85% of Shantou Lulu's shares, while Lin Weiyi accounts for 15% of the shares.

Chengde Lulu argued that the content of the document had unfair competition in the nature of market regional division and monopoly operation, but Shantou Lulu said that before the two sides were cooperative partners, Shantou Lulu used Chengde Lulu's announcement to "endorse" itself in a statement issued on August 13: Chengde Lulu wrote in the listed company announcement on May 12, 2014: "Shantou Lulu sells within the regional scope stipulated in the contract." The Economic Observer reporter inquired about Chengde Lulu's announcement on the same day, which is an investor relations activity record sheet, which does have this expression.

Chen Wen, general manager of Shantou Lulu, told the Economic Observer that the document stipulated that Shantou Lulu sold in the southern market, and Chengde Lulu had been complying with it before, but this year it was found that Chengde Lulu had spread its own products to the southern market. Shantou Lulu believes that it was a major change in the management of Chengde Lulu in 2015 that caused Chengde Lulu to not recognize the content of the original document.

The Economic Observer reporter inquired about the current executive history of Chengde Lulu, most of the executives have worked in Wanxiang Group, such as Lu Yongming, the chairman of Chengde Lulu, who was the vice chairman of Chengde Lulu from August 2015 to April 2018, and a director of Wanxiang Denong Co., Ltd. from 2011 to 2014.

A team of lawyers from a law firm in Guangdong analyzed to the Economic Observer that according to the Contract Law and relevant judicial interpretations, the circumstances of contract invalidity mainly include: one party concludes a contract by means of fraud or coercion, harming the interests of the state; malicious collusion to harm the interests of the state, the collective or a third party; the use of legal forms to cover up illegal purposes; damage to the public interest; and mandatory provisions on the validity of illegal laws and administrative regulations. From the above-mentioned legal provisions, it can be known that the apparent unfairness does not belong to the statutory situation of invalidity of the contract, but the obvious unfairness can be revoked. According to the general provisions of the Civil Law, if one party takes advantage of the other party's situation that it is in a state of distress or lacks the ability to judge, so that the civil juristic act is obviously unfair when it is established, the injured party has the right to request the people's court or arbitration institution to revoke it. "Specific to this case, to determine whether the contract is valid, it is necessary to make a further judgment based on the memorandum signed by both parties and the specific analysis of whether there are invalid circumstances stipulated by the corresponding laws. On the other hand, if Chengde Lulu believes that the agreement is manifestly unfair, he can request revocation according to law. The support of the Tribunal is based on the circumstances in which it is presented. The team of lawyers analyzed.

In Chengde Lulu's view, the two documents damaged the future interests of the shareholders of the listed company, but Shantou Lulu believed that the signing of the two documents was the protection of the interests of Shantou Lulu by the original Lulu Group and Chengde Lulu that year.

In March 1996, the original Lulu Group and Hong Kong Feida Enterprise Company established Shantou Lulu, Lulu Group accounted for 51% of the shares, Hong Kong Feida accounted for 49% of the shares, Shantou Lulu was responsible for opening up the southern market. In 2001, Lulu Shantou increased its capital, and the right to use the "Lulu" trademark and the right to patent accounted for 10% of the shares. From 1994 to 1996, the sales revenue of the original Lulu Group was 120 million, 180 million and 270 million, respectively, and the payment for the free overdue occupation of Feida Company remained at the level of 40 million to 60 million yuan all year round. In 1997, the original Lulu Group separately took out the high-quality assets in the group to restructure the listed company Chengde Lulu, and Shantou Lulu was also transferred to Chengde Lulu Holdings, becoming one of the main assets of the listed company.

In 2000, the original Lulu Group, Chengde Lulu and Hong Kong Feida jointly agreed to invest in the development of the "Lulu" Tetra Pak new packaging production line by Lulu Shantou, because for the Tetra Pak packaging products at that time, Chengde Lulu, as a listed company, considered the huge investment and risks, did not dare to introduce, so the parties negotiated to introduce Tetra Pak products from Lulu Shantou to enrich lulu's product range and expand lulu's brand influence.

In 2001, the listed company implemented a new accounting standard, the original market development expenses included in deferred assets were changed to the current cost, because shantou Lulu is responsible for the southern market is relatively new, marketing expenses are large, coupled with the new Lile package production line, the input is far greater than the output, the use of the new accounting standards makes Shantou Lulu have operating losses on the listed company's statements. Chengde Lulu believes that under such circumstances, Shantou Lulu's continued stay in the listed company will directly affect the financial report of the listed company and is not conducive to the refinancing of the listed company. Hong Kong Feida Company and Shantou Lulu put the overall interests of the "Lulu" brand as the most important, fully cooperated, and agreed to temporarily withdraw from the listed company at the request of Chengde Lulu, and the parties agreed to return to the listed company in the future when the benefits of Shantou Lulu improved.

In Shantou Lulu's narrative, for the sake of the "Lulu" brand, it assumes a "tragic and righteous" role.

Another trademark dispute

In fact, due to historical reasons, the dispute over the trademark "Lulu" is not only the dispute between the north and the south Lulu, but also the dispute between Chengde Lulu and the original Lulu Group.

In 2006, Chengde Lulu transferred a total of 127 Lulu series trademarks, 73 patents, 74 various domain names, and 205 kinds of corporate and commodity barcodes with a payment of 301 million yuan. In that year, the original Lulu Group promised that when the transfer procedures of the "Lulu" series of intangible assets were completed, the Group would apply for a change of enterprise name within 6 months. In March 2008, the transfer of intangible assets was completed, but the original Lulu Group has not applied for and authorized the "Lulu" trademark. In 2010, Chengde Lulu complained to the Bureau of Industry and Commerce.

This complaint leads to the irony behind it. Originally, in 2007, after signing the Intangible Assets Transfer Agreement and its Supplementary Agreement, Wang Baolin, who was then the chairman of Chengde Lulu and the chairman of the original Lulu Group, signed the "Trademark License Agreement" and "Enterprise Name License Agreement" on behalf of the two parties, which stipulated that Chengde Lulu licensed the original Lulu Group to continue to use the "Lulu" trademark for ten years, and the original Lulu Group to continue to use the "Lulu Group" logo for ten years, and the original Lulu Group paid a one-time license fee of 10,000 yuan and 20,000 yuan respectively according to the agreement.

After the Intervention of the Industrial and Commercial Bureau, the original Lulu Group changed its name in March 2011, and in early August 2011, the CSRC gave Wang Baolin a public reprimand for Wang Baolin's behavior. In mid-August 2011, Chengde Lulu filed a lawsuit with the court, requesting that the Trademark License Agreement and The Enterprise Name License Agreement signed in 2007 be invalid, and at the end of November 2011, Chengde Lulu received a first-instance judgment invalidating the two agreements, but Linlin Group appealed. In 2012, the final judgment rejected the appeal of Linlin Group and upheld the original judgment, and the trademark dispute between Chengde Lulu and the Original Lulu Group was legally conclusive.

As early as 2012, there were rumors that Chengde Lulu wanted to acquire Shantou Lulu as a solution, but the asking price of Shantou Lulu was too high. The Economic Observer reporter interviewed Chengde Lulu about the acquisition of Shantou Lulu, and as of press time, Chengde Lulu did not reply. However, in the Investor Relations Activity Record In May 2014, an investor asked about the acquisition of Lulu Shantou, when Chengde Lulu replied, "Southern Lulu's annual sales revenue is only tens of millions, and if it is acquired, the other party will offer a higher purchase price", "In the case of the expiration of Southern Lulu's operation and the reasonable acquisition price, it will consider the acquisition." ”

In the future, whether the dispute between the north and south Lulu will be resolved in court or other means is not yet known.