Chengde Lulu's lawsuit was dismissed, when will the "brother wall" of North and South Lulu be suspended?

The disputes related to Lulu in the North and South have progressed again. Chengde Lulu recently issued an announcement saying that the court found that the company's lawsuit against former executives Wang Baolin and Wang Qiumin and the company's related party transaction damage liability dispute overlapped with the parties in another case and constituted a duplicate lawsuit, so it dismissed the company's lawsuit.

Wang Baolin and Wang Qiumin were sued in connection with Chengde Lulu's trademark case. According to the information disclosed by Chengde Lulu, Wang Baolin and Wang Qiumin served as the chairman and general manager of the company respectively. Chengde Lulu argued that the two defendants took advantage of their position as the core management personnel of the company to privately sign a related party transaction contract with the affiliated enterprise, which harmed the interests of the company.

From "one mother compatriot" to "brother wall", Chengde Lulu and Shantou Lulu are constantly entangled. Not only Chengde Lulu, Shantou Lulu, Wang Baolin and Wang Qiumin were involved, but Chengde Lulu's holding company Wanxiang Sannong was also difficult to stay out of the matter. After years of strife, Chengde Lulu's performance has not improved significantly, and the market space has also been squeezed. While competitors increased their horsepower and moved forward, Chengde Lulu had to find a way to resolve the "lose-lose situation".

The complaint constituting a duplicate was dismissed

According to the announcement released by Chengde Lulu, Wang Baolin served as the chairman of Chengde Lulu from 1997 to 2010 and was the legal representative of the company; Wang Qiumin served as the director and general manager of Chengde Lulu from 1997 to 2014, and vice chairman from August 2014 to 2016.

According to the announcement, the two defendants took advantage of their position as the core management personnel of Chengde Lulu to privately sign memorandums, supplementary memorandums and other related party transaction contracts with the affiliated enterprise Lulu Group Co., Ltd. (later renamed Linlin Group Co., Ltd., hereinafter referred to as "Lulu Group Company"), Shantou High-tech Zone Lulu South Co., Ltd. ("Shantou Lulu") and Hong Kong Feida Enterprise Company in the name of the company.

The signing of the above-mentioned memorandum of understanding, without the asset appraisal and valuation procedures, without the deliberation and decision of the company's board of directors and shareholders' general meeting, transferred to Lulu Group Company the 51% equity of Shantou Lulu held by the plaintiff company and the status of the actual controller at a "zero yuan" consideration. Wang Baolin and Wang Qiumin then decided to give up the opportunity of Lulu Group Company to increase the capital of Shantou Lulu at an affordable price, and gave up the controlling position of state-owned property rights, so that Hong Kong Feida Enterprise Company controlled Shantou Lulu with a shareholding ratio of 85%. In addition, Wang Baolin and Wang Qiumin granted Shantou Lulu trademark and patent license rights without authorization at unfair and unreasonable price terms, and sought benefits through illegal use of the company's core intellectual property rights. Therefore, on April 1, 2020, Chengde Lulu filed a lawsuit against Wang Baolin and Wang Qiumin with the Chengde Intermediate People's Court.

Wang Baolin and Wang Qiumin raised objections to jurisdiction during the submission of their pleadings. On July 3, 2020, the Chengde Intermediate People's Court ruled that the case should be transferred to the Intermediate People's Court of Shantou City, Guangdong Province. Chengde Lulu appealed to the Higher People's Court of Hebei Province, which ruled that the case was under the jurisdiction of the Chengde Intermediate People's Court. In November 2020, the Chengde Intermediate People's Court issued a ruling on the suspension of litigation in response to the case.

This time, the Chengde Intermediate People's Court found that the parties in the case of Chengde Lulu Holding Company Wanxiang Sannong Group Co., Ltd. sued the defendants Linlin Group Co., Ltd. and Shantou High-tech Zone Lulu South Co., Ltd., and the third party, Hong Kong Feida Enterprise Company, Hebei Chengde Lulu Co., Ltd., Wang Baolin and Wang Qiumin, and the litigation claims were included, so the lawsuit in this case was rejected.

Regarding the possible impact of the case, Chengde Lulu said in the announcement that Wang Baolin and Wang Qiumin's private and secret signing of a related party transaction contract seriously violated the duty of loyalty to the listed company, violated the law, and the company's trademark was illegally used to interfere with the company's production and operation, but it was impossible to accurately estimate the specific impact on the company's profit in the current period and the profit after the period.

Cause of the memorandum

The dispute between Chengde Lulu and Shantou Lulu stemmed from the signing of the above memorandum. According to public information, in March 1996, Lulu Group, whose sales powerhouse is in the north, decided to establish Shantou Lulu as a joint venture with Hong Kong Feida Enterprise in order to open up the southern market, and the two sides held 51% and 49% of the shares respectively. In 1997, Lulu Group established Chengde Lulu separately in the process of restructuring state-owned enterprises. In order to allow Chengde Lulu to go public, Lulu Group injected 51% of the equity of Shantou Lulu as a high-quality asset, and Lulu Shantou was transformed into a subsidiary of Chengde Lulu.

In the article "Originally the Same Root And Fried He TaiQiu", Shantou Lulu once published an article described the relationship between the north and south Lulu as follows: "When Chengde Lulu was under the banner, the 'Lulu' trademark belonged to Lulu Group, and Lulu Group coordinated the use of the 'Lulu' trademark by two companies, Shantou Lulu and Chengde Lulu. Lulu Group invested 10% of the right to use the 'Lulu' trademark and the right to use the patent into Lulu Shantou, and took this as the purpose and main terms of cooperation of Shantou Lulu. ”

Public information shows that Shantou Lulu is in charge of the southern market. Before 2000, including Shantou Lulu, the almond dew produced by all parties was filled with three pieces of tinplate. In 2000, Lulu Shantou introduced Tetra Pak packaging.

In 2001, Chengde Lulu transferred its 51% equity interest in Shantou Lulu to Lulu Group, which decoupled from Chengde Lulu in the equity relationship. Subsequently, due to the uncertainty brought to the development of Shantou Lulu due to the independent investment in Tetra Pak and the withdrawal from the listed company, the four parties signed memorandums of understanding and supplementary memorandums in Shantou at the end of 2001 and the beginning of 2002.

According to the memorandum, Shantou Lulu is responsible for the production and sales of tinplate three-piece canned "Lulu" brand series of beverages in 8 southern provinces such as Guangdong, Fujian and Guangxi in China, and Shantou Lulu exclusively produces and sells "Lulu" brand composite paper flexible packaging beverage products to supply the national market, and according to development needs, use Chengde Lulu's sales channels and advantages in the north to strengthen the sales of the product in the northern Chinese market.

According to the content of this memorandum, Chengde Lulu held in the above announcement that Wang Baolin and Wang Qiumin illegally and arbitrarily divided the retail market of tinplate canned Lulu brand almond dew beverages, which fundamentally damaged the retail market value of Lulu almond dew in 8 provinces.

Numerous prosecutions continue

Because it did not approve of the signing of the memorandum of understanding, Since 2015, Chengde Lulu has initiated lawsuits, issued lawyer letters or reported to Lulu Shantou on three occasions on the grounds of trademark infringement.

In June 2015, Chengde Lulu filed a civil lawsuit with the Shuangqiao District Court of Chengde City, claiming that its relevant agreement with Shantou Lulu was invalid, but withdrew due to the lack of some evidence. In July 2017, Chengde Lulu sued Shantou Lulu for trademark infringement against the Jianguo Road branch of Beijing Wal-Mart Department Store Co., Ltd., which sold related goods, claiming more than 3 million yuan. On February 8, 2018, Chengde Lulu filed a civil lawsuit with the Beijing Intellectual Property Court on the grounds that Lulu Shantou and Beijing Rongcheng Wenhua Supermarket infringed the company's approved registration of the Figurative Trademark No. 7518767, demanding that Lulu Shantou compensate RMB90.549 million.

Regarding Chengde Lulu's lawsuit, Shantou Lulu said in the above article that due to the change in the management of Chengde Lulu, the new management attempted to deny the above historical situation, overturn the relevant agreements in the memorandum and supplementary memorandum, and used various means to try to deny the validity of the contract, terminate the long-term cooperation between Chengde Lulu and Shantou Lulu, and monopolize the consumer market of "Lulu" almond dew and a series of natural beverage products in the country.

But Shantou Lulu is not blindly passive. On the evening of August 9, 2018, Chengde Lulu issued an announcement saying that it had received a summons from the Jinping District People's Court of Shantou City and other materials served, and learned that the court had accepted shantou Lulu v. Chengde Lulu trademark license contract dispute. According to the announcement, Lulu Shantou filed a civil lawsuit on the grounds that Chengde Lulu did not fully perform its obligations in the above two memorandums as agreed, and claimed 500,000 yuan.

The protracted dispute made Wan Xiangsannong, the controlling shareholder of Chengde Lulu, unable to sit still. On March 22, 2019, Chengde Lulu issued an announcement that it had recently received a notice from the controlling shareholder, Wanxiang Sannong Group Co., Ltd., and learned that the Higher People's Court of Hebei Province had filed a case against Linlin Group Co., Ltd., Shantou High-tech Zone Lulu South Co., Ltd., Hong Kong Feida Enterprise Company, and Chengde Lulu Company for related party transaction damage liability disputes.

Wanxiang Sannong hoped to confirm that the memorandum and supplementary memorandum had no legal effect through litigation, and ordered Linlin Group Co., Ltd. and Shantou High-tech Zone Lulu South Co., Ltd. to jointly compensate for economic losses of 135.0418 million yuan, and ordered the third party, Hong Kong Feida Enterprise Company, to bear joint and several liability for compensation, and ruled that the compensation in this case belonged to Chengde Lulu.

Continuous coaching changes are under pressure

Throughout the development history of Chengde Lulu, its rapid development period is inseparable from the figure of the Universal System. In the 2006 share reform, the controlling shareholder of Chengde Lulu changed from Lulu Group to Wanxiang Sannong, which also ushered in a new period of development.

Judging from the performance of Chengde Lulu, the performance has since climbed all the way, reaching the highest performance in 2015. From 2016 to 2017, Chengde Lulu's revenue was 2.521 billion yuan and 2.112 billion yuan, and its net profit was 450 million yuan and 414 million yuan, respectively, all showing a downward trend. From 2018 to 2019, Chengde Lulu's performance increased slightly, at 2.122 billion yuan and 2.255 billion yuan respectively, but it still did not reach the peak of 2015.

Chengde Lulu once said in the announcement that the company's plant protein beverage industry is a fully market competition industry, and well-known enterprises in the beverage industry have successively launched new products to share the food market. In response to the slowdown in development in recent years, Chengde Lulu said that the main reason is the increase in the supply of soft drinks and the intensification of competition. The product structure is single, and the product image is disconnected from the consumption trend, for which Chengde Lulu has clearly shifted from the traditional gift image to daily consumption drinks.

On the other hand, in recent years, Chengde Lulu has changed coaches frequently. On March 20, 2018, Chengde Lulu issued an announcement on the change of the actual controller of the company, and Lu Weiding, the son of Lu Guanqiu, inherited 95% of the equity of Wanxiang Sannong Group Co., Ltd. under his father's name, thereby holding 100% of the equity of Wanxiang Sannong and 40.68% of the equity of Chengde Lulu, becoming the actual controller of Chengde Lulu. At that time, there was a view that Chengde Lulu might make personnel adjustments, which was also Lu Weiding's way of strengthening control over the company.

On the evening of April 16, 2018, Chengde Lulu issued an announcement that chairman Guan Dayuan applied to resign as chairman of the board for personal reasons, and Zhou Shuxiang and Jian Zecheng also resigned as chairman and supervisor of the board of supervisors respectively. Subsequently, the chairmanship was held by Lu Yongming, the general manager at the time. However, Lu Yongming also applied to resign as chairman and general manager on October 10, 2019. Liang Qichao, director of Chengde Lulu, took over as chairman and general manager.

Marketing expert Lu Shengzhen believes that for Shantou Lulu, the trademark dispute with Chengde Lulu is a matter of life and death, and dare not give up easily. Judging from the current performance, the two sides have tasted bitter fruits in the dispute, and with Shantou Lulu suing Chengde Lulu, the contradictions between the two sides have further escalated, and there may be a situation in which both sides will lose in the future.

Beijing News reporter Wang Ziyang

Edited by Li Yan Proofread by Liu Baoqing