In the summer of 2008 two red cans of different herbal tea sparked off disputes between "LoLo" and "LoLo Group", current independent trademarks once registered by the same company.

That summer a new herbal tea in a red-and-black can appeared in major Beijing supermarkets. With the eye-catching yellow logo "LoLo Group" the tea sold for 2 yuan, almost half the price of Wanglaoji, a leading herbal tea manufacturer in China. The cans were the same colors but the logo designs were different.

During interviews at a grocery store virtually every shopper said they believed the herbal tea was a new product from Hebei Chengde LoLo Co Ltd (Chengde LoLo), whose popular "LoLo" almond juice occupies 90 percent of the almond juice market share in China.

However, the name of the manufacturer printed on the side of the can reads "Shijiazhuang Baipoquan Beverage Co Ltd (Baipoquan)" instead of Heibei Chengde LoLo Co.

Indeed Baipoquan's "LoLo Group" herbal tea has nothing to do with Chengde LoLo. The company claims right to use the trademark "LoLo Group" was authorized by Hebei Chengde LoLo Group (LoLo Group) in 2006

Others disagree. "The authorization behavior of LoLo Group has violated the trademark rights of Chengde LoLo," a staff member who declines to be identified from Trademark Rights Protection Department of Chengde LoLo says in a telephone interview. "We are now paying close attention to the issue. Measures will be taken if necessary," he adds.

Chengde LoLo was once a subsidiary company of LoLo Group. As the biggest shareholder, LoLo Group controlled a 38.9 percent share of Chengde LoLo.

In June 2006, LoLo Group sold its 38.9 percent stake to Wanxiang Sannong Group, a company focusing on agriculture and forestry. After the transaction, Wanxiang Sannong Group became the biggest shareholder of Chengde LoLo, with a 42.55 percent stake. LoLo Group and Chengde LoLo therefore became two independent companies.

In September 2006, three months after the share transaction, LoLo Group registered the trademark "LoLo Group". In addition to the other trademark, "LoLo" registered in 1991, LoLo Group then possessed ownership of the two trademarks.

In November 2007, Chengde LoLo signed a transfer agreement of immaterial assets with LoLo Group. The former purchased the ownership of "LoLo" and related patents for the price of 389 million yuan.

All the transfer procedures were not completed until February this year. Since then, Chengde LoLo has legally possessed all the rights to the trademark. According to the transfer agreement and Chinese law, "LoLo" can only be used exclusively by Chengde LoLo. Any other individuals or enterprises are forbidden to use it or similar trademarks.

After the transfer agreement, "LoLo Group" became the only trademark left to LoLo Group.

Disputes

According to Article Five in Law Against Unfair Competition in China, business operators are forbidden to use trademarks or packages similar to that of well-known products with the intention to mislead customers.

But a Beijing-based lawyer who declines to be identified expresses different opinions. "'LoLo Group' was legally registered just like 'LoLo'. Therefore, LoLo Group has all the legal rights to dispose of the trademark, including authorization," she says.

"In addition, as long as the transfer agreement of immaterial assets was approved by the Trademark Office of State Administration for Industry and Commerce, 'LoLo' and 'LoLo Group' are not similar trademarks in law."

The lawyer also adds that more details of the transfer agreement, which are currently not available, are needed for more accurate judgment.

When China Business Weekly tried to inquire about the details, the spokesman for Chengde LoLo refused to reply.

"This issue is not worth reporting," the unidentified spokesman says.

Information printed on the can of herbal tea adds more confusion. On one side, the actual name of the product reads: "Victory Herbal Tea", but the print is much smaller than "LoLo Group Herbal Tea". On the homepage of the Trademark Office, "Victory" was the trademark registered in 2004 by a resident of Shijiazhuang, Hebei province, named Li Junfang.

And on Baipoquan's homepage, the same Li Junfang is listed as its "legal person", a phrase describing a legal entity needed to establish a trademark or corporation. Why does a single product use two trademarks? Both LoLo Group and Baipoquan refuse to comment.

The crux

Although Chengde LoLo and LoLo Group have divided into two independent companies, the two are still legally closely related.

Chengde LoLo and LoLo Group are also geographical neighbors. The former is located at Number 8, West District of Hebei Chengde Hi-tech Development Zone, while the latter is at Number 6 in the same zone.

The two also share the same legal person. According to the semi-annual report of Chengde LoLo in 2008, Wang Baolin is its legal person and board chairman, the appointment due in Feburary 2010. He possesses 31,200 A shares in Chengde LoLo. Meanwhile, Wang is also LoLo Group's founder and legal person.

According to Chengde LoLo's 2006 annual report Wang's double identity also existed when the transfer agreement of immaterial assets was signed.

"LoLo" almond juice currently contributes to almost all the business income of Chengde LoLo.

The staff member of the Trademark Rights Protection Department says Chengde LoLo is now making efforts to distinguish itself from its former parent company through strengthening the image of the trademark of "LoLo" and "LoLo" almond juice.

However, observers say LoLo Group's herbal tea is likely to cause disputes over trademark rights and possibly restrict the independent development of "LoLo" in the future.

Currently, the two companies are in talks looking for solutions.

(By TONG HAO China Daily 10/06/2008 page9)