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The Wahaha Group plans to file a €5 billion counterclaim against its French partner Danone SA, explaining the Trademark Office of the State Administration for Industry and Commerce (SAIC) has confirmed it did not approve the trademark transfer from Wahaha to Danone.

Wahaha spokesman Shan Qining said that Wahaha decided to "demand justice by legal procedures" after Danone filed for arbitration and lawsuits against the company.

The Wahaha Group has also applied for arbitration to resolve the trademark transfer dispute with Danone at the Hangzhou Arbitration Committee, asking the committee to terminate a trademark transfer contract signed between Hangzhou Wahaha Group and the joint venture of Wahaha and Danone in 1996 as well as a written reply from the Trademark Office of SAIC on this issue.

On June 7, the Trademark Office said it had not approved the application from the Wahaha group to transfer more than 200 registered trademarks to its joint venture with Danone in 1996 and 1997. In August 1997, the state trademark authority approved the application from Wahaha to put the trademark-licensing contract on record.

According to the office, this means the transfer was invalid and the contract should be terminated.

On May 9, Danone SA first proposed eight arbitration applications to the Arbitration Institute of the Stockholm Chamber of Commerce. On June 4, Danone filed a lawsuit in a Los Angeles-based Superior Court against Ever Maple Trading Ltd., Hangzhou Hongsheng Beverage Co. Ltd, and two individuals related to the companies.

Ever Maple Trading Ltd. is the controlling shareholder of Hangzhou Hongsheng Beverage, which is the parent company of Hangzhou Wahaha Food and Beverage Sales Co., Danone's joint venture partner in China.

Referring to the US$100 million award requested in the US lawsuit, Wahaha said Danone had not paid Wahaha for the trademark transfer fee, so the trademark-licensing contract is invalid and it is Wahaha who has the right to ask for compensation.

Turning to Danone's accusation of illegally setting up companies outside their joint ventures and selling Wahaha-branded products identical to those marketed by their joint ventures, Wahaha said in a statement that the four companies sued by Danone are investment companies which have no product lines and production activities.

Wahaha said Danone has not found proof of illegal operations on the part of Wahaha, but it has conclusive evidence that Danone has broken the law. It will file a counterclaim of €2-5 billion against Danone in addition to its active responses to lawsuits in the US and Sweden.

However, Danone rebuked Wahaha for the publication of confidential content discussed at the joint ventures'board meetings, only several hours after they ended on June 21. It also pointed out that this action deliberately set obstacles to a peaceful solution, which will affect the negotiations and harm the interests of all shareholders and staff workers.

The feud surfaced as Zong Qinghou, founder of Wahaha, rejected Danone's bid to buy out some of Wahaha's assets, while Danone, which owns 51 percent of the joint ventures, has responded by accusing Wahaha of violating the 1996 agreement by illegally setting up companies outside their joint ventures and selling identical Wahaha-branded products through these companies.

On June 6, Zong Qinghou resigned from his post as chairman of its 39 joint ventures with Danone, and Emmanuel Faber has been named interim chairman.

(International Finance News, translated by Li Shen June 27, 2007)