Aquagold International Inc (AQUI)

[Bull Trader]

uh oh.... Danone loses skirmish in China
Bloomberg News, ReutersPublished: December 10, 2007

SHANGHAI: Hangzhou Wahaha Group, the Chinese company embroiled in a trademark dispute with Groupe Danone, said Monday that it had won a conflict-of-interest lawsuit against one of the French yogurt maker's executives, potentially dealing a blow to the French food giant's business in the country.

François Caquelin, whom Danone named to the board of a venture with Wahaha, participated in unfair competition because he also sat on the boards of rivals, Wahaha said, citing a Chinese judgment. The Guilin Intermediate People's Court will consider similar claims against Emmanuel Faber and Qin Peng, who run Danone's operations in Asia and China respectively, Wahaha said.

"This means Danone's joint ventures with Wahaha could lose their most important assets - the Wahaha trademark," said Alex Wang, a lawyer with Paul Hastings. "It's a big victory for Wahaha and a heavy blow to Danone."

Danone, which owns 51 percent of 39 ventures with Wahaha, said it was "shocked" by the ruling. It pledged to appeal because Caquelin's appointments were with related companies and followed common practice in China. Danone has accused entities linked to Zong Qinghou, the Wahaha chairman, of unauthorized use of the Wahaha trademark. The Chinese company, in turn, says it retains the brand because the agreement giving Danone trademark control violated Chinese law.

"Danone's investment and the appointment of directors were made following all legal procedures," Danone, based in Paris, said. "It is a common practice in China for one person to carry director posts simultaneously in several subsidiaries."

Maire Ginhoux, a Danone spokeswoman, declined to comment further.

Zong said this year that he planned to sue Faber, Qin and Caquelin because they sat on boards for both the Wahaha venture and rivals like Guangdong Robust, a Chinese beverage maker Danone acquired in 2000.

In July, minority shareholders that own 5 percent of another venture between Danone and Wahaha, based in Shenyang, northeast China, also sued a director appointed by the French company on allegations of unfair competition.

Separately, Danone said Monday that an arbitration court in Hangzhou had also found in favor of Wahaha, ruling that the trademark used to sell bottled water, tea and other beverages remained with the Chinese company.

The arbitration court "totally ignored" evidence Danone presented on the trademark, the French company said. Last month, Danone dropped a suit against China's trademark office claiming it had improperly transferred the Wahaha brand to the joint venture.

Danone formed ventures with Wahaha in 1996. In May, it started arbitration proceedings against three of the ventures and Zong for breaking the contract by using the brand outside their original agreements. Danone has also filed 10 lawsuits against ventures that Zong set up in the British Virgin Islands and Samoa. Last month, Danone won court orders freezing assets of those companies.

In June, Danone filed a suit in Los Angeles against Ever Maple Trading, based in the British Virgin Islands, and Hangzhou Hongsheng Beverage, as well as their legal representatives, and Zong's wife and daughter. The bottler of Evian water is seeking $100 million in damages for unauthorized use of the Wahaha trademark.

http://www.iht.com/articles/2007/12/10/business/danone.php