In relation to the hot topic of the effectiveness of lease contract renewed between Guangzhuang Pharmaceutical Group with Jiaduobao on the Wanglaoji trademark, the so-called “No.1 Case of Chinese Trademark”, the Wanglaoji trademark dispute case, had its first session opened in court at China International Economic and Trade Arbitration Commission on the 29th. After a 5-hour trial, the case received no decision, and the ruling was expected to be revealed within two to six months by insiders. 

The two opposing parties were once close business partners. Wanglaoji was originally a trademark owned by Guangzhou Pharmaceutical. In 1997, Guangzhou Pharmaceutical signed a contract with the parent company of Jiaduobao, Hongdao Group, regarding the right to use the trademark Wanglaoji, for the first time. Three years later, the two signed a contract for the second time, and extended the effective term till 2010. 

However, during the effective term of the contract, the General VP of Guangzhou Pharmaceutical at the time, Li Yimin, received briberies for three times, 100 million HKD each and 300 million in total, from the Chairman of Hongkong Hongdao Group, Chen Hongdao. Soon afterwards, Guangzhou Pharmaceutical and Hongdao Group signed two supplement agreements, respectively, and extended the effective term of the contract to 2020. Unfortunately, Li Yimin was sentenced due to his actions, and Chen Hongdao was released on bail, remaining on the run. 

Therefore, the most heavily debated point was whether the contracts signed after the former VP of Guangzhou Pharmaceutical Group, Li Yimin, had received briberies, were effective or not. Guangzhou Pharmaceutical argued that, according to the supplement contracts signed by Li Yimin afterwards, the royalties Jiadoubao paid to Guangzhou Pharmaceutical rose from 4.5 million in 2000 to 5.06 million this year, with a 8-9% yearly increase. Even in 2020, the royalties for using the trademark will not exceed a couple of millions. However, the brand Wanglaoji has been in existence for 185 years and belongs to the State-owned Assets Supervision and Administration Commission of the State Council in Guangzhou. Guangzhou Pharmaceutical is the specific owner of the trademark and related royalties must be demanded, since the cheap rental brought financial losses that significantly damaged state-owned assets. On the other hand, Jiaduobao insisted that the contract is effective.

Insiders reckoned that the case is most likely to be reconciled. It was due to the efforts of Jiaduobao that Wanglaojia was able to become a renowned brand. Wanglaoji means the life and death for Jiadoubao, and the company cannot afford to lose the case. Last year, the “red can Wanglaoji” received 16-billion worth of sales and a profit of 3.2 billion, assuming a 20% profit rate. Jiaduobo can afford the royalties fee of a few hundreds of millions.