Maybe the journey of a thousand infringements starts with one bottle of “Future Cola”.

The ongoing battle between Groupe Danone and its Chinese joint-venture partner Wahaha is now well documented around the internet.  In recent months, the dispute has spiralled into litigation, arbitration, and competing press-releases. 

In 1996, pursuing a model that is popular with many Western companies, Groupe Danone, the French food-and-beverage giant, decided to jump-start its foray into China by partnering with a well-positioned local player.  Wahaha, a successful Chinese beverage maker, already had a growing business in iced tea, fruit drinks, water and soft drinks.  Its “Future Cola” brand, with red packaging reminiscent of another well-known cola product, is already making inroads into the US market.

The joint venture seemed to be a mutually profitable arrangement until allegations started surfacing this year that Wahaha was producing and selling identical products on its own, outside the scope of the joint-venture, essentially cutting Danone out of these sales and infringing the intellectual property provisions of the JV agreement. Danone does not seem to have faith in the ability of the Chinese legal system to enforce its intellectual property rights, and has opted for a lawsuit in the US and an arbitration claim in Sweden.  Wahaha responded by initiating its own arbitration claim on home turf in China.

Whatever the outcome, the dispute now stands as a cautionary tale for Western companies doing business in China. Make sure you get good local counsel, have a back-up plan for enforcement and be careful who you partner with.  Hot opportunities abound, but beware: even the biggest players can get their fingers burned when playing in China. 

 

Calgary – 10:22 MST