JDB fails to win trademark but future open

(Ecns.cn)--Though people in Fuzhou, Hangzhou and other cities can still buy the red-can herbal tea drinks made by JDB Group, the fact that Hong Kong-based JDB will have to cease its use of Wong Lo Kat, a trademark that belongs to Guangzhou Pharmaceutical Holdings, is irreversible.

Guangzhou Pharmaceutical has announced last weekend that the China International Economic and Trade Arbitration Commission ruled that JDB will no longer be authorized to use the trademark and Guangzhou Pharmaceutical's parent company will retain exclusive rights to the trademark, according to the Shanghai Daily.

According to reports, JDB was only authorized to use the trademark until 2010 and Guangzhou Pharmaceutical has the right to demand compensation from JDB for its unauthorized sales after that year.

But the actual agreement picture is more complicated. In 1997, Guangzhou Pharmaceutical granted JDB the right to use its Wong Lo Kat trademark for a limited period, but two extensions of the original agreement allowed JDB to use the trademark until 2020.

However, Guangzhou Pharmaceutical's now jailed vice president Li Yimin was taking bribes from JDB's parent company to extend the usage term. The pharmaceutical company reversed its decision on the extension once the executive left its ranks, according to media reports.

The Guangzhou-based company also claimed that the 5 million yuan ($792,430) JDB paid for the trademark of on its red-canned herbal tea was not a fair price, since the product currently enjoys annual sales of over 18 billion yuan.

JDB has not commented on the matter so far. The ruling will hit JDB hard as the company has invested heavily into the Wong Lo Kat brand, which has grown in worth to over 100 billion yuan, says Liu Hui, an industry analyst with Capital Securities.

Currently, the trademark owner Guangzhou Pharmaceutical also produces herbal tea under the same Wong Lo Kat trademark, which scored sales of over 2 billion yuan for them in 2011.

But Liu also notes that given JDB's proven record in marketing and distribution, the company will still hold a significant share of the herbal tea market even without the Wong Lo Kat brand. And according to reports, JDB is creating its own brand of Jia Duo Bao herbal drink with the help of its powerful distribution network.