There has been a long debate on whether an unregistered
trademark can be the subject of a franchise contract in China.
Proponents argue that an unregistered trademark is the
franchiser's property and is thus eligible for being franchised
so long as it is of economic value in the eyes of the franchisee.
Opponents of this argument see an unregistered trademark as not
legally owned by a franchiser without going through the trademark
registration process and therefore not eligible for being licensed
in a franchise contract. The Regulation on Administration of
Commercial Franchises ("Regulation on
enacted by the State Council of the PRC on February 6, 2007, while
clearly including registered trademarks, enterprise marks, patents
and know-how into the checklist of business resources that a
franchiser "possesses" for franchising, fails to touch on
the issue of unregistered trademarks. However, it leaves room by
putting the catch-all of "any other business resource"
As a result, courts have led the way in clarifying this issue.
In Zhou Hongjun v. Beijing Jumeizhijia Lighting Co., Ltd.
,2008-10863-Civil-1stInstance ( 10863), the People's
Court of Fengtai District, Beijing Municipality found that although
the mark at issue was not registered when the contract was formed,
there was neither fraud nor concealment of truth involved in the
case, and therefore, the plaintiff's request to invalidate the
franchise contract on grounds of the unregistered status of the
mark was not supported. In Yang Guowei v. Beijing
Lianglixinshijie Beauty Care Co., Ltd.
, 2009-00594-No.2Inter.-Civil-1stInstance ((2009) (00594), the
Beijing Municipal No. 2 People's Intermediate Court held that
the mere fact that the mark was not registered when the contract
was entered into does not give rise to a breach of contract claim.
In Zhang Jia v. Shanghai Saiya Trading Co.,
the Shanghai Municipal No. 2 People's Intermediate Court also
upheld the first instance court's finding that an unregistered
trademark is not prohibited by law from being licensed in a
On February 24, 2011, Beijing Municipal People's Higher
Court issued the Guiding Opinions on Some Issues Concerning the
Application of Laws in Hearing Cases of Commercial Franchise
Contractual Disputes ("the Guiding
For the first time, a "business resource" prescribed in
the Regulation on Franchises is interpreted as including an
unregistered trademark that has been used and bears a certain level
of influence and can bring a certain type of advantage to market
competition. Consequently, the long debate was over in the Beijing
Municipal area where the Guiding Opinions governs.
However, absent a nationally binding interpretation by the
Supreme People's Court of the PRC or from the State Council,
the debate is still live among other parts of the country, although
courts seem to have the tendency of finding an unregistered
trademark licensable in a franchise contract. (Written by Huang
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The Hon'ble High Court of Bombay has held that where a Scheme of Amalgamation is executed between two companies registered in two different states [...], then the said two orders are two independent instruments.
Lawyers are pretty good at figuring it out quietly and amicably among themselves, without recourse to a public courtroom.
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