Intangible assets of issuers holding “historic brands”
MMost issuers holding a “Traditional Chinese Brand”, a title granted by the Ministry of Commerce to companies existing before 1956, are manufacturers and merchants of consumer goods whose trademarks and trade names embody their ingrained core brand value. over the years.
While technologies, patented or not, continued to differentiate a transmitter’s products from those of other brands in terms of performance and craftsmanship, these are undoubtedly part of their vital or even fundamental assets.
In this article, the author analyzes the intangible assets of the owners of historical brands in China from the regulations in force, giving a reference value to these famous brands.
SOURCES AND OWNERSHIP
Due to their long history, ancestral Chinese brands have been passed down from generation to generation, with most branching off into several branches. In addition, early owners’ awareness of the protection of intellectual property rights such as trademarks, trade names and patents was generally low. As a result, ownership of these intangibles was often the victim of long-running disputes.
In Certain Questions and Answers on IPO Business (II), the China Securities Regulatory Commission (CSRC) notes that “major disputes or lawsuits relating to trademarks, patents, know-how, franchise rights and other material assets or technology that have a material impact on the issuer’s business or revenue generation, that have had or will have a material effect on the issuer’s financial condition or results of operations in the future” are important situations that affect the issuer’s ability to operate.
Accordingly, regulators will first pay attention to the sources of intangible assets, in particular: (1) an explanation of the sources and historical evolution of existing trademarks, trade names, patents and other intellectual property rights, if the acquisition is legal and compliant and, in the case of change and transfer of ownership, the history of the transfer of assets and whether the consideration is fair and reasonable; (2) an explanation of the differences between homologous trade names or similar marks by comparing their sources and their historical evolution; and (3) if there is a material dispute over ownership of the intellectual property rights that is prejudicial to the issuer.
In the event of a dispute between the issuer and others over the ownership of intangibles, it is necessary to explain whether or not there is any authorizing or licensing relationship in the matter, and whether the issuer is a counterfeiter.
If a case is settled through issuer withdrawal, dismissal of issuer claims, conciliation and mediation, it is also necessary to explain the background and whether the legal action in question has an adverse impact important on the transmitter.
It should be noted that in the beginning, most of the owners of traditional Chinese brands belonged to the community or the whole people. But with the development and changes of national commercial laws, they have gradually transformed into modern limited liability companies or joint-stock companies.
Therefore, if state-owned assets are involved, the transfer of intangible assets during the restructuring process is also the focus of regulators’ attention. They will examine whether these companies have fully complied with the regulatory approval procedures for the transfer of state-owned assets, whether they have obtained the consent of the relevant department of state-owned assets and whether there has been a loss state or community owned assets. .
The impact of traditional Chinese brands on consumers can be subtle but unmistakable. Considering their high value and complicated historical development, it is not surprising that various issues hamper their actual use.
In addition to requiring issuers to list specific products regarding trade names, trademarks, and other intellectual property rights under its name, regulators typically pay attention to the following issues.
If there are homologous trademarks or trade names and the trademarks and trade names of all parties have been approved by the competent authorities, it is necessary to explain whether there is any confusion as stated in the law anti-unfair competition and other laws and regulations and whether it will mislead consumers into confusing the issuer’s products with those of other brands.
If, when using trademarks, trade names, patents or other intellectual property rights, the issuer has authorized third parties to use the intellectual property rights, it is necessary to explain the specific authorization regime (duration of validity, rights, responsibilities and obligations) and the provisions after expiration. It is also necessary to explain the quality control measures of the licensee’s products and whether it constitutes direct market competition for the issuer and the licensee to use the same brand to manufacture similar products.
Given the considerable value of traditional Chinese brands and the frequency of ownership disputes or infringements, regulators often require issuers to explain the steps taken to protect intangible assets such as intellectual property rights. These include, but are not limited to: preventive measures in case of trademark infringement; monitoring rights protection measures; and protection measures for non-patented technologies, as well as their effectiveness. Chinese traditional brand owners should also focus on these aspects.
KEY TO GO
In recent years, a growing number of owners of traditional Chinese brands – such as the iconic baijiu Kweichow Moutai, the historic duck restaurant Quanjude, the imperial Chinese medicine Beijing Tongrentang, the historic scissor maker Zhang Xiaoquan and the dumpling brand zongzi traditional WuFangZhai – aspire to harness the power of capital markets to sustain or rejuvenate their proud trajectories.
However, intellectual property rights, if poorly managed, can seriously hamper the process. Therefore, owners of traditional Chinese brands are advised to make preventive plans for intellectual property rights, clarify ownership issues, crack down on counterfeits, strictly enforce their use, and fully prepare for regulatory inspection. and the market.
Grandway Law Firms
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Beijing, 100005, China
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