China Redbull License Dispute; A never ending story in China?

ORG Packaging Co. is being sued by TC Pharmaceuticals for infringing the Red Bull trademark right of TC Pharmaceuticals.

Being one of the major suppliers of Reignwood Group, it announced in July its receipt of a civil complaint and other filings with the Peoples Court in Beijing serving notice of the suits, which demands the court order ORG Packaging to cease forging and manufacturing its registered trademarks - including “Red Bull” and associated image logos - and claiming compensation for its monetary losses in the amount of over CNY 30 Mio.

This has been part of a bigger trademark dispute that started just last year.

Since the 20 year licensing agreement of Reignwood Group to produce and sell Red Bull in China expired last year, there has been an ongoing trademark dispute between its Thai owner (TC Pharmaceuticals) and Chinese partners (Reignwood Group). Chanchai Ruayrungruang, CEO of Reignwood Group, acquired the right to the Red Bull trademark in the mid 90s when he established a Joint Venture with members of the Yoovidhya family, who control TP Pharmaceuticals, the company that invented Kratingdaeng - Thai for Red Bull - in 1975. The Chinese Business Tycoon claims that he invested all of is money into advertising and factories and for this reason everyone in China believes that he is the rightful owner of Red Bull in China.

Meanwhile TC Pharmaceuticals, the inventor of the carbonated energy drink, claims to be the owner of the Red Bull trademark and therefore being no legal basis for Chanchais statement, as the license contract ended last year.

Due to Red Bull becoming more popular in China, this may cause problems. Chinese state media have reported that Reignwood earned about RMB 23 Bio. in 2015. About 6.1 Bio. cans of it are sold each year worldwide generating revenues of EUR 6 Bio., according to Red Bull in Austria. The fizzy version of the drink was launched in China in 2014, competing with both Chinese-produced Red Bull, which is non-carbonated and black market imports.

To this day It is still unclear as to whether the license agreement will be extended, although Reignwood is running a Red Bull marketing campaign that ends in December, which may point to the fact that the parties have reached a deal for an extension.

This isn’t the first time the Red Bull trademark has been infringed. Counterfeit versions of the energy drink appeared in China as early as 2005, when police in Fujian seized 180.000 cans of fake Red Bull cans, as producing and selling them can be highly lucrative. Criminals who were involved in these productions made an estimated 3,7 yuan profit on each can sold. Each one of their 12 illegal production lines was turning out 2.400 cans a day. 25 Mio. Yuan worth of assets as a part of their crackdown on these illegal products.

The problem about these fake products is that they can be almost indistinguishable from the genuine article, but the health risks to consumers is high.

For example a fake spark plug with a German or American car brand on it, which was installed at a down-the-road workshop for a few bucks, may set the car on fire. Even worse than that, it may set it on fire when the car is parked at night in the garage, thus spreading the fire to the building and injuring or killing the people sleeping in that house. The same scenario or variations are thinkable for many other consumer products like in this case Red Bull. Thus the manufacturer and seller may face damage compensations for product liability.

There are also rules in the Criminal Law against counterfeiting. If a person uses a trademark that is identical to a registered trademark for the same goods without the permission of the rights holder or knowingly sells goods bearing a counterfeit trademark or sells forged representations of a registered trademark then he shall be punished by imprisonment for up to three years or a fine, or both in serious cases. In very serious cases the court will sentence the counterfeiter to between three and seven years imprisonment and impose a fine.