GOME is China’s No. 1 electrical appliance retailer. A dispute arose between the major shareholder Huang Guangyu and the chairman of the board Chen Xiao recently, which brought about a sequence of problems to the company and attracted wide attention from the public.

Dur ing the evening of September 28, 2010, at the Hong Kong Regal Hotel, the results of the GOME Extraordinary General Meeting of shareholders were revealed. Chen Xiao (present chairman of the board of GOME) won support and maintained his current position. While one of the key proposals brought forward by Huang Guangyu (the major shareholder of GOME) “cancel the authorization of the Board of Directors” was approved, which means that any issuing of additional new stocks would be decided by the General Meeting of Shareholders in the future. To some extent, Chen Xiao was victorious; meanwhile, Huang Guangyu successfully consolidated his position as a major shareholder and greatly lowered the risk of his shares becoming diluted. Another prominent party who played a crucial role in the process was the American Private Investment Company— Bain Capital, whose choice was the decisive factor in the duel between Chen and Huang. As the subtle relationship between Chen, Huang and Bain charged on, the future of this battle seems more inconceivable. On September 29, the opening price of GOME stock was HKD 2.4, falling 3.61% compared to the HKD 2.49 of the last trading day. The stock price of GOME continuously dropped to HKD 2.31 on October 8, 2010. In a sense, the “9•28” vote was not the end of this battle. The parties’ subsequent actions have continued since September 28. On September 29, negotiations were held between Huang’s representative Du Juan (Huang’s wife, the core figure of Huang’s party) and Bain’s Directing Manager Zhu Jia in Beijing. A consensus among the public was for settlement through negotiation. Those key issues may be settled on the conference table such as the resignation of Chen Xiao, the structure of the Board of Directors, as well as the management of the nonlisted companies. The GOME dispute is a lesson for all Chinese entrepreneurs. The Chinese corporate governance, the healthy development of a listed company, the correct allocation of the professional manager, the debate between legal and moral are problems to be taken seriously. While beyond the complicated share control dispute, the reporter focuses on a special question behind the GOME dispute.

A misreading by the media—the “GOME” trademark problems emerged

Prior to the “9•28” vote, the source of “GOME” trademarks attracted media; attention and speculation over Huang’s withdrawal of his “GOME” trademarks have been widely commented on. It has been reported that the trademark right is one of the most valuable assets in Huang’s hands, which will help him to win this battle. Reports also indicate that Huang will probably withdraw his authorization of the “GOME” trademark right from the listed company by 2014, and manage his own non-listed company under the “GOME” trademarks. Thus, the listed company will have to utilize its other brands such as “YongLe” or “DaZhong” for further development after it loses the “GOME” trademarks. Recently, a representative from Huang’ party responded to this question publicly: “the major shareholder had never taken the trademark right as a priority, and had not raised any opposition against the trademarks until now. According to laws and regulations, the duration of a registered trademark is 10 years, which explains the year 2014. The original applicant of the trademark enjoys prior registration rights, thus, as long as the additional terms are not violated, the listed company can continue to use the trademark. In this way, the withdrawal of trademarks is completely a misreading by the public.” Simultaneously, as to the challenge of a breakaway of the non-listed shops put forward by the brand’s initiator Huang Guangyu, representative from Chen Xiao’s party also responded that the use of “GOME” trademarks will not be affected in any aspect even if the nonlisted shops break away from listed shops. Although it seems a misreading by the media, the serious problem that a listed company cannot control its own trademark right are clearly presented to the public. Even though the problem of trademark is not considered as the center of this dispute, it will certainly be an inevitable problem in the process. The reason why a listed company does not own its own trademark right can be tracked back to 2004 when the company was first listed.

Exploration of the ownership of trademark right

Article 4 of the “2010 annual midterm report of GOME” attracted the reporter’s attention. “The annotation incomes, other incomes and revenues” stipulates that “the non-listed GOME groups include Beijing Peng Run Investment Co., Ltd., Beijing GOME Electrical Appliance Co., Ltd., GOME Electrical Appliance Retail Co., Ltd. and other companies using the ‘GOME’ trademarks and trade in the field of Electrical Appliance and consumption electronic products in other cities in China where this group does not carry out its business.” When logging on the website of the China trademark office, the reporter found that the series of “GOME” trademarks such as “GOME in Chinese,” “GOME in Chinese and GOME,” “GOME electrical appliance in Chinese” are all under the name of “Beijing GOME electrical appliance Co., Ltd.,” which is the personal asset of Huang Guangyu as listed in the above mentioned mid-term report. Accordingly, there is no doubt that the “GOME” trademark right is owned by Huang Guangyu. Huang’s representative also confirmed to the media: “the owner of the trademark right is not the listed company, and there are additional terms for the listed company’s use of the trademarks: the trademarks can only be used in mainland China and Hong Kong, and cannot provide the use of the marks to its franchised outlets. Additionally, the listed company’s shares in the listed shops cannot be lower than 50%.” The representative further expressed that the trademark will not be taken as the next card. The listed company owns the right to use the trademarks permanently and freely. There will be an automatic extension in 2014, but it is only automatic and Huang Guangyu should sign the trademark license contract without any additional conditions. Although not the next card, the trademark right is a trump card in Huang’s hands available at any time.