Franchisee wants OldTown held responsible amid China contract fraud claim

KUALA LUMPUR (Dec 23): Malaysia-based café operator OldTown Sdn Bhd should be held responsible for the damages and losses faced by China franchisees amid allegations of contract fraud involving ownership of the OldTown trademark there, franchisee Jiangsu G&L Food & Beverage Management Co Ltd (G&L) claimed today.

G&L said in a press statement today that in June 2018, G&L reported to China's Public Security Bureau (PSB), claiming that OldTown's indirect wholly-owned unit Shenzhen Kopitiam Asia Pacific Ltd (SZKAP) granted the trademark to OldTown's China franchisees despite OldTown having full knowledge that it did not own the OldTown trademark.

G&L claimed that SZKAP's move had resulted in these franchisees incurring losses, because they had to pay franchise fees and brand royalties to OldTown. G&L claimed that the PSB has determined that this meets the criteria of criminal filing for contract fraud and has since opened an investigation on SZKAP for suspected contract fraud.

G&L, citing China's National Intellectual Property Administration (CNIPA), claimed that Ai Chang Investment Ltd owns the OldTown trademark in China.

"According to CNIPA's website, Ai Chang applied for 'OldTown' trademark on March 12, 2013 in the category of goods/services applying to cafés, restaurants, fast food, bar services and etc in China. Ai Chang received the certificate of trademark with CNIPA on Aug 14, 2014, for use of trademarks from Aug 14, 2014 until Aug 13, 2024. Kopitiam Asia Pacific Sn Bhd, a subsidiary of OldTown had applied for 'OldTown' trademark for café/restaurant goods/services category in China but was rejected by CNIPA.

"With the full knowledge that they do not own the trademark 'OldTown' in China, SZKAP signed (the) licence agreement with G&L in May 2016, granting the rights to operate OldTown White Coffee (outlets) within Jiangsu province, to use the trademark 'OldTown' and to develop it into franchising business. Ai Chang reported to the local AIC (Administration for Industry and Commerce) in April 2018 that G&L infringed their 'OldTown' trademark, which forced G&L to shut down all operating OldTown White Coffee outlets," G&L claimed.

OldTown has categorically denied G&L's allegations.

"OldTown White Coffee categorically refutes and denies all allegations from G&L that it has ever committed or intended to commit contract fraud, and its assertion that the closure of its licensed OldTown cafés in China was related to a trademark dispute. This remains a contractual matter only," OldTown said in a statement to The Edge Financial Daily (The Edge FD).

"Several of the outlets in Jiangsu Province were already closed due to poor management of the business by the licensees prior to any allegation of trademark dispute. As a company that prides itself with its integrity, we are disappointed to see these baseless allegations being levelled in the media and will be taking the necessary steps to protect our brand and our reputation," OldTown said.

The Edge FD reported today that OldTown, however, did not confirm nor deny if it was under investigation for fraud. It was reported that OldTown also did not respond to further queries seeking clarification on this.

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