FREQUENTLY ASKED QUESTION
#10 - Q: Why has YMYX decided to cancel the cooperation with me, even though I want to continue the cooperation, and I simply do not have the money right now, to register my brand? A: Recently, we have begun to notify some partner designers that we would like to cancel the collaboration between us, because, in order to cancel an agreement that has already been signed and entered into force, requires the consent from both sides. These whom we have singled out are designers who have not yet begun to start their registration process, despite having been confirmed as a partner and signed our contract for some time. There are only a handful of designers in these circumstances. But whether it is a lack of strong sensitivity or seriousness toward protecting their own brand in our market, or, they really are going through financial difficulties, if any designer fails to make a registration, we will not be able to work with them, and bring their brand name into our markets together. Just as I have written here publicly many times, trademark infringement is a serious issue in China, and a company as big and powerful as MUJI will still run into problems with this in China, by not having done the necessary preparatory filings for the trademark in full. They perhaps felt that they were too big of a brand, everybody knows them already, and they overlooked the importance of this registration. In the end, the mark was pre-emptively registered in some key categories of product by a virtually unknown company, "Hainan Nanhua", that then transferred the intellectual property to another little known company called "Beijing Cottonfield Teztile Group"; both then joined forces to jointly sue MUJI for trademark infringement, and won, in the Chinese court. MUJI had to face the consequences of violating the Beijing company's trademark rights. The Chinese court ordered MUJI to pay this Chinese company a hefty financial penalty in addition to having to publicly apologize to them in a newspaper for having violated their trademark, and also guarantee that MUJI would no longer use this trademark. We do not hope to see that the designers we partner with, someday, achieve a very big success in China, and at that time, their brand will be recognized by many, many consumers, many fans, and then suddenly another company emerges and sues our partner brand for infringing on their trademark, causing irreparable damage and loss to the brand’s reputation and profits. MUJI’s ordeal should let us all see clearly, that our company’s insistence in this regard has been entirely correct. We would rather wait until the registrations have been completed for our partner brands, and officially start when ready and protected, than go in unprepared. Again, we are not just a company trying to sell some clothes and collections. Many showrooms have come to China from Europe and set up operations in our territory. They display collections from many very good quality, but not yet famous European brands. I invite anyone who holds interest to do a bit of checking, and see, which of these brands being shown in those showrooms, has truly “made it” into a successful brand in our region? Some have been reported on in the press, but it hasn’t driven up sales and has not left an indelible, and lasting impression on the consumers’ minds. The brand value also hasn’t risen significantly as a result of this. What we aim to do is a long-term effort; from establishing the brand, presenting it, and the fashion principles of the designer, and creating a sense of recognition and closeness between the consumer and the brand, from which to push the sales of the brand. As a result, it is really important to register the trademark. Without it, I want to ask, what is it exactly that the consumers are recognizing when they buy your products as a partner brand? They recognize the brand, but the owner of that brand, in fact, isn’t the creator behind the brand - it’s someone else, an unrelated third party. When this incongruence appears, it will cause a great damage to the brand's image. Of course, we cannot guarantee that we have the ability to let each of our partner brands become famous in the Far East and achieve great success, but this is the goal that we are striving toward. At least, we hope and believe, that we can make our partner designers earn real money in our territory. Just think, if a brand's business is starting to grow, is little by little, inching upward, but then, someone comes out of nowhere and accuses the brand of violating their intellectual property rights, then this will cause irreparable harm to the brand owner, and to us as a company, and that result would be unacceptable for both. As a result, all of those brands who are joining us, we require that they immediately take action, and register their brands in our market. I am quite satisfied, that among all of our partner designers, 99.99% of our partner designers have submitted their registrations already, and many have even obtained approval for some of the territories like Hong Kong, Macau and Taiwan, and are just awaiting final approval from China. There are just a few designers, in the single digits, who for various reasons, have yet to begin this process. We have already sent out a notification for cancellation of our agreement, to some of them. In the next week, we will send out the remaining notifications for cancellation. The choices that we can give these designers, is simply to immediately register, or, immediately cease the cooperation. This is a strict and mandatory requirement for cooperating with us; this applies now, and in the future as well. After each partner design brand has signed the contract, we ask that each designer begin the registration process, otherwise, if it drags on too long, we will not be able to cooperate with that brand, it would be evident that we are not suitable for each other. Even though the reasons cited for delaying this are often financial, and even though we feel that it is very regrettable as a result, we simply feel that we are not suitable to go further in these cases.
We also hope that each of these designers can agree to these cancellations, because the contract is signed by both parties, and from our side, we cannot cancel the contract alone, and it will require the signing of a separate consent form to cancel the agreement. It is only under these circumstances, that we can effectively cancel the contract. Of course, in the cancellation of contract consent form, there will be some restrictions on either party, including the fact that we cannot continue to use the intellectual property of the designer, nor can the designer enter into our markets for marketing and promotion, for a given period of time.
This is not our ideal choice, but If we do not cancel the cooperation with designers who do not register their brands, then this kind of contract has no meaning; because without a registration in place, again, we will not take any actions in our market to promote the brand. Best, Kate Chang CEO