Chapter 228 Trademark Ownership Issues

The next morning, Mu Xin's phone vibrated on the nightstand; it was a call from Zhou Mingyuan.

"Mr. Mu, you need to come to the Hexagon Building again today." Zhou Mingyuan's voice was lower than usual, and in the background, one could hear someone next to him alternating between Cantonese and Mandarin on a call.

"Two changes occurred last night. First, Lin Ruohua has already submitted the preliminary compliance assessment opinion to the internal review system of the Commercial Vehicle Division, and she has added a very critical requirement to the wording."

"Second, President Li Zhiping of the Americas Business Division, the person you saw on the video screen, flew back from Los Angeles last night."

"He will be sitting in the conference room in person this morning. He flew for over ten hours just to participate in the second round of discussions for your project, which is very rare for him."

Mu Xin sat on the edge of the bed, holding the phone between his shoulder and ear, picked up the bottle of mineral water on the nightstand, unscrewed it, and took a sip. "Did President Li Zhiping fly back to stop the badge engineering, or to propose new conditions?"

"We'll talk in person. I'll wait for you at the entrance of the Hexagon Building at 8:30." Zhou Mingyuan hung up after saying this.

...

At nine in the morning, in the same conference room.

"Mr. Mu, today we will discuss two new agenda items," Zhou Mingyuan said, getting straight to the point.

"First, the supplementary compliance requirements from the Legal and Compliance Department regarding the Mexico transit plan; second, the formal assessment opinion from the Americas Business Division regarding your badge engineering plan."

"Neither matter affects the results of yesterday's consultations, and your project is still within the advancement channel commercially, but both need to have a clear conclusion before entering the next round of formal negotiations."

"Then let's start with the legal supplementary requirements." Mu Xin looked at Lin Ruohua.

"Mr. Mu, after the meeting yesterday, our company conducted a preliminary compliance review of your Mexico transit plan."

"The application template for the bonded warehousing license from the Lázaro Cárdenas Port Authority that you provided is standard in format, but its current status is unapproved."

"Pre-assembly operations in Mexican bonded zones are indeed compliant under federal law, provided that you have obtained an approved license."

"Currently, your side neither has a local entity registered within Mexico, nor a signed bonded zone lease agreement, let alone a bonded processing permit already approved by the Mexican side."

"I understand that your side needs to wait until the project reaches a certain stage before initiating the registration of a Mexican entity and the leasing of bonded zone premises, but our requirement is that before you and our company sign any formal supply agreement, you must provide the bonded processing license that has already been approved in Mexico."

"This is the bottom line of BYD's overseas compliance process, not some extra requirement I have for you personally."

"Any project using the KD model in any country requires actually obtaining the compliance qualifications for the bonded zone in that country before supply can begin; your situation is no exception."

She did not give Mu Xin time to respond and continued by flipping the page:

"Additionally, the definition of the scope of pre-assembly processes in the Mexican bonded zone requires a prerequisite legal opinion letter to support the compliance, legality, and traceability of its supply chain."

"This opinion letter can be written by your own legal team, provided that after we evaluate it, we determine that its conclusions do not conflict with local Mexican regulations."

"If you do not have ready access to local Mexican legal counsel, I can have your legal partner connect directly with BYD's partner law firm in Mexico so they can issue a joint opinion."

Jack did not wait for Mu Xin to speak; he leaned forward directly.

"Ms. Lin, the issue of the bonded processing license does not need further discussion."

"Mexican entity registration and bonded zone premises leasing are currently the most time-consuming administrative steps in the project's early stages, but I confirm that both will be completed and the corresponding approval licenses obtained before the supply agreement is signed."

"As for which side should specifically issue the Mexican legal opinion letter, I believe a joint opinion approach is more appropriate."

"A joint opinion issued by independent law firms from both sides can be adopted as part of the internal control compliance processes by both BYD and Mr. Mu's factory during any subsequent external audit or customs inspection, avoiding the risk of a single source of opinion being rejected by any regulatory agency."

"What do you think?"

Lin Ruohua looked at Jack and was silent for a moment. She could not disagree, because refusing the joint issuance would mean BYD would have to rely solely on its own legal opinion, and if problems arose later, the absence of independent documentation from the other party in the supply chain would become a fatal gap.

She nodded slightly, signaling her agreement.

Then everyone turned to President Li Zhiping.

"Mr. Mu, I have been working in the Americas for many years. Let me say something you might not like to hear: your badge engineering plan, which you see as the only path into the U.S. market, is, in my eyes, the beginning of BYD forever hiding behind someone else's trademark throughout the Americas region."

"Your own Ohio factory applies American trademarks. BYD only earns money from supplying parts."

"What happens after this model succeeds? The next person comes to us and says, 'I want to apply another American brand for you in Texas,' then the next person applies one in New Jersey, then the next in Florida; BYD would go from being the world's largest new energy vehicle manufacturer to just an OEM earning money from parts supply."

"Your own business model is very rigorous; your factory, your land, your suppliers, your compliance, all were built by you single-handedly."

"But where does the BYD brand fit in? What have you left for BYD in your trademark framework?"

Mu Xin did not answer immediately, but McCarthy spoke up; this was the first time he had spoken.

"I am in charge of the vehicle engineering for Mr. Mu's factory. I only need BYD to supply the Blade Battery, electric drive, electric control, and thermal management; these four items are unlikely to be replaced. Detroit is capable of handling the other components."

"I've roughly calculated that if BYD only supplies these four, the core of the vehicle technology integration remains in BYD's hands, because the module layout of the battery pack must match the electric control system, and the electric drive output curve must be jointly calibrated with the vehicle's curb weight and aerodynamic drag."

"Mr. Mu's factory does not touch these joint calibrations; joint calibration is BYD's technology."

"All vehicle parameters involving joint calibration will be written into the technology authorization chapter of the supply agreement, and BYD's name will appear in the technical documentation for every vehicle."

"This is essentially BYD technology licensing plus local assembly."

President Li Zhiping remained silent, and McCarthy continued.

"Furthermore, the joint calibration data is retained in the factory records as technical documentation, with each vehicle having a fully numbered record corresponding to it."

"After each vehicle rolls off the assembly line, there will be an independent engineering report detailing the module model of the vehicle's electric drive, the factory serial number of the battery pack, and the corresponding calibration data file."

"These reports are kept in the factory archives for ten years during the normal vehicle after-sales process, with independent third-party engineering consulting firms conducting regular audits."

"If one day trade policies make you feel it is necessary to disclose this part of the data to the federal government, you can directly produce the independent engineering report for each vehicle that belongs to BYD's technical contribution. It is written very clearly; from data traceability to parts shipment and then to the vehicle records, every link has professional records."

"This system is called the Vehicle Compliance Certification Traceability System here in Detroit; it also exists in Europe, and BYD should have already seen it when supplying in Europe."

"Mr. Mu, your people have convinced me for the time being, at least regarding the technology authorization framework part."

"But the Americas Business Division must retain the possibility of re-attaching the BYD car badge to your trademarks, certainly not now."

"In the future, if the policy environment in the U.S. regarding Chinese electric vehicles changes, making the bilateral market environment fairer, I will not allow your trademark structure to legally lock BYD out from ever being able to attach a BYD badge to your vehicle."

"The trademark independent registration condition you've proposed must include a 'Brand Return Clause.' Your assembly plant in the U.S. must legally be able to return brand rights after policy changes, or at least be able to return to the original factory badge through compensation."

President Li Zhiping's request stunned everyone present; it was somewhat too excessive.