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KDB, Kumho Industrial Clash over Use of Trademark Rights
Achilles Tendon
KDB, Kumho Industrial Clash over Use of Trademark Rights
  • By Jung Min-hee
  • April 20, 2017, 02:30
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In the Kumho Tire sales to China-based Doublestar, it takes much attention whether Kumho Industrial allows Korea Development Bank (KDB) to use the trademark rights of the Kumho brand.
In the Kumho Tire sales to China-based Doublestar, it takes much attention whether Kumho Industrial allows Korea Development Bank (KDB) to use the trademark rights of the Kumho brand.

 

It will decide the direction of the current sale of Kumho Tire whether Kumho Industrial allows Korea Development Bank (KDB) to use the trademark rights of the Kumho brand. The KDB thinks that Kumho Tire received approval of the use of the trademark rights of the Kumho brand for the next five years from Kumho Industrial, but Kumho Industrial has flatly denied the claim.

According to investment banking industry sources on April 19, Doublestar calculated its offer price for Kumho Tire on the assumption that it can use the trademark rights of the Kumho brand for 20 years – first 5 years and additional 15 years. Creditors and Doublestar specified on the sales and purchase agreement (SPA) that both sides would make every effort to fulfill the condition.  

However, Kumho Industrial under Kumho Asiana Group Chairman Park Sam-koo is the one which has the right to decide whether Kumho Tire can use the trademark rights of the Kumho brand, not creditors. When Park doesn’t allow Kumho Tire to use the trademark rights for a certain period, it will disrupt Doublestar’s business plans in the future.

In regard to the permission for its trademark rights, the KDB and Park already took a different stance. The KDB said that Kumho Tire obtained approval to use the trademark rights of Kumho brand in the next five years from Kumho Industrial at the board meeting in September last year. However, an official from Kumho Asiana Group said, “When the KDB requested us to explain our position about the use of trademark rights in the process of bidding in September last year, we clearly said on the official document that we have an intention to permit the use of the trademark rights for five years but only when royalties and other conditions meet our demands. As we never had discussions on royalties and other conditions, including period, we are not required to give approval for the use the trademark rights.” In short, there is no saying that Doublestar will be able to use the trademark rights of the Kumho brand even for five years, not to mention additional 15 years.

In this regard, Woori Bank, one of shareholder companies, sent an official document to the KDB that the trademark rights problem must be solved in order to sell Kumho Tire before when creditors and Doublestar signed a SPA in March. Industry watchers say that creditors can have internal conflicts while terminating the procedure of the sale when the trademark rights problem becomes an issue in earnest.

Many variables for lawsuits still remain. Park said on the 18th, “We have decided not to file a lawsuit against banks this time.” However, Kumho said, “We can take legal action whenever we think it is needed in the process of the sale.”

The extension of the maturity of Kumho Tire’s debts owed to its shareholder council worth 2.2 trillion won (US$1.92 billion) is another hurdle to overcome. The repayment of 1.2 trillion won (US$1.05 billion) of Kumho Tire’s debts comes due in June. The shareholder council seeks to extend the maturity of all debts in a lump before the end of the sale according to contract terms with Doublestar. However, some financial institutions, which have a lower share ratio, insist that Kumho Tire should repay at least some of its debts or adjust interest rates.

The KDB is planning to wrap up the deal from next week. Under the agreement, the sale should be completed within five months. When the deal is not finished during the period, Park will obtain his right of first refusal to buy back Kumho Tire again. An official from the KDB said, “Since financial institution shareholders already agreed on the SPA, we will be able to solve debt adjustments well. Some express concerns over technology leaks and layoffs, but it is highly unlikely to happen due to the industry structure and terms of the collective agreement. Also, the KDB will continuously monitor Kumho Tire as part of debt management even after the sale.”