In-depth Analysis of Nanjie E-commerce's Cartelo Trademark Licensing Dispute: Warning on the Sustainability of Brand Licensing Model

According to Sina Finance report [1], Nanjie E-commerce and Shanghai Xinhezhao signed the “Trademark Licensing Service Contract” on March 22, 2018, agreeing that Nanjie E-commerce authorizes Shanghai Xinhezhao to use the Cartelo series trademarks, with the licensing period from March 21, 2018 to December 31, 2027, a nearly 10-year brand licensing cooperation. This contract was originally expected to be a long-term stable source of brand licensing revenue, but serious contract execution issues emerged during actual performance.

[1]:

• Joint Liability for Trademark Infringement
  : Multiple instances of trademark infringement led Nanjie E-commerce to be listed as a co-defendant and bear joint liability, which directly damaged the brand owner’s goodwill and legal liability
• Unauthorized Sub-licensing
  : Unauthorized sub-licensing of the licensed trademarks to downstream dealers without permission, disrupting the brand owner’s basic channel control structure
• Unauthorized Modification of Trademark Style
  : Unauthorized modification of the trademark style, seriously violating the basic requirements of brand consistency
• Lack of Quality Management
  : Violating quality management agreements, leading to failure in product quality control
• Fee Arrears
  : Continuous non-payment of licensing fees from June 2024 to January 2025, constituting a material breach

The mutual claims between the two parties exceed 647 million yuan [1], forming a complex legal battle:

Litigant	Accepting Court	Lawsuit Amount	Core Claims
Shanghai Xinhezhao suing Nanjie E-commerce	Shanghai Qingpu District People’s Court	565 million yuan (excluding interest)	Terminate the contract, compensate for economic losses, return licensing fees and deposits
Nanjie E-commerce suing Shanghai Xinhezhao	Shanghai Qingpu District People’s Court	81.6907 million yuan	Pay for infringement losses, liquidated damages, arrears of licensing fees, confirm contract termination

Shanghai Xinhezhao first filed the lawsuit in January 2025. After the jurisdiction objection procedure, the case was finally transferred to Shanghai Qingpu District People’s Court for jurisdiction. Nanjie E-commerce filed a counterclaim in another case in June 2025, requesting confirmation that the contract was terminated on April 7, 2025.

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According to the research report of Dongwu Securities [2], Nanjie E-commerce’s business system presents an obvious binary structure:

:

1. Nanjie E-commerce Headquarters
   (main profit source): Includes brand licensing businesses such as Nanjiren, Basic House, Cartelo Crocodile
2. Time Interconnect Business
   (main revenue entity): Acquired in 2017, mainly engaged in internet advertising placement business, which is the main revenue source but has a much lower profit margin than the headquarters

As the core profit source of Nanjie E-commerce, the brand licensing model essentially obtains sustainable income through commercial operation of brand IP, rather than directly profiting from product sales. This “light asset, high leverage” business model puts forward extremely high requirements for brand asset management capabilities.

Nanjie E-commerce’s brand licensing model has long adopted the “OEM licensing” method. Although this model achieved scale effects during the rapid expansion period, it also accumulated deep-seated problems:

: The previous extensive OEM licensing model of the old Nanjiren resulted in poor quality control, and suppliers cut prices while ignoring quality [2], leading to gradual erosion of brand value. The inconsistent interests between the brand licensor and the actual producer make quality control a prominent governance problem.

: As can be seen from this dispute, the unauthorized sub-licensing of downstream dealers by the licensee reflects the weakness of the channel management system. The brand owner’s insufficient control over the terminal sales network makes it difficult to maintain a unified brand image.

: The disconnect between licensing fees and the actual contribution to brand value may lead to insufficient incentives for the licensee to invest in the brand, thereby generating “free-riding” behavior.

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: In this case, the licensee’s long-term fee arrears and multiple breach behaviors highlight the importance of contract clause design. Brand licensors should clearly stipulate in the contract:

• Trigger conditions and breach consequences for installment payments
• Approval procedures and restrictive conditions for sub-licensing
• Specific standards for quality management and handling mechanisms for violations
• Normative requirements for the use of brand styles

: Long-term licensing contracts (nearly 10-year term) lack sufficient flexibility to respond to market changes and operational risks. It is recommended to introduce phased evaluation and adjustment clauses to ensure that the rights and obligations of both licensing parties match the actual operational situation.

: The fact that the brand owner was listed as a co-defendant and bore joint liability due to the licensee’s infringement behavior [1] exposes serious flaws in the risk isolation mechanism. Brand licensors should:

• Establish a supervision and early warning mechanism for the licensee’s business behavior
• Clearly distinguish liability attribution and exemption conditions in the contract
• Consider setting up a brand use deposit or insurance arrangement
• Strengthen penetrating management of the licensee’s downstream dealers

: Nanjie E-commerce has realized the problems of the extensive model and is promoting the “strong control franchise model” [2], retaining only a small number of high-quality modern factories and conducting strict quality control audits on all factory products. This transformation reflects the industry’s renewed emphasis on quality control.

:

• Establish supplier access and exit mechanisms
• Implement regular and irregular quality sampling inspections
• Establish a product quality traceability system
• Set up a tiered punishment mechanism for violations

: The continuous non-payment of licensing fees by the licensee from June 2024 to January 2025 [1] indicates that there are loopholes in the current fee collection mechanism. Recommendations:

• Establish a prepayment or brand use deposit system
• Set milestone trigger conditions for fee payment
• Establish an arrears warning and rapid response mechanism
• Set clear contract termination rights for long-term arrears

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According to the company’s announcement [1], since the case has not yet been formally heard, the specific impact on the company’s current or post-period profits is uncertain. Shanghai Xinhezhao is an unrecognized revenue customer this year, which implies that the dispute may have affected Nanjie E-commerce’s revenue recognition and financial statement quality. Legal fees during the litigation period, possible compensation payments, and brand value losses will all put pressure on short-term performance.

Long-term brand licensing disputes may potentially erode brand value. As a well-known apparel brand, Cartelo Crocodile’s dispute may affect consumers’ and partners’ trust in brand management. Especially considering that the Cartelo brand also involves intellectual property disputes with Lacoste in the international market [3], the superposition of multiple legal disputes may weaken the brand’s overall market position.

From the perspective of industry development trends, Nanjie E-commerce is promoting the transformation from “extensive OEM licensing” to “strong control franchise model” [2]. The Nanjiren luxury series only retains high-quality modern factories and conducts comprehensive quality control audits on all products. The Basic House brand also adopts a strong control franchise model to eliminate copycat products. This transformation is both an active adjustment to historical problems and an inevitable choice for changes in the industry competition pattern.

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• Improve Contract Standardization
  : Industry associations should promote model brand licensing contract texts to clarify the boundaries of rights and obligations between the two parties
• Establish Credit Evaluation System
  : Record and rate the performance history of licensees to reduce information asymmetry risks
• Strengthen Information Disclosure
  : Listed companies should disclose more detailed information on the risk exposure and control measures of brand licensing businesses

: Establish systematic screening criteria for licensees, including multi-dimensional evaluations such as financial status, operational capabilities, and compliance history

: Implement real-time monitoring of the licensee’s operational data and establish an early warning indicator system

: Preset clear contract termination scenarios and liquidation procedures to reduce the cost of contract termination

: Brand licensors should transform from simply collecting licensing fees to providing brand empowerment services, including:

• Supply chain integration and management services
• Digital marketing support
• Channel expansion and management
• Quality certification and endorsement

Under this model, the brand owner and the licensee form a closer community of interests, which helps reduce moral hazards caused by agency problems.

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Nanjie E-commerce’s Cartelo trademark licensing dispute is a typical case of risk exposure in the brand licensing business model. This case reveals systemic loopholes in long-term licensing contracts in terms of risk isolation, quality control, fee collection, and channel management. For the brand licensing industry, this case has important warning significance:

1. Contract Design Must Be More Forward-looking
   : Long-term licensing contracts should preset sufficient flexibility and exit mechanisms
2. Risk Control Must Be More Refined
   : Shift from “post-event accountability” to “pre-event prevention”
3. Business Model Must Continuously Evolve
   : The transformation from extensive licensing to refined operation is an inevitable trend

As a light asset business model, the sustainability of brand licensing highly depends on sound governance mechanisms and strong brand asset management capabilities. Nanjie E-commerce’s case shows that problems accumulated during the rapid expansion period may break out in the market adjustment period, and enterprises need to find a balance between scale growth and risk control.

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[1] Sina Finance - “Nanjie E-commerce Involved in Major Trademark Contract Dispute with Total Amount Exceeding 647 Million Yuan” (https://finance.sina.com.cn/stock/aigc/sszc/2026-01-04/doc-inhfctqq7450625.shtml)

[2] Dongwu Securities Research Institute - “Why Are E-commerce Agency Operations Attracting Attention? — Online Entrance for Consumption Boost” (https://aigc.idigital.com.cn/djyanbao/)

[3] Wanhuida Intellectual Property - “Wanhuida Intellectual Property Excellent Case Directory” (https://www.wanhuida.com/UpLoadFile/Files/2025/9/4/1738366731338df0-1.pdf)