Sharp Corp. has sued China's Hisense Electric Co., which licensed the Sharp brand for televisions sold in the U.S., accusing Hisense of putting the Sharp name on poor-quality TVs and deceptively advertising them.
The court action is the latest effort by Osaka-based Sharp to retrieve the right to use its own name when selling TVs in one of the world's largest markets. Sharp is trying to recover its position as a global maker of consumer electronics.
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Hisense rejected the allegations and said it was selling high-quality televisions under the Sharp name.
The dispute illustrates the risks when the owner of a well-known brand name gives up control over products sold under that name.
In 2015, Sharp signed a deal with Hisense giving the Chinese company the right to use the Sharp name on TVs sold in the U.S. through 2020. At the time, Sharp was in financial distress and selling assets to raise cash. In 2016, Taiwan's Foxconn Technology Group, formally known as Hon Hai Precision Industry Co., took a controlling stake in Sharp for Yen388.8 billion ($3.52 billion), and Foxconn has sought to put the Japanese company back on a growth track.
In a complaint filed to a California state court in San Francisco, Sharp lawyers said the Japanese company's brand and trademark "are at risk of being destroyed" by the time the five-year term of the Hisense agreement expires.
It said that under Hisense's management, the televisions are "shoddily manufactured" and "in many cases, perceived by consumers as cheap." It said it wanted Hisense to stop using the Sharp name.
Sharp said its testing found the Sharp-brand televisions made by Hisense violated U.S. Federal Communications Commission standards. It said Hisense gave consumers deceptive information about the size and brightness of the TVs, violating other federal standards.
Hisense said it did nothing wrong.
"Hisense categorically denies Sharp's claims in the litigation and looks forward to presenting its case in the appropriate forum," a company representative told The Wall Street Journal. "Hisense is in full compliance with the trademark license agreement and Sharp's attempt to terminate the agreement is of no effect. Hisense will continue to manufacture and sell quality televisions under the Sharp licensed brands."
Waseda Business School professor Atsushi Osanai, who used to work at Sony Corp.'s TV unit, said the case was important to Sharp's efforts to restore itself as a global brand.
"If it wants to revive as a global consumer-electronics maker, Sharp should make every possible effort to retrieve the U.S. TV license because the product, which still occupies the center of the living room, remains an important marketing tool," Mr. Osanai said.
Write to Takashi Mochizuki at firstname.lastname@example.org
(END) Dow Jones Newswires
June 13, 2017 02:47 ET (06:47 GMT)