China Business Daily Update reports that Toyota Motor Corp and Chinese carmaker Geely Group have failed to reach a settlement in their lawsuit over a trademark infringement dispute. But the report does say that Toyota has agreed to settle the case under certain conditions, company officials from both parties said.

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Lou Tao, Geely’s legal consultant, was quoted on BDU: “Toyota wanted to impose unmerited allegations of trademark infringement and illicit competition on Geely… that is why the two parties didn’t reach a settlement.”

Toyota, Japan’s largest automaker, sued Geely for 14 million yuan (US$1.69 million) in compensation, alleging that the Geely’s Merrie compact car logo is very similar to Toyota’s and also that Geely used Toyota’s name in its publicity campaigns.

“During negotiations we agreed to accept a settlement if Geely gives up the logo for its Merrie model and stops mentioning the name of Toyota in its publicity,” said Sun Tuoya, a spokeswoman with Toyota’s China office.

“But no deal has been reached,” she said without elaborating.

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“Geely’s door for further negotiations is still open, but whether the two parties reach a deal depends on Toyota’s stance,” said Lou.

“If Toyota abandons its unreasonable requirements, it is still possible to reach a settlement,” he added.

He added that it is also possible for Geely and Toyota to do business together in the future, but Geely has since developed its own engines.

Local observers say that the case is also a flag waving exercise by Toyota and a warning to other local makers who could face legal action from Toyota in similar ‘imitation’ cases.