A California court has ruled that Groupe Danone's trademark dispute with Chinese joint venture partner Wahaha should be settled in China, not by the US judicial system.

China is the appropriate place for resolving the dispute, said the court late last week. Its ruling follows a case that Danone had brought in California against the wife and daughter of Wahaha chairman Zong Qinghou.

Kelly Zong is a US citizen, while You Zhen Shi is permanently resident in the US.

California superior judge Carl West refused to wholly dismiss the case last week, however, and ordered the parties to report back every six months on the progress of their case in China.

The case is the latest in a long-running international dispute between Danone and Wahaha. The firms signed a deal in 1996, but Danone has since alleged that Wahaha illegally copied products and sold them outside of the venture.

A spokesperson for Danone in China said that the US court indicated it would take the case back if China proved to be "inadequate" as an alternative forum.

He added: "The ruling is procedural in nature and does not address the merits of Danone's claims against the defendants."  

In January, Danone said it would appeal a ruling in the High Court of the British Virgin Islands, after it lost in its attempt to freeze assets of nine companies linked to Wahaha in the territory.

An arbitration court in Stockholm, Sweden, is set to hear the dispute between Danone and Wahaha this year, to make what could be a critical ruling.