China: iPad Drama: Apple’s Fight For The Rights To The iPad Trademark In China Continues

In its ongoing battle to secure trademark rights to the iPad trademark in China, Apple has appealed a decision of Shenzhen's Municipal Intermediate People's Court, which ruled that Proview Technology Shenzhen is the owner of the iPad trademark, to the Higher People's Court of Guangdong Province. Arguments were heard on February 29, 2012, and the court must decide whether Apple is the rightful owner of two iPad trademark registrations issued in China in 2001.

Background

Proview International Holdings Limited (Proview Hong Kong) is an investment holding company that was listed on the Hong Kong Stock Exchange in 1997. It has a global network of affiliates that manufacture and sell consumer electronics. Two of its affiliates are Proview Technology, located in China (Proview Shenzhen), and Proview Electronics Co. Ltd., located in Taiwan (Proview Taiwan). In early 2000, Proview Taiwan manufactured and launched an all-in-one Internet terminal named iPad. The product was ultimately discontinued years later. It is reported that between 2000 and 2003, while the product was viable, Proview Taiwan secured 10 trademark registrations for the marks I-PAD, IPAD, and iPAD in the European Union, Indonesia, Mexico, Singapore, South Korea, Thailand, and Vietnam. In 2001, Proview Shenzhen applied to the Chinese Trademark Office (CTMO) for the registration of the mark IPAD. By most accounts there is no indication that Proview Taiwan's or Proview Shenzhen's acquisitions of trademark registrations represent a case of "trademark squatting," as all of this filing activity occurred nearly a decade before Apple's iPad tablet was launched.

In 2009, Proview Taiwan negotiated and signed a Trademark Transfer Agreement with a United Kingdom company, known as IP Application Development Co. Ltd. (UK IPAD), agreeing to assign its global iPad trademark rights for a reported approximate value of $55,000. The schedule of the assigned trademark rights included two trademark registrations for the mark iPad that were registered in China. UK IPAD then reportedly entered into an agreement conveying the iPad trademark portfolio to Apple in February 2010. Apple's iPad went on sale in the United States in April 2010.

When Apple attempted to record the trademark assignment agreement with the CTMO, the CTMO rejected the assignments, finding that the iPad trademark registrations were owned by Proview Shenzhen and not Proview Taiwan, the party that had signed the initial assignment agreement with UK IPAD. As is common practice in China, the China-based affiliate, Proview Shenzhen, and not the foreign-based parent, holding, or affiliate company, had secured registration for the iPad marks in China.

Apple and UK IPAD filed suit against Proview Shenzhen in the Shenzhen Intermediate People's Court for breach of contract, alleging that the agreement signed by Proview Taiwan, assigning its global trademarks for the iPad, included the iPad trademark rights in China. Documents reportedly reviewed by the Chinese court included a copy of the agreement with a listing of 10 iPad marks registered in nine different countries around the world. The Chinese trademark registrations are included in the schedule.

The Shenzhen Intermediate People's Court ruled that the Chinese affiliate, Proview Shenzhen, owned two valid Chinese trademark registrations, and that Proview Taiwan could not assign what it did not own. In an official press release by the Shenzhen Municipal Intermediate People's Court, the court found:

  1. Proview Shenzhen is a Chinese subsidiary of Proview International Holding Company
  2. In 2001, Proview Shenzhen obtained two trademark registrations from the CTMO for the marks iPad (stylized) and iPAD
  3. In 2009, UK IPAD began negotiations with Proview Hong Kong over acquisition of the iPad trademarks
  4. In 2009, UK IPAD signed an agreement with Proview Taiwan, wherein Proview Taiwan agreed to transfer all the rights owned by Proview for a price of $55,000
  5. In February 2010, Apple and UK IPAD signed a "rights transfer agreement" assigning all rights to relevant trademarks from UK IPAD to Apple
  6. As of the date of the decision, December 5, 2011, the transfer registration process, otherwise known as registration of the assignment with the CTMO, was not effectuated

The Court noted that Proview Shenzhen did not participate in negotiations nor authorize others to dispose of their trademarks, and ultimately that the agreement is not binding on Proview Shenzhen. This trademark infringement case was arguably decided under principles of contract law, with the Shenzhen Court agreeing with the decision of the CTMO, holding that Proview affiliates Proview Shenzhen and Proview Taiwan are two different legal entities, and that an affiliate does not have the authority to assign a trademark that it does not own.

Current Posture

A pple filed an appeal with the Higher People's Court of Guangdong Province and, while arguments have been heard, a decision has not been rendered. Should either party not find the decision favorable, an appeal to the Supreme People's Court, the highest court in China, is possible. The SPC has recently accepted a large number of particularly complicated intellectual property cases and in December 2011 issued trial practice guidelines for trademark infringement cases (Opinions on Exerting the Function of Intellectual Property Rights Judgment to Facilitate Socialist Cultural Development and Prosperity and Promote Independent and Coordinated Developments).

Proview Shenzhen meanwhile has reportedly lodged complaints with more than 40 branches of the State Administration for Industry and Commerce in China, an agency with power to seize infringing products. Proview Shenzhen also has filed civil actions in multiple provinces accusing Apple of trademark infringement and demanding injunctive relief to stop Apple from selling the iPad in China and exporting iPads manufactured in China. A court in Shanghai has refused to grant the injunction, but a court in Huizhou has granted such an injunction.

Proview Shenzhen also has brought its battle to the United States. Proview Shenzhen, with its U.S. affiliate, Proview USA, has filed a complaint in the Superior Court of the State of California in Santa Clara County Court accusing Apple of committing fraud during the negotiation process by creating UK IPAD, a special-purpose entity with the sole purpose of carrying out the purchase of the trademarks, and not disclosing that it was acting as an agent of Apple.

At least in the near term, it appears that this matter is far from resolved.

Lessons Learned

T racking ownership of assets in China often presents challenges, and it is common for assets to be owned by parties other than the party claiming ownership. As a result, due diligence to determine the owner in fact of the assets subject to an agreement is critical. A comprehensive trademark search of the CTMO database would have revealed the actual owner of record.

Moreover, unlike in the United States, in China trademark assignments should be recorded. According to the current Regulations for the Implementations of Trademark Law Article 24. Notice of an Assignment, the signatures of the trademark registrant of record and the assignee should be filed immediately with the CTMO. The filing of the trademark assignment likely would have uncovered the correct owner, as the assignment likely would have been rejected by the CTMO. At that time, the problem could have been corrected, or at least Apple would have been on notice of the problem with the ownership of the trademark. Apple, in assuming that the assignment agreement with Proview Taiwan was valid, launched the iPad in mainland China before its assignment with the CTMO was examined and recorded.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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