Apple Inc. (Apple) is notorious for its wide range of innovative technology including the iPod, the iPhone and Apple Mac computer, ranking as one of the world's most admired companies and continuing to prosper even after the passing of its former CEO, Steve Jobs. Apple's legal battles concerning ownership of the iPad trade mark in China and its recent successful verdict in the law suit against Samsung Electronics (Samsung) in the USA - wherein Apple had contended that Samsung's handset and galaxy tablet imitate Apple's iPhone and iPad technology and designs - have consequently received much attention from the media highlighting the importance of adequate protection of intellectual property.
China : Apple v Shenzhen Proview - The iPad trade mark
Apple has recently paid US$60 million to the Chinese company Shenzhen Proview (Shenzhen) to settle a dispute in China over ownership of the iPad trade mark thereby removing an obstacle to the sales of Apple's iPad tablet in the Chinese market.
This settlement offer brings to an end a dispute that started during 2010 when Shenzhen declined to sign the assignment agreement required to record the transfer of ownership of the Chinese iPad trade mark registration at the Chinese Trade Marks Office.
Pertinent to the facts of the case is that Shenzhen and Taiwan Proview are both one hundred percent owned by Proview International Holdings, a company with operations in Europe, Hong Kong, Taiwan and Mainland China. The Proview Group is a producer of display devices including LCD monitors, CRT monitors and flat panel digital products.
In January 2010 Apple announced its new tablet computer branded "iPad". It was initially launched in the USA on 3rd April 2010 and in other countries around the world approximately one month thereafter.
Prior to launching the iPad, investigations and trade mark searches of the relevant trade mark registers were conducted on behalf of Apple to determine the availability of the iPad name in the various territories. These trade mark searches revealed that the Proview Group owned trade mark registrations for iPad in eight territories including two trade mark registrations in mainland China. The parties entered into negotiations from August to December 2009 and consequently entered into an agreement whereby Taiwan Proview agreed to the sale, transfer and assignment of the iPAD trade marks in all relevant territories worldwide to Apple.
It later transpired that Shenzhen was the actual registrant of the Chinese iPad registrations in China who declined to sign the assignment agreement required to record the transfer of ownership of the Chinese iPad registrations at the Chinese Trade Marks Office. Despite a letter of demand to Shenzhen to transfer the Chinese registrations to Apple, Shenzhen contended that it was not a named party to the sale agreement between Apple and Proview Group and therefore under no obligation to assign the iPad registrations to Apple in China.
The term within which an interested third party can file non-use cancellation proceedings against a registered trade mark in China is three years. Accordingly, Apple proceeded to file non-use cancellations against Shenzhen's Chinese iPad trade mark registrations in February 2010 and thereafter filed civil suit proceedings which were heard before an open court throughout 2011.
Although it was Apple's case that the Proview Group had represented and led it to believe that all the iPad marks were owned and registered in the name of Proview Electronics, the Chinese Court held that Shenzhen was the rightful owner of the Chinese iPad trade mark registrations. Consequently, the assignment agreement between Apple and Taiwan Proview was not legally binding on Shenzhen. Furthermore, even the fact that the legal representative of Taiwan Proview and Shenzhen was the same individual did not support their claim, as there was no evidence that the legal representative was acting on behalf of Shenzhen. Apple then appealed to the High Court of Guangdong Province, China.
Shenzhen reacted by lodging court claims throughout China against both Apple and distributors of the iPad tablet also alleging trade mark infringement and instituting litigation proceedings against Apple's subsidiary in Shanghai. Trade mark infringement complaints to the local State Administration for Industry & Commerce (AIC) in the main cities of Shanghai, Shenzhen and Beijing were pursued and restraining orders against the sale of iPad tablets in China were sought. Earlier this year it was reported that Shenzhen also formally requested China Customs to prohibit the import and export of Apple's iPad tablets with the result that Customs would have the authority to seize iPads on the basis of trade mark infringement.
China's Growing Market
According to the latest sales data, China is Apple's number one fastest growing market and is its second largest market, number one being the USA. China has surpassed Europe in sales with an estimated US$7,9 billion or twenty percent of Apple Inc's revenue emanating from China in the first quarter of calendar 2012. On the assumption that the current growth trend continues, China is likely to overtake the US and become Apple's largest market by 2014. This settlement now means that Apple can continue to sell its iPad tablets in China thereby further enhancing growth in the Chinese market.
The facts of this case illustrate the importance of adequate trade mark protection and conducting prior due diligence checks when moving into other markets - not only in China but worldwide as attempts to reclaim brands can be laborious, expensive and sometimes unsuccessful.
The question posed is whether Apple can justify paying US$60 million to Shenzhen to settle the dispute. It would be fair to assume that Shenzhen's actions in retaliation to Apple initiating and pursuing court proceedings would have had a significant impact on Apple's ability to retail its iPad tablet in China. It appears therefore that the settlement was the most practical solution and that a prolonged case would in all likelihood have cost Apple more, not only in legal fees but also the loss of sales revenue in China.
It is further speculated that opportunistic Chinese companies may, as a consequence of this payout, increase their interest in securing trade marks with the intention of selling them onto foreign companies and individuals as they enter into China and other Asian territories.
The aforesaid dispute concerned rightful ownership of a registered trade mark. A trade mark is a distinctive sign usually a name, word, design, symbol or logo or a combination of any of the aforesaid, indicating origin and distinguishing the relevant goods and services from those of others. While the term afforded by trade mark protection does vary from country to country a registered trade mark can be in most instances be renewed perpetually.
Apple's dispute with Samsung on the other hand also concerns registered designs and patents. A registered design affords protection in the shape, configuration and overall appearance of a product when the design is used in relation to the registered product and can be in force for up to fifteen years, depending on the territory. A patent provides exclusive protection in an invention for a limited period, in most territories twenty years. In deciding on the facts before it, a US court has now ruled that Samsung has copied essential features of both the iPad and the iPhone and in turn awarded Apple damages of US$1.05 billion. The verdict, seen by experts as one of the largest in patent history, further empowers Apple to take additional action against those using Android should it choose to do so.
Apple's legal woes emphasise that trade marks, designs and patents - all of which are integral components of Intellectual Property - are fundamental to any successful business.
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