By Dan McPheeters
An interesting trademark dispute has heated up recently, as tech juggernaut Apple, Inc. faces the risk of losing a key brand identifier associated with one of its top products to Proview Technology Shenzhen, a company based in Shenzhen, China. The facts of the case are quite interesting: Proview registered a trademark for the term “iPad” in 2001, nine years before the release of Apple’s digital tablet. In 2009, a Taiwanese affiliate of Proview sold the trademark rights to a U.K. company called IP Application Development Limited for 35,000 British pounds; IP Application Development later resold the rights to Apple for 10 British pounds. As one might surmise, it was later revealed that IP Application Development Limited was controlled by Apple. When Apple applied to Chinese authorities to transfer the rights on the mainland in 2010 in advance of the release of the iPad, but this request was denied by China’s trademark authorities. Apple and Proview are currently locked in a suit and counter-suit that is scheduled to be heard on February 22nd.
From a purely P.R. perspective, this is a set-back for the image of rights protection and general business and legal practices in China. Reviewing the facts, Apple (through its affiliate IP Application Development Limited) must have been convinced that it was acquiring both the Chinese and Taiwanese rights from Proview Taiwan – indeed, Apple’s counter-suit asserts as much. Thus, it would appear that one of the following might be true: Apple’s lawyers botched the purchase, particularly the due diligence concerning the authority of Proview Taiwan viz. the rights to the mark; Proview Taiwan negotiated in extremely bad faith and were bailed out by the Court, who took a narrow view of Proview Taiwan’s authority and who happens to be located in Proview Shenzhen’s backyard; the Court itself gamed the system to protect a local company that was reportedly experiencing serious financial problems; or some combination of the above.
Then there is the timing of Proview’s registration of the mark in the first place, made in 2001 – right around the time of the release of Apple’s iPod. Proview’s registration included the lower-case “i” followed by an upper-case “P”; a quick search at the USPTO reveals that Apple has used this distinctive format since at least the release of the iMac in 1998. This could certainly be a coincidence, but the danger to Apple’s brand value is very real nonetheless – Apple faces an administrative fine of $38 million, and Proview has reportedly asked for $1.6 billion in damages.
If this story has one takeaway, it is to highlight the distinctions between the U.S. and Chinese trademark registration regimes. That one of the two largest companies in the world can be tripped up over a key brand identifier shows just how careful counsel must be in planning business operations in China and elsewhere. A key lesson was handed down by the Shenzhen Court’s decision on Apple’s counter-suit, namely that there will be very little room to assert a claim for ownership over a mark when the mark has been modified in any way, no matter how distinct the brand identifier or how closely the modification resembles the original. Counsel should ensure they have up to date procedural information on the relevant trademark registration administrator, especially filing procedures and timelines, as well as a thorough understanding of the key elements of their mark to ensure brand identifiers are protected in their entirety. Finally, counsel must be doubly sure to know not only who they are dealing with in a particular transaction, but who they are NOT dealing with. A thorough understanding of the jurisdiction’s laws on representations and warranties, and independent research on the parties to the transaction is essential.
Sun Tzu began his famous treatise “The Art of War” by discussing the critical role played by one’s surroundings and environment, and the importance of understanding them as a means to success. In doing business overseas, those surroundings are distinct cultural, business, and legal norms, and the environment is a self-sufficient set of laws and customs with which the business, products, and brand identifiers must comply. The key to ensuring that a company’s expansion abroad is a successful one can hinge entirely on its understanding and management of these factors.