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Apple v. Proview. China Trademarks And So Much To Learn.

Posted in Legal News

 

A reporter called me the other day on the Apple-Proview trademark kerfuffle. She kept wanting me to give her a quote on what foreign companies should take away from this dispute and I kept parrying with her, unable to give her just one. I kept finding myself saying “it’s probably more complicated than that.” 

Let me back up a bit. As many of you no doubt know, Apple is in a massive trademark fight with a Shenzhen-based company called Proview. Near as I can tell, the facts are as follows:

  • Proview-Shenzhen registered the iPad trade-name before Apple had ever manufactured an iPad.
  • Proview-Taiwan (a Taiwanese company that is not the same company as Proview-Shenzhen) entered into an agreement with Apple (or, more accurately, a company acting on Apple’s behalf) to sell its Asian iPad trademarks to Apple.
  • Apple claims that agreement with Proview-Taiwan included the PRC iPad trademark, but Proview is claiming otherwise.
  • Apple sued Proview (I think Proview-Taiwan, but I am not sure) in Hong Kong and the Hong Kong court ruled that Apple is entitled to use the iPad trademark on the Mainland.

Here is where it gets so complicated and here is how I see it:

  • Proview-Shenzhen still shows up as the owner of the iPad trademark in China.
  • It is not clear if Proview-Shenzhen ever contracted with Apple to give Apple the China iPad trademark or any sort of license to use that trademark.
  • It appears that Proview-Taiwan did enter into some sort of trademark sale or licensing agreement with Apple (again, actually the company acting on Apple’s behalf), but since Proview-Taiwan did not own the PRC trademark for iPad, there are some real issues as to the validity of such a sale or license.
  • Did Proview-Taiwan have any interest in the PRC iPad trademark such that it could transfer or sell that interest to Apple?
  • Did Proview-Shenzhen ever agree to sell or license its iPad trademark to Apple?

What I find really difficult to believe is that Apple and/or Apple’s attorneys would have done a deal to acquire rights to the iPad trademark in China without having done real due diligence on that trademark. Basic due diligence would have revealed that the PRC iPad trademark was registered to Proview-Shenzhen and at that point, Apple would have required Proview-Shenzhen (not Proview-Taiwan) sign on to the contract to assign or license the PRC mark. So the first thing to be learned from this (maybe) is to do your due diligence and make sure that when you are buying something or securing a license to something that you are in fact doing so with the company that is actually authorized to sell or license that item.

This all came to the fore when Proview-Shenzhen started asking trademark officials in various Chinese cities to start pulling iPads from store shelves because those iPads infringe on Proview-Shenzhen’s trademark.  Some cities are pulling iPads from store shelves and this is obviously not good for Apple. [Full Disclosure: I have a disproportionate percentage of my retirement savings wrapped up in Apple stock]. Some cities seem to be refusing to do so, in what appear to be political, not legal, reasons. 

Now Proview-Shenzhen is saying that is going to ask China customs to block exports of Apple’s iPads from China because they infringe on Proview-Shenzhen’s trademark. The media (and even Proview-Shenzhen itself) seem to believe this will not happen because it would look so bad for China politically. This is where the real lesson lies. If you are not Apple, I can pretty much assure you that all of your iPads would be off the shelves in China by now and they would also not still be leaving China via export. The real lesson then is on how to prevent this from happening to “your” trademark and that lesson is really quite simple. If you want to avoid your product getting pulled off shelves in China and/or prevented from leaving China, make sure that the trade-names and trademarks you put on your product (or on its packaging) are actually registered (or licensed) to you in China. And just to be clear, “in China,” for purposes of China’s trademark law, does not mean in Hong Kong or in Taiwan or in Macau or in the United States or in Australia or in any other country. If you want China trademark protection, you must register the trademark in China. 

For more on China trademark law, check out the following:

Here are some articles for those who want to read more about the Apple-Proview fight:

Just don’t say we didn’t warn you.

UPDATE: Stan Abrams over at China Hearsay has two great (recent) posts on this dispute. The first post, “Apple vs. Proview: The Assignment Agreement!” contains Stan’s analysis of the Trademark Assignment Agreement between Apple (actually it’s stand-in entity) and Proview. Stan does a great job of analysing the Assignment Agreement, which really is by far the key issue involved in the case. I completely agree with all that Stan says about the Agreement and I add one thing to it. If you think you can properly assign a Chinese trademark without using an experienced attorney to draft the contracts and oversee the agreements you are wrong. And if you think that after reading Stan’s post, you are flat out crazy.

The second post, “What Have We Learned About China’s IP System? Answer: nothing,” posits that the issues in this matter involve a commercial dispute, not IP. I generally agree with this. The heart of the issue is how you secure ownership or rights to someone else’s trademark.

  • KC

    Absolutely right! Imagine the discussions / negotiations / defense you will have to make with CHINESE officials where all your points says Taiwan or Hong Kong or elsewhere but binding on China, it’s not only about political or legality, it’s down right insulting to the Chinese official concerns…. even If the official buys the story and report to his Chinese boss, what do you think his boss will think about the officer performance and loyalty?

  • numble

    The Hong Kong interim ruling is here:
    http://www.hklii.hk/cgi-bin/sinodisp/eng/hk/cases/hkcfi/2011/1375.html
    It suggests that the original contract DID include Proview Shenzhen (along with Proview International and Proview Electronics), however the clause in the contract only said that Proview *Electronics* warranted that it owned the China mark and would transfer it to IP Applications (Apple’s representative). Proview Shenzhen appears to have signed this contract, if the facts in the ruling are correct.
    The Hong Kong court ruling also indicates a willingness to pierce the veil behind all these Proview companies (and another company called Yoke), and link it all back to Rowell Yang, the CEO and legal representative for all these companies.

  • Mark

    “If you are not Apple, I can pretty much assure you that all of your iPads would be off the shelves in China by now and they would also not still be leaving China via export.” – As nearly as I can find out, the central government has never blocked export trade so long as the company has trademark rights in the country in which the shipment is going. I think Stan over at China Hearsay said the same thing. What I can’t find in your post is the fact that the Shenzhen court ruled (properly, in my opinion) that Proview-Shenzhen had trademark rights in mainland China. Correct me if I am wrong but I thought, for the most part, that a HK judgement is not enforceable in mainland China.

  • http://www.pbl.com David W.

    Dan, I believe the facts you recite do not include (or perhaps miss) that Apple sued Proview Technology (Shenzhen), in the Shenzhen Intermediate People’s Court, asking the court to declare Apple as the rightful owner of the IPAD trademarks in China. In early December, that court rejected that request, and Proview has since filed suits and administrative claims against various Apple resellers. Today it was announced that Amazon will no longer be selling iPads in China, although the reason stated was that Amazon is not an “authorized reseller, and the removal bears no relationship to the matters with Proview.” Raises an eyebrow, under these circumstances.
    I agree that the”takeaway” message is that (for any sale or licensing transaction, but especially in China) there are three steps: first, one must complete due diligence to be sure they are working with the correct party in interest, and also a duly authorized officer of that party; second, one must be sure to have clear and enforceable written documentation in place (there are allegations that the documentation for this deal was unclear and shoddy, and never specifically mentioned “China”); and third, one must be certain to complete the transaction close to or contemporaneously, with the appropriate documentation and filings (e.g., here, the filing of the assignment of the trademark in Beijing, which should have been accomplished contemporaneously, with appropriate documentation, including a power of attaorney from the proper assigning party).

  • Jim Allsop

    We too have had this exact problem of someone registering our trademark in China and then preventing our supplier from shipping product until we settle. We are in the middle of it now and it is an expensive hassle.
    Jim Allsop

  • Ben L.

    Does any one have knowledge of the Toshiba Aigo dispute a few month ago after Aigo won? Did Toshiba settle, did Aigo approach Customs or have Toshiba taken off shelves? When I first saw the Toshiba Aigo dispute was thinking of the Customs angle–and I did find Toshiba moving its manufacturing center to China from Japan a few years back. Any one knows what is happening now? If it was not like the Apple/Proview dispute, why not? And if it was proceeding like the APple/proview dispute (in terms of enforcement/importation), why haven’t we heard of it?

  • Hua Qiao

    Wondering when you might write about this case!
    I was musing whetherf Apple might have a misrepresentation (fraud) action against Proview Taiwan, which misrepresented that it owned the China rights. If Proview Taiwan owned Proview China, then perhaps Apple could sue for damages in the form of Proview China stock. Unfortunately for Apple, according to other media reports, the Taiwan and China entities are both subsidiaries of Proview International, a Hong Kong company. So it appears that Apple would not be able to redress against Proview China stock.
    On a different matter, what right does Proview China have to stop exports of the iPad? If the units are not sold in China, is there an illegal action here to enjoin? Or is this just a punitive request?

  • Mi Fu

    one point: if the manufacturer has not registered the trademark in China, and is manufacturing for export only, would the owner of the trademark in China be able to block exports?
    another question: trademarks are in general given for a very narrow range of products. It would be interesting to see, for which Proview-Shenzhen has the ownership of the trademark, whether it covers electronic toys.

  • James Chan

    The fact that Proview-Shenzhen trademarked the name iPad so many years before iPad even became popular is something that doesn’t smell good.
    I have a feeling that they, or companies like them, must have trademarked a galaxy of Western brands already.
    What if Apple, Inc. decided to stop making and selling the iPad in China and begin manufacturing it in the U.S. and sell it only outside of China? Proview-Shenzhen will not make an iPad. They don’t have all the right components. The whole dispute would come to a complete halt.
    On September 30, 2011 in Washington, D.C., the United States Patent & Trademark Office (USPTO) invited business people (me included) to listen to fifteen (15) Chinese officials from the China Patent Office. The officials complained that Americans don’t trademark their products in China and therefore cannot get trademark protection because in China trademark protection is based on a first-come-first-serve basis. I am shocked that Apple, Inc. never thought of that!
    There is another catch in the Chinese trademark system that I learned that day, namely, even if an American-invented product trademarks itself in China properly, it will get protection only if it proves that its China-trademarked products are selling successfully within the Chinese market and are “popular” with consumers. Being successful outside of China does not count.
    Having made their spiel, the fifteen (15) China Patent Office officials looked puzzled as to why small and midsize Westerner companies are not eager or willing to trademark their products. They said that the whole process does not cost much.
    I told them that it is not about the act of trademarking that concerns the small U.S. companies. The problem is that small U.S. companies must find a way to prove that American-made products can sell very well in China. But it will take many years before a company can make their Western-made products sell very well in China. The whole situation becomes a vicious, Catch-22 cycle. The Chinese officials understood every word I said (I spoke Mandarin Chinese to them.) But I felt like I was telling the fish why the birds don’t swim.
    No wonder there were more speakers and USPTO staff people on that day than there were seminar attendees.
    China is still very much like the legendary Hotel California in the Eagles song. Only Buddha can handle the suffering, and leave the case for lawyers to handle.

  • Eric Jaeb

    As always, China Law Blog provides the best and most up to date coverage of an important China legal issue ahead of anyone else on these important matters. I have many times appreciated your early heads up. Well done again!

  • Bob Walsh

    Nice comment, James Chan. It’s very instructive as to attitude and behavior.

  • Richard

    @James Chan
    “There is another catch in the Chinese trademark system that I learned that day, namely, even if an American-invented product trademarks itself in China properly, it will get protection only if it proves that its China-trademarked products are selling successfully within the Chinese market and are “popular” with consumers. Being successful outside of China does not count.”
    I have no idea what the Chinese authorities told you durung that meeting, but the above is simply not true. I think you are confusing “Well-Known Trademark” status with simply registering a trademark. A brand/product/mark does not need to be popular in China or even sold in China to be TMed in China and enjoy all related protection. To become a Well-Known Trademark, however, is a pretty high threshold, but there have been a few cases were marks that were unregistered in China have been protected because they were already so widely known (Starbucks’s Chinese name 星巴克 is one example).

  • http://www.foarp.blogspot.com FOARP

    @James Chan – What Richard said, plus a few other points:
    1) The State Intellectual Property Office (AKA the Chinese Patent Office) is not responsible for trademarks. The China Trade Mark Office (CTMO) is a separate organisation.
    2) There’s no way proview could have known that Apple were going to use that trademark. In fact, they did actually try to market their own product under the mark. Trademark registration and maintenance is not cost-free, and it is highly unlikely that an applicant would register thousands of trademarks in many different classes just on the off-chance that a company like Apple might at some point wish to use it.
    Moreover, my understanding is that, similarly to most jurisdictions, non-use of a mark is grounds for revocation of the mark under Chinese trademark law. Therefore, if they don’t use the mark (for three consecutive years, as I understand), they can lose it.
    3) Trademark protection in all countries is on a first-come-first-served basis when it comes to registration, the United States is no exception to this. This is why it makes a good deal of sense when choosing a brand-name, slogan, or whatever, to simply check whether anyone has registered the same or similar mark for the same or similar goods/services in the relevant jurisdictions. This means that if you want to sell goods/services in China under a particular brand-name, you should check whether anyone has already registered a mark that might be infringed by your doing so.
    Apple presumably did this and knew that they might infringe Proview’s trademark. Their problem (if Proview is to be believed) is that they appear to have signed their agreement with the wrong people.
    Therefore the apparent problem is not with Chinese trademark law, or with Chinese authorities, or really anything to do with IP in China: The problem appears to be that Apple did a bad job of doing their due diligence.
    @Mi Fu – I’m not sure how Chinese law defines trademark infringement, but most jurisdictions allow a trademark holder to injunct importation/exportation of goods bearing the mark, as well as preventing the act of affixing the mark to goods.

  • Hua Qiao

    I suspect that the reason that Proview Technology, a Shenshen company owned by a Hong Kong listed, legacy Taiwanese firm, is able to get the attention of mainland authorities is that the bankrupt companies creditors are predominantly mainland based. Clearly the ONLY source of repayment on those troubled loans would be getting a material settlement out of Apple.
    If you are curious as to what Proview’s “iPad” looked like, here is a link….
    http://blogs.wsj.com/chinarealtime/2012/02/17/so-this-is-what-proviews-ipad-looks-like/
    @FOARP
    Your comment to MiFu, while perhaps technically correct, (I don’t know) does not make sense commercially. Does that mean if a company that makes a product in say, Mexico, and sells the marketing and trademark rights for Mexico (Mexico only) to company A and sells the international rights to company B would not be able to ship the product across Mexican borders to fulfill Company B’s international orders?

  • Ann Lee

    Jim Allsop, I wonder whether you ever tried to file a lawsuit against the party who get your trademark abroad registered in China for copyright infringement if your trademark also has copyright under Chinese law and the creation of your trademark must have occured long before the registration in China which may give you a chance at Chinese court. For the IPAD case in China, I personally believe hardly will Apple win the second instance as the transfer of a trademark has to be executed by a valid trademark transfer agreement and it is impossible for the second court to issue a judgment, ordering Proview to sign a trademark transfer agreement with Apple.

  • HK IP Man

    The lawyer involved in the recordal of the assignment of rights from Proview to Apple Inc simply didn’t check the details deed of Assignment correctly and the trademark rights in China were simply not assigned. Apparently that lawyer is now blaming the paralegals working under her for this oversight which is quite unbelievable as the buck always stops with the lawyer responsible for handling of the matter. In this case, the checking of the assignment details is such a fundamental step that it is difficult to see how Apple wouldn’t have grouds for a negligence action against the firm.