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The Proview v. Apple China Trademark Dispute. Wanna Buy The Brooklyn Bridge?

Posted in Legal News

Just read a Bloomberg News article, “Proview Using ‘IPad’ Name is Harmful: Apple,” that quotes me on the Apple-Proview dispute, as follows:

“It’s not really trademark law, it’s about whether the trademark was legally transferred or not,” Dan Harris, a Seattle-based lawyer with Harris & Moure who handles cases on intellectual property in China, said before the hearing. “Proview Taiwan agreed to sign over the trademark, but Proview Taiwan didn’t own the trademark.”

I see the case as being about authority. Authority to sell the iPad trademark. Who had the authority to sell the iPad trademark to Apple back when Apple (acting through a third party intermediary) thought it purchased the trademark for iPad in China back in 2009?  Let me explain.

If you bought the Brooklyn Bridge from me, you would not own it. Why not? Because I cannot transfer title in the Brooklyn Bridge to anyone because I do not own it in the first place. This analysis should be the starting point for analyzing the Apple-Proview case. I say this because it appears that Apple bought the iPad China trademark from a company that did not own it. Apple (again, acting through a third party intermediary) bought the iPad China trademark from a Taiwanese company called Proview Electronics Company, Ltd. (“Proview-Taiwan”) at a time when a Shenzhen company called Proview Technology Shenzhen Co, Ltd. (“Proview-Shenzhen”) actually owned it.

So the big legal issue in China is not really a trademark issue, it is an ownership and authority issue. The ownership of the trademark when it was allegedly sold is not really in doubt; it was owned by Proview-Shenzhen. The real question is whether Proview-Shenzhen authorized Proview-Taiwan to sell the iPad trademark to Apple and that is mostly what is being argued in the Chinese courts.

To modify the Brooklyn Bridge analogy, let’s say that you bought a house from Mr. Jones and it turned out that Mr. Jones did not own the house, but rather, his wife, Mrs. Jones, owned the house. If Mr. Jones and Mrs. Jones were in the midst of a divorce and she had told him not to sell the house and had told you that she owned the house and so Mr. Jones could not sell it to you, your claim to own the house through the purchase would probably be pretty weak. But let us suppose that Mr. and Mrs. Jones were happily married and Mrs. Jones was right there during the negotiations for the sale of the house and never said a word about how she was the one who actually owned it. Well your claim to own the house would be a lot stronger.

The Apple-Proview case is dealing with similar factual issues, as can be seen in the Bloomberg article. In other words, it looks like a factual mess.

And that is not the only factual mess. Remember how I keep saying Apple used a third party intermediary to try to buy the China iPad trademark. Well, Proview-Taiwan is suing Apple in the United States about that, claiming that the way Apple sought to buy the iPad name constituted fraud and unfair competition. My initial reaction upon hearing of this lawsuit was to assume it had little validity. I assumed this because it is quite common for big companies (small ones too) to try to buy something through a third party intermediary so as to avoid revealing to the seller how much the desired item may really be worth and I had never heard of a lawsuit being brought over that.  But in reading, “How Apple snookered Proview to get the iPad trademark,” I am not prepared to just laugh off that lawsuit.  

So what should your takeaway be from the Apple-Proview case? Nothing more than that you need to be sure that the company with whom you sign a contract is the right company. I know this sounds basic, but this sort of thing happens more than you can imagine in international deals.  I personally have worked on at least two joint venture deals gone bad where the American company had signed an agreement involving the wrong party. In both cases, the American company thought it had a deal to be the distributer of the Joint Venture’s products outside China, but in fact, the agreement actually said that the American company would be the distributer for its Chinese joint venture partners’ products. And since the Chinese partner did make products that the American wanted to distribute….

For more on the Apple-Proview case, check out “Apple v. Proview. China Trademarks And So Much To Learn” and if you want still more, go over to China Hearsay, where Stan Abrams has written nearly a dozen posts on this case. And for you law-geeks out there, click here for a copy of the just-filed Amended Complaint (along with some interesting exhibits) in Proview’s U.S. litigation against Apple. 

  • Jae Zhou

    Thank you! finally a sane analysis.
    Question: wouldn’t a Chinese court be more inclined to consider the fraud issue in favor of Proview since Chinese contract law expects good faith in negotiations? Why would proview bring that suit in the US?

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

    @Dan – The first time I heard about this case I had kind of assumed (for no reason really) that it was about a licensing agreement. Then I found out that this was actually an assignment agreement and that’s when I found myself feeling a lot more critical of Apple.
    Why? Well, at least my understanding is (and correct me if I am wrong) but for a licensing agreement in China there is no requirement of formalities beyond the agreement itself. This is not the case for assignments. For assignments both the assignor and the assignee need to co-operate to make an application to the CTMO to transfer the trademark from one to the other. Basically, Apple should have confirmed that that was going to happen before signing on the bottom line – they should never have handed over the cash without making sure they were going to get product in return.

  • Peter Lee

    There’s some extremely confusing language in this post. In the second paragraph, it’s stated that Proview-Shenzhen was the actual owner of the iPad trademark at the time Apple inked an agreement with Proview-Taiwan to buy it but in the next paragraph, Proview-Taiwan is said to have been the trademark owner (“The ownership of the trademark when it was allegedly sold is not really in doubt; it was owned by Proview-Taiwan.”). Which is it, Proview-Shenzhen or Proview-Taiwan?

  • Grover

    Just saw your clusterf–k quote on All Things Digital. Funny as hell. You should link over to it.

  • Jon

    But aren’t both of these companies headed by the same guy? So this guy planned to scam Apple by selling a Brooklyn Bridge? Are you saying it’s okay for this taiwan company to scam Apple, then for this guy that scammed Apple sue Apple again for being scammed in the first place. So it scammed Apple twice in a row. Morally this doesn’t seem right with me, but this ofcourse is China.

  • aapl

    I guess it’s not just the Chinese who are sneaky… hire a british intermediary, create a shell company with the acronym i.p.a.d. and negotiate using an alias? Sneaky sneaky.

  • zato

    Dan: “Apple (again, acting through a third party intermediary) bought the iPad China trademark from a Taiwanese company called Proview Electronics Company, Ltd. (“Proview-Taiwan”) at a time when a Shenzhen company called Proview Technology Shenzhen Co, Ltd. (“Proview-Shenzhen”) actually owned it.”
    I don’t think this is an accurate representation of what happened.

  • HI

    Clusterf#*K? Are you kidding me?
    “The problem with that argument, as Apple’s legal team was quick to point out, is that negotiations over the iPad trademark were authorized by Rowell Yang, chairman of Proview Shenzhen, and the actual transfer agreement was signed by Ray Mai, head of Shenzhen’s legal department.”
    Next argument in line: the papers weren’t signed in blue ink, so they’re not valid.
    This is just extortion. In line with local business ethics.

  • Hua Qiao

    We should all be shocked about Apple using an intermediary? Come on folks! It’s done all the time. In technology markets, in real estate, consumer products. Front men are used all the time in China. It’s common knowledge that even the Chinese government uses intermediaries to purchase foreign securities such as Treasuries in order to mask how much they hold. (Of course, in China, it would be a state secret.)
    Reading the Fortune article (How Apple snookered Proview to get the iPad trademark) I will say that an individual using an alias (as Apple’s agent did) crosses a line that I would not (nor did it seem necessary). But I have no problem with the buyer being evasive when asked what they plan to use the trademark for. None of the seller’s business.
    Still, that does not compare to the fact that Proview Shenzhen’s attorney claimed in numerous communications that Taiwan owned the trademark. In Dan’s analogy, that means the wife claimed the husband owns the house. To me, that is outright fraud.
    Still, the main lesson is that Apple’s legal crew screwed up. Shame on you guys. If you used outside counsel, maybe you can sue for malpractice.

  • http://www.s-scm.com Lion

    proview is a broke company and there is no proview facility now in shenzhen,…

  • V.Bowles

    Dan Harris posted elsewhere online the Apple / Proview case is a “Clusterfuck”. I looked the word up in the Urban Dictionary to get a defination, here is the thesaurus equivalent: “fuck cluster snafu fubar mess cluster fuck disaster shit chaos fail fuckup fucked fucked up bullshit orgy train wreck charlie foxtrot fiasco” I think I now understand what he meant. The case looks like all of those put together LOL.

  • http://www.ask-solicitor.co.uk Solicitors Manchester

    Just saw your clusterf–k quote on All Things Digital. Funny as hell … Thank you! finally a sane analysis.

  • Hua Qiao

    On a related topic, did you see that the Beijing court rejected Michael Jordan’s case? It apparently agreed with the defendent Qiaodan’s assertion that there are lots of Jordans out there. Of course, Qiaodan’s products include basketball jerseys with number 23. Yup, yup, lots of NBA players named Jordan that wear number 23. Ridiculous. Sickening really.
    Yao Ming and Yi Jianlan prevailed in similar cases. 1.3 billion people and the Beijing court thinks there are more Jordans walking around the mainland than Yao’s or Yi’s. LOL

  • HI

    This is from the Hong Kong court ruling:
    “9. It is Apple and [IPADL]’s case that in the process of drawing up the formal written agreement (“the Written Agreement”) and the assignments (“the Country Assignments”) to give effect to the Agreement, the representatives of the Contracting Defendants represented and led [IPADL] to believe that all the [Worldwide IPAD Registrations], including in particular the [IPAD Marks in China], were owned by and registered in the name of [Proview Taiwan]. Accordingly, the Written Agreement and the Country Assignments executed on 23 December 2009 expressly stated that [Proview Taiwan] was the proprietor of the [Worldwide IPAD Registrations] including the China Trademarks and that [Proview Taiwan] warranted that it was the unencumbered sole owner of the [Worldwide IPAD Registrations] including [IPAD Marks in China]. The County Assignment pertaining to the [IPAD Marks] (“the China Country Assignment”) also recited that [Proview Taiwan] was the proprietor of the [IPAD Marks in China]. However, after Apple had announced the launch of iPads in January 2010, it was discovered that the [IPAD Marks in China] were in fact registered in the name of Proview Shenzhen. The China Country Assignment was accordingly ineffective in assigning the [IPAD Marks in the PRC] to [IPADL].”

    So the Proview people warranted that Proview Taiwan is the owner of the mark when they took the money. Now they’re turning around and saying “you f$&*ed up, you trusted us.”

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  • Anonymous

    This is the fight between the legal field and the government policies where trade is effecting, now i think Chinese government is serious about the international trade soon they will clear these issues.
     

  • Marvin Nakajima

    Extending your analogy of Mr. & Mrs. Jones, (with the new development that 8 banks claim that they had ownership of the trademarks 9 months before Apple even spoke to Proview since Proview was in bankruptcy proceedings) it would appear that the purchase of the house from Mr. & Mrs. Jones would not be valid even if the house was in Mrs. Jones’ name since it was being foreclosed on by the bank and the couple had no right to sell the house to you.

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