“Chinese apples” is an English term for pomegranates. Pomegranates seem to be plentiful these days, but there is another Chinese apple that is facing extinction: the Apple iPad.
Recently, a Chinese court in Shenzhen determined that Chinese technology company Proview Technology (Shenzen) was the owner of the mark “iPad” in China. Proview obtained a registration of iPad in 2001, and the court found that Apple had produced no evidence that Proview obtained that registration in bad faith. Apple argued that it bought the rights to iPad from Proview, but the court disagreed and found Apple liable for infringement.
Under Chinese law, Proview is now getting Chinese authorities to seize Apple iPad tablets in China, and is seeking a ban on all exports of Apple iPad products made in China. That means that none of Apple’s Chinese-made iPad products would be able to leave the country. The ban would also apply to the importation of any iPad products into China. Proview — which used to be a major supplier of computer screens, but now makes LED street lights — is also seeking $38 million in damages and an apology from Apple. In another pending case, Proview is seeking $1.5 billion from Apple for copyright infringement.
Interestingly, Proview does not appear to be making and selling any products like tablet computer devices. Still, the company has said publicly that it would favor a settlement. It is believed to be heavily in debt and some financial analysts think financial compensation would give Proview a shot in the arm.
Needless to say, all of this is causing enormous headaches for Apple Inc. For one thing, it has caused Apple to refrain from releasing the newest version of its iPad products in mainland China, limiting the introduction to Hong Kong, which is not subject to the legal framework of mainland China.
Apple has appealed the Shenzhen court’s decision to the Higher People’s Court of Guangzhou. The higher court’s decision is usually final and will be precedential for lower courts throughout China. A final appeal to the Supreme People’s Court to apply for a retrial is possible under Chinese law, but such applications are rarely granted. The decision of the higher court has not yet been announced as of press time, but if it rules in favor of Proview, Apple may have little choice: it may have to either reach some agreement with Proview or drop the iPad mark in China.
In the meantime, the Shanghai Pudong New Area People’s Court denied a request by Proview to prevent Apple from selling iPads in Shanghai, but because of the appeal, that court ruled that it could not enjoin Apple because a final decision on whether Apple has indeed violated Proview’s exclusive right to the iPad trademark has been made.
The lawsuits in Shenzhen and Shanghai are somewhat different. The case in Shenzhen, now on appeal in Guangzhou, will decide whether Proview has the exclusive rights to “iPad,” while the case in Shanghai will determine whether distributors of Apple products have the right to keep selling iPad-branded products. However, if the court in Guangzhou decides that Apple has no right to use the iPad trademark, the court in Shanghai would probably take that decision into consideration and could rule against Apple’s distributors.
This dispute has even crossed the Pacific. Because Apple acted through an intermediary when it thought it purchased the “iPad” mark in China, Proview has filed suit in Santa Clara County Superior Court in California, accusing Apple of forming a company in London with the sole purpose of purchasing the trademark for the “iPad” name on behalf of Apple. Proview alleges in that case that that company was called IP Application Development and was a subsidiary of Apple, but Proview was never informed that Apple was its parent company.
This is not an isolated case. There have been, and continue to be, cases where someone in China anticipates (or, if you will, speculates) that a mark or even a name will become well known and commercially valuable, and registers the mark or name in China. Sports figures, for example, have seen their names and jersey numbers registered as trademarks in China for sporting goods. Even companies that had been doing business in China, but without registering their trademarks in China, have seen others obtain Chinese trademark registrations for those trademarks, much to their detriment. The original owners of the trademark found themselves on the receiving end of lawsuits for infringement and confiscation of their products. Criminal prosecution for trademark infringement is also a risk.
Chinese law does deal with situations like this. Article 13 of the Chinese trademark law provides:
“Where a trademark in respect of which the application for registration is filed for use for identical or similar goods is a reproduction, imitation or translation of another person’s trademark not registered in China and likely to cause confusion, it shall be rejected for registration and prohibited from use.”
In Apple’s case, its U.S. registration for “iPad” recites a first date of use in commerce in 2002. Proview filed its application for “IPAD” in 2000 and obtained its registration in 2001. Thus, it would seem that under Chinese law Apple could not obtain the benefit of Article 13, since Apple would not be able to show it was using iPad prior to Proview’s application. However, Article 13 could still be used by trademark owners when their use of their marks predates applications for those marks in China.
What are the lessons here?
Putting political views aside, the key takeaway is this: register your trademarks as early as possible, and make sure you register promptly in China. Unlike in the United States, where trademark rights are based on use of a mark in commerce, trademark rights in China are based on registration. It’s possible for an entity in China that is not making your product to obtain a Chinese registration for your trademark. That entity could then use that registration to block you from importing or branding your trademarked products in China. You want to be the first to register your trademarks in China, so you don’t need to buy the rights to your own mark from someone else — or face infringement litigation for using your own mark.
If your business plans include manufacturing in or selling to China, make sure your trademarks are protected in China by registering early.
Otherwise, some rotten apple might spoil your piece of the pie. •
Gregory J. Lavorgna is a partner at Drinker Biddle. He litigates intellectual property disputes and assists clientsin protecting, enforcing and capitalizing on their intellectual property assets, and advises clients on issues of patentability, patent infringement and patent validity; trademark availability, registrability and infringement; copyright registration and infringement; trade secret protection and employee agreements; and licensing.