“iPad” is in danger

2012/7/4By Doris Li, China IP,[Trademark]

After the iPad trademark dispute between Proview Technology Co., Ltd. (Proview) and Apple Inc. (Apple) was first reported, there have been constant waves of comments, analysis and opinions from journalists, lawyers and scholars.

Apple, who has never had any rival in the tablet PC market, could never imagine that it might slow down its pace, or even “shed some blood” in China due to trademark disputes. Nor could it have anticipated the difficulty it encountered in dealing with such a debtdriven enterprise which is on the verge of bankruptcy.

Some industry insiders think that the event provides an opportunity to teach a lesson to large international enterprises so that they will learn to respect Chinese laws, especially China’s IP laws. Other people regard it as a problem of Apple’s own making: the insufficient work of preparation caused the embarrassing disputes with Proview. These opinions might all make sense from different perspectives. Those wise enterprises may learn something inspirational for themselves from this vivid dual.

The story of Proview’s development

The influence of this trademark dispute is partly because of the fame of Apple. However, few people know that Proview was also an industry leader before.

Proview was once one of the four largest displayer producers in the world. Proview International Holdings (0334.HK) is the listed company under the Proview group. Proview Technology (Shenzhen) Co., Ltd. is the R&D and production base of Proview International Holdings in the Chinese mainland. In 2000, Proview Electronics (Taiwan) Co., Ltd., under the Proview group, registered the iPAD trademark in many countries and regions. In 2001 Proview (Shenzhen) registered the iPAD trademark in the Chinese mainland. In 2009, the deficit of Proview International Holdings reached 2.9 billion HKD.

On August 2nd, 2010, Yang Rongshan, the founder of the Proview group, announced the bankruptcy of Proview. By the end of June 2012, Proview International Holdings will have been completely delisted.

As is reported, the iPAD trademark registered by Proview is the acronym for “Internet Personal Access Device.” After it started its iPad trademark dispute with Apple, Proview said on a press conference that it had devoted 30 million USD to the R&D of its iPAD computer. From 1998 to 2009, the company had altogether produced 10,000 to 20,000 iPAD computers.

From the advertisements of Proview during that time, we can see that its products were totally different from Apple’s tablet PC. The only similarity between Apple and Proview lay in that Proview also loved the trademarks beginning with an “i”, and registered many such trademarks such as iPDA, iUVD, iNOCE, iWEB, etc.

The beginning of the “trouble”

In December 2009, a British company named IP Application Development Limited (IPADL) signed a transfer agreement with Proview International Holdings and Proview Electronics (Taiwan) Co., Ltd., and bought the trademark right of “iPAD” of Proview at the price of 35,000 pounds. On April 7th, 2010, IPADL sold the trademark right under the agreement to Apple at the price of only 10 pounds.

At the end of 2009, at a meeting of creditors with the 8 large banks as the main representatives, it decided that Proview should undergo debt restructuring and Hejun Vanguard Group became the advisor for the debt restructuring of Proview. In 2010, Hejun Vanguard Group promoted the 8 creditor banks together to claim 10 billion yuan of compensation from Apple.

In 2010, believing that Proview (Shenzhen) failed to comply with its duty to transfer the trademark under the agreement, Apple and IPADL together brought Proview (Shenzhen) to court, and asked the court to decree that the exclusive right of the iPad trademark belongs to the plaintiff and Proview compensates for their economic loss of four million yuan. Shenzhen Intermediate People’s Court accepted the case on April 19th, 2010, and opened three court sessions for the case on February 23rd, August 21st and October 18th, 2011. Shenzhen Intermediate People’s Court made the first instance judgment: All of Apple’s petitions were rejected and the Court ruled that Apple should compensate Proview 45,600 yuan in litigation fees.

After Apple’s petitions were rejected, Proview began to fight back. According to Xiao Caiyuan, attorney of Proview, in December 2011, Proview began to proceed against the authorized dealers of Apple in Guangdong Province, and asked the dealers of Apple to stop their infringement-to stop using the iPad trademark. The People’s Court of Futian District of Shenzhen and Huizhou Intermediate People’s Court respectively accepted the case. Finally, Shenzhen Intermediate People’s Court made the judgment that Apple’s iPad trademark had infringed upon the trademark right of Proview, and Apple lost the lawsuit in the first instance.

The entangled situation

After its failure in the first instance, Apple appealed to the Higher People’s Court of Guangdong Province on January 5th, 2012.

On February 14th, 2012, Apple announced that the Hong Kong law had given it support. On June 28th, 2011, according to the judgment of the High Court of Hong Kong Special Administrative Region, the iPad trademark was crucial to Apple, which might cause “irreparable” damage if lost; however, this was not the case for Proview. In light of Proview’s operation situation, the High Court of Hong Kong asserted that Proview’s conduct was a “conspiracy” against Apple, and its true purpose was to “exploit the current situation as a business opportunity.”

Apple declared in its official statement, “We bought Proview’s worldwide rights to the iPad trademarks in 10 different countries several years ago. Proview refuses to honor their agreement with Apple in China, and a Hong Kong court has sided with Apple in this matter… The case is still pending on the Chinese mainland.” Apple gave “no comment” to other issues concerning the case.

On February 17th, 2012, Proview held a news conference and denied Apple’s statement. Proview said that the company was gearing up to sue Apple overseas. On the same day, the Huizhou Jiahua Store of Sundan became the first Apple dealer to lose a lawsuit according to the judgment of the court. The Huizhou Court ordered that Sundan stop infringing and Apple Computer Trading (Shanghai) Co., Ltd., as the third party was also ordered to stop its infringing immediately. However, as the third party appealed to the court, the judgment has not yet come into force.

On February 20th, 2012, before the second instance of the iPad trademark case , Apple changed the law firm to represent it in the court.

On February 22nd, 2012, Proview Technology (Shenzhen) Co. Ltd. vs. Apple Trading (Shanghai) Co., Ltd . on the infringement upon the trademark right was heard at Shanghai Pudong New Area People’s Court. The defendant Apple Trading (Shanghai) Co., Ltd. is Apple’s dealer in Shanghai, which owns all the regular chains of Apple in Shanghai. The sole distributor of Apple in the Chinese mainland is Apple Computer Trading (Shanghai) Co., Ltd., which was not involved in this case. The court pronounced no judgment on that day; nor did it state the time of the next court session. Apple Trading (Shanghai) Co., Ltd. and Apple Computer Trading (Shanghai) Co., Ltd. are two different companies established by Apple in China. The lawsuit against the former mainly concerns requiring the regular chains of Apple Shops to stop their infringement while the lawsuit against the latter mainly concerns requiring the dealers of Apple to stop their infringement. If the Huizhou Court of Guangdong province rules in favor of Proview and Apple loses the lawsuit, there will be a serious impact upon the sales of the iPad in the Chinese market.

On February 29th, 2012, the court pronounced no judgment at the final instance of the iPad trademark case.

The heated disputes

On February 29th, the second instance of the iPad trademark dispute was heard at the Higher People’s Court of Guangdong Province. The court session lasted for more than 5 hours, and the lawyers representing the appellants Apple and IPADL and the lawyers representing the appellee Proview Technology (Shenzhen) Co., Ltd. debated heatedly in court. The court session ended at around 5 p.m. The agents for both sides told the court that they needed to ask the opinions of the plaintiff and the defendant respectively on whether to accept court mediation.

Apple believes that there is an error of fact in the first instance justice. Proview (Shenzhen) is a party to the contract in the case. IPADL and Proview International Holdings have finished the trademark global transfer transaction and the transfer of the iPAD trademark was part of the transaction. “The dispute in this case actually concerns a very simple fact. Proview’s conducts are a kind of scheme with financial interests motivations.” In response to Apple’s appeal, Proview (Shenzhen) replied, “Apple has been emphasizing on Proview International Holdings all the time, which is confusing the concept of trading party. The background of the transaction is that Apple orchestrated a group of attorneys to purchase the trademark; however, their choice was completely wrong. The transfer agreement was signed by IPADL and Proview (Taiwan). Apple has made a stupid mistake.”

Whether Proview (Shenzhen) has participated in the trademark transfer has consistently been the focus of the dispute between the two parties, and Apple and Proview have their different arguments upon this issue. Apple submitted the testimony of Tim Lo, an employee of Proview (UK), at the Hong Kong court in order to prove that Proview (UK) had asked the Proview (Shenzhen) to negotiate the transfer of the iPad trademark. Apple said that in Tim Lo’s mind, the headquarters of Proview group were in Shenzhen. Later on, Yuan Hui and Mai Shihong, who negotiated with IPADL, were both from Proview (Shenzhen). Apple has also submitted a brief document signed by Proview (Shenzhen) on the iPad trademark purchase with the signature of CEO Yang Rongshan, which proved that Proview (Shenzhen) knew of the trademark transfer.

Proview (Shenzhen)’s response was that it had never signed any trademark transfer agreement with IPADL. Yuan Hui was only an employee of Proview (Shenzhen) who participated in the negotiations between Proview (Taiwan) and IPADL at the early stage because he has a very good command of English. He was sent to help Proview (Taiwan) from the affiliated company Proview (Shenzhen). His personal identity is not important; the important thing is who he was representing. Proview (Shenzhen) emphasized that the transfer agreement in 2009 was signed by IPADL and Proview (Taiwan). “If it was Proview (Shenzhen) that wanted to transfer the trademark, why wasn’t Proview named (Shenzhen) in the agreement?”

The email exchanges during the process of trademark transfer have become part of the evidence presented by Apple. Apple said that there were dozens of communication emails between IPADL and Yuan Hui of Proview (Shenzhen). The email address of Yuan Hui was the enterprise email of Proview (Shenzhen), and Yuan Hui’s wording in these emails showed that he was representing the Proview group. This gives people the reason to believe that Yuan Hui was negotiating the trademark transfer issues on behalf of the headquarters of Proview group in Shenzhen.

Proview certainly disapproved Apple’s arguments, and provided another email to refute Apple. In the email that was sent on November 10th, 2009, there were the following statements: “Our (IPADL) lawyer has already prepared a simple agreement.” and “Please let the authorizer of Proview sign the agreement.” Proview (Shenzhen) believes that the above has shown that the agreement had been prepared by IPADL, who had clearly required that the written agreement shall prevail.

At the beginning of March, in the invitation letter to Apple’s legal team, Proview’s legal team said: “The impact of the trademark dispute between Apple and Proview has far exceeded a common case. It is a test or challenge to both the IP law enforcement and protection in China… Proview wishes to reconcile with your company as soon as possible. If your company would like to reflect upon the previous deeds and provide a feasible reconciliation solution, we would very much appreciate your effort and courage.” The legal team of Proview have also raised four subjects of discussion for the “meeting”: a) Whether there was a trademark transfer agreement between Proview (Shenzhen) and Apple; b) Whether the trademark transfer agreement between Apple and Proview (Taiwan) has force of constraint upon Proview (Shenzhen); c) Whether it is reasonable to say that if Apple “losses the iPad trademark, it will do harm to the interests of the consumers”; d) Whether Apple should conscientiously stop using the iPad trademark.

The elusive new iPad

On March 8th, Apple released its new type of iPad. Though some authorities predicted that the new facility might be named as “iPad3” or “iPad HD,” Apple completely failed their expectations. However, Apple didn’t give it an unpredictable name as iPhone 4S, either. It was just called “The New iPad.” Apple didn’t give any explanation. Phil Schiller, Apple’s Senior Vice President of world-wide marketing, only said that Apple didn’t follow its old road “because we don’t want to be predictable.” “It does seem to be a bit confusing, when you have a product evolution, naming is a way to differentiate,” said Charles Rashall, President & founder of Brandadvisors, a branding firm in San Francisco. The new name is “communicating that they are going backwards.” What is the real intention of Apple? Is it a “middle way” chosen by Apple because it has neither settled its trademark dispute with Proview nor has it worked out a perfect plan for the next step? Or, does it have some other plans? Yuan Zhenfu, Standing Deputy Director of Shanghai Intellectual Property Academy (SHIPA), believes that there is no direct relationship between the naming of the new iPad and the trademark dispute, because the focus of infringement in the case was iPad, not its suffix; therefore, if Apple intends to avoid infringement issues, it will choose to avoid using “iPad,” not the suffix.

(Translated by Snow Li)

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