The iPad case and analyses from the perspective of China’s Trademark Law

2012/8/9By Tao Xinliang, Dean of the Intellectual Property School of Shanghai University,[Trademark]

The year has begun by witnessing Apple and Proview (Shenzhen) vying for the iPad trademark. With high public visibility and pending for a final solution, it will probably turn out to be a classic legal case and a most dramatic case study in corporate intellectual property operation and management.
 
I.                    What is behind iPad disputes and more
 
Nowadays major intellectual property-related legal cases are like an iceberg on the sea: what is visible from the sea level is only a tip of the iceberg, and what is invisible is the huge basal body under the water, that is, the business interests and market shares companies are competing for. What is behind legal disputes is the business, and the lawsuits are all endorsed by interests. The iPad series of trademark disputes present such a classic iceberg of the day.
 
So far, there have been seven iPad trademark cases, either judicial or administrative, between Apple and Proview: (1) Apple and IP Application Development Ltd. (IPADL) jointly filed a declaratory judgment action to quiet title over two registered iPad trademarks against Proview in China. The first-instance trial court of the Intermediate People’s Court of Shenzhen rejected the plaintiffs’ claim relying on “agency by estoppel.” On appeal, the plaintiffs made forcible arguments on “collective bargaining,” “contract de facto,” “merger of legal identity,” and “undisclosed agency” under implied authorization, etc. The appeal is still pending at the Guangdong Higher People’s Court. (2) Apple filed an administrative request with the Trademark Review Board of the State Administration for Industry and Commerce for removal of the registration of the iPad trademarks based on the statutory three years of nonuse. (3) Apple brought an action against Proview parties in a court of Hong Kong for the iPad Trademark Transfer Agreement related dispute. The court ruled that Proview (Shenzhen), as well as Proview (Taiwan), Yang Rongshan and Proview (Shenzhen) Photoelectric Lighting should not publicize themselves as owning, nor transfer, the two registered iPad trademarks in China. The case is now waiting for substantive hearing and judgment. (4) Proview (Taiwan) and Proview International brought an action in a court of California, the United States, in February, alleging that Apple created IPADL to purchase the 10 iPad trademarks of the plaintiffs globally, including 8 iPad trademarks from Proview (Taiwan) and 2 others from Proview (Shenzhen) in bad faith, and requested the court to declare the related contracts invalid. (5) Proview (Shenzhen) brought actions at the People’s Court of Futian District, Shenzhen, the Intermediate People’s Court of Huizhou, Guangdong, and the Pudong New Area People’s Court, Shanghai, alleging that Apple and its distributors infringed upon the plaintiff ’s registered iPad trademarks in China. The Intermediate People’s Court of Huizhou r uled in favor of Proview (Shenzhen); and the Pudong New Area People’s Court ruled in February to reject Proview (Shenzhen)’s request for interlocutory injunction, and affirm the request of Apple to “pause the action.” (6) Various requests were made in the name of Proview (Shenzhen) with different administrative organs to seize or impose financial penalties on Apple and its distributors for selling iPad products in China. (7) In the name of Proview (Shenzhen), the two registered iPad trademarks in China were registered with the customs authority of China, and a request was filed to effect intellectual property-related border control to forbid the import in and export from China of iPad marked goods of Apple, including the New iPad.
 
Now the question is: does Apple infringe the two iPad trademark registrations of Proview by manufacturing and selling products bearing the iPad marks?
 
II.                 Thinking in Trademark Law terms
 
In the disputes between Apple and Proview over the iPad trademarks, the trademark issues are no less important than contract issues, which need to be analyzed and studied immediately. In the following sections, the author will try to analyze the trademark issues presented in the iPad case.
 
(1). No bad faith registration by Proview of iPad trademarks
 
In the iPad case, one of the registrations is for IPAD in upright letters, under No. 1590557 in Class 9, for “Computers, Computer Peripherals, and (Electronic) Displays.” The application was filed by Proview (Shenzhen) on January 10th, 2000, and granted on June 21st, 2001. The other is the “iPAD” trademark which comprises the initial letter “i” in lower case and the upright letters “PAD” under No. 1682310, in Class 9, for “Computers, Computer Peripherals, and (Electronic) Displays.” The application was filed by Proview (Shenzhen) on September 19th, 2000 and issued on December 14th, 2001.
 
Some say that Proview (Shenzhen) procured these two iPad trademarks in bad faith in order to blackmail Apple. As shown from the above, nothing could be further from the truth, because Proview (Shenzhen) applied for the iPad trademarks in China as early as 2000, at which time Apple had not even begun to develop or publish its products, which was not formally launched until 2010, nearly a decade later.
 
(2). Are the iPad goods of Proview (Shenzhen) the same as or similar to the iPad goods of Apple?
 
Although the two registered iPad trademarks of Proview (Shenzhen) have been approved for “computer” products in Class 9 of the Nice Classification, Proview (Shenzhen) produced evidence at the Pudong New Area People’s Court that its iPad product, the “Internet Connector,” was an electronic display PC with a keyboard. But, as the iPad product sold by Apple is named “Touch Screen Portable Tablet PC,” are the two products the same as or similar to each other in trademark law terms? One opinion says that they must be the same under trademark law, as they are both computers in Class 9. On second thought, at least, a computer with a keyboard must be similar to a computer with a touch screen.
 
The other opinion says that the two products are neither the same as, nor similar to each other in trademark law sense. First, the term “computer” has become an all-inclusive and ever-changing concept. In the past two or three decades, the rapid development of the computer technology has surpassed almost all other technical areas, and computer types and products have multiplied. Thus, thousands of kinds of computer goods cannot be deemed as the same or similar under trademark law. In infringement determination, the same is true to the iPad case where the electronic display computer with a keyboard and the touch screen portable tablet computer are concerned.
 
Second, where the Nice Classification is used, it intends only to classify goods for trademark registration, and make it easy for trademark examination and administrative management; and it is different from the classification of similar goods. It can be used as a reference only, rather than an arbitrary benchmark in determining infringement. In the Interpretation of the Supreme People’s Court on a Few Issues in the Application of Laws for the Trial of Trademark-Related Civil Disputes, Article 11 provides that “The ‘similar goods’ in Article 52.1 of the Trademark Law means goods that are similar to the registered goods in function, use, manufacturer, sales channel or target consumer, or goods that are generally believed by the relevant public to be connected with or likely to lead to confusion with the registered goods.” Further, Article 12 provides that “When a people’s court determines the similarity between goods or services under Article 52.1 of the Trademark Law, it shall decide it comprehensively from the general conception of the relevant public about such goods or services, and may also refer to the International Classification of Goods and Services for the Purposes of the Registration of Marks or the Differentiation Table of Similar Goods and Services.” Thus, the sameness or similarity determination should be made “comprehensively from the general conception of the relevant public about such goods or services.” In the market of China, no consumers who use or buy the iPad of Apple will mistake the iPad of Apple with the iPAD of Proview (Shenzhen), and no relevant public will confuse or misbelieve in any specific connection between the two products.
 
The author favors the second opinion. The iPAD of Proview (Shenzhen), i.e. the electronic display computer with a keyboard, is never the same as, nor similar to the iPad of Apple, i.e. the touch screen portable tablet computer. The specific Apple product cannot be deemed as the same as or similar to the broad but inappropriate concept of “computer” as approved for the registered trademarks numbered 1590557 and 1590557 of Proview (Shenzhen).
 
(3). To balance between the iPAD trademarks of Proview (Shenzhen) that were “first to register but less known,” and the iPad trademark of Apple that was “first to be known but unregistered”
 
Even if the iPAD of Proview (Shenzhen) and the iPad of Apple ARE the same or similar, then how to balance between an earlier registered trademark and an earlier known trademark? One side of the story is that the iPad trademarks numbered 1590557 and 1682310 of Proview (Shenzhen), though registered earlier, had almost never been used and thus been unknown.
 
The other side is that the iPad trademark of Apple, though unregistered, became known earlier. In recent years, led by the overall advantages as an Apple brand and supported by the related patent and other intellectual property portfolio of Apple, the iPad tablet PC of Apple, like iPhone, has spread fast in China. It can be said that up to date, the extremely high fame, reputation and market affinity of the iPad trademark has been the result of the work of Apple alone, to which Proview (Shenzhen) and its iPAD trademarks have never done anything. Prior to the iPad trademarkrelated actions, the two iPAD trademarks of Proview (Shenzhen) had almost never been heard of among the relevant consumers in China.
 
One focus of dispute is that because the iPAD trademarks were earlier registered by Proview (Shenzhen), Apple’s later use of the iPad trademark infringed upon the trademarks of Proview (Shenzhen). Apple’s maximization of the iPad trademark would lead to more serious infringement. Because infringement will not produce any new rights, whatever Apple had done to increase the fame, reputation or market share of its iPad trademark were no more than to intensify its infringement, which could not develop any intellectual property rights for Apple with respect to the trademark.
 
In the view of this author, a trademark is different from patent or copyright in that patent or copyright deals with the relationship of rights and obligations in a closed system of owners and users (or infringers). Trademark, in addition to the system between owners and users (or infringers), is always connected with an open system of consumers’ evaluation. Trademark infringement should be determined dynamically according to the changing evaluation of consumers, i.e. whether the relevant public will or will not confuse with the infringing goods. In China, the Trademark Law provides for the basic arrangement for “first-to- file,” so as to protect registered trademark rights that are formed by completing the relevant registration procedure. In addition, it protects rights of a commercial mark that has been used to develop commercial goodwill, so that a later distinctive trademark, even if it is unregistered, can be protected and allowed for registration. “A later distinctive trademark” means a trademark that is used at a later time than a prior trademark and that has come to acquire a distinctive character through its use. This is because during the use process, the relevant public have developed the ability to easily distinguish it from the prior trademark, though the two are originally difficult to differentiate and likely to be confused. “A later trademark” means a trademark that is identical with or similar to a prior trademark and that is used on the same or similar goods as approved for the prior trademark.
 
Article 15.1 of the TRIPs Agreement provides that “Any sign, or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings, shall be capable of constituting a trademark.” The feature that distinguishes the goods or services of a company from other companies is known as the distinctive character or distinctiveness. For a later trademark that has just been used, the relevant public will likely confuse it with the prior trademark, and find it difficult to distinguish the goods or services in connection with the prior and later trademarks. Thus, at the time, the later trademark possibly infringes upon the prior trademark. However, during its use, the later trademark may gain strength and develop distinctiveness, to become a later distinctive trademark.
 
Article 15.1 of the TRIPs Agreement provides further that “Where signs are not inherently capable of distinguishing the relevant goods or services, Members may make registrability depend on distinctiveness acquired through use.” After the later trademark acquires distinctiveness through use to become capable of distinguishing the relevant goods or services, the probable infringing act will turn out to be non-infringing. Infringement occurs when the later trademark is unable to distinguish the relevant goods or services to result in possible confusion among the relevant public; and infringement disappears when the later trademark becomes able to distinguish the relevant goods or services, to not cause confusion among the relevant public any longer. For example, in recent years, Apple has used its iPad trademark consistently in a large and wide scale. It has caused the iPad trademark to acquire distinctiveness through use and become able to distinguish the relevant goods or services. This later distinctive iPad trademark should be protected and registered under Article 15.1 of the TRIPs Agreement.
 
The other focus of dispute is whether the maximization of its iPad trademark by Apple constitutes reverse confusion with the registered iPad trademarks of Proview (Shenzhen). Termed against the traditional forward confusion, “reverse confusion” means that a later trademark acquires so high a fame or reputation through its use that the consumers misbelieve the related mark to be owned by the user of such later trademark and that the goods of the user of the prior trademark is sourced from the user of the later trademark or that there must be any specific relationship between them, to damage the interests of the user of the prior trademark. In the United States, there have been scores of reverse confusion cases in past decades, but the term is not clearly stipulated in the Lanham Act. Any action involving reverse confusion may be brought under Section 43(a) of the Lanham Act—the unfair competition provision of the federal Trademark Law. In China, however, despite the provision on “reverse passing off,” “reverse confusion” is not provided for in the Trademark Law. In this respect, theoretical studies and statutory provisions are less than sufficient. Thus, it lacks demand and basis for the application of reverse confusion in the background of the current Trademark Law provisions.
 
(Translated by Ren Qingtao)
 

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