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The Battle for the “iPad” Mark in China
1 June 2012

The huge publicity of the trademark disputes in China relating to the mark “iPad” associated with Apple Inc (“Apple”) has aroused tremendous public interest and increased awareness in the protection of intellectual property rights like brand names and trademarks in this part of the world. The background relating to Apple’s acquisition of the “iPad” mark worldwide is a fairly typical one and the ongoing dispute between the parties are discussed below.

Background

Prior to Apple’s launch of its first iPad, Apple began obtaining or acquiring worldwide registration of the trademark “iPad” through a special purpose company, IP Application Development Limited (“IPAD Ltd”). This was to ensure Apple’s anonymity while the “iPad” trademarks were registered.

In 2009, IPAD Ltd approached Proview Group to acquire its rights to the “iPad” trademark in 8 countries (“Subject Trademarks”), which included 2 trademark registrations in China (“China Trademarks”). Later that same year, IPAD Ltd entered into a written agreement with members of the Proview Group of companies, being Proview International Holdings Ltd (“Proview Holdings”), Proview Electronics Company Ltd (“Proview Electronics”) and Proview Technology Shenzhen Co Ltd (“Proview Shenzhen”) (together the “Contracting Defendants”), for the sale, transfer and assignment of the Subject Trademarks to IPAD Ltd for 35,000 pounds (“the Agreement”). The assignment for the Subject Trademarks was executed by the parties on 23 December 2009.

The express wording of the agreement and assignment provided that Proview Electronics was the sole rightful owner of the Subject Trademarks, including the China Trademarks, and this was also warranted by Proview Electronics. However, after the first launch of iPad products in January 2010, it was discovered that the China Trademarks were in fact previously registered in the name of Proview Shenzhen and not Proview Electronics. Accordingly, it was argued that the assignment of the China Trademarks from Proview Electronics to IPAD Ltd was ineffective. Despite Apple’s requests, the Contracting Defendants refused to rectify the assignment and sought US$10 million from Apple as further consideration for the China Trademarks.

Legal actions taken by the respective parties

Apple and Proview Group have each instituted multiple legal proceedings against each other in China and in the USA.

In April 2010, amidst news that the Proview Group was in financial difficulty and media rumours that Proview Shenzhen was prepared to sell the Chinese Trademarks to a third party, Apple struck first and obtained an interlocutory injunction in Hong Kong against Proview Holdings, which is a Hong Kong listed company and the holding company of Proview Shenzhen, to prevent it from further dealing with the China Trademarks.

In November 2011, the Shenzhen Intermediate People’s Court rejected Apple’s argument that Proview Electronics had acted on Proview Shenzhen’s behalf with apparent authority and ruled that Proview Shenzhen was the rightful owner of the China Trademarks. The court held that Proview Shenzhen was not involved in the iPad trademark negotiations and had never authorized Proview Electronics to enter into assignments on its behalf although Proview Shenzhen was a party to the Agreement. On 5 January 2012, Apple filed an appeal with the Guangdong Higher People’s Court. As of mid-April 2012, the parties have reportedly been engaged in mediation at the encouragement of the Guangdong Higher People’s Court.

On 9 February 2012, Proview Shenzhen lodged a trademark infringement complaint to the Shijiazhuang Xinhau District branch of the Hebei Administration for Industry and Commerce (“AIC”). As part of the trademark enforcement procedure in China, raids were taken on Apple’s iPad retailers and numerous iPad2 tablets have been seized in different provinces of China.

Lessons on Effective Trademark Protection

(a) Intellectual property due diligence

Due diligence should be carried out to ascertain the ownership of a trademark before entering into an assignment or transfer of any intellectual property rights. In some jurisdictions, trademark assignments may only be effective upon approval and recordal by the local trademark registries and this will normally take more time.

(b) Early registration of a trademark

In order to effectively protect a trademark right, it is essential to register the trademark in the relevant country as early as possible even prior to commencing any business activities to prevent later exploitation of the trademark by others. It should be noted that it is always more difficult to challenge a trademark registration unless the challenging brand owner is able to provide evidence of substantial use or fame.

(c) Trademark enforcement in China

Trademark rights in China may be enforced by civil litigation or administrative action through the AIC.

Raids by the AIC are a unique alternative method of trademark enforcement in China. If administrative investigation establishes that there is a trademark infringement, AICs at the proper level may make an administrative order to immediately cease, confiscate and destroy infringing products and equipment used to produce the infringement goods and even impose a fine of 3 times the unlawful profit. Although AICs are not authorized to award financial compensation to the offended trademark owners, they may initiate separate civil actions in the Chinese courts to seek momentary remedies.

If you have any questions on the above article or on registration, infringement or enforcement of intellectual property rights in the Greater China region, experienced lawyers in our Intellectual Property Department will be happy to assist you.

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