Proview, Apple & Customs — reality check

February 15, 2012

Just wanted to make a quick note here this morning after seeing some of the press reports on this Customs issue overnight, many of which are quoting yours truly but making some assumptions that need a bit more nuance (some of the headlines on the tech sites are particularly over the top). The ability of Proview, the owner of the iPad trademark in China, to file with China Customs is clear. The general authority of Customs to halt imports/exports of infringing goods under customs law is also clear.

Additionally, Proview’s legal counsel confirmed yesterday to the press that it would be making such a filing, although I think counsel sort of left hanging what it thought it could actually accomplish with this procedure at the end of the day and after Apple got involved. This of course makes the threat sound as terrifying as possible!

Any sort of move in this area would be bad news for Apple, but how would this actually go down? That’s not so clear, as I stated in an updated post on this issue yesterday.

Let me break this down. Lets say you are the owner of a trademark in China and you know that an infringer is shipping in product. You can go to Customs and have those goods seized and held, pending an infringement suit.

So far, so good. In Apple’s case, I have no idea if there is any product being imported or not. If so, this would be a very serious problem.

Second scenario. You own a China trademark and you know that goods are being exported with that trademark from China to another jurisdiction. This is where it gets tricky. (Note by the way that if this were a patent or copyright issue, the situation would be much worse.)

Customs regulations give you the ability to petition Customs about a suspected infringement. However, and I would guess something like this would happen if Proview made a move here, Apple would have the chance to respond.

What would be Apple’s argument? That although they do not own the trademark in China, they do own the mark in other jurisdictions and that they therefore have been legally authorized to manufacture those products (under that mark) specifically for export to that other jurisdiction.

Sounds reasonable, and certainly many companies source products from China even though they do not own the China IP (as long as they own the mark in the destination jurisdiction).

OK. Where does that leave Apple? Some of this depends on their supply chain and logistics, which I noted yesterday. I’m not an expert on Apple’s international business, so I’ll leave that to others. It’s seems clear, though, that Proview could make a great deal of trouble here, more for imports than exports, but to some degree on both fronts.

Could Proview choke off all exports of the iPad from China, as I’ve seen discussion of in the press? I think more likely is that Proview could try to disrupt exports, but I think Apple ultimately wins this argument. The question is what sort of trouble could Proview throw Apple’s way in the short term? Hard to say.

If I’m Apple, I would be proactive on this Customs issue based on what Proview said yesterday. I would go to the authorities with all my trademark documentation for other jurisdictions and try to forestall any action by Proview on the export side.

Final point. This is a great deal of speculation on what might, or could, happen. I still don’t see it as likely. Both sides still have huge incentives to settle. Either way, breathless pronouncements of the end of the worldwide iPad business should be taken with a grain of salt.