Shanghai Court Hears iPad Dispute: A Quick Q&A

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The first thing to keep in mind about what went on today in Shanghai is that nothing much went on in Shanghai today. Yes, Proview, the current owner of the “iPad” trademark in China, squared off against Apple, the hopeful future owner of the mark, in a court in Pudong, Shanghai.

There was a four-hour hearing that was attended by every single reporter in the known world. No judgment was issued (of course), and no date was set by the judge for further action.

Are you bored yet?

Here’s some miscellany (the quotes are from CNN):

Q: Some press accounts say that the “iPad” trademark in China is at stake in this case. Is that true?

A: Not exactly. The question of ownership of the mark will be decided by the Guangdong High Court in a separate commercial dispute. This one in Shanghai is a trademark infringement case and will only determine whether Apple is infringing on Proview’s trademark rights. Should the judge determine that Apple is infringing Proview’s mark, Apple could be told to stop using it; that’s why the case is worth talking about.

Q: Proview’s lawyer says that a judgment will be issued very soon. How does he know that?

A: Good question, but don’t assume that what he says is based on reality. Might there be a ruling issued soon? Possibly, but there’s no reason to expect that to happen. Indeed, if I was a betting man, I would guess that the judge is going to sit on this for a while pending the case in Shenzhen. (The “Famous Last Words Rule” is now in effect. Now that I’ve said this, don’t be surprised at a quick judgment that will make me look like an idiot.)

Q: Apple was quoted as saying: “Proview has no product, no markets, no customers and no suppliers. It has nothing.” Why is this relevant?

A: It isn’t. This is a trademark infringement case. Whether Proview is currently using the mark in commerce is not important. What matters is whether they are the current registered owner. I have no idea why Apple made that statement.

Q: They also said: “Apple has huge sales in China. Its fans line up to buy Apple products. The ban, if executed, would not only hurt Apple sales but it would also hurt China’s national interest.” Is this persuasive?

A: Yes, although it’s not a legal argument. The extent of Apple’s sales in China is not relevant to the determination of infringement. However, if Apple wanted to not-too-subtly remind the judge of the political implications of this case, this would be the way to do it.

Proview responded with: “Whether people will go hungry because you can’t sell iPads in China is not the issue. The court must rule according to the law. Do you absolutely have to sell the product? Can’t you sell it using a different name?”

Proview is absolutely right. Legally. But the politics of this case are in Apple’s favor, and I suspect Proview is well aware of this reality.

Q: If the Shanghai court does rule before the Shenzhen court, what could happen?

A: First, whoever loses will appeal. That means that we’d still be in a holding pattern in terms of enforcement, relying on the discretionary powers of local authorities.

Second, there are quite a few different things a judge can mandate in an infringement case, some of which depend on the specific corporate entity that is being sued. Generally speaking, this can include injunctions against manufacturing, sales, marketing or licensing — basically the range of uses of a particular mark. Of course, you can’t order a company to stop manufacturing, for example, if it isn’t in that line of work.

Apple does not conduct all business related to the iPad in China with one single corporate entity. We know for example that Foxconn manufactures these things under license. As this case illustrates quite well, “Proview” doesn’t necessarily include all of the Proview group companies, and the same can be said for “Apple.”

Suffice it to say, this kind of determination can be complex, and when it comes to enforcing such a ruling, things can get even more complicated.

Q: So which case is more important, Shenzhen or Shanghai?

A: The Shenzhen case will determine who owns the trademark, so in my mind, that’s the biggie. The Shanghai case is a relatively simple (in terms of trademark law) infringement suit, and we already know who currently owns the mark. That being said, if the Pudong court decides to make some headlines and issues a quick ruling, a lot of heads will explode.

10 responses on “Shanghai Court Hears iPad Dispute: A Quick Q&A

  1. MW.

    hey Stan,
    I am interested in the case and I wonder is there any similar case happened before?like it was held by the public that it was a trademark case, however, in fact, it was a commercial case.
    I cannot find any by myself and I wonder whether if you could help.
    Look forward to your early reply.

    Yours sincerely,
    Mike

    1. Stan Post author

      Not sure exactly what you’re looking for, but situations involving a mix of IP and commercial disputes are very common. The one I see all the time is a fight between a manufacturer and a local distributor over ownership of trademarks. On the investment side, you see IP being fought over by JV partners all the time. Many other situations are possible.

  2. Lynne

    Stan,
    I’m not sure on this one. After watching a number of these cases of trademark infringement and the question of legal ownership I can only guess at what can happen. My guess, and I may look like a fool – the court will find some kind of fraudulent or “questionable” conduct on the part of Proview in not complying with the contract to turn over ownership. The Court will rule that the trademark be turned over legitimating Apple’s ownership but there will be a price – Apple will have to pay money down for the transaction.

    I’m not saying this is the “best practices” ruling but one that would give each party something they want.
    BTW, Who is this Proview company and are they another type of trademark troll?

    1. Stan Post author

      I wouldn’t rule it out. Obviously you are aware that China courts like to “split the baby” and pursue compromise. That could happen, but I suspect that it would be more likely if the Shenzhen case was not still pending. The Shanghai court would be smart to wait on that one, if possible, before acting, since that case involves the underlying dispute.

    1. Stan Post author

      Thanks. If a litigator isn’t annoying, he probably isn’t being a very zealous advocate. Gotta take the good with the bad.

  3. Twofish

    Disagree with both these statements

    1) Whether Proview is currently using the mark in commerce is not important. What matters is whether they are the current registered owner. I have no idea why Apple made that statement.

    2) Yes, although it’s not a legal argument. The extent of Apple’s sales in China is not relevant to the determination of infringement. However, if Apple wanted to not-too-subtly remind the judge of the political implications of this case, this would be the way to do it.

    The relevant law in this situation is

    —————————————————————————-
    Article 57 Where a trademark registrant or interested party who has evidence to show that another person is committing or will commit an infringement of the right to use its or his registered trademark, and that failure to promptly stop the infringement will cause irreparable damages to its or his legitimate rights and interests, it or he may file an application with the People’s Court to order cessation of the relevant act and to take measures for property preservation before instituting legal proceedings in the People’s Court.
    —————————————————————————-

    What the Shanghai court is trying to determine now is not who owns the trademark, but rather whether or not to issue a court order to stop the infringement pending determination of the trademark. In that situation, the legal issue is not who owns the trademark, but the consequences of issuing or not issuing a court order banning the sales of iPads. Apple is pointing out that since Proview has no sales, that it isn’t getting hurt by continuing iPad sales, and that bad things would happen to both Apple and China if the court issues an order telling Apple to stop.

  4. Twofish

    Lynne: The Court will rule that the trademark be turned over legitimating Apple’s ownership but there will be a price – Apple will have to pay money down for the transaction.

    This is going to be tricky to do….. Even if the court finds that Proview (Taiwan) acted illegally, it’s not clear on what basis they could get a different company Proview (Shenzhen) to turn over the trademarks. I’m sure that the lawyers for Apple will come up with something (that’s what lawyers get paid to do), but it’s not going to be straightforward under Chinese law.

    One thing that makes this trickier than a breach of contract suit is that Apple doesn’t want damages. It wants the trademarks. If the court just awards damages, then this is going to be useless to Apple. Also, Apple can’t make arguments that would invalidate the trademark. If the trademark is invalid, then Apple can sell ipads in China, but so can everyone else.

    What Chinese judges often do is mediation in which they get the parties to agree to a “voluntary” settlement rather than make a ruling according to law. However, in this situation, it’s high profile enough so that a “quiet settlement” is going to be difficult (although not impossible).

    1. Stan Post author

      Predicting a settlement, coerced or otherwise, always makes sense with China litigation. But it’s hard to see what that would look like in this case. If this was a question of monetary damages, they would have already dealt with this offshore (would also depend of course on whether Proview had any remaining assets). If the court does give the marks to Apple in exchange for a further payment, that judgment is going to be very interesting to read. I can see a clear decision for one side or another, but the classic compromise will be political (well, I guess most of them are). Anyway, given that whatever payment amount pushed by the court would probably end up being much less than Proview needs to stay afloat financially, and since Apple is swimming in cash, you’d still have to chalk that up as an Apple victory.

      No, Apple doesn’t want the mark cancelled. That would certainly make the tablet market interesting for the next year! Moreover, it has no grounds on which to bring a cancellation argument to the TMO anyway. No evidence of a bad faith registration, for example, that I can see.