The Natives Are Restless: Proview’s Latest iPad Threatdown

March 8, 2012

As you know, we’re all in a holding pattern on the iPad trademark case, waiting for the Guangdong High Court to tell us who owns what. The court hearing is over and done with, and we don’t have any choice but to wait for the judgment, which could take months. Welcome to the hurry-up-and-wait world of litigation.

Since I’ve written about this topic approximately 6,247 times already, I have no problem moving on to other, more exciting endeavors in the meantime. Whenever the court makes a move, we can all reconvene for some lovely chatter.

But that’s us. We’re patient. For others, particularly those of a more bankrupty persuasion, the waiting is indeed the hardest part. Our old friends Proview, for example, currently the owners of the “IPAD” trademark in China, have not been sitting on their hands. These guys, and their creditors, have been active this week, purely coincidental of course with the unveiling of the iPad 3 iPad HD. (More on that below.)

First, and most bizarre, was a statement made by a group of Proview’s creditors. The issue of Proview’s insolvency, and whether that mattered, has been lurking around in this case from the beginning. We finally have a statement from these folks, but in the end, it sounds to me like just another attempt to drive up a settlement price.

Loretta Chao reported on this for the Wall Street Journal:

A company that said it speaks for a group of major state-controlled Chinese banks said Wednesday that the lenders own the Chinese rights to the iPad brand, the object of a continuing legal battle in China between Apple Inc. and a local technology company.

[ . . . ]

Huang Yiding, vice president of consulting firm Hejun Vanguard Group, said in a emailed statement to reporters on Wednesday that a group of lenders that includes arms of Bank of China Ltd. and China Development Bank Corp. seized control of assets including the “IPAD” trademark early in 2009 through a reorganization of Proview International Holdings Ltd., which is based in Hong Kong. That was months before Apple reached an agreement with an arm of Proview International that the U.S. company argues included the transfer of the iPad trademark.

If this is true (no idea), what does it mean? Good question, and if anyone out there is a bankruptcy lawyer, please feel free to jump in. We’ve now touched on practically every area of the law with this case. The scope is amazing.

So here’s the deal. The creditors are apparently saying that the Proview holding company was already in some sort of receivership (according to Hong Kong law) prior to the deal between Proview and Apple’s intermediary company to sell the China marks. Does this mean that Proview had no legal authority to sign off on that deal without approval of the creditors’ committee?

Heaven knows. Maybe.

If that is what the creditors are actually claiming here, and if they’re right, that would be a big deal. However, why wait until now to bring it up? And are we supposed to believe that Apple would have gone ahead with the deal if they had known about that potential problem? I’ve been critical of their legal team’s handling of the assignment agreement, but I can’t believe they would ignore this sort of thing. In other words, I’m highly skeptical of all this. Moreover, should Apple win the High Court appeal, what are the creditors saying they will do, take a Hong Kong court judgment to the Trademark Office and interfere with the transfer?

A spokesman for the creditors said this to the Financial Times:

No matter what the [final] result of the lawsuit is, the eight creditor banks have the right to directly apply to the Trademark Office to reiterate the creditors’ rights of control and seizure and stop the loss of Chinese intellectual property[.]

I’m dizzy. I don’t even know if creditors have standing at the Trademark Office. And since the creditors include Bank of China, Minsheng Bank and other financial stalwarts, the political implications are also interesting; I still think politics favor Apple in the long run, though.

Before I lose my mind, let’s move on to Threat #2. This came to us today from Proview, coinciding with the launch of the new iPad. (By the way, 4G? No one has the patience to download media anymore? You poor ADHD-suffering kids.)

Nothing really new here, just another ramping up of Proview’s rhetoric:

Proview Technology (Shenzhen), in an open letter to China’s suppliers and resellers, urged them to immediately stop selling, storing and shipping the iPad as of Thursday, citing trademark infringement issues.

“Anybody who continues to do so will be seen as intentionally infringing rights and the company will adopt the most severe measures by taking legal action,” Proview Technology said in the letter to iPad suppliers and resellers in China.

Kind of a tough situation for sellers. The iPad is indeed infringing on Proview’s rights, unless and until the court says differently. The enforcement authorities have stayed on the sidelines for the most part, but not everywhere. If I was advising a seller, I’d suggest contacting the relevant AIC to find out which way the wind is blowing. And what happens if a seller keeps doing business and then Apple loses? Yes, there is potential liability there. That’s why some of them have taken the products off the shelves, at least temporarily until all this is sorted out.

Speaking of the iPad HD (terrible name – now what are they going to call the next one?), Proview’s letter also contained what I’ll call Threat #3, which essentially said that they’ve got an eye on product shipments. Well, we’ve known that Proview has been interested in an export ban for a while now, but there are (at least) two problems with this.

First, the horse is making its way out of the barn at an alarming rate:

Ahead of Apple’s big iPad 3 big event, shipments from China have increased by 20 per cent – in just one week.

The analysts, from the local media outlets, noticed that the third generation iPad is heading from the manufacturers plants to the US. This suggests that very soon after the unveiling, the device will be available to customers.

If Proview wants to stop exports, they better find a way to do so quickly.

Second, this is an old, recycled threat; Proview already went to Customs and was politely rebuffed. So it doesn’t look like anything’s going to happen soon that will disrupt the U.S. launch, at least from this end.

Right, there you have it. One new threat by the creditors that includes an angle to this story that will no doubt make it into the movie version, plus two warmed-over threats from Proview about sales and exports that we’ve seen before.

This post is now well over a thousand words; all I really needed to say was that nothing of substance occurred this week. When will I learn?

7 thoughts on “The Natives Are Restless: Proview’s Latest iPad Threatdown

  1. Mike

    I have to say I cannot wait to see how this all plays out, so I guess I am one of the more impatient ones reading your blog. I have to say though not a lot has been mentioned about what happens when this case is decided, however it ends. Specifically, where does Apple go next, and how will this case change the legal system in China if at all?

    1. Apple – It seems as if Apple loses the case with Proview that nothing really changes Apple’s situation that they have currently, correct? Because if Apple loses their case then basically does that mean Proview is the rightful owner of the trademark and they will just request injunctions all over China? If that is true then Apple might just want to wait them out and let Proview (and creditor friends) exhaust themselves dealing with the smugglers and companies that will inevitably try to sell iPad 3s in China, or the inevitable backlash from consumers demanding their iPad 3s.

    2. Proview – It seems like most of the time we think about enforcing infringements against companies we think about shady companies or poorer companies who don’t have the wealth Apple does. So can Proview sue Apple for damages for past infringements or can they only file injunctions?

    3. China – It seems like there are no clear procedural rules for courts in cases that pop up in multiple jurisdictions like this one does, is that right? In theory the Shanghai court, and Huizhou courts could come to opposite decisions since neither is controlled by the preceding decisions of the other. So do you think all the courts are just requesting guidance from the Supreme Court right now before they make their decisions? Do you think this could lead to new procedural rules about cases which spread to jurisdictions throughout China, such as they must ask for guidance from a higher court?

    Thanks for any answers you can give even though it means discussing this for the 6,249th time!

    1. Stan Post author

      1. If Apple loses, it means either paying off Proview or stop using “iPad.” Not sure there are any other choices. Proview, post-decision, should have no problem with administrative or judicial enforcement.

      2. Both. We might be talking a lot of money, although only through judicial action does that money go to Proview.

      3. This is how IP infringement works in China, so no, I don’t expect anything to change. This is normal. Local administrative actions involve local activity, so that makes sense. However, if Proview wins, they will probably go back to the Shanghai court and attempt to get an order against Apple itself. That could potentially bind Apple from infringing activity anywhere.

  2. Mike (different one)

    I’d think that somebody like Apple would (eventually) pay the appropriate “administrative fees” that see this entertaining saga get thrown out.
    Failing that, what’s to stop Apple from applying the same remedy that Chinese companies use all the time? Glue some easy-to-peel-off sticker over the iPad name/logo (BiPad, ChiPad, BleepUproviewPad?) and continue selling as if nothing ever happened.
    But what do I know…?

  3. Marvin

    If Apple loses the case to Proview, it would probably mean that they pay a fee for the sales of iPads in China up to the point of settlement and have to change the name of their device or work out another deal for the China trademark rights.

    This is all really moot if the 8 banks that claim they actually hold the rights are judged the true owners of the trademarks. The agreement between IP Application Development (Apple) and Proview would become invalid and Apple would have NONE of the trademark rights that Proview held. THAT would be a HUGE hit to Apple since they would not only have to pay for all the iPads sold in China but also in every other country that the trademarks cover.

  4. garth

    Sounds like a great movie, perhaps the Never Ending Story sequel. One thing is certain universally, if you put deceit and treachery in a room with big money and really wish to cause a major event, just add lawyers. They are the scribes of laws imposed by governments. That is why there is never a clear cut issue and it is a universal fact. Perhaps a degree in common sense should be mandatory before obtaining a law degree. Nothing is plain or simple in law and that is very profitable. Talk about your self sustaining industry.