Today’s iPad Trademark News – What Happens if Proview Goes to Customs? (update)

February 14, 2012

The latest news is that Proview, owner of the iPad trademark in China, might file an application with China Customs. This wrinkle was reported on Sina (Chinese) (h/t Bill Bishop/DigiCha).

According to the Sina report, which includes statements from the Proview legal team, there are now roughly 20 actions in nine provinces pending around the country. I believe these include both administrative actions (AIC) and judicial actions (civil suits for trademark infringement, which may involve preliminary injunction orders).

As I’ve said before, the AIC and court actions could involve raids on resellers or other retailers, fines, seizures of product, formal determinations of infringement, and orders for a public apology. So far, it sounds like the AIC in some cities have merely requested that resellers take iPads off the shelves until the dispute is resolved. Things could be a lot worse for Apple if this goes to the next level and officials get more aggressive. I’m also assuming that these actions are local and that there is no national coordination — politically, this could happen, but I haven’t seen any evidence of this so far.

Speaking of which, an action with the General Administration of Customs could be significant for Proview, and the Sina article suggests this might be in the works [this has been confirmed since I originally wrote this post]. This is a relatively simple procedure whereby an IP owner, in this case trademark owner Proview, files their trademark certificate with GAC, which is then “on notice” regarding Proview’s ownership rights.

Even before such a filing, GAC has the authority to stop any import/export of goods suspected of infringing intellectual property. Note that although this includes exports, Apple’s ownership of the mark in most other jurisdictions probably minimizes the danger on that end. This would be a true nuclear option if we were dealing with a patent infringement.

But that’s not how Customs usually operates, which is why I haven’t mentioned this before. Usually, a filing is made with Customs by the IP owner as a first step. After that, the IP owner will determine when a shipment is scheduled, which is usually done by an investigative firm, and then notify Customs of the details. Assuming everything is done properly, Customs will then seize the shipment, the IP owner will pay a bond, and the suspected infringing products will sit there in a warehouse pending resolution of an infringement suit.

The extent to which a Customs action would hurt Apple depends a bit on their supply chain and where these products go once they are assembled. I’ve mulled this over, and without knowing how Apple operates in detail, I can’t really tell how much damage this will do.

I’m getting way ahead of things, but I wonder whether Proview, which is reportedly in severe financial trouble, even has the financial wherewithal to put up the bond for a seizure. In the old days, the amount of that bond would have been equal to the full value of the shipment, but under current regulations, the bond amount is only a small percentage of the declared value. I doubt that we’ll ever find out the answer to this question, but it’s fun to speculate (unless you work for Apple).

Unsubstantiated rumors floating around this morning on the Intertubes speculate that Proview’s creditors might be responsible for legal fees at this point, but I can’t confirm that. It would explain things, though.

So the news here is that Proview may file their IP with Customs. This would be step one, and a shot across Apple’s bow. Would they then go after iPad shipments? That remains to be seen, but as with the infringement suits and AIC actions, Proview also has the law on its side when it comes to a Customs action.

You might be thinking, wow, Proview’s lawyers are really playing hardball here. Yes and no. All of the steps they have taken thus far, including a future Customs action if it comes to that, are par for the course when it comes to trademark infringement. Using courts, AIC, Customs — this happens every day here in China. These are not extraordinary measures by any stretch of the imagination, and I assume that Apple has anticipated all of this.

8 thoughts on “Today’s iPad Trademark News – What Happens if Proview Goes to Customs? (update)

  1. David

    I’d be curious to hear your opinion on how 1 Apple missed this trademark move when they started setting up shop here and 2. Why oh why didn’t they just buy this trademark off of Proview years ago (did they try before)?

    1. Stan Post author

      I don’t think they missed anything on the registration. Proview got the mark way back in 2001. As to buying it, they signed an agreement to that effect and thought they had purchased it back in 2009. The only problem was that they didn’t do their homework, and it was never transferred to them.

      So, not quite as inept as you might think, but they did make serious mistakes.

  2. Andeli

    This news is now popping up everywhere and I must say that the Chinese government is on the losing PR side of this. As you have correctly stated Apple made mistakes in the this process, and I believe you when you say that Proview has a pretty good case.

    The problem is that Louis Vuitton, Guess, Channel, Gucci etc.. also had a very good case, but because no one at Guangzhou, Shanghai or Tianjin customs tried to stop this IP violation. Now you and I know that it is easier to shut down Apple because they abide by the rules, and that these fake goods are not that easy to discover because they don´t.

    No one outside of China will care about this. If the Chinese customs really, with succes, shuts down Apple´s Ipad, there will be a massive wall of questionmarks from foreign countries, companies and other stakeholders as to why no one ever took care of their IP problems. As I put it before, when the government raids the Apple store in Sanlitun there is a building filled with fake goods just 200 meters down the road. This will scream to the heavens and the Chinese IP system will yet again stand out as one giant dobble standard bias towards its own citizens.

    So sad that following the rules will properly give China the worst IP PR in years.

  3. slim

    I agree with Andeli. This shows that China CAN enforce IP rules when it chooses to, and effectively makes the government at least guilt of lying to trade partners for 15 years and arguably complicit in all past major piracy cases. Not news, but good to see out in public.

  4. Francisca

    Thank you for your informative and balanced posts on this iPad subject, Stan. I agree with the other commenters that the official response to this case is both revealing and unfortunate. While I am all for playing by fair and transparent laws (by everyone), this selective application of rules will result in bad PR egg on China’s thick face once again. The West’s love affair with the Apple brand will preclude an unbiased understanding by the public there… and China-bashing is already a popular sport. As for the case, if my understanding is correct that Proview is not using their IPAD trademark in any commercial way, then pursuing this action against Apple is blatant opportunism at its worst (not that that is anything new in the West or the East). I’m curious why Apple doesn’t just settle. I am equally curious to see how far into the surreal this goes. I’ll be following your further posts on this.

    1. Stan Post author

      Thanks. At this point, I think the amount Proview is asking is simply too high. Also, it sounds like that Shenzhen appellate case might begin at the end of this month, so they could be waiting on that. But yeah, Proview is definitely the opportunist here!

      The coverage of this is tough because it is complex, and facts keep dribbling out. I’ve already learned things recently that have changed my earlier opinions. For your average China journalist or even tech/IT guy, this case is pretty difficult to figure out.

      1. Francisca

        Stan, I’ve been in (and out) of China doing business since 1985… WHAT in China is NOT difficult to figure out!? LOL! Keep writing, please… you are clearly not average in any sense. And yes, Proview is definitely greedy, since they have nothing to lose by giving up the trademark rights. Apple will surely learn from its (dumb) mistakes and find a way around this barrier. The Chinese consumer has joined the West in its Apple love affair and I’d bet they would buy the iPad whatever it was called.