What Have We Learned About China’s IP System? Answer: nothing

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This week I’ve spent a lot of time talking to people about this Apple vs. Proview dispute over the iPad trademark, including a number of journalists. Usually toward the end of these conversations, I get a question like “What’s the big picture here for foreign companies? What does this case tell us about IP in China?”

Additionally, I’ve seen a lot of comments online, folks grousing about the case and complaining about the government’s action here. Essentially this criticism boils down to the usual stuff: China doesn’t protect IP, China doesn’t care about the rights of foreign companies.


Here’s a good headline: Apple vs. Proview dispute is not really an IP case. I wish someone would try getting that one by an editor.

Seriously. This case is a commercial dispute. One company promised to sell Asset A to another company, which paid for it, and then the seller reneged on the deal. End of story. All this IP stuff is going on because of the nature of Asset A. In an alternate reality, Asset A could have been a truck or a piece of factory equipment, and none of us would be talking about trademark law.

The Shenzhen case that is up for appeal, Apple’s best shot at cleaning up this mess, is a commercial dispute and will be won or lost on contract/commercial law grounds. IP and trademark law will not be the main event at all.

So why have we been spending so much time on trademark? Because unless and until Apple wins that case in Shenzhen, it is not the trademark owner and is stuck in the uncomfortable position of IP infringer. All the talk about the rights of Proview, Apple’s options, government response and so on have been predicated on what the current facts are with respect to the ownership of those marks.

Moreover, this is not an example of a trademark squatter, where one company registers the well-known mark of another in order to extort money. That’s where we are now perhaps, but we didn’t start there. Proview registered this mark in 2001, long before the iPad came on the scene.

Is it therefore fair to criticize the Chinese legal system? First, you need to choose which part: the IP enforcement system or China’s commercial law. Please don’t lump both together in saying “Apple is not getting a fair shake here.” That’s nonsensical and lazy.

You could choose to criticize the Shenzhen Intermediate Court for siding with Proview over Apple. However, as the case was based on some very dicey legal issues (e.g. agent theory, piercing the corporate veil) in Chinese law that I don’t even understand very well in the absence of focused research, please first state your China commercial law expertise.

The lawyers I’ve talked to in the past few days don’t seem to agree on much and admit that there are some gray areas in the law here. The Shenzhen Intermediate Court could probably have gone either way on this, which also means that the appeal is up in the air (political considerations aside — and I’m leaving this issue for another post).

So criticism of the Shenzhen case is an option. What about the IP enforcement? Well, if you aren’t going to go after the Shenzhen court, then again, Proview is the owner of these marks and Apple is the infringer. Period. Full stop. End of story.

But some people have suggested that the enforcement authorities are acting with alacrity, that they are dealing with Proview’s applications much more expeditiously than would be the case if this were a foreign brand owner.

Double bollocks.

What is the government actually doing? Not all that much so far. A few AICs in a few cities have pulled product off shelves, which certainly is disruptive to local sales. Others, in the frankly more (politically) important cities like Beijing and Shanghai, are sitting on their hands. They could choose to act, but might have decided to wait this one out until the commercial dispute is settled. This is common.

Customs has politely indicated that they are going to sit this one out for the time being. As to the online retail space, Apple is the one making the moves here, not the government.

Seems like a great deal of restraint to me. If the government wanted to go after Apple, it certainly wouldn’t happen this way. If anything, I think AIC and Customs are being very accommodating.

What have we learned about China’s IP system? Nothing. This really isn’t at its heart an IP case. Moreover, the foreign company here is not currently the brand owner, this is not the case of a trademark squatter, and the enforcement authorities are not playing the local protectionism game.

So am I missing something here?

4 responses on “What Have We Learned About China’s IP System? Answer: nothing

  1. garth

    I keep hearing that Apple is not the brand owner. From the documents put forward to date, it would certainly seem to me that they, Apple, in good faith, did in fact purchase the name in all venues. It seems that not living up to the intent of a deal and twisting the facts is a rewardable action in many parts of the world. I have been involved in legal disputes in other backward countries and their legal systems are written to deceive, always having a gray area for shisters to play games. Latin countries simply overlap every written law with a contradicting one to ensure complete chaos. In China, the language can be construed in multiple ways so as to pervert any rational agreement, and is so full of face that ego supplants every avenue of rationale. I think that China should rethink its entire ancient and non workable language that in no way fits in todays modern society. If you really want to transend to a higher evolution one must be willing to show that it is not afraid of positive change that will benefit all of society.

    1. FOARP

      Blaiming the language? Really? Yet Hong Kong and Taiwan do not seem to have to much trouble with this. Perhaps if you learned the language (sure, I’m only guessing that you can’t speak Chinese, but it seems a fair guess given you attitudes) you might have a better idea where lack of clarity can arise?

      As for ‘backward’ countries having legislation which is ‘written to deceive’, China’s civil code (let us not mention the criminal code) seems fairly easy to follow in most respects, and this issue was not created by any lack of clarity in the legal code.

  2. FOARP

    @Stan – Here’s the thing that’s kind of been weighing on my mind. I haven’t read the agreement myself, but i’ve seen it described as an assignment agreement – that is, an agreement to transfer the trademark to Apple, not just a licensing agreement.

    My understanding of Chinese trademark law is that (just like in most other countries) trademark assignments need to be recorded and registered – that is, Proview would have to contact CTMO and tell them that they were assigning the trademark to Apple, and the transfer would have to be published. Here’s what the statute says:

    “Article 39. Where a registered trademark is to be assigned, the assignor and assignee shall sign an agreement of assignment and jointly file an application with the Trademark Office. The assignee shall guarantee the quality of the goods in respect of which the registered trademark is used.

    The assignment of a registered trademark shall be published after it has been approved. The assignee shall have the exclusive right to use the trademark from the date of publication.

    So when Apple (or their handling company whatever) signed the agreement that shouldn’t have been the end of it. They should have filed an application for transfer to CTMO with Proview. There should have been a published document showing transfer.

    Sure, there’s a lot of ifs and buts, but if the assignment never took place, and Apple never made sure that they got it, then they really must have dropped the ball. It can’t just have been that they signed this agreement a while back and then all this came up as a surprise.

    1. Stan Post author

      You’re right. If you want my take on the procedural details, several of my posts address this very issue. Apple should have required a signed application upon closing, in my opinion. As it went down, they just had Proview promise to do so after execution of the agreement and payment. Once they followed up on this, Proview refused to cooperate and all of this ugliness began.