IPad Trademark Dispute in China

Posted By Dawei Chi, JILP member , Apr 3, 2013

     Apple settled the “iPad” trademark lawsuit by agreeing to pay $60 million to Shenzhen Proview Technology.[1] While seemingly a huge amount of money, it is a small price to pay for Apple to “safely” explore the promising Chinese market for their new iPad product. Moreover, under the undisputable facts and rules of the iPad trademark case, settling may be the best option for Apple.

     Financially, settling the case by paying $60 million is a worthwhile investment for Apple. “For Apple, which has billions of dollars in cash reserves in the US and abroad, the payment will be a small cost towards a far larger goal of reaching the hundreds of millions of Chinese consumers who might want its products.”[2] “China is Apple’s second-largest market after the US,” and settling this case clears up the obstacles for the sales of the new iPad 3 in China.[3] Apple’s revenue in China tripled to $7.9 billion last quarter, largely surged by the demand of the iPad tablet. The Cupertino, California-based company’s global sales of iPads topped 32 million units last year, earning revenue of $20.4 billion.[4] The potential revenue from future sales in China would significantly outweigh the cost of $60 million.

     According to Chinese trademark law, the facts and the predictable outcome of the case are both relatively undisputable. Although there have been various cases of trademark infringement in China, this does not seem like one. Shenzhen Proview Technology Co., Proview’s mainland subsidiary, registered the iPad trademark in China in 2001.[5] In 2009, Apple paid 35,000 pounds to use the iPad name in mainland China, and the dispute is over the ownership of the iPad trademark in mainland China.[6] A seemingly IP law issue became an issue of corporate law, since the party signing the trademark ownership transfer was Proview’s Taiwan subsidiary, and therefore may not be binding on Proview’s mainland subsidiary. “Article 3 of Chinese Corporate Law says that a company is an enterprise legal person, which has independent property of a legal person and enjoys the property rights of a legal person.”[7] In practices, we need to consider the following conditions for personality confusion between corporations: (1) asset confusion, such as combined funding and mixed financial management; (2) business confusion, such as the overlap of business scope or business crossings; (3) labor and personnel confusion, such as joint legal representative, senior management, or the bilateral employment of the employees; (4) the confusion of the place of business.”[8] Under the current case, the China mainland subsidiary and the Taiwanese subsidiary, are financially, operationally, managerially, and geographically separate entities. Moreover, there are no mutual shareholdings between the two companies. [9] Therefore, there is little personality confusion between the two companies, and it is unlikely that the court will find the Taiwan subsidiary of Proview’s contract will be binding on its mainland’s subsidiary. Chinese law provides that a corporation need be responsible for its legal representative’s liability, and the two subsidiaries are actually represented by the same representative; therefore, the intention of the representative when signing the contract is of great importance in the outcome of the case.[10] Based on the above analysis, the holding of the case is unlikely to be favorable to Apple, so settling at a reasonable cost seems to be a rational decision for Apple.

[1]Keith Bradsher, Apples settles an iPad Dispute in China, N.Y. Times, Jul. 2, 2012, at B7, available at http://www.nytimes.com/2012/07/02/business/global/apple-settles-an-ipad-trademark-dispute-in-china.html

[2]Charles Arthur, Apple pays $60m to settle iPad dispute in China, The Guardian, Jul. 2, at 26, available at http://www.guardian.co.uk/technology/2012/jul/02/apple-settle-ipad-dispute-china

[3] Id.

[4]Bloomberg News, Apple Pays Proview $660m to Resolve IPad Trademark Dispute, Bloomberg, http://www.bloomberg.com/news/2012-07-02/apple-pays-60-million-to-end-china-ipad-dispute-with-proview.html (Jul. 1, 2012, 11:40 PM).

[5] Id.

[6] Id.

[7]iPad Trademark Battle and China Corporate Personality Confusion System, Bridge IP Law Commentary, http://www.chinaiplawyer.com/ipad-trademark-battle-china-corporate-personality-confusion-system/.

[8] Id.

[9] Id.

[10] See Id.