• Comprehensive Interpretation on iPad Battle, Comments by DeBund
  • March 8, 2012 | Authors: Yuan Yang; You Yunting
  • Law Firm: DeBund Law Offices - Shanghai Office
  • Case Description:

    Shenzhen Proview was granted the exclusive ownership of iPad and its variant in Class 9 respectively on 21st June, 2001 and 14th December, 2001 by the administration in mainland China, which the registered number is 1590557 and 1682310.

    On 23rd December, 2009, Mr. Yang Rongshan, the legal representative of Taiwan Proview, which is the parent company of Shenzhen Proview, authorized Mr. Mai Shihong to sign the trademark transfer agreement with the IP Company, the entity set up by Apple Inc. (Apple) for the purchase of iPad trademarks, and by the agreement Proview shall transfer 10 trademarks to the IP Company with the iPad trademark included. After that, the IP Company paid 350, 000 pounds for the transaction, who afterwards assigned the trademark to Apple with the price of only 10 pounds.

    On 27th January, 2010, Apple began to sell iPad, meanwhile, the ownership of iPad trademark in mainland China was still owned by Shenzhen Proview.

    On 19th April, 2010 (there also says the lawsuit filing date is 24th May, 2010), Apple, accompanied with the IP Company, filed a lawsuit over the trademark dispute against Shenzhen Proview in the Shenzhen Intermediate People's Court. And the case was judged on the 17th November, 2011 that Apple and IP Company lost the case.

    I. What led to Apple’s losing in the 1st instance?

    Attorney Frank Yu:

    The case seems to be a dispute over the ownership of the trademark, which shall be governed by the Contract Law and the Trademark Law. However, key of the conflict is actually the independence of the company’s personality, and that is a typical corporate matter.

    As provided in Article 38 of the General Principles of the Civil Law of PRC, “In accordance with the law or the articles of association of the legal person, the responsible person who acts on behalf of the legal person in exercising its functions and powers shall be its legal representative”, and Article 43, “An enterprise as legal person shall bear civil liability for the operational activities of its legal representatives and other personnel”. Therefore, the signing made by the legal representative shall be seen as made by the company on general. In the case, the legal representatives of two Proviews are actually the same person, which makes the intention of the signing person to represent Shenzhen Proview as the key element in deciding the whether the signing by the legal representative of Taiwan Proview could bind Shenzhen Proview. And that shall be judged from both the intention of Taiwan Proview and Apple’s understanding when entering into the contract. Basing on the facts established in the judgment, there only affixed the seal of Taiwan Proview and the signature of the chief of its legal department authorized by the legal representative of Proview, therefore the intention expressed by the company shall only bind itself, and on the other hand, Apple did not demand Shenzhen Proview to be the other party of the contract, neither did it has any acknowledgement as could be proved to take Shenzhen Proview as the singing party. Thus, it could not be simply determined that Shenzhen Proview is the signing party to the agreement for the same legal representative of the two companies.

    Apple did neglect the trademark matters in China which is an essential part to its global market when the company purchased the iPad trademark worldwide, and with its misunderstanding that the mark right in mainland China has been involved in the transfer agreement made with Proview, Apple is trapped into the current battle. That reminds local entrepreneurs in China that the basic investigation shall be solid and comprehensive, or the consequence may be head aching.

    Attorney Yuan Yang:

    The claim made by Apple in its trademark lawsuit against Shenzhen Proview is to demand the judgment that the iPad trademark owned by the plaintiff (Apple and the IP Company). However, as provided in Article 39 of the China Trademark Law, the assignment of a registered trademark shall be published after it has been approved, and the assignee enjoys the exclusive right to use the trademark from the date of publication. For this reason, the plaintiff could not get the trademark without the publicity procedure. Therefore, Apple’s demand for the determination of the trademark ownership, which has skipped the legal procedure, is not likely to be supported on the court, even on the procedure only.

    The agreement was singed by Mai Shihong authorized by Yang Rongshan, Taiwan Proview's legal representative. But the identity of Mai was not clarified by Apple and the IP Company in the 1st instance. The evidence submitted by Apple in the court to prove the identity of Mai is the media report then and Mai's business card. In practices, there are many methods to demonstrate the identity of the party, and accordingly we may say Apple made an inadequate investigation on that, and the company may at least apply for the summon of Mai to the court. Apple's unwise action has already made itself to suffer the consequence.

    II. What else could Apple do in the 2nd instance?

    Attorney Yuan Yang:

    First, to make up for its mistake. Apple shall apply for the abatement of the lawsuit and to precede the lawsuit against Shenzhen Proview after its lawsuit in Hong Kong with Taiwan Proview and Proview Holding. And we trust that the clarification of the contractual relationship is helpful to Apple to win the lawsuit. After all, the base of Apple's claim is the trademark transfer agreements signed by Taiwan Proview and IP Company, which provide that Hong Kong law shall exclusively govern the agreements. (The legal reference: Article 136 of the Civil Litigation Law, "A lawsuit shall be suspended, if it involves any of the following circumstances: (5) The current case is dependent on the results of the trial of another case that has not yet been concluded")

    Second, to further demonstrate the apparent agency between Apple and Shenzhen Proview. Despite Apple did not sign the mark transfer agreement directly with Shenzhen Proview, however, it’s agreed in the contract between Apple through IP Company and Taiwan Proview that the object is the iPad trademark. Furthermore, the legal representative of Shenzhen Proview and Taiwan Proview is the same person of Yang Rongshan, therefore, it’s reasonable for Apple to take Yang is entitled to represent Shenzhen Proview. (The legal reference: Article 66 of the General Principle of Civil Law, “The principal shall bear civil liability for an act performed by an actor with no power of agency, beyond the scope of his power of agency or after his power of agency has expired, only if he recognizes the act retroactively. If the act is not so recognized, the performer shall bear civil liability for it. If a principal is aware that a civil act is being executed in his name but fails to repudiate it, his consent shall be deemed to have been given”. Article 49 of Contract Law, “If an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract in the principal's name, and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall be effective. ”)

    III. Will Proview succeed in the export prohibition of iPad in the custom house?

    Attorney You Yunting

    By the report, Proview has applied to China Custom for the ban on the import and export of iPad with the claim that it infringes the company’s trademark right. Nevertheless, iPad is assembled and manufactured in bonded area in China, and the overseas trademark right of iPad is owned by Apple, and thus to sell the device in other countries and regions will not be illegal. Once the export is banned, the consequence is that the device is no longer available to global consumers, more than millions of labors employed by Foxcom, iPad’s manufacturer, will be influenced for Apple is its main client. For these two reasons, it’s not likely to order the ban by the custom house.

    On the other hand, even Apple suffers losses or penalty from the Proview's measures with the application for custom protection included, but such losses may transfer to Proview Group. For Proview takes no advantage morally, including the lawsuit in Hong Kong, The core question of the dispute on the iPad trademark contract is the signing subject, which is actually not Shenzhen Proview but Taiwan Proview, its affiliated company. However, the transfer contract is globally binding and with dozens of countries involved, where Proview has all fully performed its obligation unlike that in China the performance is affected by the Shenzhen Proview's creditor for the company's going bankrupt. Therefore, the dispute is mainly aroused by Proview's violation , or even the fraudulence against Apple, who is not in the wrong and has paid the money by the signed documents, and is also entitled to transfer the losses to Proview after the payment of the penalty.

    For the battle between Apple and Proview, the only way to guarantee the mutual benefits are the conciliation, in which Apple could continuously use the iPad trademark and Proview could gain the transfer fee thereby, otherwise it will leave nothing for the creditors of Proview while Apple still holds its leeway.