Apple’s disputed intellectual property
By Donvay Wegierski, director
LEGAL BRIEF | AUGUST 2012
Apple Inc. (Apple) is notorious
for its wide range of innovative
technology including the iPod, the
iPhone and Apple Mac computer,
ranking as one of the world’s
most admired companies and
continuing to prosper even after
the passing of its former CEO,
Steve Jobs. Apple’s legal battles
concerning ownership of the iPad
trade mark in China and its recent
successful verdict in the law suit
against Samsung Electronics
(Samsung) in the USA - wherein
Apple had contended that
Samsung’s handset and galaxy
tablet imitate Apple’s iPhone
and iPad technology and designs
- have consequently received
much attention from the media
highlighting the importance
of adequate protection of
intellectual property.
China : Apple v Shenzhen Proview The iPad trade mark
Apple has recently paid US$60 million to
the Chinese company Shenzhen Proview
(Shenzhen) to settle a dispute in China over
ownership of the iPad trade mark thereby
removing an obstacle to the sales of Apple’s
iPad tablet in the Chinese market.
This settlement offer brings to an end a
dispute that started during 2010 when
Shenzhen declined to sign the assignment
agreement required to record the transfer of
ownership of the Chinese iPad trade mark
registration at the Chinese Trade Marks Office.
Pertinent to the facts of the case is that
Shenzhen and Taiwan Proview are both
one hundred percent owned by Proview
International Holdings, a company with
operations in Europe, Hong Kong, Taiwan
and Mainland China. The Proview Group is
a producer of display devices including LCD
monitors, CRT monitors and flat panel digital
products.
Background
In January 2010 Apple announced its new
tablet computer branded “iPad”. It was
initially launched in the USA on 3rd April
2010 and in other countries around the world
approximately one month thereafter.
Prior to launching the iPad, investigations
and trade mark searches of the relevant trade
mark registers were conducted on behalf of
Apple to determine the availability of the
iPad name in the various territories. These
trade mark searches revealed that the Proview
Group owned trade mark registrations for iPad
in eight territories including two trade mark
registrations in mainland China. The parties
entered into negotiations from August to
December 2009 and consequently entered
into an agreement whereby Taiwan Proview
agreed to the sale, transfer and assignment of
the iPAD trade marks in all relevant territories
worldwide to Apple.
It later transpired that Shenzhen was
the actual registrant of the Chinese iPad
registrations in China who declined to sign
the assignment agreement required to record
the transfer of ownership of the Chinese
iPad registrations at the Chinese Trade
Marks Office. Despite a letter of demand to
Shenzhen to transfer the Chinese registrations
to Apple, Shenzhen contended that it was not
a named party to the sale agreement between
Apple and Proview Group and therefore under
no obligation to assign the iPad registrations
to Apple in China.
The term within which an interested
third party can file non-use cancellation
proceedings against a registered trade mark
in China is three years. Accordingly, Apple
proceeded to file non-use cancellations
against Shenzhen’s Chinese iPad trade mark
registrations in February 2010 and thereafter
filed civil suit proceedings which were heard
before an open court throughout 2011.
Although it was Apple’s case that the Proview
Group had represented and led it to believe
that all the iPad marks were owned and
registered in the name of Proview Electronics,
the Chinese Court held that Shenzhen
was the rightful owner of the Chinese iPad
trade mark registrations. Consequently, the
assignment agreement between Apple and
Taiwan Proview was not legally binding on
Shenzhen. Furthermore, even the fact that
the legal representative of Taiwan Proview
and Shenzhen was the same individual did not
support their claim, as there was no evidence
that the legal representative was acting on
behalf of Shenzhen. Apple then appealed to
the High Court of Guangdong Province, China.
Shenzhen reacted by lodging court claims
throughout China against both Apple
and distributors of the iPad tablet also
alleging trade mark infringement and
instituting litigation proceedings against
Apple’s subsidiary in Shanghai. Trade mark
infringement complaints to the local State
Administration for Industry & Commerce (AIC)
in the main cities of Shanghai, Shenzhen and
Beijing were pursued and restraining orders
against the sale of iPad tablets in China were
sought. Earlier this year it was reported that
Shenzhen also formally requested China
Customs to prohibit the import and export
of Apple’s iPad tablets with the result that
Customs would have the authority to seize
iPads on the basis of trade mark infringement.
China’s Growing Market
According to the latest sales data, China is
Apple’s number one fastest growing market
and is its second largest market, number one
being the USA. China has surpassed Europe
in sales with an estimated US$7,9 billion
or twenty percent of Apple Inc’s revenue
emanating from China in the first quarter of
calendar 2012. On the assumption that the
current growth trend continues, China is likely
to overtake the US and become Apple’s largest
market by 2014. This settlement now means
that Apple can continue to sell its iPad tablets
in China thereby further enhancing growth in
the Chinese market.
Comment
The facts of this case illustrate the importance
of adequate trade mark protection and
conducting prior due diligence checks when
moving into other markets - not only in China
but worldwide as attempts to reclaim brands
can be laborious, expensive and sometimes
unsuccessful.
The question posed is whether Apple can
justify paying US$60 million to Shenzhen to
settle the dispute. It would be fair to assume
that Shenzhen’s actions in retaliation to Apple
initiating and pursuing court proceedings
would have had a significant impact on Apple’s
ability to retail its iPad tablet in China. It
appears therefore that the settlement was the
most practical solution and that a prolonged
case would in all likelihood have cost Apple
more, not only in legal fees but also the loss of
sales revenue in China.
It is further speculated that opportunistic
Chinese companies may, as a consequence of
this payout, increase their interest in securing
trade marks with the intention of selling
them onto foreign companies and individuals
as they enter into China and other Asian
territories.
The aforesaid dispute concerned rightful
ownership of a registered trade mark. A trade
mark is a distinctive sign usually a name, word,
design, symbol or logo or a combination of
any of the aforesaid, indicating origin and
distinguishing the relevant goods and services
from those of others. While the term afforded
by trade mark protection does vary from
country to country, a registered trade mark
can in most instances be renewed perpetually.
Apple’s dispute with Samsung on the other
hand also concerns registered designs and
patents. A registered design can provide
protection in the shape, configuration and
overall appearance of a product and can be
in force for up to fifteen years, depending
on the territory. A patent provides exclusive
protection in an invention for a limited period,
in most territories twenty years. In deciding on
the facts before it, a US court has now ruled
that Samsung has copied essential features
of both the iPad and the iPhone and in turn
awarded Apple damages of US$1.05 billion.
The verdict, seen by experts as one of the
largest in patent history, further empowers
Apple to take additional action against those
using Android should it choose to do so.
Apple’s legal woes emphasise that trade
marks, designs and patents - all of which are
integral components of intellectual property are fundamental to any successful business.
About the Author
Donvay Wegierski
Title: Director
Office: Stellenbosch
Direct line: +27 (0)21 809 6009
Fax: +27 (0)86 510 6732
Switchboard: +27 (0)21 809 6000
Email: [email protected]
Donvay Wegierski is a director of Werksmans Attorneys and member of the firm’s Intellectual Property (IP) Practice in
Stellenbosch. She specialises in all aspects of IP law and related matters, including trade mark screening and registration, trade
mark infringement and passing off, domain and company names, and counterfeit goods. Donvay’s particular area of focus is on
IP law and related matters outside of South Africa. She is a member of the South African Institute of Intellectual Property Law
(SAIIPL) and has a B SocSc LLB from the University of KwaZulu-Natal.
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