Apple’s Woes in China Provide Lessons for All Trademark Owners
February 17, 2012 by Barbara Berschler
Who would think that Apple does not own the trademark rights in “iPad”? Few would dream of manufacturing a computer tablet and calling it an iPad. Well, it appears that Shenzhen Proview Technology (“Proview”), a Chinese company, won a Chinese court decision that, in fact, it and not Apple owns the mark in China. This ruling led to the seizure of iPads from some retailers and Proview is pursuing such enforcement in 30 other Chinese cites. See http://www.washingtonpost.com/business/technology/chinese-company-to-seek-ban-on-ipad-import-export-in-dispute-over-ownership-of-name/2012/02/14/gIQA3a2dCR_story.html?wpisrc=nl_tech
This situation for Apple is not only awkward but could also have a profound effect on its bottom line. Worse, since all of Apple’s iPad tablets are manufactured in China, its sales inside and outside of China could be halted.
Apple claims to have bought Proview’s rights in ten different countries including China. But was that the case? It appears that Apple dealt with Proview Taipei, a Taiwanese company affiliated with Proview in Mainland China. Did the Taiwanese company have the requisite authority to bind its Mainland affiliate? So far it seems that Proview is winning the dispute, although Apple has taken an appeal.
What about smaller firms? Can anyone other than a Fortune 500 company learn from Apple’s travails in China? Yes!
- Lesson 1: Just because you own trademark rights in the United States does not mean you own rights in the identical mark in any other country. Registration of a mark with the United States Patent and Trademark Office (USPTO) offers protection only within the US borders. If you plan to sell your goods or services in other countries, it is important to register your mark there.
- Lesson 2: You need to know exactly with whom you are negotiating a trademark deal. Do they have the requisite authority to sell or license the rights that you are negotiating to purchase? Apple’s agreement with the Taiwanese company surely contained representations and warranties (“reps and warranties”) as to authority, and may even provide for the indemnification of Apple should the reps and warranties prove to be untrue. So what? Regardless of the liability of the Taiwanese company for breach of the reps and warranties, Apple still has a problem. The money it might get from the Taiwanese company in no way would compensate Apple for its loss of the large Chinese market or its ability to have the product manufactured on the Mainland.
- Lesson 3: Difficult as it is for large companies to protect their marks worldwide, it can also be a problem and a large expense for smaller firms.
If you hope to make a worldwide splash with your product or services, careful advance planning for how you will introduce your trademarks will be critical to avoid some of the dilemmas now being faced by Apple.