Friday, April 27, 2012

Apple in Trade-mark Purgatory

Friday, April 27, 2012
The Apple dispute is a reminder that in the Chinese market, strict compliance with the law is necessary, but is not sufficient. 

Apple thought it had purchased the worldwide rights to the iPad trade-mark. The original owner, Proview, maintains that it still owns the mark within China. The courts and the Chinese government are caught between not wanting to put Proview out of business, and not wanting to embarrass Apple and face the resulting consumer anger and loss of tax revenues if Apple withholds its new products from China. On the other hand, China is a huge market for Apple, and it would be a significant cost to Apple if they limit sales there. Both of the parties are presumably furiously lobbying the government. While the courts, government and Proview would clearly be happiest with an out of court settlement, it is not clear if this is going to be acceptable to Apple. It is also not clear what the dollar amount of any settlement might be: Apple had paid about $55,000 for the mark and Proview is now claiming about $1.5 Billion in damages. 

 The Apple case is a good illustration of some of the issues that can arise in Chinese legal disputes. Courts in China are very much a part of the government bureaucracy, and any legal dispute can have a political dimension. Having good relationships with local authorities and decision makers can be critically important, both to avoid serious disputes, and also to find a liveable solution to any disputes that may arise. Even when one party seems to be clearly in the right, there may be political reasons why a court wants to force a settlement rather than decide against one party or other. The authorities routinely launch campaigns to showcase their efforts against IP infringement (amongst other things), and whether you become a target or a beneficiary of those campaigns may depend on who your friends are. China has mandatory government approval processes that may involve significant amounts of discretion, corruption is a well known problem, officials may be poorly trained, and regulatory processes are often far from transparent. Doing business there can have more than its share of hidden dangers. 

None of this means that the law is irrelevant. A party that does not comply with applicable laws and regulations is going to have a hard time arguing its case. If you show up at the local IP administration office asking for help against infringers and it turns out that you haven’t registered your trademark, and didn’t get the necessary government approvals for your business, you are not going to get much sympathy and your friends are going to find it very difficult to help you. 

Apple clearly think they took all the right legal steps to purchase the iPad mark in China, but they are still dealing with huge mess. How the dispute gets resolved is going to depend on more than just whether they have the right bits of paper.