The Guangdong Higher People's
Court announced on Monday that Apple paid $60 million to end
its three-year iPad trademark dispute with Proview Shenzhen.
The dispute has been the focus of unprecedented media attention
and caused delays in releasing Apple’s latest iPad
into the China market.
"This case is an excellent example
of analysing the establishment and enforcement of a contract,"
said Steven Lin, legal counsel for Shanghai Shanda Networking,
a developer and operator of online games.
The dispute started in 2009, when
Apple used a shell company to purchase the iPad trademarks from
Proview for $55,000. According to a lawyer China Law &
Practice spoke to, the warning signs should have been clear
from the beginning: "when a deal is too good to be true, you
always have to pay more down the line".
Another lawyer highlighted the
need to ensure thorough due diligence right from the beginning
when making acquisitions like this: "Get competent local
counsel. When Apple was purchasing the trademarks, its counsel
should have checked public records for all past registrations,
renewals, transfers, pledges and licences".
In 2010, Proview claimed that its
subsidiary Proview Shenzhen owned the China trademark for the
iPad and demanded an additional $1.6 billion for the
This kick-started the legal battle
before a Hong Kong Court and Shenzhen People’s
Intermediate Court. Hong Kong
ruled in Apple’s favour, granting
an interlocutory judgment. The Shenzhen Court ruled against
Apple, stating that Proview Shenzhen was the legitimate owner
of the trademark.
"The difference between the Hong
Kong decision and the Shenzhen one shows that Chinese judges
refused to look at the totality of the circumstances in the
entire transaction," said one lawyer.
The difference was that the Hong
Kong court considered the contract between the two parties
while the judges over the border in Shenzhen did not. Some of
China’s Administration of Industry and Commerce
organisations removed iPads from shop floors in
north China. At the same time, Apple appealed
to Guangdong Higher People’s Court.
The Higher Court asked Apple and
Proview to mediate through in-court discussions. Apple
reportedly offered $16 million, with Proview seeking $400
million. Finally, the Court announced on its Sina micro-blog that on June 25 both parties had
resolved the dispute and on June 28 Apple applied for the
trademark to be transferred.
"I hope in the future the
Trademark Law will give greater opportunities for those who
really established a business’s reputation using
the trademark, rather than justifying someone who benefitted
from filing an application earlier," said Lin.
Throughout the dispute, Chinese
officials were pushing both parties for a settlement. "They
want to foster a good image for IP protection in the
international community. In addition, this case involves
millions of Apple consumers," said Chen Jihong, an IP lawyer
with Zhong Lun Law Firm in Beijing.
"The impact on the image of Chinese courts could
have been too grave if Apple lost the case," said another
With $60 million now with Proview
(or at least with their creditors), the dispute is over. "It is
what I expected for a settlement amount. Proview’s
creditors get their money back as it covers the $48 million
owed to them with some left over for any additional costs,"
said Elliot Papageorgiou, a partner with Rouse in
The resounding message is that
there are no guarantees a contract will be upheld before
Chinese courts. There are also no certainties courts will look
at the bigger picture – only the case at hand and the
evidence available. For Apple, the fact that Proview
Shenzhen’s name stayed on the trademark register
has cost them a lot of time and money.
By David Tring
Apple's hollow Hong Kong
Apple’s iPads taken off the
shelves in north China