Investors aren’t the only people getting rich from Apple – lawyers are too. In yet another legal battle involving Apple, Proview, a Chinese company, has asserted ownership of the IPAD trademark in mainland China, and has persuaded a Chinese court to side with its claim.

Facts:
In 2000, Proview began registering the IPAD mark for use with what is now known as a tablet computer. Proview did not use the mark until 2009, a year before Apple’s iPad was released. At that time, Apple paid a Taiwanese Proview subsidiary $55,000 for the rights to the mark in ten countries, including mainland China. Proview subsequently claimed that it, not its subsidiary, owned the rights in mainland China, and that the agreement reached between Apple and the subsidiary did not grant Apple the right to use IPAD in mainland China. Proview brought Apple to court in China, and in December 2011, the court determined that the purported agreement transferring the rights to the IPAD mark was not binding and that the IPAD mark was still owned in mainland China by Proview. Apple’s appeal of the decision was rejected.

Status:
Currently, some Chinese retail outlets have stopped selling the Apple iPad, and Apple is appealing the decision to a higher court. Proview also plans to seek a ban on iPad exports, which could be disastrous for Apple since most Apple iPads are assembled in China. Proview admits that customs says that a ban is unlikely in light of the popularity of the Apple iPad.

Outcome:
Proview is said to be in dire straits financially, and is ultimately seeking a monetary settlement with Apple, rumored to be around $1.6 billion.

Worth noting is that this case, as it stands now, does not affect Apple iPad sales outside of China, but China is the iPad’s second-biggest market after the United States, and that makes a ban of sales in China damaging to Apple. If Proview convinces Chinese customs to ban iPad exports, and that is a big “if”, then we will see the effects here in the US.

Opinion:
I sometimes feel that Apple is too litigious, but in this case I feel for Apple. I don’t know whether Apple just didn’t do enough due diligence in purchasing the IPAD mark from the Proview subsidiary, or if something else went wrong for Apple, but it sounds like this isn’t a case of Apple disrespecting others’ intellectual property rights. Instead, this is a case of a desperate company who had their claimed ownership of the mark all this time and who waited until Apple developed its iPad product into a multi-billion dollar business before asserting a claim of ownership and essentially holding Apple ransom. Apple has the industry clout to change its product name if absolutely necessary, but doing that would be costly as all unsold units would need new casing and packaging, and right now “iPad” is almost synonymous with “tablet” in the eyes of the consumer so it’d be a shame for Apple to lose that kind of branding.

Trademark Question:
This case brings up an interesting trademark issue. Trademark law, at least in the US, protects words, symbols, etc., that are used in connection with goods in commerce. Without goods in commerce, there is no protection, so companies can’t warehouse unused trademarks the way “patent trolls” warehouse patents.

Proview has claimed ownership of the IPAD mark during a period of twelve years. It looks to me like its only use was in 2009, that the 2009 use was short-lived, and that Proview’s IPAD never really took off since I can’t find any information on it. If that’s the case, I don’t know how Proview maintained their ownership of the mark from 2000-2009, before it used the mark in commerce, and how Proview has maintained their ownership of the mark since abandoning the mark by ceasing manufacture of its IPAD with no apparent intent to use the mark again. I’m sure there is something with Chinese law or a fact here that I am unaware of and that Apple’s lawyers are on top of the case, but it still is an interesting question.

UPDATE: 2/17/12

This story is getting picked up by more and more news sources, and I don’t want to throw any reporters and bloggers under the bus, but there are inconsistencies with certain elements of the story that make things confusing, such as whether Proview Electronics in Taiwan is an affiliate or a subsidiary of the Proview Technology (Shenzhen) in China that is extorting suing Apple, dates, the amounts of money being sought, and where lawsuits are taking place. I think the inconsistencies are based on several different people speaking for Proview, the confusion inherent with foreign names and locations, and reporting based on other reports (which I am guilty of too). Anyway, here are a few follow-ups:

Documentary Evidence:
AllThingsD posted emails and agreements between Proview and Apple’s IP agent. This part brings up two confusing elements to this story. First, “Proview Technology (Shenzhen)” is the company claiming ownership of the mark now, and “Proview Electronics” is their Taiwan subsidiary/affiliate that entered into an agreement with Apple’s IP agent in 2009. The emails posted by AllThingsD that lay out the terms of the agreement contain a signature block from the “Proview Technology (Shenzhen)” legal department, but the agreement itself indicates “Proview Electronics” as the assignor. So that means that Proview Technology (Shenzhen) – the company now claiming to still own the IPAD trademark in mainland China – was involved in the negotiations with Apple’s IP agent and drew up an agreement transferring rights for consideration based on facts it knew to be incorrect (ie that it, and not Proview Electronics, owned the IPAD trademark). Maybe there is something I don’t know about, or maybe Chinese courts just function differently, but I think in the US a court would not let a party who committed a fraud like this benefit from its fraud.

Second, AllThingsD, as well as other sources, cite a Hong Kong decision from this past summer that sided with Apple and basically admonished Proview. I had to really dig deep to figure out what significance that decision has, so I think reporters and bloggers should be more clear when discussing the Hong Kong decision. The case at issue here is different from the Hong Kong case. Here, a Shenzhen court in mainland China sided with Proview, and based on that decision (and the denial of Apple’s first appeal), Proview now has the ammunition to talk such large figures.

More about Proview’s IPAD:
MICGadget did a great job of tracking down Proview’s IPAD, which sold 20,000 copies from 1998 to 2009. It looks a lot like the iMac G3, which was also released in 1998, and which makes me wonder what would have happened if Apple had gone after Proview’s IPAD in 1998. I note that this new timeline may make the front end of my above trademark question moot, since according to this article Proview was using the IPAD mark in commerce from registration until 2009. Still, if Proview discontinued use of the mark in 2009 (possibly to comply with their agreement with Apple), I would think eventually the mark will return to the public domain. The fact that Apple’s iPad came out so close to the time that Proview’s IPAD was still on the market may hurt that argument though, at least now, less than three years later.

Proview increasing its demands and looking to sue in the US:
9to5Mac cites a subscription-only Wall Street Journal article in which a representative of Proview creditors suggested the price for the IPAD mark could go up to $2 billion, up $400 million from previous rumors. 9to5Mac also has a quote from Proview’s chairman: “If we are not compensated properly, then Apple doesn’t use the iPad trademark in mainland China.”

CNET reports that Proview creditors are selecting from three US law firm to sue Apple in the US for $2 billion. I don’t know how successful they’ll be here, but clearly they’re willing to roll the dice to get some money from Apple. I’m also not sure whether the $2 billion figure allegedly being sought in the US caused some confusion with respect to the amount being sought in China going up to $2 billion, or if Proview is seeking $2 billion in both countries. Also in this article is Proview’s CEO’s defense of his company’s actions: “We own [the iPad trademark] in China. If you were in my position… you would try to protect your rights.”

Proview’s stance in 2010:
AllThingsD cites a Financial Times article with another juicy quote from Proview’s CEO back in October 2010: “It is arrogant of Apple to just ignore our rights and go ahead selling the iPad in this market, and we will oppose that. Besides that, we are in big financial trouble and the trademarks are a valuable asset that could help us sort out part of that trouble.” This brings on another mea culpa from me: I hadn’t seen anything about Proview’s allegations against Apple before this past summer, so I accused Proview of lying in wait until Apple built up the value of the IPAD mark before taking action to maximize profits, but apparently that isn’t the case and Proview has been objecting to Apple’s use of the IPAD mark all along.

More iPads seized:
Finally, AP News reports that the Chinese government is seizing more iPads as a result of this trademark dispute.

Opinion, Part 2:
The more I read about this story, the more Proview’s actions bother me. I’m all for protection of trademarks and for holding infringers accountable, and if Apple swooped in and used a mark it did not own – even if that mark at the time was almost worthless – then the owner of the mark is entitled to relief. But here Apple researched the mark it planned to use, contacted the owner of the mark, and negotiated an agreement with the owner of the mark. Somehow during the negotiations, the owner’s subsidiary/affiliate was listed as the assignor, but the owner still directed the finalization of the agreement. It looks like Apple did its job here and was either the victim of fraud or a big mistake by Proview, who judging by the emails had every intention of transferring the mark. For a court to turn around and allow Proview, which is fraudulent at worst and incompetent at best, to make such incredible demands of Apple is an injustice. Maybe the agreement itself allows Proview some wiggle room, but when looking at the negotiations that led up to the execution of the agreement and the apparently close connection between Proview Technology and Proview Electronics, the Shenzhen court should have interpreted the agreement to be binding on Proview Technology.

Still, an important lesson on due diligence.