Apparently, $60 Million.
The trademark battle between Apple Inc. and Shenzhen Proview Technology (which I previously covered here) has come to an end. The value of the name “iPad” in China is now known, even before the tablet can be stocked on store shelves in the Mainland. A few days ago, the Guangdong Higher People’s Court posted an official news release on their website stating that the two parties underwent successful mediation and have come to a mutually acceptable settlement agreement. Although Proview had wanted as much as $2 billion when negotiations first started, it appears that they are content with the final agreement sum of US$60 million in exchange for releasing the trademark rights of the iPad name in China to Apple. With Proview deeply saddled with debt and Apple keen to forge ahead with its business in one of its largest consumer markets, the settlement must have come as a relief for both parties given that both were operating without the benefit of time.
The news has caused a stir in the blogosphere amongst many Apple technology enthusiasts, and the biggest concern floating around seems to be what this settlement means for the development and implementation of intellectual property law in China. On the extreme end of the spectrum are the commentators who have blasted the settlement as indicative of the country’s utter lack of respect for and understanding of Western IP protections. While high-level corruption in government and the law does still remain a pertinent issue in China, it seems to me that journalist and IP lawyer Jeff John Roberts has sensationalized the settlement into something that overlooks the actual legal facts.
At its core, the Municipal Intermediate People’s Court of Shenzhen’s ruling that said the trademark for “iPad” belonged to Proview was based purely on the contract particulars provided by both parties. Although intellectual property elements are involved, the decision itself was supported by legally enforceable documentation that proved Proview’s legal ownership of the name in China. Proview had registered the name “IPAD” in the year 2000, a full decade before Apple introduced the first ever iPad to the public. When Apple purchased the worldwide trademark rights from Proview Taiwan under a proxy name, they failed to realize that the Taiwan parent company did not have legal authority to dispose of any Shenzhen Proview trademark rights in China, since the subsidiary and the parent never signed an agreement. While the media has been keen to portray Proview as a failed tech firm on the verge of bankruptcy looking to access the deep pockets of the Cupertino-based tech giant, it is clear on the facts that they have not violated any IP laws; nor has the Chinese justice system been aiding and abetting in Proview’s attempt at a “stick-up” as quoted by Roberts.
Beijing-based IP/IT lawyer Stan Abrams provides a useful counter article to Roberts that sets out the discussion in more detail. Abrams also writes that while the settlement has no real effect on the state of IP legislation in China, he does believe that this may set the standard for quick-cash schemes from actual trademark squatters. An increase in lawsuit filings over trademarks with higher damages asked of large foreign companies is also expected. This sentiment has been echoed by others, and it seems awfully coincidental that reports of yet another Mainland Chinese company suing Apple for trademark infringement surfaced mere days after the announcement of the settlement. This time though, the case seems less promising – Jiangsu Xuebao Consumer Goods Company, a maker of household chemicals and other implements, claims that Apple’s use of “Snow Leopard” as the moniker given to its 7th major release Macintosh operating system infringes on the Chinese company’s trademark of “Xuebao (雪豹),” the Chinese translation of the name. It is hard to imagine this case following in footsteps of the Proview case though, since Apple has never used the Chinese name “雪豹” for any of its product sales strategies in China.
The $60 million settlement appears to be a win-win for both parties. To Apple, a company that pulled in $34 billion in 2012 Q2 revenues alone, $60 million is peanuts to pay for the potential earnings expected from sales of the iPad in Mainland China. Even though the settlement isn’t nearly enough for Proview to take care of all of its debts totalling $180 million, the $60 million settlement is still a huge sum to take away for a company that stopped making use of the IPAD name years ago. This fact is further highlighted when considering that the average settlement amount in 2009 for trademark cases in China was RMB¥52,632 (about US$8,200), and even the average damages claimed by plaintiffs in 2011 only accounted for 0.02% of the Proview-Apple settlement at RMB¥90,573 (about US$14,000).
The Higher Court of Guangdong reports that Apple will transfer the settlement amount to a court-designated account. They have alerted China’s State Administration for Industry and Commerce Trademark Office to the settlement agreement terms, helping to facilitate the change of ownership. While Apple currently only has unofficial ownership of the iPad name in China, plans for the import of iPads into Mainland China will surely be undertaken the second they receive official notification of a successful trademark transfer.
Fan Hannah Lan is a JD Candidate at Osgoode Hall Law School.