February 14, 2012 2:44 pm

China IP dispute threatens iPad exports

Apple’s long-running dispute over the iPad trademark in China could threaten global shipments of the popular tablet as the company which registered the trademark in the country is seeking an export ban from Chinese customs.

Proview Technology (Shenzhen), a struggling Taiwanese-owned electronics company in southern China, is asking the customs administration to seize iPads passing through Chinese ports for import or export, its lawyers said on Tuesday. The move raises pressure ahead of Proview Shenzhen and Apple’s latest round of negotiations this week aimed at settling the dispute.

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It also highlights the risks for multinationals producing in China for the world market as Chinese law allows plaintiffs in intellectual property disputes to mobilise customs against the defendant.

“This is one of the most effective tools in intellectual property disputes in China,” said Kenny Wong, head of the IP practice at Mayer Brown JSM, the law firm. “Once you complain to customs, they have to act provided you have recorded your rights with them. With a Rmb100,000 [$15,900] bond, you can hold millions of dollars in goods.”

China’s official trademark database shows that Proview Shenzhen registered the iPad trademark in China as early as 2000. In 2006, Apple bought the iPad trademark for several markets, including the European Union, from Proview Taiwan, another affiliate of Proview International, the groups’ Hong Kong-listed holding company. Only after Apple started selling the iPad in China did it realize Proview Shenzhen’s claim to the trademark there.

In December, a Shenzhen court rejected Apple’s request to have the China trademark transferred to its name, a ruling that Apple has appealed against.

According to legal experts, it normally takes up to a month to record a patent or trademark with customs. After it is recorded, customs will seize shipments from a sender other than the rights holder if it discovers them during random checks. Rights holders achieve more regular shipment blockages if they tip off customs on incoming shipments.

When goods are seized under this procedure, a court has to decide on the infringement claims, but customs can fine the defendant and the shipments remain blocked for the duration of the court case.

In 2006, Hitachi was forced to stop using a hard disk trademark because a Chinese rival that owned the trademark had blocked the Japanese firm’s shipments through customs.

“Multinationals frequently use this against counterfeiters, but it is also being used by Chinese companies against foreign firms,” said Li Yongbo, an IP expert with Jijia, a Beijing law firm. He said many foreign companies failed to register trademarks in China because they were not aware that this mattered for exports as well.

“Apple appears not to have done its due diligence properly in this case,” said Mr Wong. “Of course they are well-known and everyone now knows the iPad name in connection with them, but in this case, the trademark is owned by somebody else. They can’t keep selling under a trademark that they don’t own.”

Apple said that it bought Proview’s worldwide rights to the iPad trademark in 10 different countries several years ago. “Proview refuses to honour their agreement with Apple in China and a Hong Kong court has sided with Apple in this matter. Our case is still pending in mainland China,” it said.

A customs spokesman declined to comment.

Additional reporting by Chen Yuanni

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