Made in China but Not Sold in China: Why a Company is Trying to Ban the Sale of iPads in China

By Chris Hewitt *

Sony DSCA few months ago I examined Apple’s patent dispute with Samsung that originated in the United States and has since spread to several countries throughout the world.  Samsung, however, is not the only company that the tech giant is currently battling over an intellectual property dispute that has transcended continents.  Apple is in the midst of a legal battle with subsidiaries of Proview International Holdings Ltd. over the ownership of the iPad trademark.

The trademark dispute began in China with Proview alleging that Apple is not the owner of the iPad trademark.  Proview trademarked “IPAD” in a number of countries in 2000.  The company planned to use the trademark to market a handheld device capable of accessing the Internet but the plans never materialized. Apple claims that it purchased the trademark from Proview several years ago and that Proview is now refusing to honor the agreement.  Apple, however, actually purchased the trademark from a Taiwanese subsidiary of Proview in 2009.  Proview contends that its Shenzen subsidiary, which registered the trademark in China, still owns the trademark because it was not covered in the agreement executed in 2009.

A Shenzen court ruled against Apple, holding that it did not own the trademark registered in China but the company has appealed the decision.  Proview has since requested an investigation into whether iPads are still being sold after the announcement of the decision.  This investigation gives officials the authority to seize iPads wherever they are found, which they have been doing in several cities throughout China.  Proview has also reached out to customs officials in an attempt to have an embargo imposed on the iPad 3, which is expected to ship this spring.  Officials, however, have said that such a ban is unlikely because it would be difficult to enforce.

The trademark battle in Shenzen has since entered Shanghai, one of the wealthiest cities in China.  An adverse ruling in Shanghai would prove especially detrimental to Apple’s presence in China.  Shanghai is the location of three of Apple’s five stores in China, making it Apple’s biggest market in the country.  A loss in the Shanghai court could mean that these stores would have to cease the sale of iPads.  The litigation, which is based on the same arguments used in the Shenzen case, is likely to carry on for several months before a decision is issued.

Apple LogoThe litigation in China threatens Apple’s presence in the country, which has earned it a 76% market share in the tablet sector.  China is not only a great market for Apple products, but it is also where most of the company’s iPads and iPhones are currently manufactured.  To make matters even more complicated, Proview has filed a suit against Apple in the United States over virtually the same trademark dispute that is being litigated in China.

Proview is requesting that the court award damages and permanently prevent Apple from using the iPad trademark.  Proview specifically alleges that Apple used a shell company called IP Application Development Ltd. (the abbreviation of which is iPad) to fraudulently acquire trademarks.  Proview claims that when IP Application Development acquired the iPad trademark in 2009, it specifically promised not to use the trademark to compete against Proview’s products.  IP Application Development subsequently transferred the trademark to Apple, which used it to unleash the iPad.

Proview has successfully launched a full attack on Apple, attempting to have the iPad banned in China and ultimately trying to prevent Apple from using the iPad trademark indefinitely.  Observers have noted that Proview is “deeply in debt” and have suggested that the company needs a large settlement to pay creditors.  With the suggestion by experts that the companies should enter a mediation, only time will tell whether Proview will get the payday it desperately needs or if Apple will be forced to rename its popular tablet.

*  Chris Hewitt is a second-year law student at Wake Forest University School of Law and a member of the Journal of Business and Intellectual Property Law.  He holds a Bachelor of Business Administration in Trust and Wealth Management from Campbell University.  Upon graduation in 2013, Mr. Hewitt plans to practice business and estate planning law.