By Professor Jeffery Atik
Apple's lawyers woke up last month to discover that its China-based iPad trademark litigation with Proview had spilled over to California's courts. On February 17, Proview sued Apple in state court in Santa Clara county, asserting that Apple had defrauded Proview of its IPAD trademarks registered in Europe and in key Asian markets. The California iPad litigation is not a trademark infringement case (Apple's U.S. rights to the iPad mark are not challenged) -- rather Proview disputes Apple's ownerships of the various foreign IPAD marks registered by Proview. Proview urges that its assignment of these marks to Apple be rescinded, due to what it considers to be Apple's fraud. With that said, the California litigation forms part of the larger conflict between the two firms -- which has occupied courts in Hong Kong and Shenzen, China -- and so reflects Proview's grand strategy to cloud Apple's claims to the iPad marks, either by resort to law or by subjecting Apple to public embarrassment. And here lies a tale of Apple's over-cleverness, in approaching Proview in the guise of IP Application Development Limited, a stealth UK company whose name's initials conveniently spell out "IPAD."
The iPad has developed into one of Apple's most important products, now accounting for 26 percent of Apple's gargantuan sales and defining a new category of computing device. The iPad trademark is thus one of Apple's most valuable assets. And so it seems difficult to recall that leading up to Steve Jobs's January 2010 introduction of the device, there was much fascination -- and much mystery -- as to what it would be called. When Steve asked his fans to welcome a "truly magical and revolutionary product," few could conceive how commonplace the term iPad would shortly become in our everyday vocabularies.
Recent litigation -- starting in China but now clouding Apple's claim to the iPad trademark in other Asian markets and Europe as well -- reveals that Apple took elaborate steps in the five months prior to the January 2010 launch to secure the iPad mark. Apple knew exactly where to look: back in 2005 it had a spat of litigation with a Chinese firm, Proview, over Apple's rights to the iPod trademark. Proview had a product line with a similar name: its IPAD. That dispute ended with a non-disclosed settlement and some lingering bad blood between the firms.
If Apple had been concerned by the similarity between its iPod mark and Proview's IPAD mark, imagine Apple's IP lawyers' reactions when they were informed that the new Apple product would have the vastly more similar name of iPad.
Apple used the services of investigators Farncombe International to approach Proview -- which was by this time in grave financial difficulty -- to acquire its IPAD trademarks. Proview had stopped selling its line of IPAD computer products (which had never been terrifically successful) and was besieged by creditors. Apple's agent Graham Robinson adopted the nom-de-guerre "Jonathan Hargreaves" in contacting Proview on behalf of what he represented to be a UK start-up: IP Application Development Limited (i.e. IPAD Ltd.). In a series of e-mails (which are now attached to Proview's California complaint for the world to see), "Hargreaves" contacted Proview's UK representative, Timothy Lo, "regarding the possible assignment of the IPAD trademarks to our company [i.e. IPAD Ltd., Apple's vehicle]." "Hargreaves" requested discussion "on an urgent basis." When asked about IPAD Ltd.'s intentions, "Hargreaves" replied that IPAD Ltd. will "be involved in the computer field" but "will not be competing with your company." Lo put "Hargreaves" in touch with his Proview principals in China, who ultimately agreed to sell the trademarks outright to IPAD Ltd. for 35,000 pounds sterling (about $55,000).
The December 2009 agreement of assignment is between IPAD Ltd. and Proview's Taiwan affiliate, which warrants that it is the owner of the various Proview IPAD trademarks (including the Chinese trademark that is the subject of the Hong Kong and Shenzen litigation). And the December 2009 agreement provides that it is "governed exclusively by the laws of Hong Kong and the Hong Kong courts shall have exclusive jurisdiction arising from or in connection with this Agreement."
As of this writing, Apple has not responded to Proview's California complaint. Various moves can be expected: a response on the merits, perhaps, or a motion to remove the litigation to federal court. But the language in the agreement certainly makes a motion for a stay seem likely. Apple will no doubt argue that Proview's complaint -- which carefully avoids making contract claims based on the December 2009 agreement -- nonetheless is "in connection with" that agreement, and hence is properly (and exclusively) within the jurisdiction of the courts of Hong Kong -- where (conveniently) litigation between Apple and Proview is already in course. Some combination of stay and dismissal will be fairly appealing to a harried California state judge.
If it plays out this way, what has Proview accomplished by filing this suit? From a legal standpoint, perhaps not much. But the complaint (and the accompanying press releases) do not paint Apple in a particularly good light. Apple's motives for using "Hargreaves" and its IPAD Ltd. vehicle to disguise its identity can be understood -- Apple might have been motivated by its well-documented aversion to releasing information about upcoming product introductions. And it had a long-standing contentious relationship with Proview. Still "Hargreaves'" assurances to Proview seem borderline truthful.
The larger story may involve a global settlement -- and an enhanced payment to Proview. Proview's financial situation seems to continue to deteriorate -- and the prospect of a recovery from Apple may be the only thing saving it from liquidation.
Thanks to Jack Cooper and Luke Fisher for research assistance.