Feb. 23 (Bloomberg) ? Apple Inc.?s legal fight for the iPad name in China doesn?t just pit the world?s most-valuable company against a failed Hong Kong display maker. Some of the nation?s biggest banks also are opposing the technology giant.
Apple is appealing a Chinese court ruling that the trademark belongs to a mainland unit of Proview International Holdings Ltd. At the time Apple says it bought those rights, the Shenzhen subsidiary was controlled by creditors including Bank of China Ltd. and China Minsheng Banking Corp., according to Proview founder Rowell Yang.
Losing its Feb. 29 appeal would open Apple to lawsuits seeking damages and enable a nationwide ban on iPad sales in the Cupertino, California-based company?s biggest market outside the U.S. The dispute revolves on whether Proview?s Taiwan unit, to which Apple paid 35,000 British pounds ($55,163) to use the iPad name in China, had the right to sell it or whether that rested with the Shenzhen unit and its creditors.
?Right now, the most valuable asset of Proview Group is the iPad trademark registration in China,? said Eugene Low, a trademark lawyer at Mayer Brown JSM in Hong Kong. ?Assuming the creditors have control of the affairs of Proview Shenzhen, it might be in their best interest to get a settlement as quickly as possible to monetize the Proview assets.?
?Not True?
After Proview Technology (Shenzhen) Co. defaulted on loans, the Shenzhen Intermediate People?s Court in March 2009 appointed Bank of China and Minsheng to lead a reorganization of the company, Yang, who remains chairman of the unit, said in a Feb. 21 interview.
?We can?t make any agreements without the creditors,? Yang said. ?We are under the monitoring and control of the court.? Chinese court documents are not publicly available to verify the claim.
No one in Shenzhen, a city neighboring Hong Kong, knew the Taiwan unit signed away the China trademarks, Yang said.
Apple says that?s not true. Proview ?refuses to honor their agreement with Apple in China,? said Carolyn Wu, a Beijing-based Apple spokeswoman. She declined to comment further, as the case is pending before the courts.
Proview?s wholly owned Shenzhen subsidiary obtained the iPad trademark in China in 2001, according to a Feb. 3, 2010, regulatory filing with the Hong Kong stock exchange.
The mark was obtained for a desktop terminal with touch- screen display called the Internet Personal Access Device, or iPad, that the company developed starting in 1998, Yang said.
Court Rejects
Apple sued Proview?s Shenzhen-based unit in 2010, claiming ownership of the iPad trademark in China on the basis of the December 2009 contract that the U.S. company says gave it global rights to the name, including in China. The Shenzhen Intermediate People?s Court rejected Apple?s claims on Nov. 17.
?If the plaintiff wants to buy trademarks from the defendant, it should do so according to China?s laws and regulations by signing contracts with the defendant,? the judgment said.
The court said the purchase agreement was signed in the name of Proview?s Taipei-based subsidiary, Proview Electronics Co., which failed to demonstrate that the transfer was approved by the Shenzhen unit that owned the mark.
Apple appealed to the Higher People?s Court of Guangdong, said Ma Dongxiao, a lawyer representing Proview at Grandall Law Firm in Beijing. Hearings begin Feb. 29.
London Link
Proview ?hasn?t yet decided the final claim amount? it will seek from Apple, the company?s lawyer, Roger Xie, said last week. A 10 billion-yuan ($1.6 billion) sum cited by China?s state-run Xinhua News Agency in December was ?preliminary,? he said.
Apple bought Proview?s trademarks through a U.K.-based unit called IP Application Development Ltd., or IPADL. Haydn Wood, who signed the agreement with Proview Electronics on behalf of IPADL, declined to comment on the agreement or lawsuits when contacted by Bloomberg News.
Sales of iPads reached 32 million worldwide last year, earning revenue of $20.4 billion. At $480 billion, Apple?s market capitalization surpasses the $454 billion value of all of Mexico?s listed companies, data compiled by Bloomberg show.
Apple has itself to blame for failing to properly secure rights for the China market, said Ray Mai, the Shanghai-based lawyer who represented Proview in the 2009 talks with IPADL.
Apple Rush
?At that time, Proview was not in good condition,? said Mai, whose signature is on the sales agreement. ?On one side is this nearly bankrupt company, on the other is one of the strongest companies in the world. When we signed, Apple dispatched a lot of famous lawyers in front of me, very big law firms.?
Mai was outside counsel for Proview at the time and no longer represents the company, he said in a Feb. 17 phone interview. A copy of a business card from 2009 with Mai?s name on it described him as ?director and lawyer? of Proview Technology (Shenzhen)?s legal department.
Apple was rushing to obtain trademark rights for the iPad name so it could roll out the product, Yang said. Then-Chief Executive Officer Steve Jobs announced the iPad on Jan. 27, 2010, more than a month after the Proview contract was signed Dec. 23. Apple didn?t grasp the nature of the relationship between the Shenzhen trademark holder, its banks and the courts, Yang said.
?The banks controlled Proview Shenzhen from March 2009,? Yang said. ?We needed bank approval for any sale of assets.?
Bank of China is still a Proview creditor, according to the Shenzhen-based press officer of the nation?s fourth-largest lender by market value, who declined to be identified citing company policy. An official at Minsheng Bank, who also declined to be identified, confirmed creditors control Proview?s Shenzhen assets. The banks declined to comment on the Apple case.
Rise, Fall
The Proview Group was founded by Yang in Taiwan in 1989 as a maker of televisions and computer displays, and went public eight years later in Hong Kong.
By September 1999, it was among the world?s 10 biggest makers of computer monitors and planned to reach the top five ?in the near future,? its annual report for that year shows. Sales expanded 10-fold from HK$1.77 billion ($228 million) in 1997 to HK$17.4 billion in 2008, when the U.S. subprime mortgage crisis expanded into a global slowdown.
Proview?s sales plunged 74 percent to HK$4.46 billion in 2009, when it lost HK$2.91 billion. As falling sales eroded cash flow, Proview units defaulted on payments to suppliers and creditors, the company said in its annual report that year.
Delisting Move
?The Shenzhen factory, the group?s primary manufacturing base, could only continue its operation with the assistance of the municipal government and the Bank of China and other creditor banks,? it said.
The company last published results in March 2010, for the six months ended Dec. 31, 2009. It had a loss of HK$755.8 million and a deficit attributable to equity holders of HK$2.37 billion. Bank borrowings stood at HK$1.8 billion.
Proview?s Hong Kong shares have been suspended since Aug. 2, 2010. The Hong Kong stock exchange on Dec. 30 gave Proview a third and final warning that it would be removed from the bourse by June 29 if it failed to publish results and demonstrate sufficient working capital for 12 months.
On Dec. 2, Proview announced it had struck an agreement with investor Rally Praise Ltd. to restructure the company and raise capital. No record of a company with that name could be found using Internet and registry searches.
Export Threat
Meantime, Proview is taking the fight to Apple. The company filed complaints to more than 40 local branches of the Administration for Industry and Commerce, according to Proview lawyer Ma. Court actions have been lodged in Shanghai, Shenzhen and Huizhou, he said.
Pudong District Court in Shanghai yesterday heard Proview?s application for an injunction against sales of iPads in the city. No ruling was made, he said.
The decision of the Guangdong Higher People?s Court will likely be final, said He Fang, an intellectual property lawyer at Rouse Co. International in Shanghai. In exceptional cases, litigants who lose a second decision can refer their cases to the Supreme People?s Court, the nation?s highest, He said.
Proview has also applied to the Customs Bureau to block exports as well as imports of iPads, it said last week.
?China?s Customs Bureau has powers not just on imports, but on exports, too, making it different from other countries,? He said. ?Most of Apple?s iPads are manufactured in China, so if the Customs Bureau imposes restrictions on exports, then it becomes a global issue for Apple.?
?Edmond Lococo and Mark Lee, with assistance from Stephanie Tong in Hong Kong, Jun Luo in Shanghai, Beth Mellor in London and Adam Satariano in San Francisco. Editors: Ben Richardson, Michael Tighe
To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Mark Lee in Hong Kong at wlee37@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
Tags: China, news
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Source: http://www.chinamedia.com/news/2012/02/23/apples-ipad-trademark-battle-unveils-bank-of-china-as-opponent/
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