Government officials in the city of Shijiazhuang raided an unnamed Apple reseller (not an official brand store) over the weekend, seizing 45 iPad 2 units as part of an investigation into Apple’s (NASDAQ:AAPL) “iPad” trademark dispute in the country. This seems to be a one-off swoop (pictured right), and the iPad remains on sale in China as a whole, so there’s no need for iPad-toting CNN reporters to rip out their hair. But there is a chance – albeit slight – of this legal case turning even nastier.
We know that everyone who’s anyone is suing each other in the smartphone and tablet industry of late – but the tiny Proview (HKG:0334) maybe be more of a short-term risk to Apple than Motorola (NYSE:MMI) or HTC (TPE:2498). This Taiwanese manufacturer, whose mainland operations are based in Shenzhen, owns the record and trademark for the iPad name in China, and is demanding US$1.6 billion.
Chinese media say that some sellers in that afore-mentioned city have been spooked by the raid and are hiding their stock of iPads rather than risk having them seized by (not very trustworthy) local authorities. But it’s business as normal for all the official, unofficial, and grey-import iPad vendors across the country.
However, Beijing-based IP and IT lawyer Stan Abrams, who predicted the raid last week, points out that Proview’s case is strong, and different cities across the country might act separately:
Proview has apparently filed an enforcement application with the Beijing Administration of Industry and Commerce (AIC) [and has] a pending appeal to the High Court on a Shenzhen contract-based lawsuit that Proview won at the lower level, and a trademark infringement case that Proview filed in Shanghai.
Since Proview is the legal owner of the iPad trademark in China and, as far as we know, Apple has no good evidence that Proview filed the trademark in bad faith over a decade ago, it certainly looks good for Proview in both cases, particularly the one in Shanghai.
Local AICs [being federal agencies] have the authority to handle intellectual property infringement cases that involve trademark and unfair competition. In the case of the iPad dispute, we are dealing with trademark infringement.
What can the AIC do? It can raid premises, seize documents, equipment, products and counterfeit marks, and it can halt activity and lock down businesses. Once AIC makes a decision about infringement, it can order fines (these go to the government, not the trademark owner), revoke business licenses, and mandate a public apology.
This is a very high-profile and delicate case, so Chinese federal agencies might take a bit more care than normal not to blunder around, terrifying tech companies that employ millions of its citizens. But Apple’s team in China ought to be sweating, as China sure knows how to enforce IP when it’s convenient – ie: when a local company is on the losing end.