According to a report issued by United Nations, foreign direct investment in China in 2010 rose to a record $106 billion, representing a yearly increase of 11.58%. It was reported that 470 companies out of the Global Fortune 500 had direct investment in China and there were more than 1,200 R&D centers set up by foreign companies. Obviously, a continuously improved intellectual property protection environment is critical for success in attracting foreign investment. However, protection of intellectual property is still one of the major concerns for foreign companies doing business in China. For foreign companies doing business or will do business in China, understanding and following local rules may substantially reduce their legal risks.

1. $3.65 million for “i-phone” mark

In 2002, Apple Inc. filed a trademark application with the China trademark Office for the mark “IPHONE” on “computer and computer software” goods. In 2004, a Chinese company filed a trademark application for the mark “i-phone” on “phone and mobile phone” goods. Once the latter application was published for opposition, Apple opposed. The opposition was denied on the basis that although the two marks were similar, goods designated for the two marks were not similar. After losing again in an appeal, Apple paid $3.65 million to buy the registered mark “i-phone”.

As “first-to-file” doctrine is adopted by Chinese Trademark Law, it is advisable for companies to register their trademarks in China well before launching their products. Early registration saves money and time.

Although Nice Classification is adopted, according to Chinese Classification Guidelines, goods/services in all classes are divided into subclasses. The general rule on the issue of similarities of goods/services is that only goods/services in the same subclass are similar.

Although “computer and computer software” goods and “phone and mobile phone” goods are in the same class, they are in different subclasses.

Therefore, it is advisable to reasonably extend coverage of goods/services to related ones, especially when it is not decided on what products the mark is to be used.

Apple also has trouble in marketing another product in China.

2. Unsettled dispute on ownership of “iPad” mark

As early as 2000, a subsidiary of Proview International Holdings Limited, a Hong Kong based company (hereafter referred to as Proview International), in Taipei, Taiwan (hereafter referred to as Taipei Proview) registered the “iPad” mark in Europe and other countries on computer and other related goods. In 2001, the subsidiary of Proview International in Shenzhen, China (hereafter referred to as Shenzhen Proview) filed applications for the same mark in China on the same goods and obtained two registrations.

In December 2009, Taipei Proview signed an agreement with the company IP Application Development Limited agreeing to assign eight registrations for the “iPad” mark, including the two obtained in China, in the amount of £35,000. In April 2010, IPADL signed an agreement with Apple Inc. agreeing to assign the registrations in the amount of £10. Although Apple failed to complete the formalities to assign the two Chinese registrations, iPad products were launched in China in September 2010.

In March 2010, assets of Shenzhen Proview, including the two registrations for the “iPad” mark, were frozen by a court in Shenzhen at the request of eight creditor banks due to debt default.

In May 2010, Apple and IPADL jointly initiated legal actions in a court in Shenzhen against Shenzhen Proview, claiming ownership of the two registrations based on said agreements. In February 2011, a hearing was held and no decision has been made to date.

The defendant argued that Taipei Proview had no authority to assign trademark registrations in the name of Shenzhen Proview as they were legally independent companies.

Shenzhen Proview publicly alleged infringement by Apple but has not taken any legal actions.

To assign a trademark registration, a petition should be submitted with the China Trademark Office, supported by an agreement signed by the assignor, who shall be the recorded registrant for the mark, and the assignee. The assignment shall be recorded in the trademark gazette if it is approved. Without such record, assignment will not come into force.

This is not the first time that Shenzhen Proview is involved in a high-profile trademark litigation.

3. EMC vs. EMC2

In 1992, a Chinese company filed a trademark application for the mark “EMC” on “computer monitors” with the China Trademark Office, and the mark was registered in 1993. The registration was assigned to Shenzhen Proview in 1995 when it was founded.

As the world leading provider of data storage platforms, EMC Corporation, headquartered in Massachusetts, USA uses the “EMC2” mark globally. In 1995, EMC filed a trademark application for the mark “EMC2” on “intelligent system with processor, memory, software and information storage unit”. When the application was published for opposition in 1999, Shenzhen Proview opposed based on said prior registration. After receiving a decision in favor of Shenzhen Proview, EMC appealed the decision with the Trademark Review and Adjudication Board and then the dispute was submitted with a court in Beijing. A final decision in favor of Shenzhen Proview was made in November 2005 by an appellate court. Therefore, EMC’s application for registration of the “EMC2” mark was finally rejected due to conflict with the prior registration.

In August 2007, alleging that use of the mark EMC2 infringed its registered “EMC” mark, Shenzhen Proview sued EMC for trademark infringement, claiming damages of 80 million Yuan (approximately $12.3 million).

No decision on trademark infringement has been issued to date.

Anticipation happens either by coincidence, or bad-faith applications. Professional trademark traders or business competitors may take advantage of first-to-file rule to make a fortune or take a free ride on the reputation of another’s mark. The difficulty in fighting such a bad-faith application is proving the bad faith in filing. In some cases, the true owner fails to prove that before filing of the application, his identical or similar mark had obtained a reputation in China and the other party had known or should have known the mark.

To tackle the bad-faith applications, in addition to early registration and reasonable extension of coverage of goods/services, trademark watch is recommended. In most cases, the true owner needs to take opposition or cancellation actions.




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