—-the Key points to the trademark transaction under the frame of China laws
Highlight:Apple gets involved in the litigation against a Chinese company for the ownership of iPad trademark, which Apple has claimed the property from purchase. However, such conflict could be averted if proper preparation has been done before the trademark transaction.
Recently, the trademark conflict over “iPad” initiated by Apple Inc. (NASDAQ:AAPL, the “Apple”) against Proview Technology (Shenzhen) Co., Ltd. (the “Proview”) was heard for the third time on Shenzhen Intermediate Court. In the trial, Apple affirmed it owns the global trademark right of “iPad”, which was stroke back by Proview that such right in mainland China is exclusively held by Proview and the claimed transaction of Apple for the acquisition of such right has no permission or authorization from it, furthermore, Apple was also accused of its malicious purchase of the registered “iPad” behind the IP Application Development Company worldwide.
The case occupied the public attention again for the hearing was held when the iPad is popular throughout the world and the passing away of Mr. Jobs. Bridge IP Commentary also focuses on the case, and basing on years of experiences, we believe such conflict could be averted by proper investigation and other legal methods:
I. Due Diligence Investigation before the transaction
The investigation mainly involves the trademark and the trademark owner.
(1)The investigation on the trademark
The trademarks may be involved in the transfer include the unregistered trademark, the trademark in application, the registered trademark and the expired trademark. For these trademarks, the transaction of the unregistered ones may bring the most risks, for it could not be directly put under the protection of Trademark Law (with the well-known marks excluded), or no registration could be approved due to its defect or prior registration. The transferee may also face the risk of the registration failure for less distinctiveness or infringing against prior rights or other reasons when purchasing the trademark in application. As to the expired trademark, the registered term, by China laws and regulations, could be extended in the first 6 months after the expiration, in which period no application for the registration on such trademark will be filed, and the trademark will be back to the unregistered ones if no extension has been applied within such period.
We once handled an extreme case, in which the transferor irrevocably licensed the trademark to a third party before the transaction, and that resulted in the awkward situation that the transferee shall share the trademark right with the licensed party or may even has no access to the purchased trademark should such license were exclusive. Therefore, it’s recommended to demand a warranty of no such license and the agreement on the liability related to the transferor in the transaction.
In addition to this, the transferor shall also pay attention to the problems of territorial scope, trademark class and the possible pledge, etc.
(2) The investigation on the trademark owner
Normally, the user of trademark is the registered owner, while there also may be exceptions of the licensed using. In such situation, the party intending to buy the trademark could not legally acquire the right through transaction, if not the transfer or license is agreed clearly in the license agreement. The conflict between Apple and Proview is actually kind of dispute of the true owner of the iPad trademark.
Besides the true owner of the trademark, when the mark is registered under the name of a corporation, then the status shall also be part of the investigation. As a property of legal entity, the trademark shall be distributed in liquidation while occasionally it could be omitted. In this case, the transaction could only be continued after the recovery of the corporation. It shall be pointed out that Shanghai High Court has promulgated a legal interpretation that the shareholder of the bankrupted company could claim the right of the omitted property in the liquidation in his/her name. For this point, the purchase could also be finished once the trademark is judged to the shareholder.
II. The immediate handling of the change procedure through agency
There’s no regulation in the Trademark Law banning the transfer or license by the original owner during the administrative examination period of the change application, and also no limitation on the investment by the transferred trademark either. The direct sequence of the lack of regulations is that the trademark right may still be exercised by the transferor after the transaction, thus makes the benefits of the transferee un-guaranteed.
For these reasons, it’s highly recommended by Bridge IP Commentary that the change procedure in the administration shall be immediately handled by the qualified local agency after the confirmation of the transfer and the signing of the documents.
III. It’s legal to make the purchase through “white glove” companies.
The other main controversy in the case lies on Proview’s accusation against Apple’s purchase of the “iPad” trademark through the shell company IP Application and Development Company. However, such transaction through “white glove” company is legal in China, and the invalid transaction regulated in China laws mainly limits to the cases of those harming the benefits of state, groups, the third party or public profits, as well as those illegal purpose covered up by legal form. If only the adequate procedure has been gone through for the establishment of the white glove company and the obligation in the transaction has been fully fulfilled by the company under fair business conditions, the transactions like Apple’s acquisition of the iPad trademak through IP Application Development are fairly legal and effective.
In a word, the risks of the transaction of transferors could be minimized and their benefits could be guaranteed once the due diligence investigation could be conducted and the administration
Copyright reserved by Mr. You Yunting
Founder & Editor-in-Chief of Bridge IP Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
You can also find us on Facebook, Twitter and Linkedin.
Bridge IP Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works. All news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only. You may contact us shall you have any opinions or suggestions.