Apple tactics in China iPad deal unusual - experts

Proview Electronics, the firm trying to stop Apple Inc from using the iPad name in China, has a plausible claim over the unusual methods Apple used to conceal its identity when attempting to acquire Proview’s trademarks, according to several legal experts. But Apple also has some strong defenses against a lawsuit Proview filed last week in California - including the argument that Proview cannot sue Apple, but can only sue the corporation that actually bought the trademarks, the experts said.

Apple announced its iPad tablet computer in January 2010 and the device has become phenomenally popular. During the last 14 weeks of 2011 Apple sold 15.43 million iPads. China represents a potentially huge market for the device. Proview has sued Apple in China, requesting that sales of Apple’s iPads be suspended across the country because of the trademark dispute. Authorities in several Chinese cities, such as Shijiazhuang and Huizhou, have already banned the sale of iPads, citing the legal dispute.

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Proview extended the battle to American shores last week by accusing Apple of fraud in a lawsuit filed in a California state court. According to the complaint, Apple’s lawyers formed an opaque special purpose entity to buy the iPad trademark. They also sent an email with the allegedly false promise that the entity would not be competing with Proview, the suit said.

Representatives for Apple did not respond to a request for comment, but the company has said that it bought Proview’s worldwide rights to the iPad trademark. Apple’s lawyers called the special purpose entity IP Application Development Limited, and told Proview it wanted the iPad trademark because it was an abbreviation of the company name, according to the lawsuit.

The raging war

Large companies often use special purpose entities to conceal their identities in trademark negotiations, for fear that the price will skyrocket if they are revealed. But naming the special purpose entity after the product is unusual, said Martin Schwimmer, a trademark attorney based in New York. “I have never encountered this level of ruse,” Schwimmer said.

While Proview’s fraud claim is plausible, Apple has some key defenses, Schwimmer and other experts said. Proview’s licensing deal with Apple said that the agreement itself supersedes all prior representations and warranties, according to a copy of the agreement. Since Proview did not ask for noncompete protections in the contract, then it may not matter what Apple’s lawyers said in an email, Schwimmer said.

Apple could also argue that it should not have to defend the lawsuit at all, said Anna Han, a technology licensing professor at Santa Clara University School of Law in Silicon Valley. That is because Proview sold the trademarks to the special entity - not to Apple, she said.

A Proview spokeswoman could not comment on the litigation.

Proview’s parent, Hong Kong-listed Proview International Holdings Ltd, was the first Taiwanese technology company to list in Hong Kong, and by the end of the 1990s numbered itself among the top five computer monitor makers.

In 1999 it partnered with U.S. chip maker National Semiconductor to launch the I-PAD, a stripped-down desktop computer whose main selling points were its Internet connectivity and ease of use. But Proview had been badly hammered by the financial crisis, and trading of its stock was suspended in Hong Kong in 2010.

Beyond the legal maneuvering with Apple, filing the California lawsuit gives Proview a public relations boost, said Laura Young, a trademark attorney who practices in San Francisco and China. Lawsuits in China are private, she said, which is not the case in the United States.

“It gets all this bad-smelling stuff out in the public, and that doesn’t look good for Apple,” Young said.

Should the legal dispute defy settlement, a Proview victory would send a sharp warning to companies about what they say in negotiations over trademarks, Han said. “They would become very cautious,” Han said. The case in the Superior Court of California, County of Santa Clara is Proview Electronics Co. Limited and Proview Technology v. Apple Inc. And IP Application Development Limited, and Does 1-25, 12-cv-219219.

Reuters