May 13,2010

iPad's Road to China: Patent Disputes and Tele Giants Loom

By CSC staff, Shanghai

The Apple iPad tablet PC entered the market less than a month ago and its sales have already breached the one million unit mark. By the end of the month, it will be sold in 9 countries outside the US, not, however, in China.


China's Apple fans are awaiting the iPad launch here, but at the same time a campaign against Apple iPad is developing.


Earlier this year, Shenzhen Great Loong Brother Industrial Company in South China laid a claim that Apple iPad infringed its patents. General Manager Wu Xiaolong says he is also contacting senior management of Proview International, a world top-five display devices producer, hoping to buy China's IPAD trademark. "We are willing to pay a higher price than Apple," he stated. "If Proview does not want to sell, we can work together with them to produce and sell IPAD Tablet PCs in China."


The two sides have not yet reached a price agreement, but once negotiations are settled, Apple iPad will have to pay big money for access to the China market. Wu Xiaolong says his company has the IPAD Tablet PC design patent in China and Proview has the IPAD China trademark, and that paves way for cooperation between the two.


A search for "IPAD" in the Trademark Office of the State Administration for Industry and Commence website, shows eight relevant results. Trademarks, with the registered numbers 1590557 and 1682310, were applied for by Proview Technology Shenzhen Co., Ltd., in January and September of 2000, respectively, with trademark images for "iPAD" and "IPAD" and merchandise categories for computer, computer peripheral equipment, monitors, and cameras, and they will expire on June 20th and December 13th of 2011.


Proview owned the Taiwan IPAD trademark and sold it to Apple last year. Apple apparently thought that purchase also included the IPAD trademark ownership on the mainland. Proview says it did not. Apple is already suing Proview Hong Kong on this issue in Hong Kong. It is reported that Proview International has put US$3.6 million price tag on the IPAD China (mainland) trademark.


However, the contention over the IPAD China trademark ownership is not limited to only Apple and Great Loong Brother. Proview International owes between one and two billion yuan to the banks, so any possible sale is being monitored by creditors who will certainly put pressure on the company to get the highest price.


Great Loong Brother's Wu says in addition to his company's newly-released P88, they are cooperating with Japan's WACOM to launch a new generation of tablet PC. The company last year applied to the State Intellectual Property Office for two flat-panel TV appearance patents with application numbers of 200930166516.3 and 200930166757.8. When the Apple iPad hit the market, foreign media discovered that its tablet PC and that of Great Loong Brother were almost identical. Wu says an American law firm has taken the initiative to sue Apple for patent infringement and is collecting evidence and information but has not yet entered into legal procedures.


Wu says that if Apple iPad enters China, a lawsuit here is a certainty. "The Shenzhen Baoan District government is encouraging us to defend our rights and a legal aid center has been organized." He sees the lawsuit as an inevitable success if the company has the IPAD China trademark.


 "In China, the protected fields of Proview's IPAD trademark include domestic production and sales of similar products," says Liu Hui, partner of the Guangdong Jun Yan Law Firm. He says that while iPad is not yet for sale in China, the manufacture of iPad in China is already an infringement, and the trademark owner has the right to raid the factory and ask the Customs to detain and confiscate exported products. However, Liu Hui cautions that proving identity of appearance infringement is not so easy nor so obvious as proving trademark infringement. The Apple iPad is being produced in Shenzhen, and will certainly be marked with "iPad" in its OEM factory Foxconn.


Since the appearance of iPad in the US, shanzhai (pirate product) factories have been producing iPad knock-offs at home and abroad, encroaching on any market Great Loong Brother wants to enter. This also daunts any optimism over the appearance patent lawsuit.


In addition to trademark and patent litigation, Apple iPad must also contend with Chinese telecoms operators. Last July, after more than a year of negotiation, China Unicom finally reached consensus in detail with Apple on its 3G iPhone entering China, but iPhone sold in China is not equipped with Wi-Fi. In addition, in 2004, Hanvon, a Chinese electronics firm, registered the "i-phone" trademark and used it on a model of smart phone that it no longer sells. Hanvon, transferred its "i-phone" trademark to Apple last July for US$3.65 million. Without such permission from Hanvon, it would be considered trademark infringement if Apple sold its iPhone in China.


Beyond the trademark issue, Apple has to solve technical problems before its entry into China. iPad's network transmission relies mainly on Wi-Fi and 3G, while wi-fi hot spots in China are concentrated in the hands of telecoms operators, with the rest being free wi-fi hot spots such as at Starbucks, so even an iPad Wi-Fi version is bound to get tied up with a Chinese telecoms operator.


In addition, as the product is involved with 3G, Apple iPad may in China be defined as a mobile communication terminal, and wi-fi features must be compatible with China's wireless standard WAPI. Once, if, Apple can reach agreement with domestic telecom operators, it must add WAPI function to iPad, obtain China's iPad trademark, at whatever cost, and get clear of infringement suspicion. Apple iPad fans in China will have to show the patience of long distance lovers, as any launch schedule is going to fraught with difficulties.

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