The Importance of Trademarks
The phrase "intellectual property" is often used in the Indian media as synonymous with "patents". In fact, patents are only one form of intellectual property. Other forms of intellectual property include trademarks, copyright, design rights, plant variety protection, etc. Of these, trademarks are used in business for the purpose of distinguishing the goods or services of one person from those of others. The names and logos of companies, academic institutions, or businesses, and the products (goods) or services they offer can all be protected under the trademark law.
A registered trademark gives its proprietor the exclusive right to use that trademark for the registered category of goods or services. For example, a pharmaceutical company selling a medicine in the market under a trademarked name or brand would be protected from other companies selling medicines under the same name or brand. Similarly, an institution providing educational services under its trademarked name or logo would be able to prevent anyone else from taking advantage of the institution's reputation by marketing similar services under the same name or logo.
Once a trademark is registered for a particular category of goods or services, no one else can obtain the same trademark for the same category. Thus, before selling any goods or services, it is advisable to ensure that no one else has registered the same trademark. There is no such thing as an international trademark. Every trademark is valid only in the specific country or countries for which it is filed.
The importance of having a registered trademark was highlighted recently when a Chinese court held that the "iPad" trademark does not belong to Apple Inc. in China, as it was already registered there in the name of a Chinese company. One reaction to this might be that the Chinese company is trying to exploit the success of Apple's iPad, and has registered that name as a trademark in order to harass Apple and extract money from it. However, the facts show otherwise.
In 2000, long before the Apple iPad appeared on the horizon, a Chinese company called Proview Technology (Shenzhen) Co. Ltd., registered two trademarks for the IPAD name at the China Patent and Trademark Office. This company was a member of the Proview Group, headed by Proview International Holdings Ltd. based in Hong Kong. Proview manufactured and marketed a tablet computer under the IPAD name, and the Group registered trademarks for the IPAD name in several countries around the world. This "IPAD" was not a success, and Proview Technology (Shenzhen) Co. Ltd. was in serious financial difficulties. Apple introduced its iPad only in January 2010, and it was available in China from September 2010.
Before the launch of Apple's iPad in China, a company based in the United Kingdom called IP Application Development Co.Ltd. (note the acronym: IPAD) negotiated and signed a Trademark Transfer Agreement with Proview Electronics Co. Ltd., acompany based in Taiwan. Under this Agreement, the global rights to the iPad trademark were purchased from Proview Electronics Co. Ltd for £ 35,000/-. In February 2010, IP Application Development Co. Ltd. sold these rights to Apple for £10/-.
When Apple applied to the China Patent and Trademarks Office to transfer the two iPad trademarks to its name, the application was rejected as the iPad trademarks in China were not in fact owned by Proview Electronics Co. Ltd., Taiwan, which had signed the Agreement, but by Proview Technology (Shenzhen) Co. Ltd., China, which had not. Apple and IP Application Development Co. Ltd. then filed a case in the Shenzhen Intermediate People's Court in China, seeking a declaration that the iPad trademark in China belonged to them.
On 5th December 2011, the Chinese Court rejected Apple's claim. It said that although the Trademark Transfer contact was signed "Proview", this was the Taiwan company and not the Shenzhen company. Proview Technology (Shenzhen) Co.Ltd. did not participate in the negotiations, nor did it authorize others to dispose of its trademarks and to enter into a trademark transfer contract. Accordingly, the trademark transfer contract would not be binding on it, and Apple had no right to the Chinese trademarks.
Earlier that year, despite not having a registered trademark in China for the iPad, Apple released the iPad in China; and it was an enormous commercial success. Proview Technology (Shenzhen) filed cases in the Chinese courts against Apple's retailers in China for trademark infringement, and was reportedly asking for $1.5 billion as compensation. Recently, Proview Electronics Co. Ltd., Taiwan has filed a case in the United States against Apple, claiming that Apple used fraud in negotiating the Technology Transfer Agreement.
Apple has filed an Appeal against the 5th December judgment of the Chinese Court, raising additional grounds. It hopes to show that Proview Technology (Shenzhen) was also involved in the Trademark Transfer Agreement, and has a legal obligation to transfer the IPAD trademarks to Apple. Meanwhile, Apple is facing several cases filed against its retailers in the courts in China, and the case filed against it in the United States.
If Apple succeeds, it will obtain the right to the use of the IPAD trademark in the People's Republic of China. If it does not succeed, it would have to find a new name for its iPad in the Chinese market. Moreover, all the iPads that are with Appleand its dealers, distributors, retailers etc. in China would be considered to be trademark "infringing goods", which could consequently be confiscated and destroyed. In addition, Apple would be liable to pay damages to Proview Technology (Shenzhen) and could also be prosecuted under the criminal law. The better alternative for Apple could be to settle the dispute by purchasing the IPAD trademarks directly from Proview Technology (Shenzhen). If it does that, however, it would have to pay not £10/- or £35,000/-, but much, much more - it would have to pay Proview Technology (Shenzhen) Co. Ltd. something close to the actual value of the IPAD trademark in China.
When a name or a brand develops a reputation and is associated with quality goods or services, a trademark assumes importance. The trademark indicates to the public that there is a connection between the goods or services and the proprietor of the trademark. It acts as an indicator of quality and can help create an image for the business. If it is used without authorization, an action for infringement of the registered trademark can be filed, with serious consequences to the infringer. It is an extremely valuable form of intellectual property and is commonly used by companies, businesses, institutions and others across the world.