iPhone News Desk
Proview Sues Apple in US, Tells Ripping Good Yarn
It figures it was snookered because Apple used a third party to buy the trademark rights
By: Maureen O'Gara
Mar. 1, 2012 08:15 AM
Here we are on the cusp of the iPad 3 introduction next week and Apple, whose market cap has now passed a half-a-trillion dollar, as in trillion - finds itself in the ludicrous position of being sued by a bankrupt Chinese company on the verge of being delisted from the Hong Kong Stock Exchange over the iPad trademark.
Proview may be flat broke but it seems to have money enough for lawyers and press agents and that may be because Proview's assets including the trademark was seized by three big Chinese banks in 2009 after it defaulted on a $400 million loan.
Anyway, Proview has opened a legal front in the US where it is now suing Apple in California's Superior Court in Santa Clara for fraud and unfair competition.
It figures it was snookered because Apple used a third party to buy the trademark rights, a common enough device in both the US and China, but Proview alleges fraud by intentional misrepresentation, fraud by concealment and fraudulent inducement.
It claims the 2009 sale - completed for the princely sum of $55,000 (£35,000) a month before Apple announced the original iPad - is void and that the trademarks covering the European Union, South Korea, Mexico, Singapore, Indonesia, Thailand and Vietnam should revert back to Proview Taiwan.
It seems Proview once objected to Apple's use of the name iPod and Apple allegedly threatened it with legal action. Proview believes this unhappy history explains why Apple "hatched a plan" to trick Proview and used a British company, Farncombe International, and its managing director Graham Robinson as an intermediary.
Proview told the court that Farncombe in turn created a purpose-built company called IP Application Development Limited (IPAD Ltd) and to add to the cloak-and-dagger atmosphere Robinson adopted the alias Jonathan Hargreaves to negotiate with Proview, ultimately threatening legal action to overturn Proview's trademarks if it didn't sell them to him.
The Brit allegedly told Proview that he wanted the iPad trademarks because iPad was an abbreviation for IP Application Development Limited, a statement that could eventually prove to be a problem. Proview claimed in a press release that "While some technology companies create special-purpose vehicles in order to obtain trademarks, in this case the sole function of Apple's special-purpose vehicle was intentional misrepresentation, and an effort to fraudulently induce Proview Taiwan into a sale of the IPAD trademarks."
Hargreaves-Robinson reportedly declined to discuss the new company's business with Proview, since there had been no public announcement yet, but assured the Chinese it was not a competitor. No lie there though Proview claims the statement was "patently false."
Proview's failed I-Pad was an Internet-connected desktop terminal introduced in 2000 and Proview's stock-in-trade is LCD monitors for computers and other media devices, a business it used to be quite successful at.
It seems a bit far-fetched that Proview didn't know in its heart of hearts that it was dealing with Apple and its "i" signature.
It's demanding compensatory damages and disgorgement of Apple's profits from the unfair competition, as well as an injunction to stop Apple's continued use of the trademarks. It says it wants to know "who at Apple orchestrated the fraud, and the specifics of how it was implemented."
It has previously suggested that it's trolling for an out-of-court settlement in the neighborhood of $1.6 billion.
Reuters checked around in legal circles and heard that Apple could allege that Proview can only sue the company that actually bought the trademark. The licensing deal also states that the agreement superseded all prior representations and warranties and doesn't include a non-compete.
In China Proview claims the deal never covered the Mainland but doesn't contest the validity of the deal. Apple's appeal of a judgment against its ownership of the trademark was heard Wednesday by the Guangdong High Court.
The Wall Street Journal reports that Proview's lawyers said they would ask their client if it wished to settle when asked by the court at the end of the six-hour hearing where Apple argued that allowing Proview to use the name on a product would confuse and hurt consumers.
Apple said at least three representatives of Proview Shenzhen, which claims to have retained rights to the trademark in China, took part in the sales negotiations, which were authorized by the Shenzhen unit's chairman and that the agreement was signed by the head of Proview Shenzhen's legal department, according to Bloomberg.
Proview maintains the deal was cut with Proview Taiwan, which had no rights to the trademark on the Mainland. Apple claims Proview Shenzhen was supposed to transfer the IP to the Taiwan unit. It's unclear if the trademark was legally encumbered.
It's also unclear how long it will take the three Guangdong judges to come to a decision, which is supposed to be definitive and set the style for courts elsewhere in China. Apparently it could take months and Reuters suggests the delay will lead to more sales of iPad smuggled from Hong Kong into the Mainland market, Apple's second-largest.
Last week Shanghai's High Court refused to stop Apple from selling iPads in Shanghai, where Apple has three retail stores, ahead of the Guangzhou decision. Chinese customs has so far ignored Proview's attempts to halt iPad shipments in and out of the country. Proview has however succeeded in getting some retailers to halt sales.
A Hong Kong court ruled last year that Proview was in breach of the agreement and out to damage Apple but its writ doesn't run into Mainland China.
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