Apple’s Trademark Ownership Woes Resolved

Settlement

As of July 2, 2012, the World Trademark Review and its blogger, Helen Sloan, are reporting that Apple has agreed to pay $60 million to Proview Technologies for the IPAD mark in China.  As I previously summarized in an earlier post, Apple thought it had already acquired all the rights to the IPAD mark, but it learned after a transaction with Proview’s sister company that it had not (allegedly) obtained a complete assignment in China from the record owner of the rights there.  Apple’s proffered settlement is quite a bit larger than the $16 million it was rumored to be offering, but given the popularity of the Apple device and the potential market in China, the sum is a worthy investment.

Lessons from Apple’s experience include:

1)  Diligence needs to be thorough.  Mixed ownership of assets in related, sister and subsidiary names is not uncommon.  Making sure the papers are signed by the right entity is critical to finalizing a deal and getting genuine closure on the acquisition of any intellectual property right.

2) Negotiating through an acquisition subsidiary can be perilous.  Apple used a separate corporation to purchase rights to the IPAD mark in various countries — a method that is rather common among large companies to fend off demands for a high price when sellers know that they have a deep-pocketed purchaser.  But Apple’s experience with Proview demonstrates that, even though perfectly legal, such tactics can lead to disputes later.  Of course, Proview’s complaints in this regard were handily dismissed in the U.S., but at what cost to Apple in reputation and legal fees?  In the wake of Apple’s experience, it’s worth considering whether using an opaque acquisition sub really saves the buyer anything and/or whether a fair and open dialog might have avoided the stress and cost caused by Proview’s lawsuits.  Certainly there will be times when using such tactics is worthy.  But a careful strategy will include consideration of alternate methods and the pros/cons of using such a method.

3)   Clearing rights early and often can be critical.  Although Apple surely began its clearance early, a common mistake made by some companies  is not clearing trademark rights ahead of product launch.  Companies too often leave clearance to the last minute or only clearGlobal Clearnance rights nationally — even though the marketing strategy is global. There are many rationalizations for this approach, not the least of which are the time and cost associated with a global review of rights.   But in reality, if  product development teams and marketers get ahead of the trademark clearance process in advance of launch, they almost always will avoid costs down the road, whether it be the cost of fending off unnecessary lawsuits or the exposure caused by the need t0 acquire rights from third parties.  Generally, those clearance procedures should be as geographically broad as any planned market penetration at least 18-36  months into the future.