Lessons for Silicon Valley Companies in Apple Trademark Dispute
In case you have not been following the story, Apple has found itself in the middle of a trademark dispute in China over the use of its mark "iPad," as MSNBC reported on its website yesterday.
You might wonder how in the world this happened, given Apple's large, IP savvy legal department and the fact that China was such a large potential market. Apple surely started focusing on the protection of its worldwide rights in the "iPad" mark the moment it conceived the concept and the name itself.
Well, according to MSNBC's report, a Chinese company reserved the mark originally back in 2000 and in 2009, Apple purchased the company's worldwide rights in the mark from the company's Taiwanese subsidiary. However, the Chinese company maintains that it still owns the rights in the mark in the Chinese mainland, and that the subsidiary never had those rights to license. Unfortunately for Apple, the Chinese company is now having financial problems, and so, the Chinese company is diligently pursuing this issue, no doubt in order to procure a large settlement from Apple that can keep the company in business.
The facts of this particular legal dispute provide a variety of lessons to Silicon Valley companies.
First and foremost, if you come up with novel business product that you plan on marketing worldwide, you need to devote resources before you launch to protecting your mark in all of your key markets and you need to work with qualified local counsel in each country to ensure that your mark is actually protected in each of those key markets. Then, when you have to enter into agreements with with foreign companies, make sure that both your local and your U.S. counsel are experts in the relevant areas of law, so that they can confirm that the English and foreign language versions of your agreements give you the correct rights that you need to proceed. When I negotiate agreements with China, for example, the agreements typically have one line in Chinese and another line in English, so it is important to confirm that both sentences read as intended.
Second, when you enter into agreements regarding IP, do due diligence on the IP in advance to confirm ownership rights in the IP and also procure warranties and indemnifications regarding the ownership of the IP from any third party who is transferring rights in IP to you, so that you don't find out down the road that you didn't actually get what you paid for and have to absorb the losses directly yourself, when those losses are inevitably going to be far more expensive.
Finally, if you are launching a product for the worldwide market, make certain that the marks you want to build your brand around are protectable on a worldwide basis. So many clients that I work with do it backwards and select a name and develop their brand before they even stop to consider whether they can even protect the brand they are developing. Far too often I see companies have to start over 2 to 3 years into their business with rebranding everything because they discover that a third party is already using their mark. Even if they are successful in avoiding a lawsuit for trademark infringement, they run the risk of losing all of their Internet history for their old brand and having to spend thousands and thousands of dollars recreating all of their branded materials such as their website, business cards, landing pages, brochures, stationery and everything else. It can be a very costly mistake, even when the companies escape the worst case scenario of litigation.
The bottom line is that trademark protection planning needs to start on the day that you conceptualize a brand, and when you are trying to protect the brand off-shore, you need to make sure you are coordinating your U.S. and foreign representation to ensure that you are definitely protecting your brand in both locations.
