Apple has been dealt a painful blow to its intellectual property rights in China as it has failed to prevent registration and use of the IPHONE trade mark by a Chinese company.

Apple is famously litigious and no stranger to trade mark disputes. Frequently bringing proceedings to enforce its intellectual property rights,   Apple also takes pre-emptive action to protect itself by registering its trade marks around the world before releasing a new device.

The Beijing Municipal High People’s Court has however rejected Apple’s appeal on the IPHONE mark and held that Xintong Tiandi Technology Co (Xintong Tiandi) is free to continue to make IPHONE branded purses, wallets and phone cases.

In another recent Chinese case, Apple was ordered to pay US$60 million to end a dispute with Shenzhen Proview Technology over its ownership of the IPAD trade mark.

China’s trade mark squatters

A practice has developed in China whereby companies register the trade marks of well-known Western companies for unrelated goods.  The apparent intention is to later profit from an association with the original trade mark owner.

Apple and Xintong Tiandi’s IPHONE trade mark registrations

Apple applied to register IPHONE as a trade mark in China in 2002 in class 9 for electronics, well in advance of the device’s release in 2009 and the application was approved in 2013.  Following the release of Apple’s IPHONE devices in 2010, Xintong Tiandi registered the IPHONE trade mark in class 18 for leather goods.  Apple began pursuing Xintong Tiandi in 2012.

The Appeal Court has now found that Xintong Tiandi’s use of the IPHONE trade mark does not harm Apple’s interests, as no one in China would in fact be confused and think that the leather goods were associated with Apple.  Further, it held that Apple failed to prove that the brand “iPhone” was famous in China in 2010.

Xintong Tiandi’s website includes a summary of the dispute (in Chinese) which commends its intellectual property achievement and free market success.  It has been reported that Xintong Tiandi’s Mr Xiong would be open to any sort of “commercial cooperation” with Apple in the future.

Apple has said it plans to request a retrial with the Supreme People’s Court, the highest court in mainland China. "Apple is disappointed the Beijing Higher People's Court chose to allow Xintong Tiandi to use the iPhone mark for leather goods when we have prevailed in several other cases against Xintong," said a spokesman for the firm.

While an action like this brought in New Zealand would most likely secure a victory for Apple, the case is a reminder to all companies who trade, or intend to trade, in China, to secure trade mark protection for their brands as early as possible.