Following our legal update “iPads Being Taken off Shelves in China” focusing on the “iPad” trade mark dispute between Apple Inc. (“Apple”) and the Proview group in China, we have prepared this follow-up article in response to our readers’ interest - we will look at the dispute brought before the Hong Kong courts and, interestingly, the different findings.

The Hong Kong action

The facts surrounding the Hong Kong proceedings and the parties’ litigation in China are very much similar. For the background information about the parties’ dispute in China and the relationship between the different entities within the Proview group, please refer to our legal update “iPads Being Taken off Shelves in China”.  

At or around the time when Apple and IP Application Development Limited (“IP Application”) filed a lawsuit in China against Proview Shenzhen seeking a transfer of the two PRC IPAD trade mark registrations (“IPAD Trade Mark Registrations”), there were developments which suggested that the Proview group was facing financial difficulties and that Proview Shenzhen had applied to the PRC Trade Mark Office to transfer the IPAD Trade Mark Registrations to a Yoke Technology (Shenzhen) Co. Ltd. Apple then applied to the Hong Kong courts in May 2010 for an interlocutory injunction to, inter alia, stop the relevant Proview entities from disposing of the IPAD Trade Mark Registrations.  

The Hong Kong Court of First Instance granted the interlocutory injunction against the four defendants who were subjects of the application, namely, Proview International, Proview Shenzhen, Yoke Technology and Mr. Yang (the founder of the Proview group).

We summarise the key facts and findings of the Hong Kong action as follows:

  • Among the defendants, Proview Shenzhen and Yoke Technology did not appear in the hearing and resulted in the interlocutory injunction granted against them. Proview International consented to the interlocutory injunction through its solicitors. Mr. Yang, declared bankrupt, did not have legal representation and failed to file any admissible evidence.
  • The only outstanding issue before the court was the application for interlocutory injunction against Mr. Yang.
  • The applicable legal principles are the well-known American Cyanamid criteria. It must be established that there is a serious question to be tried and that irreparable damage will be caused to the plaintiff if no injunction is granted (and no such damage to the defendant if granted). If the issue of irreparable damage is not conclusive, the court will consider the balance of convenience.
  • The court agreed that there is a serious question to be tried for each of the four causes of action that Apple and IP Application raised:
  1. Breach of Contract

The court found that IP Application contracted with Proview International, Proview Taiwan and Proview Shenzhen in December 2009 for the assignment of the subject trade marks (“Agreement”). Proview Taiwan was expressly stated in the formal written Agreement to be the proprietor of the IPAD Trade Mark Registrations and warranted to be the unencumbered sole owner. The court considered that there is a serious question to be tried that the relevant Proview parties had wrongfully refused to honour their obligation to assign the IPAD Trade Mark Registrations.

  1. Unlawful means conspiracy

The court found that the defendants demonstrated by conduct that they had combined together with the common intention of injuring Apple and IP Application by breaching the Agreement. The Proview entities were all under Mr. Yang’s control but refused to take steps to effect the assignment. Instead they took the opportunity to try to seek another US$10 million from Apple for the assignment. Mr. Yang participated in the conspiracy as he had management and control over the entities and had knowledge of the Agreement.

  1. IPAD Trade Mark Registrations held on trust

The court considered it arguable that Proview Shenzhen holds the IPAD Trade Mark Registrations on trust for Apple and IP Application. There might be a remedy of specific performance to IP Application if the breach of contract claim would succeed.

  1. Breach of trust and dishonest assistance

The court agreed that this cause of action posed a serious question to be tried. It would be arguable that Proview Shenzhen acted in breach of the trust by refusing to transfer and that the other defendants had dishonestly induced and/or assisted in such breach.

  • The court went on to find irreparable damage to Apple and IP Application given that Apple had already launched its iPads worldwide, including in China. On the contrary, no damage or harm would be caused to the defendants if they were stopped from disposing of the IPAD Trade Mark Registrations. The balance of convenience was also clearly on Apple’s side.

Observations

Hong Kong is now part of the PRC but remains essentially a common law jurisdiction independent of the judicial system in China. Although the parties’ disputes are based on the same facts, it is interesting to note how the Hong Kong court and the Chinese court read them differently. One would imagine that concepts like breach of trust and conspiracy would perhaps appeal more in a common-law court.

A note of caution is that the Hong Kong proceedings on the dispute are so far interlocutory which means that the court decides on affidavit evidence and that the issues have yet to be fully tried.