As a number of sources pointed out last week, Apple received an important legal ruling in China. Proview International Holdings has been fighting with Apple over rights to the iPad trademark, and the company’s Shenzhen unit had requested a ban of iPad sales in that city. A Shanghai court rejected the request last week. The battle isn’t over, however, as both companies wait for tomorrow, when a court in Guangdong is scheduled to rule on Apple’s appeal of a lower court decision that the company’s 2009 purchase of the trademark from a Taiwan-based unit of Proview was invalid.
Now that’s all interesting enough, but what really caught my attention was an article in Businessweek noting that even if a company like Apple can become embroiled in legal battles with an obscure Chinese rival, that doesn’t bode well for other, smaller companies hoping to do business in China. So what can those other companies do?
The article’s author, Bruce Einhorn, offers some interesting advice. First of all, he writes, companies need to make sure the government is on their side. For instance, if a company does get caught up in a dispute with a local player, it would be nice to know they have government officials on their side who can make problems go away. To make sure they do have government backing, companies need to show goodwill by helping with state priorities such as promoting the development of smaller cities and less prosperous regions in China’s interior.
It sounds simple enough, but if necessary, companies need to buy their trademark. To figure out who owns what names, foreign companies often use specialists that monitor trademark registrations in China and other countries, Einhorn says. Once they’ve identified potential problems, companies then try to buy back the rights to those names. When negotiating with Proview for the rights to the iPad name, Apple worked through an intermediary, a company it set up to do the negotiations and buy the trademark, says Einhorn.
It’s also critical to remember to transfer the trademark properly. It’s possible this may have been a critical mistake for Apple, writes Einhorn. When concluding its deal with Proview, Apple may have neglected to get an agreement from the Chinese company to submit the deal to the government’s trademark office, part of the State Administration of Industry and Commerce, Einhorn writes. All that may have been missing is a signature.
All this reminds me of another post about working in China. While that one was specifically about steps multinationals need to take to safeguard the company’s IP in China, there was also some similar advice that—I believe—can go a long way toward helping companies do business in China.
Anil K. Gupta—a professor of strategy at the Smith School of Business, The University of Maryland at College Park, and a visiting professor in strategy at INSEAD—and Haiyan Wang— managing partner of the China India Institute--have conducted discussions with senior executives at several American and European companies. They now urge executives to cultivate relationships with the government and the media, especially at the local levels, in China.
While local governments in China may be eager to attract high-technology players and R&D operations, they also may strive to help local companies advance, Gupta and Wang say. In China, it will almost always pay to cultivate solid relationships with government officials and to keep making the case that protecting everybody’s intellectual property is the fastest route to creating an innovation-driven economy, they add.
Some of this advice sounds obvious. Then again, beginning to do business in China can be so overwhelming for some companies that it’s easy to see how some details can slip through the cracks. But it’s important to remember that details like who owns a trademark can make or break a company. And regardless of where business takes place, it never hurts to cultivate favor and develop relationships with local officials.