Liability of Apple to Use iPad Trademark in China

November 8, 2012
Zhao Lei


My thesis of this paper is that China should conditionally adopt reverse confusion doctrine and Chinese Trademark Law should be revised and improved to become a strongest weapon on protection of senior and small companies’ rights and interests.
Specifically, this article would begin by an introduction of iPad case. The second part reviews the details of the whole iPad trademark dispute. The third part discusses and analyzes issues to determine whether Apple should be liable to use iPad trademark in China. The fourth part figures out our proposal to the problems under the present rules. Then finally we will draw our conclusion in fifth part.

I. Introduction
With the rise and rapid development of the international economic integration, investment in overseas markets which is the most extensive and popular model of the international business grew significantly. To some degree, the importance of overseas market is even higher than domestic market for big multinational companies. So many multinational companies develop the overseas markets positively to sell their products and get more profits all over the world.
And if these multinational companies want to sell their products in foreign markets, they need to get intellectual property rights in those countries or districts because of territorial and geographic features of intellectual property rights. Otherwise, these multinational companies will have risk to infringe local intellectual property rights, to be issued injunction by local goverment or courts and to pay compensation.
Apple Inc is one of famous and successful American multinational corporations which designs and manufactures consumer electronics and software products. The company’s best-known hardware products include Macintosh computers, the iPod , the iPhone and the iPad. They rely on overseas market so much especially in a huge market like China. Almost all its products including iPad have been hot and sold very well in the global including China.
However, iPad which is known as a real founder of tablet computer however is suffering an unprecedented infringement storm in China from last year. Weiguan Shenzhen a former famous display manufacturers accused that Apple did not get a trademark rights in the mainland of China. And Apple adamantly denied, claiming that had already purchased all iPad trademarks including China from Weiguan Taipei. So Apple brought a declaration lawsuit against Weiguan to confirm his ownership of iPad trademarks in China. The trial court found for Weiguan. Apple appealed but the case is still pending. However, after trial court favor Weiguan, Weiguan sued and file complain against Apple and its distributors in many cities in China.
From watching the judgments and decisions, courts and administrative authorities in different cities take different views about liability of Apple and its distributors. In Huizhou of Guangdong and Shijiazhuang of Hebei court and local administrative office of industrial and commercial held Apple’s distributors are liable. And in Shanghai, courts suspended case until the result of declaration case. However, some local administrative office of industrial and commercial in Beijng did not take any measure against Apple after they received complain.
Weiguan argued that they applied and used trademark earlier than Apple. And they own the trademark which should be protected and it will cause reverse confusion. Apple contended that they have bought all iPad trademarks from Weiguan including China. It will be unfair that Apple who invested a lot of money and built up good reputation of iPad trademark could not use iPad trademark in China. And it will not cause consumers confusion about the source of products. So this paper will discuss whether Apple should be liable to use iPad trademark and whether China should adopt reverse confusion doctrine to determine trademark infringement.

II. Detail of case
Weiguan International Holding Co. Ltd (Hereinafter referred to as Weiguan Hong Kong) was incorporated in Hong Kong. Weiguan Hong Kong has subsidiaries in China, British, America, Hong Kong and Taiwan. Weiguan Technology Shenzhen Co. Ltd (Hereinafter referred to as Weiguan Shenzhen) is the subsidiary of Weiguan Hong Kong in China. Weiguan Electronic Holding Co. Ltd (Hereinafter referred to as Weiguan Taipei) is the subsidiary of Weiguan Hong Kong in Taiwan. Weiguan Shenzhen and Weiguan Taipei have same legal representative of the company. However, they are independent brother corporation and they do not have any other relationship with each other.
In 2000, Weiguan Taipei applied IPAD trademark in Europe Union, Korea, Mexico, Singapore, Indonesia, Thailand and Vietnam. From 2001 to 2004, Weiguan Taipei got registration in above corresponding countries. In 2000, Weiguan Shenzhen applied two IPAD trademarks on computers in class 9 in China and got registration in 2001. After Weiguan Shenzhen got registration in China, they did use the IPAD on computers in China but not so much and not very famous.
In 2006, when Apple planed to launch its new product which will be named iPad, they found Weiguan owned iPad trademark rights in many countries after trademark research. So Apple knows that if they sell iPad products in those countries, they will infringe iPad trademark rights owned by Weiguan. As apple did not want to change name, so they planed to buy all the trademarks in those countries to use iPad trademark in the future. However, Apple knew that if they negotiate with Weiguan Taipei directly to buy the trademarks, it is hard to reach an agreement at a reasonable price.
To avoid high cost of potential transfer in the name of Apple, Apple incorporated a company in British named IP Application Development Co. Ltd (Hereinafter referred to as IP). They told Weiguan that the reason they want to buy iPad trademarks is that the abbreviation of this company is IPAD. Bu using this interpretation Apple in the name of IP easily reached an agreement with Weiguan Taipei in 2009. According to transfer agreement, Weiguan Taipei would transfer all the IPAD trademarks they owned to IP in many countries at 35,000 pound. And then IP transferred all the IPAD trademarks to Apple at 10 pound.
However, Weiguan Shenzhen said the iPad trademarks in China are not included in the 35,000 pound transfer agreement. Because actually Weiguan Shenzhen is the owner of iPad trademarks in the mainland of China, so Weiguan Taipei is not the owner of iPad trademarks in the mainland of China. Then Weiguan Taipei has no any right to sell or transfer iPad trademarks in China. So the transfer agreement is invalid about the part of China and then iPad trademark rights in China do not belong to Apple.
For this reason, Apple and IP brought a declaration law suit against Weiguan Shenzhen to confirm ownership of iPad trademarks in Shenzhen Intermediate People’s Court in Guangdong. Apple argued that on December 23, 2009, CEO Yang Rongshan of Weiguan Hong Kong authorized representative named Mai Shihong to sign the agreement. According to agreement, all the trademarks owned by Weiguan Taipei and Weiguan Shenzhen have been transferred to IP including iPad trademarks in China. After the agreement was signed, IP paid Weiguan Taipei 35,000 pounds for all the iPad trademarks. And then IP transferred all iPad trademarks to Apple at 10 pound. Apple and IP requested the court to make a declaration judgment that they own the iPad trademark rights in China and order the defendant to compensate plaintiff for trademark ownership investigation expenses, attorney fees and the loss of RMB four million Yuan.
In December 2011, Shenzhen Intermediate People’s Court in Guangdong held that the plaintiff who wants to get trademark shall have duty of care, reach agreement with trademark owner and file application of trademark assignment through Chinese Trademark Office. So the court rejected Apple and IP’s petition and found for Weiguan Shenzhen. Apple and IP appealed. The higher court of Guangdong has heard this appellate case, but the judgment is still in pending. The final decision of this declaration litigation will be very important to Apple.
In December 2011, Weiguan Shenzhen brought many trademark infringement lawsuits against Apple’s authorized distributors in different cities in China. Weiguan Shenzhen required Apple’s distributors to stop contributory infringement and stop selling iPad products and using iPad trademark in China. Huizhou Intermediate People’s Court in Guangdong held trademark infringement against one of distributor of Apple. The court held trademark infringement and issued injunction. The distributor in this case appealed. Final decision of appellate court is pending. And other trademark infringement lawsuits against distributors like in Shenzhen are still pending too.
As there are two ways to stop infringement in China, trademark owners could get protection by judicial or administrative authority. Local industry and commercial offices have the right to detain infringing goods and fine infringer. So besides judicial procedure Weiguan Shenzhen filed many complain applications through many local industry and commercial offices.
Basically, there are two different opinions and decisions about complain. First, some industry and commercial offices have detained all potential infringing products but will not fine distributors until the result of the declaration case of iPad trademark ownership is clear, for example Shijiazhuang industry and commercial offices. Second, some offices think it is not trademark infringement. So they will not take any measure against distributors, unless Weiguan Shenzhen’s ownership of iPad trademark is confirmed by the final judgment.
On February 7, 2012, Weiguan Shenzhen brought direct trademark infringement lawsuit against one of subsidiaries of Apple in Shanghai. As Weiguan Shenzhen only sued Apple’s distributors before, this is the first time that Weiguan Shenzhen sues subsidiaries of Apple in China. As the result of the declaration case of ownership in Guangdong is crucial for the trial of the trademark infringement, Shanghai Intermediate People’s Court suspended the trial till the result of the declaration case of iPad trademark ownership is clear. So basically, if Apple loses declaration case in the appeal in Guangdong, then iPad trademarks in China belong to Weiguan Shenzhen. Apple will probably lose this direct trademark infringement case and all the Apple’s distributors will lose as well.
Now although many distributors are still selling iPad products in China, some of them remove iPad advertise materials or put iPad advertise materials in inconspicuous position. And some of them stop selling iPad products already. Furthermore, many distributors that are still selling said that they will stop selling if Apple loses in appeal.
As we know that Apple iPad tablet computer is one of major popular products in Chinese market, its sales is larger, if industry and commerce offices distrain iPad goods at this stage, it may cause a great loss to Apple.

III. Issues and analysis

The key issue of complicated trademark infringement case is whether Apple should be liable to use iPad trademark in China. To determine trademark infringement, courts at least need to consider three aspects of the sub-issues: first, whether iPad trademark owned by Weiguan Shenzhen is legal and effective; second, whether iPad trademark used by Apple is identical or similar to IPAD trademark registered by Weiguan Shenzhen on identical or similar goods and will make consumer confusion; third, whether it will cause reverse confusion.

A. Whether iPad trademark owned by Weiguan Shenzhen is legal and effective?
1. Weiguan Shenzhen did apply the IPAD trademarks earlier in China without bad faith. As a trademark owner Weiguan Shenzhen has right to defend their own trademark under any circumstance.
Dislike the United States, generally applicants who applies trademark earlier will get registration in China, unless third party could prove that they have used the trademark applied by applicant before application date and applicant applied the trademark in bad faith. Any trademark in respect of which an application for registration is filed shall be so distinctive as to be distinguishable, and shall not conflict with any prior right acquired by another person.
So as I mentioned before, Weiguan Shenzhen applied IPAD trademark in 2000 and got registration in 2001. However, Apple prepared to use iPad trademark in 2006 and actually started to use iPad trademark in 2010. At the time Weiguan Shenzhen applied IPAD trademarks in China, Apple did not really start to use iPad trademark. The fact that Weiguan registered earlier without any bad faith supports Weiguan Shenzhen. Some people think who register first, who gets trademark rights. And then any use without consent will be treated as infringement, even though Weiguan Shenzhen did not use the IPAD trademark so much and the trademark was not famous.
However, other people think that considering the fact that Weiguan Shenzhen is going broke, the reason they sued Apple now is just for money not for real protection of intellectual property rights. The author thinks that this opinion is inappropriate. Even though Weiguan Shenzhen is going broke, any trademark owner has right to exercise their exclusive right, sue infringer and get protection. So Weiguan Shenzhen did apply the IPAD trademarks earlier in China without bad faith. As a trademark owner Weiguan Shenzhen has right to defend their own trademark under any circumstance.

2. Who has ownership of iPad trademark in China?
Apple has sued Weiguan Shenzhen in the Shenzhen intermediate people’s court to confirm the ownership of iPad trademark rights. However, trial court found for Weiguan Shenzhen. After Apple appeal, Guangdong higher people’s court heard this case three times but still in pending. Because the result of this case depends on evidence of trademark assignment contract and letter of authorization by the legal representative, we could not estimate the final decision.
And especially it is a contract issue that IP signed the contract with Weiguan Taipei not Weiguan Shenzhen to transfer the IPAD trademarks in China. So it is not the really intellectual property issue. I personally think Apple made a serious mistake in signing trademark transfer agreement with Weiguan Taipei to transfer iPad trademarks in China. As Weiguan Taipei is not the owner of IPAD trademark in China, the agreement is not binding on Weiguan Shenzhen.
But I have to point out that declaration litigation of ownership is not trademark infringement litigation. In this declaration case, even if apple fails, it does not say apple infringed Weiguan Shenzhen’s trademark, and just says the trademarks in China belong to Weiguan Shenzhen. However, if the ownership of Weiguan Shenzhen is confirmed, actually it is bad new for Apple in all the litigations and complains of trademark infringement 

3. Could iPad trademark owned by Weiguan Shenzhen be cancelled according to Chinese trademark law?
In this case, Weiguan Shenzhen did not violate any regulations of cancellation according article 41 of Chinese Trademark law. So the only possible way to cancel IPAD trademarks owned by Weiguan Shenzhen is to file non-use cancellation. According to article 44 of Chinese Trademark Law, where any person who uses a registered trademark has committed any of the following, the Trademark Office shall order him to rectify the situation within a specified period or even cancel the registered trademark: …… (4) Where the use of the registered trademark has ceased for three consecutive years.
Searching from website of Chinese Trademark Office, one of IPAD trademark owned by Weiguan Shenzhen has been filed non-use cancellation for three years on February 9, 2010. As generally it will take CTO two or three years to make decision of non-use cancellation, now the trademark is still effective. And Weiguan Shenzhen could submit proof to prove they have used this trademark in past three years. CTO could make decision to cancel this trademark, if Weiguan Shenzhen fails to submit any effective proofs. Weiguan Shenzhen still have right to appeal. And it still will take CTRB two or three years to make decision. Furthermore, if any party is not satisfied with decision, they still could file appeal in Beijing First intermediate people’s court. Before the IPAD trademark is cancelled, it is still effective and is protected by Chinese Trademark Law.
The author think even if Weiguan Shenzhen can not submit effective proof, they still have chance to file appeal. So if Weiguan Shenzhen uses all the procedures, they could make IPAD trademark effective in at least 6 years. So the result of non-use cancellation will not be helpful and useful to current declaration litigation and many trademark infringement litigations and complaints against Apple’s distributors.

B. whether iPad trademark used by Apple is identical or similar to IPAD trademark registered by Weiguan Shenzhen on identical or similar goods and will make consumer confusion?

1. Rules
a. Chinese Trademark Law
According to section 1 of article 52 of Chinese Trademark Law, any of the following acts shall be an infringement of the exclusive right to use a registered trademark: To use a trademark that is identical with or similar to a registered trademark in respect of the identical or similar goods without the authorization from the trademark registrant.

b. Interpretation of the Supreme People’s Court on trademark infringement
Based on section 9 of interpretation of the supreme people’s court on trademark infringement, two trademarks are identical means that there is basically no any difference between the two trademarks. Two trademarks are similar means that the trademark used on accused products is similar to plaintiff’s trademark in appearance, pronunciation, meaning or graphic composition and color and are easy to cause the public to confuse source of goods or think the source of accused products has some relationship with a registered trademark of the plaintiff’s goods.

c. Interpretation of Supreme People’s court on intellectual property case
According to section 6 of another interpretation of the supreme people’s court on intellectual property, if trademark used on accused products is identical with plaintiff’s trademark, then courts do not need to consider confusion factors. It means that if two trademarks are recognized as identical trademarks, then courts will not take confusion factor into account.

2. Argument and counterargument
In China like other civil law countries, trademark right is based on registration, not based on actual use. So to determine trademark infringement, usually courts do not compare accused products and infringed products. They only compare trademark used on accused products and trademark certificate applied by plaintiff. If we view all the provisions above, we could see that the only requirement in Chinese Trademark law is similarity of trademarks and similarity of goods. There is no requirement of likelihood of confusion when trademarks are identical. However, likelihood of confusion is one of element to determine trademark infringement in the interpretation when trademarks are not identical.
From this point, Attorney of Weiguan Shenzhen contended that it is obvious for Apple to constitute a trademark infringement. As iPad trademark used by Apple has same four letters with IPAD trademark registered by Weiguan Shenzhen. The only difference is that Apple uses lowercase of letters of i, a, and d. So two trademarks are identical trademarks on similar goods, court should not consider element of likelihood of confusion. Then Apple and its distributors constitute a trademark infringement. From a survey of major website
But Apple and its distributors argued that even though both trademarks consisted of same letters, they are still not same trademark, just similar trademark. They pointed out that another element of the trademark infringement which is “easy to make the public confuse the source of the relevant goods” should be taken into account. Because in this case awareness of Apple’s iPad trademark is very high and Weiguan Shenzhen’s IPAD products are not popular, so consumers will not be misled that Apple’s products are from Weiguan Shenzhen products. Then as it will not make consumers confuse and mistake, there are no any harm to consumers and Shenzhen Weiguan. So it is not trademark infringement.

3. The author’s opinion
This view sounds reasonable but the author disagrees. There is basically no any difference between the two trademarks. Actually two trademarks consisted of same four letters in same order and they are just different in lowercase or capital letter. The author thinks that the two trademarks in this case are almost identical trademark. And as the two trademarks are almost identical trademarks, so likelihood of confusion factors should not be considered to determine trademark infringement. Even though consumer may not confuse and mislead that Apple’s products are from Weiguan Shenzhen products, Apple still constituted trademark infringement.
However, if the two trademarks are not recognized as identical trademarks by the courts, then likelihood of confusion has to be taken into account. As consumers will not believe iPad products are from Weiguan Shenzhen, there will be no general confusion existed. If this happens, should Apple still be liable? Based traditional confusion doctrine, Apple probably will not be liable. Then we have to face next issue that whether consumers would mistake Weiguan Shenzhen’s products as Apple’s products.
C. Whether the use of iPad trademark by Apple will cause reverse confusion?

1. Introduction of reverse confusion
In an ordinary trademark infringement case, the alleged trademark infringer takes advantage of the reputation and goodwill of a senior trademark owner by adopting a similar or identical mark. So the alleged trademark infringer will make consumers believe that the infringer’s products are from senior trademark owner.
In contrast, reverse confusion arises when a larger, more powerful entity adopts the trademark of a smaller, less powerful trademark user and thereby causes confusion as to the origin of the senior trademark user’s goods or services. Because the junior user is a larger company with greater financial ability and trademark recognition in the marketplace, it can easily overwhelm the senior user by flooding the market with promotion of its similar trademark. The strength of the junior user’s promotional campaigns leads consumers to believe that the senior user’s products derive from that of the junior user or that the senior user is actually the trademark infringer. 1
American authorities of the trademark law professor McCarthy explained that when people see unfamiliar signs or words, it is easily for people to mistake the signs or words as it was known. It is very common and normal psychological phenomena. 2
Because senior users always sell so many products, reverse confusion cases often involves huge amount of damages. The seventh circuit court in the United State once pointed out in a judgment that if there is no bad faith, plaintiff should gain reasonable licensing fees or get 10%-30% profits of defendant.3 This astronomical compensation tends to inspire plaintiff file lawsuit. In fact, some small business is just symbolically to use a trademark. The purpose of lawsuit is to prevent large companies from using similar trademark and finally intention is to get sums of compensation. So courts have to deal with this kind case carefully.4
Compared to traditional confusion, a reverse confusion is different in facts, injury of consequence and social influence. Only courts consider the interests of the senior user, alleged trademark infringer and consumers, they could make balance between fairness and efficiency in their judgments.

2. History of reverse confusion in the United States
As early as in 1918, the famous American judge Holmes ambiguously mentioned the reverse confusion. He said that the general trademark case is defendants fake the plaintiffs’ products. In contrast, there is reverse confusion which will lead people to mistakenly think the plaintiff’s products from the defendant. 5
Even so until 1968 in Westward Coach manufacturing co. v. Ford Motor Co. case6 , plaintiff had used and registered Mustang trademark earlier on the trailer and sport utility vehicle. Defendant Ford just ignored plaintiff’s strong opposition, selected Mustang in 1962, and started to produce and sell Mustang products in1964. By 1965, defendant spent 16 million for advertisement. The seventh circuit court ruled that plaintiff did not have a strong trademark. So there is no trademark infringement.
But critics noted that Ford knew perfectly well that Mustang belongs to plaintiff and still forced to use. The subjective fault of Ford is obvious. Only because there are large differences in economic strength and social influence, infringement consequences is different from the general trademark infringement. That is not general confusion but reverse confusion. Buyers of plaintiff’s products will mistake that the purchased product comes from defendant Ford. In this case, the court refused to give plaintiff relief was to encourage big companies to rape small companies’ property. It is not fair for all those small companies 7
Under this pressure, American courts have to re-examine the issue of reverse confusion. In 1977, in Big O Tire Dealers , Inc. v. Goodyear Tire & Rubber Co case the court used reverse confusion doctrine and found for plaintiff. 8 In the case, the two parties “Big O” and “Goodyear” are all tire manufacturers. The plaintiff started to use “BIG FOOT” trademark on tire products in February 1974. In the same year in July defendant used the same trademark on same goods. Meanwhile, defendant had negotiated with plaintiff about trademark transfer, but plaintiff refused. Regardless of the plaintiff’s opposition against defendant, defendant still used BIG FOOT trademark on tire products and made a lot of advertisement. By August 1975, defendant spent over ten million dollars in advertising campaigns.
The 10th circuit court held that after witnesses saw the advertisement of defendant, they mistakenly think that the plaintiff’s products are from defendant. The defendant’s act caused consumer’s reverse confusion. It shall be prohibited. The court further pointed out no interference against reverse confusion is to show that big companies can steal and possess prior trademark owned by small companies by their strong economic strength and intensive advertising.
Since then, reverse confusion doctrine is gradually accepted by other circuit courts in the United States. 9 In the courts’ opinion, reverse confusion may not only lead to consumer confuse, but also and can damage the reputation and goodwill of owners of prior trademark, therefore junior users shall bear the tort liability. And the American anti-unfair competition law (the third restatement) has said that reverse confusion did not jump out of the adjusting range of traditional trademark infringement. 10

3. Reverse confusion doctrine in China
Reverse confusion doctrine in the United States is generally accepted, however, there is no any similar law and regulations in China. There are not so many cases which are in favor of reverse confusion. But the decision made by the higher people’s court of Zhejiang province in “blue storm” case seems that “reverse confusion” doctrine could also be acceptable by Chinese court. 11
Plaintiff Zhejiang Lanye wine Co., LTD. (hereinafter referred to as Lanye) is a small company in Zhejiang province of Lishui and is trademark owner of “blue storm” in Chinese letter in class 32 on beer, water (drink), coke. The trademark was registered on December 14, 2003. Lanye already has used the “blue storm” trademarks on beer and said they intended to use on carbonic acid beverage. Shanghai Pepsi cola drinking Co., LTD. (hereinafter referred to as Pepsi) is one of subsidiary of Pepsi group in China. On November 17, 2005, Lanye found that Pepsi has used blue storm in Chinese letter on Pepsi’s production and sell in Zhejiang and Shanghai. Then Lanye filed lawsuit against Pepsi for trademark infringement.
Lanye claimed that Pepsi used its registered trademark on the same goods without permission. Pepsi constituted a trademark infringement. Pepsi’s act will inevitably compress future operation space of their trademark. As Pepsi is a world famous multinational company, based on its awareness and popularity, it is easy for consumers to mistake the “blue storm” trademark as Pepsi’s trademark. And Pepsi had gross negligence in using blue storm trademark in Chinese letter in China, since it is very easy for Pepsi to search this prior registered trademark.
Pepsi counter-argued that Pepsi did use the blue storm trademark on its products, but blue storm was just the theme of 2005 summer promotion not trademark. And it will not lead to consumer’s confusion.12 In fact, as the well-known trademark, Pepsi in China has a very good reputation, and had no intention to copy Lanye’s “blue storm” trademark or to use Lanye’s reputation to sell products. Lanye also acknowledged that Pepsi did not have intention to let the consumer mistake goods from Lanye. However, Pepsi’s massive advertising and marketing activities made Lanye cannot normally develop and use its registered trademark.
Hangzhou intermediate people’s court in April 2006 held that Pepsi’s use of “blue storm” trademark is not trademark use and “blue storm” trademark is not a strong trademark. At same time, Pepsi’s act will not mislead the public and also will not cause public confusion. The court did not adopt reverse confusion doctrine. In 2006, the court rejected plaintiff’ claim and found for defendant.
Lanye appealed to Zhejiang higher people’s court. The court held that Pepsi through “blue storm” product promotion had made the “blue storm” logo in fact become a trademark. It is trademark infringement that Pepsi in the poster campaign highlighted “blue storm” logo without the permission of the trademark registrant on same goods. Pepsi shall bear the corresponding civil liabilities. The court reversed and held that Pepsi’s act will cause reverse confusion. Pepsi should be liable for trademark infringement.

4. Legitimacy of prohibition of reverse confusion in current case
In any trademark case, the judge must also consider interests of three parties which are plaintiff, defendant and social public. In general confusion case, defendant intends to use fame of prior trademarks to promote products. It may not only damage the interests of trademark owners, cause consumer confusion, and increase consumer’s search cost. This means that, it is fair and reasonable to prohibit general confusion. However, in the reverse confusion lawsuit, situation is more complicated. Judges in this case should take many factors into account to keep balance of interests of all parties.
First, court should consider fairness. Trademark protection aims to encourage enterprises to improve product quality and increase investment. The essence of prohibition against trademark infringement and prevention of confusion is to protect reputation and goodwill built by trademark owner and to encourage enterprises to provide high quality products to the society. Prohibition of reverse confusion is just one of special form of trademark protection which is designed to protect prior trademark rights of small companies. If no intervention against reverse confusion, as big companies can rape the small companies’ trademark, it will cause vicious competition. Only prohibiting reverse confusion could ensure that all companies, regardless of their size, strength, strong or weak, could have same equal prior trademark rights.
Even so, in most cases, defendant also did a lot of investment. Some of them do not have bad faith of free-rider intentions and do not know that the existence of prior trademark. Not only that, because of bigger influence on the market and higher advertising strength of junior users, in the public’s eye, they think junior users should own the trademark. According to labor theory of the property rights, junior users should have rights, prohibiting reverse confusion will deprive of their investment and rights they should get.
So the author thinks generally speaking, in the early days, the defendant did not use the trademark so much and such use has not give consumers deep impression. Then the court shall protect the interests of prior trademark, ban defendant’s use, and compensate for the loss of the plaintiff. But, if plaintiff indulges the defendant to use its trademark, it will make consumers treat trademark owned by plaintiff as defendant’s trademark. At this time, the court can only admit that is fact, allow defendant to use trademark without trademark infringement and give the plaintiff appropriate compensation based on defendant’s fault.
Second, courts should consider utility and efficiency. Some people think forbidding reverse confusion means that trademark owner prohibit anyone from using its trademark by prior registration and prior use, even if the trademark is more worth and valuable infringer. This means that senior users should continue to use prior trademark and maintain its trademark, and junior users must stop using trademark. In other words, forbidding reverse confusion is justified.
However, from the point of economic analysis view, many commenters said that forbidding reverse confusion is not always effective. Obviously, in the case of reverse confusion, most junior users are large powerful enterprises that generally have the ability to meet senior users’ requirements of prior reasonable compensation. Therefore, reducing the level of prohibition of the reverse confusion may be more effective protection of strength. Junior users can bring much income to themselves and can reduce the consumers’ search cost. Actually due to the existence of the reverse confusion, junior users can give trademark in the society of much more impact and can play a greater role in the market.
The author thinks that of course, in consideration of efficiency protection, we should also include interest protection of small companies and even further consider this influence on the side effects of the whole social economic development. At the same time, as the trademark used by junior users may have had a strong social influence when senior users sue junior users, damage of prohibition against junior users’ use is also substantive for junior users and to the public.
The so-called “reverse confusion”, apply to this case, can simply expressed as: although consumers will not treat Apple’s products as Weiguan Shenzhen’s products, consumers would mistake Weiguan Shenzhen’s products as Apple’s products. As a result, the senior user loses the value of the trademark-its product identity, corporate identity, control over its goodwill and reputation, and ability to move into new markets. Three factors are pivotal factors here to determine reverse confusion: (1) arbitrariness of the mark; (2) similarity of sight, sound and meaning; (3) relatedness of the goods.
Admittedly, whether reverse confusion will damage interests of senior users and pubic? In this case, first on the market there are Weiguan Shenzhen’s iPad products exist. If there are no plaintiff’s product existed, “reverse confusion” doctrine is not applicable. The author thinks that based on the above reasons, the courts will hold Apple and its distributor constitute a trademark infringement for apple’s iPad product.

IV. Proposal
Through the whole analysis we can see that senior users are almost small companies and junior users are large companies. For senior users they used and registered trademark earlier but they did not contribute and increase the value of trademark so much. For junior users they used trademark late but they contribute and increase the value of trademark. Based on the present rules adopted in the United States and practice of the court in China, we still find many problems to be clarified and many experiences and lessons to be shared. To solve these problems and to share all these experiences and lessons we have followed proposal.
First, as there is no any law or regulation about reverse confusion enacted in China, it makes practice of legal person in China confused. Many lawyers, judges and professor have different opinion about the said issued whether China should adopt reverse confusion doctrine. So basically, China should enact new legislation to regulate issue of reverse confusion and make it clear to apply.
Second, as China is still a developing country, there are still many small companies in China. To encourage all these small companies and keep economics development going up, new legislation should be designed and emphasis on the protection of small companies.
Third, for multinational companies like Apple before they prepare to sell their products in foreign countries, they should make very accurate trademark research to make sure whether they could use their trademark in local market. Or they will have risk to constitute trademark infringement.
Fourth, any companies whatever big or small should establish internal regulation about trademark monitor before they go to local market. If they could file opposition when their trademark is applied in foreign countries, they probably will easily to negotiate with applicant and reach transfer agreement.
Fifth, based on accurate trademark research report, for multinational companies like Apple they should investigate all the detail about trademark which is applied by others. Company should get a very good and accurate investigation report about registrant before negotiation. When they negotiate trademark transfer agreement, they should make sure whether this company has the right to sell the trademark and sign the transfer contract with them.
Sixth, reaching the transfer contract is just first step to complete transfer procedure in China. They need to file trademark transfer application in CTO. And only after Chinese Trademark Office issues the approval of trademark transfer, they could finally get trademark rights.
Seventh, in this case, when Apple started to use iPad trademark, they did know they do not have trademark rights in China. Company like apple should assess the legal risk of trademark infringement before they still plan to sell iPad products or use iPad trademark that they do not own. And after the assessment, they should reach a agreement with registrant before litigation as early as possible.

V. Conclusion
Through the “blue storm” trademark infringement, China first faced the issue reverse confuse. Now the iPad trademark infringement case makes that it is urgent to have corresponding legislation to solve this kind of problem. Now China is revising Chinese Trademark law at the third time. Reviewing the regulation of trademark infringement in Chinese Trademark law, it is very important that this new form of trademark infringement should be adopted into Chinese Trademark law.
As mentioned above, reverse confusion is obviously different with general confusion in fact, injury consequence and social impact. Therefore, reverse confusion and general confusion are two different type of trademark infringement. They should be treated differently by legislation. Also, as the complexity of the balance of interests in reverse confusion, China should conditionally adopt reverse confusion doctrine and Chinese Trademark Law should be revised and improved to become a strongest weapon on protection of senior and small companies’ rights and interests. So the author personally thinks that Apple should be liable to use iPad trademark in China.

1. See Ameritech , Inc. v. American Information Technologies Corp . , 811 F. 2d 960 (6t h Cir . 1987) .
2. J . Thomas McCart hy , McCart hy on Trademarks and Unfair Competition 23 :10 , 2006 , Thomson/ West .
3. Joel R. Feldman , Reverse Confusion in Trademarks : Balancing t he Interest s of t he Public , the Trademark Owner , and the Infringer , 8 J . Tech. L. & Pol’y 163.
4. See Roger E. Schechter & John R. Thomas , Intellectual Property : t he Law of Copyright s Patent s and Trademarks , Thomson West •146 •
5. International News Service v. Associated Press , 248 U. S. 215 (1918) at 247 ( Holmes , J . , concurring) . See David Y. Gan ,“MarchMadness”: An Examination of Dual Use Trademark Terms and Reverse Confusion , 50 Hastings L. J . 223.
6. See Westward Coach Mfg. Co. v. Ford Motor Co. 388 F. 2d 627 (7t h Cir . 1968) .
7. See Joel R. Feldman , Reverse Confusion in Trademarks : Balancing t he Interest s of t he Public , t he Trademark Owner , and t he In2f ringer , 8 J . Tech. L. & Pol’y 163.
8. See Big O Tire Dealers , Inc. v. Goodyear Tire & Rubber Co. , 561 F. 2d 1365 (10t h Cir . 1977) .
9. See J . Thomas McCart hy , McCart hy on Trademarks and Un2fair Competition 23 :10 & n. 7 , 2006 , Thomson/ West
10. Restatement ( Third) of Unfair Competition , §20 , Comment f (1995) .
11. See judgment of Hangzhou intermediate people’s court No.(2006) 429 and judgment of Zhejiang Higher people’s court (2007) 12. http :/ / WWW. ccn. com. cn/ xbyw/ 2007 - 06 - 11/ 1181523153d271415. html .