A problem in the iPad battle between Proview and Apple is noticeable that the party signing the transfer agreement with Apple is Taiwan Proview, while the iPad trademark owner is registered under the name of Shenzhen Proview, therefore, the core question emerges: could the contract signed by Taiwan Proview naturally bind Shenzhen Proview? The answer to the question concerns the personality confusion on the law. Today, Bridge IP Law commentary invites Mr. Yu Zhiyuan, the legal attorney specialized in corporate law, to introduce you the legal system on the personality confusion in China.
The case seems to be a dispute over the ownership of the trademark, which shall be governed by the Contract Law and the Trademark Law. However, key of the conflict is actually the independence of the company?s personality, and that is a typical corporate matter.
Article 3 of Chinese Corporate Law says that a company is an enterprise legal person, which has independent property of a legal person and enjoys the property rights of a legal person. That?s the legal reference of the independent personality of corporate in China law system, and is also the basis of Shenzhen Proview?s defense that Shenzhen Proview and Taiwan Proview is actually two independent entities. Therefore, to the case, it?s arguable and deserves our consideration that is there any personality confusion between the Proviews or a vague boundary of such personalities. The fact is that both companies above are the affiliates to a same company listed in Hong Kong, and furthermore, the legal representatives of the companies are the same person. And for this reason, it also comes to us could the signing of Taiwan Proview stands for Shenzhen Proview?
Let?s check the personality confusion of the company first. The personality confusion refers to the direct liability of the shareholder to the debt of the company for the interests protection of the creditors of the company when a vague boundary between the shareholders of the company and the company itself. Once there has mutually invested by both Proviews, namely either becomes the shareholder of the other, the personality confusion could be preliminarily applied, though for the limited liability of the company, other strict legal preconditions shall be taken into account.
In practices, as concluded by Shanghai Higher People?s Court, the abovesaid strict conditions could be (1) the asset confusion, such as the confusion of fund and mixed financial management; (2) business confusion, such as the same business scope or most crossed business,; (3) labor and personnel confusion, such as taking post in both the company and the shareholder for the legal representative, direct, supervisor and other senior management, or the bilateral employment of the employees; (4) the confusion of the place of business (specified in Article 8 of Several Opinions on Hearing Personality Denial of Companies issued by No 2 Hearing Court of Shanghai Higher People?s Court). In the case, either Shenzhen Proview or Taiwan Proview is constructed under its jurisdiction, involving financial management, personnel, labor management or business operation, which is obviously against the establishment of confusion. Moreover, there?s little evidence to prove the confusion, neither there?s any mutual share holding between the companies.
As to the same legal representative, As provided in Article 38 of the General Principles of the Civil Law of PRC, ?In accordance with the law or the articles of association of the legal person, the responsible person who acts on behalf of the legal person in exercising its functions and powers shall be its legal representative?, and Article 43, ?An enterprise as legal person shall bear civil liability for the operational activities of its legal representatives and other personnel?. Therefore, the signing made by the legal representative shall be seen as made by the company on general. In the case, the legal representatives of two Proviews are actually the same person, which makes the intention of the signing person to represent Shenzhen Proview as the key element in deciding the whether the signing by the legal representative of Taiwan Proview could bind Shenzhen Proview.
For the iPad battle, we believe China court will make a proper judgment, but the problem of the personality confusion of the corporate as well as the binding of the contract signed by affiliated company deserves the attention of the investors, and wish our post may help you a lot in this field.
Other recommended posts on our website:
1. The Actual Term of Trademark Registration in China
2. How to Apply for the Trademark Record in China Custom
3. How to improve the success rate of trademark registration in China?
4. Matters for Attention in Trademark Refusal Review in China
5. Introduction of China?s Legal System of Trademark Renewal
6. Introduction on the Regulations concerning the Capital Contribution in IPR or Domain Name in China
7. The Copyright Registration in China Could Be FREE?
8. China Copyright Protection Term Longer than EU?s?
9. Matters for Attention in the Patent Preliminary Injunction Application in China(I)
Author: Frank Yu?(Yu Zhiyuan)
Attorney-at-law of DeBund Law Offices
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Bridge IP Law Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works.?And all news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works. You may contact us shall you have any opinions or suggestions.
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