Tuesday, January 10, 2012

Spanish tablet computer maker NT-K brings indictment against Apple for alleged extortion

In early November 2011 I reported on the acquittal of a small Spanish tablet computer maker, Nuevas Tecnologías y Energías Catalá (doing business as "NT-K"), after Apple had alleged "counterfeiting", and translated the relevant court order. Today, NT-K issued a Spanish-language press release announcing the filing of an indictment against Apple for the alleged act of extortion. NT-K's owners filed those charges with the office of the district attorney (public prosecutor) for the Valencia region.

I have only seen the press release and the front page of the indictment. NT-K plans to publish some of the accompanying documentation on its corporate blog, starting next week.

Back in November I already pointed out that I believe NT-K's Android-based tablet computers didn't represent an act of counterfeiting in the narrow sense of the word: NT-K wasn't building iPad clones. At the most, they may have infringed a Community design, an EU-wide design-related right (comparable to a U.S. design patent), that belongs to Apple. In my view, any dispute over that type of infringement should be resolved under civil law without raising, directly or indirectly, issues under criminal law.

But this goes both ways. I understand that NT-K was offended by having to defend itself in a criminal proceeding that was more or less directly triggered by Apple asking customs authorities for help against an alleged counterfeiter. However, that doesn't make Apple's aggressive enforcement activities a crime. For now I don't see evidentiary support for the claim that Apple sought to "extort" NT-K and possibly other small companies.

I have looked up (on Wikipedia) the definition of extortion according to Spanish criminal law. It comes down to someone with the intent to enrich himself forcing, through violence or intimidation, his victim to commit or desist from an act or transaction to the economic detriment of the victim or a third party. NT-K argues that Apple sought to enrich itself to NT-K's detriment by intimidating NT-K, with the force ot its legal machinery, into the destruction of its products, the discontinuation of their commercialization, a waiver of its legal rights and the surrender of its customer list. In the alternative, Apple was going to -- and did -- shut down NT-K's importation of allegedly infringing products for at least a certain period of time.

While NT-K's representation of the events appears to match the aforementioned definition on the surface, aggressive enforcement of rights -- in this case, intellectual property rights -- is not necessarily a crime. Apple's lawyers threatened with legal action that may have been based on a very far-reaching definition of "counterfeiting" and probably also on the assumption of a very broad scope of the asserted Community design, but so far I don't see any signs of a criminal act. Since Apple's allegations of counterfeiting were dismissed, NT-K can try to recover damages and pursue other legal action, but it appears to me that Apple's conduct was above board. What NT-K has described so far looks to me like a case of bullying and I don't support it, but there was most probably a genuine legal dispute. In such a dispute, each party is allowed to assert its rights, state its views, and threaten with further legal action in the event of continued non-compliance with its requests.

NT-K's press release mentions that its lawyers sent Apple's counsel a letter that "dismantled, item by item, Apple's allegations" of counterfeiting, but subsequently, Apple reported NT-K's tablet to the Spanish customs authorities regardless. While I don't rule out that it might have been more appropriate for Apple in this case to engage in a constructive dialog with NT-K's counsel, it's nothing unusual for a right holder to take the next step if the recipient of a cease-and-desist order or notice of infringement disagrees.

I don't want to speculate about NT-K's intentions here. I believe that NT-K is probably entitled to the recovery of a reasonable amount of damages, but if I were Apple, I wouldn't pay more, or more quickly, just because of an indictment that may be no less overreaching than Apple's original "counterfeiting" claim was.

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