Whenever fashionable people become immersed in their own worlds holding their iPhones and wearing the earphones, people can’t help to glance at them sideways, not in amazement of how chic they are, but in hopes of getting a glimpse of the iPhones. Apple Inc. is committed to making stylish and personalized products. However, the high prices unfortunately scare many fans.

The Apple iPod Touch is a media player, while the iPhone is a smart phone. The two are similar in appearance, but their prices greatly differ. An iPod Touch runs about 1,000 Yuan, but the price of an iPhone is around 5,000 Yuan. The difference in pricing is caused by their dissimilar functions. An iPod Touch could be seen as an iPhone without the functions of making phone calls, sending messages and filming videos.

The Apple logo is an image of an apple with a bite taken out. This mouthful arouses the business appetite of many. In early August, a product called the “Apple Peel 520” caught the eyes of iPhone fans and became popular throughout the Internet. The birth of Apple Peel 520 makes iPhone fans without enough

money excited because it can transform an iPod Touch into an iPhone. The producer of the Apple Peel 520 is Yosion Technology, a company founded by two brothers in Henan. The Apple Peel 520 is a functional back, custommade for the iPod Touch. It is understood that its communication function depends on a communication module in the back. There is a SIM card slot, battery, handset and other related components on the module. Inside the Apple Peel 520 is an Infineon module. The iPod Touch lacks a dialer program. If it could be used to make a call, third-party software needs to be installed (namely a “prison break,” which means opening user rights, breaking through an Apple program to freely install and run third-party software), then a special dialer program and program for sending messages has to be installed. It is reported that the price for an Apple Peel 520 runs about 388 Yuan. If the combination of the Apple Peel 520 and iPod Touch could function like an iPhone, it is believed that the price gap of several thousand Yuan would make it win the favor of many consumers. According to the news from the official website of Yosion Technology, the Apple Peel 520 is being produced and entered the market in September 2010. Most netizens highly praise the Apple Peel 520 and consider it very creative. However, some doubt its legality. An article on caijing.com.cn predicted that “the modification is too unpredictable to be legally permissible with so many uncertainties as to affect the business prospect of the Apple Peel 520. Although the Apple Peel has substantial differences from earlier Shanzhai versions of the pirated iPhone, it might still be unable to escape the Shanzhai model for survival."

 

Before the Apple Peel 520, iPhone has been well battered by Shanzhai products in China. Some netizens believe that the Apple Peel 520 smells more or less Shanzhai, but the lawyers and specialists interviewed by our reporter think otherwise. Mr. Tang Xiyou, a lawyer of the Guangdong Li Quan Law Fir m, commented that the Apple Peel 520 is an innovation rather than imitation; it was originally developed by Yosion. As such, it is not an act of Shanzhai, which is the copying of another’s product. Mr. Cai Xinhua, a lawyer form the Sichuan Jia Shi Law Firm, shared the view that Shanzhai, in general understanding, is a takeoff of another’s product. According to relevant data, however, the Apple Peel 520 does not merely copy the physical appearance of the iPhone; nor does it clone the high-tech application system. It is an expansion of the iPod Touch functions, and structurally very different. Dr. Yun Zhenfu, deputy director of the Shanghai Intellectual Property Association, said in the interview, “The iPod wearing Apple Peel 520 really looks like a Shanzhai product of iPhone. But a Shanzhai doesn’t necessarily mean that it lacks innovation. At least, Apple Peel 520 itself is ingenious and creative.”

Although the Apple Peel 520 could cast off the suspicion of copycatting, it couldn’t avoid the fate of being shanzhaied. There are many copycats of the Apple Peel 520 appearing on the market throughout China even before Apple Peel enters into the market. The Henan brothers have reportedly said, “We are angry but could do nothing about it.”

Since the Apple Peel 520 hasn’t been placed on the market up to the time this article was written, some intellectual property issues are mere speculations. Regarding the issue of trademark, Yuan Zhenfu considered that if Yosion Technology uses “Apple Peel” as a trademark for this product, it might constitute trademark infringement because “Apple Peel” is similar to the “Apple” trademark registered in China by Apple Inc. Tan Wenye, a lawyer from the Anova Law Group, said that Apple Inc. might assert its trademark right by claiming: “Apple Peel” is likely to cause confusion as to “Apple” and Apple Peel 520 would very probably trade on “iPod Touch”, “iPhone” and other trademarks of Apple Inc.

Under the Doctrine of Exhaustion, the patent is exhausted after the first sale of the patented product made by patentee or under authorization of patentee. A person having lawfully acquired the patented product may use, sell, or offer for sale the same product, without interfering the patentee’s right. Mr. Wang Zhiyong, a lawyer with Kangxin Partners, P.C., explained, once a specific iPod Touch is sold, no matter how it would be physically altered or fixed with other collateral products, it would not be considered as infringing upon the iPod Touch patents. To find for infringement, the subject matter of the “Apple Peel” and iPod Touch combination must

comprise all the limitations in the i Phone patent c l a ims . O n l y in this way, the iPhone patent can be said read on the combination, hence the patent infringement. Wh a t c o u l d be most likely

involving the Apple Pe e l 520 is the design patent, according to Yuan Zhenfu. “However, the Apple Peel 520 itself is very different from iPod Touch or iPhone. What may be somewhat similar is the combination when an iPod Touch is inserted into the Apple Peel 520, and the similarity comes more from the iPod Touch itself than the Peel. Although Apple Inc. owns the design patent of iPhone, Apple Peel 520 would not face the danger of infringing the design patent. However, if the communication module directly imitates or copies that of iPhone, it might be within the patent protection scope of Apple Inc.” Both comments above share the same view that the infringement issues hinge upon a thorough element-by-element comparison. Currently, there is not specific technical subject matter of the Apple Peel 520 available, and many issues are just speculations. Everything will settle when a real controversy is brought to trial.

 

On July 26, 2010, the U.S. Copyright Office under the Library of Congress announced a new exception to the Digital Millennium Copyright Act for mobile phone unlocking, smartphone jail breaking, and using video clips in transformational work and noncommercial work: The users have the right to crack smart phones such as iPhone to change carrier or install thirdparty software. Then, would the jail breaking of iPod Touch have the same luck? Yuan Zhenfu explained, the Re g u l a t i o n for Computer S o f t w a r e Protection in China bans deliberatel y e v a d i n g or destroying the technical measures used by the copyright owner for protecting the software copyright it holds, but it is noteworthy that if the aim of evading or destroying the technical measures is not obstructing the copyright owner from protecting its copyright, the obstructing and destroying is permitted according specific situations. Therefore, if Apple Peel 520 evades or even destroys the technical measure just by installing the software which could exchange data or realize communication function, then, there should be no legal obstacles for the unlocking. However, if the software installed in Apple Peel 520 belongs to Apple Inc. or the mobile phone software system of a thirdparty, the software itself constitutes infringement. In addition, when Apple Peel 520 installing software, if it is needed to modify the software inside iPod, according to Article 8 of Regulation for Computer Software Protection , as the software copyright owner, Apple Inc. enjoys the modification right, namely, the right to amend, delete, and change command, program statement order of the software. Tang Xiyou contemp la ted that developing related peripherals by cracking software not through the nature of usage directly doesn’t constitute a clear violation of the Copyright Law and the Regulation for Computer Software Protection ; moreover, it could help promote scientific and technological progress, which is at least not in the scope of prohibition.

 

Yuan Zhenfu considers that the Apple Peel 520 is very easy to be involved in the dispute of unfair competition because Apple Peel 520 updates the iPod to an iPhone which could affect iPhone’s market share. Strictly speaking, the competitive product of the Apple Peel 520 is iPhone. The Apple Peel 520 ties up the iPod from Apple Inc., and competes with iPone produced by Apple Inc., which would arouse the suspicion of unfair competition, especially if Yosion Technology takes changing iPod into iPhone as a promotional slogan. However, the Anti-Unfair Competition Law doesn’t provide clear provisions for such behavior, only the “good faith principle” in Article 2 of it could be suitable for use. We should use the legal weapon of unfair competition cautiously especially when people do not directly use other’s intellectual property or take other actions to directly damage the interests of the competitor, in order to leave reasonable space for business competition. Nevertheless, Wang Zhiyong observed that the Apple Peel might be suspected as an illegal operation. The manufacture, s a l e, and incor porating i n to the communication network of a mobile phone should be permitted only by a related department in China. If a company or an individual operates products through state trading, they should get permission to be operated.

 

(Translated by Jessica Zhang)