Apple has ended its long-running trademark trouble in China by agreeing to pay $60 million to use the iPad brand name in the country.
The Cupertino company had argued that it bought the rights to use the iPad name from Shenzhen-based Proview Technology for $55,000 three years ago — but a Chinese court disagreed, ruling in December that Apple was in breach of trademark law and threatening to seize iPads as a result. The fine print? Apple had bought the rights from Proview Electronics, a subsidiary based in Taiwan, not the main company itself.
Everyone seems to be satisfied, if not necessarily happy, at the outcome. As the AP reports:
“The iPad dispute resolution is ended,” the Guangdong High People’s Court said in a statement. “Apple Inc. has transferred $60 million to the account of the Guangdong High Court as requested in the mediation letter.”
Proview hoped for more money but felt pressure to settle because it needs to pay debts, said a lawyer for the company, Xie Xianghui. He said the company had hoped for as much as $400 million and might still be declared bankrupt in a separate legal proceeding despite the infusion of settlement money.
“This is a result that is acceptable to both sides,” Xie said.
While $60 million is clearly a significant sum, it could have been much higher: Proview, which faces bankruptcy, was seeking as much as $1.5 billion in compensation for the illegal use of the iPad trademark, which it had registered China in 2001.
And Apple seems to have decided that the threat to its Chinese business — long ignored by the company but now its second-largest market after the United States — was worth the cost. There has been a prohibition on selling iPads while the case was underway.
Ransom demands on the way?
The case has already raised concerns among many Western companies, who feel that the country remains a “minefield” for trademark cases. The fact that China is a “first-to-register” market has left many businesses at the mercy of trademark vultures who register the names of foreign companies and products before outsiders get there.
It’s left many companies having to pay to buy the rights, as this recent report from NTDTV discusses.
In it Hong Kong-based lawyer Sandra Gibbons explains that some Chinese individuals have turned trademark registration into a profitable business.
”It happens all the time and I’ve got several clients at the moment who are blocked from registering their trademark in China. They’re faced with a large payment in order to try and get it back, sometimes in terms of millions of US dollars, to try to buy back their trademark which is their legitimate business.”
But while the Apple settlement may increase concerns from Western companies that they are going to be hauled over the coals by squatters, one important point is worth remembering: Proview’s trademark goes back a long, long way — well before the launch of the tablet.