Apple has paid $60 million to settle a dispute in China over ownership
of the iPad name, a court announced Monday, removing a potential
obstacle to sales of the popular tablet computer in the key Chinese
market.
Apple's dispute with Shenzhen Proview Technology highlighted
the possible pitfalls for global companies in China's infant trademark
system. It also posed a challenge for the communist government, which
wants to attract technology investors to develop China's economy.
Apple
Inc. says it bought the global rights to the iPad name from Proview in
2009 but Chinese authorities say the rights in China were never
transferred. A Chinese court ruled in December that Proview still owned
the name in China. Proview, which is struggling financially, asked
Chinese authorities to seize iPads in an apparent effort to pressure
Apple to settle.
"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."
China is Apple's
second-largest market after the United States and the source of much of
the Cupertino, California-based company's sales growth.
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 Proview
sought 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.
The
dispute centered on whether Apple acquired the iPad name in China when
it bought rights in various countries from a Proview affiliate in Taiwan
for 35,000 British pounds ($55,000). The December court ruling said
Proview, which registered the iPad trademark in China in 2001, was not
bound by that sale, even though it was part of the same company.
The
settlement should be good news for both Apple and its customers because
it clears a potential obstacle for the company to start selling the new
iPad 3 in China, said You Yunting, a lawyer for the DeBund Law Office
in Shanghai.
"It is a good deal for Apple, because sales of iPads,
which are in great demand, can compensate for this $60 million cost,"
You said.
Apple has yet to announce a China release date for the
iPad 3 but the country's telecommunications equipment certification
agency approved the tablet in May.
The case gave Chinese
authorities a chance to show that their courts could impartially resolve
intellectual property disputes but also raised the possibility that
technology investors might be put off by a negative outcome for Apple.
Chinese regulators said Proview clearly owned the mainland name rights
under Chinese rules.
Without a formal ruling, it will be hard for
companies to draw lessons about how Chinese courts will handle such
disputes in the future, said Stan Abrams, an American lawyer who teaches
intellectual property law at Beijing's Central University of Finance
and Economics.
"It's such an atypical case," he said. "Certainly,
the details and specifics of this kind of commercial dispute aren't
going to give us any long-term lessons."
The outcome reflects
Chinese courts' preference for encouraging adversaries in commercial
disputes to settle instead of pushing for a ruling, Abrams said. He said
the relatively small size of the settlement by Apple's standards
suggested Proview gave in, possibly under pressure from either its
creditors or the court.
All of Apple's iPads are made in China by
Foxconn Technologies Group, which employs more than 1 million people in
sprawling factories. Brazil's government says Taiwan-based Foxconn plans
to open factories there to produce iPads and other products.
Shenzhen Proview Technology is a subsidiary of LCD screen maker Proview International Holdings Ltd., headquartered in Hong Kong.
A
Hong Kong court ruled in July that Proview and the Taiwan company both
were "clearly under the control" of the same Taiwanese businessman, Yang
Long-san, and had refused to take steps required to transfer the name
under the agreement. The judge said the companies acted together "with
the common intention of injuring Apple."
However, that judgment
had no automatic force in the mainland case because Hong Kong, while
Chinese territory, has a separate legal system.
Apple also ran into a trademark dispute before it launched the iPhone in 2007.
Cisco
Systems Inc., the maker of networking hardware, had owned the trademark
since 2000 and used it for a line of Internet-connected desk phones.
After Cisco sued, the companies reached an undisclosed settlement and
the phone launch went off as planned.
The dispute came amid
complaints Beijing is failing to stamp out rampant unlicensed Chinese
copying of goods ranging from music and Hollywood movies to designer
clothing and pharmaceuticals.
But unlike "trademark squatters" who
register names of products already sold abroad and then demand foreign
companies pay for the Chinese rights, Proview registered the iPad name
long before Apple planned its tablet computer.
"The only thing
companies really should take form this case is, be careful when you do
transactions, be careful with your contracts," Abrams said. "Be careful
you're doing it the right way or you could pay a lot for your mistakes."
Also see10 facts about Apple's 'iPad' battle in China