trademark wars

Apple's $60M iPad Deal Could Make China Trademark Nightmare Worse

Posted by Abe Sauer on July 2, 2012 01:57 PM

Apple's iPad trademark nightmare in China is over. The AP reports that, after what seemed like endless haggling, face giving and face loss, Apple has agreed to settle and pay Taiwan's Proview for the trademark rights to "iPad" for what is now Apple's second largest market, China. For anyone with experience in China, the deal looks a lot like a typical buying experience.

Proview — the trademark seller — saw a 老外 (lǎowài) it thought it could rip off and set its price at $400 million. Apple, revealing itself to in fact be a 老油条 (lăoyóutiáo), countered (rumor has it) by offering $16 million. Proview threw up its arms, laughed, complained that it couldn't feed its family for that price, and countered. This went on for a long time until Proview finally offered the trademark for $60 million, and would throw in a "I Climbed the Great Wall" t-shirt for free. Apple took it.

It's a win for Apple, and not a loss for Proview. But it may prove to be a disaster for other brands in China, as Apple's payoff may just embolden China's already extremely bold trademark squatters.

Of course Proview does not have a family to feed, but it does have huge debts to finance. AP notes that even with the deal, Proview "might still be declared bankrupt in a separate legal proceeding despite the infusion of settlement money." Either way, it's fairly safe to say that Proview's 15 minutes is up and its name will not be making headline news anytime soon.

Meanwhile, Apple essentially paid $59,945,000 more than it had planned on for the iPad mark when it agreed with Proview a decade ago to pay $55,000 for (what it thought were) global trademark rights to the term "iPad." (The Economist correspondent Gady Epstein tweeted his estimate that $60 million represents about half a day's income for Apple.)

Apple's China iPad debacle is sure to land as a case study in law schools and MBA programs. But the pinch Apple felt in this legal stand-off is not that uncommon when doing business in China. Stan Abrams, a Beijing-based IP/IT lawyer and law professor, told brandchannel that "the screw-up that was central to this dispute is unfortunately very common." He added, "This is a great case to use when instructing first-year associates!"

Of the deal, Abrams told us, "I'm sure that Apple is not happy they had to pay anything. On the other hand, I bet they feel good about getting this whole thing behind them, and for a price that isn't really going to hurt their bottom line. In that sense, good deal for Apple." At his blog about China law, business and politics, China Hearsay, Abrams wrote more, including pointing out that "this was not really an IP case. It was a breach of contract that happened to be about a trademark."

Apple's trademark problems were, as Forbes notes, "self-inflicted" and not a result of China's famous first-to-file trademark squatting phenomenon. But that does not mean the deal will not embolden trademark squatters who will only see the outcome's dollar signs.

"Unfortunately, yes. Squatters out there might just be emboldened by this settlement amount, even though this of course was not a squatting case. But it was just a matter of time before a high-profile trademark case in China resulted in a large number like this," said Abrams.

Apple is not any average company and $60 is pocket change, but the takeaway for many Chinese trademark squatters will be, stick to the guns, and western brands will eventually tire and fork over the cash. All the more reason to run, don't walk, to claim your China trademark.

In any event, the deal leaves Apple free to concentrate on its other China headache.

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