Apple Inc. (AAPL), the world’s most valuable company, paid $60 million to settle a two-year-old legal dispute with Proview International Holdings Ltd. (334) regarding the iPad trademark in China.
The terms of the settlement agreement were reached on June 25 and Apple has transferred the funds as agreed, the Higher People’s Court of Guangdong Province announced in a statement on its website today.
The iPad case had threatened sales of the second-best selling product of Apple, which had $110.2 billion in cash and investments on its balance sheet at the end of March, in its largest market outside the U.S. Before the agreement, Proview had applied to Chinese customs to block shipments of Apple’s iPad tablets in and out of China, and asked local retailers to stop sales of the product.
“If I’m Apple, I’m pretty happy, because this amount of money to them is nothing,” Stan Abrams, an intellectual property lawyer and a law professor at the Central University of Finance and Economics in Beijing, said in a phone interview today. “This isn’t a big amount to get this over and done with.”
Apple spokeswoman Carolyn Wu didn’t immediately return calls to her office and mobile phones.
The dispute had centered on whether Proview’s Taiwan unit, which Apple paid 35,000 pounds ($54,800) in 2009 to use the iPad name in mainland China, had the right to sell it or whether that rested with Proview’s Shenzhen unit, which held the mark. Apple sued Proview Shenzhen in 2010 claiming ownership of the iPad trademark in China and lost. Its appeal of that case was heard on Feb. 29, and the two sides had engaged in court-sponsored mediation since then.
Apple revenue in China tripled to $7.9 billion last quarter, helped by surging demand for products including the iPad tablet computer. The Cupertino, California-based company’s global sales of iPads topped 32 million units last year, earning revenue of $20.4 billion. In less than two years, the device has become the company’s second-best selling product by revenue, behind the iPhone.
Proview’s wholly owned subsidiary, Proview Technology (Shenzhen) Co., obtained the iPad trademark in China in 2001, according to a Feb. 3, 2010, regulatory filing with the Hong Kong stock exchange. The mark was obtained for a desktop terminal with touch-screen display called the Internet Personal Access Device, or IPAD, that the company developed starting in 1998.
I don’t think Proview Shenzhen is satisfied with the amount, but it’s very realistic,” said Roger Xie, an attorney for the company. “Proview accepted the settlement amount because it’s under great pressure from creditors. Maybe this is the only choice.”
Proview’s Shenzhen factory was shuttered in November 2010 and is being dismantled after creditor banks took over its assets when the company missed payments to suppliers and banks, founder Rowell Yang said in a phone interview today. The Shenzhen unit still owes about $400 million to creditors, including Bank of China Ltd. and China Minsheng Banking Corp., so the Apple settlement alone won’t cover the total, Yang said.
How Proview Shenzhen is to repay its creditors is still to be settled by the courts, Yang said.
“We tried to achieve a higher settlement target for our creditors,” Yang said. “Many of our creditors cannot wait too long, so we believe it’s best for us to settle at this moment.”