SHANGHAI (Reuters) - Apple Inc has paid $60 million to Proview Technology (Shenzhen) to end a protracted legal dispute over the iPad trademark in China.
The lawsuit had hampered some sales and delayed the introduction of the new iPad in China. Prior to the launch, Proview requested authorities in scores of Chinese cities to order resellers to take all iPads off their shelves.
The court-mediated settlement, announced on the website of the Higher People’s Court of Guangdong province, will allow Apple to get on with selling its popular tablet PC in one of its most important markets, analysts said.
“The settlement is great news for Apple,” said Teck-Zhung Wong, a Beijing-based analyst with technology research firm IDC. “It just allows them to get on with business and stop being distracted. The new iPad has been so late to the China market that if they drag it any longer, Apple will stand to lose quite a bit more.”
China is a key growth area for Apple, and Chief Executive Tim Cook has often said that the company has only scratched the surface in the region.
Sales in greater China - mainland China, Hong Kong and Taiwan - increased threefold to $7.9 billion in the second quarter ended on March 31, accounting for about 20 percent of Apple’s $39.2 billion in revenue.
The settlement with Proview paves the way to spark iPad sales for the September quarter, Topeka Capital Markets analyst Brian White said.
“Apple lifted its two-iPad-per-shopper policy in Hong Kong in what we believe may have been driven by demand from mainland China as many Apple products make their way over to the mainland,” he said. “Today’s iPad settlement is important and opens up the sale of the new iPad.”
The company and Proview, a unit of Hong Kong-listed Proview International Holdings Ltd, have been negotiating to reach a settlement since the court conducted an initial hearing in February, after Apple appealed a lower court ruling against it.
Apple had said it bought ownership of the iPad trademark in various countries from Proview, once a global monitor maker. But the Chinese company said Apple dealt with only one unit of Proview.
A Chinese court ruled that Proview Technology (Shenzhen) owned the name in China. Proview, which registered the iPad trademark in China in 2001, tried in May to sue Apple in the United States, but that case was thrown out.
Apple can afford the $60 million extra price tag on the trademark, given its more than $100 billion in cash and securities.
An Apple spokeswoman declined to comment on Monday.
Shares of Apple were up 1.3 percent at $591.59 in afternoon trading.
The iPad dominates China’s tablet PC market with more than 70 percent market share, but Lenovo Group Ltd’s Lepads and Samsung Electronics Co Ltd’s Galaxy Tabs have been gaining traction.
From the introduction of the iPad in the third quarter of 2010 to March this year, Apple shipped more than 6 million iPads to mainland China, according to IDC.
Proview - which local media had said was seeking as much as 10 billion yuan ($1.57 billion) from Apple - and its creditors should welcome the settlement, some lawyers said.
The $60 million will go into a court-designated account and be used to pay Proview’s creditors, said a source familiar with the situation. In March, Taiwan’s Fubon Insurance, one of several creditors and a unit of Fubon Financial Holding Co Ltd, applied for bankruptcy proceedings against Proview because of $8.68 million in outstanding debt.
“The settlement fee is not bad for Proview, because although Proview owns the trademark, it was Apple, not Proview, who created the brand’s value,” said Chen Jihong, a Beijing-based intellectual property rights lawyer at Zhong Lun Law Firm. ($1 = 6.3541 Chinese yuan)
Additional reporting by Poornima Gupta in San Francisco; Writing by Kazunori Takada; Editing by Jason Subler, Ian Geoghegan and Lisa Von Ahn