Proview and Apple: A Tale of Two Lawsuits
A California court has thrown out Proview's lawsuit against Apple over the iPad brand. But a similar lawsuit in China drags on between the two. The companies have at least talked about settling -- Apple reportedly offered $16 million, which Proview rejected. The problem for Apple may not be as simple as paying Proview to go away. Whatever payout Proview gets could set a precedent Apple doesn't want to set.
05/11/12 5:00 AM PT
A Chinese company that claims it owns the rights to the iPad name reportedly refused to settle its claims against Apple for US$16 million.
The company, Shenzhen Proview Technology, was apparently offered $16 million by representatives of Apple to drop its challenge of Apple's right to use the iPad trademark in China.
Shenzhen Proview, which is currently in the Chinese equivalent of bankruptcy, is reportedly looking for $400 million from Apple. Originally, it sought $2 billion from the make of the iPad.
If Apple's offer to Shenzhen Proview is genuine, it would affirm a report in the China Business Journal that after two years of frosty relations, the two companies are ready to hammer out a settlement.
U.S. Lawsuit Dismissed
Apple's reported offer came after a court on Monday threw out a lawsuit over the iPad trademark filed by Shenzhen Proview in California. In that case, Santa Clara County Superior Court Judge Mark Pierce ruled that the Chinese company failed to prove that settling the dispute in Hong Kong, where the original lawsuit was filed, is "unreasonable or unfair" in any way.
"They were suing Apple for doing what everyone does: using a front company to buy something," he explained.
Apple purchased the iPad trademark in 2009 for around $55,000 through a UK-based business unit of Shenzhen Proview's parent company, Taiwan-based Proview International Holdings.
Apple contends that purchase secured the worldwide rights to the iPad name, rights that extend to China. Shenzhen Proview, located on mainland China, maintains its parent had no right to sell the iPad name to anyone.
Donald Trump at the Door
Using a proxy to purchase things is a tactic used in the real estate business all the time, Harris explained. It's a way to prevent property prices from being inflated based on the identity of a buyer.
For example, if Donald Trump came knocking at your door to buy your house, you might think about trying to get more for it than if a neighbor came inquiring about purchasing it.
One reason that Apple may have taken so long to come to the negotiating table with Shenzhen Proview is that the American company doesn't like the Chinese firm's tactics, according to Rob Enderle, president and principal analyst with the Enderle Group.
"Proview is holding Apple for ransom," he told MacNewsWorld.
"Proview as a company has pretty much gone under," he continued. "This lawsuit is pretty much all they've got. So they're tying to get as much money out of Apple as they possible can get."
Apple may also be concerned about the ripple effect of dishing out big bucks for a brand, Enderle added.
"This won't be the last product that Apple brings out," he explained, "and it looks like Apple is paying a million dollars for a brand, then everybody from now on is going to want to a million dollars. It can get a little pricey after a while."
"Whatever Apple does, it's going to set a precedent, and Apple doesn't want to set a precedent," he added.
Meanwhile, Apple isn't selling iPads in China, one of its biggest markets for other products. In the financial quarter ending in March, for example, Apple reported that revenues from China reach $7.9 billion, or 20 percent of the company's total sales for the period.
As long as the Shenzhen Proview case drags on, it basically eliminates China as a market for the iPad, Enderle said.
What's more, he added, "It allows people who are selling iPad knockoffs a free reign. So all of the iPad business, except for some of the gray market stuff, means that money is going to knockoff makers and not Apple.
"It's got to be incredibly upsetting for Apple," he added.