Apple Pays for iPad Trademark in China – Again

Apple just let a Chinese court wrestle $60 million for the iPad trademark in China, even though Apple had already bought the rights two years ago. Did Apple do the right thing?

At first glance, you might think Apple folded by paying $60 million for a trademark it arguably already owned in China. You might wonder if a Chinese court helped a shady Chinese company squeeze some cash out of the world’s biggest tech vendor.

You might also be shaking your head at the whole thing.

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The Taiwanese unit of a Chinese company called Proview International Holdings sold the iPad trademark rights for mainland China to Apple for $55,000 two years ago. Proview, nearing bankruptcy, claimed the Taiwanese unit didn’t have the authority to sell the trademark, tried to block iPad shipments at customs, and sought to extract some $400 million from Apple.

This week, the Higher People’s Court of Guangdong Province sided with Proview but reduced the amount to $60 million. Apple paid the terms of the settlement, which is a mere footnote in its $110 billion war chest. All of this happened in the land of copycats where a Chinese government largely turns a blind eye to trademarks, patents and intellectual property rights.

Did Apple do the right thing? Absolutely.

American companies have been at a severe disadvantage in the global market for years. They need to tap cheap manufacturing in China in order to stay price competitive. Yet as soon as their designs make their way to a Chinese manufacturing plant, illegal copycat products quickly hit the streets.

A CIO of an American company even speculated that the same Chinese manufacturer his company contracted with ran 24-hour cycles, churning out legal products in the day and illegal ones at night. Chinese manufacturers are some of the best reverse engineers he has ever seen, he told me.

Now Apple is leveraging its sheer weight and global popularity to try and fix this problem.

Chinese copycats have a storied history of producing knock-off iPads and iPhones. Last summer, the problem hit a crescendo when a spate of fake Apple retail stores popped up in China. The stores looked very much like real Apple stores, even fooling employees who thought they were working for Apple.

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The big tip-off was that the sign outside the fake Apple stores read “Apple Store,” which real Apple stores don’t have. Anything with Apple in the headline, especially something this juicy, goes viral on a global scale. The fake Apple store became the symbol of China’s endemic copycat problem.

Following the media blitz, the Chinese government stepped in and shuttered two of the fake stores.

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Clearly, the Chinese government is getting the message that it needs to enforce intellectual property rights. Of course, it’s an ongoing process that will take time, because a shift in business culture and practice doesn’t happen overnight.

By acquiescing and paying out the $60 million, Apple is telling Chinese courts that it takes trademarks very seriously. When on the wrong side, Apple is willing to pay. Much like the fake Apple store, the very public nature of this lawsuit will put more pressure on Chinese courts to toe the line on intellectual property.

There’s no question Apple is helping to drag Chinese copycats out into the light from the stealthy shadows from which they operate. It’ll take time, but it’s happening.

Copyright © 2012 IDG Communications, Inc.

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