Apple has paid 60 million US dollars (£38 million) to settle a dispute in China over ownership of the iPad name, a court announced, removing a potential obstacle to sales of the popular tablet computer in the key Chinese market.
Apple's dispute with Shenzhen Proview Technology highlighted the possible pitfalls for global companies in China's infant trademark system, and also posed a challenge for the communist government, which wants to attract technology investors to develop China's economy.
Apple says it bought the global rights to the iPad name from Proview in 2009 but Chinese authorities say the rights in China were never transferred. A Chinese court ruled in December that Proview still owned the name in China. Proview, which is struggling financially, asked Chinese authorities to seize iPads in an apparent effort to pressure Apple to settle.
"The iPad dispute resolution is ended," the Guangdong High People's Court said in a statement. "Apple Inc. has transferred $60 million to the account of the Guangdong High Court as requested in the mediation letter."
China is Apple's second-largest market after the United States and the source of much of the California-based company's sales growth.
Proview hoped for more money but felt pressure to settle because it needs to pay debts, said a lawyer for the company, Xie Xianghui. He said Proview sought as much as 400 million dollars (£254 million) and might still be declared bankrupt in a separate legal proceeding despite the infusion of settlement money.
The dispute centred on whether Apple acquired the iPad name in China when it bought rights in various countries from a Proview affiliate in Taiwan for £35,000. The December court ruling said Proview, which registered the iPad trademark in China in 2001, was not bound by that sale, even though it was part of the same company.
The settlement should be good news for both Apple and its customers because it clears a potential obstacle for the company to start selling the new iPad 3 in China, said You Yunting, a lawyer for the DeBund Law Office in Shanghai.
Apple has yet to announce a China release date for the iPad 3 but the country's telecommunications equipment certification agency approved the tablet in May.
The case gave Chinese authorities a chance to show that their courts could impartially resolve intellectual property disputes but also raised the possibility that technology investors might be put off by a negative outcome for Apple. Chinese regulators said Proview clearly owned the mainland name rights under Chinese rules. Without a formal ruling, it will be hard for companies to draw lessons about how Chinese courts will handle such disputes in the future, said Stan Abrams, an American lawyer who teaches intellectual property law at Beijing's Central University of Finance and Economics.