Apple in hot seat again over iPad trademark

(Ecns.cn) – When Steve Jobs decided to use "iPad" as the brand name for Apple's uber-popular tablet computer, he probably never imagined that the decision would result in so many headaches for the company. Now, thanks to persistent lawsuits by China's Proview Group against the U.S. tech giant for infringement of trademark, Apple's reputation has come under heavy fire once again.

Last week the battle escalated to a new level, as Proview accused Apple of fraud in a lawsuit filed in a state court of California, where it claimed Apple had engaged in deceptive practices when it bought the iPad trademark. Meanwhile, many legal experts say that Proview has a legitimate claim in the case, and that Apple has more to lose if doesn't agree to a settlement soon.

Apple's products have won a large and extremely zealous Chinese fan base in recent years, creating a mainland market that the company dearly covets. However, recent scandals over child labor violations, worker suicides, rampant pollution and factory explosions have shaken the faith of many of Apple's cult-like fans all over the world, who increasingly find themselves in a moral quandary about their prized Apple products and the way they are manufactured.

Roots of 'iPad' dispute

In 1991, Yang Rongshan brought his business from Taiwan to the Chinese mainland for the first time and founded Proview Technology (Shenzhen) Ltd. Since then, Yang has set up numerous factories across the country in cities such as Dongguan, Wuhan and Changchun, noted China Newsweek.

In 1997, Yang united all of his IT companies and factories and listed them on the Hong Kong stock exchange under the parent company Proview International Holdings Ltd.

With several subsidiaries in hand, Yang succeeded in registering ten forms of "iPad" trademarks in 31 countries and regions between 2000 and 2001, including two in the Chinese mainland, said China Newsweek.

In 2000, Proview International released a product in the shape of a flat, thin computer, which the company claims was the first IPAD (Internet Personal Access Device) it had ever produced.

But according to Yang Rongshan, Proview only produced about 20,000 of the IPADs, and never released new generations of the product. Later, the company's business shifted to the production of computer monitors, in which its annual output ranked third in the world by 2006.

However, after the global financial crisis hit in 2008, Proview kept only one subsidiary in Wuhan in operation, while its others remained trapped in debt restructuring. The company continues to struggle with debt and is currently at risk of being delisted from the Hong Kong stock exchange.

This year, Proview sued Apple over rights to the iPad name and requested that Apple stop selling its iPad tablet computers in Shenzhen, Huizhou and Shanghai. However, on February 23, the Shanghai Pudong New Area People's Court rejected the request because no ruling had been made on whether Apple had violated Proview's exclusive right to use the iPad trademark.

Battle continues

To defuse the time bomb of the iPad trademark case, Apple has been keeping in touch with Proview International Holdings, according to China Newsweek.

Between 2004 and 2006, Apple confronted Proview before a UK court in a dispute over the similarities between Apple's brand "iPod" and Proview's ten forms of "iPad." Apple requested to revoke Proview's idled trademarks, but lost the case.

Though both sides did not reveal any details on the ruling, the contradictions between them have since intensified.

In August 2009, Apple set up a company called IP Application Development (IPAD) through its attorney in the UK, and soon signed a contract with Proview on the transfer of its iPad trademark in ten countries and regions at a cost of 35,000 British pounds ($55,000), including the two in the Chinese mainland.

However, after a few days, Proview found that IP Application Development had sold the rights of the iPad trademark to Apple, which then began selling the tablet product in the Chinese mainland.

Upon learning this, the Proview Group said it would sue Apple for illegitimate fraudulent commercial activity, and that Proview Technology (Shenzhen) Ltd still holds the rights to the iPad trademark in China.

Massive market

For Apple, China has already become the largest market for its various products outside the U.S., and hundreds of millions of dollars in mainland sales volume create an irresistible attraction.

Moreover, the market is expanding rapidly in China, which has contributed greatly to Apple's global sales growth. In the first three quarters of the 2011 fiscal year, Apple's revenue in China reached more than US$8.8 billion, approximately six times that of the same period in 2010.

In a recent speech, Apple's CEO Tim Cook said openly that the company has been paying great attention to the Chinese market and cherishes it very much. But he also mentioned that Apple must now make tougher choices for China than it did in 2010, when it introduced its first generation of iPads to the country.

Judging from his remarks, Apple will never give up the iPad trademark in the Chinese mainland. However, major retailers including Carrefour, Amazon.cn, 360Buy.com and the country's biggest electronics retailer Suning have all halted sales of iPads.

Though the case of the Apple iPad ban has been suspended for now in Shanghai, Proview has made good on its threats to continue the battle in U.S. courts, which will likely worsen the headache for Apple Inc.