Apple Saves $340 Million in iPad Trademark Dispute
Apple (NASDAQ: AAPL) has paid $60 million to officially purchase the iPad name in China.
The Cupertino, California-based enterprise thought that it had acquired the global rights to the iPad name when it purchased them from a Proview affiliate in Taiwan for roughly $55,000. But according to the Associated Press, Proview (which registered the iPad trademark in China in 2001) argued that it did not sell the name in China, and a Chinese court agreed. Consequently, Apple was forced to settle.
Globally, this presents a new challenge for tech companies that are looking to invest in China. How can they ever be sure that the legal entities (trademarks, patents, etc.) that they obtain are truly global? If a company disputes any such ownership, which side is more likely to get the support of the Chinese government -- the foreign corporation or the domestic firm?
This settlement is a significant loss for Apple, but it could have been much worse. When the Mac maker originally purchased the global rights to the iPad name, Apple had yet to transform the tablet industry. Thus, Proview agreed to sell. But after a couple years of industry-leading tablet sales, the iPad name became a valuable property worldwide. Proview knew that Apple had to acquire the name if it wanted to maintain the brand globally, particularly in China, which is Apple's fastest-growing market.
Apple was now at the mercy of Proview. However, the iPad maker had one advantage: deep pockets. Proview is struggling financially and may soon be declared bankrupt. The company had hoped to receive as much as $400 million from Apple, but a Proview lawyer, Xie Xianghui, told the Associated Press that the company "felt pressure" to settle because it needs capital to pay down its debts.
In that sense, Apple might have gotten off easy with a $60 million loss. If Proview had the financial resources to continue fighting, Apple could have been forced to pay $340 million more.
Follow me @LouisBedigianBZ
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.