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Apple settlement: An aye for an 'i'?

FINALLY, one of China's highest-profile trademark disputes is resolved. Apple is paying US$60 million to Shenzhen-based Proview as settlement to end a two-year battle over use of the iPad trademark on the mainland. Media reports have called the settlement a "reasonable and acceptable price," but I think the cost to Apple is more than it appears.

The dispute centered on whether Proview's Taiwan unit, which Apple paid US$54,800 in 2009 to use the iPad name, had the rights to the trademark on the mainland. For Apple, the way is now clear to launch its latest iPad on the Chinese mainland, four months after its debut in the United States.For Proview, the settlement money will help defray the company's debt load of about US$400 million.US$60 million is small change to Apple. But there have been additional costs, including legal fees and the loss of several months' sales of its latest flagship product in its second biggest market.

Luxury-level fees

Apple hired King & Wood Mallesons, which was founded by Wang Junfeng, current chairman of the All China Lawyers Association, to represent it in the Proview case. It's a blue-chip firm in legal circles and charges clients "luxury-level" fees. King & Wood wouldn't have touched the Proview case for anything less than US$10 million, I was told by several lawyer friends in off-the-record talks.

Apple is the world's No. 1 consumer electronics firm and China is its second-largest market after the US, contributing about 20 percent of Apple's global revenue in the quarter ended March 31.

The delay in selling its newest iPad here must have hurt those coffers.

Normally, Apple launches its latest products, including the iPad, iPhone and Mac computer, on the Chinese mainland one or two months after debuts in the US. By that measure, Apples should have started sales of its new iPad in May. In fact, it had received all the necessary approvals from authorities to do so.

Because of the trademark dispute, the launch has been delayed.Last year, Apple sold 800,000 iPad2s within several months after it began sales of the device in China. The latest iPad will sell at a price 1,000 yuan (US$158) higher than its predecessor. Therefore, the delay in the launch will certainly have some impact on the profits of Apple China this quarter.So when is the big launch? Sometime later this month, apparently.

It's been what you might call a "busy period" the past two months for the information technology industry.

Apple's longtime rival Google has released its updated Android operating system for mobile phones. The upgraded Android contains Google Now, a new voice search and assistant tool that will be a direct and powerful challenge to Apple's Siri, a major selling point of the iPhone 4S and the new iPad.

Potential Chinese iPad buyers - the people who normally embrace the latest gadgets and technologies - will have the opportunity to compare Android tablets with Google Now and the new iPad with Siri.

In early June, Microsoft, a software giant now eager to gain some market share in the booming mobile Internet sector, launched its lasted Windows Phone 8 system for mobile devices, which shares the same core architecture as its laptop computers.

Microsoft's new system will be available to the public in autumn. Obviously, it can't wait to show consumers the seamless connection and same user experience between mobile devices and computers. This is just the weakness of the iPad, which is strong on consumer functions but not convenient for business users. Even though Microsoft's announcement is not a fatal blow to Apple, it is expected to shake up the purchasing decisions of high-end business people.

Apple sold 1.68 million iPads on the Chinese mainland last year, up 50 percent from the previous year. At the end of 2011, the iPad had 70 percent of the domestic market for tablet computers. But the slice of the pie is narrowing quarter by quarter, according to Analysys International.

At such a critical moment, the absence of its flagship new iPad in the market gives rivals some space to gain ground. That's especially true with Samsung and domestic brands with a cost advantage, like Lenovo.

Legal headaches

The Proview settlement may not be the last of Apple's legal headaches on the mainland. The biggest ever settlement in a mainland trademark dispute is likely to open doors to other intellectual property rights lawsuits against Apple.

Every one wants to take a "bite of the Apple," as pundits are fond of saying. Apple, with its huge revenue and capital flow is a tempting target.

The value of related cases may rise after the Apple-Proview case, said intellectual property rights lawyer Liu Chunquan, a partner in Shanghai Pan-Ocean Law Firm.

In 2010, Apple paid Beijing-based Hanwang US$3.65 million for the iPhone trademark on the Chinese mainland. This time, just two years later, the cost to secure the iPad trademark was US$60 million.

And we're not just talking about legal action confined to the IT realm.

Jiangsu Xuebao Consumer Goods Co, a cosmetics and skincare firm, has sued Apple, claiming that the latter's Snow Leopard operating system on Mac computers infringes on its registered trademark Xuebao, which is the Chinese-language equivalent of "snow leopard."

Chinese home appliance maker Haier has also registered iTV as a trademark on the Chinese mainland.

Apple is expected to launch televisions and it is widely believed that the US company would use iTV as the name for the fresh product line. Will Apple then be forced to fork over another US$60 million or even more to protect a brand name in keeping with its product history?


 

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