Winding road to iPad deal

PUBLISHED : Tuesday, 03 July, 2012, 12:00am
UPDATED : Tuesday, 03 July, 2012, 12:00am


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Soon after news broke yesterday of Apple's US$60 million payment to settle the legal dispute over the iPad's mainland Chinese trademarks, the company sent out new flyers online to promote its popular media tablet.

'Just what you need to do, just about anything,' said the advertisement, which encouraged recipients to shop online or find a retail store that sold the iPad.

It was a promotion that could not have been more timely, following on the heels of a long-awaited resolution to the nagging trademark issue in Apple's second-largest market after the United States.

For Apple's adversary, the deal meant it was time to move on after its hopes of squeezing up to a US$2 billion settlement for its domestic iPad trademarks from the world's biggest technology company were dashed.

Hong Kong-listed Proview International, its subsidiaries in Taipei and Shenzhen and the group's bankrupt Taiwanese founder, Rowell Yang Long-san, represented the legal nemesis Apple faced in the acrimonious trademark dispute that was fought in courts in Hong Kong, Shenzhen, Guangzhou and California over the past two years.

Negotiations between Apple and the Proview group for the iPad's worldwide trademarks began in early 2009, several months before Apple co-founder Steve Jobs introduced the media tablet in the US on January 27, 2010.

Legal documents show that Apple used a company called IP Application Development as its intermediary in these talks.

The firm was set up by Apple in Britain to acquire the trademarks to the iPad name.

Proview International, which had been one of the world's leading makers of computer displays, and its subsidiaries - Proview Technology (Shenzhen) and Taipei-based Proview Electronics - had registered the trademarks 'I-PAD', 'IPAD' and 'i-PAD' between 2001 and 2003. The trademarks were for what Proview called an 'internet personal access device' that the group would produce in a deal with US chipmaker National Semiconductor.

Reuters described the device as a stripped-down personal computer with a bulky cathode ray tube monitor and a slow processor that ran a very basic version of Microsoft's Windows operating system.

Yang said Proview spent more than US$30 million on research and development for that product while the group competed in the cutthroat computer monitor market. More than 10,000 units were produced, with a retail price of US$300 each, until production was stopped because of what Yang suggested were technical problems.

The global financial crisis put an immense strain on Proview's business in 2008, which was the same year the company posted its first loss.

The firm's Brazilian subsidiary had filed for bankruptcy protection in 2009, when Yang was already providing his own money to keep the operations of the group afloat.

In December 2009, Proview International agreed to sell the group's iPad trademarks in eight countries and territories - including two registered in mainland China - for ?35,000 (HK$432,000) to Apple and IP Application Development.

While drawing up the agreement for that sale and the so-called country assignments, Apple and its intermediary discovered the two mainland Chinese iPad trademarks were not owned by Proview's Taiwan subsidiary, as they had been led to believe, but by Proview Shenzhen. That made ineffective the China country assignments provided to IP Application Development by the Proview group.

Apple said the Proview group, while acknowledging the mistake made, refused to rectify the matter and asked Apple to pay US$10 million for the two mainland-registered trademarks. The US firm and its British intermediary began an action against the Proview group in Hong Kong on May 20, 2010. Under their previous transaction, the parties agreed to exclusively settle all their disputes in the city.

Proview International's shares were suspended from trading on the Hong Kong stock exchange in August 2010 as it scrambled to restructure and sell off assets on the mainland to pay its debts. Its Shenzhen subsidiary filed for bankruptcy later that year.

The Hong Kong stock exchange targeted Proview International for delisting for failure to file its financial reports since the second half of 2010.

In October that same year, Proview International said the group had about 3.8 billion yuan (HK$4.67 billion) in debts. Hejun Vanguard Group, a management consultancy firm in Beijing, had become Proview's major creditor after the company's assets were frozen by eight state-owned banks.

Hong Kong's Court of First Instance ruled in Apple's favour in July last year when it issued preliminary injunctions against defendants Yang and the Proview group from selling the mainland trademarks to other parties. The court found that Taiwan-based Proview Electronics negotiated as the sole proprietor of all the iPad trademarks, including the two registered on the mainland. A final adjudication by the court was slated for later this year.

The Intermediate People's Court in Shenzhen ruled against Apple in December last year in the trademark infringement lawsuit it filed to the court, declaring that the US company had no claim to the iPad name, because the rights to that brand on the mainland belonged to Proview Shenzhen.

After Apple appealed that ruling to the Higher People's Court of Guangdong province, Proview's Taipei subsidiary sued Apple in February this year in the Superior Court of California in Santa Clara county to void their deal and reclaim international rights to the iPad name. The case was thrown out in May because the court recognised Hong Kong's jurisdiction, based on the litigants' previous agreement.

The Guangdong court, which heard Apple's appeal in March, urged Apple and Proview Shenzhen to settle. It confirmed that the parties agreed to a settlement last week.

Apple's legal representative and spokeswoman in Beijing had no comment.