iPad trademark dispute shows difficulty of doing business in China

To most global consumers, the iPad is practically synonymous with American electronics titan Apple.

But one debt-ridden company in China, Proview, is alleging that it is the rightful owner of the trademark for the name of one of Apple’s signature devices. The claim has resulted in government officials yanking the tablet from store shelves in some Chinese cities, despite high demand for the product.

It’s a strange twist on a pervasive problem: American and other global firms often accuse Chinese entities of unfairly copying their intellectual property, but now a Chinese company is pointing a finger at a U.S. corporation in a copyright dispute. And a lower Chinese court has ruled in Proview’s favor, although Apple produced documents that it claims prove the company legally bought the iPad trademark in 2009.

The legal clash illustrates why it can be difficult for U.S. companies to do business in China.

Adam Segal, senior fellow at the Council on Foreign Relations, said the trademark dispute is “symbolic of kind of a set of problems. I think it’s an issue of how laws are interpreted and how they’re implemented and what you can expect from different level courts.” But, he added, “I don’t think it’s a larger part of the Chinese strategy” to have an electronics market that is dominated by Chinese producers.

It’s not just intellectual property laws that may give businesses headaches when they come to court consumers in China.

Bill Reinsch, president of the National Foreign Trade Council, said that when U.S. companies do business abroad, they want a sense that the host government has a transparent way of resolving commercial disputes. “They don’t have to win every time, but they want to know they have a fighting chance,” Reinsch said, adding that “they don’t have that in China.”

China is crucially important for Apple, as the company faces an increasingly saturated market for mobile devices in the United States. Chief executive Tim Cook has said that demand for the company’s products among Chinese consumers is “staggering.”

“We bought Proview’s worldwide rights to the iPad trademark in 10 different countries several years ago,” Apple spokeswoman Kristin Huguet said. “Proview refuses to honor their agreement with Apple in China and a Hong Kong court has sided with Apple in this matter. Our case is still pending in mainland China.”

The Chinese Embassy in Washington did not immediately respond to a request for comment.

When it comes to intellectual property issues in China, Reinsch said the costs to technology companies can be bigger than they are to other firms.

Reinsch explained that for a business such as a film studio, the infringed product — a movie — has a short shelf life. But for a technology company, an intellectual property violation could cause a loss of market share on a core business line.

Wednesday, Apple and Proview both had their say in a Shanghai court. But after four hours, the Associated Press reported, the hearing judge did not reach a decision and had not set a date for a future hearing or judgment. The Guangdong High Court will hold a hearing on the issue Feb. 29.

The Chinese company indicated that it was willing to resolve the dispute in a settlement after receiving a letter from Apple accusing Proview of spreading false information in the media. But at least 39 other Chinese companies or individuals have tried to register the iPhone or iPad trademark, according to the state-run China Daily.

“China has a problem with aggressive copying,” said Robert Enderle, a technology analyst from the Enderle Group. “The question is, are you willing to take the risk that China will take that technology and use it against you?”

The dispute over the iPad comes as Apple faces a challenge from rivals racing to tap the lucrative Chinese market. In October-December, Apple’s share of the smartphone market slipped for the second straight quarter.

Samsung had 24.3 percent of the market, more than three times Apple’s 7.5 percent share. Smartphones made by Nokia and two Chinese companies, Huawei and ZTE, also sold better than Apple’s, according to a study released by Gartner this month.

Researcher Wang Juan in Shanghai contributed to this report.

Sarah Halzack is a reporter and Web editor for Capital Business. She covers the local job market and the business of talent and hiring. She occasionally writes for other sections at the Post, most frequently in the form of dance reviews, dance features, book reviews and obituaries.
Hayley Tsukayama covers consumer technology for The Washington Post.
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