Apple has agreed to pay a Chinese company $60 million to settle a dispute over ownership of the iPad name, a court announced Monday, removing a potential obstacle to sales of the popular tablet computer in the key Chinese market.
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“The iPad dispute resolution is ended,” the Guangdong High People’s Court said in a statement. “Apple Inc. has transferred $60 million to the account of the Guangdong High Court as requested in the mediation letter.” (Associated Press)
If you want to see the notice that got everyone’s attention this morning, you can see it here (in Chinese).
A few questions everyone will be asking. First, why did this happen? Well, we already knew that Proview was looking for/needed a big payout and were holding out for a much larger amount. Seems like their legal counsel admits to this:
Proview hoped for more money but felt pressure to settle because it needs to pay debts, said a lawyer for the company, Xie Xianghui. He said the company had hoped for as much as $400 million and might still be declared bankrupt in a separate legal proceeding despite the infusion of settlement money.
All along, I was wondering if Proview’s creditors were going to force it to stand tall and try to get enough to pay off as much of their debt as possible. But apparently someone on that side blinked, realizing that Apple wasn’t going to get anywhere near that figure. That explains why settlement talks never went anywhere for so long.
So why did Proview agree to this now? Hard to say, but perhaps the court whispered into their ear and suggested it was time to get back to reality and agree on a much lower figure. We already know that the system here prefers settlements to high-profile cases like this.
Alternatively, Proview and/or its creditors had enough and said let’s take what we can get. Perhaps we’ll know the answer when more information comes out.
Second question: what about Apple? Why would they agree to this?
Are you kidding? Sixty million dollars to put this to bed once and for all? While I’m sure no one was happy to give up on this case, the amount seems pretty low, all things considered. I’m sure someone out there will come up with a cute infographic showing how many seconds/minutes it takes Apple to make $60 million. I don’t think this payout will hurt their bottom line, and everyone at HQ in Cupertino can now sleep soundly. There might be some Apple lawyers out there who will remain bitter over this incident, firmly believing their side was in the right, but the legal issues are secondary to the business ones.
Third question: what happens now? In the announcement, the court said it had formally notified the Trademark Office of the settlement. That means that Apple now has unofficial ownership of the mark. It will not have official ownership until an assignment agreement is approved by the Trademark Office and a new trademark certificate is issued in Apple’s name. This can take up to several months in a normal case. None of that really matters anyway unless Apple immediately needs to assert its ownership rights against, for example, a third party infringer. Even so, I would assume that the settlement agreement includes a provision regarding Proview’s cooperation in that eventually, so no worries there.
Fourth question: what have we learned? As I’ve been telling folks this morning, this is NOT a case that imparts a lot of lessons for other foreign companies with IP issues. Just to remind you, this was not really an IP case. It was a breach of contract that happened to be about a trademark. This case did not involve the Trademark Law, Anti-unfair Competition Law or other IP rules or regulations, at least not directly.
The only lesson here relates to the importance of due diligence, careful contract drafting, and post-agreement follow up. That’s where Apple made its mistakes, and it ultimately paid $60 million+ for its troubles.
It’s been an interesting ride, folks. I’ll have more if we learn additional details about the settlement agreement, but I doubt there is anything exciting there. Otherwise, I think this is pretty much a done deal.