Foreign companies 'must carry out due diligence' before entering market

Apple Inc has paid $60 million in a court-mediated settlement over a trademark case that sheds light on possible legal disputes foreign companies may face as more enter the domestic market.

The money was paid to Proview Technology (Shenzhen) to end a dispute over the iPad trademark in China, the Guangdong High People's Court said on Monday.

Apple is involved in another trademark case in Shanghai.

"The mediation letter was sent to both parties and came into effect on June 25. Apple has paid the money into the bank account designated by Guangdong High People's Court," according to a statement from the court published on Monday.

A request has been made by legal authorities to the State Administration for Industry and Commerce to transfer the iPad name from Proview Shenzhen to Apple.

Apple said it acquired the iPad name in China in 2009 when it bought rights from a Proview affiliate in Taiwan for about $55,000. But a court ruling in December found that Proview Shenzhen, which registered the iPad trademark on the mainland in 2001, was not bound by that sale, even though it was part of the same company.

Apple launched its iPad on the mainland in 2010.

Proview Shenzhen, facing bankruptcy, requested authorities in scores of cities to order shops to take all iPads off their shelves and tried to impose an embargo on new models of the iPad prior to the court case.

"We understand that Proview Shenzhen has hundreds of creditors ... any devaluation of the trademark would cause loss to the creditors," the court said.

"We listened to reasonable appeals from both parties ... and find an innovative solution for trademark disputes involving foreign entities."

Xie Xianghui, an attorney representing Proview Shenzhen, told China Daily that the ruling fell short of the original demand of $400 million.

"But we accept the mediation, as it is the best way to settle the lawsuit at the moment," Xie said.

"Both Proview and Apple Inc made huge concessions during negotiations that lasted 2-3 months."

The money will be used to pay Proview's debts, about $400 million, according to Xie. Yang Rongshan, chairman of Shenzhen Proview, also said his company accepted the mediation.

Calls to Apple and interview requests went unanswered.

Analysts and experts said the settlement will allow Apple to get on with selling its popular tablet computer in one of its most important markets.

"It's good news for Apple because the settlement cleared the last obstacle for the new iPad entering the mainland market," said Wang Ying, an analyst from research company Analysis International.

According to earlier reports, the iPad dominates China's tablet market with more than 70 percent of market share. The iPad series took 62 percent of the global tablet PC market as of last year, data from research company IHS iSuppli showed.

"The absence of the new iPad on the market provided a golden opportunity for both overseas and domestic tablet PC manufacturers to snatch market share that had belonged to Apple," Wang said.

Commercial concerns played an important role, Stan Abrams, a law professor at Central University of Finance and Economics, said.

"There might be some Apple lawyers out there who are bitter over this incident, firmly believing their side was in the right, but legal issues are secondary to the business ones," he said.

The case showed "how complex cross-border or multi-jurisdictional intellectual property issues can be".

Companies must do their homework, he said.

"If Apple, which is one of the world’s largest multinationals, can make these kinds of mistakes, that should really serve as an example for smaller, less experienced companies, including those from China, that they need to take great care in cross-border deals."

Wang Jun, a law professor at Fudan University, agreed that the arrival of more foreign capital could herald an escalation in legal disputes, especially over intellectual property.

"Apple would not have got into trouble if it had done due diligence," Wang said.

Feng Xiaoqing, an intellectual-property scholar with the China University of Political Science and Law, said companies should attach equal attention to the management of intellectual property rights as they did to creating them.

"They have to look forward in making brand strategies. Otherwise, they may face difficulties in seeking protection or end up paying large sums."