Apple looks ahead as storm blows over

Consumer electronics giant plans aggressive moves in China after settling iPad trademark dispute

Apple Inc's decision to shell out $60 million (47.89 million euros) to settle a dispute over the iPad trademark in China will help the consumer electronics giant accelerate its pace of expansion in its fastest growing market, analysts say.

The Guangdong High People's Court said in a statement on July 2 that Apple will pay $60 million to Proview Technology (Shenzhen) for the iPad trademark in the Chinese mainland.

After the necessary transfer procedures, the iPad trademark will be registered under the name Apple, the statement said.

You Yunting, a partner at the DeBund Law Offices in Shanghai who has represented different clients in intellectual property cases, says the settlement removes the last obstacle for Apple to aggressively expand its business in China. The development will also hasten the pace for the introduction of the new iPad, launched in other markets four months ago, on the Chinese mainland.

The new iPad will be launched on July 27 on the Chinese mainland, according to eNet.com.cn, an IT information portal with daily visits over 18 million.

"Considering the benefits of an early launch of the new iPad, it (the settlement) is still a good deal for Apple at that price," he says.

Wang Ying, an analyst with Analysys International, a Beijing-based consultancy, also agrees that the settlement will speed up the official launch of the new iPad on the Chinese mainland.

"After four months, consumers' expectation for the new iPad have increased and this may trigger a new round of marketing," Wang says.

Apple could not be reached for its response on the settlement issue.

Established in 1989, the Hong Kong-based Proview International Holdings Ltd was a computer monitor maker, with operations in over 50 countries and regions. Proview started to develop its "iPad", a desktop terminal with touch-screen display, from 1998. However, the company was shuttered in 2010.

Last year, Proview (Shenzhen) petitioned the Chinese courts to ban the sales of Apple iPads on the mainland as the iPad trademark for the mainland was registered in its name in 2001.

Apple's iPad first entered the Chinese market in 2010 and has since enjoyed tremendous popularity with customers. Last year the Apple iPad dominated the tablet PC market in China with a 72.5 percent market share, far ahead of other rivals such as Samsung, Lenovo and Asus, according to data provided by Analysys International.

In its earnings filings for 2011, Apple said China was its second-largest market and accounted for more than 10 percent of its net sales in 2011. It said sales in China nearly quadrupled from 2010 to $12.5 billion in 2011.

The US company says there has seen strong demand from consumers in China for its iPhone and iPad, especially for the iPhone 4S with voice-assistant software Siri.

The trademark dispute had also raised doubts on the US company's ability to replicate its earlier successes in China. Xie Wen, a Chinese IT experts and former president of Yahoo China, however, says the case did not have any impact on Apple's business in China.

"The only impact was in terms of new products as the dispute delayed the launch of the new iPad," Xie says.

"China is a large market and can seldom keep pace with other markets like the US, especially in terms of updating Apple products. New products cannot be launched without government approval and this entire process may drag on to anywhere between three-six months," Xie says.

Liu Muhe, CEO of 1pad.cn, a Shenzhen-based website that covers the tablet PC industry, says the Apple dispute settlement will boost sales for local distributors such as 360buy, an online shopping mall for consumer electronics.

Xie says the inherent advantages of iPad will help the US company make up for lost ground in the tablet PC market.

At the same time, some experts feel that the dispute settlement is a lesson for Apple and other multinational companies. Intellectual property issues will become more complicated as China further opens up its markets and makes IPR protection a key task, Liu says.

In the trademark case with Proview, Apple realized that it was no longer something that it could brush under the carpet, but rather an issue that needed to be settled amicably.

"Though the payout is not such a big issue for a cash-rich company like Apple, the lessons it learnt during the process will prove to be valuable," Liu says. "It is more like the 'tuition fee' that Apple paid to better understand China's business environment."

Experts also say that the iPad trademark case is not the only hurdle that Apple will face in China. There are several other Chinese brands that have products with similar names like Apple.

A Chinese company called Jiangsu Xuebao Daily Chemical has already decided to take Apple to court for infringing trademark rights. The Chinese company says that the Chinese name of Apple's Snow Leopard operating system, Xuebao, is similar to a product launched by it.

Apple started selling Snow Leopard in China from 2009 onwards, while the Jiangsu company said in a statement that it had registered the trademark for Xuebao in 2000.

Xie says Apple should pay more attention to such cases in China as lawsuits may impinge on future growth plans in China.

You, the lawer, says the iPad trademark case has already triggered negative sentiment about Apple in industry circles.

"Apple paid $60 million to learn a valuable lesson. It will also prove handy for other multinationals to understand the different commercial practices and judicial systems prevalent in China," he says.

"Such cases will aggravate the distrust between foreign and domestic companies and also increase overall transaction costs," he says.