Earlier this month, Apple reached a $60 million agreement with China-based Proview International Holdings to acquire the rights to the trademark for the iPad in China.  The deal ends several years of litigation in Chinese courts between the two parties.  While far short of the $2 billion Proview initially asked for, and even further short of the $110 billion in cash Apple had on hand earlier this year, the sum still demonstrates both the value of a trademark and the importance of acquiring the rights to the mark before it becomes so valuable.

Proview initially registered the mark in China in 2001 for an “Internet Personal Access Device.”  In 2009, at a time when it maintained very little presence in China and before it launched the wildly successful tablet, Apple set up a subsidiary named IP Application Development to procure rights to the IPAD mark around the world.  Conveniently, IP Application Development abbreviates to IPAD and could not be easily linked to Apple.  At this point, the iPad device had not yet been announced and the mark was therefore not associated with any valuable brand.  Apple, through IP Application Development, struck a deal worth roughly $55,000 with what it thought was Proview for the rights to the mark in a number of countries, including China.

A year later, after the iPad device debuted to immediate success, Proview initiated a law suit in Chinese court claiming rights to the mark.  Its argument was that the deal struck with Apple was actually signed by Proview’s Taiwanese subsidiary, which did not own the mark.  The Chinese court ultimately found this argument persuasive and Apple, faced with the prospect of protracted litigation, decided settlement was in its best interest.  Industry speculators believe the acquisition of the mark was the last hurdle Apple needed to clear before releasing the latest version of the device in China.

Ultimately, Apple’s trademark struggle in China highlights the importance of registering marks as soon as possible in China as both an offensive and defensive measure for building and protecting brands.  It is important to note that unlike the U.S., China is a first-to-file country, whereby a party can claim rights to a mark by simply beating competitors to the filing process.  Under this type of system, a party can potentially claim rights to a priceless mark like IPAD by obtaining a registration first, and can then effectively hold other parties that might have a claim to the mark, like Apple, hostage.  Thus, Apple’s costly battle to obtain the IPAD mark in China represents a key reminder that a party should always consider registering a mark in China as soon as possible to ensure that they reserve their rights to use and enforce that mark in China.  

For more information about this settlement, please see: http://www.bbc.co.uk/news/business-18669394