Yikes. Apple may have made a $2 billion dollar mistake in purchasing the iPad trademark from a company called Proview International Holdings, ltd.
Proview, a Hong-Kong listed company that has since filed for bankruptcy, had been making a small laptop called iPAD, which stood for “Internet personal access device.” Apple purchased international trademark rights from Proview in 2009 for $55,000, but now Proview is alleging that the purchase agreement didn’t include the territory of mainland China.
The price they’re now asking to use it in China? $2 billion.
The issue over Chinese rights to the trademark isn’t exactly new. A court in Hong Kong sided with Apple last year in the dispute. But courts in mainland China are more sympathetic to Proview, and iPads have started being pulled from retail stores in the country.
And of course, in the year-plus that the issue has made its way through the courts, iPad sales have exploded to make it the fastest-selling electronic device ever, and Apple has sailed past Exxon as the most valuable company in the world. Apple closed out the fourth quarter with $97 billion in cash on hand, and is expected to end this quarter with $100 billion. All of which makes a bankrupt computer-maker turning a $55,000 sale into a $2 billion payout a little suspicious. Legalese aside, it looks a lot like extortion.
The Wall Street Journal reports that Proview “declared Friday that it’s sticking by its claim that it still owns the trademark in China.” At a press conference Proview CEO Yang Rongshan said, “If we are not compensated properly, then Apple doesn’t use the iPad trademark in mainland China.”
A Proview attorney noted that four courts in China have accepted its case against Apple, and in December a Chinese court ruled that the trademark only applied to Taiwan and rejected Apple’s case that the trademark for China should be transferred to them as part of their earlier agreement.
Apple recently had to cancel its plans to start selling the iPhone 4 in Beijing because the intensity of the demand there caused a riot outside the store. Clearly Proview, since the time of the trademark’s initial sale, has had time to see Apple’s fanbase grow in size and intensity, and is no doubt seeing dollar signs everywhere they look.
What’s crazy is that, given Apple’s insanely huge cash reserve, it’s not even clear that forking over $2 billion for the trademark rights would even hurt them all that much. As is usually the case with these things, I’m sure Proview will extract some settlement fee way lower than $2 billion but enough to make its CEO Yang Rongshan, who WSJ notes is Proview’s biggest stock-holder, an extremely rich man.