The Financial Times: In 2006 Taiwan-based Proview Electronics chair­man Rongshan Yang agreed to sell the global trade­mark for IPAD to IP Application Development for £35,000 with­out knowl­edge the com­pany had ties to Apple. The IPAD trade­mark for the Chinese mar­ket was filed by Shenzhen-based Proview Technology, an affil­i­ate of Hong Kong-based Proview International.

Proview Technology defaulted on loans worth US$400 mil­lion and a group of Chinese cred­i­tor banks seized the company’s assets, includ­ing the IPAD trade­mark for the Chinese mar­ket. Proview Technology share­hold­ers and cred­i­tors planned to sell the trade­mark to the high­est bid­der. This is when Apple and IP Application Development sued to have the Chinese mar­ket IPAD trade­mark assigned to IP Application Development. The prob­lem lies right here: Yang claims the pur­chase agree­ment for the global trade­mark for IPAD did not include the Chinese market.

Financial Post: On Tuesday, the Intermediate People’s Court in Shenzhen, China rejected Apple’s claim that Proview was infring­ing its iPad trademark.

FT: After the court’s rul­ing Proview Technology has sued Shenzhen and Huizhou based Apple resellers to block iPad sales. If Proview Technology suc­cess­fully blocks the sales of iPads in these two cities the com­pany may tar­get Apple resellers in other cities in China.

There is Proview International, the hold­ing com­pany based in Hong Kong, Proview Electronics an affil­i­ate in Taiwan, and Proview Technology another affil­i­ate in Shenzhen. Proview Electronics sells the global trade­mark for IPAD to IP Application Development. But it’s the Shenzhen-based Proview Technology, a com­pany that defaulted on mil­lions of dol­lars worth of loans, who owns the IPAD trade­mark in China, which for some rea­son wasn’t included in the sale to IP Application Development. Sounds fishy to me, but this might be a sim­ple case of Proview International/Electronics/Technology swin­dling Apple into buy­ing a not-so-global IPAD trade­mark. If so Apple may be forced to pay dearly for its mis­take, to the tune of US$1.5 billion.

Update: Mike Elgan, Datamation:

In order to squeeze Apple, the com­pany has con­vinced author­i­ties in sev­eral cities to send police into stores to con­fis­cate iPads. So mer­chants are tak­ing iPads off the shelves pre­emp­tively. The com­pany is try­ing to do so in more than a dozen other major cities as well.

This leads to a strange real­ity in those cities: Police are crack­ing down on the sale of legit­i­mate iPads, while coun­ter­feit iPads based on Apple’s stolen intel­lec­tual prop­erty are sold freely in the same stores.

Welcome to China.

I see this as an oppor­tu­nity for Apple to ini­ti­ate build­ing its man­u­fac­tur­ing capa­bil­i­ties in the U.S. If Apple were build­ing the iPad in the U.S. the only coun­try that would be impacted by China’s pseudo-legal sys­tem would be China: Apple would be pre­vented from export­ing iPads there, but other parts of the world would not be affected. If Proview con­tin­ues to gets its way with judges and gov­ern­ment bureau­crats in China, Apple’s global iPad busi­ness might come into jeop­ardy. And that point a cou­ple of bil­lions of dol­lars might be the price Apple is forced to pay to sell iPads in China, and only for the time being.

Update 2: Wang Huazhong, Cao Yin, and Yuo Yannan, People’s Daily Online:

“We bought Proview’s world­wide rights to the iPad trade­mark in 10 dif­fer­ent coun­tries sev­eral years ago,” accord­ing to a state­ment Apple sent to China Daily on Wednesday.

“Proview refuses to honor their agree­ment with Apple, and a Hong Kong court has sided with Apple in this mat­ter,” accord­ing to the state­ment, which also said the case is still pend­ing on the Chinese mainland.

Unfortunately, what hap­pens in Hong Kong might not have much rel­e­vance in main­land China:

Yu Guofu, a Beijing-based lawyer spe­cial­iz­ing in intel­lec­tual prop­erty rights, said the ver­dict of the Hong Kong trial or that of the main­land will not have any influ­ence on one another or vice versa.

“The root cause of the dis­pute is Apple’ under­es­ti­ma­tion of the legal com­pli­ca­tions in China,” the lawyer said, adding the case also serves as a warn­ing to com­pa­nies in China to think twice about risks before “going abroad”.

Update 3: John Paczkowski:

In it, Judge Hon Poon writes that Proview’s con­duct smells of con­spir­acy dri­ven by finan­cial des­per­a­tion, and that there’s rea­son to believe that it acted in breach of its agree­ment with Apple by wrong­fully refus­ing to honor its oblig­a­tion to hand over the iPad trade­mark in China.

In this par­tic­u­lar case, it seems law in main­land China is enforced based on the strength of per­sonal rela­tion­ships, for finan­cial gain. And have a look at the addi­tional doc­u­ments AllThingsD acquired; to me it’s clear: Proview sold it’s rights to the iPad trade­mark to Apple.

Update 2012.02.18: Proview’s iPAD was an iMac ripoff.

Update 2012.02.23: Mat Smith, Engadget:

According to Chinese news out­let Xinmin, a Shanghai court has rebuffed Proview’s demand for an injunc­tion halt­ing the sale of the Apple tablet due to licens­ing issues. The Pudong New Area People’s Court made the deci­sion yes­ter­day, stat­ing that while the Guangdong court case has yet to make a final deci­sion on who owns the “iPad” trade­mark, there wasn’t enough evi­dence on Proview’s side to honor an injunction.

Here’s the link to Xinmin (Chinese). With the immi­nent announce­ment of the next iPad this trade­mark fiasco with Proview is cut­ting it pretty close. I’d like to see Apple take this as a warn­ing and start build­ing man­u­fac­tur­ing capa­bil­i­ties else­where, just in case.

Update 2012.07.03: The cost of sell­ing the iPad in China just rose by US$60 mil­lion for Apple. Joe McDonald, Associated Press:

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.

That Chinese com­pany is Proview Technology.