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Inflaming trademark dispute, second city in China halts sales of the iPad

Inflaming trademark dispute, second city in China halts sales of the iPad

By Michael Wines, New York Times | Updated: 5 June 2012 18:16 IST

Highlights

The authorities in a second Chinese city have begun seizing iPads from local retailers in a trademark dispute between Apple and Proview Technology.

The authorities in a second Chinese city have begun seizing iPads from local retailers in an escalating trademark dispute between Apple and an insolvent maker of computer displays, Proview Technology.

The tablet computers are under "temporary impoundment" from retailers in Xuzhou, a city of 1.8 million people in coastal Jiangsu Province, Ma Dongxiao, a lawyer for Proview's creditors and the company, said by telephone. State-owned CCTV television confirmed the seizures in Xuzhou.

The seizures follow a ruling in December in which a court in Shenzhen dismissed Apple's contention that it owned the iPad name in China. Proview later asked the authorities in more than 20 Chinese cities to investigative whether iPads were being sold after the ruling, Mr. Ma said, a move that allows the authorities to impound the tablets until their inquiries are complete.

News reports Monday said that about 45 iPads had been confiscated from outlets in Shijiazhuang, the capital of Hebei Province, about 265 kilometers, or 165 miles, southwest of Beijing. Reports on the Chinese microblogging service Sina Weibo said that other retailers had removed iPads from displays, though some were selling them under the counter.

Proview has also made a filing with the General Administration of Customs in China, Mr. Ma said, putting Apple on notice that the company could seek to block the export of iPads, should Proview's ownership claims be upheld.

In effect, the seizures and the filing are warnings by Proview of the havoc it could wreak unless Apple agrees to pay a large fee to settle the trademark fight.

The Chinese government is widely accused of ignoring what foreign intellectual property experts call the rampant theft of patents, trademarks and other creations like Hollywood films and computer software.

Paradoxically, however, China's own intellectual property laws are so sweeping that they allow the government to ban the worldwide sale of any made-in-China product that is found to violate a Chinese patent, trademark or other protection. Tens of millions of iPads have been manufactured in plants in Chengdu and Shenzhen since the tablet was introduced in April 2010.

Moreover, because Chinese courts answer to the Communist Party, rulings can frequently be swayed by politics, personal relationships and other factors.

"It's the wild, wild East," one lawyer said of China's intellectual property environment in an interview Tuesday. The lawyer, who refused to be identified for fear of recrimination by government officials, said that a rush by foreign companies to shift manufacturing to China had left them exposed to draconian remedies not just in legitimate disputes, but in lawsuits brought by so-called trolls, who seek to exploit dubious property claims to extort settlements from global brands.

"You can't afford to lose a case in China," said the lawyer.

Some specialists have called it unlikely that the Chinese government will shut down exports by a major multinational company, even one that lost an intellectual property case, because of the potential for diplomatic repercussions and an exodus of foreign corporations unwilling to put their operations at risk.

A spokesman for Apple could not be reached, but in the past the company has refused to comment on the dispute.

Proview, based in Hong Kong, was once one of the world's biggest makers of computer displays. But it fell into financial difficulties and was delisted by the Hong Kong stock exchange in 2010.

Proview trademarked the name IPAD in several countries in 2000, intending to use it for a Web-capable hand-held device, but the project was scrapped, said Mr. Ma, the lawyer for the company. Apple bought the rights to the name from a subsidiary in Taiwan in 2009.

Proview now contends that that sale did not cover its Shenzhen subsidiary, which had registered the trademark in China. The Shenzhen court rejected Apple's argument against that in December, but Apple is appealing that ruling. Proview has filed another lawsuit in Shanghai; arguments in that case will be heard this month, Mr. Ma said.

Mr. Ma declined to say how much money the company and its creditors were seeking from Apple but said they were willing to settle the case "in or outside of court."

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