Apple plays with fire in Chinese trademark stick-up

The problem with paying a ransom is that the hostage takers can come back for more — as Apple (s aapl) can now attest. This week, the company paid $60 million to settle a spurious trademark suit in China only to be hit immediately with a second trademark claim that sounds as fishy as the first. Could more be on the way?
In case you missed it, Apple’s trademark troubles began when a bankrupt Chinese computer maker called Proview sued it for using the iPad name for its tablets. Even though Apple bought the name from Proview’s Taiwan subsidiary in 2009, it has been on the losing end of a series of court proceedings in mainland China. The company finally threw in the towel after warnings Proview could use the trademark to exclude it from parts of the Chinese market.
On Tuesday, the Higher People’s Court of Guangdong Province confirmed the dispute was resolved, posting a statement on its website that Apple had transfered $60 million to a Proview holding company. Then, in a strange bit of timing, came reports that a Chinese chemical company wants Apple to pay for using the name “Snow Leopard.”
Media reports of the Proview settlement have noted that Apple got a good deal because of the value of the iPad mark. Some have also held up the case as a warning to Apple and other companies to conduct due diligence and be careful to respect local intellectual property laws.
This is a load of nonsense. China doesn’t give a damn about intellectual property — take a look at its rampant counterfeiting or its state-guided efforts to plunder valuable secrets from the computers of western companies. To think that the country has suddenly sprouted a fair and functioning trademark regime is laughable. What’s going on here looks a lot more like a new form of the corruption that has bedeviled foreign countries in China.
“From a high altitude, it looks like a stick-up,” said Peter Toren, a Washington intellectual property expert and former prosecutor. Toren added that the Proview case would never have happened had Apple been a Chinese company and that, in China, it can be hard to tell where a company ends and the government begins. He suspects Apple’s trademark payout will simply be divided among connected officials.
“China hasn’t come around to understanding our thinking on intellectual property rights,” Toren notes.
China’s attitude is, in many ways, understandable. Developed countries’ intellectual property law can be ill-suited for still-developing countries like China (consider that America once flouted British intellectual property law so that it could develop a homegrown technology base). But this logic only makes sense for parts of patent and copyright law. The trumped-up trademark cases against Apple look instead more like coercion or bribery than industrial strategy.
Apple likely faced an unpalatable choice between paying a senseless trademark settlement or else see the iPad shut out from the Chinese market. Paying was probably the right business choice in the short term but it could expose Apple and other companies to many more such suits in the future.
(Image by Andrey Armyagov via Shutterstock)