A Chinese firm trying to stop Apple Inc from using the iPad name in China has launched an attack on the consumer electronics giant's home turf, filing a lawsuit in California that accuses it of employing deception when it bought the trademark.
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A unit of Proview International Holdings Ltd, a major computer monitor maker that fell on hard times during the global financial crisis, is already suing Apple in multiple Chinese jurisdictions and requesting that sales of iPads be suspended across the country.
Last week, Proview Electronics Co Ltd and Proview Technology Co filed a lawsuit in Santa Clara County that brings their legal dispute to Silicon Valley.
Some legal experts said there could be different outcomes from the U.S. and Chinese cases, but a spreading of the lawsuit and delay in coming to settlement terms could hurt Apple more.
"In relation to the U.S., Apple is going to somewhat have a homeground advantage," said Elliot Papageorgiou, a Shanghai-based partner and executive at law firm Rouse Legal (China).
At stake for Apple is its sales and shipments in China, where its CEO Tim Cook said it was merely scratching the surface. Debt-laden Proview International, meanwhile, needs to come up with a viable rescue plan before mid-2012 or else it faces delisting from the Hong Kong stock exchange.
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"Given the current timeline, Apple would have the greater impetus to come to settlement simply because the ability to disrupt shipments is more immediate than the pressure faced by Proview and its potential delisting," said Papageorgiou.
Proview accuses Apple of creating a special purpose entity -- IP Application Development Ltd, or IPAD -- to buy the iPad name from it, concealing Apple's role in the matter.
In its filing, Proview alleged lawyers for IPAD repeatedly said it would not be competing with the Chinese firm, and refused to say why they needed the trademark.
Those representations were made "with the intent to defraud and induce the plaintiffs to enter into the agreement", Proview said in the filing dated Feb. 17, requesting an unspecified amount of damages.
Apple on Friday reiterated its statement saying that it had bought Proview's worldwide rights to the iPad trademark in 10 different countries several years ago. It also said that Proview had refused to honour their agreement and a Hong Kong court had sided with the U.S. technology giant in the matter.
"Our case is still pending in mainland China," Apple said.
DISPUTE HINGES ON 2009 DEAL
The battle between a little-known Asian company and the world's most valuable technology corporation dates back to a disagreement over precisely what was covered in a deal for the transfer of the iPad trademark to Apple in 2009.
Authorities in several Chinese cities, such as Shijiazhuang and Huizhou, have already banned the sale of iPads, citing the legal dispute.
Proview, which maintains it holds the iPad trademark in China, has been suing Apple in various jurisdictions in the country for trademark infringement, while also using the courts to get retailers in some smaller cities to stop selling the tablet PCs.
Major electronics retailer Suning has resumed selling iPads online this week in China after it stopped sales last week due to a supply shortage, rather than because of the lawsuit, company executives said.
China is becoming an increasingly pivotal market for Apple, which sold more than 15 million iPads worldwide in the last quarter alone and is trying to expand its business in the world's No. 2 economy to sustain its rip-roaring pace of growth.
It now has a 76 percent market share in China's tablet PC sector, followed by Lenovo Group Ltd and Samsung Electronics Co Ltd that have a combined share of only 10 percent, data from research firm IDC showed.
The country is also where the majority of its iPhones and iPads are now assembled, in partnership with Taiwan's Foxconn .
A Shanghai court this week threw out Proview's request to halt iPad sales in the city. But the outcome of the broader dispute hinges on a higher court in Guangdong, which earlier ruled in Proview's favour.
The next hearing in that case is set for Feb. 29. Proview lawyers said there might not be a decision immediately and it could take weeks or months before there was an outcome.
"It is more appropriate for both parties to mediate. I think that is the best outcome," David Chen, senior partner at Allbright Law Offices in Shanghai.
China's trademark system is a minefield of murky rules and opportunistic "trademark squatters" that even the world's biggest companies and their highly-paid lawyers find hard to navigate.
Legal experts say the onus is on companies looking to do business in China to understand how China's trademark law works, as it differs greatly from that of the United States.
Industry executives have said employing special-purpose entities to acquire trademarks is a frequent tactic in China. (Additional reporting by Artemisia Ng from Asian Legal Business in HONG KONG; Editing by Alex Richardson)