The Battle of the iPad Comes Home to Roost

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The Battle of the iPad keeps on escalating. It has now invaded Apple's (NAS: AAPL) home court in California.

For those of you just now joining us, a brief refresher might help. A small Chinese computer maker named Proview came out with an iMac-esque computer called the iPAD more than a decade ago. Apple acquired the trademark rights to the iPad name back in 2009 for the paltry sum of roughly 35,000 British pounds, or about $55,000. The Mac maker completed the transaction through a shell holding company named IP Application Development, which could conceivably have been another acronym for IPAD.

Proview had no idea it was actually dealing with Apple, and now that the cat's out of the bag, the company is now calling foul and trying to renege and has sued Apple in China with demands as high as $2 billion. The pair has been tussling in China, with a local court in Guangdong siding with Proview and ordering distributors to stop selling iPads in China. Meanwhile, a Hong Kong court ruled in Apple's favor.

Apple then threatened to sue Proview for "damages that may result from defamatory statements and unlawful actions." Translation: Stop bashing us and hold up your end of the bargain.

The battle proceeded to move to a Shanghai court, and on the eve of the court hearing, Proview said it was "preparing for negotiations." The suit proceeded, with Apple's legal team arguing:

Proview has no product, no markets, no customers, and no suppliers. It has nothing. Apple has huge sales in China. Its fans line up to buy Apple products. The ban, if executed, would not only hurt Apple sales but it would also hurt China's national interest.

The court apparently thought this made sense and sided against bankrupt Proview, rejecting its proposed sales injunction.

We're now back in Silicon Valley, where Proview has filed suit in Santa Clara County, alleging that Apple committed fraud by using the shell company and saying it acted "with oppression, fraud, and/or malice." Apple is expected to have a home-court advantage here and continues to reiterate that it bought the name fair and square years ago.

Using shell companies for acquisitions is nothing new. Amazon.com (NAS: AMZN) is thought to have used one to acquire a small voice-recognition company Yap last year, presumably to take on Siri. Proview is justifiably peeved that it sold the trademark for what now seems like pennies on the dollar (or rather a penny on $360, considering the magnitude of its new demands), since the iPad is now a globally recognized Apple product. Those creditors breathing down Proview's neck don't help, either.

Add Apple to your Watchlist to see how this trademark dispute pans out. While you're at it, don't forget to check out this new special free report on a handful of component suppliers that are cashing in on the iPhone's rise.

At the time this article was published Fool contributorEvan Niuowns shares of Apple and Amazon.com, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Amazon.com and Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and Amazon.com and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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