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Apple's $60m answer to Chinese dispute over iPad trademark

Apple has today agreed to pay $60 million (£38 million) to an unknown Chinese computer firm in return for the rights to the name 'iPad'.

In the end, the money did the talking. The world's richest company realised that the long-running legal dispute was threatening to block its access to the world's second-largest market for its products.

Sales in China, Taiwan and Hong Kong are now worth around £5 billion to Apple, according to figures from the second quarter of this year. So actually, £38 million to settle the case seems like a bargain.

A man tries out an iPad 2 at Apple's Nanjing Road store in Shanghai Credit: REUTERS/Aly Song

Apple had argued it bought ownership of the iPad trademark in various countries including China. Proview, a Chinese computer monitor maker, argued the US giant had only bought the name from another wing of Proview which is not connected to the Chinese company.

Back in 2001, Proview developed a computer monitor which they called the 'IPAD' or 'Internet Personal Access Device'. That is what they based their claim against Apple on.

Proview had been seeking £1 billion as compensation because they argued they had the rights to the name 'iPad' in mainland China.

Labourers dismantle metal at Proview's derelict office in Shenzhen, southern China Credit: REUTERS/Bobby Yip

Proview is a struggling firm. Its factory in Shenzhen looks derelict and it owes a number of suppliers huge amounts. So the £38 million settlement agreed today will go into a court-designated account and will be used to pay Proview's creditors.

How Apple bought the iPad name is a shadowy tale linking the Californian tech giant with a small suburban semi in the town of Roydon in Essex.

That was the house used as the base of Essex-registered IPAD, or 'Intellectual Property Application Development'. It was a proxy firm set up and used by Apple to buy up the name 'iPad' before its launch in 2010. So it was IPAD, rather than Apple, that approached Proview saying it wanted to buy the name for itself.

Then along came the launch of the Apple iPad in 2010.

The story goes that when Proview realised it had sold the name to Apple, and not a small computer firm in Essex, for £35,000, the Chinese firm kicked itself and decided to take revenge.

Customers test out iPads in an Apple Store in downtown Shanghai Credit: REUTERS/Aly Song

Proview launched a long and complicated legal action in the Chinese courts, but it hasn't always been successful. Apple points to a Hong Kong ruling last year which stated that Proview is involved in a "conspiracy" to force Apple into handing over millions of dollars in damages.

The judge said: "The conduct of the defendants demonstrate that they have combined together with the common intention of injuring Apple."

In addition to the Chinese cases, Proview lodged a claim in a US court accusing Apple of fraud because it used the proxy Essex-based firm to buy the rights to the name. That case was dropped in May.

On Chinese social media, the reactions to today's settlement are mixed. Some see the payout as daylight robbery. One microblogger says:

This proves Apple cares about the Chinese market and compared with their profits this compensation is like a hair from nine cows [meaning it's comparatively nothing].

Another microblogger posts: "Only now does it look like there is justice in Chinese law," while another comments: "what a successful blackmail".

Others claim that Proview has "won the case but lost its dignity".

Crowds outside the Apple store in Beijing's Sanlitun district ahead of the launch of the iPhone 4S Credit: REUTERS/David Gray

It will be interesting to see how quickly Apple gets the new iPad 3 onto the shelves of its flagship shops in China, since it hasn't been able to sell the new tablet while the case has rumbled on. There will be massive crowds of eager customers when it does.

Was it blackmail or did Proview have a legitimate claim? Apple wasn't prepared to wait any longer for the answer - not when the firm is now free to get an even bigger bite of the massive Chinese market.