A man walks past an advertisement of Apple's iPad 2 on Feb. 28 in Shanghai, China. Proview Electronics said it is now seeking to regain worldwide rights to the iPad name and is suing Apple Inc. for alleged fraud and unfair competition, hoping to have a 2009 sale of the trademark ruled void.

BEIJING – Apple’s recent market valuation of over $500 billion has invited countless comparisons, even inspiring a website that gleefully chronicles the places and things the tech giant is now valued more than.

Among other things, Apple is now worth more than the entire GDP of Poland, all the gold in the U.S. Federal Reserve Bank of New York and America’s entire aircraft carrier fleet.

But is that enough to take the sting out of the $1.6 billion in compensation Proview Technology (Shenzhen) is rumored to be demanding in exchange for settling the thorny dispute over ownership of the iPad trademark in China? 

Last Wednesday, Guangdong’s Higher People’s Court heard an appeal from Apple after a lower court ruled in favor of Proview and declared them the actual owner of the iPad name in China. 

The significance of the case has not been lost in Chinese. Both local and foreign media were said to be staked outside the courtroom. In response to greater calls for transparency from the government, Wednesday’s legal proceedings before the three-judge panel were actually live-blogged by the court on a twitter-like service called Tencent Weibo.

The court now has almost 80,000 followers – but their decision has not been announced yet. According to Chinese law, the time limit for ruling on an appeal is three months. 

The stakes are high for everyone involved: Apple, Proview, the Chinese government and other Western investors.

High stakes
China is Apple’s second largest market behind the United States. It is also where most of its products are made –  including the highly anticipated iPad 3 which some tech-watchers are speculating may be released as soon as tomorrow. 
 
This court is typically the final word on legal proceedings in China, although Apple could still appeal to the Supreme People’s Court in Beijing. A loss would leave two undesirable options: An appeal to a Supreme Court that is not known for overturning many decisions of its lower court; or settling with the cash-strapped Proview. 

Alvin Chan / Reuters

Reporters wait outside the Higher People's Court of Guangdong in Guangzhou on Feb. 29 for Apple's appeal to the higher court in the Proview case.

For Proview, a company that at one time was an industry leader in the manufacturing of computer displays before falling on hard times, a win or an out-of-court settlement could set the stage for a dramatic revitalization of a company that now counts the Bank of China and China Banking Corp. as creditors. 

According to a Chinese-language report out last Friday, Proview’s consortium of creditors are said to be seeking $400 million from the cash-strapped company.

A settlement with Proview may be anathema to Apple; effectively inviting similar copycat suits against them in other jurisdictions, but the alternative of changing the name of a product they’ve already sold 32 million of worldwide is an equally bitter pill to swallow.

A warning for Western investors?
The need to legally resolve this issue is also uncomfortable for the Chinese government, which stands to lose politically regardless of who wins the case. 

Should Proview prevail and receive control of the trademark in China, it would stir up a certain crisis-of-faith among the foreign business community, whose concerns about intellectual property have become louder in recent years.

Sixty-six percent of respondents to the American Chamber of Commerce’s 2011 China Business Climate Survey said intellectual property rights protection is “very” or “critically” important to their business.

One U.S. businessman, who declined to be named for this piece, noted that while Apple’s spat with Proview is over the sale of a trademark and not the legal standing of the trademark itself, he would nevertheless be concerned about the strength of his company’s own trademarks in China should Apple lose. 

“Remember that line from the movie, ‘The Social Network,’ ‘You better lawyer up!’? You bet we have our lawyers looking closely now at all our company’s legal arrangements.”

It’s an example of corporate skepticism of the legal system here and a growing sentiment among the foreign business community of economic inequality between foreign and domestic companies.

That’s a sentiment that China’s ruling Communist Party wishes to avoid at all cost. In recent years the government has worked hard to improve intellectual property rights law in the country. They touted them as the Guangdong Higher People’s Court did on its Weibo feed of the court proceedings, inviting China’s web sphere to “witness the progress of intellectual property right protection in China.”

Ironically, the enforcement of those laws could potentially unravel the goodwill they were intended to build with foreign companies and investors.

Best for all? Out-of-court settlement
An Apple victory may mollify Western companies. It will also likely draw the ire of a more nationalist section of the population here that may view it as an example of China serving foreign interests before those of its own companies.

As unlikely as it may seem that a decision in Apple’s favor could lead to any mass resentment towards the government, in this sensitive time leading up to China’s leadership transition later this year, the Party is hyper-attuned to perceived public discontent.

So in the meantime, China’s government is quietly pushing through the court’s judges their dream solution to this dispute: out-of-court settlement. At the end of the hearing on Wednesday, the judge apparently gently urged Apple and Proview to consider a private settlement.

The financial motivations are there for both parties to come to the bargaining table, but Apple’s participation will either require a dramatic change of heart by the company which has refused to come to the table so far or a more pessimistic analysis of their chances in court.

Either way, you can bet the Apple CEO Tim Cook is thinking twice about his bold earlier statement last month that the company “has more money than it needs.”

Customers test out Apple iPads in the company's flagship store in Beijing's Sanlitun area on Wednesday. A Chinese tech firm, Proview claims it still owns the iPad trademark In China and will seek a ban on exports of Apple Inc's computer tablets from China, which could deal a blow to the U.S. technology giant's sales worldwide.

BEIJING – “This is the user manual and spec sheets for the IPAD,” said Ma Dongxiao, a patent lawyer in Beijing. In his hands he held a simple black and white pamphlet that laid out the technical aspects of his client’s product.

Absent from the front page was the familiar Apple logo we have come to expect. Rather, he held just a simple description in English for a boxy wireless device shaped like an old TV that was ponderously dubbed a “Professional Color LCD Monitor.”

Simple as the device might appear, it is the linchpin in a new phase of Shenzhen-based tech company Proview’s latest attack on Apple: A restraining order filed this month in a Shanghai court demanding Apple cease using the iPad name in China.

Just days after the euphoria of a $500 stock valuation, Apple has been dealt a series of significant legal blows in China that casts doubt on the legality of the tech giant’s control of the iPad trademark here on the mainland.

And the worst might be yet to come.

The legal issue at hand for Apple is simple enough: Does the Cupertino-based company own the “iPad” trademark in China? Or does it belong to Proview (Shenzhen), a subsidiary of Hong Kong-based Proview International Holdings Ltd. – at one time one of the largest manufacturers of computer displays in the world.

NBC/ITN

The cover of Shenzhen-based tech company Proview's owner's manual for their IPAD device, called a "Professional Color LCD Monitor."

Murky trademark deal
Proview began trademarking the term, “IPAD,” in China and other countries back in 2000. The company coined the name for a handheld device it claims was the actual start of what later would be dubbed “tablet computing.”

The project never came to fruition, though, and the name sat unused until 2009 – a year before the debut of the iPad we know today. That’s when Apple allegedly swooped in and paid a Proview subsidiary in Taiwan $55,000 for the trademark rights in ten countries, including they claim, China.

Not so, says Proview in Shenzhen, which argued that it – not the subsidiary in Taiwan – had registered the iPad name in China and thus controlled its trademark on the mainland.

In 2010, Proview took Apple to court in Shenzhen and won a decision last December that ruled Apple had incorrectly purchased the China trademark from the Taiwan-based subsidiary, resulting in a legally non-binding agreement. 

An appeal filed last month by Apple in a Guangdong provincial court was similarly rejected, paving the way for Proview to file a slew of trademark violation complaints across China with local Industrial and Commercial Administrative Bureaus. In 20 cities across four provinces, these departments began enforcing the decision, confiscating iPads from sellers and exposing Apple to fines up to five times the profit from iPad sales.

Online retailers are also taking note of the complaints, with Amazon China and Suning.com, a Chinese e-commerce site, also pulling iPads off their websites.

Undeterred, Apple has appealed the ruling to a higher Guangdong court. Carolyn Wu, a spokesman for Apple in China, told the Wall Street Journal Tuesday, “We bought Proview’s world-wide rights to the iPad trademark in 10 different countries several years ago… Proview refuses to honor their agreement with Apple in China.”

More suits to come
Talking about the upcoming Shanghai suit for which Ma says arguments will begin next week, Chinese legal experts are already arguing that Apple faces long odds of winning. As one lawyer put it, Apple’s negotiating with Proview’s Taiwanese subsidiary is “like negotiating with a son and expecting the father to go along with what was agreed upon.”

NBC/ITN

The user manual for Proview's  IPAD shows off its boxy wireless device shaped like an old TV. Proview claims it has the rights to the trademark "IPAD" in China , locking it in a legal battle with U.S.-based tech giant Apple.

With Proview’s ownership of the iPad trademark already established in the Shenzhen courts, it seems doubtful that the Shanghai court will side in favor of Apple and effectively overturn the appeals court in Guangdong.

Late last year, China became Apple’s second largest market after the United States. A decision against Apple that results in the ceasing of mainland iPad sales would be catastrophic for the company, which reportedly sold 15.43 million iPads in the last quarter of 2011 alone.

Even more troubling is another complaint Proview plans to file by the end of this month to China’s customs authorities that would ban the export and import of the new iPad 3. Almost all of the 30 million iPads sold last year are assembled outside the U.S., mostly in China. A successful injunction against Apple on exports of its iPad 3 would effectively make its rumored early March rollout date a pipe dream, putting a significant dent in the company’s profits.

Payday ahead for Proview?
All of these lawsuits, injunctions and complaints beg the question, what is Proview’s end game?

After all, Proview can seemingly look ahead confidently to the upcoming customs complaint and Shanghai lawsuit knowing that the Chinese courts have ruled in their favor in regards to ownership of the iPad trademark. Barring some new, compelling evidence from Apple, it will be extremely difficult for Apple to overturn two decisions in favor of Proview.

Bobby Yip / Reuters

A man walks on a bridge in front of the derelict office of Proview Technology in China's southern city of Shenzhen on Wednesday.

So what does Proview want?

The lawyer, Ma, played coy in answering that question and simply said he hoped that the two parties would be able to settle their disputes out of court. Indeed, a settlement between Apple and Proview is increasingly looking like an expensive proposition for the American tech company and a financial windfall for the cash-strapped Proview.

However, rumors of Proview seeking a $1.6 billion dollar payout may seem almost reasonable to Apple if Proview’s multiple suits successfully pass through Chinese courts and an embargo on shipments of iPad 3s is enacted. Although, it’s important to remember that Apple reportedly has $97.6 billion in cash reserves, so a $1.6 billion payout wouldn’t exactly break their bank.

Despite the long legal odds against Apple, and Proview seemingly sitting in the driver’s seat, the chances of such a doomsday scenario occurring seem distant as both sides appear even more poised for a settlement.

After all, while China’s expansive, albeit limitedly enforced, intellectual property laws currently favor Proview, it seems doubtful that a Chinese ruling blocking the shipment of iPad to countries where Apple legally owns the trademark would hold up in a complaint among the bodies that regulate international trade.

Furthermore, during these trying economic times globally, it would simply be foolhardy for China’s Customs Bureau – and by extension, the ruling Communist Party – to invite the swift international condemnation that would inevitably follow any blocking of Apple exports.

Ultimately, as Stan Abrams of the China Hearsay blog put it, Proview’s best strategy would seemingly be to wreak enough legal havoc for Apple so that the disruption of exports, while not an inevitability, would be a big enough threat to bring them to the settlement table.

Whatever decisions are made in the next few weeks, Apple will surely pay dearly for its first significant blunder since its entry into the China market.