Apple’s meteoric success in the Chinese market has hinged on a golden rule for foreign tech firms: stick to hardware, stay away from content, and you should be fine.
That premise broke down at the end of last week, when Beijing’s Intellectual Property Office revealed a ruling against Apple in a patent case brought by little-known Chinese smartphone vendor Shenzhen Baili. The Chinese company claims the iPhone 6 and 6s infringed on a patent held for their 100C phone.
The gravity of the order is enormous, as it could potentially halt sales of the iPhone 6 and 6s in Beijing. Apple says that they have appealed to a higher court, and the phones remain on sale across China. The case was settled late last month, though the decision was only revealed at the end of last week.
It’s the latest storm cloud in an increasingly complex relationship between the U.S tech company and Chinese authorities. Beijing has recently being coaxing foreign tech firms to extend their strategic cooperation in China, singling Apple out by name on multiple occasions. Apple CEO Tim Cook has made a series of symbolic and strategic moves to charm the country’s regulators, including numerous visits to the capital.
Apple’s Path To The Chinese Consumer Is Becoming More Complex
It’s been a tumultuous six months for Apple in China. In May, a drop in sales on the mainland contributed to the company’s first revenue decline in 13 years, as China’s purse strings tightened amid market saturation. In April the U.S company received a very public blow, when their iBooks and iTunes movie services were banned under a sweeping crackdown on foreign content by the Chinese government.
Last month the U.S. smartphone vendor laid deep roots in the market with a $1 billion USD strategic investment in Chinese Uber competitor, Didi Chuxing. The investment saw Apple join a club of investors which includes several top Chinese tech companies as well as a handful of state-backed investors, including sovereign wealth fund China investment Corporation.
According to the Wall Street Journal, the company behind Apple’s latest patent dispute, Shenzhen Baili, appears to be affiliated with better-known brand Digione, which counts Baidu as their largest investor. Baidu is also Uber’s biggest strategic partner in the Chinese market.
The latest patent roadblock shows that Apple’s passage in the Chinese market continues to be perilous, despite their deepening commitment.
Chinese Firms Are Taking Advantage Of Stronger Intellectual Property Laws
Interestingly it’s not Apple’s first brush with the law this year. In May, Beijing’s Municipal High People’s Court ruled against the U.S. smartphone maker in a bizarre case of trademark infringement. A Chinese leather goods maker called Xintong Tiandi successfully defended their claim to the ‘iPhone’ name, which they had trademarked in 2010. Apple said they would continue to pursue legal action against the company, which currently sells leather wallets and phone cases imprinted with the iPhone trademark.
It’s one in a series of cases highlighting the newfound confidence of Chinese companies, who are increasingly expressing their intellectual property rights. In May Chinese smartphone vendor Huawei filed a series of high-level patent suits against Samsung, marking their first patent dispute against the South Korean electronics maker.