SAN FRANCISCO – Apple is embroiled in a patent dispute in China that threatens to block future sales of the iPhone 6 in Beijing unless the company can overturn a regulator’s recent ruling.
The potential ban stems from a decision issued last month by the Beijing Intellectual Property Office. The agency found the iPhone 6 and iPhone 6 Plus infringed on a patent for the exterior design of a smartphone called the 100C made by a Chinese company, Shenzhen Baili.
Apple Inc. is still being allowed to sell both of the affected iPhone models while it appeals the ruling to an intellectual property court in China.
If it loses, Apple could be forbidden from selling some of its most profitable iPhones in China’s capital at a time when sales of the entire iPhone line have already been declining.
The downturn is the main reason that Apple’s stock has fallen by 9 per cent so far this year while the Standard & Poor’s 500 index has edged up by 1 per cent. Apple’s shares dropped $2.10, or about 2 per cent, to $94.45 in Friday’s late afternoon trading.
The patent dispute is Apple’s latest headache in China, the company’s second biggest source of revenue after the U.S. and one of its fastest growing markets. China accounted for 26 per cent, or $61 billion, of Apple’s revenue last year, up from 12 per cent in 2011, based on calculations by RBC Capital Markets analyst Amit Daryanani.
In April, China’s government blocked Apple’s books and movies services in the country after finding they violated the rules covering foreign publishers. The Cupertino, California, company also lost a fight earlier this year to keep the exclusive rights to the iPhone name in China.
Activist investor Carl Icahn also cast a spotlight on Apple’s prospects in China earlier this year when he cited concerns about a sales slowdown in the country as the reason he decided to sell a large stake that he held built up in the company since 2013.
In a Friday research note, RBC’s Daryanani predicted the patent dispute with Shenzhen Baili wouldn’t depress Apple’s revenue or profit margins in China.