Tesla Motors Inc. (TSLA) has been sued in the largest automobile market of the world for trademark infringement, spelling more difficulties for foreign corporations conducting business in the second-largest economy in the world. This recent development could substantially dent Elon Musk’s aggressive plan to expand in China.
Tesla revealed in January that its conflict with Zhan Baosheng – who has always been considered a barrier for Tesla to enter the Chinese market – was resolved. The auto maker based out of Palo Alto, California had initiated delivery of its Model S to Chinese consumers in April. Other multinational companies – like Koninklijke Philips NV (ADR) (PHG), Apple Inc (AAPL), Burberry Group Plc (BURBY), and Unilever N.V. (ADR) (UN) – have all been taken to court at one point or another for similar reasons.
Mr. Zhan registered the Tesla trademark for auto-related purposes in China’s southern province of Guangdong back in 2006 in Chinese and English, three years after the company was formed in the US. He received permission for the trademark for a period of 10 years in 2009. In January, it was expected that Tesla had come to an agreement with him to sell its electric vehicles in China, before that fell through.
But Mr. Zhan, who registered the “Tesla” trademark before the company entered the Chinese market, is now draggling Tesla to court to demand that the automaker suspend all its operations in the country and pay him 23.9 million yuan ($3.85 million) in compensation. The Beijing Third Intermediate Court will commence proceedings from August 5.
In the past, Apple had paid $60 million to settle a two-year-old dispute over iPad’s trademark in China with Proview International Holdings Ltd, which had applied to Chinese custom authorities to stop local shipments of the iPad. Burberry, the London-based designer of luxury apparel, was appealing a ruling by Chinese regulators to prohibit the company’s logo on its hallmark checkered pattern for leather goods.
Tesla’s stock price tumbled nearly 2.9% yesterday after Barclays analyst Brian Johnson revealed that the manufacturer of electric vehicles could miss second-quarter estimates for unit deliveries. As of 8:50 AM EDT, Tesla’s stock price is down 1.33% in pre-market trading. On a year-to-date (YTD) basis, shares of Tesla are up 46%.