The rights to use the iPad moniker in the 1.33 billion people market of China belong to the bankrupt display maker Proview, a Chinese government official told Reuters this morning.

The official quote indicates that Chinese government is very much interested in helping Proview prevail by gently pushing Apple into a court-moderated mediation leading to a possible settlement.

The mediation was first hinted by IDG News Service last week. Should Apple continue its court fight with Proview to lose the case, it could face a big fine plus a country-wide ban on iPad sales in China…

According to the news gathering organization, a senior official with the State Administration for Industry and Commerce (SAIC), an agency that enforces trade laws in China, claims Proview is the rightful owner of the iPad trademark in China:

According to the … provisions of the China Trademark Law, currently Shenzhen Proview is the legal registrant of the iPad trademark.

The Associated Press quoted Apple spokeswoman Carolyn Wu as saying the company had no new comment on the possibility of a settlement with Proview, adding:

In a statement, Apple reiterated its earlier insistence that it would never “knowingly abuse someone else’s trademarks.” The statement adds that Proview “still owe a lot of people a lot of money, they are now unfairly trying to get more from Apple for a trademark we already paid for.”

Proview’s debt has reportedly reached $400 million.

That Apple and Proview have entered in a court-moderated mediation with government officials who support Proview’s take of the legal dispute is an indication, to say the least, of a potential settlement which could be on the horizon.

Deputy Director of China’s State Administration for Industry and Commerce Fu Shuangjian re-iterated the government’s stance in The Wall Street Journal article, saying:

Currently, Proview Shenzhen is still the legitimate registered owner of the IPAD trademark.

The article goes on to note that Chinese officials are waiting for the Guangdong court’s final judgment in the following months, unless the two parties reach an amicable solution.

If Apple loses the iPad trademark case, the company will face a fine potentially measured in millions of dollars and its iPad could be banned from China unless they re-brand the device or agree to pay for the rights to use the iPad name in the country.

What’s your take, is Apple putting its iPad business in China at risk with this high-stake legal dispute?

Should they just settle with the opportunistic Proview and pay whatever money that company is seeking for the rights to brand its tablet in China under the widely recognized iPad moniker?