For some time now, Apple has been involved in a dispute regarding its use of the “iPad” name in China. Now, as the dispute escalates, Chinese authorities in at least one city have started seizing iPads, prompting retail store owners to hide their iPad stock in back rooms and sell the device secretly to avoid gaining unwanted attention.

The dispute actually dates back to October, 2010, and involves a company called Proview who sold the “iPad” trademark to Apple before the first-generation tablet device launched. However, Proview now claims that the deal didn’t involve Apple using the “iPad” name in China, and is looking to sue the Cupertino, CA company for a hefty sum.

According to Apple Insider, who cites a report from the Chinese newspaper Herbal Youth Daily:

Authorities told the newspaper that they had received complaints of trademark infringement from Proview Technology (Shenzhen), a company that is suing Apple in China over the issue.

According to IP law professor Stan Abrams of China Hearsay, the AIC is a Chinese federal agency that sits above China’s Trademark Office. The agency has the authority to “raid premises, seize documents, equipment, products and counterfeit marks, and it can halt activity and lock down businesses,” he noted in a recent report.

Apple is still selling its iPad via the Chinese Apple Online Store, and an Apple salesperson reportedly told Apple Insider that the company is still able to send iPad orders over to Shijiazhuang (the city where the iPad has been, in part, “banned”).

Proview is apparently seeking 10 billion yuan ($1.6 billion) in damages from Apple, alongside a formal apology. We’ll let you know if this story develops further.