In August 2026, the Shanghai Intellectual Property Court ordered a trademark squatter to pay RMB 300,000 (about USD 42,000) to an exporter whose goods it had detained at a Chinese port using a hijacked trademark. The court held that seeking customs IP protection on the strength of a bad-faith trademark registration, then using the detention to force a sale of that mark, is an "improper application" under China's Customs IP Protection Regulations. Any company that manufactures or ships products out of China, whether through OEM manufacturing or Amazon-style cross-border selling, should understand what this decision changes.

China's border enforcement is fast and cheap for rights holders, and it has become a serious weapon. A rights holder records its trademark with China Customs, watches for suspicious shipments, and can ask customs to detain goods before they leave the country. For a legitimate brand, this is a powerful tool. For a squatter, it is a cheap way to freeze a competitor's cargo mid-shipment and hold it for ransom.

The BILOBAN case is the clearest signal yet that courts will hold squatters accountable for that second use. The exporter here was the real brand owner in the United States. It registered BILOBAN with the United States Patent and Trademark Office (USPTO) in September 2017 and had used the mark continuously since. It shipped goods to the US through an OEM arrangement. None of that protected it from what happened next.

In November 2022, a Chinese company applied to register an identical BILOBAN mark in China, in the same class of goods. It then recorded that mark with China Customs and asked customs to detain the exporter's outbound shipments.

During the detention, the squatter leaned on the exporter. It threatened to have the goods destroyed. It threatened fines. It threatened to interfere with the exporter's US trademark and its store listings. The price to make it all stop: RMB 568,800, to buy the registered mark.

The exporter pushed back, submitted evidence, and customs released the goods after finding it could not confirm infringement. The exporter then sued for a declaration of non-infringement and RMB 300,000 in damages.

The first-instance court agreed that the exports did not infringe the squatter's Chinese mark. But it declined to award damages, finding insufficient evidence that the squatter had acted with intent or gross negligence. Both sides appealed.

The Shanghai Intellectual Property Court reversed. What it found on appeal changed the case.

First, the China National Intellectual Property Administration (CNIPA) had already invalidated the squatter's BILOBAN mark on the ground that it was filed without any intent to use it, a violation of Article 4 of the Trademark Law of the People's Republic of China. The squatter's administrative appeals failed at both levels, and CNIPA published the invalidation on February 27, 2026. The administrative judgment recorded that the squatter held nearly 100 trademarks across 18 classes, many of them identical or similar to marks that other sellers were already using on Amazon. Multiple marks had been opposed or invalidated. CNIPA found that the registrations violated Article 44(1) of the Trademark Law, which bars obtaining registration through deception or other improper means.

Second, the record showed the squatter was not just aggressive. After the first-instance court served the squatter with the lawsuit, the exporter's US trademark began being transferred repeatedly to third parties and to the squatter itself. The USPTO voided some of those transfers, but the mark kept moving. It was eventually transferred back to the exporter.

The court put the pieces together. Trademark hoarding, plus an attempt to sell the mark during the detention, showed that the registration itself breached the good-faith principle in Article 7 of the Trademark Law. A customs application built on that kind of mark was improper from the start. The threats, the reports to the market supervision authority, the attacks on the US trademark and store: that was abuse of rights, not enforcement. The purpose was never to stop infringement. It was to extract money.

The court ordered the squatter to pay RMB 300,000.

Chinese law has long said that a rights holder who improperly applies for customs protection must compensate the importer or exporter for the resulting damage. Articles 14 and 28(2) of the Regulations of the People's Republic of China on Customs Protection of Intellectual Property Rights spell this out. Article 14 requires the applicant to post security to cover potential harm to the consignee or consignor. Article 28(2) makes the rights holder liable when customs cannot confirm infringement, or when a court finds no infringement.

What "improper" meant had been thin on detail. This judgment fills it in. The court treats an improper application as a fault-based property damage claim under general tort principles, and it set out three concrete questions for testing fault:

1. Did the applicant acquire the trademark honestly? Hoarding and bad-faith registration cut against it.

2. Did the applicant use the detention itself as leverage, demanding a sale or license, threatening reports, or interfering with the target's existing trademark or store?

3. How did the applicant behave afterward: did it answer the invalidation and opposition proceedings, or did it refile once its mark fell?

A "no" to the first question and a "yes" to the second and third points toward liability.

If you export from China, treat customs enforcement as a two-way street. You can use it, and it can be used against you.

Check your own marks first. If you sell into China or ship out of China, file your trademark in China before a squatter does. The exporter in this case owned the mark in the US but not in China, and that gap is exactly what the squatter exploited. Filing in China is cheap relative to what a detention costs.

Record defensively, not just offensively. If a competitor or squatter records a lookalike mark with China Customs, your shipments are the collateral. Watching your export lanes for sudden detentions is worth the effort.

If your goods get detained, move fast. Submit evidence of prior use and ownership immediately, and document every contact with the detaining party. The BILOBAN exporter won partly because the record showed the squatter's threats and the ransom demand. Screenshots, messages, and a clear timeline matter.

Know the counterclaim. If a detention turns out to be groundless, you can sue for a declaration of non-infringement and damages under Article 28(2), the same route this exporter took. The RMB 300,000 award is modest next to a stalled container, but the ruling's real value is the precedent: courts will now examine how the applicant obtained its mark and how it behaved during the detention.

This is not an isolated case. It is the latest step in a multi-year crackdown on trademark squatting in China. CNIPA invalidates marks filed without intent to use, and courts increasingly refuse to protect registrations obtained in bad faith. The BILOBAN ruling closes the loop: a squatter who uses a hijacked mark to seize goods at the border now faces damages, not just an invalidated registration.

For legitimate foreign brands, the message cuts both ways. China's customs system remains one of the fastest, cheapest enforcement channels in the world, and it is still worth using. But the same speed that helps you can hurt you if you do not hold your own China registration. The companies that avoid the BILOBAN trap are the ones that file early, watch their lanes, and keep evidence ready.