By Chenchen Ye
Case: X Company v. Jiang, Shanghai Y Company, Hong Kong Y Company, and Gan – Dispute over Unfair Competition
Court: Shanghai IP Court (Final Instance Judgment No. (2024) Hu 73 Min Zhong 1456)
Date of Final Judgment: April 25, 2025
Introduction
In an increasingly globalized market, the intersection of domestic unfair competition law and foreign intellectual property rights raises complex legal questions. The recent decision by the Shanghai Intellectual Property Court provides valuable guidance on how Chinese courts address abusive foreign trademark registration and enforcement that disrupts domestic export competition.
This case centers around the improper registration and assertion of an EU trademark by a former Chinese trading partner, and whether such actions amount to unfair competition under Article 2 of China’s Anti-Unfair Competition Law.
Case Background
The plaintiff, X Company, is a Chinese enterprise engaged in the production and export of non-medical masks. It had previously collaborated with Shanghai Y Company, a firm wholly owned by Mr. Jiang, for the export of masks to Europe. In the course of that business, Jiang and his wife, Ms. Gan (owners of Hong Kong Y Company and Shanghai Y Company), became familiar with X Company's use of a specific figurative trademark on mask products.
Despite knowing that the said mark had not been registered in China or the EU, Hong Kong Y Company applied to register it in both jurisdictions. While the application was rejected by the CNIPA, the EUIPO approved the registration under Class 10 (which includes medical masks).
Shortly thereafter, Mr. Jiang and Hong Kong Y Company began enforcing this registration against X Company by:
Issuing cease-and-desist letters alleging trademark infringement;
Filing takedown requests on Alibaba International;
Sending letters to X Company’s German distributor urging termination of cooperation;
Filing administrative complaints with market regulators.
These actions caused Alibaba to shut down X Company’s online listings and led to a substantial drop in export sales.
Legal Issues and Court Findings
1. Export Interest as a Core Competitive Right
The court recognized that for cross-border SMEs like X Company, sales channels and export continuity are essential competitive assets. The loss of such channels due to abusive IP enforcement can irreparably harm their market position.
The court emphasized that even if a mark is not registered, consistent use in commerce and establishment of goodwill in export markets constitutes a protectable competitive interest.
2. Abusive Trademark Registration as Unfair Competition
Hong Kong Y Company’s EU trademark registration was found to be in bad faith:
The defendants had prior commercial ties with X Company;
They knew X Company had been using the unregistered mark in commerce;
The enforcement began just days after the EU registration was granted;
The purpose was to seize business advantages and disrupt a competitor’s export business.
Such conduct was held to be a violation of commercial ethics, falling squarely under Article 2 of the Anti-Unfair Competition Law, which prohibits acts contrary to fair commercial practices.
3. Validity of Foreign Trademark Rights vs. Domestic Competition Order
The court made a critical distinction: holding a valid foreign trademark registration does not immunize a party from liability under Chinese unfair competition law.
Citing the territorial nature of IP rights, the court ruled that when foreign IP rights are used as tools to interfere with China’s domestic market order, the domestic legal system has the authority and responsibility to intervene and protect fair competition.
Final Judgment and Compensation
The Shanghai IP Court upheld the first-instance ruling, ordering Mr. Jiang and Hong Kong Y Company to pay RMB 500,000 (around 70,000 USD) in damages for economic loss and reasonable enforcement expenses.
The court rejected the counterclaims of Shanghai Y Company and Ms. Gan, as their involvement was not found to directly cause the damage.
Practical and Legal Significance
1. Recognition of Export Interests as Protectable Rights
This case affirms that the Chinese judiciary is willing to extend the protective reach of unfair competition law to cover export-related interests. For small and medium-sized export enterprises, especially those unable to afford broad international trademark portfolios, this is a meaningful step in bridging the protection gap in cross-border commerce.
2. Deterring Cross-Border Bad-Faith Trademark Tactics
The judgment sends a clear message: registering a partner’s unregistered mark in a foreign jurisdiction and using it to cut off their supply chains is not a legitimate business strategy: it is unfair competition.
This case complements earlier Chinese decisions against malicious trademark squatting and broadens the scope to include abuse of foreign registrations, addressing real-world challenges in global trade.
3. Jurisdictional Innovation and Normative Development
Perhaps most importantly, this decision showcases the evolving judicial willingness to prioritize domestic competitive order even when faced with formally valid foreign IP rights.
Conclusion
The X Company v. Jiang et al. case serves as a landmark in delineating the limits of trademark rights in cross-border disputes. It provides clear precedent that unfair commercial behavior masked under the appearance of IP enforcement — even when grounded in foreign legal systems — will not be tolerated when it undermines China’s export integrity and fair market order.
Chinese exporters and legal counsel alike should view this case as both a warning against overreach and a reassurance of legal recourse when faced with unfair tactics in international markets.
For further case information or tailored legal analysis, please contact Allasya Law & IP or consult the original judgments published by the Shanghai Intellectual Property Court.