Shenzhen Court Recognizes Malicious Trademark Squatting and Abuse of the Three-Year Non-Use Cancellation Procedure Can Constitute Unfair Competition
Published 24 November 2025
Fei Dang
On November 19, 2025, the China Intellectual Property News reported a case where four defendants were recognized as constituting unfair competition by the People's Court of Futian District in Shenzhen (the Court) for repeatedly squatting on other's trademarks in bad faith and filing multiple third-party cancellations against the registered owner's trademarks. Ultimately, the defendants were ordered to compensate the plaintiff for economic losses and reasonable expenses totalling 500,000 yuan.
Case Introduction
Trout & Partners is a globally leading strategic positioning consultancy founded by Jack Trout, the originator of the “Positioning Theory” in corporate strategy. According to the company's official website, “Jack Trout developed the concept of positioning based on the military principle of ‘selecting the decisive battlefield location.’ This defines the external outcomes a business must create, while internal operational planning becomes ‘how to drive the army to reach that position’ to establish the positioning. Specifically, this means that companies must define a positioning in external market competition that resonates with customers' minds. This positioning then guides internal operations, ensuring that the products and services produced by the company are accepted by customers and converted into performance." Headquartered in the United States, Trout & Partners has offices in 27 countries and regions worldwide, where local partners and experts provide strategic positioning consulting services to businesses.
It is reported that the plaintiff company herein is the Chinese subsidiary of the brand consulting firm mentionedabove. The plaintiff is not only legally authorized to use the ‘Trout’ trade name within China but has also applied to register a series of trademarks related to “Trout” in China, which include, but are not limited to, the trademarks registered in relation to “commercial management consultancy” in Class 35, “education; training” in Class 41, and so on, since at least 2011. It is reported that through years of operation, the plaintiff company has accumulated significant recognition and influence in the Chinese market.
The defendants in this case include three affiliated companies and one natural person, with the latter serving as the supervisor of one of the company defendants. According to the report, since 2021, the three company defendants had successively applied to register over 100 trademarks containing the plaintiff's core brand “特劳特” (Trout) in Classes such as 35 and 41. Although the plaintiff initiated trademark opposition proceedings against three of these applications in 2022 and received favorable decisions from the China National Intellectual Property Administration (CNIPA), such actions did not deter the three defendants from continuing to submit registration applications for trademarks containing the word “特劳特” (Trout). Furthermore, defendant Yin, the natural person serving as the supervisor of one of the defendant companies, filed applications in his own name to cancel eight of the plaintiff's “特劳特” (Trout) and “特劳特定位” (Trout Positioning) trademarks on the grounds of non-use for three consecutive years. He also initiated cancellation review proceedings against certain cases thereof where the CNIPA upheld the registrations. Additionally, according to the Court, apart from registering numerous trademarks related to the plaintiff's core brand, the defendants also “established promotional websites under identical names, falsely claiming partnerships with major corporations, and misappropriated the plaintiff's successful case studies for deceptive advertising.”Accordingly, the plaintiff company filed a lawsuit of trademark infringement and unfair competition to the People's Court of Futian District in Shenzhen, Guangdong province. During the lawsuit, the said defendants raised defenses such as “our company's trademark is an independent creation, differing from the plaintiff's trademark in both meaning and pronunciation, and there was no intent to free-ride”; “the trademark application constitutes normal business operations and is the lawful exercise of rights”; and so on.
According to the China Intellectual Property News, upon trial the Court considered that “the plaintiff company's trade name and the involved trademark enjoy high recognition. As the operators in the same industry, the four defendants should have been aware of the plaintiff's trade name and the involved trademark. Nevertheless, they registered multiple trademarks similar to the plaintiff's trade name and the involved trademark within a short period for the same service categories. Not only did they fail to reasonably avoid such marks, but their actions also clearly exceeded the needs of normal business operations. Furthermore, despite being aware of the plaintiff's continuous use of its trademarks, the defendants initiated cancellation proceedings against multiple trademarks of the plaintiff. The defendants' said actions compelled the plaintiff to file numerous time-consuming trademark oppositions, invalidation applications, and related lawsuits, incurring substantial trademark application fees and other legal expenses. This severely disrupted the plaintiff's normal production and business operations, undermined the trademark registration management order, disrupted normal market competition order, and harmed the legitimate rights and interests of both the plaintiff and consumers.” Therefore, the Court ordered the four defendants to cease their unfair competition practices and compensate the plaintiff for economic losses and reasonable expenses totaling 500,000 yuan.Neither the plaintiff nor the defendants appealed, and the judgment has come into effect.
Comment
This case involves a trademark infringement and unfair competition dispute arising from the malicious squatting of another party's trademark and the abuse of the nonuse cancellation of trademarks for three consecutive years. Under normal circumstances, when a trademark owner faces malicious squatting of its brand, it can only resolve the issue through administrative procedures under the Trademark Law, such as filing a trademark opposition, invalidation application, and/or initiating the nonuse cancellation of trademark for three consecutive years with the CNIPA. Even if the right holder succeeds in preventing registration, invalidating, or revoking the squatted trademark through the said procedures, the malicious squatter can simply resubmit a new trademark application, thereby dragging the right holder back into another time-consuming, effort-consuming, and costly enforcement process, as in the trademark opposition and invalidation proceedings the burden of proof primarily rests with the initiating party (i.e., the right holder), whereas the opposed party/respondent (such as the malicious squatter) may choose to participate in the defense, but their absence does not affect the case's adjudication. In other words, for malicious squatters, the maximum cost incurred during squatting may only be the time and money spent on the trademark application itself. They can then simply “sit back and wait” for the relevant decision/ruling from the CNIPA. This results in right holders incurring significantly higher time and financial costs in the said right maintenance procedures than the costs borne by malicious squatters during a trademark squatting. Consequently, it “encourages” malicious squatters to continue their activities to some extent. Therefore, the emergence of this case provides right holders facing repeated malicious squatting with a new approach: considering regulation of such conduct under the Anti-Unfair Competition Law.
It needs to point out that the legislative purposes and scope of protection under the Trademark Law and the Anti-Unfair Competition Law are not entirely identical. As it is mentioned in the China Intellectual Property News, “the Trademark Law primarily grants exclusive trademark rights through registration, thereby excluding general trademark infringement. It focuses on absolute protection for trademark owners. In contrast, the Anti-Unfair Competition Law achieves dynamic protection of trademark rights by regulating improper conduct that violates commercial practices and ethics. However, its primary emphasis lies in regulating competitive order, with the core focus being on examining whether related conduct is legitimate.” Furthermore, Article 1 of the Supreme People's Court's Interpretation on Several Issues Concerning the Application of the Anti-Unfair Competition Law of the People's Republic of China also corroborates this point “Where an operator disrupts the order of market competition, damages the lawful rights and interests of other operators or consumers, and such conduct falls outside the scope of violations covered by Chapter II of the Anti-Unfair Competition Law or provisions of the Patent Law, Trademark Law, Copyright Law, etc., the people's court may apply Article 2 of the Anti-Unfair Competition Law to make a determination.”
In this case, the Court comprehensively reviewed the four defendants' actions, including filing hundreds of similar trademarks within a short period, initiating cancellation proceedings, establishing counterfeit websites, and misappropriating promotional materials, and determined that “their subjective malice was evident. These acts severely disrupted the plaintiff's normal operations, undermined trademark management order, and distorted the competitive market environment, constituting unfair competition.” Notably, according to the report, the Court further stated that “in disputes involving trademark squatting, even if the trademark is not invalidated, if the registration constitutes malicious squatting or abuse of administrative confirmation procedures and has actually impacted the legitimate business operations of the right holder or caused harm, the Court may still deem it unfair competition and order cessation of infringement.” This ruling not only establishes that such abusive conduct itself can constitute an independent ground for unfair competition but also provides other right holders with a new strategic approach for addressing trademark abuse and malicious squatting in future proceedings.
Compared to preventing from registration of malicious registered trademarks through opposition or invalidation, the Court's order under the Anti-Unfair Competition Law for the four defendants to jointly compensate for economic losses and reasonable expenses totaling 500,000 yuan undoubtedly imposes significant financial pressure and serves as a deterrent to the defendants in this case. Therefore, although such civil judgment do not affect the validity of the defendants' registered trademarks, the relevant facts established in the judgment can serve as supporting evidence for “malicious registration” in subsequent trademark invalidation proceedings (if any). More importantly, the ruling for joint and several liability to compensate for economic losses and reasonable expenses totaling RMB 500,000 not only imposes the deserved punishment on the defendants for malicious registration and procedural abuse but also serves as a powerful deterrent to other potential malicious trademark squatters.