September 14, 2026 · 12 min read · By Logo China Pro

Squatter Seized Goods at China Customs -- Court Made Him Pay

In August 2026, a Shanghai court handed down a ruling that should make every trademark squatter think twice before weaponizing China's customs system.

Here's what happened: An American brand called BILOBAN -- a baby bedding company that's been selling crib sheets and play mats on Shopify for over a decade -- found its export shipments detained at a Chinese port. The company that seized the goods wasn't a competitor or a government agency. It was a trademark squatter that had registered the BILOBAN name in China, recorded it with customs, and then used that registration to hold the shipments hostage.

The squatter's demand: 568,800 yuan (about $85,000) to "sell" the trademark back.

Eight months later, the court ordered the squatter to pay the exporter 300,000 yuan (about $45,000) in damages for improper customs application.

The squatter didn't just lose the case. The squatter got hit with the bill.

This is the BILOBAN case, and it's the first time a Chinese court has clearly ruled that using customs recordation to seize goods -- when your trademark was obtained in bad faith -- constitutes "improper application" under China's Regulations on Customs Protection of Intellectual Property Rights.

If you're shipping from China, or sourcing from Chinese factories under your own brand, this case changes your risk calculus.

What Exactly Happened to BILOBAN at the Chinese Border?

Let's walk through the timeline, because the details matter.

September 2017: An American company registered the BILOBAN trademark at the USPTO. BILOBAN is a real brand -- they sell baby bedding, crib sheets, crib skirts, play mats, and waterproof pads. Their website claims they've served over a million moms in more than 10 years. They have OEKO-TEX 100 and GOTS certifications. This isn't a shell company. This is an operating business.

November 2022: Five years later, a Chinese company (referred to in court documents as "Lang Company") files a trademark application for "BILOBAN" in the same product categories -- but in China.

Sometime after registration: Lang Company records the BILOBAN trademark with China Customs (GACC). This is a legitimate feature of the Chinese customs system -- trademark holders can record their marks with customs authorities, who then inspect shipments for potential infringement.

The seizure: When the American BILOBAN company's goods pass through a Chinese port (likely as OEM exports from a contract manufacturer), customs detains the shipments based on Lang Company's recordation.

The ransom: During the detention period, Lang Company doesn't just sit on the paperwork. They escalate:

• They threaten to destroy the goods
• They threaten to report the exporter for "infringement"
• They threaten to interfere with the American company's USPTO trademark and online store operations
• They offer to "sell" their Chinese BILOBAN registration for 568,800 yuan

This isn't how legitimate trademark enforcement works. This is hostage-taking with paperwork.

Customs releases the goods: Eventually, customs determines it cannot confirm whether the goods actually infringe, and releases the detention.

The lawsuit: The American company files suit seeking a declaration of non-infringement and 300,000 yuan in damages for improper customs application.

First instance: The trial court rules that the goods don't infringe -- but rejects the damages claim, saying the evidence is insufficient.

Second instance (August 2026): The Shanghai IP Court reverses. The court finds that Lang Company's customs application was "improper" and awards the full 300,000 yuan in damages.

During the appeal process, CNIPA (China's trademark office) also invalidated Lang Company's BILOBAN trademark registration entirely -- a decision announced on February 27, 2026.

The Squatter Didn't Just Operate at the Border

Here's a detail that makes the case even more disturbing.

After the trial court served litigation documents on Lang Company, the American company's USPTO trademark started getting transferred -- repeatedly -- to third parties and eventually back to Lang Company itself. Someone was filing fraudulent trademark assignment records with the USPTO to hijack the brand at its origin.

The USPTO caught on. It determined that some of the assignment filings were invalid and revoked them. But the harassment continued until the trademark was finally transferred back to its rightful owner.

This is a two-front attack: customs detention in China to squeeze ransom from exports, plus USPTO manipulation to destabilize the brand's home registration.

And here's what CNIPA found when it investigated Lang Company's trademark portfolio:

• The company held nearly 100 trademarks covering 18 different product categories
• A large number of these trademarks were identical or similar to trademarks used by Amazon sellers on their product listings
• Multiple trademarks had already been challenged through opposition or invalidation proceedings
• CNIPA concluded that the company's registration behavior violated the legislative intent of the Trademark Law's prohibition against obtaining trademark registration through deceptive or other improper means

This is not a company that accidentally registered a conflicting mark. This is a systematic operation that scans Amazon for successful brands, registers their names in China, and then waits for the opportunity to strike.

The Court's Three-Question Test: A New Standard for "Improper Application"

This is the part of the ruling that matters most for future cases.

The Shanghai IP Court didn't just say "Lang Company acted badly." The court created a structured test for determining when a customs IP protection application crosses the line into "improper application" -- a term that appears in Article 14 and Article 28(2) of the Regulations on Customs Protection of Intellectual Property Rights, but was never clearly defined before this case.

The court's three-question test:

Question 1: Did the applicant acquire the trademark in good faith?

The court looks at whether the applicant engaged in trademark hoarding, bad-faith registration, or other conduct that violates the principle of good faith. In this case, Lang Company's portfolio of nearly 100 marks across 18 categories -- many matching active Amazon seller brands -- was clear evidence of bad-faith acquisition.

Question 2: Did the applicant use the customs detention itself as leverage for improper purposes?

The court examines whether the applicant engaged in trademark transfer negotiations, licensing demands, threats to report, or interference with the target's existing trademark use or business operations. Lang Company's demand for 568,800 yuan to "sell" the mark, combined with threats to destroy goods and interfere with the USPTO registration, answered this question definitively.

Question 3: How did the applicant behave in subsequent proceedings?

The court looks at whether the applicant actively defended against invalidation or opposition proceedings, and whether they attempted to re-register after their mark was invalidated. Lang Company's continued attempts to transfer the American company's USPTO trademark -- even after being sued -- demonstrated persistent bad faith.

This three-question framework is new. Before the BILOBAN case, "improper application" was a vague standard that rights holders had to prove without clear guidance. Now there's a structured test.

And the court made something else clear: the fact that Lang Company held a technically valid trademark registration at the time of the customs application doesn't matter if the underlying acquisition was in bad faith and the enforcement was used as a weapon rather than as legitimate rights protection.

Why This Ruling Matters for Amazon Sellers and OEM Buyers

Let me be direct about what this means for you if you're selling on Amazon or sourcing from China.

China Customs is a double-edged sword.

In the first half of 2026 alone, Chinese customs seized 13,000 batches of suspected infringing goods totaling 36.09 million items, according to GACC's official enforcement data. The system works fast -- it's one of the reasons brand owners love it. But the same speed that protects legitimate brands can be weaponized against them by squatters.

Here's the mechanics:

1. A squatter registers your brand name in China
2. The squatter records the trademark with customs
3. When your goods pass through a Chinese port (even if you're just exporting from your own contract manufacturer), customs flags your shipment
4. Your goods get detained. You can't ship. Your Amazon inventory runs dry. Your FBA deadlines get missed.
5. The squatter contacts you with an "offer" to sell the trademark -- at a price

Before the BILOBAN ruling, the squatter could argue: "I have a valid trademark registration, I used the lawful customs process, what's the problem?"

Now the answer is clear: If your trademark was obtained in bad faith, and you used customs detention as leverage rather than as legitimate enforcement, you face damages -- not just an invalidated registration.

But here's the thing.

The BILOBAN case took years to resolve. The American company had to litigate through two court instances, go through CNIPA invalidation, and deal with USPTO trademark harassment along the way. The 300,000 yuan damages award is significant, but it doesn't fully compensate for the business disruption, legal fees, and time cost.

The lesson isn't "customs is dangerous." The lesson is: The companies that avoid the BILOBAN trap are the ones that file early, watch their lanes, and keep evidence ready.

What to Do If Your Goods Are Detained at China Customs

If you're reading this because your shipment just got flagged, here's the immediate action list.

Within 48 hours of detention:

1. Gather evidence of prior use. Your USPTO registration date, your first sale date, your Amazon listing history, your contracts with Chinese manufacturers -- all of it. The BILOBAN company's 2017 USPTO registration was central to proving it was the legitimate rights holder.
2. Document all communications from the detaining party. If they demand money, threaten destruction of goods, or offer to "sell" their trademark -- save everything. These communications became key evidence in the BILOBAN case for proving "improper application."
3. Check the detaining party's trademark portfolio. In the BILOBAN case, CNIPA found that Lang Company held nearly 100 marks across 18 categories, many matching Amazon sellers' brands. This pattern evidence was critical to the bad-faith finding.
4. File for trademark invalidation at CNIPA. Under Article 4 and Article 44 of the Trademark Law (2026 amendment), trademarks obtained through bad faith or improper means can be invalidated. CNIPA invalidated Lang Company's mark in this case.
5. Consider a declaratory judgment of non-infringement. If customs cannot confirm infringement (as happened here), you can go to court to establish that your goods don't infringe -- and then claim damages for improper application.

The legal pathway is now clearer than it was before BILOBAN. The three-question test gives courts a framework. The damages provision in Article 28(2) gives you a financial remedy. But you need evidence, and you need to act fast.

How to Avoid Becoming the Next BILOBAN

Three steps before your next shipment leaves the factory.

Step 1: Run a China trademark search. Before you commit to a supplier or a brand name for the Chinese market, check CNIPA's database. A simple search can tell you whether someone has already registered your mark. (Here's how to do a CNIPA trademark search.)

Step 2: File your trademark in China. If you're serious about the Chinese market -- even if you're just sourcing and exporting -- you need a Chinese trademark registration. In a first-to-file system, the person who files first wins. Period. (See our breakdown of China's first-to-file system.)

Step 3: Record your trademark with customs. Once you have your Chinese registration, record it with GACC. This gives you the same border enforcement power that squatters misuse -- but on the legitimate side. It's fast, it's cheap, and it works.

If you've been selling on Amazon for years without a China trademark, you've been lucky. The BILOBAN case is proof that luck runs out.

The Bigger Picture: Customs Enforcement in 2026

The BILOBAN case arrived alongside some striking enforcement numbers.

In H1 2026, Chinese customs conducted the "Long Teng 2026" (Dragon Rising) enforcement campaign, seizing 13,000 batches of suspected infringing goods totaling 36.09 million items. Customs approved 15,000 new IP recordation applications and processed 165 general guarantee cases.

Customs is using big data and AI-powered image recognition to flag suspicious shipments faster than ever. The system is getting more sophisticated -- which means both legitimate brands and bad-faith actors have more powerful tools at their disposal.

The BILOBAN ruling sends a clear signal: customs IP protection is legitimate and valuable, but it's not a weapon for squatters. The system is designed to protect rights holders, not to enable ransom schemes.

If you're a legitimate brand owner, this should give you confidence. The courts are catching up to the squatters' tactics.

If you're a squatter reading this -- and yes, some of you are -- the message is equally clear: the 568,800 yuan ransom strategy now comes with a 300,000 yuan price tag.

Frequently Asked Questions

Sources: Shanghai IP Court case publication (August 2026); CNIPA Trademark Law (2026 Amendment); GACC H1 2026 IP Enforcement Data; Regulations on Customs Protection of Intellectual Property Rights.