Entering the Chinese market is a dream for many European brands, but it often comes with unforeseen challenges—especially when it comes to intellectual property (IP) protection. Today, we share a real-world example of “Luna & Sol,” a sustainable fashion brand from Spain, which faced a trademark dispute shortly after launching in China. Their journey offers valuable lessons for any international business looking to operate in China confidently and compliantly.
Background: The Allure and Risk of the Chinese Market
Luna & Sol, known for its eco-friendly apparel and accessories, began exploring the Chinese market in early 2023. After positive feedback from trade shows and e-commerce trials, they decided to register their trademark in China to secure their brand identity. To their surprise, during the trademark search, they discovered that a local company in Guangzhou had already registered an identical trademark in Class 25 (clothing, footwear, headgear) just six months earlier.
The Chinese entity had not yet launched products under the mark but had filed the application in what appeared to be a classic case of “trademark squatting”—a practice where local entities register well-known foreign trademarks to later sell them back at a high price or block the original brand’s entry.
Step 1: Comprehensive Due Diligence and Evidence Gathering
Instead of reacting impulsively, Luna & Sol’s legal team, assisted by a local Chinese IP advisory firm, took a systematic approach:
- Verifying the Opposing Party: They first obtained an Official Enterprise Credit Report for the Guangzhou company. This document, retrieved from China’s National Enterprise Credit Information Publicity System, revealed key details: the company was newly established, had a small registered capital, and had no actual business operations or retail presence. This strengthened the argument that the registration was made in bad faith.
- Building a Case for Bad Faith: The team gathered evidence of Luna & Sol’s international presence prior to the Chinese company’s filing date. This included:
- International trademark registration certificates.
- Archived website pages, social media accounts, and press releases showing brand use.
- Sales invoices and distribution agreements in Europe and other Asian markets.
- Awards and media coverage establishing the brand’s reputation.
- Understanding the Legal Landscape: They reviewed China’s Trademark Law, which explicitly states that trademarks shall not be registered “by fraudulent or other improper means.” Articles 7 and 44 provide grounds for opposing or invalidating trademarks filed in bad faith. Furthermore, they considered the “Regulations on Handling Foreign-Related Intellectual Property Disputes” (effective May 1, 2025), which emphasizes strengthened guidance and support for foreign entities in IP disputes and encourages alternative dispute resolution.
Step 2: Choosing the Right Path: Opposition vs. Negotiation
With a solid evidence file, Luna & Sol had two main options:
- Filing a Formal Opposition: They could file an opposition with the China National Intellectual Property Administration (CNIPA) within the 3-month公告期 (publication period) after the squatting company’s trademark was published for opposition. This is a legal administrative procedure that can be lengthy (9-12 months) and requires detailed legal arguments.
- Direct Negotiation & Mediation: Given the clear evidence of bad faith and the squatting company’s lack of real business, their advisors suggested first attempting negotiation, possibly facilitated by a commercial mediator. This route is often faster and less costly.
Luna & Sol chose a hybrid strategy. They initiated contact with the Guangzhou company through a legal letter, stating their intent to file an opposition and a subsequent invalidation action based on bad faith, while simultaneously expressing openness to a swift, reasonable settlement. They cited the new regulations’ encouragement of mediation and和解 (settlement) as efficient pathways.
Step 3: The Resolution
The negotiation was tense initially. The squatter’s asking price was exorbitant. However, Luna & Sol’s team, backed by irrefutable evidence of prior use and the squatter’s lack of legitimate intent, held firm. They also filed the trademark opposition as a parallel action to show seriousness.
Facing a high likelihood of losing the administrative case and potentially being liable for legal costs, the Guangzhou company agreed to mediation. Within two months, a settlement was reached:
- The squatter agreed to voluntarily withdraw its trademark application.
- Luna & Sol covered the squatter’s official trademark application fees (a minimal cost) as a gesture of goodwill.
- Both parties signed a binding agreement, and the withdrawal was promptly filed with CNIPA.
Shortly after, Luna & Sol successfully filed its own trademark application, which proceeded to registration without further issues. The entire process, from discovery to resolution, took about 7 months.
Key Takeaways and Proactive Advice for Foreign Brands
Luna & Sol’s case underscores several critical lessons for protecting your IP in China:
- Proactive Registration is Non-Negotiable: File your trademarks, patents, and copyrights in China as early as possible, ideally before any market entry or public announcement. China operates on a “first-to-file” system.
- Conduct Thorough Pre-Entry Due Diligence: Before committing to partnerships or market entry, conduct comprehensive background checks. This goes beyond IP searches. A Professional Enterprise Credit Report can reveal a potential partner’s or competitor’s business legitimacy, operational status, and risk history, providing crucial context. For instance, understanding a company’s financial standing and litigation history can inform your negotiation strategy.
- Gather and Organize Global Evidence: Maintain meticulous records of your brand’s use globally—dated marketing materials, sales data, and registration certificates. This evidence is vital for proving bad faith or prior rights.
- Understand and Utilize China’s Evolving IP Framework: China has significantly strengthened its IP laws and enforcement mechanisms. The 2025 regulations highlight the government’s push for better guidance,预警 (early warning), and alternative dispute resolution (ADR) like mediation. Leverage these resources.
- Seek Expert Local Guidance: Navigating Chinese administrative procedures and legal nuances requires expertise. Partner with reputable local IP law firms or consultancies that understand both the law and local business practices.
- Consider a Multi-Pronged Approach: As shown in the case, combining firm legal action (like an opposition) with openness to negotiation or mediation can be the most efficient strategy to resolve disputes.
How to Stay Protected: The Role of Continuous Monitoring
Resolving a dispute is one thing; preventing the next one is another. For brands operating in China, ongoing monitoring is essential.
- Trademark Watch Services: Subscribe to services that alert you to new trademark applications that are identical or similar to yours.
- Regular Business Verification: Periodically verify the status of your key distributors, manufacturers, or competitors. Services that provide company document retrieval and official reports help you stay informed about any changes in their registration, legal status, or leadership.
- Leverage Official Resources: Utilize the China National Intellectual Property Administration (CNIPA) website for official searches and updates on trademark and patent gazettes.
Conclusion
Luna & Sol’s experience, while challenging, ended successfully due to preparation, the right local support, and a strategic use of China’s legal and regulatory framework. It highlights that while IP risks in China are real, they are manageable with diligence, expert help, and a proactive mindset.
For any overseas company, knowledge is your first line of defense. Understanding who you are dealing with—through verified, official company and IP data—is the foundation of sound risk management and successful market entry in China. Before signing any agreement or launching a product, know your Chinese partners.