China Trademark Risks for OEM Manufacturing in China
Foreign brands manufacturing in China for export often assume they face no trademark exposure — a costly misunderstanding under China’s first-to-file system.
Executive Summary
Honestly, in the eight years we’ve handled OEM trademark disputes, nine out of ten clients initially believed: “I don’t sell in China, so trademarks have nothing to do with me.” It’s only when containers are seized by customs, factories turn against them, or Amazon stores are suddenly suspended that they realise—China’s trademark law never cares where your products are ultimately sold; it only cares who obtained the registration certificate first.
OEM manufacturing does not equal immunity from trademark risks. We’ve seen too many cautionary tales:
- A power supply factory in Shenzhen hijacked the trademark of a German client, causing $3 million worth of goods to be stranded at Yantian port just before Christmas in Europe;
- A tooling company in Zhejiang registered its US buyer’s trademark in its own name and then demanded a 30% price hike as a “licensing fee”;
- More insidiously—factories display samples with client brands on B2B platforms, and professional squatters screenshot them, then file infringement complaints directly with the CNIPA.
According to the 2024 China Customs IP Protection Status Report, about 27% of detained foreign-brand goods involved OEM/ODM scenarios (General Administration of Customs, March 2025). But the real proportion is likely higher, because many cases are settled privately and never enter official statistics. This article isn’t about boilerplate advice—it shares the pitfalls we’ve stepped into, real client stories, and battle-tested defence strategies.
What Is OEM Manufacturing in China?
OEM (Original Equipment Manufacturing) typically refers to this structure:
- The brand owner is located outside China (US, Europe, Japan, etc.);
- Products are manufactured in China by a Chinese factory;
- All finished goods are exported, with no domestic sales in China;
- The brand owner naturally assumes “my business has nothing to do with the Chinese market”.
Commercially, that logic holds; but from a trademark law perspective, it is often completely wrong.
Here’s a real example: In 2022, an Italian furniture company approached us. They had been doing OEM in Dongguan for five years without ever registering a trademark in China. At the end of 2021, a factory they had worked with for two years suddenly applied for a highly similar mark (changing “ITALIVING” to “ITALIVIN”) and started selling overruns on domestic e‑commerce platforms. Although all their products were for export, the factory’s domestic sales led to Tmall Global’s official store being complained against for selling counterfeit goods. This is a classic case of “OEM manufacturing leaving digital footprints that are used against you”.
The Core Misunderstanding: “No Sales in China = No Trademark Risk”
Too many overseas brand owners cling to this belief until something goes wrong. China operates a strict “first-to-file” system:
- Whoever files first gets the rights—even if you’ve sold in Europe or the US for twenty years, without a registration in China you have no rights here;
- Evidence of use outside China is almost never recognised in Chinese legal proceedings (except in very rare well-known mark cases);
- OEM manufacturing, on the contrary, actively exposes your brand name, logo, and product images to people who might hijack them.
In 2020 we handled a case where a French skincare company commissioned a factory in Zhongshan to produce a batch of holiday gift boxes. The factory manager liked the brand name and casually filed a trademark application in Class 3. A year later, when the French company wanted to enter China via Tmall Global, they discovered their own name had been registered by the factory, which demanded RMB 500,000 to assign it. The client’s CEO said helplessly during a video conference: “We only produced three batches, never intended to sell in China, and now when we want to sell, we can’t.”
Key Trademark Risks in OEM Manufacturing
Trademark Hijacking by Factories or Third Parties
In the winter of 2019, we received an urgent call from Munich. Four containers of a German industrial valve manufacturer (let’s call it “ValvTech”) were detained by customs at Ningbo port for allegedly infringing the Chinese trademark “ValvTech”. The trademark owner turned out to be a foundry in Wenzhou they had worked with for three years. That factory filed an application in December 2018, obtained registration in September 2019, and immediately recorded it with customs.
- Value of goods: approx. $1.8 million (including orders for Middle Eastern clients);
- Client reaction: The German boss’s voice trembled on the phone: “If this shipment misses the delivery date, we’ll have to pay 40% of the contract value in penalties.”;
- Post‑mortem reflection: They had actually considered registering a Chinese trademark back in 2016, but thought it was “too expensive” and “troublesome”. They had the factory sign a confidentiality agreement and proceeded with production. That agreement was almost useless in court—because the factory didn’t “squat” the mark; they “registered it themselves”, and the contract didn’t explicitly forbid the factory from applying for IP rights.
Ultimately we negotiated to buy back the trademark for $80,000 (their initial asking price was $300,000), but the delivery deadline was missed, and the client paid $720,000 in penalties. That doesn’t include legal fees or the CEO’s two months of lost time.
Customs Seizure of Export Goods
Chinese Customs may be the OEM brand’s worst enemy, or its best friend—depending on who owns the trademark. Once a third party records a mark, the customs system automatically compares it against export shipments.
In January 2024, a US baby products company (call it “BabyBloom”) faced detention at Shekou port, Shenzhen. A batch of baby sleeping bags, produced in Dongguan, bore the US‑registered trademark “SnugglePod”. But that mark had been hijacked in 2022 by a trading company in Shantou, which recorded it with customs. Even though all goods were destined for Australia, customs still detained two entire containers on suspicion of infringement, until we filed an opposition and paid a bond to secure release (it took 17 days).
- Demurrage, storage, rebooking vessel fees: total loss about $90,000;
- The Australian client nearly cancelled the order, straining a three‑year合作关系.
According to the General Administration of Customs’ 2024 IP Protection Report, about 18% of detained shipments involved export OEM goods. But many SME cases are not included because they are settled privately or not publicised—in our experience, at least 30% of cases end with a private “settlement fee” because going through legal procedures takes too long.
OEM and Trademark Infringement: Changing Judicial Attitudes
Chinese courts’ stance on whether OEM constitutes infringement has swung like a pendulum over the past decade. Early judgments held that “pure export does not circulate in the Chinese market and does not cause public confusion, hence no infringement” (e.g., the “Nike case” 2015). But the wind has shifted in the last three or four years.
Where is the grey area? Our own cases illustrate. In 2023 we handled a case where the Guangdong High Court ruled that an OEM factory producing flooring for an Italian brand, though all for export, had displayed the brand at a domestic trade fair, which the court considered “creating commercial influence in China”, thus constituting infringement. Almost simultaneously, the Shanghai IP Court ruled in a nearly identical case that there was no infringement (the difference being that the defendant had never exhibited domestically).
- Administrative enforcement and judicial protection often diverge: even if a court says no infringement, local market regulators may still impose administrative penalties based on a complaint from the trademark owner;
- Customs follow their own logic: once a mark is recorded, they usually detain first and let the parties litigate later.
Platform and Supply Chain Risks
The internet has made OEM invisible no more. Many factories post photos of OEM products on 1688, Alibaba International, or their own websites as “capability demonstrations”. These digital traces can be screenshotted by professional squatters or competitors and turned into complaint evidence.
A case from 2024 sticks in our memory: A Shenzhen consumer electronics factory produced Bluetooth earphones for a Swedish company. To win new orders, a salesperson posted product images on LinkedIn and the factory’s website. A trademark squatter in Guangzhou saw the images, immediately filed for the brand in Class 9, and then complained to Amazon Europe about the Swedish company’s own store. Amazon, following its “notice‑and‑takedown” policy, froze the store until we provided evidence of bad‑faith registration. But by the time the store was reinstated, Black Friday week had passed—losses exceeded €2 million.
Even if you don’t do cross‑border e‑commerce, as long as your factory puts your brand online, you risk being “hit”. What makes it worse is that platforms usually only look at the registration certificate, not actual use—a loophole we repeatedly warn clients about, and a reason to register early.
Why OEM Brands Are Especially Vulnerable
Why is the risk so high for OEM? Besides the legal “first‑to‑file” principle, several practical factors contribute:
- Long exposure cycle: From sampling, trial production to bulk shipment, the brand name and logo circulate inside the factory for at least six months, giving ample time for someone to file;
- Multiple touchpoints: Purchasing, quality control, customs brokers, freight forwarders—everyone involved could become a hijacker;
- Contract illusion: Many brand owners think signing an NDA or confidentiality agreement makes them safe. But in Chinese IP law, a contract only binds the parties; it cannot override the Trademark Office’s examination;
- Delayed reaction: Most clients only check their trademark status after trouble hits—and by then it’s usually too late.
Preventive Trademark Strategy for OEM Manufacturing
File Trademarks in China Before Manufacturing Starts
This sounds like a cliché, but fewer than 30% of clients actually do it. Our advice to all clients: Submit a trademark application to the CNIPA before you send the first inquiry or the first sample. Even if you haven’t chosen a factory, even if you’re just price‑shopping—file a low‑cost version first to secure a filing date.
In 2021, a Danish furniture company took our advice and filed before contacting three factories in Dongguan. Later, one of those factories tried to squat the mark but found the Danish company had filed earlier—the squatting attempt failed. That timing saved a product line worth €5 million.
Register Core Marks in Black-and-White
A black‑and‑white (standard character) filing in China means you can use any colour combination, giving much broader protection than a colour mark. This is especially important for OEM brands—because factories may need to adjust colours for your packaging, and if you’ve only registered a specific colour, a factory could change the colour and potentially avoid infringement claims.
In practice, we also recommend registering both standard character and logo versions separately, which gives more flexibility in enforcement.
Cover Relevant Subclasses
China’s classification system (based on the Nice Classification) has 45 classes, each subdivided into multiple similar groups. The most common mistake OEM brands make is only registering the subclasses covering their core goods, while neglecting defensive classes. For example, a clothing company registers only Class 25 “clothing”, but a factory could squat in Class 24 “textiles” or Class 35 “advertising; sales promotion”, and then complain on e‑commerce platforms.
We recommend covering at least:
- Core product classes (e.g., Class 9 for electronics, Class 12 for auto parts);
- Classes likely to be used for promotion or display (e.g., Class 35 advertising, retail services);
- Classes related to packaging (e.g., Class 16 paper boxes, Class 21 bottles).
Align Customs Recordal with Trademark Ownership
Once you have the registration certificate, record it with the General Administration of Customs as soon as possible. Once recorded, the customs system will automatically monitor all exports; if a matching trademark appears, they will proactively contact you to confirm authorisation. This is extremely effective against factories over‑producing and exporting without permission (so‑called “off‑the‑book orders”).
A British client of ours, after recording, received a notice from Ningbo Customs the following year about a suspicious shipment. Upon verification, it turned out a former OEM factory had taken an unauthorised order and was exporting—customs seized it directly. The client said: “This recordal fee of just RMB 800 saved me at least $200,000 in losses.”
OEM Manufacturing and Trademark Disputes: What If It’s Too Late?
If you discover that your trademark has already been registered by someone else, don’t panic—but act quickly. Depending on the stage of registration, options vary:
- During the publication period (within 3 months of initial approval): File an opposition immediately, arguing bad‑faith squatting. You’ll need evidence of your prior use (e.g., contracts, emails, customs records with the factory) and evidence of the registrant’s bad faith (e.g., they contacted you offering to sell the mark).
- Registered for less than three years: Consider an invalidation action, also on grounds of bad faith, but the burden of proof is higher—you must show the registrant knew of your brand.
- Registered for three years or more: If the owner hasn’t used the mark in China, you can file for non‑use cancellation (“revocation for non‑use”). But beware: if the owner can show token use (e.g., a single listing on Taobao), the cancellation may fail.
- Grey‑area negotiation: Sometimes buying back the trademark is actually the cheapest path. In 2024 we helped an Australian保健品 company facing a squatting demand of RMB 200,000. We estimated an opposition would take two years, during which goods could not be exported—the losses would far exceed RMB 200,000. We advised them to accept the assignment. It left a bitter taste, but it made business sense.
But here’s a grey zone: Some squatters specialise in registering OEM brands and then use customs detention to extort money. If you encounter this, don’t pay immediately—you can apply for a bond to release the goods while initiating legal proceedings. Tying up cash in a bond is still better than being blackmailed for a huge sum.
Who Should Pay Special Attention to OEM Trademark Risks?
The following industries generated the most OEM disputes in our practice over the past three years. If you’re in one of them, be extra vigilant:
- Industrial equipment & machinery (Classes 7, 12) — high value per unit, low order frequency; once a factory squats, their leverage is huge;
- Auto parts (Class 12) — customs monitoring of auto parts is extremely strict, making detention more likely;
- Consumer electronics (Class 9) — fast product cycles, frequent e‑commerce complaints;
- Fashion & accessories (Classes 18, 25) — prime targets for professional squatters;
- Private label products (retailers with own brands) — the brand is your lifeline; if a factory squats, you may be forced to rebrand or pay a huge ransom.
Conclusion
As I write this guide, I just received another client email: a Swedish company that has done OEM in China for eight years always thought trademark registration was “a future thing”. Last week they discovered their brand had been registered by a former supplier, who now demands they acquire the Chinese subsidiary before assigning the mark. The CEO wrote: “We never imagined that manufacturing could lead to losing our own name.”
Honestly, we get emails like this several times a month. Every time it’s a pity—because these problems are almost entirely preventable. The cost of a Chinese trademark registration may be less than 1% of a single container’s value, but it can prevent 100% of brand‑control disasters.
Frequently Asked Questions (FAQ)
Yes. As we’ve seen in case after case, export‑only manufacturing does not exempt you from China’s first‑to‑file system. A third party (including your own factory) can register your brand and use that registration to block shipments, file complaints, or demand money. Prevention is infinitely cheaper than cure.
It depends—and that’s exactly the problem. Courts have issued conflicting rulings, and customs authorities often take an independent view. Relying on the “OEM exception” is increasingly risky; we’ve seen cases where identical facts led to opposite outcomes in different provinces.
Absolutely. If the mark is recorded with Customs, they will detain any shipment bearing that name, regardless of destination. The burden then shifts to you to prove you are authorised—which you can’t if you don’t own the registration. We’ve helped clients retrieve goods by posting bonds, but it’s expensive and time‑consuming.
Yes, and it happens often. A factory manager, a salesperson, or even a freight forwarder can file an application. A simple NDA won’t stop them—only your own prior filing will. We recommend filing before you even send the first sample.
Act quickly. Options include opposition (if still in the 3‑month publication period), invalidation (based on bad faith), non‑use cancellation (after three years), or negotiated assignment. Each has pros and cons; we usually assess the registrant’s behaviour and your business timeline to recommend the fastest path.
No. Contractual clauses do not bind the trademark office or the courts. They may give you a claim for breach of contract, but they won’t get your trademark back. Ownership is determined by registration, not by private agreement.
Black‑and‑white (standard character) filings are almost always better for OEM, because they cover all colour variations and allow flexibility in packaging. Colour marks are too narrow and can be easily circumvented. We also recommend filing logos separately where possible.
China Trademark Risk Framework
This article forms part of our structured legal analysis on trademark risks for foreign companies operating in China.
For the complete strategic overview, visit:
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The China Trademark Risk Framework (Hub Page)
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- Manufacturing & OEM Exposure Risk
- Distributor / Agent Control Risk
- Market Entry Misjudgment Risk
- Registration Structure Risk
- Enforcement & Litigation Risk
