On September 8, 2008, Picasso International Enterprise Co., Ltd. (Picasso), the figurative trademark owner, granted exclusive usage right to Shanghai Pafuluo Stationery Co., Ltd. (Pafuluo) in the category of writing instruments in China on the term from September 10, 2008 to December 31, 2013. On March 12, 2009, the Recordal of License Contract is approved by the China Trademark Office (CTMO).

On February 11, 2010, Picasso and Pafuluo conducted an agreement with a ten-year extension based on the original term stated in the License Contract. However, they didn’t request a Recordal of License Contract before the CTMO for the updated agreement.

On February 16, 2012, Picasso signed a trademark license contract with Shanghai Yixiang Stationery Co., Ltd. (Yixiang), with terms including exclusive usage right of the disputed trademark from January 15, 2012 to 31 August 2017. Pafuluo believes the act of Picasso and Yixiang is suspected of being involved of “malicious collaboration detrimental to the legitimate interests of the third party” and” violation of the mandatory provisions of laws and administrative regulations” under the Contract Law, and filed a lawsuit to the court requesting: invalidation of the trademark license contract between Picasso and Yixiang; a compensation of 1 million CNY for economic losses. The first intermediate people's Court of Shanghai Municipality holds that: the trademark license contract between Picasso and Yixiang is based on true intentions of both parties with the purpose of obtaining exclusive usage right of the disputed trademark and it is difficult to identify the subjectively ill will of harming the legitimate interests of Pafuluo; The definition of trademark licensing method  is not included in the mandatory provisions of laws and administrative regulations belong to the mandatory legal norms, then ruled dismissing all claims. Pafuluo dissatisfies the decision and appeals. In the second trial, the first higher people's Court of Shanghai Municipality holds that: both Picasso and Yixiang are aware of the existing agreements between Picasso and Pafuluo when signing the trademark license contract, thus, Yixiang does not qualify the Bona Fide Third Party; However, there is also no sufficient evidence to prove nether Yixiang has subjectively ill will against Pafuluo nor collaborations in doing so between Yixiang and Picasso, so it is difficult to identify if it qualifies malicious collaboration detrimental to the legitimate interests of the third party; But because Yixiang is not the Bona Fide Third Party, its obtained exclusive usage right cannot be exercised against the prior right which Pafuluo holds. Therefore, the judge rejects the appeal and upholds the original verdict.

The ruling of the second trial clearly shows: to constitute " malicious collaboration detrimental to the legitimate interests of the third party”, not only it needs to prove intention to harm subjectively, but also it needs to prove collaborative behavior. In this case, the posterior trademark license contract is not deemed to be invalidated on because it is signed at a later time. But the prior contract can be used against a posterior contract signed by non- bona fides third party.