When looking for a manufacturer in China, you may wonder what kind of agreement to use to protect your ideas. Should it be a non-disclosure agreement (NDA)?
As others in the China manufacturing legal consulting world have emphasized, the answer is “no.” NDAs are not effective in protecting IP or trade secrets in China. Instead, use a non-disclosure, non-use, non-circumvention (NNN) agreement. We recommend NNNs to all of our clients that are dealing with any proprietary information with China-based suppliers and manufacturers. However, always understand: Even with an NNN, it is exceedingly challenging prevent IP theft unless your IP is registered in China and you have a registered business entity there.
How can you use an NNN agreement?
Our advice is to use an English and Chinese language NNN. This is a tool to develop the relationship, as noted in the detailed overview “Here’s why a Chinese NNN agreement is more effective than a NDA” by Gorilla ROI. The process of agreeing on on NNN and asking your potential supplier or manufacturer to obtain the legal signature (and chop) from their management helps establish a strong foundation for your relationship.
An NNN template, unlike an NDA, will set expectations on the below:
- Non-Use: Agreement to not to use Confidential Information to develop and/or sell the same or significantly similar product to any third party. This seems to be an issue that most of our clients have faced. An example is a manufacturer or supplier in China replicates the client’s product and sells is to markets where the brand does not have IP protection.
- Non-circumvention: This sets expectations that the supplier or manufacturer does not contact, deal with, transact, or otherwise be involved with any of your customers. This can happen where suppliers bypass the corporate offices of the brand and go directly to regional distributors. If you do not have solid relationships set up with your distributors and lack enforceable IP registration in the regional market(s), this can create problems.
Having an NNN agreement template is vital when working with manufacturers in China because it provides a standardized and enforceable framework to protect your business interests. By outlining clear terms on non-disclosure, non-use, and non-circumvention, the template helps prevent the unauthorized sharing of confidential information, protects against intellectual property theft, and mitigates the risk of a manufacturer bypassing your business to deal directly with your customers or suppliers. This proactive legal tool not only safeguards your products and ideas but also fosters a more secure and trustworthy partnership with manufacturers, reducing potential disputes and ensuring that your business remains competitive in the global market.
NNN Template Download
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