Make IP protection a core responsibility of the entire China management team, not merely a function of the legal or brand protection teams, and adjust internal information flows and reporting structures to reflect those responsibilities. Registering your IP in China is one of the most important things that companies can do even before they start looking for manufacturers in China.
Instead of drafting a pure NDA agreement, foreign companies should be opting for a Non-Disclosure, Non-Use, and Non-Circumvention agreement (NNN) that includes the normal protections of an NDA including non-disclosure and non-use provisions but in addition to those, also non-circumvention protection. China NNN agreement prevents your Chinese manufacturer from distribution of your IP to 3rd parties. It stops Chinese suppliers from using your IP for any purpose other than manufacturing the product in question for you and prohibits a supplier from selling directly to your clients.
Must have Provisions in a China NNN Agreement–
- NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant.
- It will need to be written in English and Chinese and we will need to be able to make slight edits (such as changing the supplier’s name in English and Chinese) so you can re-use the document (for the same product) but for different suppliers.
- An NNN agreement must include a sum certain contract damage provision that a Chinese court can and will enforce by ordering the seizure of the defendant’s assets.
NNN agreements should clearly define which rights are being disclosed or licensed, their nature, and their scope. Always have a written contract for all business activities in China, and the language should be Chinese. Keep in mind that your contract is not translated into Chinese from another language or from Hong Kong to the mainland, because the meaning of a translated version could be ambiguous and could hold an entirely different meaning. That’s why China lawyers suggest drafting the NNN contract completely in the Chinese language.
NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant. This means that Chinese law is the governing law, Chinese is the governing language, and exclusive jurisdiction is in a Chinese court with jurisdiction over the defendant. the China-specific Non-Disclosure, Non-Use And Non-Circumvention Agreement (NNN), and accompanying Original Equipment/Design (OEM/ODM) Manufacturer Agreements. These agreements are used to protect your confidential information and to prevent your Chinese manufacturer from competing with you or going around you to your customers or vendors. In other words, they make sense for almost every company doing business with China.