China NNN and NDA Agreements

China NNN Agreements

Someone on our China Law Blog Linkedin Group just posed a question about using non disclosure agreements (NDAs) in China. My first thought was to refer them over to one of our posts on the subject, but then I realized we have not really written anything on them since 2006. That is far too long for something so important and so effective.

We love NDAs. They are fast, cheap, easy, telling and effective. Let me explain.

If you are going to be revealing anything in China that you do not want dispersed into the public sphere, you should consider an NDA. If you are going to be showing your product, prototype or designs to a Chinese factory, you should consider an NDA. If you do not want your Chinese manufacturer competing with you with your products, you should consider an NDA. The most important thing to know about using NDAs is that they are far more effective when signed before you reveal the information than trying to get someone to sign one after they have the information you are trying to keep quiet. The other most important thing you need to know about NDAs for China is that they really should not be NDAs at all; they should be China-specific NNN Agreements instead because Western-style NDA agreements do not work for China and most of the time using one of those is truly worse than having nothing at all.

NDA agreements prohibit your Chinese counter-party from disclosing your secrets. They do not stop them from competing with you or going around your back to your customers or clients or to anyone else. For these things — which are what is needed 99+ percent of the time in China, you need a China NNN Agreement.

China NNN Agreements (non-disclosure, non-compete, non-circumvent) are fast, cheap and easy. We like putting in an attorneys’ fee provision and a provision regarding injunctive relief in our China NNN Agreements so that if the other side violates it, we will be able to act quickly to stop them from continuing to do so and we will get our attorneys’ fees in the process. Most importantly, we put in a finely tailored contract damages clause because Chinese companies know how quick and effective and deadly this clause can be and — more than anything else — it is this clause that will make your Chinese counter-party abide by your NNN Agreement. We always do our China NNN Agreements As in both English and Chinese. We make the Chinese version the official one and the English version just a translation for our clients.

Making them in Chinese means that the Chinese courts will be able to better understand them and enforce them more quickly. It also takes away the other side’s argument that it did not know what it was signing.

Well-crafted NNN Agreements are effective in China for two reasons. First, they greatly reduce the likelihood of your information being revealed. Chinese company owners are no different from anyone else and if they can help it they will seek to avoid a lawsuit where the odds have already been stacked against them. Second, the Chinese courts are familiar with them and they generally enforce them.

We also like how much we can learn from the reaction of Chinese companies to our China NNN Agreements. This is the “telling’ part because we have found that if a Chinese company refuses to sign one of our China NNN Agreements, it is probably not the Chinese company with which you want to do business. We have drafted and put before Chinese companies around 500 of our China NNN Agreements and they have been signed approximately 495 times. If a Chinese company says, nobody signs these in China, we tell them that is not true and they either buckle down and fly straight or our client walks.

16 responses to “China NNN and NDA Agreements”

  1. My position:
    – NDAs for specific purposes covering specific activities/material are a necessary safety belt for any business deal in which sensitive information could be disclosed.
    – NDAs for employees who regularly come into contact with sensitive information, and limited to such sensitive information, are a necessary defence against industrial espionage and other such dirty dealings.
    – NDAs blanket-applied to entire workforces and drafted so as to cover practically anything that employees might come into contact with are a god-damned human rights violation, often foisted on employees after they have signed their contracts of employment and separate to their employment contracts. The same goes for the non-compete agreements that employees are asked to sign along with them, the main purpose of which seems to be to restrict the employees freedom of action in seeking employment with other firms in the same line of business. China is correct in giving such contracts short-shrift.

  2. My position:
    – NDAs for specific purposes covering specific activities/material are a necessary safety belt for any business deal in which sensitive information could be disclosed.
    – NDAs for employees who regularly come into contact with sensitive information, and limited to such sensitive information, are a necessary defence against industrial espionage and other such dirty dealings.
    – NDAs blanket-applied to entire workforces and drafted so as to cover practically anything that employees might come into contact with are a god-damned human rights violation, often foisted on employees after they have signed their contracts of employment and separate to their employment contracts. The same goes for the non-compete agreements that employees are asked to sign along with them, the main purpose of which seems to be to restrict the employees freedom of action in seeking employment with other firms in the same line of business. China is correct in giving such contracts short-shrift.

  3. At first I thought there was a bit of humor to the post, but then as I got through the third paragraph I realized Dan was being dead serious.
    Punchy and juicy (not Punch and Judy). This is why I come to CLB. Ideal length for any post, Dan.

  4. At first I thought there was a bit of humor to the post, but then as I got through the third paragraph I realized Dan was being dead serious.
    Punchy and juicy (not Punch and Judy). This is why I come to CLB. Ideal length for any post, Dan.

  5. Why Non Disclosures (NDAs) Alone Are Not Enough For China.
    The other day, I did a post on why non disclosures are so often critical for those doing business with China. Within a few hours of that post, entitled, “China Non Disclosure Agreements (NDA). A Really Good Thing,” my co-blogger, Steve Dickinson, was p…

  6. Why Non Disclosures (NDAs) Alone Are Not Enough For China.
    The other day, I did a post on why non disclosures are so often critical for those doing business with China. Within a few hours of that post, entitled, “China Non Disclosure Agreements (NDA). A Really Good Thing,” my co-blogger, Steve Dickinson, was p…

  7. With great respect to all on this list here is my take on non-disclosures.
    In all of my years doing what i do, I have never heard a good enough reason to sign non disclosure agreements. When an entrepreneur asks me to sign an NDA, my first question to them – and I mean right away – is why?
    I am often told for ‘protection’ but the truth is they do not protect all that much.
    Here is what needs to be understood: except for a very few rare companies, asking to sign an NDA means you have something to hide and that it must be hidden no matter what. The fear is, of course, that someone will steal one’s project.
    If you give me a business plan and ask me to sign an NDA, what I basically interpret is that you are afraid that I will steal your idea and make millions off of it and so on.
    However, if I can really ‘steal’ your plan and build a business off of that plan than what you are telling me is that you have a very, very weak business. Who would want to invest in a company if I could simply take away your 20 or 40 page document and start making money?
    A real business is not only the business plan, but much, much more.
    However – and to be fair to those who want people to sign NDAs – if you came to me or if I approached you with a business idea, I would most likely ask you to sign an NDA prior to releasing any real information.
    So I guess I am not consistent (:

  8. With great respect to all on this list here is my take on non-disclosures.
    In all of my years doing what i do, I have never heard a good enough reason to sign non disclosure agreements. When an entrepreneur asks me to sign an NDA, my first question to them – and I mean right away – is why?
    I am often told for ‘protection’ but the truth is they do not protect all that much.
    Here is what needs to be understood: except for a very few rare companies, asking to sign an NDA means you have something to hide and that it must be hidden no matter what. The fear is, of course, that someone will steal one’s project.
    If you give me a business plan and ask me to sign an NDA, what I basically interpret is that you are afraid that I will steal your idea and make millions off of it and so on.
    However, if I can really ‘steal’ your plan and build a business off of that plan than what you are telling me is that you have a very, very weak business. Who would want to invest in a company if I could simply take away your 20 or 40 page document and start making money?
    A real business is not only the business plan, but much, much more.
    However – and to be fair to those who want people to sign NDAs – if you came to me or if I approached you with a business idea, I would most likely ask you to sign an NDA prior to releasing any real information.
    So I guess I am not consistent (:

  9. Most of non disclosure agreement americans use for China are not good because they have it all wrong for China including and especially when they expect the dispute to happen in an American court as though American court can tell Chinese company what to do.

  10. Most of non disclosure agreement americans use for China are not good because they have it all wrong for China including and especially when they expect the dispute to happen in an American court as though American court can tell Chinese company what to do.

  11. Is there a place I can download a standard Chinese and English NDA that is written to protect invention ideas in China? Or is that something I need to pay for? I am an American living in Guangzhou wanting to prototype an invention but want to make sure my idea is not stolen or copied in prototype stage by the factory personnel. It is a small operation

  12. Is there a place I can download a standard Chinese and English NDA that is written to protect invention ideas in China? Or is that something I need to pay for? I am an American living in Guangzhou wanting to prototype an invention but want to make sure my idea is not stolen or copied in prototype stage by the factory personnel. It is a small operation

  13. I would also like to know of a standard Chinese and English NNN I can download or an affordable one I can use in China to protect my products. I found one, but its a little over my budget (approx. $1000)! Please help!

  14. I would also like to know of a standard Chinese and English NNN I can download or an affordable one I can use in China to protect my products. I found one, but its a little over my budget (approx. $1000)! Please help!

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