China, Contracts, Intellectual Property

IP Agreements That Work For China

How can you draft an NNN Agreement that China courts will actually enforce?

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In Want to Protect Your IP from China? Throw Your NDA in the Waste Basket, I explained why US-style NDA Agreements do not work for China. Then in Want To Protect Your IP From China? Use An NNN Agreement, I explained China-centric NNN Agreements and why those are what works for China instead of NDA Agreements. In today’s post, I explain how to draft an NNN Agreement that China courts will actually enforce.

Common law IP lawyers typically view infringement of IP rights as impossible to value monetarily, and so they craft their IP agreements with a focus on injunctive relief. This makes sense in countries like the United States and Canada, where judges have ample power to issue and enforce injunctions. This does not make sense for China.

Though Chinese judges are empowered to issue injunctive orders, they lack the power to ensure implementation. For this reason, they avoid issuing injunctions they know will be ignored and instead favor asset seizure orders. So in drafting a China IP agreement, the goal should be to provide for a specific monetary remedy for virtually every act of infringement or other violation of the terms of the contract and to avoid creating a situation where injunctive relief is required. 

A well-crafted contract damage provision makes it easy for Chinese courts to issue asset seizure orders and decisions on damages. This is an effective solution for protecting IP from China that accounts for the realities of Chinese law and China’s court system. Perhaps most importantly, Chinese companies and their lawyers know these provisions will work and so just having one is an effective way to stop your Chinese counterparty from breaching your NNN Agreement by stealing your IP.

Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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