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Want To Protect Your IP From China? Throw Your NDA In The Waste Basket

Protecting clients from intellectual property theft in China requires more than most lawyers realize.

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Most foreign companies make the mistake of trying to protect their IP from China by using an American-style non-disclosure (NDA) agreement, rather than a China-centric NNN (non-use, non-disclosure, non-circumvention) agreement. This is the first in a series of posts I will be writing on how to protect your IP from China with a China appropriate NNN agreement. This post discusses why US-style NDA agreements do not work for China.

Why do so many good American (and Canadian and British) IP lawyers draft NDA agreements of no use to their clients?

NDA agreements focus on protecting trade secrets. For a trade secret to be protectable property, the information must remain a secret. For this reason, NDA agreements focus on preventing disclosure of a secret to the public. Good US-style NDA agreements therefore focus narrowly on preventing secret information from being revealed to the public.

Since U.S. lawyers generally seek to maintain their clients’ domestic intellectual property portfolio, it is natural for them to believe they can rely on a single NDA agreement, written in English, subject to U.S. law, and exclusively enforceable in some U.S. state. But for the following two reasons, this kind of NDA is of no value in China.

1. The fundamental issue in China is not protection from disclosure to the general public. The Chinese factory that steals your idea is not planning to disclose that concept to the general public. It steals your idea to use for its own benefit. This means that your contract with this factory needs to make clear that whether the information provided is a secret or not, the Chinese factory agrees not to use the information in competition with you. Now that you know what is really required for China, you can see why the language in US-style NDA agreements is so far removed from what is actually needed to protect your IP from China.

2. The other fundamental problem with the typical U.S. style NDA agreement is that it is virtually never enforceable in China. Chinese law both allows for protecting trade secrets and for contracts that provide NNN protections. But for such a contract to be effective in China it should be written in Chinese, governed by Chinese law, and exclusively enforceable in a Chinese court. See Drafting China Contracts That Work.

In future posts I will write more about what should go into your China NNN agreement, and why.

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Earlier: Drafting China Contracts That Work

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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