Basics of Manufacturing Non-disclosure Agreements in China

Page 1. ContractsIn today’s blog post we are going to take a closer look at different contracts and agreements that help European companies to protect their precious IP in China. In particular, you will learn more about non-disclosure agreements and non-use, non-disclosure and non-circumvention agreements. 

Introduction: contracts in China

Many SMEs view Chinese manufacturers as cheap, technically-skilled, attractive options for manufacturing their products and as such pursue partnerships with them. While Chinese manufacturers can be the key to the products needed to give your company worldwide reach, China—like all countries—can be home to unscrupulous merchants with a taste for IP theft. As such, tailoring contracts to suit your intellectual property rights (IPR) is an important way to ensure that your company’s specific intellectual property assets are adequately protected when dealing with Chinese manufacturers. In particular, this article will address use of so-called NDAs (non-disclosure agreements) and NNNs (non-use, non-disclosure, and non-circumvention agreements) to protect an SME’s trade secrets—“any non-public technical or business information with commercial value that is guarded by confidentiality measures.”

What are NDAs and NNNs?

At its core, a non-disclosure agreement (NDA) between an SME and a Chinese manufacturer is an agreement which states that once the SME reveals its trade secrets to the Chinese manufacturer, the manufacturer will refrain from disclosing those secrets to anyone else. Once a secret loses its secrecy—once it is revealed to the public—it no longer has any kind of legal protection and, most likely, will lose its economic value. That is why NDAs are go-to contracts for any SME which seeks to use a Chinese manufacturer. Otherwise, the manufacturer could reveal the SME’s trade secrets, making those secrets impossible to protect and capitalise on. Continue reading “Basics of Manufacturing Non-disclosure Agreements in China” »

Dealing with Partners and Employees: Writing a Good Manufacturing Non-disclosure Agreement in China

MP900438585There are various ways in which European SMEs can protect their IP. The most obvious way is to register IP in the country where SMEs do business in. At the same time, another, sometimes overlooked, way to protect IP is using well-written contracts. The people and companies that SMEs do business with in China, and therefore contract with, will often use the European SMEs’ IP to varying degrees. Therefore, it is also very important for the European SMEs to protect their IP with well-written manufacturing contracts. Today’s blog post gives some  practical tips on how to write good manufacturing non-disclosure agreements for doing business in China. 

Defining protected information: keeping everyone on the same page

NNN agreements should clearly define which rights are being disclosed or licensed, their nature, and their scope. Clear mechanisms for identifying and marking, accounting for, and maintaining secrecy for this information (or indications of who will bear these responsibilities, what general types of information should be considered confidential, or processes for retroactively marking material as confidential) should be present. If desired, additional clauses can also outline what types of information will not be considered confidential. Naturally, before these types of information can be identified, an SME should first understand just what its trade secrets are. Conducting an IP assessment and audit can identify key IP which was otherwise taken for granted or not fully appreciated by the SME and can assign a value to the IP which will make calculating contract damages much easier.

While the contract is in force, these rules should be strictly followed. Over the course of the contract, additional IP may be generated as a result of the work of employees or independent innovations on the part of the manufacturer. NNN agreements can also include clauses which dictate that all such IP belongs to the SME and can thereby avoid future disputes. Note, however, that China places restrictions on the export of some technology—meaning that agreements automatically granting new IP to the SME could be struck down in court. Continue reading “Dealing with Partners and Employees: Writing a Good Manufacturing Non-disclosure Agreement in China” »

Using Contracts to Protect your IP in South-East Asia: NDAs and Employment Contracts

MP900438585IPR protection is an essential part of SMEs’ business strategy and it often defines the success of the business. Thus, it is very important for the SMEs to be aware of all of the possibilities to protect their IP. In today’s blog post we are taking a closer look at IP protection with different contracts and agreements. More specifically,  we are discussing Non-Disclosure Agreements and Employment Agreements, which can be used as preemptive measures to deter possible infringers from violating SMEs’ IP rights. 

There are many ways in which intellectual property (IP) owners should protect their valuable assets. Perhaps the most apparent ways are to register the IP in relevant jurisdictions and then enforce that IP right against infringing third parties. There is, however, a very practical and pre-emptive way of protecting IP on a commercial level. SMEs should also think about protecting their IP with different contracts like non-disclosure agreements, memorandums of understanding and employment contracts.

A large proportion of the value of business is derived from IP due to its presence in SMEs’ everyday business. IP can create value and revenue in a number of ways: it can be sold or licensed, contributed as capital in a joint venture, offered to enter into strategic alliances, integrated with a current business, or used to create a new business. The people and companies that SMEs do business with, and therefore contract with, will often use SME’s IP to varying degrees. When doing business that involves IP, there are two key points to bear in mind: always use written contracts wherever possible and ensure that, where relevant, that company’s IP is covered in those agreements.

Non-Disclosure Agreements (NDA) and Confidentiality Agreements

Ensuring non-disclosure and confidentiality is important for any type of deal—not only for technology, IP and trade secret matters which may be the core part of the deal, but also for business strategies, new product ideas and financial and accounting information, all of which are likely to be useful in deciding whether a deal will go forward. Non-disclosure and confidentiality undertakings are enforceable in South-East Asia, provided that they are reasonable and fair and do not violate the public interest. Normal Western-style confidentiality undertakings setting out the agreed terms of what constitutes the “confidential information” and what does not, acknowledgement of proprietary interest in the confidential information and penalties for unauthorized disclosure, etc., are also common in Southeast Asia. Continue reading “Using Contracts to Protect your IP in South-East Asia: NDAs and Employment Contracts” »