China Law Blog

Good advice indeed. We have NDA's with all suppliers and our customers but I've often wondered how much they are worth given the size of our company and our business in China. I've sat with suppliers who we have NDA's with and they've openly shown us or told us information about our competition that I think they'd considered to be company confidential. It bloody horrifies me sometimes and I have to tell suppliers (even customers sometimes) that we're not interested in getting information like that. When I ask if they have NDA's with the company whose info they are are sharing it's always 'No' - something I find hard to believe given our line of business and the companies we compete with.

We've even been given samples of parts from our competition by (Chinese) senior sourcing and purchasing staff at a large multi-national OEM. I was even more shocked at that since I know for a fact that the person who gave us them had signed a confidentiality/non-disclosure contract with his employer. If we were caught with the samples we'd have to chose between admitting where we go them, and then losing the business through revenge from his colleagues or lying and trying to protect him and possibly losing the business as well.

As always in China - complain all you want but lead by example. *>* :-)

PiPi --

Thanks for checking in. I have no doubt (in fact, I know from my own experience) that even the best NDA might be completely ignored/violated so they are definitely less than foolproof.

I will say, however, that my sense is that they are being taken more and more seriously in China, particularly in the high tech arena and their efficacy will only continue to increase.

As for the "telling" part, one of the things we notice (we think) is that the way they are treated by the opposing part can be a good indicator of whether they intend to abide by them. This is based by our evidence over the years in many countries, but our sense is that if you give an NDA to someone and they sign it instantly without looking at it carefully, you may have problems. The person signed it quickly because they do not care what they sign because they have no problem breaking their agreements. On the flip side (and as I mentioned in the post) the person who refuses to sign a reasonable PDA is almost certainly going to pose problems down the road. The ideal person looks it over carefully and suggests a reasonable modification, deletion or addition. This person is serious about signing the agreement and is likely to be the most serious about abiding by it.

These agreements both decrease the likelihood of someone stealing your information and increase the likelihood of your being able to secure a remedy if stealing does occur. But, again, get it in Chinese and in English.

CLB, would you say that NDA enforcement is more common when and only when a chinese partner is being damaged or a large MNC is harmed AND the PLA is not benefitting?

nanheyangrouchuan --

Thanks for checking in. Good questions. Unfortunately, I do not have enough of a basis on which to answer with respect to NDAs specifically. I will say that generally Chinese courts are more concerned with harm to Chinese companies as opposed to foreign companies. This is particularly true outside the big commercial cities. But, this definitely does not mean foreign companies cannot prevail, it just means their being foreign will be one factor against them.

Just this week, I met with an attorney from a very small town in Washington state who my firm brought in to help handle a case in that town on behalf of a European client. This town is economically quite depressed and I asked whether our clients' nationality would be a negative with the court/jury. The lawyer thought not, but we all agreed this would almost certainly be otherwise if our client were Chinese.

"The lawyer thought not, but we all agreed this would almost certainly be otherwise if our client were Chinese."

But not if Japanese or Korean, so "anti-asian" racism is pretty much eliminated. Unfortunately all Chinese have to bear the burden of a certain political organization like all Americans had to bear the burden of curious George and Darth Cheney. Unfortunately for the Chinese they can't "adjust" the position of the gov't every couple of years.

nanheyangrouchuan --

Thanks for checking in. Interesting you should focus on the government because the reason we lawyers were talking about a Chinese party plaintiff was because the case is in an economically depressed part of the state and we were thinking there might be some blame thrown on China for their economic situation. I never even thought about the Communist part, though that too might be a small factor.

When I was growing up in Michigan, a Chinese man was killed in a bar by patrons who insisted he was Japanese and were angry by Japan "taking over the auto industry." It was that sort of thinking that got us to talking.