Someone over on the 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. 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.
They are fast, cheap and easy because they do not require much customization from company to company or from product to product. We like putting in an attorneys’ fee provision and a provision regarding injunctive relief 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. Just putting in these provisions makes a violation less likely. We always do our NDAs 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 NDAs are effective in China for two reasons. First, they greatly reduce the likelihood of your information being revealed. Chinese companies 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 pretty familiar with them and they will generally enforce them.
We also like how much we can learn from the reaction of Chinese companies to the NDAs we draft. This is the “telling’ part and it is telling because we have found that if a Chinese company refuses to sign one, it is probably not the Chinese company with whom you want to do business. NDAs have become so common in China that it is truly the rare company that will not sign.