Late last year, a Foxconn executive was criminally charged in China with having stolen 5,700 iPhones and I am guessing most companies doing business in China never thought twice about this. They should.
When one of our China lawyers tells a client about how important it is to have a contract with their Chinese counter-party that makes clear who owns what and what must be kept confidential, our clients sometimes respond by insisting they know and trust the owner of the Chinese company and so such a contract or provision will not be necessary.
So what is the connection between the 5700 stolen iPhones and the reaction our clients sometimes convey to our China attorneys? Here goes.
The meaning of the Foxconn story is that a company is more than one person. Yes, your friend may never steal your trade secrets, but his or her employees or subcontractors very well might and if you want to encourage your friend from preventing such thefts and set yourself up for compensation if one occurs, you need something in your contract that does those things. Also, how many times have you had a friend or ally leave or even sell the company with which you are conducting business and then the new person claims no knowledge of previously agreed upon matters? And is it really beyond the realm of possibility that at some point your relationship with this person might sour?
So though friendship is of great importance, a written contract can be more long-lasting and provide better or at least additional protections. And who does not want that?