Just received the following comment to our post, How To Find And Deal With Chinese Manufacturers:

I have a question, I sent a picture of a unique [product] and they sent back an email saying  they would like to manufacture it and when I said “mine” they corrected me by stating “ours.” Is this normal? How should I deal with them?
How does something like this work?

We get this type of question shockingly often. Usually, it comes from someone who just returned from Asia calling to say they just spent the last week in China or Vietnam or India or wherever, meeting with a whole slew of potential manufacturers and they just realized (oftentimes by having read one of our blog posts on the need for an NNN Agreement) that they should have required the potential manufacturers to sign an NNN Agreement BEFORE revealing their product or prototype or CAD product drawings.

So what can be done? How should this company deal with their foreign manufacturer now? How can this company protect its trade secrets/IP now? With this particular company, all may not be los and that is why I deleted their specific definition of their product and replaced it with the generic word, “product.”

If this company provided its product to just one manufacturer and is now planning to buy from just this one manufacturer, this company may end up doing just fine.

What this company should have done BEFORE it showed its unique product to anyone  is to have required that manufacturer to sign a comprehensive NNN Agreement written specifically for the country in which that manufacturer is located.  But that was not done, and the question is what can this company do now that it has returned without an NNN Agreement of any kind.

This company can and should go to this particular manufacturer and say something along the following:

We want you to manufacture our product, but for that to happen, we need you to sign this Manufacturing Agreement.

The Manufacturing Agreement this company provides to its chosen manufacturer should contain each and every trade secret provision that should have gone into the NNN Agreement this company should have required the manufacturer to have signed before showing the manufacturer anything. If the manufacturer signs the Manufacturing Agreement, the company will have its trade secret protections. If the Chinese manufacturer refuses to sign the Manufacturing Agreement, the company will have a big problem.

Manufacturers virtually always will sign a legitimate Manufacturing Agreement containing trade secret protections because they want the manufacturing business. If they do not sign, it is because they are not a legitimate company and they do not want to be bound by legitimate requirements. In other words, the manufacturer that refuses to sign a Manufacturing Agreement does so because they intend to steal trade secrets or fail to deliver on their quality promises and they do not want to sign a contract that could effectively penalize them for doing so.

The much tougher problem is the company that comes returns to their home country after having shown its unique product to ten manufacturers. That company can get a protective Manufacturing Agreement from just the ones it will be using to manufacture its products, but that means it will remain at great risk with eight or nine of them.

The real solution is always to have an NNN Agreement at the ready.

If you are seeking to have your product manufactured overseas, I suggest you scour the following regarding NNN Agreements:

And the following regarding Manufacturing Agreements:

And the following regarding other key issues arising from China product outsourcing:

 

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. 

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.