China Vietnam Thailand Malaysia contracts As regular readers of our blog know well, we constantly emphasize the need for a China-specific NNN Agreement to protect your intellectual property. See Why Your NDA is WORSE Than Nothing for China and China NNN Agreements: Do Them Correctly or Walk Away.

To put it another way….

Earlier this week I was cc’ed on an email from one of our China IP lawyers to a client, very briefly explaining to our client the differences between the China NNN Agreements we draft and a Western-style NDA agreement. I found it very clear and helpful and so I am running it below (with some minor changes to be sure to hide any client information) for the edification of our readers

Attached please find an English language/Chinese language PRC NNN Agreement and an English language/Chinese language draft Hong Kong NNN Agreement. For the reasons we previously discussed, the Chinese language will be the official language for the PRC NNN Agreement and the English language will be the official language for the Hong Kong NNN Agreement. Please note the following:

1. These are not traditional NDA agreements. A traditional NDA agreement relies on the concept of trade secrecy. Under this sort of an agreement only something that qualifies now and later as a trade secret is entitled to protection. As a practical matter, the information you will be disclosing will almost never meet the technical legal standard for trade secrecy. Our NNN takes a different and more effective approach. We write these to prevent your Chinese and your HK counter-parties from using the information you give them in competition with you.

2. The agreements hold the Chinese and HK receiving parties liable for any damages caused by a company/person related in any way to the receiving parties as if the act were committed by the receiving party. This is critical as one of the most common ways confidential information gets “lost in China” is when the Chinese recipient discloses that information to another entity owned by a relative or a business associate. For this reason, we are very careful in this area. In principal, at the NNN stage, there is no reason for a Chinese company to disclose your confidential information to subcontractors. However, if this happens, our approach makes the Chinese company that signs the NNN Agreement liable for any violations of the agreement by a related party or by a subcontractor. 

3. Our NNN agreements also provide for contract damages in a specific monetary amount for every act of breach. This provision provides the following primary benefits. First, it makes clear to the Chinese party that it will face real and quantifiable consequences if it breaches the NNN agreement. For the PRC, a specific monetary amount also provides for a specific minimum level of damages and this sum certain amount then provides a Chinese court with the basis for a pre-judgment seizure of assets. A credible threat of your seizing assets greatly increases the likelihood of the Chinese company abiding by your NNN agreement. Please let me know if you wish to adjust this amount: note though, this amount needs to be a reasonable pre-estimate of your damages as a result of the receiving party’s violation of the NNN. If you wish to read more on China contract damages (more commonly referred to as liquidated damages under Western country legal systems) I urge you to read On the Importance of Contract Damages in China Contracts.

4. These NNN Agreements have no set term. This means the receiving parties (those to whom you turn over your confidential information) can NEVER use your confidential information. It is a permanent obligation.

5. Seeing as how the receiving parties have orally accepted the terms of theses agreement, you should go first by signing and dating these agreements and then sending them to the receiving parties in the PRC and in Hong Kong. You should wait until you get these agreements back, fully executed, before you send them any confidential information.

6. The NNN Agreements we draft for Vietnam, Thailand, Mexico and Malaysia are very similar to these, though in different languages. Please let me know when you want to discuss those in greater depth.

 

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Dan Harris

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

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My 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.

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

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). 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 me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus 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.