A Non-disclosure, Non-use and Non-circumvention Agreement (NNN) is a type of confidentiality agreement used in business dealings with Chinese companies, particularly Chinese manufacturers. “Non-disclosure” means the counterparty cannot disclose any confidential information you provide.

A Non-disclosure, Non-use and Non-circumvention Agreement (NNN) only protects the products that are being made by your manufacturer, not other companies. If you want to be protected from all the companies in China, you need to have a Trademark from your home country and apply for a Chinese trademark. Please add the Chinese trademark to your order. This is only if you have a trademark in your home country.

The second fundamental problem with typical NDA agreements is that they are not enforceable in China. Chinese law allows for protecting trade secrets and for contracts that provide NNN protections. But if such a contract is going to be effective in China it usually should be written in Chinese, governed by Chinese law, and exclusively enforceable in a Chinese court. We discuss this issue in more detail in Section III below.

You need a China-centric NNN agreement to protect your IP in China. The three “Ns” that make up a China NNN agreement are: non-use, non-disclosure, and non-circumvention. Consider each in turn.

Non-use means the Chinese factory agrees by written contract not to use your idea or concept or product in a way that competes with you, the disclosing party. The key here is that this obligation arises by Chinese contract, not from some abstract property rights arising under intellectual property law. A contractual provision prohibiting use will protect you not because your concept is classified as some form of intellectual property such as trademark, copyright, patent, or trade secret. Rather, it will protect you because the Chinese factory cannot use your work because if it does so it will be in breach of its contract with you. Getting a Chinese factory to sign a contract with a non-use provision means you will not need to look outside that contract for you or for China’s courts to be able to control the Chinese factory.

The next “N” in a China NNN agreement is non-disclosure. In most instances, you need not be terribly concerned with your Chinese counter-party making your secrets public. The Chinese factory usually has no interest in letting the general public in on its good thing as it typically wants to use your idea or concept for its own purposes. But as we mentioned above, this is usually all that a standard NDA can accomplish, and it cannot usually even accomplish that in a China context.

If you prohibit a Chinese factory from using your protected information, the clever Chinese entity will not directly breach the non-use prohibition; it will instead disclose the concept to someone in its “group” and then deny having breached the non-use prohibition because it did not directly use the protected information. For this reason, it is important to understand the type of group with which you are dealing and to make clear in writing that: 1) disclosure is specifically prohibited within the group and 2) if there is infringement by any member of the group, the factory that made the disclosure will be fully liable.

Usually, some education on this issue is required because Chinese companies often do not view disclosure to a member of their group as violating a non-disclosure prohibition.

Non-circumvention is the third and last “N” and its importance varies with the situation. Your Chinese factory knows you are purchasing product from it at the China price and then adding a big margin before you sell the product in a foreign market. How would you be impacted if your Chinese factory seeks to sell your product to your customers at 50% less than you charge? What if your Chinese factory were to start selling your product to the rest of the world? In industries where quality and service are critical, many of your customers would probably stay with you. But in other industries, this is less likely to be the case. The best way to prevent circumvention by your Chinese supplier is by having a China-appropriate non-circumvention provision in your China NNN Agreement.