There are a lot of things you can do to proactively protect your intellectual property (IP) when you are outsourcing production into China.
The Chinese NNN agreement may be one of the most important parts of the overall picture.
If you want to hear about NNN agreements, you are in the right place.
In this article, you will learn what’s involved in an NNN agreement, why you need it, and how it can help your business succeed in China.
What is an NNN Agreement?
So, first thing first. You may want to know the definition of an NNN agreement especially if you are new to Chinese manufacturing.
NNN stands for non-disclosure, non-use, and non-circumvention. The three Ns include:
- Non-Disclosure: Don’t tell anyone
It means that the counterparty can’t disclose any confidential information you provide.
- Non-Use: Don’t use the information
This means that the counterparty can’t use your IP for any purposes other than for your benefit under the contract.
- Non-Circumvention: Don’t go around your back
It means your manufacturing contractor can’t circumvent you and sell to your customers directly, usually at a lower price.
An NNN Agreement is a type of confidentiality agreement used in business dealings with Chinese companies, particularly Chinese manufacturers.
An effective NNN agreement can be used to protect your confidentiality such as product details, drawings, marketing strategies, etc. when working with manufacturers directly in China.
It’s a Chinese equivalent to the western world’s Non-Disclosure Agreement (NDA).
Difference between An NDA Agreement and An NNN Agreement
A Non-Disclosure Agreement (NDA) focuses on protecting trade secrets in the US. while an NNN can be used to safeguard IP in China.
To be considered protectable property, a trade secret must stay a secret. As such, NDAs are typically aimed at preventing the disclosure of trade secrets to members of the public.
Therefore, an NDA agreement focuses narrowly on confidential information from being revealed to the public.
Typically, an NDA agreement is written in English, subject to U.S. law, and exclusively enforceable in a U.S. city and state.
The Advantages of a Chinese NNN Agreement
Whether you work with an existing Chinese manufacturer or looking for a new one, building and signing a legitimate contract will guarantee the safety of your company’s confidential information.
Here are some good reasons why you should sign up for an NNN agreement.
1. Protect Sensitive Information
The primary advantage of an NNN is that sensitive information about your company remains secure.
This could involve anything like proprietary data, patents, finances, negotiation terms—anything confidential.
Signing an NNN agreement is a method to protect private details from coming out publicly or being used by the manufacturer and their staff members.
2. Build Trust
Having confidentiality when writing and signing agreements between your company and your chosen manufacturing supplier lends trust to these types of negotiations, thereby deterring the possible theft of intellectual property.
You can also use this agreement to detail your expectations for the Chinese manufacturing process, including specifications for quality control and product safety.
3. Avoid Unapproved Subcontracting
Some overseas companies that outsource production to China discover that their manufacturing suppliers rely in turn on layers of subcontractors, without the buyer’s knowledge or approval.
With this contract in place, you can reduce or even eliminate the problems caused by unethical manufacturing suppliers who could steal your IP and pass it to their subcontractors.
A Step-By-Step Guide To Protect Your Intellectual Property in China
Keep a Close Eye on Your Manufacturer
Before working with a manufacturing company in China, it’s always a good idea to do due diligence. You should understand the tier of different suppliers and the transparency of every production stage.
When working with a reputable supplier, you still need to keep a close eye on their company updates by continuous monitoring.
Filing your IP Rights In China
Though you have your IPR registered in your country, you may not be protected by any foreign law or foreign judgments in China. Instead, the Chinese law and the Chinese court protect your right.
For overseas businesses engaging in import-export, they are suggested to file their IP information and register for trademark protection with relative authorities in China.
Sing An NNN Agreement
When partnering with a manufacturing company, make sure you have a well-drafted and properly executed NNN agreement that will help you protect your IP, and provide you with relief if the manufacturer breaches the agreement.
Choose A Reliable Manufacturing Partner
Finding a reliable manufacturer in China can be daunting and time-consuming. Shield Works can be your local manufacturing partner to safeguard your IP and meet your production expectations.
As a British-owned and managed company, Shield Works is committed to protecting every aspect of your IP without excessive costs and time.
Shield Works partners with Innopat, a leading Zhuhai-based IP industry expert, to provide you with clear IP protective manufacturing services in China. In addition, Innopat is a professional patent and trademark agency authorized by the National Intellectual Property Administration of the People’s Republic of China.
We also have our IP Protection flagship facility to conduct activities from manufacturing, and product assembly to quality inspection and warehousing.
In this case, you no longer have to worry about the risk of copy-cat manufacturing. Contact us to diss your project today!
You’ve come up with a great idea for a product or a service, and you’re sure it’ll make a big splash in the market. You spend a lot of time developing it and are ready to unveil it only to discover that someone has beaten you to the punch. Unless you’ve invested in some kind of IP protection, there isn’t much you can do in response.
IP protection in China takes many forms, such as patenting or trademarking your property. The main reason to do so is to prevent other people from using your branding or claiming your product as their own.
Here are seven steps you can take to protect intellectual property in China and prevent idea theft.
1. Assess Risks vs Benefits
The very first step is to understand IP laws in China and assess your overall risk. For example, the Copyright Law of China considers the publication of a copyright owner’s work without permission as infringement. Authorities may impose fines and confiscate any illegal income as a result.
If you intend to do business in China, only transfer over IPs that are absolutely required. Retain newer designs and prototypes in your origin country to minimize the risk of theft.
Hire a qualified IP lawyer to review the terms and conditions of anything you license. Try to negotiate favorable royalty rates and retain ownership of any improvements made in the country.
2. Register Your IP in China
There is no such thing as an international copyright option for your intellectual property. If you’ve invested in copyright inside the United States, then it’s only good inside the United States. As such, those looking to move their IPs into China will need to register them there.
Without a trademark in China, there is little your company can do to prevent counterfeiting. Luckily, there is such thing as an international trademark you can apply for. However, a particular country will have to agree to register it after you apply through the U.S. Patent and Trademark Office (USPTO).
Keep in mind that trademarks must be used exactly in the way that you registered them. That means using the same logo and text as it was registered.
3. Use a Contract Manufacturer
Utilizing product assembly in China can reduce costs, improve your time to market, and increase overall customer satisfaction. However, you have to be careful who you choose to do your manufacturing.
A contract manufacturer doesn’t do the design of your products. They get the design files, validate them, and do the manufacturing. There’s little risk of them taking your ideas and running with them.
Meanwhile, a manufacturer who is in the same business as your company should be considered a competitor and treated as such. Don’t give them anything they can use for their own profit.
4. Sign an NDA
An additional measure you can take when dealing with a manufacturer is to have them sign a Non-Disclosure Agreement (NDA). An NDA is a binding contract that prevents the sharing of certain information with other parties. It also helps to distinguish what can be shared so the manufacturer can work more freely within the set boundaries.
Since an NDA is a civil contract, it doesn’t violate the law as with copyright and trademark violations. However, it does open up the other party to lawsuits from their employer and risks financial damage. As such, an NDA is an important method of intellectual property protection.
5. Identify and Categorize Your IP Assets
Moving your business into China doesn’t mean you need to register every single one of your intellectual properties. If you’re not using them, then it’ll only be a waste of time and money.
Identify your IP assets and categorize them according to the level of risk and value. Provide sufficient protection within your company and task your management team with protecting your company’s IP. Limit employee access to those who absolutely need it.
Two of the most important assets to protect are your designs and any trade secrets. If your product has a unique visual appearance, you can register the design. Trade secrets are protected throughout the use of NDAs or other written agreements.
6. Engage in Business Carefully
Even if you’ve obtained copyright, trademarked your product, and had your manufacturer sign an NDA, you still need to tread carefully. All suppliers, vendors, distributors, and so on are potential competitors.
It may be more convenient to have all your processes done under the same roof, but it also means giving them more power over your end product.
Design your manufacturing process to protect your IP. For example, you can manufacture all the different components at separate OEMs and assemble them back home at a trusted facility.
If you have a facility in China, do not allow visitors to record or document anything they see or hear.
7. Monitor for Infringement
There’s no point in having IP protection in China if you don’t keep an eye out for instances of infringement. Monitoring an IP overseas can prove challenging, especially if your company operates from the United States.
One way to monitor for trademark infringement is with an online search. Not only should you keep an eye out for anything similar to your trademark, but you can also find anything that may be confused for it. Google allows you to search for similar images, as well.
While you’re there, set up a Google alert for your trademark. Once done, you’ll get email notification reports whenever a new search result pops up using your trademark.
IP Protection in China Made Simple
Protecting your company’s intellectual properties is an important part of running a business in any country. IP protection in China is no different. Even if you’re only manufacturing certain products overseas, IP theft can cost your company a significant amount of time and money.
If you need a manufacturing company you can trust in the area, look no further. Shield Works is British-owned and managed in the heart of Zhuhai city. Contact us to learn more about our services and how we can help your business.
Many big corporations you can think of paid their dues when they first moved their manufacturing to China, a country that just had opened up to the modern world while blessed with a consumers market of 1.4 billion people. The dues included infringement on their IP rights. IP, back in the days, was still a very novel concept to the people in this country and consequently laws regarding its protection was not at all in place. Companies have learned the lesson the hard way by losing billions of dollars over knockoffs sold in a local market or some cheap commodities of bad quality in disguise of your brand with confusing spellings.
But the perks of manufacturing in China are undisputedly still very tempting compared with the risk of your IPR being violated. Does it mean it’s an either-or situation?
Not necessarily. Time has changed. China has changed. 40 years of economic development have made its mark on the progress of IPR protection, especially after China joined WTO with the promise of cracking down on IPR abuse. Despite the encouraging establishment of its IPR protection system, unfortunately, loopholes are seen and risks exist. Some self-help will still be needed on your end to protect your IPR when manufacturing in China.
Make good use of the system
The first thing you want to do is make sure you use a PCT (Patent Cooperation Treaty) country. This means that instead of having to file one application at home and then a separate application abroad, your patent will be applied for in an international system that covers all major countries including China. This eliminates additional costs when you are trying to secure patents abroad. In addition, it also improves your chances of being approved because one examiner reviews it rather than multiple examiners separately examining different applications in different countries.
Also just like in your native country, registration of your IP, including your trademarks and patents, is the legal foundation of protecting your IPR. Unlike many countries, China has adopted a file-to-file system as opposed to as a first-to-use system. So do it before you even start manufacturing there. China Trademark Office is not the only place you’ll need to register with. Don’t forget Chinese Customs. Your registration there will serve as the base for them to determine infringement and effectively block its export with adequate information provided, such as manufacturers and ports.
Keep a watchful eye
To make sure you understand what your intellectual property is—you may have a patent, trademark, or copyright without even realizing it. If you want to move forward with manufacturing in China, contact your lawyer to find out which of your pieces of intellectual property will be at risk and how you can protect them; having a legal agreement in place before you begin production will give you much more leverage than scrambling afterward.
Some extra help can be needed in terms of detecting possible infringement. Alibaba/Taobao, as the biggest e-commerce platform in China serving 1.4 billion people, cannot spare the chance of selling infringing products as much as they try. But correspondingly they have established takedown procedures in case you see anything abusing your IPR. If you are new to the market, you can even hire brand monitor service to help you monitor the internet for any possible infringement or even assist in takedowns.
Choose A Good Manufacturer
If you’re in China, finding a good manufacturer is going to be one of your primary challenges. Most manufacturers are new at dealing with IP issues, so they might not be receptive to your demands. In these cases, it’s probably best to shop elsewhere. This might not always be possible or desirable, but if you do have options it’s worth exploring them before deciding on a manufacturer. Once you find a reliable partner and have developed a working relationship with them, create an IPR protection plan that works for both of you.
Shield Works partners with Innopat a leading Zhuhai based IP industry expert to provide our clients with clear no-nonsense advice and IP protection services. We also have a seamlessly designed IP Protection Zone to ensure all your intellectual properties stay in our facility. What happens at SW, stays at SW.
Please feel free to send an inquiry today, should you have any questions.