NNN Agreement: A Comprehensive Overview
An NNN agreement, or Non-Disclosure, Non-Use, and Non-Circumvention agreement, serves as a useful tool in safeguarding confidential information in business relationships, particularly with Chinese manufacturers. This agreement signifies a commitment from the receiving party to refrain from disclosing, utilizing, or bypassing the disclosing party’s confidential information.
The following is our template of NNN agreement for clients:
NNN vs NDA
In comparing NNN and NDA agreements, it is important to note that NNN agreements demand a more comprehensive level of confidentiality. While most suppliers may not have the intention to disclose sensitive information, they could potentially leverage the knowledge gained to target the same customer base. Consequently, the NNN agreement plays a crucial role in prohibiting the use and unauthorized dissemination of such information. However, for non-Chinese suppliers, an NDA agreement may be more suitable as the stringent nature of an NNN agreement could be perceived as unfair.
Key Terms of an Enforceable NNN Agreement
- Definition: Clearly define the scope of protected information.
- Term: Ensure that confidentiality extends beyond the agreement’s expiration.
- Non-disclosure, Non-use, and Non-circumvention: Prohibit the use and circumvention of confidential information.
- Joint Liabilities: Hold subcontractors accountable for compliance with the NNN agreement.
- Product Improvement: Establish the disclosing party’s ownership of any product improvements.
- Breach of Contract: Outline penalties for breaches.
- Applicable Law: Specify the priority of Chinese law for enforcement.
- Jurisdiction: Select a court or arbitration institute in China for dispute resolution.
Steps to Sign an Effective NNN Agreement
- Collect Required Information: Gather pertinent details from both parties and outline the business project.
- Draft and Amend: Tailor the agreement according to the specific situation and revise as needed.
- Background Check: Conduct thorough due diligence on the receiving party to mitigate potential risks.
- Review Signature and Seal: Verify the accuracy of signatures and seals to activate the agreement.
Under what circumstances does the NNN agreement become invalid?
The NNN agreement will come into effect upon the signature of both parties, though this does not imply that it will be void.
Once your new design has been publicly sold or advertised, the NNN agreement may become invalid, as the information is no longer considered confidential. Furthermore, it is not possible to prevent third parties from utilizing this information, as they are not contracting parties.
To safeguard your design, it is essential to apply for a patent in China. For detailed information on patent fees in China, please visit this link.
If obtaining a patent is not feasible due to budget constraints, it may be advisable to reiterate the non-use clause within the manufacturing agreement when placing orders with the Chinese factory.
What additional measures should be taken to safeguard your IP apart from NNN agreements?
- Filing a patent (know more about the patent application in China), design (know more about the design application in China), or trademark against any 3rd party.
- Executing a manufacturing agreement with a non-use clause, ensuring protection of your unique product even if disclosed prior to order placement.
Please do not hesitate to reach out to us if you are in the process of signing an NNN/NDA agreement with the Chinese factory.
