Business owners looking to start a business in China must understand how to protect their business interests. Namely, they must ensure they take the proper efforts to protect their intellectual property.
Usually, most American business owners use non-disclosure agreements (NDAs) to keep their trade secrets or other intellectual property confidential. These agreements prevent any employees from using those trade secrets, even if they leave the company.
However, NDAs do not work in China as they do in the United States.
Almost all business ventures require confidentiality
Most business ventures require some level of confidentiality. NDAs usually work well in American business settings, such as when companies:
- Present new inventions or new products to investors, partners or buyers
- Hire new employees who will have regular access to financial or confidential information
- Work with third-party manufacturers
NDAs prevent other parties from disclosing a business' trade secrets or intellectual property to competitors or the public. However, disclosure is rarely the primary issue in Chinese markets.
Why do NDAs not work in China?
The reason that NDAs do not often work in China is that they only prevent the disclosure of confidential information. But they do not prevent other companies from using that information in competition.
So, business owners must take additional steps to protect their intellectual property in Chinese markets, as well as the Chinese legal system. That is why all companies who do business in China must create NNN agreements instead of NDAs.
NNN agreements include three elements:
- They prevent the disclosure of concepts or intellectual property.
- They prevent the creation, sale and use of a similar product.
- They protect products against circumvention.
This helps businesses proactively protect their intellectual property. So, creating NNN agreements can help safeguard businesses in international settings.