An American NDA is of “Zero Value” when Dealing with China

At China Law Blog, Dan Harris shared his (blunt) thoughts on the value of an American Non-Disclosure Agreement (NDA) when dealing with China:

I (and most other lawyers) virtually never weigh in on specific legal matters online because it does not make sense to provide legal advice without knowing all of the facts specific to the individual situation, I could not resist doing so here and I did. I had a vision that someone somewhere might actually think that this agreement [a free online NDA] would work when dealing with a China company and I could not allow that to stand. So I wrote the following:

This online NDA is of ZERO value when dealing with China and I would strongly urge that nobody use it for that. I do not believe any Chinese court would enforce it, and even if they did, it is not clear what there is in it that would help. Do not use domestic NDAs for China as they just do not work!

Harris then directs readers to one of his previous posts on NDAs:

An American NDA with jurisdiction in Chicago is not likely to have any impact on a Chinese company. What you need is not really a China NDA at all, but an NNN (Non-Disclosure, Non-Use, Non-Circumvention) Agreement that protects you before you have actually chosen a particular manufacturer for your product. This sort of agreement can go a long way towards preventing potential or future manufacturers from stealing your design.

The ability to sue in Chicago is not likely to give you any power over a Chinese manufacturer. The bottom line is that Chinese manufacturers do not fear foreign litigation as much as they fear being hauled into a Chinese court and hit with liquidated damages (or even worse, a pre-judgment seizure of their assets). The goal with our NNN agreements (and of all our China contracts) is to prevent the Chinese company from doing what you don’t want them to do, not so much to beat them if you end up having to sue.