I was recently asked by a client if I thought a NDA (non disclosure agreement) with their supplier would protect their intellectual property in China. Here is my response.
No matter how well drafted, after all, NDA is a piece paper and can’t enforce itself. So do not expect too much protection from NDA. However, I still think NDA is necessary if any IP is involved. Beyond the obvious desire to state directly that IP infringement is forbidden, and thus letting the supplier know you are serious about IP, an NDA is a good tool to protect yourself if the following item is included in your NDA.
The NDA should specify the legal consequence of breaching the agreement. In other words, as long as the penalty is reasonable, liquidated damages provisions are enforceable in Chinese court and it will save you lot of trouble as it is hard to prove how much loss you have suffered when the IP is breached. So a pre-agreed remedy makes it easier for the judge to give a ruling in your favor.
Written for CSIC by Sophie Mao
China based lawyer at www.AsiaBridgeLaw.com