Beware the Online China NNN Agreement
Your Intellectual Property Is at Risk with Online China NNN Agreements.
In China Contract Drafting Scams: From Bad to Much Worse, I wrote about fake Chinese lawyers and Chinese lawyers who American and European companies would hire and pay, only to have them take money from the Chinese company on the other side to draft an agreement that benefited the Chinese company but harmed the foreign one—in other words, total frauds.
I wrote that post in 2021 because I was seeing an alarming surge in scams that had left companies losing their valuable intellectual property, incurring significant financial losses, and facing irreparable damage.
I am writing today’s post on China NNN Agreements because if you are a foreign company considering doing business in or with China, you need to know why opting for a cheap, poorly drafted NNN Agreement is one of the biggest mistakes you could make.
Rising tensions between China and the West have fueled a surge in fake legal services, with unsuspecting Western companies often lured by unrealistically low prices. This bargain-basement approach nearly always backfires, resulting in stolen product designs, leaked confidential information, and even counterfeit products being sold under your brand.
This post aims to help you avoid these costly mistakes.
The Rise of Fake China Legal Services
Since COVID, we have seen an alarming increase in unscrupulous online “legal” service providers. Here are some red flags to watch for when evaluating legal services:
- Extremely low prices for complex legal work
- Lack of verifiable qualifications or licensing information
- No guarantee of confidentiality
- No (or fake) legal credentials listed, such as a law degree or bar association membership.
- Inconsistent or non-existent online presence, making it difficult to verify their expertise.
These service providers present themselves as legitimate lawyers but may only be freelancers with no legal background or, worse, individuals hired by Chinese manufacturers to draft agreements that expose your IP to theft.
Our China lawyers have frequently had to inform foreign companies that their contracts are either completely useless or even worse than having no contract at all. Many of these companies believed that a cheap contract would be ‘better than nothing’ due to budget constraints.
They were wrong.
China NNN Agreements Are Your Greatest Risk
The NNN Agreement is usually the first contract foreign companies enter into with potential Chinese manufacturers, which often makes it the most critical agreement in protecting your intellectual property. At this early stage, the level of trust is typically low, and the risk of IP theft is at its highest. Despite this importance, we frequently see NNN Agreements drafted to favor the Chinese manufacturer, leading us to believe that the Chinese lawyer (or fake lawyer) who drafted it was influenced or paid by the Chinese manufacturer.
A poorly drafted China NNN Agreement can give your Chinese manufacturer almost unlimited freedom to misuse yourIP, making it crucial that this document be drafted by someone who is both truly on your side and who fully understands the nuances of Chinese law.
Alternatives to NNN Agreements That Provide Better Protection
In The Critical Absence of Attorney-Client Confidentiality in China, we discussed some of the risks inherent in using a Chinese citizen as your lawyer and steps you can take to mitigate these risks. To mitigate the risk of confidentiality breaches, always ensure that your legal representatives are vetted thoroughly and prioritize engaging legal counsel bound by the attorney ethics rules of your home country or a country you trust.
Conclusion
Navigating China’s legal landscape has always been challenging, but rising tensions with the West have increased these risks. It’s more important than ever to use qualified, reputable legal help to safeguard your business. Low-cost services might seem like an attractive shortcut, but they will likely cost you far more in the long run. Protect your company and secure your IP by working with trusted professionals who understand the intricacies of Chinese law.