Getting your vendor to sign an NDA ( Non-Disclosure Agreement)

This subject comes up all the time in China blogs and it is a very real concern for many companies that want to manufacture in China. The advice from lawyers is always the same: you should ask your vendor to sign an NDA when you run a project by them or give them one of your designs. And you should be prepared to go after them if they violate the terms of the agreement.

I have a hard time with this advice for a few reasons:

1.) NDAs in China are only effective with sophisticated vendors in big cities. If I asked a handicrafts vendor in rural Fujian Province ( just to use as an example) to sign an NDA he/she would probably look at me and ask “what’s this ? ” And even if he/she did sign it I don’t think he/she would feel the obligation to abide by the terms if he/she felt there was a market for my product in China. China is not a monolith. Taking these western business practices and concepts and expecting them to apply anywhere and with every vendor in China is not practical.

2.) This kind of advice is good for big companies that have the resources for international litigation. However, your average small business in the US is probably not in the position to go after a Chinese company that took their design. Even if they did win a judgment in a Chinese court, who would enforce it? As Shaun Rein, in The End of Cheap China, has illustrated quite well, winning judgments against Chinese companies that infringe on IP is one thing. Enforcing those judgments is an entirely different thing.

3.) When you ask someone to sign an NDA they may interpret this as a sign that you don’t trust them. And immediately the relationship is off on the wrong foot. Why risk your relationship with your vendor by asking them to sign something which is proabably meaningless to begin with.

So should you get bent out of shape worrying that your vendor in China might copy your design? If you do then you probably should not be manufacturing in China in the first place. In short, sure, ask them to sign one if it makes you feel better. But don’t lie awake at night worrying about it.

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