NNN Agreement
NNN stands for non-disclosure, non-use, and non-circumvention agreement
Uses of NNN:
This template NNN can be used by a company to protect its confidential information and contact when engaged in a transaction or discussions with a counterparty located in China. This template includes practical guidance, drafting notes, and alternate and optional clauses.
Necessity:
An NNN agreement is necessary when disclosing proprietary information with a party based in China. A typical non-disclosure agreement (NDA) used in transactions in the United States (and many other countries) will not serve to adequately protect a client's information in China. Generally, the primary purpose of a western-style NDA is to protect dissemination of trade secrets and confidential information to the general public. However, when dealing with a Chinese counterparty, the fundamental risk is not public dissemination of confidential information but, rather, that the Chinese counterparty will exploit the information to create a competitive product or service or utilize the information for its own purposes to the detriment of the disclosing party. Additionally, the Chinese legal system is vastly different from the U.S legal system and as such, NDA agreements are generally not enforceable in China. Accordingly, an NNN agreement must be used instead of a standard NDA when dealing with a counterparty in China.
This NNN is drafted unilaterally in the U.S part's favor and is premised on only the U.S party disclosing its confidential information as part od discussions and negotiations regarding a potential business transaction. Additional safeguards may be warranted when a U.S. company contracts with a manufacturing entity to produce its products in China, such as express prohibitions on manufacturing and selling a competitive or similar product. The template is also industry neutral. While this template is written in English, best practices dictate incorporating a Chinese translation to avoid translation-related disputes.
Confidential Information:
For the purpose of this agreement, "Confidential Information" shall include all non-public information of any type or character that is either disclosed by the Disclosing Party, directly or indirectly, to Recipient (including its affiliates, group companies, or affiliated companies) or with which Recipient comes into contact or is provided access to in connection with the purpose. Confidential Information may include, but not limited to:
i. all information relating to Disclosing Party's business and operations including, but not limited to, business plans, financial records, customers, suppliers, vendors, products, product samples, coasts, sources, strategies, inventions, procedures, sales data and literature, technical advice or knowledge, contractual agreements, pricing, price lists, product specifications, trade secrets, procedures, distribution, methods, inventories, marketing strategies and interests, advertising, algorithms, data, designs, drawings, work sheets, blueprints, concepts, manufacturing processes, computer programs and systems and know-how or other intellectual property of Disclosing party and its affiliates that may be at any time furnished, communicated, delivered to or accessed by Recipient, whether in oral, tangible, electronic or other forms;
ii. the terms of any agreement, including this Agreement, and the discussions, negotiations and proposals related to any agreement;
iii. information acquired during any tours of Disclosing Party's facilities;
iv. all other non-public information provided by Disclosing Party to Recipient including, but not limited, to financial, technical and business information.
This Agreement shall not require Disclosing Party to disclose any of its Confidential Information.