Defining “competitor” when drafting an NNN agreement in China
NDA = Non-Disclosure Agreement
NNN= Non-disclosure, Non-compete, Non-circumvention
How to define “competition” under the NNN agreement?
In a recent blog post we explained why the NDA does not offer enough protection when buying from China.
A key element of a robust NNN is wording that prohibits the supplier from doing business with the buyer’s competitors.
Sometimes the suppliers are hesitant to sign the non-competition clauses of the NNN if it is too open-ended, especially when there is a penalty clause in place for breaking the contract. The supplier may raise the following legitimate concerns
- How will we know who are your competitors?
- Do you mean we can’t do business with your competitors on any products or just the part numbers we sell to you?
Each case is unique, but an attorney with solid China experience may solve the situation in multiple ways:
- Explain “competitor” is related to only those companies (present or future) that deal in a very specific product. Rather than any competitor that competes with you in any product line.
- Incorporate product details into the contract by using samples, images, uses, part numbers, patents and other means so that the product in question is very well defined.
- Simply make a list of competitors you don’t want the supplier to deal with regardless of which product lines are involved.
NDA vs. NNN
ABL Blog: Sr. Editor and Primary Content Creator: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
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