NNN AGREEMENT VS. TRADEMARK IN CHINA – PROS & CONS

Introduction

When conducting business in China, protecting your intellectual property, brand and trade secrets is crucial. Two common methods used by foreign companies are NNN agreements and Trademark registrations.

NNN Agreement

An NNN Agreement (Non-Disclosure, Non-Use, Non-Circumvention) is a contractual document designed to protect a company’s confidential information and trade secrets when engaging with manufacturers or other partners in China.
In contrast to NDAs, an NNN agreement provides more comprehensive protection.

It includes three key components:

1. Non-Disclosure: This clause ensures that the Chinese counterpart does not disclose the shared information.
2. Non-Use: This provision prevents the receiving party from using the disclosed information for their own benefit, typically applying to business ideas, processes, or intellectual property rights.
3. Non-Circumvention: This provision prohibits the provider from circumventing the client and directly reaching the client’s customers, such as bypassing the client and selling directly to those customers.

Additionally, some NNN agreements may include a Non-Competition provision, which states that the provider may not become a competitor in the client’s market, thus protecting the client’s business from being undercut by its own partners.

Trademark Registration

Trademark registration involves legally registering a brand’s logo, name, or other distinctive marks with the China National Intellectual Property Administration (CNIPA). This registration grants the trademark owner exclusive rights to use the mark within China, offering legal protection against unauthorized use by others.

Pros and Cons

ASPECT	NNN AGREEMENT	TRADEMARK REGISTRATION
Purpose	Protects trade secrets and confidential information	Protects brand identity and prevents unauthorized use
Legal Coverage	Contractual agreement, enforceable in case breach	Legal ownership, enforceable under Chinese trademark law
Protection scope	Limited to the information shared with the signatory	Extensive, covers all instances of trademark use
Cost	Generally higher, involves drafting and legal fees (≤ USD 100)	Lower, includes registration fees and possible renewal costs (≤ USD 500)
Duration	Valid for 5 years. Renewed at little cost.	Typically 10 years, renewable indefinitely
Enforceability	Dependent on the specificity and strength of the contract	Strong and straightforward, backed by Chinese trademark law
Complexity	Requires careful drafting to ensure all aspects are covered	Straightforward process, but involves bureaucratic steps
Speed of Implementation	Quick, once the agreement is signed (≤ 1 week)	Takes time due to the registration process (≤ 6 months)
Market Awareness	Not publicly visible, internal protection	Publicly recognized, adds value to the brand
Risk of Breach	Higher, relies on the other party honoring the agreement	Lower, legal ownership deters infringement

Conclusions

Choosing between an NNN agreement and trademark registration depends on the specific needs of your business. An NNN agreement is essential for safeguarding trade secrets and confidential information during negotiations and collaborations. In contrast, trademark registration is crucial for protecting your brand identity and ensuring exclusive rights to your trademark in the Chinese market. In many cases, utilizing both methods can provide comprehensive protection for your business interests in China.