This morning a client sent me an NDA and asked if it was a good NDA. I said “yes, it’s well drafted.” Then I told him the part that mattered: “It’s terrible for what you’re doing.”

That conversation is common. Someone forwards an NDA and asks, “Can I just use this?” The answer is usually no, and in China deals it is always no.

The document usually looks fine. It has the right headings, the right buzzwords, and the right level of seriousness. It does not read like a scam. It reads like something a lawyer drafted for someone, somewhere, at some point.

That is exactly why it is so risky.

The biggest danger with templates is not that they are obviously wrong. It is that they are plausibly right. They are good enough to get signed, but wrong in the ways that matter–wrong forum, narrow definition of confidential information, weak or missing non-use protections.

This comes up constantly in China-related work because China deals magnify the cost of being wrong. You are dealing with at least two legal systems, two enforcement realities, and a business relationship where information moves fast and is nearly impossible to pull back. Once your factory has your specs, you may not find out they were used until a competing product is already on the market.

A recent example is typical. A client sent an NDA he had gotten from someone else. His situation, as he described it, was a fairly straightforward U.S. company-to-U.S. company discussion. The NDA required disputes to be resolved in Hong Kong. That single clause was enough to tell me the document was from a different world than the one in which my client was currently operating.

People treat dispute resolution clauses like boilerplate. They most emphatically are not. See A Guide to Dispute Resolution Clauses in International Contracts.

They determine where you fight, how you fight, how much it costs, and whether you can afford to fight at all. Hong Kong might be a smart forum in the right circumstances. If both parties have a real Hong Kong connection, if enforcement there is the point, and if the cost and distance are acceptable, it can make sense. But if the deal is really between two U.S. companies, Hong Kong is not a neutral detail. It is a built-in tax on enforcement. It is expensive and far away, and it can function as a practical barrier to ever bringing a claim, which can let the other side breach with near impunity. And even if you win there, turning a Hong Kong victory into money or practical relief where the assets actually are can be slow and expensive. For many companies, that gap is the whole problem.

When you see a clause like that, assume it benefits someone. If you cannot explain how it benefits you, assume it does not.

The Hong Kong clause is just one example. Even if the forum is right, the substance is often wrong.

Many template NDAs define “Confidential Information” in a way that does not match how information actually moves in manufacturing and sourcing relationships. In China-related work, the information that matters is rarely a neatly labeled document. It is the CAD file, the supplier list, pricing logic, packaging die lines, test data, and the small iterative changes buried in email threads, WeChat messages, and shared folders that nobody thinks to label “confidential” until the day the information is used against them.

Templates tend to miss this in two directions. If the definition is too narrow, the NDA may not even cover what you are trying to protect. If it is too broad, you end up with an agreement no one can realistically follow. An NDA that treats everything as confidential forever sounds strong, but in practice it becomes a compliance failure generator. People stop taking it seriously because they cannot run a business while treating every routine communication as a legal event. And once nobody can comply, the agreement stops being protection and becomes leverage for whoever wants to claim breach.

Then there is the non-use problem, which is where many NDAs in China deals quietly fall apart. People assume an NDA stops the other side from sharing your information with third parties. That is not the real risk. The real risk is use.

You are worried the factory will use your specs to produce the same product for your competitor at a lower price. You are worried the contractor will launch a competing product using everything you taught them. You are worried the other side will take the most valuable parts of what you shared – the “how” and the “why,” not just the “what” – and apply it internally or through affiliates while staying technically within the words of the agreement.

An NDA that is weak on non-use might look protective, but it does not stop the harm you actually care about.

Even when the big concepts are present, templates often fail on the boring details that end up deciding real disputes. The wrong legal entity name can mean you are suing a shell company with no assets. If the “company” on the signature line is really a sales rep, a trading name, or an affiliate, and not the actual PRC entity that owns the assets, you can end up with a contract that is hard to enforce against anyone who matters. And in China, execution formalities matter. If the agreement is not signed and sealed in a way that clearly binds the actual company, the other side may have an easy argument that the company never agreed to anything.

None of this is exciting. But all of it matters once you are in the messy part of the relationship, when somebody is stalling, shifting blame, quietly moving your project to someone else, or rolling out “your” product under a different name.

This is why “but it’s just an NDA” is dangerous. The NDA is often the first contract in the relationship. If you sign a weak one, you are signaling you will tolerate weak paper, and you are often giving away the leverage you will need when the real negotiations start.

If you sign a weak NDA and start disclosing sensitive information, you have already given away your leverage. In China deals, once it is gone, it usually does not come back.

Free templates are prepaid risk. The bill shows up later when you are staring at a five-figure enforcement bill in a forum you never wanted because you thought you were saving on legal fees on the front end.

Templates are not always useless. They can work when the stakes are low, both parties are local, and you are not sharing anything that could be used against you. But those conditions virtually never exist in China deals.

NDA vs. NNN Agreement – And Why China Usually Calls for NNN

A lot of template trouble in China starts with a mismatch. The document says “NDA,” but the business problem is not confidentiality. The business problem is that you are about to hand a counterparty in China something valuable, and you need to stop them from using it, selling around you, or turning your work into their next revenue stream.

A traditional NDA is designed to restrict disclosure of confidential information. Many are light or say nothing about restrictions on use, and most say nothing about circumvention. In a purely domestic setting, with a counterparty you can sue easily and cheaply, that can be enough. In China, it almost always is not.

An NNN Agreement is built for the realities of China manufacturing and sourcing. The name is literal: non-disclosure, non-use, and non-circumvention. The non-use piece is usually the most important because it addresses the core fear in China deals: your factory uses your drawings, prototypes, supplier list, or pricing structure to make the same product for someone else, while insisting they never “disclosed” anything.

Non-circumvention is the other major gap. In many China deals, you are not just worried about a factory misusing your information. You are worried about the factory going around you. That can mean contacting your customers directly, taking over your distributors, approaching your suppliers, or copying your product and then competing with you through your own channels. A standard NDA usually does not squarely address this, and when it tries, it often does it in vague, hard-to-enforce language.

NNN Agreements also tend to be drafted with enforcement realities in mind. The goal is not to win a theoretical argument in a distant forum. The goal is deterrence where the counterparty operates, with remedies that matter, against the right legal entity, in a form you can actually use. That typically means thinking carefully about language, jurisdiction, damages, and whether you can get practical relief without spending a fortune just to get in the door.

None of this means an NNN Agreement is always required or always sufficient. If you are doing a truly low-stakes disclosure, a standard NDA might be fine. But if you are sending product specs, CAD files, prototypes, pricing logic, or supplier and customer data to a China-based counterparty, an NDA that focuses primarily on confidentiality is usually solving yesterday’s problem. The problem you need to solve is use and circumvention.

This is why we are skeptical when someone says, “We already have an NDA, so we’re covered.” In China deals, the question is almost never whether the document says “confidential.” The question is whether it stops the specific harm you are trying to prevent, and whether it can be enforced in a way that makes the other side think twice before testing it.

For more on what is required for a good NNN with a China company, check out A Guide to China NNN Agreements.

How to Know If You’re About to Make a Template Mistake

Here is how to pressure-test a template.

First off, stop thinking like a cooperative businessperson and start thinking like someone who just got burned.

If the other side misuses what you share, where do you sue them? Can you afford to? What exactly are you disclosing and is that clearly covered? Is your real risk disclosure or use? Does this agreement give you leverage, or does it hand leverage away?

If you cannot answer those questions, do not sign. And if you are moving quickly because the factory wants to start production or the investor meeting is next week, that is not a reason to sign faster. That is when bad NDAs do the most damage.

When we review template NDAs for China-related deals, we almost always start with a free short call, because what is needed always depends on facts that a template cannot know. Who is the counterparty, really? Where are their assets? What are you sharing, and in what form? What is the business goal? What is the worst-case outcome? Only then can we decide whether a basic NDA is enough, whether our client needs stronger non-use protections, or whether they need an NNN Agreement that matches the deal and the enforcement reality.

In domestic situations, the is sometimes that a simple NDA is fine. Often it is not. The only honest answer is that templates erase the most important variable: context. And context is where contracts live or die.

If you are doing business involving China, assume the template is wrong until proven otherwise. When something looks fine, that is not reassurance. That is the sound of a landmine that has not gone off yet.

FAQ: NDAs and NNN Agreements for China Deals

Quick Self-Assessment

Q: When do I actually need a lawyer for an NDA?

You need one any time the NDA will be tested in the real world, not just filed away. If the other party is in China or any other foreign jurisdiction, if you are disclosing proprietary information that could be used to compete with you, if you are sharing or funding physical assets like molds, tooling, or prototypes, or if the relationship involves manufacturing rather than a simple introductory conversation, a template NDA is usually a bad bet. The same is true if the draft includes a forum selection clause in a place where you cannot realistically enforce.

If none of that applies and you are only having a preliminary discussion with another U.S. company about non-sensitive information, a simple template may be fine. In most China-related deals, even one of the risk factors above is enough to justify getting it right before you share anything that matters.

Q: What is the fastest way to spot a dangerous template?

The fastest test is whether the document protects you against how IP actually gets misused, and whether you can afford to enforce it.

The 30-Second Landmine Test

If you cannot answer YES to all three of these, do not sign:

1. Does it explicitly ban use, not just disclosure?

2. Does it clearly cover modern communication and file types, including WeChat messages, email, and CAD files, rather than limiting protection to “marked” documents?

3. Could you realistically afford to enforce it in the location listed?

Q: Are template NDAs ever safe to use?

Sometimes, but only when the stakes are low, both parties are local, and you are not sharing anything that would hurt you if it escaped. In China manufacturing relationships, those conditions rarely exist. Templates are usually built for a generic legal reality, and they tend to fail when tested against cross-border enforcement, the way manufacturing relationships actually operate, and the ways information moves in practice.

China-Specific Traps

Q: What is the difference between an NDA and an NNN Agreement?

A standard NDA usually focuses on non-disclosure: do not reveal confidential information to others. An NNN agreement is designed for China manufacturing risk because it also addresses the two problems that typically matter more in practice: non-use and non-circumvention. Non-use is the prohibition on using your information to make a competing product or to make your product for someone else. Non-circumvention is the prohibition on going around you to your customers, your suppliers, or your distribution channels.

In many China manufacturing situations, “use” and “circumvention” are the real threats. A factory often does not need to disclose your designs to a competitor to harm you. They can simply start producing your product for someone else, or produce a lookalike that competes with you directly. A disclosure-only NDA often does not stop that. NNN-style protections are built to. See China NDAs: Still Worthless After All These Years.

Q: Why is a Hong Kong dispute clause often a red flag?

Hong Kong can be a legitimate forum in certain deal structures, but in many small-to-mid-sized China manufacturing relationships it functions as an enforcement deterrent. If you are a U.S. company, pursuing a dispute in Hong Kong is usually more expensive and slower than pursuing relief in a forum that lets you move quickly against a China-based counterparty. On top of that, turning a Hong Kong outcome into practical leverage inside Mainland China can add cost and complexity.

Hong Kong clauses are frequently copied from someone else’s deal without considering whether they make enforcement harder for you. If the clause exists mainly because it came from a template, treat it as a warning sign.

Q: Does my NDA need to be in Chinese?

If you want a realistic shot at fast, practical enforcement in China, you generally want a Chinese-language version and you generally want the Chinese version to control. Chinese courts can consider English documents, but English-only agreements tend to slow things down and create friction at the worst possible moment, especially if you are trying to stop ongoing misuse. If you need emergency relief, speed and clarity matter, and a China-facing agreement drafted for China enforcement is the difference between a plan and a hope. See The Essential Checklist for Signing Contracts with Chinese Companies.

Q: Do I need the company chop (seal) on the document?

In practice, you want clear proof the company is bound, and that usually means a proper company chop and a signatory whose authority you can verify. China contracts are routinely attacked later on authority grounds, and the absence of a seal or clear signing authority is one of the easiest ways for the other side to create doubt about whether the company is actually bound. If the counterparty insists that a sales representative signature is enough and refuses to seal, treat that as a risk signal, not a formality.

Q: If a Chinese company signs my NNN Agreement, isn’t that enough?

Not necessarily. “Signed” is not the finish line. “Enforceable against the right entity, in a forum where you can act, with leverage you can actually use” is the finish line.

At minimum, you should be able to answer four questions. First, is the contract tied to the correct legal entity, using the registered Chinese name, not just an English trade name or an informal translation. Second, is it executed in a way that clearly binds the company, including a proper chop and verifiable signing authority. Third, does the agreement’s language and dispute resolution structure support the kind of enforcement you would actually need, including fast action if something goes wrong. Fourth, even if you win, does the counterparty have assets or operational leverage you can realistically reach.

If you are missing any of those, a signed NNN Agreement can be paperwork that looks comforting but does not protect you when you need it.

Manufacturing and Physical Assets

Q: What should my NNN Agreement cover if I’m working with a Chinese manufacturer?

It should cover what you will actually share and how you will actually share it. If it only protects “documents marked confidential,” it is probably missing the disclosures that matter most, because critical details are often discussed in chat threads, emails, and informal revisions. Your agreement should clearly treat business communications and technical communications as covered, including WeChat and WhatsApp messages, email chains, shared CAD files, drawings, specifications, pricing structures, supplier lists, quality and test data, and any iterative design feedback.

It should also address leakage through related parties. If the manufacturer can hand your specifications to an affiliate, a sister factory, or a sub-supplier and claim they did not “disclose” in a prohibited way, you have a problem. A China-appropriate NNN agreement should make it clear that the counterparty is responsible for its affiliates and subcontractors, and that your information cannot be used anywhere in their orbit. See A Guide to China NNN Agreements for more specifics.

Q: I’m paying for molds and tooling. Does that change what my NNN Agreement should cover?

Yes, but also no, because an NNN Agreement alone is not the right tool to protect molds and tooling. An NNN Agreement can help protect the information about the tooling. It does not resolve ownership or control of the physical assets themselves.

If you are funding molds or tooling, you typically need a separate mold ownership agreement that clearly states who owns the tooling, who has the right to use it, whether use is exclusive, where it will be stored, what access you have, what happens at the end of the relationship, and what remedies apply if the factory refuses to return it or uses it for someone else.

Without a tooling ownership agreement, it is possible to spend serious money and still end up watching the factory use “your” molds to produce for someone else while arguing they have not violated a disclosure-only NDA. Information protection and asset control are related, but they are not the same legal problem. For more on this, check out THE Guide to Molds and Tooling in International Manufacturing.

Process and Logistics

Q: What do you need from me to review an NDA or NNN Agreement quickly?

We can move quickly if you give us the facts that determine the risk. We need the draft agreement, even if it is sloppy. We need the counterparty’s full legal name and location, including the registered Chinese name if the other side is a China entity, not just an English brand name. We need a one-sentence description of what you will disclose, such as CAD files for injection molds or a bill of materials and supplier list. We also need your worst-case scenario, stated plainly, such as “they use my specifications to make the product for my competitor,” or “they keep the tooling and hold production hostage.”

When you provide those four inputs, we can usually tell you quickly whether the document is fixable or whether it needs to be rebuilt.

Q: How quickly can you review or draft an NDA?

A review is often feasible within one to two business days, and a China-specific draft is often feasible within three to four business days, assuming we have the context above. Timing depends on complexity, the number of entities involved, and whether the agreement needs to be coordinated with tooling, manufacturing, or development terms.

One caution is worth stating plainly. If the factory is pushing you to “just sign something” so production can start, that pressure is often the moment when slowing down saves you money. Urgency is frequently used to get you to accept a template that is convenient for them and expensive for you.

Q: What if the Chinese company refuses to sign my NNN Agreement?

If a manufacturer or contractor refuses to sign a reasonable NNN Agreement before you share proprietary information, treat that as meaningful information about the relationship. At best, it signals unprofessional process. At worst, it signals they want freedom to use what you disclose.

There is one common variation. Larger manufacturers sometimes insist you sign their BNN Agreement instead of yours. That is not automatically disqualifying, but it is a reason to have their document reviewed before you sign. Their version is often written to protect them, not you, and it may contain exactly the gaps that create problems later.

Next Steps

If you are about to send or sign an NDA or NNN Agreement for a China deal, use the Landmine Test above before you sign anything. If you cannot answer those questions confidently, do not sign yet.

If you want a quick review of an existing NDA or NNN Agreement or you want a China-appropriate agreement drafted for your specific manufacturing and tooling risks, contact us with the draft agreement, the counterparty’s full legal name and location, one sentence describing what you will disclose, and your worst-case scenario. We will tell you what is missing and whether the document can be salvaged or needs to be rebuilt. But I warn you not to expect us to just say everything is okay, when it’s not.

* Original article published on IPRdaily. Read the full article here. *