If you send a Chinese factory your full BOM, Gerbers, and firmware under a US-style NDA, you have signed a document that is, in practice, close to unenforceable where it matters. The NDA you copied from a SaaS deal assumes a US court, US discovery, and a counterparty with US assets. The factory in Dongguan has none of those exposures. When your design shows up on a competitor's listing eight months later, that NDA buys you a lawsuit in a jurisdiction where it was never meant to operate.
This is one of the most expensive lessons first-time hardware founders learn, and it is entirely avoidable. The fix is an NNN agreement.
Why an NDA is the wrong tool
A Non-Disclosure Agreement protects against one thing: the other party telling someone your secret. That is not your actual risk in China. Your real risks are:
- The factory using your design to build the same product for itself.
- The factory circumventing you by selling directly to your customers or onto a marketplace.
An NDA addresses neither. An NNN agreement does all three: Non-disclosure, Non-use, Non-circumvention.
Make it Chinese law, Chinese court, Chinese language
The single most important clause is jurisdiction. An NNN agreement should be:
- Governed by PRC law, not Delaware or English law.
- Enforceable in the Chinese court with jurisdiction over the factory's location.
- Drafted in Chinese as the controlling version (have a bilingual copy, but the Chinese text governs).
It also needs contractual damages written in — a fixed sum the factory owes on breach, payable without you first proving lost profits. A Chinese court can act on that quickly, including freezing assets. A foreign-law NDA gives the same court nothing it can use.
Register your trademark in China first
China is first-to-file on trademarks. If you have not registered your mark in China, a factory (or a "trademark squatter") can register it before you and then legally block your own goods from leaving the port. Filing costs a few hundred dollars and takes months to grant, so start it the day you decide to manufacture there — well before your first PO.
Practical IP hygiene beyond the paperwork
Contracts are the backstop, not the only layer. Two operational habits matter more day to day:
- Own the tooling explicitly. Injection molds and test fixtures you paid for are yours — state it in writing, with the molds physically identified by serial number, and the right to move them to another factory. Without this, your $8,000 mold becomes a hostage during a price dispute.
- Split the BOM. Don't give one factory the complete picture. Have the PCB fabbed at one house, populated at another, and final assembly + firmware flashing somewhere you control. No single vendor holds everything needed to clone you.
What to sign before sending a full BOM
A concrete sequence, in order:
- File your China trademark application before any factory sees the brand.
- Sign an NNN agreement (PRC law, Chinese court, Chinese controlling text, fixed contractual damages) before sharing anything beyond a high-level spec.
- Add a tooling ownership clause naming the molds/fixtures as your property with a right to relocate.
- Only then release the full BOM — and where you can, split it so no one vendor sees all of it.
For a 200-unit pilot, doing this adds maybe two weeks and a four-figure legal cost. Compare that to discovering your gateway design being sold under another name after you have spent months on certification.
If you don't have someone on the ground who reads contracts in Chinese and walks the factory floor, that gap is where most IP leaks happen. An engineering-led agent like China Sourcing Agents can vet the factory, hold a proper NNN before any files move, and keep tooling ownership documented — which is cheaper than learning it through litigation.
The order is everything: trademark, then NNN, then tooling, then BOM. Reverse it and the paperwork becomes a record of what you lost rather than protection against losing it.
Top comments (0)