Quick Question Friday: China Law Answers, Part 75

Because of this blog, our international lawyers get a fairly steady stream of legal questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a quick general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

We are always preaching how if you are going to have your products manufactured overseas you should have the following:

1. An NNN Agreement.

2. A Manufacturing Agreement.

3. A registered trademark in the country in which you are manufacturing and in the countries in which you will be selling your product.

4. Oftentimes, a Product Development Agreement as well.

But we are often asked by companies whether they need all of the above (or at least the first three) if they will only be buying X amount of product at a time or even over time. There are no hard and fast rules on this. We usually like a 10-15 minute phone calls to ask questions and then give answers. Will you be putting your brand name or your company name or your logo on your product? What about on its packaging? How much will you be paying for your initial order? Will you definitely be making future orders? For how much? What, if anything is unique about your product? In what countries will you be selling your product? Do you have any patents, trademarks or copyrights anywhere in the world?  Where? What kind of patents? How terrible would it be for you if your product is sold by someone else before you can sell it? How terrible would it be if your product is sold by someone else but without your brand name or your logo? How easy would it be for someone who is not your manufacturer to duplicate your product? The answers to these questions allow us to give our advice.

Any general guidelines? Maybe the following:

If you are only going to be doing a one-time $10,000 or less purchase you probably do not need any of the four.

If you will be making a $10,000 purchase with plans to buy more if you do well selling your initial order, you can usually get away with just a trademark and maybe an NNN Agreement at the beginning, but maybe not.

We have seen too many start-up companies get shut down early for not protecting themselves early for us to tell anyone that not doing something will not put their future at risk.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.