Using contracts and agreements

Last updated: 
9 December 2016

Strong contracts and agreements will mean you are best placed to protect your IP rights when operating in China.

Before you start negotiations, you should conduct due diligence on your potential Chinese business partner, including a basic background search. A legal professional is best placed to assist you with this. This will also enable you to identify whether a prospective Chinese partner has a history of infringing the IP of other parties or has been involved in IP litigation.

You should be aware that there are legal differences between China and Australia. The sorts of contracts and agreements you could put in place include:

  • non-disclosure or confidentiality agreements are often signed before you start working together to ensure sensitive information is protected and kept confidential
  • a term sheet or letter of intent  are short documents that enable two parties to record key headline terms in advance of preparing longer more formal agreements
  • licensing agreements allow use of your IP by others while you still retain ownership
  • non-circumvention agreements prevent your business partner from approaching your suppliers or contacts
  • legally binding contract is a legally-enforceable document that outlines the relationship between you and your business partner or manufacturer
  • memorandum of understanding is a contract that can be legally binding or non-binding.

Legally binding contracts

To carry out business in China or work with a Chinese company, ensure you have a legally binding written contract in place.

The contract should detail:

  • the commercial agreement between the two companies
  • each company’s rights and responsibilities
  • how any disputes should be resolved
  • the IP that each company will have access to and who will own it
  • how any newly-developed IP will be handled
  • what will happen with the IP after the termination of the relationship.

We suggest you get specialist legal advice from an Australian law firm with expertise in China or from a Chinese firm.

Chinese enforceable contracts

It's important to create a contract which is enforceable in China. You cannot use contracts created for Australia to enforce your IP in China. Contracts should be prepared both in English and Chinese to aid understanding and enforcement.

Depending on the contract, it may be mandatory to include some provisions that deal with public interest issues, such as labour rights and protection, food or public health safety, environmental security, financial security, foreign exchange control, competition law or anti-dumping.

You should seek legal advice when entering into contracts or agreements.