“Can a Non-Disclosure Agreement (NDA) be signed for custom hardware structural parts?” — Not only is it possible, but it is also strongly recommended. Technical drawings, molds, and process parameters constitute the core technical assets of the client;
if leaked, the losses resulting from product counterfeiting or a supplier reusing the same mold for other clients far exceed the initial procurement costs.
Signing an NDA serves as a crucial legal safeguard in hardware customization partnerships.
This article outlines the legal basis, core clauses, and practical considerations regarding NDAs.
I.
What the Law Says: Trade Secrets Are Explicitly Protected
The drawings, manufacturing processes, and mold specifications involved in hardware customization are legally classified as trade secrets.
According to the *Provisions on the Protection of Trade Secrets* issued by the State Administration for Market Regulation, trade secrets are defined as technical or business information that is not known to the public, possesses commercial value, and is subject to confidentiality measures taken by the rights holder. Technical information includes, but is not limited to, drawings, structural designs, formulas, processes, methods, data, samples, and styles.
Judicial interpretations and Supreme People’s Court precedents have further clarified that confidentiality clauses in contracts eliminate the need to prove the constituent elements of a trade secret and shift the burden of proof in infringement cases; signing an NDA significantly lowers the evidentiary threshold for enforcing one’s rights.
In judicial practice, infringers who misappropriate technical secrets may be ordered not only to cease the infringement but also to pay joint compensation for economic losses and reasonable expenses.
II. Differences Between Manufacturing-Specific NDAs and Generic Templates
Industry experts advise that confidentiality agreements for custom hardware manufacturing cannot simply rely on generic templates designed for software or investment sectors. They must cover assets specific to the manufacturing context: mold structures and 3D models; machining programs and mold-trial parameters; heat treatment and surface finishing specifications; cost breakdowns and customer channels; and the ownership and disposition of molds.
A typical hardware industry NDA defines confidential information broadly to include product drawings, structural designs, mold data, manufacturing processes, formula parameters, technical standards, inspection records, samples, quotations, procurement channels, supplier and customer details, order information, and production schedules. It also stipulates that such information may not be copied, imitated, disclosed, or used for third-party products without written consent.
III.
Key Elements of a Proper Confidentiality Agreement
- Parties Subject to Confidentiality: Clearly specify whether the agreement is one-way (only the supplier is bound) or mutual (both parties are bound); a mutual agreement is recommended when both pricing and technical information are exchanged.
- Scope of Confidentiality: Itemize the information covered—such as drawings, molds, processes, quotations, and customer data; the more specific the scope, the more enforceable the agreement.
- Duration of Confidentiality: A term of 2 to 5 years is common in the industry, though core technical secrets may be designated as confidential indefinitely. Obligations must continue after the partnership ends, including the return or destruction of confidential materials.
- Usage Restrictions: Confidential information must be used solely for the purposes of the contract; copying, retaining, disclosing, or using it for other projects is prohibited. Explicitly include a commitment that molds shall not be used for third-party production.
- Liability for Breach: Stipulate compensation for both direct and indirect losses, liquidated damages, and legal enforcement costs; liability caps may also be established.
- Dispute Resolution: Clearly designate the competent court or arbitration institution; for cross-border collaborations, specify the governing law to facilitate legal enforcement abroad.
IV.
Complementary Measures Beyond Signing the Agreement
A confidentiality agreement is no substitute for comprehensive confidentiality management.
According to the *Provisions on the Protection of Trade Secrets*, rights holders must impose confidentiality obligations on employees and suppliers with access to trade secrets through means such as internal policies, training, and written notices; implement differentiated management for facilities and workshops handling confidential information; and apply tiered access controls to technical drawings and data.
Guiding cases from the Supreme People’s Court further indicate that if an enterprise recruits talent from another party and subsequently produces relevant products within a timeframe significantly shorter than what independent R&D would require, infringement of technical secrets may be presumed.
Therefore, beyond merely signing agreements, companies should control the distribution of confidential documents, mark confidentiality levels, and maintain records of handover procedures upon employee departure, thereby establishing a comprehensive “agreement + management + evidence” loop.
V.
Trend: Upgrading Confidentiality Clauses in Cross-Border Cooperation
With the rise in customized exports of hardware structural components, cross-border Non-Disclosure Agreement (NDA) clauses are becoming increasingly sophisticated. Key points of negotiation now include the governing law, jurisdiction, liability caps, and compliance regarding cross-border data transfer. Furthermore, commitments regarding mold exclusivity and conditions for mold transfer are being incorporated into master contracts to complement the NDA.
Industry experts recommend making the confidentiality agreement the first step in the cooperation initiation process—signing it before any drawings are released—as the “defensive value” of the agreement only takes effect once the drawings have been shared.
