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June 24, 2016

New Procedures to Record Exclusive Distributorships in Cambodia

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On May 31, 2016, the Ministry of Commerce introduced a Prakas  (regulation) on the Procedures to Record and File Permission Letters for Imported Goods Bearing Exclusive Trademarks. For the first time, this regulation sets out the procedures to register an exclusive distributorship at the Department of Intellectual Property Rights (DIPR).

Under the Prakas, an exclusive distributorship provides the right to a trademark owner or distributor to import and distribute goods that bear a trademark registered in Cambodia. An exclusive distributorship must be registered at the DIPR for the trademark owner or distributor to enforce their rights against third parties.

A critical feature of the Prakas  that trademark owners and distributors must be aware of is that approval letters issued by the DIPR before the Prakas  was introduced, which lack an express validity period, will become null and void on June 30, 2016—30 days after the Prakas  entered into force. These distribution agreements must be re-registered.

Another notable aspect of the Prakas  is its limited scope. It only applies to goods that: (1) bear a registered trademark; (2) are genuine, noncounterfeit goods; and (3) are new goods, which are not secondhand. Pharmaceutical products were not included in the Prakas.

The Prakas  also introduces provisions related to parallel imports for the first time. Under the Prakas, if a trademark owner or distributor has registered an exclusive distributorship, they can take enforcement actions against parallel imports.

But it is important to note that the regulation does not clarify the actual process to take an enforcement action against parallel imports. The DIPR and Customs may enact provisions that follow previous practice. Before this regulation was introduced, in order to take an enforcement action against parallel imports, a trademark owner or distributor must have successfully registered an exclusive distributorship. The DIPR would then issue an approval letter. On their request, the DIPR would forward a copy of that letter to the Customs Department, which would monitor parallel imports entering the country.

In addition, under the Prakas, the DIPR’s approval letter for an exclusive distributorship agreement is valid for two years. The trademark owner and distributor must renew the approval letter no earlier than three months before the expiry date.

The Prakas  sets out a number of important requirements and procedures to register an exclusive distributorship, as follows:

  • The distributor must be incorporated in Cambodia.
  • To register an exclusive distributorship, the trademark owner and distributor must use a short-form template provided by the DIPR. In this template, the trademark owner assigns the exclusive distributor. This template must be signed by the trademark owner and certified by a notary public or competent authority.
  • The trademark certificates must be attached to the short-form template together with a letter from either the trademark owner or the distributor requesting registration of the exclusive distributorship.
  • Trademark owners or distributors must file the short-form template and additional documentation within three months from signing the template.
  • If the registered distributor wants to completely or partially transfer its exclusive rights, it must obtain written consent from the trademark owner.
  • If an exclusive distributorship is registered with the DIPR, another exclusive distributorship covering the same trademark-bearing goods may not be registered unless the first distributorship has expired.
  • To register an exclusive distributorship over goods bearing the same trademark in different classes of goods, a separate short-form template must be filed that appoints an exclusive distributorship for each class.

While the Prakas  is a positive step forward, many requirements need further clarification. Once the DIPR clarifies these requirements, trademark owners and distributors will be able to enforce their rights more effectively, and it will instill greater confidence in investors.

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