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With a continuous remarkable growth rate of 7.7% between 1995 and 2018, Cambodia’s economy is expanding quickly (World Bank, Cambodia Overview). Cambodia has changed from being categorised by the World Bank as a low-income country to a lower middle-income country over that time. A sizeable middle class had also grown, especially in Phnom Penh. Cambodia has seen the arrival of several foreign franchises, including Burger King, Carl’s Jr., Circle K, Cold Stone Creamery, Domino’s Pizza, Krispy Kreme, L’Occitane, Levi’s, Lotteria, Pandora, and Starbucks, among others, in addition to economic growth, an expanding middle class, and a welcoming investment framework.
[Image Sources : Shutterstock]
Since Cambodia has not passed any comprehensive franchise laws, rules of broad application that touch on franchise-related concerns are essentially what govern franchising in Cambodia. While the Ministry of Commerce is working on a Law on Commercial Contracts that ostensibly includes a section on franchise agreements, there is no set deadline for when this law will become effective.
Any licence agreement for a trademark, including a franchise agreement that includes a trademark licence, must, in accordance with Article 19 of the Trademark Law, require the licensor to exert effective control over the quality of the goods or services associated with the mark; otherwise, the contract is void. According to the Trademark Law, all licences to use trademarks must be filed with the Department of Intellectual Property Rights (DIPR). A trademark licence agreement or franchise agreement that contains a trademark licence only needs to be registered if the licensor wants to grant the licensee the right to enforce the agreement against third parties (for instance, individuals infringing on the licensor’s trademarks in Cambodia).
Although pre-contract disclosure is not required by Cambodian law, a franchise agreement must contain only true information. According to the Civil Code, a person who enters into a contract based on a misrepresentation made by another party is allowed to withdraw the agreement and demand compensation from the person misrepresenting. Additionally, if the guarantor was not fully informed of all relevant information pertaining to the guaranteed duty at the time the guarantee was written, it is against the law for a personal guarantee to be given.
The Department of Intellectual Property Rights published a new regulation on January 13, 2020, which made major modifications to the processes for recording trademark licencing and franchise agreements in Cambodia. In contrast to previous practise, new documents and information are needed, and recordals are now only valid for renewed five-year terms. The rule also stipulates that licence agreements must include certain details in order to be documented.
A licence must be registered with the DIPR in accordance with the Trademark Law in order to be protected against other parties. If the trademark-owning licensor is unwilling or unable to enforce the trademark rights, the recordal enables the licensee to do so.
Licenses covering both registered trademarks and pending applications may be recorded. However, requests for recordals covering pending applications will only be reviewed and examined once the application has been granted.
If the parties intend to record the license, it must contain at a minimum the following:
- Identification of the licensor and licensee [Name, nationality, and permanent residence if the licensor or licensee is a natural person – Company’s name, nationality, and registered address in licensor or licensee is a legal person]
- Mark details including the mark, registration number or application number, classification, and goods/services subject to be recorded.
- Type of license contract, specifically whether it is an exclusive, non-exclusive, single license, and/or sub-license contract.
- Duration period shall be mentioned in the license agreement or can be determined by referring to another agreement.
- Conditions for monitoring the effectiveness and quality control on goods or services.
- Signatures of both parties and certified by the notary public or competent authorities.
The application must be accompanied by the following documents:
- Original or certified copy of license certified by the notary public or competent
- If the entire license cannot be submitted, the applicant shall provide an extract of the license with the required information.
- If the license or extract is written in language other than English, it shall be translated into Khmer or English and certified as true and correct translation by authorized translator.
- Original notarized POA and Deed of Substitution if agent is appointed
- Copy of mark registration certificate or renewal registration certificate or acknowledgement of filing instruction,
- Documents required from licensor and licensee if they are resident in Cambodia: for Natural person of Khmer nationality: copy of ID card with signature or thumbprint; foreign nationality and has commercial establishment in the Kingdom of Cambodia: copy of passport with valid visa and documents pertaining to business registration; legal person: Copies of documents pertaining to commercial registration.
- Receipt of payment of the official fee.
If the prerequisites and necessary papers are not met, the Registrar will inform the applicant within 30 days of the date the application for recordal was received. Following then, the applicant has 60 days to reply to the notification; this period may be extended upon request.
Only recorded licences are enforceable against third parties in the new Prakas. The recordal is valid for a maximum of five years from the recordal date, or, if either is less than five years, for the duration of the licence or the remaining validity of the mark registration. In accordance with an application and payment of the official fee, the recordal may be extended for additional five-year terms. The renewal application must be submitted within six months prior to expiration of the recordal.
After a successful recordal, the licensee is granted the following rights: to file a complaint with the appropriate court or authority, to request temporary or border measures to stop an infringement, an impending infringement, or any act that violates the Trademark Laws and other provisions, to request damages and other remedies, to file a complaint with the appropriate court against any infringement if the licensor refuses to do so, and to request to the appropriate court or authority that the licensee be granted a licence. A copy of the Letter of Recordal may also be published by the applicant after the licence has been recorded in any newspaper.