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What do pirated software and t-shirt have in common? More than you might think.
The Information and Communications Technology Business Association of Cambodia is drawing attention to an important issue for garment exporters to consider: their shipments to the USA might be blocked and they could be fined if they are using pirated software.
A number of American states have passed what are known as Unfair Competition Acts that can be used to block the importation of manufactured goods that have made in factories using pirated software. The rationale behind the law is that by not paying licensing fees for the software, these factories can undercut factories in the US that have to pay for their software. The laws are thus meant to protect US industry from this type of unfair competition.
The ICT Business Association recently sent a letter informing the over 300 garment factories in Cambodia of the issue. Pily Wong, President of the association said in a statement:
Garment is one of the largest industry in Cambodia and software piracy rate is very high in the country. Thus, we see a potential risk that the US garment customers stop ordering from the Kingdom in order to avoid short supply because US customs are confiscating and destroying all the products coming from Cambodia. Cambodia is maybe not enforcing IPR in the country, but US Authorities are definitely very active and one day or another, some factories from Cambodia will get hit. Cambodia is exporting billions worth of products to USA every year and over a million jobs in the Kingdom are at stake, we need the garment factories to be compliant in order to protect their business and their workers. Hopefully GMAC will follow up and play a more active role in informing their members about official regulations which may affect their operations and in providing them good advices about compliance.
A factory in China, and another one in India, have already been hit with a lawsuit in California. More suits are likely to follow, and it is possible that a Cambodian exporter is next in line. By conducting an audit of their IT systems and seeking legal advice, factories can ensure they’re in compliance with these laws and ensure access to the US market.
Cambodia still has a long way to go in terms of its intellectual property enforcement, and infringement is rife in all areas of consumer products. But a recent news article in The Cambodia Daily highlighted the issues around not fake bags or bootleg movies, but fake pepper.
As previously discussed in an earlier blog post, Cambodia registered Kampot pepper as a geographical indication. A geographical indication is a special type of protection for goods, where the source of the good is an important aspect and indicator of the product’s quality. This also means that only pepper as grown according to certain guidelines is permitted to be legitimately sold as Kampot pepper.
Why would this pepper be an ideal good to counterfeit? For one thing, Kampot pepper is renowned for its quality and as such, can be sold for higher prices. According to the article, prices are estimated to rise to $10 per kilogram for genuine black Kampot pepper, and white and red pepper can be sold for even higher prices. Kampot pepper is also in high demand, and because their GI status requires strict rules governing production and quality control, increasing supply is challenging.
While the Ministry of Commerce has been assisting to prevent the sale of fake Kampot pepper and has been issuing warning letters to illegitimate sellers, the article mentions that in 2011, only two shops were shut down. Hopefully, stronger enforcement measures will be taken in the future to help maintain the quality associated with Kampot pepper and encourage real Kampot pepper farmers to continue production. And for those buyers wondering if they have the real thing on their hands, according to the article, real Kampot pepper should be sold with the green seal of authenticity as issued by the Ministry of Commerce.
A recent Cambodia Daily article reports that the Ministry of Culture and Fine Arts has implemented anti-piracy measures for ten major Hollywood films currently licensed by Westec Media (owner of the newly opened Legend Cinemas movie theater). These films (which include such blockbusters like “Harry Potter and the Deathly Hallows,” “Rise of the Planet of the Apes,” “Thor” and “Cowboys and Aliens”) will not be permitted to be sold at pirated DVD stores or shown on television. Any store owner who sells the targeted titles will be fined and have those DVDs confiscated.
While only ten movies were the initial target of this new enforcement, more are expected to be added to the list as Westec Media acquires new film licenses. The current movie roster at Legend Cinemas includes films such as Final Destination 5 and Johnny English Reborn and it would not be surprising if these and other currently featured films eventually disappear from bootleg DVD shelves.
With intellectual property enforcement still fairly new and copyright laws especially untested, entertainment in Cambodia is still dominated by the bootleg market. While it is unclear how long these currently banned DVDs will stay off the shelves, it is at least one sign of anti-piracy measures being put into action in Cambodia. To learn more about copyright law in Cambodia, please see our report here.
We blogged a few weeks ago about naming your company, and how the Ministry of Commerce will make sure that your proposed name is not already taken by another firm. It was all pretty straightforward, but left a glaring gap: trademarks! The list of registered trademarks and registered company names were totally separate.
Say you’re selling some kind of consumer good through a distributor in Cambodia. You’ve done the smart thing and properly registered all your trademarks. But the distributor gets sneaky, and registers YOUR trademark as his company name. As there was no cross-checking, the company name would probably accepted. Then it’s up to you to try and sue him for trademark infringement, not a fun proposition.
Well, the registrars of companies and trademarks (both within the Ministry of Commerce), are finally talking to each other. From now on, proposed company names will be checked against the list of trademarks. There are still some issues to iron out – like what happens when the company is in an entirely different field from the trademarked goods – but this is a really important step in Cambodian IP law.
You may find that it adds a couple of days to the company registration process but it may save you headache and expense in the longer term.
A recent Cambodia Daily (offline only) reports on the busting up of (reportedly) the largest counterfeit-cosmetics ring ever in Cambodia:
Seven tons of counterfeit cosmetics were seized and four people were arrested yesterday during a raid on a house in Phnom Penh’s Russei Keo district, according to Police.
Between 15 and 17 different brands of fake soap, balm, lotion and powders were seized.
As our recent counterfeit survey confirmed, fake goods are readily available in markets and stores in Cambodia. Counterfeit cosmetics can be particularly harmful, as they’re used directly on a person’s skin.
While it’s unclear how exactly the ring operated, it’s not uncommon to find branded bottles refilled with a homemade concoction on sale in the markets. Best to buy the real thing from a reputable dealer.
Yesterday’s Koh Santepheap Daily (Offline Khmer edition only) reported on a seizure of Heineken beer for “infringement of monopoly rights”. The term “monopoly rights” might make you think of trademark infringement, and that this was some sort of fake Heineken brew. From my reading of the article, the beers are not fakes, but interestingly enough, they are infringing Heineken’s trademarks.
How can this be? Parallel imports, my friend. Let me explain.
According to the article, the Attwood Import-Export Company has the exclusive rights to the Heineken brand within Cambodia. Some other unnamed company has the rights to Heineken in Vietnam. Though I haven’t seen their contracts, I’d venture that they prevent Attwood and the Vietnamese distributor from selling into each others’ territories. But that doesn’t prevent some enterprising chap from buying a few cases in Ho Chi Minh City and trucking them over to Phnom Penh, assuming it’s cheaper on the Vietnamese side. That’s because the contracts only bind the parties to the agreement – and the enterprising chap never signed the contract. For all the Vietnamese distributor knows, he’s just another domestic customer.
So how then would the Cambodian authorities be able to legally seize the shipment? After all, these cans were made by Heineken and sold legally in Vietnam.
The Cambodian trademark law grants mark owners the exclusive right to sell products bearing the mark within Cambodia. Because this rule would also prohibit second-hand sales of trademarked goods (think about how much your car would be worth if Toyota could sue you for reselling it), trademark rights are exhausted upon their first authorized sale in Cambodia. Those last two words are key to the whole parallel imports issue. It means that an authorized sale in Vietnam does not exhaust the trademark rights in Cambodia. For better or worse, it allows companies to price and market their goods differently in different countries.
And that’s why Heineken from Vietnam is nothing like the Heineken from Cambodia, at least according to trademark law.
From car parts, to electronics, to pharmaceuticals and fashion, counterfeit goods can readily be found on sale in Cambodia. Just how readily has rarely, if ever, been accurately determined. Enforcement actions are uncommon, official statistics on seizures are difficult to come by, and there have been no published surveys on the scope of intellectual property infringement.
Our firm recently surveyed several retail locations in Phnom Penh, and recorded the brands on sale. The results show just how pervasive the problem is. Of the stalls surveyed, more than half sold at least one counterfeit. Gucci, Louis Vuitton, Nike, Abercrombie, and just about any other global brand can be had for a fraction of the original’s price. The following table shows the top marks across the four categories surveyed:
The full results, as well as an analysis of the anti-counterfeiting laws, can be found in the full report.
In Cambodia, assuming all the relevant procedures are followed, trademarks go to the first person to register. The “legitimate” owner might be a big foreign brand with registrations all over the world, but if they don’t register the mark in Cambodia, they’re risking trouble.
In recent weeks I’ve seen an uptick in the number of clients facing such trouble. Typically they’re a foreign company selling products around the world, including Cambodia. But for one reason or another, they never registered in Cambodia. Some sneaky company – perhaps a Cambodian distributor wanting business – registers the mark from under my client.
The Trademark Law provides several solutions, but none are straightforward and all involve more time and expense than simply registering the mark in the first place. If you become aware of the situation early enough, you can file an opposition within 90 days of the registration’s publication in the Official Gazette. After the 90 day window, you’d have to request the Ministry to cancel or invalidate the mark, which is available on narrower grounds than opposition.
The take-home message is that if you’re selling a product in Cambodia, or even considering it in the future, be sure to register those marks!
For more on trademark opposition and cancellation in Cambodia, see our full report here.
The Ministry of Commerce just announced the registration of the first two Geographical Indications (GI) for Cambodia. A GI is like a trademark for goods – typically food products – originating in a certain region. Producers within the region, who abide by the governing organizations’ rules, can use the GI designation on their products.
So what’s the point? A GI is all about differentiating your product from the run-of-the-mill commodities of your competitors, which hopefully will let you charge a higher price. If a regional group of producers can point to something distinctive about their product – perhaps the soil gives it a particular flavor, or there’s a traditional production technique – then it might form the basis for a successful GI campaign.
In order to join the WTO, Cambodia had to agree to update its intellectual property laws – including passing a GI law. The Ministry of Commerce issued an interim regulation early last year allowing for the registration of GIs, while a full GI Law is currently being drafted. Today, the first two GI applications were granted, for Kampong Speu palm sugar and Kampot pepper. I don’t know much about the palm sugar, but Kampot pepper is a real treat – the fresh green clumps of peppercorns make a fantastic seafood sauce. Before the civil war disrupted production, Kampot pepper was quite reknowned in the French culinary world.
Hopefully with the GI and a bit of marketing, the producers down in Kampot can regain some of that cachet.
Yesterday’s Cambodia Daily (print edition only) reported on a police raid that seized 700 bottles of fake Johnnie Walker whiskey. Refilling and distributing counterfeit alcohol is not only a violation of trademark law, but also highly dangerous to public health. Bootleg bottlers have been known to add all sorts of nasty things to their concoctions to boost the alcohol content. According to the article, the legitimate Johnnie Walker distributor will be launching an advertisement campaign to teach drinkers how to tell the difference between the real stuff and imitations.
This is exactly the right strategy. Counterfeit goods are a major problem for too many companies, as they undermine consumer confidence in their product and erode profits. Johnnie Walker is going after both the supply and demand sides of the problem. Coordinated police raids, blocking of imports, and court cases can disrupt the supply chain, hopefully persuading the infringers to move on to a more legitimate line of work. But an effective anti-counterfeit strategy needs also to deal with consumer demand. If consumers can’t tell the difference between fakes and the real thing, or worse, don’t care which they buy, then no amount supply disruption will solve the problem. This is a long-term process – a single raid won’t shut down the counterfeiters for good, and consumer preferences don’t change overnight. It requires a sustained investment in monitoring, advertising, and legal action.
Though counterfeits of many goods are widely available in Cambodia, in my opinion this is due in part to lack of effort on the part of trademark owners. The legislation is in place and the authorities have been established. These laws are not self-enforcing though – it’s up to the trademark owners to figure out who is ripping off their products and complain to the relevant authorities. Though enforcement might not be perfect the first time, Johnnie Walker is showing that effective action is possible.