Notwithstanding legislation* that appears to prohibit the importation of genuine non-counterfeit products without the trade mark owner’s consent, parallel imports remain a systematic feature of commerce in Cambodia.
Parallel imports arise when a product is placed on a national, regional or international marketplace by the product’s intellectual property rights holder, or with their consent, and is from there purchased and resold in a separate market from the one in which it was first distributed. The term “parallel” refers to the existence of rights held by the owner in both jurisdictions, in parallel with one another.
Recognising that ownership of intellectual property rights is not the same as ownership of the product itself, and in order to prevent owners from claiming royalties beyond their due, most countries have by now adopted some variation on the doctrine of exhaustion of rights. This restricts the rights holder’s ability to prevent further distribution of the product bearing their trade mark, or patent etc. Once the relevant good is put on sale for the first time by a rights holder, or with their consent, they cannot object to subsequent circulation of the product in the relevant market. The rights are “exhausted” by virtue of that first sale.
Different countries have adopted different approaches to the doctrine however, with some opting for international exhaustion so that products properly placed in any part of the world may be lawfully imported into that country, while others have adopted a more restrictive regional approach, such as that which pertains in the EU. Under a national exhaustion system, such as in Cambodia, the trade mark or patent owner’s rights are not exhausted until the first lawful sale in the domestic market, i.e. in Cambodia.
This is an unusual move by a developing country but one which can act to protect consumer interests, in particular when it comes to distinguishing real goods from counterfeit ones — when the two are reportedly often sold side by side — after-sale care and protecting legitimate ordinary traders from being unfairly undercut by less rigorous competitors. Problems can arise in particular in relation to, for example, automobiles and pharmaceutical products.
Pharmaceutical products are in fact a special case as pharmaceutical companies are unable by law to secure the exclusive right to import pharmaceutical products into Cambodia and parallel imports are exceptionally considered legal. Unfortunately, some distributors avail of this system to bypass the law on registration of pharmaceutical products and import products that have avoided registration and testing. Some of these are not appropriate for sale in the Kingdom, for example by not being packaged in appropriate materials for the climate.
However, in all of the issues raised here, the question comes down less to law than to enforcement. This is why EuroCham is assisting the government with the creation of a trade mark recordal system so that trade mark owners can make their rights formally known to the General Department for Customs and Excise to give them the information and support they need to ensure their rights are protected.
Rights holders are further strongly advised to ensure that their rights and associated licences are properly registered.
*Art. 11(c) Law Concerning Marks, Trade Names and Acts of Unfair Competition.