Overview of Patents in Cambodia

Patents grant an inventor the exclusive right to an invention for a set period of time. In Cambodia, the Law on Patents, Utility Model Certificates and Industrial Designs (2003) governs registration, protection and enforcement of patents. The Prakas on the Procedure for the Grant of Patents and Utility Model Certificates (2007) provides details on the administrative procedures for the filing and granting of patents. As patent law is still very much in its infancy in Cambodia, no patents have been finalized and granted to date, and the law is largely untested. However, a review of the law can provide some indications as to what issues to consider when filing and maintaining a patent in Cambodia.

What can be patented in Cambodia?

Patents can cover inventions which are new, involve an inventive step and are industrially applicable. An invention is defined as an idea which permits the solution to a specific problem in the field of technology, and may be, or may relate to, a product or process. However, certain types of inventions are not patentable, such as scientific theories, business methods, surgical treatments, and plants and animals. Plant variety registration is governed by a separate law. Pharmaceutical products are currently excluded from protection until January 1,2016 (though applications can be filed earlier to be examined after this date). Furthermore, inventions which would cause social harm (such as illegal narcotics) are not patentable.

An invention is considered new if it is not anticipated by prior art. This means that prior to the Cambodian filing (or priority date), any prior public disclosure of the invention anywhere in the world and by whatever format will be considered prior art and affect the novelty of the invention. An exception is if the disclosure occurred within twelve months prior to the filing date (or if applicable, the priority date) and the disclosure was either by reason or as a result of acts committed by the applicant/predecessor in title, or as an abuse by a third party against the applicant/predecessor in title.

QIP’s: could your business be eligible for a tax holiday?

In order to encourage rehabilitation and growth in the Cambodian economy, in 1994, the Cambodian government came up with an incentive scheme to attract investment in the Kingdom. The scheme provides that candidates can apply to the Cambodian Development Council (CDC) for recognition as a Qualified Investment Project (QIP). This grants them a holiday on income tax and/or customs duties for up to nine years.

If the CDC approves the application, the business will be granted a tax holiday based on the formula below. Note that it is the project itself, rather than the company or entity that qualifies for the exemption, meaning that non-QIP income will still be liable for tax.

New Property Tax

In January 2011, the Ministry of Economy and Finance implemented a new property tax which applies to all immoveable property worth more than 100 million riel (USD$25,000). This is in addition to existing taxes such as Tax on Unused Land, Registration Tax and Tax on Land and House Rent. The law follows the establishment of a Property Valuation Committee (PVC) which is responsible for property valuation in relation to the new law.

Any property subject to the tax will be issued with a Tax Identification number and the taxpayer will be required to file and pay the tax before 30 September each year. Each property requires a separate return. The amount owing will be assessed as 0.1% of the value in excess of the amount specified. No declaration is necessary for properties valued below this. If a taxpayer makes alterations to the property which may reduce its value for the purpose of the tax, the responsibility of notifying the PVC lies with the taxpayer.

“Immoveable property” is defined very broadly as applicable to land (both used and unused), housing and building and constructions (including those without walls or roofs). This means that anything fixed to land will have its value considered for the purpose of the tax.

Foreign investors may be caught by the definition of taxpayer, which includes occupiers and final beneficiaries as well as owners. Careful consideration needs to be paid to tax liability when negotiating leases and other rental arrangements to make ensure ultimate liability does not end up resting with a lessee or tenant. Purchasers also need to be cautious that taxes to date have been paid, or they may end up with the responsibility for unpaid taxes on the property – under the regulation, liability rests with the owner at the time tax is due.The tax was implemented following the International Monetary Fund’s recommendation that Cambodia increase revenues from tax collection to open up resources for development needs in the wake of the global economic crisis.

THE FORTHCOMING NATIONAL ARBITRATION CENTER

Cambodia’s first National Arbitration Center will be established with the aim of resolving business disputes and enhancing the confidence of private sector investors. The International Finance Corporation, a member of the World Bank Group, and Cambodia’s Ministry of Commerce signed a Memorandum of Understanding (MOU) in August, 2009 to implement a three-year project to set up a National Arbitration Center.

The National Arbitration Center will be the first commercial arbitration body in Cambodia offering the business community an alternative commercial dispute resolution mechanism to the courts. In theory, it will enable businesses to resolve their disputes quickly, inexpensively, fairly, and with certainty. It thus promises to enhance the private sector’s comfort level when engaging in business transactions.

As a form of Alternative Dispute Resolution (ADR), Commercial Arbitration (CA) could act as a catapult for economic growth and creation of wealth in Cambodia. It could do this in such a way as to advertise an enhanced and more reliable business climate, crucial to attracting foreign investment. Predictability is also a valuable commodity given systemic issues in the judiciary. Unlike the court process, CA gives both parties in a dispute the flexibility to choose both the arbitrator as well as the rule that will be followed in deciding the case. Essentially, as the Cambodian economy grows and with it the number of commercial transactions, a streamlined dispute resolution mechanism gives the private sector more comfort to engage in business transactions. These features of a more enticing economic landscape in which to invest are echoed in the legislation itself;

What Employers Need to Know About the Cambodian Labor Law

Recent entrants to the world of business in Cambodia often find it difficult to navigate the sometimes murky waters of the Cambodian Labor Law. Even if an employment contract was negotiated and signed abroad, if the work is performed in Cambodia, the Cambodian Labor Law must be followed. It serves as both a guarantor of minimum rights for employees, and enforcer of regulations for employers. This is not a comprehensive summary of the Labor Law, but it does highlight important areas that may differ from practices in other countries.

Opening Your Organization

There are procedures that must be followed in order to be compliant with the Cambodian Labor Law, and avoid future obstacles. If you are opening a business, a declaration must be made to the Ministry of Labor. The timeframe to make the declaration will depend on the number of workers employed by the organization. It is important to be proactive in making your declaration, as the Labor Inspector can make surprise visits and give you a fine for failure to properly make the declaration.

Cambodian Stock Exchange

The last three years have seen a surge of anticipation for a fully functioning stock exchange in Cambodia. Expected to be established in CamKo City, hopefully by the end of the year, the Cambodian Stock Exchange (CSX) will be a joint-venture between the Korean Exchange and Cambodia’s Ministry of Economy and Finance (MEF). Proponents of the exchange point out the potential benefits of raising much needed capital and thereby facilitating growth in local companies. A less publicized benefit of a well functioning stock exchange in Cambodia may be that it will encourage a more rational allocation of resources, given the current propensity of Cambodian investors to park their money in land for long periods of time.

Until March 1st, the Stock Exchange Commission of Cambodia (SECC) accepted license applications from firms seeking to participate in the future stock exchange. According to press reports, twenty-two national and international firms applied. A qualifying firm must comply with rigorous standards. The legislation states that along with having a sound corporate structure, firms seeking a securities license must have a minimum capital between USD 96,000 to 9.52 million. Prospective firms must also pay a license fee ranging from roughly USD 100,000 to 10 million. The minimum capital requirements and license fees vary depending on the type of securities license sought.

A word from our Managing Director

We are proud to announce several important changes at our law firm. First and foremost, we have completely revamped our BNG brand, including a new logo, website, and publications. We’ve changed our name from BNG Advocates & Solicitors, to BNG Legal, to more simply and clearly define who we are and what we do. We designed our new logo around a globe, to better reflect our international client-base, staff, and standards.