Tag Archives: Corporate Commercial

Trademarks vs Trade Names: Key Distinctions

In our previous article we mentioned that although trade names and trademarks sound similar, they have completely different legal implications. In this article we will discuss about legal implications of registering a trademark.

A trademark is a more significant step identified with establishing brand recognition in the marketplace. A trademark can be associated with, or part of, your trade name, and can be used to provide legal protection for the use of names, logos, symbols, words, phrases, slogans, or other designs that help customers identify your company.

A trademark requires separate registration from a trade name. You must register your trademark with the state authority in charge of intellectual property matters. The registration of a trademark guarantees a business the exclusive use of the trademark, establishes legally that the trademark was not already being used by any other business entity or person prior to your registration of it and provides official government protection from any other business subsequently infringing on your registered trademark. In other words, when you register your trademark, you hold several legal rights. You are the only one allowed to use, copy, profit from, distribute the registered trademark, and no other company or person can use that trademark. This process also establishes your ownership of the trademark as a unique and protected element of your business. Your trade name might also be included in the trademark that now has that legal protection. If any other person or company tries to use something similar, you have the right to take legal action. It also provides legal liability protection against someone subsequently claiming that you are infringing on a previously registered trademark.

In registering a trademark, you or your business can directly register the trademark, or you can choose to have a licensed intellectual property agent (IP agent) do it for you. Having an IP agent handle the registration provides an extra layer of insurance that the registration is done properly and completely, and that a thorough investigation has been conducted verifying that the trademark has not been previously registered by any other person or company.

Trademarks vs Trade Names: Differences You Should Know

When starting a business, there is often some confusion about the registration of business name, in particular confusion between trade names and trademarks. The terms “trade name” and “trademark” sound similar, but it is important for business owners – especially those just starting businesses – to know the difference. Selecting and registering trade names and trademarks is an important part of establishing a brand presence and recognition in the marketplace for a company and its products, so it’s a process that should be considered carefully.

A trade name is your company’s official name under which it does business. A trademark protects the intellectual property of a business. Trademark may include logos, symbols, words, phrases, slogans, or other designs that help customers identify your company. Trademark can also be associated with your trade name. When consumers look for products and services, they often rely on the trademarks to find the items they want. An important reason to distinguish between trade names and trademarks is that if a business starts to use its trade name to identify products and services, it could be perceived that the trade name is now functioning as a trademark, which could potentially infringe on existing trademarks.

Trade name

Registering your company’s trade name is much simpler than registering for a trademark but doesn’t offer the same legal protection. It only serves as the official name of your company. You need to register your company’s trade name with the state registration authority as soon as you decide to incorporate a company. When you do so, your company will gain recognition as a legal entity. The registration process also makes it legal for your company to enter into contracts and participate in other legal forms of business. The practical function of registering a trade name is primarily for administrative and accounting purposes, such as filing taxes, issuing pay to employees, setting up websites and other online presences, advertising, and product packaging, etc. Registration requirements for trade names are really geared more toward making the tax authorities aware of your business than they are toward providing any substantial brand name protection. However, even though registering a trade name does not provide legal protection in the way that registering a trademark does, selecting a trade name should still be done thoughtfully, as it is the initial step in establishing an identity for your company in the marketplace.

Revised Rules of Dispute Resolution Committee of the Intellectual Property Office of Mongolia come into force (part 1)

In 2018 the Government of Mongolia has adopted a new revised structure of government agencies, pursuant to which General Authority for Intellectual property and State registration has divided into two separate agencies, General Authority for State registration and Intellectual Property Office of Mongolia, with their own separate functions. Due to this division Intellectual Property Office of Mongolia (IPOM) has started to renew its internal structure and some rules and regulations, in particular Rules of Dispute Resolution Committee. In connection with this, activities of Dispute Resolution Committee of IPOM have been suspended sine die.

On February 13th, 2019 by the order of the Minister of Justice and Home affairs No. A/26 a revised Rules of Dispute Resolution Committee (Committee) of IPOM was adopted and new members of the Committee were appointed. In this article we will highlight main differences between old and new Rules of the Committee and new additions to the Rules.

Pursuant to old Rules chairman and secretary of the Committee were appointed by the Head of IPOM, and members of the Committee were appointed every time when a decision to initiate a dispute resolution case was carried out. And number of members to be appointed were not specified. Pursuant to new Rules the Committee is a non-permanent division and will consist of 11 regular members. By the order of the Minister of Justice and Home affairs No. A/26 dated February 13th, 2019 regular members of the Committee were appointed, and the Committee consists of chairman, secretary and 9 members. The Committee is distinctive because it now includes not only IPOM specialists and inspectors, but also specialist from Ministry of Justice and Home affairs, law school professor and IPOM researcher.

Under new Rules the Committee shall not accept and resolve disputes regarding claims for incurred damages and claims of compensation (payment) for using protected invention as specified in paragraph 28.1 of Article 28 of Law on Patents. Whereas under old Rules the Committee did not resolve requests to recognize the trademark is a well-known trademark, as specified in paragraph 32.1.4 of Article 32 of Law on Trademarks and Geographical indications, now under new Rules it is possible to submit such requests to the Committee.

Under old Rules requests and complaints were submitted in writing to the Committee, and chairman of the Committee carried out a decision whether to initiate a dispute resolution case or not within 14 days from date of submission. Pursuant to new Rules requests and complaints are submitted in writing to chairman of the Committee. Chairman of the Committee shall transfer requests and complaints to one of the members of the Committee for review within 5 business days from date of submission. The member of the Committee shall review and present his/her suggestions and comments to chairman of the Committee within 10 business days from date of receipt. Chairman of the Committee based on suggestions and comments of the member of the Committee shall carry out a decision whether to initiate a dispute resolution case or not.

Before, dispute resolution cases were resolved within 6 months as specified in Law on Patents and Law on Trademarks and Geographical indications, whereas now this period has significantly shortened. New Rules provide for that dispute resolution cases must be resolved within 30 days from date of decision to initiate a case is carried out, and if additional procedures and measures are necessary then this period may be extended once for up to 30 days by chairman of the Committee.

New Online Platform Streamlines Mongolia Government Services

In 2018 Parliament of Mongolia adopted 4 new laws related to state registration and made corresponding amendments to relevant laws. These new laws and amendments came into force on November 1st, 2018. The advantages of new laws are to facilitate government services for citizens and legal entities by transitioning into providing online services, thereby introducing and implementing new electronic (online) networks to all public (government) institutions and eliminating previous legal overlaps.

General Authority for State Registration has set its main objectives, including reduction of paper-based workflows, implementation of new information technologies and improvement of government services. Within framework of these objectives General Authority for State Registration has introduced and launched new online data system www.burtgel.mn. Purpose of this online system is to provide government services to citizens and legal entities more quickly, without any delay, bureaucracy, excess demands (requirements) and resolve issues directly. Anyone who has access to internet can obtain all government services provided by state registration authority without having to directly communicate with a person. Currently one can obtain instantly more than 10 types of state registration references free of charge using this online system. Furthermore, services related to civil registrations, registrations of legal entities and registrations of property rights will be soon available on this online system as well.

The new law provides that information can be obtained if an individual is identified. There are two ways to be identified. One is with individual’s cell phone, other one is with digital signature. Law on Digital signature was adopted in 2012. Digital signature can be obtained from National data center, authority for communication and information technology, and private companies licensed to grant digital signature certificates.

Individuals who have access to internet using digital signature can obtain any information without any limitations of registration jurisdiction. In other words, an individual is being identified on the internet. Digital signature is the key. This key is password or access code. Basically, in order to obtain necessary information from online data system an individual must be registered in the system. When registering in the system individuals must use their digital signature. However, individuals are not always required to have digital signature. For individuals with smartphones digital signature is not obligatory. It is possible to obtain services and information related to state registration using smartphone chip. Depending on cell phone carrier if individual wants – it is possible to install his/her personal state registration information into his/her smartphone sim.

As for legal entities, they already have started using digital signatures while ago. For example, for submission of online tax reports or when participating in online government procurement biddings.

Basics of Tax Reporting in Mongolia

Pursuant to Article 43 of the General Taxation Law taxpayers are obliged to independently determine their taxable income and tax deductions payable in accordance with the law based on relevant documents, reflect them in their tax reports and pay either in cash and non-cash forms.

Timeframe for submission of tax reports and payment of taxes are determined by the laws of the particular tax type, and deadline for submission of tax reports and payment of taxes are usually the same. Lets have a look at timeframes for submission of tax reports and payment of taxes commonly paid by legal entities (companies) and individuals.

Corporate income tax

A taxpayer must pay the taxes due in advance by the 25th of each month, and submit the quarterly tax reports by the 20th of the first month of the following quarter and annual tax report by February 10th of the following year to corresponding tax authority and finalize tax year-end calculations.

Personal income tax

A tax withholder must pay the taxes deducted (withheld) from the taxpayer’s income to the relevant budget by the 10th of the following month and submit the quarterly reports of the withholding taxes by the 20th of the first month of the following quarter and annual report of the withholding taxes by February 15th of the following year with ascending sum to corresponding tax authority.

Value added tax

A tax withholder must pay the taxes imposed from sale of goods, rendering of works and services in accordance with the laws to consolidated account of state treasury by the 10th of the following month and submit the tax reports to corresponding tax authority in accordance with approved forms.

Capital city tax

A tax withholder must pay the taxes imposed from sale of goods and rendering of services by the 10th of the following month and submit the tax reports by the 20th of the first month of the following quarter to corresponding tax authority in accordance with approved forms.

Tax on automobiles and self moving vehicles

Individuals must pay annual tax on automobiles and self moving vehicles once a year to corresponding tax authority before June 1st of the same year. If an automobile or self moving vehicle has been imported after June 1st, taxes payable for the remainder of the year must be paid to corresponding tax authority within the same year.

In order to implement the law, on January 26th, 2015 by Resolution No. 28 of the Presidium of the Capital City Council of Citizens’ Representatives was approved “Regulation on re-implementation of vehicle registration and payment systems in the capital city”. Pursuant to this new regulation the timeframe for payment of taxes on automobiles and self moving vehicles in the capital city shall depend on the last digit number of the licence plate (state registration number) of the automobile or self moving vehicle. In other words, if your vehicle’s licence plate (state registration number) ends with 1 or 6 – the taxes must be paid before end of January, if it ends with 2 or 7 – before end of February, if it ends with 3 or 8 – before end of March, if it ends with 4 or 9 – before end of April, if it ends with 5 or 0 – before end of May.

Legal entities must pay annual tax on automobiles and self moving vehicles by the 25th of the last month of each quarter dividing annual tax into equal amounts and submit the tax report by February 15th of the following year to corresponding tax authority.

Land fee and tax on immovable property

Unless stated otherwise in the land possession or land use contracts, land fee payers must pay the land fee by the 25th of the first month of each quarter dividing the annual land fee into equal amounts; and may pay the next quarter installments in advance. The authority (or official) in charge of land fee matters (collection) must submit to the tax authority one copy of the land possession or land use contract of a citizen or legal entity and a copy of the land fee report produced at corresponding administrative level.

A taxpayer must calculate tax on immovable property based on the value of immovable property as of January 15th of each year. Legal entities that own immovable property must pay annual tax on immovable property by the 15th of the last month of each quarter dividing annual tax into equal amounts. Individuals (citizens of Mongolia, foreign citizens and stateless persons) that own immovable property must pay annual tax on immovable property once a year by February 15th of each year. A taxpayer must submit the tax reports of taxes on immovable property by February 10th of the following year to corresponding tax authority.

Pursuant to law if the deadline for submission of tax reports and payment of taxes coincides with weekends and/or public holidays, the tax reports shall be submitted, and taxes paid on the previous working day. Due to circumstances that this year’s Lunar New Year holidays fall on February 5, 6 and 7th, and that the Government of Mongolia has ruled to transfer the workday of February 8th to another day and make it a public holiday, tax authority has decided to extend the legal timeframe for submission of annual tax reports for 2018 for 5 business days, i.e. now taxpayers may submit their annual tax reports by February 15th.

Pursuant to Article 45 of the General Taxation Law taxpayers (tax withholders) are obliged to execute tax reports in accordance with instructions, forms and within timeframes specified by the law, and submit to corresponding tax authority. Taxpayers eligible for tax exemptions and returns in accordance with laws are not be relieved from duty to submit tax reports. Because the tax reports are the main documents to provide taxpayers with tax exemptions and returns.

Using Factoring as a Finance Tool

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. Factoring is commonly referred to as accounts-receivable financing, accounts receivable factoring, and sometimes invoice factoring.

Accounts-receivable financing is a type of asset-financing arrangement in which a company uses its receivables — outstanding invoices or money owed by customers — to receive financing. The company receives an amount that is equal to a reduced value of the receivables pledged. The receivables’ age largely impacts the amount of financing the company receives. Accounts receivables financing companies typically advance companies 70 to 90 percent of the value of their outstanding invoices. The factoring company collects the debts and pays the original company any remaining amount beyond the financing amount minus a factoring fee.

This type of asset-based financing allows companies to get instant access to working capital without jumping through the hoops or dealing with the long waits associated with getting a business loan (bank loans). While bank loans may be secured by different kinds of collateral, including plants and equipment, real estate, and/or the personal assets of the business owner, accounts-receivable financing is backed strictly by a pledge of the business’s assets associated with the accounts receivable to the finance company.

This type of financing helps companies free up capital that is stuck in unpaid debts. When a business leverages its accounts receivables to boost its cash flow, it also doesn’t have to worry about repayment schedules. Instead of focusing on trying to collect bills, it can focus on other core aspects of its business.

While this type of financing is commonly used in many countries, in Mongolia it is not quite popular. Although legal definition, grounds and regulations are provided for in relevant laws, not many financing companies provide this type of financing, nor the demand for it is so big either. But with today’s rapid development and progress in international business and trade it is an open business option to consider for companies.

Letter of Credit in Mongolia – a Trade Finance Tool

Foreign trade is an important part of the economic life of any country and for Mongolia it is an essential part of its economic life. In recent years foreign trade in Mongolia is expanding, offering consumers a wide variety of goods and services. Thereby traders, both importers and exporters, must carefully and mindfully choose from range of trade finance tools to help their transactions run smoothly.

Most popular and commonly used trade finance tool is a letter of credit. Working with an overseas buyer can be risky because you don’t really know who you’re working with. A buyer may be honest and have good intentions, but business troubles or political unrest can delay payment or put a buyer out of business. In addition, due to different laws, different time zones, and different languages there might occur certain difficulties. A letter of credit spells out the details so that everybody is on the same page. Instead of assuming that things will work a certain way, everybody agrees on the process up front.

A letter of credit is a document issued by a bank that guarantees payment. There are several types of letters of credit, and some of them may be defined by their purpose. Still they provide security when buying and selling. Importers and exporters regularly use letters of credit to protect themselves.

Commercial letter of credit is a standard letter of credit that is commonly used in international trade and may also be referred to as a documentary credit. This is a negotiable financial instrument from an importer’s (buyer’s) bank guaranteeing that payment to an exporter (seller) will be the correct amount and received on time subject to the exporter presenting compliant shipping documents (assuming those documents meet the requirements listed in the letter of credit).

To get a letter of credit, importers must contact a bank in their home country and apply for opening a letter of credit. In Mongolia most banks issue letters of credit. In turn sellers must trust that the bank issuing the letter of credit is legitimate and that the bank will pay as agreed. If sellers have any doubts, they can use a “confirmed” letter of credit, which means that another (presumably more trustworthy) bank will guarantee payment. Sellers typically get letters of credit confirmed by banks in their home country.

However, prior to contacting a bank, important to remember that buyer and seller must have mutual agreement that the payment will be done with a letter of credit and list all requirements to shipping documents in the contract.

Issues with Mongolian Competition Law

Our Mongolian lawyers have encountered an unusual number of inquiries regarding Mongolian competition and anti-monopoly issues in the past few months. The scenario below takes a looks a common situation found in Mongolian trade.

Let’s assume that multinational company A currently sells to several Mongolian counterparties (Supplier Customers) who have a product import permit. Under the terms of sale, title passes to the Mongolian counterparty before the product is imported on either the Russian or Chinese border.

Mongolian wholesale client (Company B) proposes a profit-sharing agreement whereby Company B will Purchase products from Company A for purposes of:

  • storing product in Company B’s facilities and reselling to the other Supplier Customers within Mongolia; and
  • selling to wholesale clients provided that they are not already existing customers of the Supplier Customers.

In this scenario Mongolian Competition Law does not apply to the company A.  The Mongolian Competition Law does not apply to business entities which are not registered in Mongolia and are operating outside of its borders. Since the proposed transaction contemplated by the agreement would have company A deliver the products to the purchaser outside of Mongolian territory, the provisions of the Competition Law would not be applicable.

In our view, Company A and B would not be forming a monopoly because the transaction is cross-border, and A is not a “business entity” within the meaning of the Competition Law.

Company B only occupies approximately 1% of the domestic market for sale and supply of certain products. Accordingly, since it does not occupy a “dominant position” in Mongolia’s market (defined as a party which sells or produces 1/3 or more of a certain type of goods), the prohibitions in Mongolia’s Competition Law with regard to monopolistic activities would not be relevant to its operations.

With regard entering into agreements and monopolies, the following activities are prohibited under the Mongolian Competition Law:

  • mutually agreeing to fix prices of products;
  • dividing markets by location, production, services, sales, name or type of products or consumers;
  • restricting the production, supply, sale, shipping, transportation and market accessibility of products, investment, technical and technological renovation;
  • participating in competitive tender or bid auction or activities procuring goods, works or services by state and local funds having in advance agreed on the price, other conditions and criteria of products;

In addition, the following agreements or entered between business entities shall be prohibited where they contradict the public interests or create circumstances restricting competition:

  •  refusing to establish economic relations without economic or technical justifications;
  • restricting sales to or purchase by third parties of products;
  • collectively refusing to enter into agreements or negotiations which have significance for competition;
  • preventing competitors from joining organizations with the purpose of running their businesses profitably;

Mongolian business entities are prohibited to enter into agreements with effects as described above.

Liability of a Mongolian Company for Non-Compliance

We have looked at the requirement for a Mongolian company to have an internal control body and discussed a little about the forms such body may take. Our readers may be interested to note that while having such body is mandatory for a Mongolian company under law, there isn’t actually any penalty for a company that does not establish an internal control process.

What this means is that while there is no penalty for not having the review body, the Company will be considered liable under Mongolian law for any compliance violation or audit irregularity caused by the actions of the company’s officers or staff, which result in legal penalties or civil damages. By making the company responsible to maintain the internal control and compliance committee, the law makes the company responsible for any failure of compliance. Such liability will be in effect even where the non-compliance was accidental or was caused by the unapproved actions of a single staff member. The theory is that these things would not happen if the company had established and followed an appropriate internal control process.

Mongolian companies should therefore take the legal requirement to establish a Internal Control and Audit Committee seriously. The internal control system will allow company management to better ensure proper operations of the company and identify and stop potentially non-compliant behavior before it results in a larger problem, potentially carrying legal penalty. Since the law makes the company liable for non-compliance in any case, it makes sense for the company to establish internal procedures to reduce this risk.

Compliance Options for Your Mongolian Company

We talked yesterday about the Internal Control or Auditing Committee every Mongolian company should have. The Committee should operate by a set of rules, which the company approves and implements for itself. Government regulations stipulate that each, “Entity or organization must have its own internal control and auditing procedure in compliance with this regulation and consistence with its activities.”

To comply with this rule, the company must establish the Internal Control or Audit Committee, or for larger companies a complete department devoted to compliance may be used. Smaller companies have the option to appoint a single company officer to be responsible for compliance. This individual office, committee or department will have responsibly to conduct internal compliance reviews and audits.