In a market economy that encourages free and fair competition, everyone should have an opportunity to participate and succeed. Laws meant to regulate business should promote performance competition and combat economic exploitation.

One downside of a competitive economy is the lack of a permanent ownership position: One may lose tomorrow that what she or he gained today. However, despite this insecurity, competitive economies give ordinary people the best chance for economic success, the most thrilling results of which are innovation, creativity, and an entrepreneurial spirit. Indeed, competition is far better than the alternatives we’ve seen, such as feudal, state-controlled, or political party cartel systems, in which only a few control the wealth of a country while the majority struggle with low wages and less opportunity.

And yet, 26 years since the collapse of the socialist system, the notion that the state should encourage free and fair competition is not very clear to many Mongolians. Luckily there is such a mechanism for the promotion of competition in the form of the current Trademark Law of Mongolia.

Trademarks give individuals and businesses the opportunity to own a product or service name by obtaining a state registration. With a registration, one gains the position of excluding others from using the same or similar name for the same or similar product or service. In Europe, for example, this opportunity is not given out for free without obligation; the trademark owner should be an active participant in the economy by producing and selling goods or services under that trademark. If the trademark owner fails to produce or sell goods or services using the registered trademark within a period of time set by law (normally five years), she or he loses the ownership of the trademark. This then gives other businesses an opportunity to use the same or similar name (referred to as “non-use cancellation”). Essentially, with trademarks, it’s “use it or lose it”.

But in Mongolia the Trademark Law does not provide a non-use cancellation requirement. Additionally, the trademark registration, examination, and renewal fees are extremely low. One could say that the Mongolian state is offering the trademark registration services almost for free. Consequently, there is an increasing tendency for enterprises and individuals to register trademarks in Mongolia without a serious interest in actually participating in the Mongolian economy through the production and/or selling of goods or services using their trademark.

Therefore, as a result of the current trademark registration system, enterprises might find out that their product or service names are already registered to someone else. In such cases, these enterprises might be forced to negotiate with the owner of the Mongolian trademark in order to obtain the registration, often by ownership transfer or consent. Start-up companies might end up spending most of their valuable time in legal disputes with a trademark registration owner who does not do any business at all. The belief that trademark registration is a money-making opportunity seems to prevail.

It is, therefore, not surprising when one encounters a Mongolian trademark registration owner who insists on trademark licensing against payment of annual fees, even though she or he did not establish a product or service brand, nor attempt to introduce goods or services to the market. Mongolia would do well to increase its awareness of the actual purpose and benefit of trademark protection—that it encourages fair competition and legitimate contributions to the economy.

August 2018