Indonesia has long been a difficult place to maintain intellectual property rights. A recent overhaul of IPR laws may contribute to better understanding and effective enforcement, but the real key is the education of stakeholders, writes George W Russell

The airport on the Indonesian tourist island of Lombok, just east of Bali, is largely funded by the national government in Jakarta and run by the island’s provincial government in Mataram. So why, many intellectual property rights (IPR) supporters might ask, is there a flagrant violation in the terminal building?

CFC (California Fried Chicken), with its red-and-white décor and echoes of a certain better known fried chicken franchise based in the US, has been operating unhindered – and amid great popularity – in Lombok International Airport for years. Such blatant disregard for IPR is, unfortunately, a common characteristic of the archipelago. “There are two challenges in dealing with IP protection in Indonesia,” says Nadia Ambadar, director of strategy and business development at Am Badar & Partners, a Jakarta-based IP law firm. “They are the lack of public awareness of IPR, and the lack of law enforcement of IP infringements.”Indonesia’s vast geography – its 17,000-plus islands extend 5,000 kilometres east to west and 3,000 km north to south – and diversity – its 240 million people speak more than 300 languages – are obstacles to cost-effective IP enforcement. “IP owners have difficulty monitoring infringements, especially in small cities and rural areas,” says Zoraida Syarfuan, IP practice director at Assegaf Hamzah & Partners in Jakarta.

IP violation cases in Indonesia are more far-reaching than CFC’s fried chicken. A slew of fake pharmaceuticals throughout 2016 endangered not just brand reputations but consumer health. Diana Kusumasari, managing associate at Budidjaja & Associates, suggests that in the two years to 30 June 2016, the financial cost of IP infringements to the economy was up to 6.5 trillion rupiah (about US$487 million).

Law firms cite a multitude of reasons for Indonesia’s low IP protection performance: lack of public awareness, poor co-ordination of agencies, and corruption. Red tape is another issue. “Bureaucracy and unclear provisions are the two main challenges facing IP rights protection in Indonesia,” says Tilleke & Gibbins partner Somboon Earterasarun, director of the Thai firm’s Jakarta office.

Somboon Earterasarun, Director, Tilleke & Gibbins

The IP owner or the licensee must file the infringement report, Syarfuan points out. “This means that the legal enforcer does not have the authority to conduct any raid and/or to seize any alleged infringing goods without the consent of the IP owner,” she says.

Infringement proceedings must be instituted at a local level. “Even when the IP owner files an official report, the local police need to communicate with the civilian IP agency to further investigate,” syarfuan adds. “The long and ineffective legal process brings disadvantages to the IP owner, since efficiency, immediate action and secrecy are the keys to successful IPR enforcement.”

Statutory evolution

The good news is that Indonesia is steadily, if slowly, bringing its IP regime up to international standards, and an informed and active legal community is there to counter infringers. “In a first-to-file jurisdiction like Indonesia, it is vital for brand owners to proactively file, renew and protect their IP rights,” says Andrew Diamond, Foreign IP consultant at Januar Jahja & Partners in Jakarta.

Andrew Diamond, Foreign IP consultant, Januar Jahja & Partners

Last year, two flagship pieces of IP legislation were updated. Law No. 13 of 2016 on patents disallows second use or second medical use claims, expands the scope of simple patents and compulsory licences, and makes provision for post-grant opposition and payment of patent annuities. The law also includes certain exemptions from patent infringement, according to a client note by Adolf Panggabean (Jakarta) and Jonathan Loh (Singapore) of Spruson & Ferguson. They include “importation of a pharmaceutical product that is patented in Indonesia, and the product is legally marketed in another country without the permission of the patent owner”.

Other new developments in patent law are measures to receive interim injunctions. A “request letter for interlocutory injunctions” must be submitted to the commercial court. “A cash or bank guarantee has to be submitted in the amount equal to the value of goods,” says Citra Citrawinda, Managing Partner of Cita Citrawinda Priapantja & Associates in Jakarta.

Law No. 20 of 2016 on trademarks and geographical indications was also passed. “Indonesia is now protecting non-traditional trademarks … limited to: sound, three-dimensional and hologram,” observes Insan Budi Maulana, managing partner of Maulana & Partners Law Firm, in a recent update.

The updates follow a revised copyright statute, Law No. 28 of 2014, and a part of a regular revision process. Some lawyers are unimpressed, however. “The new laws have not yet improved Indonesia’s performance in several global IP and innovation indices,” says Lia Alizia, a partner with Makarim and Taira S in Jakarta.

Liz Alizia, Partner, Makarim and Taira S

Furthermore, a sluggish civil service body, the Directorate-General of Intellectual Property, administers the laws. “Challenges within the IP office can include a non-transparent bureaucracy, inefficient and unprofessional administration, unreliable online information and various degrees of corruption,” says Arno Rizaldi Setiawan, a partner at Kusnandar & Co, which acted for Time Warner in an infringement action against a local magazine, and for the Oberoi Group against infringers in Bali.

Indonesia’s interpretation of “well-known marks” remains fully uncertain, lawyers say. Inter IKEA, the Dutch franchise-issuing subsidiary of IKEA, the Swedish furniture giant, lost another trademark case last year, although it did not lose rights to the IKEA trademark altogether, as widely reported. “The case at hand only relates to a small number of registrations,” points out Severin de Wit, managing partner of IPEG (Intellectual Property Expert Group) Consultancy in The Hague.

Am Badar & Partners acted for ex-Beatle Ringo Starr in a successful cancellation case where an Indonesian infringer tried to use the “Ringgo Star” brand. However in 2016, the Supreme Court dismissed a complaint by French clothier Pierre Cardin against a local businessman selling apparel labelled “Pierre Cardin product by PT Gudang Rejeki”.

Counterfeit clothing is a huge issue, especially in the city of Bandung in West Java, the country’s fashion capital, 155km east of Jakarta. “The usual reason for outlets selling clothing and apparel at very cheap prices is that they are selling rejected goods, but often these goods are in fact counterfeit products,” says Somboon at Tilleke & Gibbins.

“We represented a leading clothing and apparel retailer in identifying counterfeit products and collecting evidence and reaching out to outlets in Bandung, pointing out that they are infringing our client’s trademark rights,” says Somboon. “Through our efforts, these outlets agreed to take down counterfeit products on display and destroy them.”

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Early signs are encouraging that the increasing use of electronic filings will help speed up the prosecution and renewal process. “However, the pre-existing backlog is substantial and it is still too early to tell if the early gains under the new trademark law will continue or be enough to make any significant dent,” says Prudence Jahja, a partner at Januar Jahja & Partners.

Prudence Jahja, Partner, Januar Jahja & Partners

In the meantime, Indonesian IP law firms, and in-house IP teams, expect a busy year ahead. One top-of-mind issue will be article 74 of the new trademark law (equivalent to article 61 of the old one) on the time limit on marks, i.e., cancellations for non-use. That provision tripped up IKEA, which lost its right upon its trademark in class 21 on the grounds of non-use for more than three consecutive years since its registration. “In Indonesia, owning a trademark and actually utilizing them in the market are separate matters,” says Kusumasari at Budijaja.

“Under both the old and new Indonesian trademark laws, registered marks that are not used are vulnerable to non-use cancellation,” says Jahja at Jauar Jahja. “However, the new law is not as strict when it comes to the use requirement because previously the use in trade had to almost exactly match the mark as registered, and even small differences in font, colour or size could be significant enough to create vulnerabilities.”

Lawyers might be relieved that Indonesia is finally seeing the big picture about IP law, rather than being bogged down in technical details. It remains to be seen if that will apply to the country’s IPR regime in general.