Recording licenses

It is not yet possible to record licenses at the Directorate-General of Intellectual Property.  Until it is, license agreements will not be enforceable against third parties.

The Plaintiff’s claim in Lie Reza H. v. PT. Djarum (30/PDT.SUS/2013/PN.Niaga Jkt. Pst.) failed because the relevant license agreement had not been recorded, and as licensee the Plaintiff had no standing to bring an action against a third party.  Particularly, the Commercial Court decision noted that three procedural requirements must be met before a license agreement can be effective against third parties:

• submission of a request for recordation to the Directorate-General of Intellectual Property;
• proof of payment of official fees related to the request for recordation; and
• evidence of registration of the license by the Directorate-General of Intellectual Property.

The Commercial Court specifically addressed the lack of implementing regulations governing license recordals.  The Court said that absence of implementing regulations (and therefore the inability of parties to record license agreements) was not sufficient reason for the Court to accept a request for recordation on its own (i.e. no proof of payment or evidence of registration).

We commented on enforcing licensed IP rights here.

Examination guidelines

The inability to access to examination guidelines in Indonesia results in unnecessary burdens on rights holders.

The Directorate-General of Intellectual Property (“DGIP”) has internal examination guidelines.  Examiners refer to guidelines when discussing cases, and even in written submissions in formal proceedings (for example, Commercial Court proceedings).  However, these guidelines are not publicly accessible.  This results in less transparency and predictability in the examination process, and a compromised position in disputes with the DGIP (the DGIP can refer to their guidelines in support of a submission, and the right-holder is unable to review the accuracy of the reference).

This practice of restricting access to examination guidelines is in contrast with international practice.  Established IP offices publish their examination guidelines, for example:

• the USPTO
• IP Australia
• the JPO

We understand that the DGIP does intend to publish examination guidelines, but that this is a work in progress and may take some time.  In the interests of efficiency and fairness, the sooner the better.

DGIP examination as evidence of satisfaction of pre-resquisites for registration

Examination by the Directorate-General of Intellectual Property (i.e. registration) should not be cited as evidence of satisfaction of pre-resquisites for registration.

There is a recurring argument posed by Defendants less familiar with intellectual property laws, that because a patent/trademark/industrial design has passed substantive examination at the Directorate-General of Intellectual Property, the Court should accept that pre-resquisites for registration have been fulfilled.  For example, a patented invention is novel (because it passed examination).  Or a trademark has been filed in good faith (because it passed examination).

It was refreshing to see the Supreme Court directly address this issue in PT. Subur Semesta & Tjia Tek Ijoe v. PT. Stella Satindo (108 PK/Pdt.Sus.HKI/2013).  At page 19 of the decision in these patent cancellation proceedings, the Court says:

The submission in Reconsideration Appeal that “the simple patent has been properly processed” does not negate the need for examination of evidence such as that performed by the (Commercial) Court where the Plaintiff succeeded in proving that the simple patent subject of these proceedings is not novel and has become public domain, such that the Judex Facti (Commercial Court) and Judex Juris (Supreme Court at cassation level) accepting the Claim in entirety was appropriate.

There is no doctrine of precedent in Indonesia, so at best the decision will be persuasive in future proceedings where the same argument is encountered.

Vexatious litigation

As caseloads at the Commercial Court increase and resources are stretched, the legislature will need to introduce deterrents against vexatious litigation in order to maintain acceptable standards of service.

It is not unusual to see vexatious claims heard in the Commercial Court.  In PT. Tiga Reksa Perdana Indonesia v. PT. Indoasia Thrivetama and Djohan Kohar (32/Desain Industri/2013/PN.Niaga Jkt. Pst.), the Plaintiff did not produce any convincing evidence to support its claim for cancellation of the defendants’ registered design. Further, in their Defence, the Defendants’ described the complicated history of the dispute between the parties, including that the Plaintiff had referred to the design cancellation Claim in order to suspend a pending criminal action (police raid).  If the Plaintiff did file its Claim for the sole purpose of disrupting the criminal action, it did not receive any appreciable sanction for wasting the Commercial Court’s time.

Civil procedure rules provide no real disincentive against filing vexatious litigation in Indonesia, as there is no costs regime (see our post on costs in IP litigation here). It is no wonder then that we see vexatious claims filed by litigants where it is in their commercial interests to do so (e.g. to disrupt a raid, or where estimated profit over the six month period it could take to hear first-instance proceedings will exceed the costs of proceedings).  Civil procedure reforms could curb this trend and improve the effectiveness of the judiciary.

Compulsory use of Bahasa Indonesia

In one of the most significant cases of 2013, a West Jakarta District Court decided that Bahasa Indonesia must be used in any contract involving an Indonesian party.

In PT Bangun Karya Pratama Lestari v. Nine AM Ltd. (451/Pdt.G/2012/PN.Jkt Bar.), an agreement between the parties was declared invalid because it was drafted in English only.  The Court referred to article 1320 of the Civil Code, which requires that contracts not be in breach of prevailing laws.  The Court then noted that the contract was in breach of article 31 of Law on the National Flag, Language and Coat of Arms, and National Anthem (Law No. 24 of 2009), which requires that Bahasa Indonesia be used in any contract involving Indonesian government, entities and individuals.

Nine AM Ltd. filed an appeal against the West Jakarta District Court’s decision on 14 October 2013.  The appeal proceedings will be followed with keen interest.  Regardless of the outcome, however, it is advisable to adopt a conservative approach - the Law on the National Flag, Language and Coat of Arms, and National Anthem has been in force since 9 July 2009, and any contracts entered into on or after this date should be drafted in Bahasa Indonesia.  Parties will often prefer to draft a bilingual agreement and nominate the Bahasa Indonesia provisions as the operative clauses.

Landlord’s liability - a missed opportunity

The Ministry of Trade has missed an opportunity to impose landlord’s liability for infringement of intellectual property rights on owners of shopping centres.

Regulation on Guidelines for Establishing and Developing Traditional Markets, Shopping Centers, and Modern Stores (No. 70/M-DAG/PER/12/2013) was passed on 12 December 2013 and will come into force on 13 May 2014.  It governs licensing for traditional markets, shopping centres, and modern stores.

Formulation of this regulation was an excellent opportunity to introduce specific liability for landlords that allow infringing activity, for example:

• where a shopping centre owner has been given notice of infringement of registered intellectual property rights (i.e. warning letter); and
• has not taken steps to address the acts of infringement within a set timeframe.

Sanctions could have included fines and/or revocation of business licenses.

Laws imposing liability on landlords would be an invaluable enforcement tool, especially in Indonesia where counterfeiting activity is widespread.

2014

As the year begins in earnest, we’ve been gathered some toughest on what’s in store for the IP community in 2014.

We’re likely to see some new IP legislation passed this year.  According to articles 16 and 17 of Law No. 12 of 2011 on the Establishment of Laws and Regulations, the House of Representatives must include proposed new laws in in the National Legislative Program (Program Legislasi Nasional).  A review of the 66 laws listed in the 2014 National Legislation Program (see here) reveals that an amendment to the existing Copyright Law (Law No. 19 of 2002 on Copyright) has been included.  House elections in April and the Presidential election in July will likely cause significant disruption, but with some luck we may see a revised Copyright Law passed.  Unfortunately there is no mention of any other IP legislation.

Corruption continues to be a serious concern.  Reports that the KPK (Corruption Eradication Commission) has succeeded in changing attitudes towards corruption (see here) are encouraging, but there’s still a long way to go.  Transparency International’s Corruption Perceptions Index 2013 (see here) has Indonesia ranked 114th of 177 assessed countries.  We can expect increasing levels of action from the KPK in 2014 as it continues to tackle this crippling problem.  Tailoring IP strategies to avoid situations where corrupt payments might be required, continues to be the best way forward.

It will be an interesting year for the tobacco industry, as IP strategies are adjusted to accommodate new regulations on graphic warnings on cigarettes packets (see here) and restrictions on the use of certain descriptors (see our post here).

For IP professionals, we have another round of PERADI (bar) exams coming up in February, and another IP Consultant’s course later in the year.

It’s great to be back in the office again with a full staff, after the year-end break.  Here's to a successful 2014!