Brand name infringement and investor confidence

Brand name infringement and investor confidence

Frans H. Winarta, Member, National Law Commission (KHN),
Jakarta

The Jakarta Post and Asian Wall Street Journal have recently
highlighted intellectual property issues in Indonesia in articles
by Tom Wright entitled respectively: Supreme Court's Davidoff
ruling offers hope to foreign brands and Indonesia ruling offers
hope to foreign brands.

The local market here has been flooded by products such as
Intel jeans, Sony underwear and Rolex cigarettes. Indonesia has
indeed long been known as one of the worst offenders of
intellectual property rights in the Asian region by the high-
jacking of well-known brand names. Many Indonesian companies have
used well-known logos and trademarks in order to sell a variety
of low-class products in large volumes, without the need to worry
about being taken to court.

However, a recent Supreme Court judgment has given hope and
some optimism that the Indonesian government will be able to
overcome the problem of high-jacking well-known brands -- a
practice that naturally has negative consequences for investor
confidence.

The pirating of well-known names reduces investor interest in
Indonesia because we are considered not serious in trying to
protect the producers of well-known brand names. Legal
uncertainty appears to reign without adequate legal protection.

Imperial Tobacco Group PLC, for instance, is postponing the
construction of a US$ 70 million factory pending the result of an
appeal by PT Sumatera Tobacco Trading against a judgment in favor
of the former. Imperial Tobacco will have to wait for the outcome
of this Supreme Court appeal before it can decide whether it is
safe to invest or not.

Actually, in the lead-up to next year's elections, the parties
should be campaigning on rule of law issues that will naturally
attract voters' interest. Unfortunately, some of the biggest and
most influential parties are not doing this and it is not clear
why.

A party that is prepared to place rule of law, law enforcement
and legal certainty issues at the forefront of their political
platform will surely attract public sympathy and this will
represent valuable long term political capital.

What actually happens is that law enforcement gets politicized
in election campaigns, but without any political will to truly
fight corruption in a consistent manner. In the end, a campaign
that lacks seriousness will be sure to fail as its true colors
will soon become known to voters. Voters will realize that the
so-called campaign to eradicate corruption is only designed to
last as long as the day of the election.

What the pirates of well-known names are actually doing is
getting a free ride out of the fame of brands that have sometimes
been registered for more than 100 years in other countries and
promoted over many years through costly advertising campaigns.
Those pirating the brands then register them for a different type
or class of product.

The producers of the well-known brands will, of course, object
to the misuse and theft of their product. Consumers can not
differentiate between products produced by the real company
holding the brand name nor by the copyright infringer. Those
pirating well-known consumer brands are making sales by getting a
free ride atop famous registered trademarks without the long,
costly promotion campaigns needed to achieve brand recognition.

In other words, they are stealing from the outcomes of hard-
work and creativity and the long-term investments of others.

Another way of getting a free ride on well-known brands is by
registering the logo or a picture of the brand as copyright and
then, once registration is completed, trading in a particular
product by misusing the famous and well-recognized brand.

This is because the law on intellectual property rights
requires a trademark to be registered at the Directorate-General
for Intellectual Property, whereas this is not compulsory for
copyright on artwork, books, photography, music and the like.

These infringements of intellectual property have already
created legal uncertainty and a decline in investor interest in
Indonesia. It is for this reason that firm action must be taken
and court decisions rendered. Only through legal certainty can we
encourage and promote investor confidence or the desire to once
again invest in Indonesia.