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.