Has the new President's 'shock therapy' tactics improved intellectual property rights?

Gunawan Suryomurcito Jakarta

During his election campaign last year, Indonesian President Susilo Bambang Yudhoyono promised to deliver a dose of 'shock therapy' to shake the country out of its pattern of corruption and legal ambiguity.

Investors are still looking for signs of another kind of shock therapy, particularly in the area of judicial reform.

Despite assurances made to foreign investors by President Susilo during the Infrastructure Summit held in Jakarta on Jan. 17 and Jan. 18 that their investments in the country were safe, many are waiting for signs that the government is taking serious steps to resolve two long-running issues: Legal uncertainty and rampant corruption.

During the summit, the government offered 91 infrastructure projects with a total value of US$22.5 billion. As the projects may well involve new and patented technologies involving intellectual property issues, investors are tending to be cautious before committing to new operations in the country.

Indonesia has been included on the priority watch list of the U.S. Trade Representative for four consecutive years for trademark violations.

Many foreign investors have had bad experiences with weak intellectual property protection in Indonesia. The battle over the Davidoff cigarette brand, which was successfully won on Supreme Court appeal last year after a questionable Commercial Court decision, prompted Swiss Ambassador to Indonesia Georges Martin to express his government's hopes that the Indonesian government would pay closer attention to the creation of a clean court system, judges and prosecutors.

Indonesia is in fact well equipped to provide adequate intellectual property protection, with an Intellectual Property Rights Law that has been revised several times, a Patent Law, and revised Trademark Laws. Nonetheless, reports of trademark violations committed by local companies without retribution have become all too commonplace.

Inordinate amounts of money, time, and effort have been spent by legitimate trademark owners on legal suits to protect their rights to use their own brands, or to cancel trademarks filed by local trademark pirates who have registered the trademarks at the Directorate General of Intellectual Property Rights.

A high-profile case occurred several years ago between U.S. food producer Nabisco Inc. and local company PT Perusahaan Dagang dan Industri Ceres (Ceres).

The source of the dispute was that Ceres produced and marketed biscuits under the Ritz brand, which had been a well-known Nabisco brand in the U.S. and several other countries since 1941.

However Ceres, which registered the brand in Indonesia in 1960, also considered itself the legal owner of the brand. In addition, the previous Trademark Law Number 21/1961 stated that the first party to register a trademark in Indonesia was the owner of the trademark.

Trademark Law Number 21/1961 was based on the principle of stelsel deklaratif, or "first to register", which means that whichever party acted fastest in registering a trademark, whether it was a well-known brand or not, would obtain the rights to the trademark. That is why Ceres won the trademark battle against Nabisco in 1996.

A more recent hot legal battle over a trademark took place over the use of the Ri Sheng trademark by Indonesian producer Halim Kho. Chinese company Zhongshan Rishen Electrical Product C. Ltd (ZREP) has possessed the exclusive rights to that particular trademark since 1997.

When ZREP tried to register its Ri Sheng trademark in August 2004 in Indonesia, it was surprised to discover that the Ri Sheng trademark had already been registered in September 2002 by Halim Kho.

The surprise quickly turned to anger, culminating in a lawsuit against both Halim Kho and the Director General of Intellectual Property Rights, demanding the revocation of the trademark registration. This case is still being decided in court.

The existing Trademark Law has experienced several revisions. Trademark Law Number 15/2001 is based on the principle of stelsel konstitutif with a special protection for well-known trademarks, which prohibits a person from registering a well-known trademark even for dissimilar goods.

Another trademark case that has reached the Supreme Court is that of the well-known tire brand Goodyear. U.S.-based tire producer The Goodyear Tire & Rubber Company (GTRC) has been in a tussle with local tire producer PT Banteng Pratama Rubber (BPR) for over a decade.

The disputed issue is that Banteng continues to produce bicycle tires using the Goodyear trademark even though its agreement with GTRC expired in 1993. Banteng even created its own brand "Goodyear-Luckystone" and uses the Goodyear winged foot logo on its products and letterhead.

After 10 years of written notices and attempted negotiations, Goodyear eventually brought its case to the Jakarta Commercial Court, which decided in August 2004 that GTRC was the legitimate owner of the Goodyear trademark in Indonesia and that Goodyear is a well-known trademark.

However, the court did not issue an injunction against Banteng to stop the production of bicycle tires and tubes with the Goodyear trademark, which is a violation of Trademark Law Number 15/2001 protecting well-known trademarks. Therefore Goodyear appealed to the Indonesian Supreme Court to instruct Banteng to stop using the Goodyear trademark without authorization. The final decision is expected at the end of January.

The government is currently preparing a Government Regulation on well-known trademarks in order to give the authority to the Directorate of Trademarks to reject any registration for a trademark that has similarities with a well-known trademark. There is a great need for the issuance of the government decree, as without it, the law on well-known trademarks is powerless.

However, the Chairman of the Intellectual Property Alumni Association (IIPAA), Insan Budi Maulana, says that the weakness in intellectual property protection in Indonesia was also due to the fact that few judges are intellectual property experts.

The seriousness of the Susilo government in improving the investment climate depends to a great degree on whether judges are given adequate intellectual property rights training and whether the legal system can be free of the accusations of payoffs in exchange for decisions.

The writer, an observer of legal issues particularly concerning intellectual property rights is a patent consultant from Suryomurcito & Co, an intellectual and industrial property attorneys office. ----------