Supreme Court's Davidoff ruling offers hope to foreign brands

Supreme Court's Davidoff ruling offers hope to foreign brands

Tom Wright, Dow Jones, Jakarta

Intel jeans. Sony underwear. Rolex cigarettes.

Malls and markets across Indonesia are full of well-known
international brand names - but often they are affixed to
products the foreign companies don't even make.

While trademark piracy is widespread in Asia, Indonesia is
viewed by the U.S. and other governments as one of the worst
offenders, because of a weak legal system that protects violators
of intellectual-property rights. Until now, some Indonesian
companies have been able to use logos of foreign brands to help
sell a wide range of low-quality goods with little fear of legal
action, lawyers say.

However, a recent decision by Indonesia's Supreme Court has
given foreign companies reason for cautious optimism that the
country is moving to tackle the problem. In June, the court ruled
in favor of Britain's Imperial Tobacco Group PLC, which has been
battling to stop PT Sumatra Tobacco Trading, an Indonesian
cigarette maker, from using the Davidoff brand name.

Sumatra Tobacco is seeking to get the court decision reviewed,
so Davidoff still hasn't begun building a planned US$70 million
Indonesian factory that it has put on hold until it feels
confident its legal problems in the country are completely over.

Still, the Supreme Court ruling has cheered others with
similar problems involving the use and abuse of their brand
names. Indonesian courts aren't bound by precedent, so judges in
other trademark cases could disregard the ruling. But it "could
influence later decisions on similar cases," said Gunawan
Suryomurcito, a lawyer representing Imperial Tobacco and also
U.S. microprocessor maker Intel Corp., which is currently
appealing to Indonesia's Supreme Court to stop Intel Garment, of
Jakarta, from using the U.S. company's trademark to sell jeans.

The Davidoff decision also suggests the government of
President Megawati Soekarnoputri, who faces elections next year,
is keen to show foreign investors it is serious about defending
their intellectual-property rights, lawyers and businessmen say.
Trademark violations are among a long list of disincentives
discouraging foreign companies from making investments Indonesia
needs to combat high unemployment.

The Supreme Court ruling "sent the message to foreign
investors that their legal and intellectual-property rights would
be upheld," said Gary Andrews, president of the British Chamber
of Commerce in Jakarta.

Imperial Tobacco's German unit, Reemtsma Cigarettenfabriken,
began its legal action last year as it was laying plans for an
Indonesia factory to expand sales of Davidoff cigarettes across
Southeast Asia. Reemtsma held back from beginning the proposed
investment with PT Gudang Garam, Indonesia's largest cigarette
maker, because of Sumatra Tobacco's claim to rights to the
Davidoff brand, which it refused to give up.

During the past 20 years, Sumatra Tobacco has registered with
Indonesia's trademark office the rights to hundreds of brand
names, including those of Swiss watchmaker Montres Rolex SA,
French fashion house Chanel SA and Remy Martin, which is owned by
Remy-Cointreau SA.

Sumatra Tobacco not only makes products associated with those
brands, but also often uses the names to help market other goods,
lawyers say. These include Rolex cigarettes, which it sells in
Indonesia and has exported to China, says George Widjojo, an
intellectual-property lawyer who failed during the 1990s to stop
Sumatra Tobacco from using the Swiss company's brand name.

Other Indonesian companies also have been busy registering
trademarks. That is why Intel Corp., the world's largest maker of
microprocessors, has been trying to stop Intel Garment from
making jeans that bear the U.S. company's "dropped-e" logo. Sony
undergarments - a product Japanese electronics maker Sony Corp.
has fought to block - are for sale in many Indonesian shopping
malls.

A lower court threw out Intel Corp.'s case in 2000 on the
grounds the chip maker is only known in the field of technology,
and not jeans, a decision lawyers say ignores international
standards. Intel Corp. lost a similar case three years ago
against an Indonesian company using its name to market household
electronic goods, but hasn't appealed. Prada SA, also represented
by Suryomurcito, is seeking reversal of a lower-court decision
allowing an Indonesian company to sell goods under the Prada name
on the island of Bali.

At the least, the Davidoff ruling was a blow to Sumatra
Tobacco, owned by Indonesian businessman Sendi Bingei. Its
factory in Pematang Siantar, an industrial town, is one of the
largest employers in northern Sumatra. Bingei has filed an appeal
against the Supreme Court's ruling, which is still pending, his
lawyers say. Repeated attempts to contact Sumatra Tobacco's
directors were unsuccessful.

The long journey Imperial Group's Reemtsma has taken through
Indonesia's courts shows that legal redress for other foreign
companies could take time, lawyers say. In the past several
years, Reemtsma has been trying to win back global rights to sell
cigarettes under the Davidoff name.

In the late 1970s, a Brazilian businessman registered the
Davidoff trademark in 37 countries and later sold the rights.
Reemtsma has been able to recover its right to the Davidoff
trademark everywhere except Indonesia, where a commercial court
earlier this year ruled Davidoff wasn't a well-known brand when
Sumatra Tobacco bought the rights - therefore giving the
Indonesian company prior claim to the name.

The Supreme Court reversed that decision in its recent ruling,
accepting the argument of the New York-based International
Trademark Association. The trade group had written to the court,
maintaining that a trademark with reputation "must be protected
regardless of the actual use of this mark in Indonesia."