Indonesia and IPR developments, a new dimension

Following the conclusion of the TRIPS Agreement, much has been written on the potential costs and benefits of stronger Intellectual Property Rights (IPRs) protection in terms of growth and technology transfer, particularly for developing countries. In a 2006 UNIDO[1] study, new evidence was provided linking protection of IPRs to economic growth, innovation and technology diffusion. Results suggest that while stronger IPR protection can ultimately reap rewards in terms of greater domestic innovation and increased technology diffusion in developing countries with sufficient capacity to innovate, it has little impact on innovation and diffusion in those developing countries without such capacity and may impose additional costs. There is a considerable incentive, therefore, for countries at different stages of development to use the flexibilities in the TRIPS Agreement to maximize its net benefits for their development. Indonesia is one of those countries that has decided to improve it IPRs so as to bolster its trade performance.

Indonesia a member of WTO and WIPO, and it is party to the main WIPO treaties, including the Berne (re-entering in 1997) and Paris Convention, the PCT, the Hague Agreement, the WIPO Performances and Phonograms Treaty (WPPT), the WIPO Copyright Treaty (WCT) and the Trademark Law Treaty. Indonesian legislation was substantially revised in recent years to bring it in line with regional and international IPR standards. In 2000, laws concerning the protection of new plant varieties (law no. 29), trade secrets (law no. 30), industrial designs (law no. 31), and layout designs of integrated circuits (law no. 32) were enacted and promulgated. In 2001, new laws on trademarks (law no. 15) and patents (law no. 14) were enacted. In 2002, the new copyright law (law no. 19) was issued. With support from a development project called ECAP II, in 2005-2007, Indonesia’s legal IP framework was further enhanced with a new customs act and a regulation for a patent attorney profession. An implementing regulation of the law on trademark introducing a sui generis Geographical Indications protection and registration was also passed. In addition, Indonesia started to work on a legislation to protect genetic resources, traditional knowledge and expression of folklore. The Indonesian Government is currently reviewing all its IP laws, in consultation with all stakeholders. “Explanatory memoranda” specify provisions in the legislation and play an important role in Indonesia, as they may be used by the court to clarify issues related to the legal language and to integrate details which are in missing in the legislation.

General IP climate

EU-Indonesia trade relations continue to flourish with EU being Indonesia’s main trading partner. However the registration protection and enforcement of IPRs continue to be an area of concern for European investors particularly in the high-technology sector. The obligation to develop adequate IPR protection strategies is not only essential for the long-term integration of Indonesia into the global trading system but also in decreasing investor concerns about IPR violations. Indonesia has passed laws that should improve protection of IP but they are in many cases not effectively enforced, piracy levels in Indonesia remain among the highest in the world. Moreover, uncertainty in the outcome of court proceedings together with corruption have been identified as the main IPR related problems that foreign investors face. In addition, the implementation of certain TRIPS requirements does not yet appear to be complete, particularly in relation to the lack of legal protection of confidential information submitted by pharmaceutical companies to obtain marketing approval for drugs. (Source: EuroCham Indonesia, Position Paper 2011)

On the good news: the passage of a new copyright law in July 2002 and accompanying optical disc regulations in 2004 greatly strengthened Indonesia’s intellectual property rights (IPR) regime. In March 2006, President Yudhoyono issued a decree establishing a National Task Force for IPR Violation Prevention. The IPR Task Force was intended to formulate national policy to prevent IPR violations and determine additional resources needed for prevention, as well as to help educate the public through various activities and improve bilateral, regional, and multilateral cooperation to prevent IPR violations. It has yet to fully realize these aims. In 2007, Indonesia was removed from the U.S. Trade Representative’s “Priority Watch” list and placed on the “Watch” list. However, Indonesia was raised back to the Priority Watch List in 2009 due to an overall deterioration of the climate for IPR protection and enforcement and some concerns over market access barriers for IP products. (Source: US Department of State, Background Note, June 2011)

A 2010 study by International Data Corporation which was published in May 2011 revealed that around 87 percent of software installed on personal computers throughout Indonesia is without proper license or pirated. From the results of this study, Indonesia was ranked seventh out of 32 countries surveyed that often use illegally obtained software. (Source: Jakarta Updates, Sept. 2011)

Recent improvements of the IPR regime in Indonesia

Following its 1994 ratification of the World Trade Organization (WTO) Agreement, Indonesia has taken steps to develop and issue IP laws, create a better framework for IP protection and provide a better environment for the development of IP. Amendments to the IP laws drafted and circulated by DGIP for comment in recent years continue. Some positive actions include:

  • The establishment of a national task force for IPR infringement prevention that reports directly to the President of Indonesia,
  • the “Cyberlaw” containing copyright provisions
  • the issuing of the Government Regulation on Geographical Indications which will benefit the protection of Indonesian originated products
  • the passing of the implementing regulation to enable recordal of patent assignments, thus removing the uncertainty as to who owns patents that have been transferred

IPRs are an essential part for any party to invest in Indonesia. Recognition and enforcement of IPR rights will strengthen the FDI status of Indonesia[2]. Indonesia has a number of trade barriers that have prevented stronger commercial ties between large economies like EU and the US. Those barriers include e.g. import licensing requirements and poor protection of intellectual property rights.

Globalization suggests that emerging countries have strong and growing interests in attracting trade, FDI, and technological expertise, although such encouragements must be tempered by accompanying programs to build local skills and ensure that the benefits of competition actually arise.  In this context, intellectual property rights are an important element in a broader policy package that governments in developing economies should design with a view toward maximizing the benefits of expanded market access and promoting dynamic competition in which local firms take part meaningfully.

IPR improvement can be reached on various levels:

  1. specific IPR legislative initiatives to improve IPR certainty and enforcement
  2. increase awareness of the importance and relevance of IP[3]
  3. support in creating uniform judiciary approaches to IP legal issues
  4. coordinating with R&D initiatives to align IP with those initiatives
  5. creation of a effective border IP protection system in line with existing EU, US and Asian regimes

A new EU-Indonesia cooperation project will soon be launched with financial support of the EU, with the aim to support and assist Indonesia in improving its IPR status thus achieving a better FDI and becoming an even more attractive place to invest.

[1] United Nations Industrial Development Organization

[2] Indonesia’s foreign direct investment hit a record US$20 billion (S$25 billion) in 2011 with Singapore, Japan and the United States (US) among the South-east Asian nation’s top investors. This is a 18.4 per cent hike over 2010 as foreign money flowed into the country’s fast-growing economy. Moody’s Investors Service restored Indonesia’s investment grade sovereign credit rating, weeks after a similar move by rival ratings agency Fitch.  Indonesia, Moody’s said, had earned the bump following steps to bring down its debt-to-gross domestic product ratio as well as having a ‘well-managed financial system.’ Indonesia’s total investment in 2011, from both domestic and foreign sources, was US$27.6 billion, surpassing the government’s 240 trillion rupiah (S$3.3 billion) target. (Source Singapore Straight Times, Jan. 20, 2012)

[3] WIPP publication  No. 988, “The Intellectual Property-Conscious Nation: Mapping the Path from Developing to Developed”

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