(in million RP)
Source: B Pasaribu, ‘Industrial Policy and Competition Policy. Are they always conflicting?’, UNCTAD 1GE Meeting, Geneva, 7–9 July 2009.
The private sector is highly fragmented and consists mainly of businesses with less than 20 employees (99.85 per cent in 2005). This fragmented industrial structure is grossly inefficient, and reforms have sought to help small and medium sized enterprises (SMEs) grow.
B. IP Investment and Protection
Indonesia has a low level of R&D investment compared to other Asian countries and one-twentieth of the Organisation for Economic Co-operation and Development (OECD) average (Table 2 below).
The protection of IPRs in Indonesia is weak by international standards. Its IP protection was ranked 67 out of 134 countries, according to the Global Competitiveness Index 2009–10 (Table 3 below). This was the lowest of any South East Asian country (at 81). However, this was a significant improvement compared with 2008/09 rankings.
Table 2: R&D as % GDP
Source: GA Hu and GH Jefferson, ‘Economic Integration, Technologic Development and Public Policy in Asia’ (Asia Development Bank, 2007).
Table 3: Global Competitiveness Index, Asia 2009/10
Source: World Economic Forum, The Global Competitiveness Report 2009–10 (New York, World Economic Forum, 2010).
According to the International IP Watch List, IP infringement in Indonesia is significant particularly for CDs, DVDs, clothing and software (the highest estimated business losses, see Table 4 below). Furthermore, high unemployment (around 9.1 per cent in 2007) and low standard of living make piracy an attractive and profitable business.
Indonesia has been on the Office of the United States Trade Representative’s Special 301 Priority Watch List for violations of IPRs rights since 2001. The 2007 watch list claimed that Indonesia had improved its position. Nonetheless, the 2009 watch list states that Indonesia had ‘high copyright piracy levels, including involvement by organized crime’ which continue to plague the market. The US Government continues to raise the IP infringement concerns with the Indonesian Government, and to work with it to strengthen its IPR regime.
In late 2008, the Indonesian Government announced a change in import licensing procedures on a broad range of products including electronics, household appliances, textiles, footwear, toys, and food and beverage products. The measure, known as Decree 56, includes a requirement for pre-shipment at importers’ expense and a restriction on imports to five designated ports and airports. The Indonesian Government is considering extending these licensing provisions to additional products.
There have also been claims of widespread drug counterfeiting. According to the International Pharmaceutical Manufacturers Group (IPMG), 25 per cent of Indonesia’s US$2 billion pharmaceutical drugs market is pirated, counterfeited, or contains unregistered drugs. These counterfeit medicines are either illegally manufactured in the home country or illegally imported from western countries. In recent years, Indonesia (and a number of other developing countries) has made use of compulsory licensing to enable the supply of more affordable generic drugs. However, access to medicines is being affected by new developments such as free trade agreements (FTAs) with developed countries. These FTAs restrict parallel imports and technology licensing. Higher IP standards can prevent or delay the competition from the generic drugs, forming a barrier to the access to medicines. However, one must exercise caution in interpreting these figures and claims, as apart from data and estimation problems there are tricky issues regarding parallel imports which are legal in some jurisdictions such as the European Union.
Table 5 below shows the number of prosecutions for the infringement from 2005 to 2007 for counterfeit drugs and for illegally imported products such as food related products and cosmetics in Indonesia. The low level of prosecutions suggests that the problem is either not significant or that there is a massive under-enforcement of the law. The government enforcement agencies, such as the Trademark Office (supported by international organisations such as the World Intellectual Property Organization Intergovernmental Committee) are reportedly reluctant to conduct regular enforcement actions because of the presence of organised criminal gangs.
The attitude of the Government and institutions towards IPRs is similar for the other developing countries. There is often a reluctance to deal with the problem, the enforcement is poor and there is a lack of awareness that violating IPRs is wrong. In Indonesia, IPR laws are enforced by the special Commercial Court which is a branch to general court. The enforcement has been generally not effective.
Table 5: Number of Prosecuted Cases, 2005–07
Illegally imported products
Source: NADFC, Combating Counterfeit Drugs in Indonesia (Jakarta, NADFC, 2007).
IV. Intellectual Property Law
Indonesia has enacted three major pieces of IPR legislation covering copyrights, patents and trademarks:
— Copyright: Law No 6 of 1982 as amended by Law No 7 of 1987 and Law No 12 of 1997, and lastly by Law No 19 of 2002.
— Patents: Law No 6 of 1989 (as amended by Law No 13 of 1997) and latest by Law No 14 of 2001.
— Trademarks: Law No 19 of 1992 (as amended by Law No 14 of 1997) and latest by Law No 15 of 2001.
Copyright protects the rights of authors of creative works. The duration of a copyright varies between 25 to 50 years. The copyright on photography and typographical arrangements of a published work is valid for 25 years and copyright on other works for 50 years (sections 26 and 27). The State can hold copyright in works from prehistoric remains, historical and other national cultural objects. Copyright held or implemented by the State is for an indefinite period, except copyright regulated under article 10(1) which is valid for 50 years.
Patents protect inventions. An invention is defined as any activity that solves a specific problem related to technology, either in the form of a product or process, or an improvement and development of a product or a process. An invention must be novel when the patent application is filed, and not similar to nor part of any previous invention (section 3). A simple patent can be applied to inventions in the form of a new product or process, having simple quality of invention but with practical use value (section 6).
Under Indonesian law, a patent will not be granted for any invention of the following:
1. A process or product, which awards and/or contravenes the law, public order or morality.
2. A method of examination, treatment, medication, and/or surgery applied to humans and/or animals but without reaching out any product used in or related to the aforesaid method.
3. A theory and method in the field of science and mathematics.
The life of a patent is 20 years from the date of the registration (section 8). A simple patent is granted for a period of 10 years from the date of application (section 9).
The Law on Trademarks recognises three types of trademarks—trademark, service mark and collective mark. A trademark is a mark used on goods traded by an individual or by several persons collectively or by a legal entity to distinguish the goods from other goods of the same kind. A service mark is a mark used for services traded by an individual or by several persons collectively or by a legal entity to distinguish the services from other services of the same kind. Collective mark is a mark used on goods and/or services of the same characteristics traded collectively by several persons or legal entities to distinguish the goods and/or services from others of the same kind (some experts are of the opinion that collective mark cannot be categorised as a separate mark, as it consists of service mark and trademark).
A trademark is registered in the General Register of Marks for a specific period for own use or to grant permission for one person, a number of persons collectively or a legal entity. The owner of the mark can be one person or a number of persons collectively or a legal entity.