Three major IP issues to when entering the Indonesian market from China

As a result of the “Belt and Road” initiative, Chinese companies are increasingly investing in Southeast Asian countries, and Indonesia is one of the biggest beneficiaries.

With a population of 260 million, Indonesia is the most populous country in Southeast Asia and ranks fourth in the world. This is one of the reasons it attracts Chinese companies. In addition, the relatively stable government has also helped Indonesia attract a number of large-scale infrastructure projects, such as high-speed rail, power plants and toll road projects.

This article focuses on three important intellectual property considerations when Chinese companies enter the Indonesian market:

  1. How to deal with malicious / unauthorized trademark registration;
  2. How to use criminal complaints to achieve the most favourable solution when infringed;
  3. Addressing the problem of high translation error rates for patent applications.

Malicious trademark registration

Malicious registration and unauthorized registration of trademarks is a serious problem because it has the potential to exclude legitimate trademark holders from the Indonesian market.

If the trademark has been squatted, re-entry into the Indonesian market may be at risk, as products with the same trademark will be considered to infringe the rights of the squatter and may even lead to criminal proceedings.

Therefore, the most important thing is to register the major brands as early as possible. Considering the size of the population, Indonesia should be listed as a priority country for trademark protection when planning overseas trademark application strategies, regardless of whether there is a plan to enter the Indonesian market immediately. Companies can search the WIPO database to see if their trademarks can still be registered in Indonesia.

The cost of processing a maliciously registered trademark is often expensive, and lawsuits must be filed to cancel the trademark registration. The cost of hiring an experienced law firm for such litigation may exceed $30,000.  It is usually impossible to negotiate directly with trademark squatters, because in most cases their purpose is to obtain high compensation from the original trademark owner, and their requirements will generally exceed the legal costs required for litigation.

In Indonesia, the usual legal basis for revoking squatting marks is as follows:

  1. Similar to well-known trademarks.
  2. Malicious.

These two legal grounds are not the same. In the case where the similarity to a well-known trademark is legally based, even if it is a non-malicious plagiarism of a well-known trademark, it can be used as a reason to cancel the registration of the trademark. The defence is untenable. Even if a trademark is known only abroad and not locally, it can be revoked on the basis of a well-known trademark, but it needs to prove that the trademark is registered in more than 10 countries.

In the case of bad faith as the legal basis, it is necessary to prove that the registrant intentionally copied the trademark. The plagiarism intention can be inferred from the fact that the registrant copied the basic name and unique design elements of the original trademark, so it is impossible for a squatter to argue that his trademark is an independent creation that does not mimic the original trademark.

Although commercial courts have been very successful in filing trademark revocations, in some cases, court decisions may be unexpected.

Rights infringement strategy for trademark infringement

When dealing with infringement, the most cost-effective method is to reach a favorable settlement through a warning letter, but it also needs to be prepared for criminal proceedings, because trademark infringement in Indonesia can also constitute a criminal offence.

If the infringing party does not comply with the warning letter, the owner of the trademark right can choose to escalate to criminal proceedings or file a claim for civil tort.

Most trademark owners tend to initiate criminal proceedings, which often result in the seizure of suspected infringing products (which may constitute evidence of infringement) as part of the investigative process carried out by the police upon receipt of criminal proceedings. The police may also call the seller of the suspected infringing goods for interrogation, because most ordinary companies are unwilling to deal with the police, so the police subpoena alone can disturb the defendant. The trademark owner should take this opportunity to negotiate with the infringer as soon as possible Settlement, the conditions of which should include a public apology from the infringing party.

The trademark owner may submit a criminal indictment to the police station with jurisdiction in the place where the infringement occurred, or a criminal indictment to the Jakarta Intellectual Property Office. However, submission to the police is usually more effective and can give the trademark owner a better position when negotiating with the infringer, because the infringer is often more afraid of the police.

If no settlement is reached, the criminal investigation will proceed to criminal proceedings in the District Court. During the litigation phase, litigation will not be withdrawn, which means that trademark owners will not have the right to negotiate further. The right to withdraw criminal proceedings is an important bargaining chip in negotiations. Due to the uncertainty of criminal proceedings, if the prosecutor loses the case, it may be necessary to return the seized goods to the infringer.

Civil lawsuits are not economical because they are expensive and the level of any damages is unknown . If the whistleblower does not withdraw his criminal report and continues the criminal procedure, the person being reported will be prosecuted. Under the threat of possible prosecution, the whistleblower can still be compromised and the whistleblower can get a favourable settlement plan. Due to the uncertainty of the outcome of the criminal proceedings, a settlement is more recommended. Settlement agreements in favour of trademark owners usually include the infringer agreeing to pay for a public apology in the newspaper.  The newspaper apology helps create a deterrent in the market to avoid possible infringements by other potential infringers in the future.

Patent translation issues

In Indonesia, patent documents must be written in Indonesian, the official local language.

Most Indonesian patent applications come from abroad. Usually PCT applications enter the national phase, and the specification and claims of these patents must be translated into Indonesian. A patent can correct the translation errors in its specification and claims within three months from the date of authorization. If it exceeds three months, it cannot be corrected.

Translation errors are common and can lead to serious consequences, such as a reduction in the scope of protection of claims. Translation errors are common in many technical fields, although relatively few in the field of chemistry, because these terms are usually standardized. Translation errors may be due to a lack of understanding of the invention, as the translator simply translates words and lacks understanding of the context.

Mistranslations can cause changes in the scope of protection of rights, thereby protecting competitors from infringement.

Therefore, it is recommended that patent applicants at least translate the independent claims in the patent application back to the original language and compare them with other claims in the same patent family.

For non-patent holders who conduct a freedom to operate search (FTO search) in the Indonesian market, they may discover a patent that may be infringed in their home country, so Indonesia should search for patents in the same patent family. This is a more targeted approach when searching freely, as most patent applications in Indonesia come from overseas. Of course, it is necessary to search based on the relevant keywords of the present invention.

If there are Indonesian patents from the same patent family, the Indonesian claims should be turned back to the original language and compared with overseas patents from the same patent family. This step is necessary because any errors in translation may mean that even if the same product infringes an overseas patent of the same patent family, it will not infringe an Indonesian patent.

Indonesia has one of the highest annual patent filings in Southeast Asia (over 10,000 a year). For new products and high-tech products, a free-hand search is recommended to develop a better intellectual property risk management strategy.

We hope these three points can help you benefit from Indonesia's intellectual property protection system.

This article was originally published by worldip.cn in February 2020. To see the article in the original Chinese, please click here.