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2012
Utilisation of intellectual property rights by
Indonesian Small and Medium Enterprises: a case
study of challanges facing the Batik and Jamu
industries
Selvie Sinaga
University of Wollongong
Recommended Citation
Sinaga, Selvie, Utilisation of intellectual property rights by Indonesian Small and Medium Enterprises: a case study of challanges facing
the Batik and Jamu industries, Doctor of Philosophy thesis, Faculty of Law, University of Wollongong, 2012. http://ro.uow.edu.au/
theses/3520
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UTILISATION OF INTELLECTUAL PROPERTY RIGHTS BY
INDONESIAN SMALL AND MEDIUM ENTERPRISES: A CASE STUDY OF
CHALLENGES FACING THE BATIK AND JAMU INDUSTRIES
A thesis submitted in fulfilment of
the requirements for the award of the degree
DOCTOR OF PHILOSOPHY
of the
UNIVERSITY OF WOLLONGONG
by
SELVIE SINAGA
LLB (Gadjah Mada University – Indonesia),
LLM (Monash University)
Faculty of Law
2012
CERTIFICATION
I, Selvie Sinaga, declare that this thesis, submitted in fulfilment of the requirements
for the award of Doctor of Philosophy in the Faculty of Law, University of
Wollongong, is entirely my own work, unless otherwise referenced or acknowledged.
The document has not been submitted for qualifications at any other academic
institution.
Selvie Sinaga
February 2012
ii
ABSTRACT
Intellectual Property Rights (IPRs) are purported to have benefits for a business
enterprise, such as protecting its intellectual property assets and enhancing the
commercialization of its innovations, regardless of its size. Despite the contended
benefits of IPRs to a business, the number of Indonesian small and medium sized
enterprises (SMEs) which integrate relevant IPRs in their business activities is small.
This study seeks to understand the obstacles and challenges that discourage
Indonesian SMEs from utilizing IPRs in their businesses. It examines the approaches
and measures that have been taken by the government of Indonesia in the
administration of its intellectual property system to encourage the integration of IPRs
into SMEs business strategies.
The study takes a social legal approach, by interviewing relevant government
officers and SME owners in two selected industries, batik and jamu, which are iconic
traditional fabric and medicinal industries, in the Central Java and Yogyakarta
provinces. The data gained from the interviews was contextualized in the legal,
regulatory and historical literature.
The study shows that only a few types of IPRs, namely trademarks, copyrights,
industrial designs, petty patents and trade secrets are relevant to and can provide
direct benefits for SMEs engaged in the batik and jamu industries in Indonesia. It
found that the administration of intellectual property in Indonesia is so cumbersome
iii
that it discourages the SMEs from incorporating the relevant IPRs into their business
strategies. The cumbersome process of obtaining the IPRs is caused by complex rules
of procedure, inefficient bureaucracy and a weak decentralization policy, a
corruption problem and a lack of skilled human resources, of effective information
technology (IT) infrastructure and of financial resources.
iv
ACKNOWLEDGEMENTS
My thanks and appreciation goes to my former supervisor, Professor Christoph
Antons, who guided, encouraged and provided me with helpful insights related to the
research topic in the first three years of my project. I extend my gratitude to
Professor Gregory Rose and Associate Professor Jakkrit Kuanpoth for their excellent
supervision and invaluable guidance for this thesis in the last six months of its
preparation. Professor Greg Rose assisted me to redirect and reshape the thesis by
applying his logical thinking structure. Associate Professor Jakkrit Kuanpoth
provided me with valuable comments and knowledge on the research topic.
I would like to acknowledge the Australian Agency for International Development
(AusAID) for sponsoring my PhD study and the Atma Jaya Catholic University of
Indonesia for funding my fieldwork in Indonesia. I express my gratitude to all the
interviewees who participated in my research. Special thanks go to a number of
people who helped my fieldwork process go smoothly; Yoseph Teguh and G.
Subagyo in Semarang; Maya Ginting, Adrianto Hartadi and Bambang Hudayana in
Yogyakarta; Safren Sundjaja in Pekalongan; Robinson Sinaga, Christophorus Barutu
and J. Kristiadi in Jakarta. I also acknowledge the great professional editing service
provided by Elaine Newby for this thesis.
To my colleagues at the University of Wollongong: Sutiporn Bunmak, Clara Endah
Triastuti, Suzanna Ariff Azizan and Hujuala Rika Ayu, I would like to thank for your
encouragement and companionship. I also appreciated other necessary supports to
v
complete a doctoral study that I received from Nhat Thanh Phan, I Made Andi
Arsana and Gabriel Garcia. To the Indonesian Bible Study group in Wollongong,
especially Matthew Meek and Dr. Parulian Silaen’s family, who made me and my
family feel at home, I am indebted to you.
Last but not least, I dedicated this thesis to my family. For his enormous patience,
encouragement, assistance and trust in my ability through this challenging time, I
owe everything to Regius Sinaga, my husband. For providing me with a colourful
and meaningful life, I am indebted to Pasquale Sinaga, my son. To my parents,
Hendrikus Hadi Wijaya and Susanti Winoto, for their continuous support, prayer for
and trust in me, I express my greatest gratitude.
vi
TABLE OF CONTENTS
ABSTRACT ............................................................................................................... iii
ACKNOWLEDGEMENTS....................................................................................... v
TABLE OF CONTENTS......................................................................................... vii
LIST OF FIGURES ................................................................................................ xiii
LIST OF TABLES ................................................................................................... xv
GLOSSARY/ LIST OF ACRONYMS .................................................................. xvi
Chapter 1 .................................................................................................................... 1
Introduction ................................................................................................................ 1
1.1.
Background of Study ................................................................................... 1
1.1.1.
TRIPS in Developing Countries ........................................................... 1
1.1.2.
IPRs and SMEs in Indonesia ................................................................ 3
1.2.
Objectives of the Thesis ............................................................................. 10
1.3.
Research Questions .................................................................................... 10
1.4.
Significance of Study ................................................................................. 12
1.5.
Literature Review ....................................................................................... 12
1.6.
Methodology .............................................................................................. 23
1.7.
Structure of Thesis ..................................................................................... 29
Chapter 2 .................................................................................................................. 33
International Context on the Issue of Intellectual Property and Small Medium
Enterprises in Developing Countries...................................................................... 33
2.1.
Introduction ................................................................................................ 33
2.2.
The Emergence of TRIPS .......................................................................... 35
2.3.
Problematic Issues on the Implementation of TRIPS Agreement in
Developing Countries ................................................................................ 43
2.4.
Potential Effects of Stronger IP Protection Standards on SMEs in
Developing Countries ................................................................................ 48
2.5.
International Efforts to Make TRIPS Beneficial to SMEs ......................... 54
2.5.1.
The WTO Framework ........................................................................ 54
vii
2.6.2.
The WIPO Framework ....................................................................... 56
2.5.2.
The ASEAN Framework .................................................................... 60
2.6.
Conclusion ................................................................................................. 64
Chapter 3 .................................................................................................................. 67
International Standards of Intellectual Property Rights and Their Relevance to
Small and Medium Enterprises in Developing Countries .................................... 67
3.1. Introduction ..................................................................................................... 67
3.2.
Intellectual Property Rights Governed in the TRIPS Agreement .............. 70
3.2.1.
Copyrights .......................................................................................... 70
3.2.2.
Trademarks ......................................................................................... 74
3.2.3.
Geographical Indications .................................................................... 78
3.2.4.
Industrial Designs ............................................................................... 82
3.2.5.
Patents................................................................................................. 85
3.2.6.
Undisclosed Information (Trade Secrets) ........................................... 92
3.2.7.
Plant Varieties Protection ................................................................... 95
3.3.
Intellectual Property Rights beyond the TRIPS Agreement ...................... 98
3.3.1.
Petty Patents (Utility Models) ............................................................ 98
3.3.2.
Traditional Knowledge (TK) and Traditional Cultural Expressions
(TCE) ................................................................................................ 101
3.4.
Conclusion ............................................................................................... 104
Chapter 4 ................................................................................................................ 106
Intellectual Property System in Indonesia and Socio Legal Issues that Affect the
Implementation of Intellectual Property Rights relevant to Small Medium
Enterprises in Indonesia ........................................................................................ 106
4.1.
Introduction .............................................................................................. 106
4.2.
A Brief Legal History of Indonesia.......................................................... 107
4.3.
Development of Intellectual Property System in Indonesia..................... 114
4.3.1.
Before TRIPS: A Neglected Period .................................................. 114
4.3.2.
After TRIPS: An Unfocused Reform Period .................................... 119
4.4.
Overview of Indonesian Intellectual Property Law ................................. 131
4.4.1.
Law No. 19 of 2002 on Copyright.................................................... 132
viii
4.4.2.
Law No. 15 of 2001 on Trade Mark ................................................. 136
4.4.3.
Law No. 31 of 2000 on Industrial Design ....................................... 142
4.4.4.
Law No. 31 of 2000 on Patents ........................................................ 145
4.4.5.
Law No. 30 of 2000 on Trade Secrets .............................................. 149
4.4.6.
Law No. 29 of 2000 on Plant Variety Protection ............................. 151
4.5.
Judicial Enforcement of Intellectual Property in Indonesia ..................... 154
4.6.
Inefficient Public Service and Corruption: Entrenched Problems in
Indonesia.................................................................................................. 162
4.7.
Conclusion ............................................................................................... 176
Chapter 5 ................................................................................................................ 178
Small And Medium Enterprises in Indonesia: Their Intellectual Property
Rights (IPRs) Management and Government Agencies’ IPR-related Programs
for Them.................................................................................................................. 178
5.1.
Introduction .............................................................................................. 178
5.2.
Profile of Small to Medium Enterprises (SMEs) in Indonesia ................ 179
5.2.1.
The Significance of SMEs in Indonesia ........................................... 179
5.2.2.
Indonesian SMEs during the Economic Crisis of 1997–1998.......... 183
5.3.
Government Agencies Responsible for the Issues Regarding SMEs and
IPRs in Indonesia ..................................................................................... 188
5.3.1.
State Ministry of Cooperatives and Small-Medium Enterprises
(SMoCSMEs) ................................................................................... 189
5.3.2.
Ministry of Trade (MoT) .................................................................. 194
5.3.3.
Ministry of Industry (MoI) ............................................................... 201
5.3.4.
State Ministry of Research and Technology (SMoRT) .................... 206
5.3.5.
Directorate General of Intellectual Property Rights (DGIPR) ......... 208
5.3.6.
Agencies at the Regional Level: the Trade and Industry Agency
(AoTI) and the Agency for Cooperatives and SMEs (AoCSME) .... 209
5.4.
Programs related to IPRs for SMEs in Indonesia .................................... 211
5.5.
Decentralisation Policy as a Challenge to the Implementation of IP
Programs for SMEs in Indonesia ............................................................. 219
5.6.
Conclusion ............................................................................................... 225
ix
Chapter 6 ................................................................................................................ 227
The Batik Industry and Intellectual Property System In Indonesia: The Case of
Batik Small and Medium Enterprises in Pekalongan and Yogyakarta ............ 227
6.1.
Introduction .............................................................................................. 227
6.2.
A Glance at Indonesian Batik................................................................... 229
6.3.
History of the Batik Industry in Indonesia ............................................... 234
6.4.
Batik Industry and Intellectual Property Rights ....................................... 242
6.4.1.
Copyrights and the Protection of Traditional Cultural Expressions
(TCE) ................................................................................................ 243
6.4.2.
Industrial Designs ............................................................................. 247
6.4.3.
Trade Secrets .................................................................................... 248
6.4.4.
Trademarks ....................................................................................... 249
6.4.5.
Geographical Indications .................................................................. 251
6.5.
General Comments on the Appropriateness of IPRs to SMEs in the Batik
Industry .................................................................................................... 252
6.6.
Setting the Scenes: Profiles and the Batik Industry in Pekalongan and
Yogyakarta............................................................................................... 255
6.7.
Pekalongan Region: ................................................................................. 257
6.7.1.
Its Geography, Demography, Economy and Administrative Profile 257
6.7.2.
The Development of the Batik Industry in Pekalongan.................... 260
6.8.
The Special Province of Yogyakarta........................................................ 265
6.8.1.
Its Geography, Demography, Administration and Economy ........... 265
6.8.2.
The Batik Industry in the Yogyakarta Province and Its Dynamics .. 268
6.9.
The Story behind the Interview Process................................................... 272
6.10.
The Attitudes of Batik SMEs in Pekalongan and Yogyakarta on Intellectual
Property Issues: The Interview Outcomes ............................................... 276
a.
Knowledge about IPRs ..................................................................... 277
b.
Use of IPRs in the Business and the Reasons Not To Use Them..... 278
c.
The Methods to Protect IP Assets .................................................... 281
d.
Assistance from Government Agencies and/or NGOs on IPR issues ....
.......................................................................................................... 282
e.
6.11.
Expectations of the Government Related to IPR issues ................... 284
Conclusion ............................................................................................... 287
x
Chapter 7 ................................................................................................................ 288
The Jamu industry and Intellectual Property System in Indonesia: The Case of
Jamu Small and Medium Enterprises in Semarang and Yogyakarta............... 288
7.1.
Introduction .............................................................................................. 288
7.2.
Jamu of Indonesia: A Brief Discourse ..................................................... 290
7.3.
The Jamu Industry in Indonesia: Its Development, Regulation and Current
Issues ....................................................................................................... 296
7.4.
Intellectual Property Rights and the Jamu Industry in Indonesia ............ 311
7.4.1.
Copyrights and the Protection of Traditional Cultural Expressions
(TCE) ................................................................................................ 312
7.4.2.
Trade Secrets .................................................................................... 313
7.4.3.
Geographical Indications .................................................................. 315
7.4.4.
Trademarks ....................................................................................... 317
7.4.5.
Petty Patents ..................................................................................... 318
7.4.6. Plant Variety Protection (PVP) .............................................................. 319
7.5.
General Comments on the Issue of Intellectual Property Rights and the
Jamu Industry in Indonesia...................................................................... 321
7.6.
Profile of the Jamu Industry in Semarang and Yogyakarta ..................... 324
7.7.
Background Notes to the Interview Process ............................................ 326
7.8.
The Attitudes of Jamu SMEs Enterpreneurs on Intellectual Property Issues:
Findings from the Interviews ................................................................... 328
a.
Knowledge of IPRs........................................................................... 329
b.
Use of IPRs in Business and the Reasons for Not Using Them ....... 331
c.
Methods to Protect Trade Secrets ..................................................... 333
d.
Assistance from Government Agencies and/or NGOs on IPR issue 335
e.
Expectations to the Government Related to IPR issues ................... 336
7.9.
Conclusion ............................................................................................... 337
Chapter 8 ................................................................................................................ 340
Legislative Requirements and Administrative Procesess for Intellectual
Property Rights (IPRs) in Indonesia: Challenges for Indonesian SMEs in
Acquiring IPRS ...................................................................................................... 340
xi
8.1.
Introduction .............................................................................................. 340
8.2.
Problems behind the Burdensome Process to Obtain IPRs Protection in
Indonesia that are Relevant to SMEs....................................................... 341
8.2.1.
Rules of Procedure ........................................................................... 341
8.2.2.
Onerous Costs ................................................................................... 365
8.2.3.
Administrative Factors: the Role of the Regional Office, Human
Resources, Information Technology, and the Budget ...................... 375
8.3.
Conclusion ............................................................................................... 384
Chapter 9 ................................................................................................................ 427
Conclusion............................................................................................................... 427
9.1.
Introduction .............................................................................................. 427
9.2.
Summary of Findings ............................................................................... 429
9.2.1.
What are the International IP Standards that Potentially Affect SMEs
in Indonesia? ..................................................................................... 429
9.2.2.
How are the International IP Standards Implemented in Indonesia’s IP
system? ............................................................................................. 432
9.2.3.
What is the Relevance of IP to Indonesian SMEs? .......................... 439
9.2.4.
What are the Problems with the Administration of the IP System in
Indonesia that Negatively Affect the Interests of SMEs in Using IPRs
in their Business Activities? ............................................................. 451
9.3.
Recommendations for the Design of Relevant National IP Policies, and
Programs in the Best Interests of Indonesian SMEs ............................... 458
9.3.1.
Complexity ....................................................................................... 459
9.3.2.
Lengthy Process................................................................................ 460
9.3.3.
Cost ................................................................................................... 462
9.3.4.
Uncertainty and Ineffectiveness ....................................................... 463
9.4.
Final Remarks .......................................................................................... 465
BIBLIOGRAPHY .................................................................................................. 467
xii
LIST OF FIGURES
Figure 1: The Areas of Field Research: Pekalongan and Semarang Regencies in
the Central Java Province and the Yogyakarta Province* .......................... 26
Figure 2: Pekalongan (Regency and City) and Yogyakarta Province* ............. 256
Figure 3: The Location of Batik SMEs in Pekalongan Regions (City and
Regency)* ........................................................................................................ 260
Figure 4: The Location of the Batik SMEs in the Yogyakarta Province (City and
Regencies)*...................................................................................................... 268
Figure 5: Procedure for Trademark Registration in the absence of any Objection
from
Another
Party
.......................................................................................................................... 342
Figure 6: Procedure for Copyright Registration in the absence of any Objection
from Another Party........................................................................................ 349
Figure 7: Procedure for Industrial Design Registration in the absence of any
Objection from Another Party ...................................................................... 353
Figure 8: Petty Patent Registration Procedure in the Absence of any Objection
from Another Party........................................................................................ 358
Figure 9: Organisation Chart of the Directorate General of Intellectual
Property Rights .............................................................................................. 379
xiii
xiv
LIST OF TABLES
Table 1: Micro, Small and Medium Enterprises Category based on Law No 20
of 2008 ............................................................................................................... 28
Table 2: The Number of Business Entities by Size of Business 2007–2008 ...... 181
Table 3: Growth of GDP by the Size of Business 2007–2008 ............................. 182
Table 4: Growth of Labour Absorption by the Size of Business 2007-2008 ..... 182
Table 5: Industrial Value Added per Worker by Firm Size (Sales-based
Definition) ....................................................................................................... 184
Table 6: Impact of the Crisis on SEs in Selected Sectors (April 1998) ............. 185
Table 7: Strategy/Response of the Individual Producers by Size ...................... 187
Table 8: Target of Creative Industries in Indonesia related to IPRs Sector .... 197
Table 9: Target, Direction and Strategy of Development of Creative Economy
related IPR Issues 2009–2015........................................................................ 200
Table 10: Profile of Interview Participants in Pekalongan Region from the Batik
SME Owners Category .................................................................................. 274
Table 11: Profile of Interview Participants in the Special Province of
Yogyakarta from Batik SME Owners Category ......................................... 276
Table 12: Profile of Interview Participants in Semarang, Central Java ........... 327
Table 13: Profile of Interview Participants in Yogyakarta ................................ 328
Table 14: Compulsory Registration Costs of IPRs and Other Associated Costs
in Indonesia. .................................................................................................... 367
xv
GLOSSARY/ LIST OF ACRONYMS
AC-FTA (ASEAN – China Free Trade Agreement) = a free trade agreement between
ASEAN countries and China which implemented fully in January 2010.
AoTI = Agency for Trade and Industry
AoCSMEs = Agency for Cooperatives and Small and Medium Enterprises
ASEAN (Association of Southeast Asian Nations) = an organization which
established in 1967 and consists of 10 Southeast Asian countries, namely Indonesia,
Malaysia, Thailand, Philippine, Singapore, Brunei Darussalam, Lao, Myanmar,
Cambodia and Vietnam.
BPKP (Badan Pengawasan Keuangan dan Pembangunan) = Development and
Finance Comptroller Agency
BPPT (Badan Pengkajian dan Penerapan Teknologi) = Agency for the Assessment
and Application of Technology
BPS (Biro Pusat Statistik) = Central Bureau of Statistic
DGSMI = Directorate General of Small Medium Industry – Ministry of Industry
DGIPR = Directorate General of Intellectual Property Rights – Ministry of Law and
Human Rights
GKBI (Gabungan Koperasi Batik Indonesia) = Indonesian Batik Cooperatives
Association
GNI = Gross National Income
GP JAMU (Gabungan Pengusaha Jamu dan Obat Tradisional) = Association of
Jamu and Traditional Medicine Enterpreneurs.
IDR = Indonesian currency
IKOT (Industri Kecil Obat Tradisional) = Small traditional medicine enterprise
which owns maximum assets of IDR 600,000,000.00 in total, excluding land and
building.
IOT (Industri Obat Tradisional) = Traditional medicine enterprise with total assets
of more than Rp. 600,000,000.00 in total, excluding land and building.
IP(Rs) = Intellectual Property (Rights)
KPK (Komisi Pemberantasan Korupsi) = Corruption Eradication Commission
xvi
LEs = Large Enterprises
LIPI (Lembaga Ilmu Pengetahuan Indonesia) = The Indonesian Institute of Sciences
MoFA = Ministry of Foreign Affairs
MoT = Ministry of Trade
MoI = Ministry of Industry
NGO = Non-government organization
Peranakan = mixed blood of Chinese and native Indonesian, mostly Javanese.
PP = Petty Patents
PPBP (Persatuan Pengusaha Batik Bumi Putera) = the first batik cooperatives in
Yogyakarta.
POLRI (Polisi Republik Indonesia) =Republic of Indonesia National Police
PVP = Plant Variety Protection
SDI
(Sarekat Dagang Islam) = The first Islamic Merchants Organization
established in Java in 1905
SMoCSMEs = State Ministry of Cooperatives and SMEs
SMoRT = State Ministry of Research and Technology
Timnas PPHKI (Tim Nasional Penanggulangan Pelanggaran Hak Kekayaan
Intelektual) = National Team for the Tackling of Intellectual Property Right
Infringements
TRIPS (Trade Related Intellectual Property Rights Agreement) = An agreement on
trade and IP under the administration of the WTO.
UJG (Usaha Jamu Gendong) = Jamu gendong enterprise which prepare, mix,
process and distribute powders, liquids, camphor-based compresses, plasters and
ointments of traditional medicine without designation and trademark. Jamu gendong
sellers are using peddling method and the products must be drunk straightaway.
UJR (Usaha Jamu Racikan) = a small enterprise which prepare, mix and process cut
leaves, powders, liquids, plasters, camphor-based compresses applied to forehead or
ointments of traditional medicines without designation or trademark.
WTO = World Trade Organization
xvii
CHAPTER 1
INTRODUCTION
1.1.
Background of Study
1.1.1. TRIPS in Developing Countries
Over the last two decades, intellectual property (IP) issues have been intensely
debated at international level. At the centre of this debate is the Agreement on Trade
Related Aspect of Intellectual Property Rights (TRIPS), 1 which incorporated IP into
the multilateral trading system managed by the World Trade Organisation. TRIPS
has been controversial 2 since its inception as it sets forth minimum standards of
protection for intellectual property rights (IPRs), making such protection stronger
and broader. TRIPS covers seven fields, namely copyright and related rights,
trademarks, geographical indications, industrial designs, patents, integrated circuits
(topographies) and undisclosed information (trade secrets). 3 Besides these seven
fields, TRIPS also requires its member countries to provide protection for plant
varieties (not simply ‘plants’) either by patents or by an effective system sui generis
system beyond TRIPS or by any combination thereof. 4 Although TRIPS does not
Original tapes of the interviews conducted and all transcripts are on file with the author.
All translations in this thesis are done by the author, except where otherwise indicated.
1
The Agreement on Trade-Related Aspects of Intellectual Property Rights forms Annex 1C to the
Agreement Establishing the World Trade Organisation, opened for signature 15 April 1994, 1867
UNTS 3 (entered into force 1 January 1995) ('TRIPS Agreement' or 'TRIPS') (hereinafter the ‘TRIPS
Agreement’ or ‘TRIPS’).
2
The discussion of controversial aspects of TRIPS can be found, for instance, in Peter Drahos and
Ruth Mayne (eds), Global Intellectual Property Rights: Knowledge, Access and Development
(Palgrave Macmillan, 2002), and Peter Drahos and John Braithwaite, Information Feudalism: Who
Owns the Knowledge Economy? (Earthscan, 2002).
3
Further information on these seven fields will be presented together with the discussion on the
relevant TRIPS provisions and the laws in Indonesia in Chapter 3 (section 3.2) and Chapter 4 (section
4.4) respectively.
4
‘Members may exclude from patentability:
1
require member countries to harmonise their IP laws, it obliges them to apply these
minimum standards, regardless of their level of development. 5 Accordingly,
controversy surrounds the potential impact of TRIPS on key areas of public policy,
such as public health, agriculture and education, in developing countries. It has there
elicited great concern over its pervasive role in people’s lives and in society
generally. 6
As some TRIPS standards had never before been implemented and some other
matters, such as patent, copyright, and trademark, required stronger levels of
protection, the implementation of TRIPS standards has triggered new or reformed
national IP systems in such countries. Some of the new IP systems in developing
countries cover not only IPRs included in the TRIPS Agreement, but also other rights
beyond it, such as traditional knowledge (TK), traditional cultural expression (TCE)
and petty patents (utility models). 7 TK and TCE are not part of TRIPS; however,
these two issues have been included on the agenda for the meetings of the Council
for TRIPS meetings. Since the objects of TK and TCE protection are mainly owned
in developing countries, it is they who support the incorporation of TK and TCE
under TRIPS. 8 This idea, however, has been opposed by developed countries, which
(a) diagnostic, therapeutic and surgical methods for the treatment of humans or animals;
(b) plants and animals other than micro-organisms, and essentially biological processes for the
production of plants or animals other than non-biological and microbiological processes. However,
Members shall provide for the protection of plant varieties either by patents or by an effective sui
generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed
four years after the date of entry into force of the WTO Agreement’: TRIPS Agreement art 27(3).
5
Despite the same standards that must be complied by member countries, TRIPS provides privileges
for developing and least developed country (LDC) members who are able to delay the application of
the agreement. A developing country member can delay the date of application of TRIPS for four
years and an LDC member is entitled to delay for 10 years. See TRIPS Agreement arts 65(2), 66(1).
6
UNCTAD-ICTSD Project on IPRs and Sustainable Development, Resource Book on TRIPS and
Development (Cambridge University Press, 2005) vii.
7
For more detailed discussions on TK, TCE and petty patents, see Chapter 3 (section 3.3.2).
8
UNCTAD-ICTSD, above n 6, 399.
2
instead see the World Intellectual Property Organisation (WIPO) as the appropriate
forum to manage TK and TCE.
Having to deal with an abundance of other problems, the governments of many
developing countries have questioned the benefits of these new IP systems to
developing countries. They have concerns about the effects of stronger and broader
protection standards for IPRs on development, particularly on key areas such as
public health and education. Although several studies have found IPRs protection to
have a positive impact on the economy of developing countries, such studies focus
on upper-middle income countries (for example, China), 9 which are more ready to
take part in the global trade system. An important question remains as to whether
IPRs protection of the level required by TRIPS would serve the interests of small and
medium enterprises (SMEs) 10 in developing or lower-middle income countries. The
investigation undertaken in the course of researching and writing this thesis take
some steps towards answering that question.
1.1.2. IPRs and SMEs in Indonesia
SMEs make significant contributions to the economies of most developing countries;
however, unlike large enterprises (LEs), they have limited technical and financial
9
See, eg, Carlos A Primo Braga and Carsten Fink, 'The Relationship between Intellectual Property
Rights and Foreign Direct Investment' (1998) 9(163) (7 May 2008) Duke Journal of Comparative and
International Law 1; Keith E Maskus and Mohan Penubarti, 'How Trade-related are Intellectual
Property Rights?' (1995) (39) Journal of International Economics 227 and Keith E Maskus, Sean M
Dougherty and Andrew Mertha, 'Intellectual Property Rights and Economic Development in China' in
Carsten Fink and Keith E Maskus (eds), Intellectual Property and Development (World Bank, 2005)
295.
10
There are various definitions of SMEs in the world; however, in this thesis, the definition of SMEs
follows what has been provided in a relevant law that applies in Indonesia, namely Law No 20 of
2008 on Micro, Small and Medium Business. It classifies enterprises into three categories, namely
micro, small and medium, based on assets and annual turnover. For a detailed definition, see Chapter
1 (section 1.6).
3
resources to acquire or to enforce IP protection and to get optimal benefits of IPRs if
they have obtained them. In most developing countries, it seems that the
implementation of new IP systems has only benefited LEs and those governments
have paid little or no attention to the problems of SMEs. 11 In addition, SMEs in
developing countries have also to deal with many general problems related to the
implementation of the IP system in their countries, with such problems including an
inefficient bureaucracy, and a lack of human resources and information technology
infrastructure.
Indonesia, which is considered as a lower-middle income country, 12 became a
member of TRIPS in 1994. As a developing country, Indonesia was entitled to delay
the implementation of TRIPS until the end of 1999. However, it was only ready to
meet its commitments under TRIPS in 2001. To comply with TRIPS, the Indonesian
government reformed its IP legislation shortly before and after 2001. To date,
Indonesia has passed seven IP Laws in accordance with TRIPS standards, namely
Law No 29 of 2000 on Plant Variety Protection (PVP), Law No 30 of 2000 on Trade
Secrets, Law No 31 of 2000 on Industrial Design, Law No 32 of 2000 on Integrated
Circuit Layout Design, Law No 14 of 2001 on Patent Law, Law No 15 of 2001 on
Trade Marks, and Law No 19 of 2002 on Copyright. In IPR administrative and
enforcement fields, Indonesia has also made significant changes, such as allowing
regional offices of the Ministry of Law and Human Rights to accept IP applications
11
Carlos M Correa, 'Do SMEs Benefit from Patent Protection?' in Carlo Pietrobelli and Arni
Sverrisson (eds), Linking Local and Global Economies: The Ties that Bind (Routledge, 2004) 220,
220.
12
The World Bank classifies countries based on Gross National Income per capita into the categories
designated ‘low’, ‘lower middle’, ‘upper middle’ or ‘high income’. Developing countries are countries
that have low and lower middle income economies. According to the World Bank, Indonesia has a
lower middle income economy; therefore it falls within the category of developing countries. See,
World
Bank,
'World
Development
Indicators
2011'
(2011)
<http://issuu.com/world.bank.publications/docs/9780821387092>, 2-3.
4
from their respective regions and giving the authority to the Commercial Courts to
settle most of IPR disputes, except for trade secrets and PVP.
Beyond TRIPS, Indonesia also introduced some provisions that protect the objects of
TK and TCE in its PVP and copyrights laws. Article 7(1) of the 2000 PVP Law
provides protection for existing local plant varieties, which are one of the TK objects,
while Articles 10(2) and 12(1)(i) of the 2002 Copyright Law protect folklore and
batik respectively. For petty patents, the new patent law includes several provisions
related to petty patents protection with higher standards than provided in the former
patent law. For instance, the novelty requirement for a petty patent is applied
universally in the new patent law, 13 while this was not the clear rule in the former
law (Law No 6 of 1989 on Patents). Although the inclusion of such provisions in the
current Indonesian IP laws are positive initiatives, they are inefficient to provide
comprehensive protection for petty patents, and TK and TCE regimes.
Although Indonesia has spent more than 10 years reforming its IP system, it seems
that still not much improvement has been made in the protection of IPRs. In the ten
years since 2001, Indonesia has been on the United States Trade Representative
(USTR) Priority Watch List 14, except for three years (2006–2008 inclusive). 15 In
2011, Indonesia still remains in the USTR Priority Watch List. 16
13
General Part of Elucidation of the Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14
of 2001 on Patents] (Indonesia).
14
The USTR Priority Watch List is a list of countries with high rate of IPR infringements indicating
an overall poor IPR protection performance. It is published annually in the Special 301 Report, which
assesses on the adequacy and effectiveness of US trading partners’ IPR protection.14 Almost every
year,14 the USTR report highlights Indonesian IP enforcement efforts as inadequate according to US
standards (most recently describing them as ‘insufficient’ and criticising investigatory and
prosecutorial efforts as ‘limited’, and appealing for ‘deterrent’ scaled penalties to be provided and
imposed). Indonesia remains on the USTR Priority Watch List in 2011. See Office of the United
States Trade Representative, USTR Releases 2010 Special 301 Report on Intellectual Property Rights
5
Moreover, from the domestic point of view, it seems the IP reform has still not
brought much benefit to Indonesian entrepreneurs and makes them reluctant to
integrate IPRs into their business strategies. A quick overview of IP registration in
Indonesia shows the low number of domestic IPR applications. Although this
number has increased since 2001, it is still small compared to the total population of
Indonesian SME entrepreneurs. For example, the total number of domestic trademark
applications for the decade from 2001 to February 2011 is 331,644, 17 while the
number of Indonesian SME entrepreneurs is estimated around 4.6 million. 18 This
means that only 7.2 per cent SME owners seek protection for a trademark.
Neverttheless the statistics show that the number of applications in the trademark
field in Indonesia is high compared to other IPRs applications, such as for copyright,
patents, and industrial designs. 19 Thus, it may be concluded the use of other IPRs
which require registration to obtain protection (that is, copyright, patents, industrial
(Press Release, April 2010) <http://www.ustr.gov/about-us/press-office/pressreleases/2010/april/ustr-releases-2010-special-301-report-intellectual-p>.
15
Between 2006 and 2008, the USTR considered improvements in the condition of IPRs in Indonesia
sufficient to relegate Indonesia however, Indonesia has been always on either the Watch and Priority
Watch Lists. International Intellectual Property Alliance (IIPA), Appendix D: Chart of Countries'
Special 301 Placement (1989-2005) and IIPA 2006 Special 301 Recommendations (13 February
2006)
<http://www.iipa.com/pdf/HISTORY%20OF%20USTR%20DECISIONS%202006%20Sp%20301%2
0021106.pdf> 2.
16
Office of the United States of Trade and Representative, 'Special 301 Report' (The United States of
Trade and Representative, 2011) <http://www.ustr.gov/webfm_send/2841>.
17
Direktoral Jenderal Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia
Republik Indonesia (Directorate General of Intellectual Property Rights - Ministry of Law and
Human Rights of Republic of Indonesia, Permohonan Pendaftaran Merek Asing & Domestik Tahun
2001 s.d. 2011 (Application of Foreign and Domestic IP Registration from 2001 to 2011) (2011)
Directorate
General
<http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=3&type=0&id=123>.
18
Afrizal Akbar, 'Jumlah Pengusaha Indonesia Masih Rendah (The Number of Indonesian
Enterpreneurs
is
Still
Low)',
Kompas
(Surabaya),
13
February
2010
2010
<http://bisniskeuangan.kompas.com/read/2010/02/13/12450552/Jumlah.Pengusaha.Indonesia.Masih.R
endah>
19
For detailed statistics for copyright, patents, and industrial designs, see the website of the
Directorate
General
of
Intellectual
Property
Rights,
<http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=4&type=0&id=139>.
6
designs, layout design (topography) of integrated circuits, and PVP) in the
Indonesian business sector is even lower than the percentage mentioned above for
trademark applications.
In Indonesia, manufacturing is the third largest sector 20 of SME activity (6.56 per
cent). They are mainly involved in simple traditional manufacturing activities, such
as wood products, furniture, textiles, garments, footwear, and food and beverages. 21
Their traditional manufacturing activities are very likely based on traditional
knowledge or expressions of folklore transferred from one generation to another and
circulated around their family or society. Such activities are also likely to produce
goods with minor or incremental innovations, which become the object of petty
patents protection. Therefore, the protection of TK, TCE and petty patents would
certainly benefit Indonesian SMEs in the manufacturing sector.
The relationship between IPRs and SMEs in Indonesia is a significant subject of
study and analysis for a number of reasons. First, SMEs play an important role in
economic development and creation of employment in Indonesia. 22 In 2007, SMEs
contributed 53.6 per cent of the total gross domestic product of Indonesia. 23 In the
same year, the number of SMEs expressed as a percentage of the total number of
businesses in Indonesia was almost 100 per cent, or 49.8 million business units of the
20
Agricultural (53.68%) and trade, hotel, and restaurant (27.13%) are the first and the second largest
SME sectors in Indonesia. See Tulus Tambunan, 'SME Development in Indonesia with Reference to
Networking, Innovativeness, Market Expansion and Government Policy' (Economic Research
Institute
for
ASEAN
and
East
Asia
(ERIA),
2007)
<http://www.eria.org/research/images/pdf/PDF%20No.5/No,5-4-Indonesia.pdf> 102.
21
Ibid 103.
22
Hal Hill, 'Small and Medium Enterprises in Indonesia: Old Policy Challenges for A New
Administration' (2001) 41(2) Asian Survey 248; Tulus Tambunan, 'Promoting Small and Medium
Enterprises with a Clustering Approach: A Policy Experience from Indonesia' (2005) 43(2) Journal of
Small Business Management 138
23
2.
7
total of 49.845 million businesses in Indonesia. There is little to suggest that this has
changed. 24 Moreover, still in 2007, SMEs employed a massive work force, with 97.3
per cent of the Indonesian workforce (91.8 million workers 25 of a total of 94.3
million workers) employed in SMEs. 26
Secondly, SMEs are generally producers of lower quality and cheaper import
substitution consumer goods for low-income groups. These enterprises also support
larger industries by producing components, tools and spare parts through
subcontracting networks. 27 Thirdly, the performance of SMEs was better than large
enterprises (LEs) during the 1997–1998 economic crisis in Indonesia. There is
evidence that some SME clusters, such as Jepara furniture makers 28 and the
traditional batik cloth weaving industry in Central Java, 29 actually performed well
during the crisis. 30
24
The total of SMEs units in 2009 was 52.764 million businesses in Indonesia. See Kementerian
Negara Koperasi dan Usaha Kecil Menengah [State Ministry of Cooperatives and Small Medium
Enterprises], Perkembangan Data Usaha Mikro, Kecil, Menengah (UMKM) dan Usaha Besar (UB)
Tahun 2005-2009 [Data Development of Micro, Small and Medium Enterprises and Large
Enterprises in 2005-2009] (14 October 2010 2010) Kementerian Koperasi dan Usaha Kecil
Menengah (Ministry of Cooperatives and Small Medium Enterprises)
<http://www.depkop.go.id/index.php?option=com_phocadownload&view=file&id=199:perkembanga
n-data-usaha-mikro-kecil-menengah-umkm-dan-usaha-besar-ub-tahun-2005-s.d.-2009&Itemid=93>.
25
In 2009, SMEs employed 96.2 million workers of a total of 98.8 millon workers in Indonesia. See
Kementerian Koperasi dan Usaha Kecil Menengah, ibid.
26
Biro Pusat Statistik, ‘Perkembangan Indikator Makro UKM Tahun 2008’, above n 24, 5.
27
Hill, above n 23, 249; Tambunan, above n 23, 139.
28
Henry Sandee, Roos Kities Andadari and Sri Sulandjari, 'Small Firm Development During Good
Times and Bad: The Jepara Furniture Industry' in Chris Manning and Peter van Diermen (eds),
Indonesia in Transition: Social Aspects of Reformasi and Crisis (Institute of Southeast Asian Studies,
2000) 184.
29
Peter van Diermen et al, The IMF 50-Points Program: Evaluation of the Likely Impact on SMEs
(The Asian Foundation, 1998).
30
However, it should be kept in mind that the majority of SMEs that survived during that period of
economic distress were those that earned foreign exchange from their export activities, used local raw
materials, and did not heavily rely on formal credit. See Tulus Tambunan, 'The Performance of Small
Enterprises during Economic Crisis: Evidence from Indonesia' (2000) 38(4) Journal of Small Business
Management 93.
8
Although SMEs have an important role in the Indonesian economy, they still have
problems in accessing markets, technology, information, capital, and institutional
support. 31 Because of these problems, most of them lack the capacity to compete in a
global market. It is likely that stronger and broader IP protection standards in
Indonesia will further burden, rather than assist them. For example, most SME
owners in Indonesia lack knowledge on how to protect and manage their trademarks
and how not to infringe on others’ trademarks. 32 Indonesian SMEs also have to deal
with the poor government administration of IP protection in Indonesia.
This study examines the relationship of the IP system in Indonesia — which is
derived mostly from TRIPS standards — with SMEs. The main finding of this thesis
is that the implementation of current IP system in Indonesia, especially in its
administrative aspect, is so burdensome that it discourages Indonesian SMEs from
integrating IPRs into their business strategies. This thesis does not focus on the
difficulties that international IP standards pose for SMEs, but scrutinises the
administrative and enforcement approaches taken by the Indonesian government to
implementing these standards so that they work effectively and in a manner
consistent with the interests of Indonesian SMEs. Since it is impossible to examine
SMEs in all industries operating in Indonesia, two specific industries are selected
using a case study method, and the approaches of government agencies to IP issues
31
Kementerian Koperasi dan Usaha Kecil Menengah Republik Indonesia (Ministry of Cooperatives
and Small Medium Enterprises-Republic of Indonesia) and BPS (Statistic Indonesia), 'Pengkajian
Dukungan Finansial dan Non Finansial dalam Pengembangan Sentra Bisnis Usaha Kecil dan
Menengah (Investigation of Financial and Non Financial Support in the Development of Small
Medium Enterprise Cluster) ' (Kementerian KUKM (State Ministry of Cooperatives and SMEs) &
BPS (Statistic Indonesia), 2004) 53; Donald C Mead and Carl Liedholm, 'The Dynamics of Micro and
Small Enterprises in Developing Countries' (1998) 26(1) World Development 61.
32
Alexander Y Agung Nugroho and Sih Yuliana Wahyuningtyas, 'The Implementation of Trademark
Law in Small and Medium Size Enterprises (SME) Business Activities in Indonesia' (2007) 10(Fall 2)
Thailand Law Journal <http://www.thailawforum.com/articles/trademark-law-indonesia.html>.
9
are examined. To obtain a more complete picture, the problems and responses of
SME owners in these two industries in regard to the approaches adopted by
government are also examined.
1.2.
Objectives of the Thesis
The aim of this study is to identify the problems that hamper SMEs in Indonesia in
relation to the integration of relevant IPRs into their business strategies. Despite
many purported benefits of IPRs for SMEs, not many Indonesian SMEs employ IPRs
in their business activities. To achieve the aim outlined above, this study has three
subsidiary objectives. First, it is to study approaches that have been adopted and
measures undertaken by the Indonesian government, particularly in the IP
management sector, to enhance the uptake of IPRs into SMEs business activities.
Secondly, using the batik and jamu industries as examples, this thesis is keen to find
evidence of difficulties experienced by SMEs in obtaining relevant IPR protection in
Indonesia. Thirdly, any such evidence detected will be analysed to identify
obstructions in the administration of the IP system that discourage use of IPRs in
SMEs and the reasons for these obstructions. Specific attention is given to the
cumbersome process of obtaining IPR protection.
1.3. Research Questions
The primary question asked here is: ‘How does the current IP system in Indonesia
affect Indonesian SMEs in their uptake of IPRs?’ That is, it focuses on the purported
10
benefits of IPRs for SMEs, rather than on the purported negative impacts of IPRs on
SMEs or public policy in developing countries.
To answer this primary question, the following secondary questions are asked:
1. What are the international IP standards that potentially affect SMEs in Indonesia?
- What is the international context?
- How are they articulated in international treaties?
2.
How are these standards implemented in Indonesia’s IP system?
- How do international organisations promote the implementation of these
standards in Indonesia?
-
What are the initiatives of the Indonesian government to integrate IP
protection with SMEs activities?
3.
What is the relevance of IP to Indonesian SMEs?
- Which IPRs do Indonesian SMEs use?
- What are the attitudes of Indonesian SME owners towards dealing with the
administration of IP system in Indonesia?
- What are the reasons for the current pattern of Indonesian SME use of IPRs?
4.
What are the problems with the administration of the IP system in Indonesia that
negatively affect the interest of SMEs in using IPRs in their business activities?
- Are there excessive procedures, high costs, and lengthy periods involved in
obtaining IPR protection?
- What are other factors (beyond the procedures mandated in IP legislation)
that hamper the effective performance of the IP administration system for
SMEs in Indonesia?
11
1.4. Significance of Study
This thesis is significant for three reasons. First, this study fills a gap in academic
literature on the relationship of the global IP system and SMEs in developing
countries. This thesis is one of the first studies to examine the implementation of
international IP standards in a developing country and its effects on SMEs in the
country concerned. Secondly, the findings of this study might assist the Indonesian
government in designing or reforming IP laws and policies, to ensure they better suit
the needs of Indonesian SMEs and are in accordance with TRIPS and other
international standards. Thirdly, although each country has its own unique situation,
this study might be useful for other developing countries as part of a comparative
knowledge base for finding the most suitable approach to implement international IP
standards, and thus serve the interests of SMEs in those countries.
1.5.
Literature Review
Global and stronger IP protection, especially in compliance with TRIPS standards,
and its effects on developing countries, has been studied extensively. These past
studies focused on the political economy, economic, legal perspectives and any
combination of these. 33 Some leading scholars have also studied the Indonesian IP
33
Studies on TRIPS and the effects to developing countries which focus on political economy
perspective are, eg, Susan K Sell, Power and Ideas: North-South Politics of Intellectual Property and
Antitrust (State University of New York Press, 1998); Christopher May, A Global Political Economy
of Intellectual Property Rights: The New Enclosures?, Global Political Economy (Routledge, 2000);
Drahos and Braithwaite, above n 2; Susan K Sell, Private Power, Public Law: The Globalization of
Intellectual Property Rights, Cambridge Studies in International Relations (Cambridge University
Press, 2003); Donald Richards, Intellectual Property Rights and Global Capitalism: The Political
Economy of the TRIPS Agreement (M E Sharpe, 2004); Meir Perez Pugatch, The International
Political Economy of Intellectual Property Rights (Edward Elgar, 2005). The following studies
examine the issue from economic perspectives: Primo Braga and Fink, above n 9; Maskus and
12
system from various perspectives, ranging over the development of Indonesian IP
law, the issues of political economy behind IP law reform, the failure of IP law
implementation, trade secrets, and pharmaceutical patents.
With regard to Indonesia, Christoph Antons conducts extensive research focused on
IP law in Indonesia. 34 One of his studies, ‘Intellectual Property in Indonesia’,
published in 2000, covers almost all of the issues in the development of IP law in
Indonesia from pre-independence to the post-TRIPS period. It analyses current
Indonesian IP laws and judicial decisions and compares them with principles of the
international IP protection. This book also provides a socio-historical discussion of
legal pluralism, legal development in Indonesia and the involvement of Indonesia in
international IP conventions in its endeavour to help readers understand the
complexity of IP law implementation in Indonesia. In his subsequent research,
Antons has focused on more detailed issues of IP law in Indonesia, such as IP law
Penubarti, above n 9; Maskus, Dougherty and Mertha, above n 9 ; Carlos A Primo Braga, Carsten
Fink and Claudia Paz Sepulveda, 'Intellectual Property Rights and Economic Development' (World
Bank, March 2000); Keith E Maskus, 'Intellectual Property Rights and Economic Development'
(2000) 32 Case Western Reserve Journal of International Law 471. Examples of legally focused
research on the issue are Daya Shanker, Fault Lines in the World Trade Organization: An Analysis of
the TRIPS Agreement and Developing Countries (PhD Thesis, University of Wollongong 2005);
Carlos M Correa, Intellectual Property Rights, the WTO and Developing Countries (Zed Books,
2000); Michael Blakeney, 'The Impact of The TRIPS Agreement in the Asia Pacific Region' (1996)
18(10) European Intellectual Property Review 544. A combination of these approaches is represented
by the UK Commission on Intellectual Property Rights, 'Integrating Intellectual Property Rights and
Development Policy ' (UK Commission on Intellectual Property Rights, 2002)
<http://www.iprcommission.org/papers/pdfs/final_report/CIPRfullfinal.pdf>.
34
Examples of Christoph Antons’ works on IP Law in Indonesia include: Christoph Antons, 'The
Development of Intellectual Property Law in Indonesia: From Colonial to National Law' (1991) 22(3)
International Review of Industrial Property and Copyright Law 359 (‘Development of IPL in
Indonesia’); Christoph Antons, 'Indonesian Intellectual Property Law in Context' in Veronica Taylor
(ed), Asian Law through Australian Eyes (LBC, 1997) (‘Indonesian IPL in Context’); Christoph
Antons, 'Intellectual Property Law Reform in Indonesia' in T Lindsey (ed), Indonesian Law and
Society (Federation Press, 1999) 304 (‘IPL Reform in Indonesia’); Christoph Antons, Intellectual
Property Law in Indonesia (Kluwer Law, 2000) (‘IPL in Indonesia’).
13
reform, parallel imports, and well-known trademarks. 35 However, his works do not
specifically deal with the issues of TRIPS and SMEs in Indonesia after 2001.
Andrew Rosser has also written on IP law in Indonesia with a focus on its reform. 36
His works provide an insight into the political and economic situation in Indonesia
before the IP law reform in the late-1990s. Rosser perceives the intellectual property
law reform in Indonesia as a result of the collapse of oil prices that forced the
government of Indonesia to seek foreign investment as other source of revenue in the
mid-1980s. Becoming a member in international IP conventions, such as TRIPS, and
undertaking national IP law reform, was necessary to attract foreign investors to the
country. 37 However, he argued, compared to banking, the capital market, trade, and
various investment sectors, intellectual property was the only sector in which a proliberal regulatory reform did not face many challenges. This was because Indonesian
counterfeiting industries were generally dominated by SMEs which did not have the
political power to influence regulatory processes. Only patent law reform
encountered strong opposition — and that was from large local pharmaceutical
industries which were involved in the copying of drugs. 38 While Rosser’s argument
about the cause of lower resistance to law reform for IP compared to that offered by
35
See, for instance, Christoph Antons and Cita Citrawinda Priapantja, 'Exhaustion and Parallel Import
in Indonesia' in C Health (ed), Parallel Imports in Asia, Asian Intellectual Property Law (Kluwer Law
International, 2004) vol 9, 101 (‘Parallel Import in Indonesia’); Christoph Antons, 'The Recognition
and Protection of Well-Known Trade Marks in Indonesia' (2008) 3(3) Journal of Intellectual Property
and Practice 185 (‘Well-Known Trade Marks in Indonesia’).
36
Andrew Rosser, The Politics of Economic Liberalisation in Indonesia: State, Market and Power
(Curzon, 2002) 147 (‘Politics of Economic Liberalisation in Indonesia’). See also, Andrew Rosser,
'The Political Economy of Institutional Reform in Indonesia: The Case of Intellectual Property Law' in
Kanishka Jayasuriya (ed), Law, Capitalism and Power in Asia (Routledge, 1999) 95 (‘Case of IP
Law’).
37
Rosser, Politics of Economic Liberalisation in Indonesia, above n 37, 147.
38
Ibid, 159.
14
other sectors (such as banking and the capital market) is not entirely convincing. 39
His study is still worth recalling here for an understanding of the political and
economic background of such reform.
There have been several other studies focusing on IP law reform in Indonesia. Darko
Djaic, 40 Affifah Kusumadara, 41 and Simon Butt 42 examine the reasons for the failure
of IP legislative and administrative reforms of the late-1990s to be effectively
enforced in Indonesia. All three studies present similar arguments (with only a
difference in degree). 43 All argue that one factor in the failure of the new Indonesian
IP laws was that they were not drafted in accordance with the cultural values of
Indonesian people under Adat or customary law, which embrace, for example, a
communal concept of property ownership which is different to the individual western
conception which serves as basis of the modern IP system. 44 Regarding the
enforcement problem in Indonesia, both Djaic and Butt 45 also argue that the lack of
effective IP administration and a transparent judiciary which works efficiently have
39
Rosser argues that because SMEs with no political power in the law-making process dominated the
Indonesian counterfeiting industries, the law reform in the IP sector was rather easier to accept than in
other sectors. However, there have been many reports about the involvement of big business in the
counterfeiting and pirating industries in Indonesia. See, for example, Lutfi Yusniar, Nala Dipa
Alamsyah and Budi Supriyantoro, Mafia Pembajakan Tak Tergulung (Piracy Mafia Cannot Be Rolled
Up) (2004) Trust <http://www.majalahtrust.com/verboden/691.php>; Lutfi Yusniar, Marah Sutan
Nasution and Wisnu Arto Subari, Maraknya Onderdil Palsu (The Thrive of Counterfeit Spare Parts)
(2004) Trust <http://www.majalahtrust.com/verboden/739.php>.
40
Darko Djaic, 'Why Does the Enforcement of Indonesia's Intellectual Property Laws Continue to be
A Problem?' (2000) 22(10) European Intellectual Property Review 454.
41
Affifah Kusumadara, Analysis of the Failure of the Implementation of Intellectual Property Laws in
Indonesia (PhD Thesis, University of Sydney, 2000).
42
Simon Butt, 'Intellectual Property in Indonesia: A Problematic Legal Transplant' in Tim Lindsey
(ed), Indonesia: Law and Society (Federation Press, Second ed, 2008) 620.
43
In Kusumadara’s study, the main point of Indonesia’s problems in effectively enforcing IP laws is
that the laws are not in harmony with Indonesian’s cultural values with respect to communal
ownership. Djaic’s study is focused more on ineffective administration and the lack of Indonesia’s
interest in protecting IP because it gives more benefits to foreigners, rather than respecting culture.
Although Butt’s study also acknowledges other impediments, such as administration and enforcement,
he puts more emphasis on cultural issues as the main problem relating to unsuccessful IP law
enforcement in Indonesia.
44
Butt, above n 43, 627; Djaic, above n 41, 460; Kusumadara, above n 42, 247.
45
Djaic, above n 41, 459; Butt, above n 43, 629.
15
also been the root of such problems. Further, all of the writers expressed the view
that the new IP laws also have little benefit to Indonesia’s economic and
technological development.
Another source regarding the ineffective implementation of TRIPS in Indonesia and
which relates to Indonesian legal culture comes from Agus Sardjono. 46 He found a
dissonance between the need to harmonise Indonesian national IP laws with TRIPS
and the reality that the IP laws do not suit the need of traditional and local
communities in Indonesia. He observed that the IP concept is foreign to local
communities in Indonesia. According to him, local communities in Indonesia never
consider IPR as ‘property owned by an individual’ because they have communal
values which emphasise sharing with other members of communities. It must be
pointed out, however, that one area of IP, Geographical Indications (GI), does
provide protection for products produced by communities of a particular area or
region. 47
46
Agus Sardjono, 'The Development of Indonesian Intellectual Property Laws in the Legal Reform
Era: Between Need and Reality' (Institute of Developing Economies, Japan External Trade
Organization, 2007).
47
In the context of Indonesia, there has been growing concern within the past few years among the
Indonesian government and some local NGOs over the country’s GI based products, like Toraja
coffee and Batik, which allegedly have been registered in foreign countries. GI was first included in
the Indonesian Trade Mark Law of 1992. The current legislation that regulates GI issues in Indonesia
are Articles 56–60 of the Trade Mark Law of 2001 and Government Regulation No 51 of 2007. See,
Surip Muwardi, Geographical Indication in Indonesia: Opportunities and Challenges (15 September
2008 2005) EC-ASEAN Intellectual Property Rights Co-operation Programme (ECAP II); 'Indonesia
Kalah Cepat Patenkan Batik (Indonesia is Late Registering Batik)', Kompas (Jakarta), 5 June 2008
<http://www.kompas.com/read/xml/2008/06/05/17323458/indonesia.kalah.cepat.patenkan.batik>; D
W Radius, 'Tempe dan Batik Pun Dipatenkan Negara Lain (Tempe and Batik is also Registered by
Other
Country)',
Kompas
5
December
2006
<http://64.203.71.11/kompascetak/0612/05/Jabar/8256.htm>; 'Indonesia Kalah Cepat Patenkan Batik (Indonesia is Late
Registering Batik)', Kompas (Jakarta), 5 June 2008; Charles Lawson, '"Flexibility" in TRIPs: Using
Patented Inventions without the Authorisation of the Rights Holder' (2004) 15(3) Australian
Intellectual Property Journal 141
16
Regarding culture and IP, Christoph Antons, in his paper, ‘Legal Culture and Its
Impact on Regional Harmonisation’, 48 partly contests the assertion of developing
countries that their cultures are not familiar with IPR. He observes that the argument
of the lack of cultural familiarity has been a defensive argument of developing
countries for the last few years to gain sympathy from foreigners and international
lawyers. 49 Political and economic concerns in relation to stronger IP protection are
more relevant, he maintains, than cultural issues as the explanation of ineffective IP
law implementation in many developing countries, including Indonesia. 50
The above reviewed literature does not cover the relationship between IP and
Indonesian SMEs in particular; however, they provide an understanding on the
complexity of transplanting foreign legal instruments, such as the TRIPS Agreement,
into local Indonesian laws. As SMEs are also affected by the implementation of
TRIPS in Indonesia in general, these are significant resources to provide background
knowledge on the challenges of Indonesian SMEs dealing with national IP policies
which are derived from TRIPS.
Outside of Indonesia, there are a few scholarly works on the impact of IP policies on
SMEs activities. Amongst them, the most relevant work was written by Carlos
Correa, who questioned the benefit of patent protection to SMEs.51 One of the issues
in his writing is the extent to which SMEs use or can use patents to protect their
innovations. Regarding this, Correa observed the link between the innovation level
48
Christoph Antons, 'Legal Culture and Its Impact on Regional Harmonisation' in Christoph Antons,
Michael Blakeney and Christopher Heath (eds), Intellectual Property Harmonisation within ASEAN
and APEC, Asian Intellectual Property Law (Kluwer Law International, 2004) vol 10, 29
49
Ibid 34.
50
Ibid.
51
Correa, above n 11.
17
and the importance of patents and other IPRs for SMEs. 52 When the level of
innovation in a firm is high, patents and other IPRs are also important to the firms.
Nevertheless, there is no generalisation possible on the importance of patents and
other IPRs to SMEs, since the level of SMEs innovation varies greatly among
different industries. 53 Moreover, through an examination of available evidence from
previous studies conducted by other scholars, 54 Correa maintained the patent system
is not used actively and effectively by SMEs and the barriers to that include the
direct and indirect costs of filing patent applications, the length of procedures, and
the high costs and uncertainty of litigation. 55 Using the same evidence, Correa also
assumed that the patent system may be safely assumed to be even less relevant as an
incentive to innovation to SMEs in developing countries than in a country with large
industrial infrastructure. 56 The work of Correa, which focuses on one specific type of
IPRs, patents, and on SMEs in no particular country, is really relevant to this study. It
would be interesting to see whether the findings in Correa’s chapter are also found in
this study, which focuses on the whole range of IPRs applied in one specific
developing country, Indonesia.
52
Ibid 222.
Ibid.
54
Correa used evidence found in the following studies to maintain his argument: Stuart Macdonald,
'Exploring the hidden costs of patents' in Peter Drahos and Ruth Mayne (eds), Global Intellectual
Property Rights: Knowledge, Access and Development (Palgrave Macmillan, 2003) 13 comma after
close bracket; Ernest Braun and Stuart Macdonald, Revolution in Miniature: The History and Impact
of Semiconductor Electronic (Cambridge University Press, Second ed, 1982); R. Coleman and D.
Fishlock, 'Background and Overview of the Intellectual Property Initiative' (2000)
<www.info.sm.umist.ac.uk/esrcip/background.htm
> Philippe Kaminski, 'How can Very Small Technology Firms be Helped?' in OECD (ed), Innovation,
Patents and Technological Strategies (OECD, 1996) .
55
Correa, above n 11, 226.
56
Ibid 225.
53
18
Other scholars, Stuart Macdonald and Tim Turpin, wrote a relevant article derived
from a report for the Association of South East Asian Nations (ASEAN). 57 In this
article, they discussed whether the IPR system will make SMEs in the region more
innovative and competitive. Through an extensive survey and interviews with many
SME managers or owners and relevant government agencies in ASEAN countries,
the authors found that, without an embedded business strategy, IPR itself cannot help
SMEs in the region to be more innovative and competitive. In order to enhance the
competitiveness of SMEs through the IPR system, it is necessary that ‘user-friendly’
information on IPR be presented in ‘current and potential business plans’ and
‘prepared and disseminated by professional bodies and industry associations’.58
Further, regarding the obligation to accommodate TRIPS in government policy, the
authors suggested that the ASEAN governments take advantage of TRIPS
flexibilities for innovation and technology transfer. Although this article does not
specifically discuss Indonesian SMEs, it is a valuable resource for increasing
understanding of the situation of IPR in the ASEAN region and relationship between
the IPR system and the competitiveness of SMEs in the region.
In the United Kingdom (UK), John Kitching and Robert Blackburn 59 conducted a
survey and asked some small business managers or owners about the relevance of IP
laws in their country to their businesses. Interestingly, the majority of the participants
in this survey perceived IP legislation as irrelevant to their innovation and noted that
57
Stuart Macdonald and Tim Turpin, 'Technology Transfer and IPR Policy for SMEs in South-East
Asia' (Paper presented at the The IEEE International Conference on Management of Innovation and
Technology, Singapore, 21-23 June 2006).
58
Ibid 242.
59
John Kitching and Robert A Blackburn, 'Innovation, Intellectual Property and Informality: Evidence
from A Study of Small Enterprises and Some Implications for Policy' in Robert A Blackburn (ed),
Intellectual Property and Innovation Management in Small Firms (Routledge, 2003) 16
19
it could not provide effective protection from imitation, unauthorised use or theft of
their business interests. The major constraint to their product development was not a
lack of IP legal protection, but lack of finance for investment and expansion. Instead
of protecting the IP of their existing products, the SME owners prefer to use their
resources to develop new products and innovations. Although SME owners in the
UK are able to protect their product using legal mechanisms, both through contract
and registration of IP rights, they prefer to use informal protection methods since
such practices are cheaper and already proven as successful to protect IP of small
business. Despite this survey emanating from a developed country which possesses
far better infrastructure than Indonesia, it is relevant for this research as it supplies a
basis of comparison, as it records the perceptions of similar SME actors in another
country regarding their national IP laws.
In Indonesia, the perception of IP laws could be even worse, as they still have not
been implemented effectively there. In a part of Cita Citrawinda Priapantja’s book60
(which is based on her PhD research conducted before 1999), the perception of the
pharmaceutical industry in Indonesia towards trade secret protection was discussed.
Her study found that there is a different perception between large and small
pharmaceutical industries in Indonesia about the importance of trade secret
protection. Large-sized pharmaceutical industries in Indonesia perceive their
business knowledge as a valuable resource; hence they considered trade secret
protection as important. Although there was no legal protection for trade secrets in
60
Cita Citrawinda Priapantja, Budaya Hukum Indonesia Menghadapi Globalisasi: Perlindungan
Rahasia Dagang di Bidang Farmasi [Legal Culture of Indonesia in Encountering Globalization:
Trade Secret Protection in Pharmaceutical Industry] (Chandra Pratama, 3rd ed, 2005).
20
Indonesia at that time, 61 in practice, they already protected their trade secrets under
various legal agreements, such as secrecy, licensing, or through work or labour and
technology transfer agreements as part of joint ventures. 62 On the other hand,
Indonesian small-sized pharmaceutical industries, which predominantly produce
traditional jamu medicines, had a lack of understanding of the importance of
protecting their business knowledge and information through legal mechanisms. 63
Most of these traditional jamu industries were aware that trade secrets will create
economic benefit for their businesses; however, they were reluctant to seek legal
protection. 64 Although this research provides important information for this proposed
research, it is worth noting that Priapantja’s study is outdated and does not focus on
the issue of IP laws and SMEs.
An article written by Alexander Agung Nugroho and Sih Yuliana Wahyuningtyas 65
does focus on one selected area of IP laws, that is, trademarks, in connection with
SMEs business activities in Indonesia. It discusses the problems for SMEs in relation
to compliance with Indonesian trademark law. The writers argue that there are two
problems faced by Indonesian SMEs in dealing with trade mark law. First, only a
few SMEs register their trade mark and consequently a large number of Indonesian
SME trademarks have no legal protection. Secondly, Indonesian SMEs may
commonly infringe well-known trademarks in certain industries, such as food or
drink, shoes, clothing, and bags. Implicitly, the writers conclude that these problems
occur because trademark law in Indonesia has not been designed to suit the
61
When Priapantja finished writing her PhD thesis in 1999, Indonesia did not have the legislation on
trade secrets. A year later, Indonesia passed Law No 30 of 2000 on trade secrets.
62
Priapantja, above n 61 , 261.
63
Ibid 363.
64
Ibid.
65
Nugroho and Wahyuningtyas, above n 33.
21
characteristics and needs of SMEs. They suggest that before taking further steps to
enforce trademark law in Indonesia, it is important to understand the characteristics
and needs of SMEs. It is not clear what ‘further step’ the writers intend here.
However, it seems impossible at this point to delay the enforcement of trademark law
merely for the benefit of SMEs. Besides, the enforcement of trade mark law is
compulsory for Indonesia as a member of TRIPS. It is also necessary for all trade
related activities which involve not only SMEs, but also other entities in business.
Despite this article being a worthy effort to start the discussion on this issue, it does
not provide a detailed analysis of the impact of IP laws — which were created
according to the standards in the TRIPS Agreement — on SMEs in Indonesia. Also,
this article is not sufficiently inclusive as it only covers the issue of SMEs in the area
of trade marks.
To sum up, the materials which specifically discuss the issues of the Indonesian IP
system, particularly that derived from the TRIPS standards and its effects on SMEs,
are limited. Existing literature merely provides an understanding of the state of
implementation and enforcement of IP laws generally in Indonesia. The majority of
this literature does not touch on the issue of IP laws and SMEs. Systematic and
comprehensive research that questions the effectiveness in Indonesia of IP laws and
policies on SMEs, legislation and policies that were designed according to the TRIPS
Agreement, has not yet been conducted and is needed. Therefore, this research is
intended to fill a gap in the literature.
22
1.6. Methodology
This study is qualitative research with a socio legal approach, analysing the issue not
only from legal perspective, but also applying ‘social scientific perspectives to
law’. 66 In particular, this research involves social, political, historical, business,
management, statistical and regulatory studies.
This study is divided into two parts. The first part provides foundations for the
research and discusses the theoretical frameworks of IP standards at international
level and which are adopted in Indonesia currently. It also explains the social,
political and legal background of the current implementation of the IP system in
Indonesia and initiatives that have been taken by the Indonesian government to
integrate IPRs into SME business activities. The second part of the study provides
case studies that examine SME experiences in two industries in selected provinces of
Indonesia, dealing with IP issues and how these experiences shape their attitude
towards the IP system and its administration in Indonesia.
The first part of this thesis relies mainly on documentary sources, such as official
documents (laws, policies, programs and reports) issued by various Indonesian
government agencies and bodies of the WTO, writings of prominent scholars in the
field and relevant articles published in the magazines and newspapers. However, to
acquire a comprehensive understanding of the policies and initiatives of the
66
Rikardo Simarmata, Socio-Legal Studies dan Gerakan Pembaharuan Hukum (Socio-Legal Studies
and
Legal
Reform
Movement)
(2007)
<http://www.huma.or.id/document/I.03.%20Analisa%20Hukum/Rikardo%20Simarmata.%20SOCIOLEGAL%20STUDIES%20DAN%20GERAKAN%20PEMBAHARUAN%20HUKUM.pdf>.
23
Indonesian government related to SMEs and IPRs issue, this part also uses interviews
with the relevant Indonesian government officers as a source of information. In
contrast, the second part of this study depends heavily on interviews with SME
owners in the selected industries and areas. Documentary data are also employed in
the second part, as minor sources, particularly for giving historical background of the
selected industries in the areas.
The case studies were selected from two industries which represent typical
Indonesian SMEs. These two industries are within the area of traditional knowledge
which forms a concern of developing countries in relation to TRIPS standards. 67 The
particular industries were also selected because their products are known at national
and international level as of Indonesian origin and are primarily oriented to markets
outside of the local community. 68 This would make the products candidates for IP
protection. Based on these criteria, batik (traditional textile) and jamu (traditional
medicine) industries were chosen as each manufactures products within the TK area,
are well-known as icons of Indonesian products, but are poorly protected under IP
laws, and have attracted special attention in Indonesia concerning IP issues. 69 The
67
The UK Commission on Intellectual Property Rights identifies four areas which become the
concern of developing countries about TRIPS. These areas are public health; agriculture and genetic
resources; traditional knowledge; digital copyright and patent. See UK Commission on Intellectual
Property Rights, above n 34.
68
Albert Berry, Edgar Rodriguez and Henry Sandee, 'Small and Medium Enterprise Dynamics in
Indonesia' (2001) 37(3) Bulletin of Indonesian Economic Studies 363, 370.
69
See, Radius, above n 48; Ermias Tekeste Biadgleng, 'The Development-Balance of the TRIPS
Agreement and Enforcement of Intellectual Property Rights' in J Malbon and C Lawson (eds),
Interpreting and Implementing the TRIPS Agreement: Is It Fair? (Edward Elgar, 2008) 97; 'DIY
Kembali Patenkan 40 Motif Batik (Special Region of Yogyakarta Registered Again 40 Batik
Patterns)', Kompas (Bantul-Yogyakarta), 9 Maret 2008; N P Mugasejati, B A Jatmiko and P Kusumo,
'Keterkaitan Industri Kecil dan Menengah terhadap Pasar Luar Negeri: Kasus Industri Kerajinan di
Daerah Istimewa Yogyakarta dan Jawa Tengah (Relevance of Small and Medium Industry to Foreign
Market: Case of Handicraft Industry in Special Region of Yogyakarta and Central Java)' (Pusat Studi
Asia Pasifik - Universitas Gadjah Mada & Yayasan Indonesia Forum, 2001). Regarding jamu, there
was a national workshop on ‘Jamu, Brand of Indonesia’ 4 March 2008, and also an ‘International
Symposium on Curcuma’ 27–28 May 2008. Both workshop and symposium were organised by
24
study focuses on SMEs in the batik and jamu industries in two provinces, namely the
Special Region of Yogyakarta and Central Java. These two provinces are chosen
because they are well-known as the primary producers of batik and jamu products in
Indonesia.
Interviews were conducted in several locations within the Special Region of
Yogyakarta and Central Java provinces. For the batik industry, the locations were in
the city and regency of Pekalongan (Central Java) and the city of Yogyakarta and
Bantul regency (Special Region of Yogyakarta). The city and regency of Semarang
(Central Java) and the regency of Sleman (Special Region of Yogyakarta) became
the locations of field study for jamu industry. The type of interview used in this study
was semi-structured. It contained both elements of structured and unstructured types
of interview. 70 The author prepared semi-structured questionnaires comprising a list
of questions able to be put to participants; however, the presentation of these
questions’ order and wording was flexible. 71 The questions being asked of the
interviewees include their knowledge about IPRs, the use of IPRs in their business
and the reasons not to use them, methods to protect their IP assets, assistance that
they received from government agencies and/or non-government organisations to
deal with IPRs, and their expectations of the government in relation to IPR issues.
several government agencies involved with the issue, such as Department of Trade, Department of
Agriculture, State Ministry of Cooperatives and SMEs, LIPI (Indonesian Institute of Sciences) etc, in
cooperation with GP Jamu (Association of Indonesian Jamu and Traditional Medicines
Entrepreneurs). One area that was discussed was the role of IPR in Jamu industry. See
Communication from Japan-Draft Agreement on the TRIPS, GATT Doc. No MTN.GNG/NG11/W/74
(15 May 1990); Mariani Dewi and Aditya Suharmoko, 'Indonesia to host symposium on 'Curcuma'',
The
Jakarta
Post
(Jakarta),
26
May
2008
<http://www.thejakartapost.com/news/2008/05/26/indonesia-host-symposium-039curcuma039.html>.
70
Sotirios Sarantakos, Social Research (Palgrave Macmillan, Third ed, 2005), 269.
71
Ibid 268.
25
Figure 1: The Areas of Field Research: Pekalongan and Semarang Regencies in
the Central Java Province and the Yogyakarta Province*
*Map was prepared by I Made Andi Arsana, a surveyor by training.
Participants were divided into four groups. The first and second groups were officers
of relevant government agencies that manage the issues of IP and SMEs at central
and regional levels respectively. Government agencies included in the first group
were the Direktorat Jenderal Hak Kekayaan Intelektual (Directorate General of
Intellectual Property Rights – DGIPR), Kementerian Negara Kopearsi dan Usaha
Kecil Menengah (State Ministry of Cooperatives and SMEs - SMoCSMEs),
Kementerian Perdagangan (Ministry of Trade – MoT), Kementerian Industri
(Ministry of Industry – MoI), and Kementerian Negara Riset dan Teknologi (State
Ministry of Research and Technology – SMoRT). In the second group, the
government agencies involved were trade, industry and SME agencies under the
regional governments and regional offices of Ministry of Law and Human Rights.
26
Participants of these two groups were asked about their initiatives or programs
related to IP and SME issues, particularly in the batik and jamu industries. In
addition, they were asked about problems that they had experienced in undertaking
IP programs or exercising initiatives for SMEs in their areas of activity.
The third group consisted of figures from associations of batik and jamu
entrepreneurs (which have SME members), as well as IP lawyers in local
universities, and people working in relevant non-government organisations (NGOs).
Interviewees in the third group normally provide assistance to SMEs related to IP
matters and, thus, their experience in helping SMEs deal with the IP system provide
useful insights into the effectiveness of government’s IP programs for SMEs.
The last group was comprised of SME owners in the batik and jamu industries in the
selected areas mentioned above. There were 27 SME owners or managers in total,
who participated in the interviews. For batik industries, the total participants were 14,
each of the two provinces was represented by 7 SME owners. On the other hand, the
number participants in jamu industries were 13 in total with 8 SME owners from the
Special Region of Yogyakarta province and 5 others from Central Java. The
participants in this group were asked about their perceptions, problems and
expectations related to IP issues. Information provided by interviewees in this group
was the most important and became the focus of further analysis in this thesis.
As the topic of this study is broad, it is necessary at the outset to state its limits. First,
the term SME is defined as set out in Law No 20 of 2008 on Micro, Small and
27
Medium Business 72. There are three categories of enterprises in this law, namely
‘micro’, ‘small’ and ‘medium’ enterprises. Criteria that are employed to determine
the size of an enterprise are assets and annual turnover. The following table presents
the categorisation stipulated in the law.
Table 1: Micro, Small and Medium Enterprises Category based on Law No 20
of 2008
Category of
Enterprises
Micro 73
Small 74
Medium 75
Total Assets
Annual Turnover
≤ IDR 50,000,000
(USD 5863)
> IDR 50,000,000 –
≤ IDR 500,000,000
(USD 58,356)
> IDR 500,000,000 –
≤ IDR 10,000,000,000
(USD 1,167,133)
≤ IDR 300,000,000
(USD 35,178)
> IDR 300,000,000
≤ IDR 2,500,000,000 (USD
291,783)
> IDR 2,500,000,000 –
≤ IDR 50,000,000,000
(USD 5,835,677)
In this thesis, the term ‘SME’ is used not only to designate small (SEs) and medium
enterprises (MEs), but also applies to micro enterprises (MIEs). In other words, MIEs
and SEs will be categorised as SEs.
Secondly, this study is based on data, which are valid up to January 2011. Almost all
interview data were collected between January and April 2009 and it was later
supplemented in June 2010. For non-interview data, the latest documentary data was
collected in May 2011. Therefore, this study should be seen in this time context.
72
Undang-Undang No 20 Tahun 2008 tentang Usaha Mikro, Kecil dan Menengah [Law No 20 of
2008 on Micro, Small and Medium Enterprises] (Indonesia).
73
Ibid art 6(1)(a)–6(1)(b)
74
Ibid art 6(2)(a)–6(2)(b).
75
Ibid art 6(3)(a)–6(3)(b).
28
1.7.
Structure of Thesis
All of the issues addressed above are discussed in the eight chapters of this thesis,
which is divided into two parts. The first part, which consists of chapters two to five,
is intended to provide knowledge on other issues relevant for this study. The second
part presents, in chapters six and seven, the discussion of SMEs’ experience
(perceptions and problems) in the batik and jamu industries in the provinces of
Yogyakarta and Central Java dealing with IP issues and, in chapter eight, the analysis
of legislative requirements and administrative processes that become the challenge
for SMEs to obtain IPRs in Indonesia. Apart from these core chapters, Chapter one
serves as an introductory chapter to set up the framework for this study and Chapter
nine draws the conclusions and makes recommendations from the findings of the
study. A synopsis of the following chapters is set out here:
Chapter 2 explains the international context of the issue of IP and SMEs in
developing countries. The discussion, first, depicts the debates between developed
and developing countries over development issues affected by TRIPS during and
after conclusion of the Agreement in 1994. The next two issues presented in this
chapter are problematic ones on the implementation of TRIPS Agreement in
developing countries and the potential effects of stronger IP protection standards on
SMEs in developing countries. Finally, the efforts that have been made at
international and regional level to assist SMEs in developing countries utilise the IP
system and benefit from TRIPS will be discussed in the last sub-section of this
chapter. In this sub-section, the focus of discussion will be given to the efforts made
by two relevant international IP organisations, the World Trade Organisation (WTO)
29
and the World Intellectual Property Organisation (WIPO), and a regional
organisation in which Indonesia is an active member, the Association of Southeast
Asian Nations (ASEAN).
Chapter 3 analyses international provisions on standards of IPRs and their relevance
to SMEs. It discusses minimum standards of protection for copyrights, trademarks,
geographical indications, industrial designs, patents, undisclosed information (trade
secrets) and plant variety protection, which are stipulated in Part II (Articles 9–40) of
TRIPS Agreement. In addition to discussing the TRIPS standards, this chapter also
presents an analysis of international rules applied to petty patents and traditional
knowledge as well as traditional cultural expressions (which are not included in the
TRIPS Agreement).
Chapter 4 presents the discussion on the current IP system applied in Indonesia and
socio legal factors that affect the implementation of the IP system in Indonesia. First,
it describes a brief legal history of Indonesia. Then, it continues with the past and
present facts about the IP system and an overview of the current IP legislation in
Indonesia. This chapter also provides analysis of socio and legal issues that form the
background of IP implementation problems in Indonesia as well as in regard to SME
issues. It specifically discusses about bureaucratic inefficiency and problems of
corruption, which form the background to IP administrative problems at central and
regional levels in Indonesia.
Chapter 5 focuses on providing a comprehensive profile of SMEs in Indonesia and
the management of SME issues at national and regional level. It presents the
30
government initiatives dedicated to assist the development of SMEs in Indonesia,
particularly in those related to IPRs and examines whether the initiatives are
effective or not. Since decentralization policy affects the implementation of the IPR
programs for SMEs at regional level, this chapter discusses such issue as well.
Chapter 6 is the first case study chapter, which is intended to provide comprehensive
information on the batik industry and the IP system in Indonesia. It begins with the
history of the industry in Indonesia and its relations with IPRs. To better understand
this issue, this chapter also presents the profile of the batik industry in Pekalongan (a
city in the province of Central Java), and Yogyakarta (a city in the province of
Yogyakarta). Then, based on the interviews, this chapter reveals the attitudes of batik
SME owners on IP issues. The interviews also captured the respondents’ concerns
and problems dealing with IPRs.
Chapter 7 is the second case study chapter, which discusses the jamu industry in
Indonesia and its relations with IPRs. The discussion on this chapter includes the
development of the jamu industry in Indonesia, its current issues, and regulations that
govern such an industry. Similarly to Chapter 6, this chapter also presents the general
attitude of SMEs in the jamu industry in the provinces of Central Java and Special
Region of Yogyakarta, as detected in interviews on IPR issues. Similarly to the
experience in relation to the batik industry, two main issues emerged during the
interviews, namely the interviewees’ concerns and problems dealing with IPRs.
Chapter 8 examines the IP administration of the IP system after 2001 in Indonesia
relevant to SMEs. Based on information gathered from SME owners who
31
participated in this study, this chapter provides an analysis of the IPR legislative
requirements and administrative processes, which became the main concern and
problem for Indonesian SMEs in dealing with IP system.
Chapter 9 is the final chapter, which answers the research questions expressed in the
introductory chapter and summarises all the findings from the previous chapters. It
concludes that the implementation of Indonesian IP system, particularly in relation to
administrative processes of registration, is not effective and discourages Indonesian
SMEs from employing IPRs in their businesses. This chapter also presents a number
of recommendations to solve these problems and to make the IP system works better
for Indonesian SMEs.
32
CHAPTER 2
INTERNATIONAL CONTEXT ON THE ISSUE OF
INTELLECTUAL PROPERTY AND SMALL MEDIUM
ENTERPRISES IN DEVELOPING COUNTRIES
2.1.
Introduction
International intellectual property (IP) standards that apply in many countries in the
world are mainly derived from the Agreement on Trade Related Intellectual Property
Rights (TRIPS) 1. For developing countries, the implementation of these standards
would present a number of problems since many of these standards are new and
higher than the previous ones applied in their countries. Among many sectors that are
affected by the implementation of such IP standards, there is one sector, namely
small to medium enterprises (SMEs), which presumably faces difficulties in dealing
with new and higher global IP standards due to their limited resources. Using survey
of literature, this chapter discusses the issue of IP and SMEs in developing countries
in an international context. It will provide a background that will promote an
understanding of the debate between developed and developing countries on
international IP standards formulated in TRIPS, the problematic implementation of
such standards in developing countries that also experienced by SMEs, the potential
effects of international IP standards on SMEs in developing countries and the efforts
that have been made to make such standards beneficial to SMEs in developing
1
The Agreement on Trade-Related Aspects of Intellectual Property Rights forms Annex 1C to the
Agreement Establishing the World Trade Organisation, opened for signature 15 April 1994, 1867
UNTS 3 (entered into force 1 January 1995) ('TRIPS Agreement' or 'TRIPS')
33
countries. Besides providing a background to facilitate an understanding of the
debate on stronger IP standards in an international context, the discussion is
important to this thesis to help identify the reasons why IPRs do not work properly in
developing countries.
This chapter begins with description of the international debate before and during
negotiations which eventually led to the conclusion of TRIPS. Then, it moves to the
problems encountered by developing countries in implementing TRIPS provisions
and the concerns of developing countries towards the TRIPS implementation in
relation to the economy in their countries. The discussion on the economic concerns
in regards to TRIPS will analyse whether the issues are real or perceived and also
link the discussion with the issues of SMEs. The next matter presented in this chapter
is about international efforts to assist SMEs, particularly in developing countries, to
utilise the IP system and gain benefits from the implementation of TRIPS. The focus
of discussion in this part will be given to see what efforts have been made by a two
international and a major regional organisation to incorporate the IP system, with
TRIPS standards, in SME activities in developing countries. These organisations are:
two major international IP organizations, the World Trade Organization (WTO) and
the World Intellectual Property Organization (WIPO), and a regional organisation in
which Indonesia is one of its active members, the Association of Southeast Asian
Nations (ASEAN).
34
2.2. The Emergence of TRIPS
Prior to the TRIPS Agreement, IPRs have been protected internationally for more
than a hundred years. There are four major international legal instruments, namely
the Paris Convention for the Protection of Industrial Property.(Paris Convention) 2,
the Berne Convention for the Protection of Literary and Artistic Works (Berne
Convention) 3, the International Convention for the Protection of Performers,
Producers of Phonograms, and Broadcasting Organizations (Rome Convention) 4, and
the Washington Treaty on Intellectual Property in Respect of Integrated Circuits
(Washington Treaty) 5, which later were incorporated into TRIPS. Since 1883 the
Paris Convention has protected industrial property, which has comprised a number of
object types, namely ‘patents, utility models, industrial designs, trademarks, service
marks, trade names, appellations of origin’, and also supported the repression of
unfair competition. 6 The Berne Convention, which was first adopted in 1886,
protects ‘literary and artistic works’ 7 or copyright. To adapt to the advancements in
technological development that affect the copyright regime, the Berne Convention
has been revised several times, with the last revision on substance done at Paris in
2
The Paris Convention for the Protection of Industrial Property (1967), opened for signature 13
January 1968, 828 UNTS 305 (entered into force 26 April 1970) (hereinafter the ‘Paris Convention’).
3
The Berne Convention for the Protection of Literary and Artistic Works, opened for signature 24
July 1971, 828 UNTS 221 (entered into force 31 January 1972) (hereinafter the ‘Berne Convention’).
4
International Convention for the Protection of Performers, Producers of Phonograms, and
Broadcasting Organizations, opened for signature 26 October 1961, 496 UNTS 43 (entered into force
18 May 1964) (hereinafter the ‘Rome Convention’).
5
Treaty on Intellectual Property in Respect of Integrated Circuits, opened for signature between 26
August 1989 and 25 May 1990, 28 ILM 1477 (not yet in force) (hereinafter the ‘Washington Treaty’).
6
The Paris Convention for the Protection of Industrial Property, art 1(2) . The Paris Convention,
which was concluded 20 March 1883, has been revised several times since, with the last revision at
Stockholm, 14 July 1967. The text referred to here is the amendment of Stockholm version. See also
Julie Chasen Ross and Jessica A Wasserman, Trade-Related Aspects of Intellectual Property Rights,
The GATT Uruguay Round: A Negotiating History (1986-1992) (Kluwer Law and Taxation, 1993) 3.
7
The Berne Convention, art 2(1) provides that the kind of works that can be protected fall under the
term‘literary and artistic works’. Some of the protected works are books, pamphlets and other
writings, architecture, topography, etc.
35
1971. 8 The Rome Convention (1961) extends the protection of copyright given in the
Berne Convention and safeguards the rights of performers, producers of phonograms
and broadcasting organisations. 9 The last convention, the Washington Treaty, 10
provides protection for integrated circuit products.
All of the aforementioned conventions are administered under WIPO. While the
Berne Convention, the Paris Convention and the Washington Treaty are fully under
auspices of WIPO, the Rome Convention has joint administrators with WIPO, the
United
Nations
Educational
and
Scientific
Organization
(UNESCO)
and
International Labour Organization (ILO). 11 Unlike these three conventions, the
Washington Treaty is not yet in force because the numbers of countries that have
ratified it are less than the number required by the Treaty for its ratification. 12
A lack of specific enforcement rules and an ineffective dispute settlement system
between member states are seen as two shortcomings of the Berne and Paris
Conventions. 13 Developed countries, such as the United States (US), Canada, Japan,
and the European Union (EU), consider that these conventions are not strong enough
to protect their national IP interests in the international forum. They even argued that
8
Michael Blakeney, Trade Related Aspects of Intellectual Property Rights: A Concise Guide to the
TRIPS Agreement (Sweet & Maxwell, 1996) 21 (‘A Consise Guide to the TRIPS’)
9
World Intellectual Property Organization, Summary of the Rome Convention for the Protection of
Performers,
Producers
of
Phonograms
and
Broadcasting
Organisations
(1961)
(<http://www.wipo.int/treaties/en/ip/rome/summary_rome.html>
(‘Summary
of
the
Rome
Convention’).
10
Duncan Matthews, Globalising Intellectual Property Rights: The TRIPs Agreement, Warwick
Studies in Globalisation (Routledge, 2002) vol 4, 62.
11
Summary of the Rome Convention, above n 9.; Daniel Gervais, The TRIPS Agreement: Drafting
History and Analysis (Sweet & Maxwell, 2nd ed, 2003) 9.
12
As at 30 June 2011. Only three countries – Bosnia-Herzegovina, Egypt and St. Lucia – have
ratified, or acceded to, the Washington Treaty, two short of the five required to enforce it. See World
Intellectual Property Organization, Washington Treaty on Intellectual Property in Respect of
Integrated Circuits
(<www.wipo.int/treaties/en/ip/washington/>.
13
Gervais, above n 11, 10.
36
these shortcomings encouraged piracy and counterfeiting of IP. 14 Likewise, they also
confronted dilemmas created by the new advanced technologies, in particular
computerisation and digitalisation, which threaten their IP industries 15 while (at the
same time) these new technologies become the object of copyright protection and are
responsible for the importance of copyright today. The existing IP conventions were
considered incapable of providing the best answer for the dilemmas presented.
In the 1970s and 1980s, several efforts were made to revise the Paris and Berne
Conventions within the WIPO framework. However, these attempts were
unsuccessful since developed and developing countries had different interests in, and
thus standpoints on, IP issues. Developed countries require international instruments
to set enforcement provisions and establish a dispute settlement system to protect
their IP industries from piracy and counterfeiting in foreign countries, while
developing countries want to formulate provisions that accelerate economic growth
and the transfer of technology. 16
As piracy and counterfeiting activities are closely related to trade issues, the US
made several initiatives 17 to establish ‘a framework to regulate trade in counterfeited
goods’ within the General Agreement on Tariffs and Trade 18 (GATT). 19 The US
14
Ross and Wasserman, above n 6, 5.
Ibid 9.
16
Ibid 11.
17
The initiative began at the Ministerial Meeting of 1982 when the US submitted a proposal which
promoted further negotiations and the inclusion of the counterfeiting issue in the GATT framework.
This proposal was challenged by many developing countries, including Brazil and India, and was not
accepted at that meeting. See ibid 16.
18
General Agreement on Tariffs and Trade opened for signature 30 October 1947, 55 UNTS 187
(entered into force 1 January 1958) ('GATT'). GATT is a multilateral agreement designed to promote
global free trade by reducing high tariffs on goods. It ended in 1994 when the World Trade
Organization was established. See Selected EU Terms (2007) Oxford University Press,
<http://www.oup.com/uk/orc/bin/qanda/books/05eu/terms/>.
15
37
initiatives succeeded when the Preparatory Committee 20 for the 1986 Uruguay
Round included the issue of counterfeit of trademarked goods on the agenda for the
Round. Further, the US and Japan proposed to incorporate a broader issue, that of IP
and its enforcement. 21 The proposal to include IP protection in the GATT context
was rejected by Brazil, India, and Argentina. These countries argued that IP
protection was beyond GATT’s jurisdiction, 22 that GATT only covers trade issues
related to tangible property, and that WIPO is the appropriate forum for the IP
protection issue. 23
The subsequent negotiations to include IP protection issues within the GATT
framework formed a long and rocky process. For the first three years after the
Uruguay Round began, the process of negotiations in this group was almost
overwhelmed by volume of proposals submitted by the negotiating parties which
expressed their thinking on the issues involved. 24 For developed countries,
counterfeiting and piracy activities beyond their immediate jurisdictions had
threatened the viability of their IP industries and they, therefore, demanded
appropriate IP protection in foreign jurisdictions for their IP products. From the
viewpoint of these countries, appropriate IP protection can be achieved by imposing
19
Ross and Wasserman, above n 6, 15.
The Preparatory Committee was established in 1985 by the GATT Council to prepare ‘the
objectives, subject matter, modalities for and participation in the multilateral trade negotiations’ in the
which 1986 Uruguay Round of GATT. See Decision of 28 December 1985 on Establishment of the
Preparatory Committee, GATT Doc No L/ 5925 (23 December 1985) (Decision).
21
Ross and Wasserman, above n 6, 19 and Gervais, above n 11, 10–11.
22
India and Brazil had a similar standpoint that IP protection was not a GATT issue. The
representative of Brazil also stated that there must be a formal amendment if a party wanted to include
the IP issue within GATT. See Discussion of 8-31 July 1986, GATT Doc PREP.COM (86) SR/9 (26
August 1986) (Record of Discussion) 7 [34] and 8 [38].
23
This argument was submitted by Argentina’s representative. See ibid 8 [39].
24
Drahos and Braithwaite stated that a number of countries, the GATT Secretariat and international
organisations submitted 97 working documents, with only 19 submissions coming from developing
countries. Instead of submitting more proposals, the developing countries made many complaints on
the existing proposals from developed countries. See Peter Drahos and John Braithwaite, Information
Feudalism: Who Owns the Knowledge Economy? (Earthscan, 2002), 133.
20
38
a stronger level of IP protection and creating an effective dispute settlement
mechanism for inter-jurisdictional IP disputes. In response to these demands,
developing countries expressed their concern that stronger IP protection might
prevent them from access to modern technology which was mostly coming from
developed countries. 25
Recognising the strong resistance emanating from developing countries led by India
and Brazil, developed countries, particularly the US, made a conscious effort to
convince developing countries to accept ideas put forward by the developed
countries. Over and above these efforts, the US adopted a coercive strategy in
bilateral relationships to counter resistance to this idea in multilateral negotiations.26
For instance, the US imposed Section 301 of the US Trade Act 1984 27 on Brazil in
1988, which increased the tariff on Brazilian products 28 because Brazil did not have
patent protection for pharmaceutical products. 29 The trade sanction was believed to
discourage Brazil’s resistance in the TRIPS negotiations. 30 In 1990, this coercive
strategy succeeded in forcing Brazil to draft the legislation demanded by the US and
weakened their position of resistance previously adopted in the TRIPS
negotiations. 31 In addition, the US also threatened to cut the privileges enjoyed by a
number of nations (including Indonesia) available under the Generalized System of
25
Ross and Wasserman, above n 6, 23.
Susan K Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights,
Cambridge Studies in International Relations (Cambridge University Press, 2003), 13.
27
Article 301 of the US Trade Act 1984 grants authority to the US President to impose trade sanctions
on countries that are unable to provide ‘adequate and effective’ IP protection for US products. Drahos
and Braithwaite, above n 25, 89.
28
Ibid 105, 136.
29
Brazil and some other South American countries, such as Argentina and Mexico, maintained that
patent protection would increase the price of medicines which were needed by people in their
countries. Ibid 104.
30
Ibid 105.
31
Ibid 136.
26
39
Preferences in order to force developing countries to increase their level of IP
protection. 32
After several failed attempts to secure a mutually acceptable outcome, a consolidated
draft that tried to accommodate the different views of negotiating countries was
produced and presented at the Brussels Ministerial Conference of the Uruguay
Round on 3 December 1990. During the conference, this draft was discussed, revised
and eventually released as the Brussels Draft. It was, then, expected to be finalised as
the draft of the TRIPS Agreement at the end of the conference. However, such
expectations did not eventuate as there was a deadlock in discussion within the
conference on the issue of trade in agriculture. Thus, IP issues were left until the
following year when the Uruguay Round meeting was restarted. 33
The position of negotiating countries about TRIPS in the new phase of the Uruguay
Round did not substantially change. On 20 December 1991, there was a new
compromised draft produced, that is, the Draft Final Act Embodying the Results of
the Uruguay Round of Multilateral Trade Negotiations (also known as the Dunkel
Draft), which was designed as a ‘take all or nothing’ agreement to prevent the
negotiating countries from accepting only parts of the draft which favoured them. 34
However, once again, this draft was criticised by both developed and developing
country blocs. Developing countries, which were represented by India, still had
32
The Generalized System of Preferences (‘GSP’) is a US program which provides preferential dutyfree entry for about 4800 products from 131 designated beneficiary countries and territories. See The
Office of the United States Trade Representative, Generalized System of Preference (2009)
<http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-systempreference-gsp>.
33
Matthews, above n 10, 36.
34
Ibid 39.
40
concerns about the possible implication of TRIPS on development. 35 On the other
hand, developed countries, in particular the US pharmaceutical industry, had
concerns about the transitional periods to implement appropriate patent laws in
developing countries and least developed countries (LDC) which, from their
perspective, were too long. 36 In late 1992, the TRIPS negotiations were
recommenced. Both India and the US proposed revisions to the Dunkel Draft which
reflected their concerns. Eventually, when the Uruguay Round was concluded in
December 1993, it was decided that the 1992 Dunkel Draft with a small revision
proposed by India and another by the US was adopted as the final text of the TRIPS
Agreement which entered into force in 1 January 1995. 37
After 1995, a significant development in the journey of TRIPS is the issuance of the
Declaration on the TRIPS Agreement and Public Health 38 (hereinafter the Doha
Declaration) at the end of the Doha Ministerial Conference in November 2001. The
declaration provides an interpretation to Article 7 on objectives and Article 8 on
principles of the TRIPS Agreement related to public health issues in developing
countries and LDC. It acknowledges the need for the TRIPS Agreement to join wider
community and international action in dealing with several diseases, such as
HIV/AIDS, tuberculosis, malaria and other epidemics, 39 which exist to a greater
extent in developing countries and LDC, 40 and with greater ramifications than in
developed nations, largely due to the cost of medications, concomitant lack of
35
Ibid; Ross and Wasserman, above n 6, 40.
Blakeney, A Concise Guide to the TRIPS, above n 8, 7.
37
Gervais, above n 11, 26.
38
Declaration on the TRIPS Agreement and Public Health, WTO Doc WT/MIN(01)/DEC/2 (20
November 2001, adopted 14 November 2001) (Ministerial Declaration) (‘The Doha Declaration’).
39
The ‘Doha Declaration’, para 1.
40
The ‘Doha Declaration’, para 2.
36
41
appropriate treatment facilities and so forth. The Declaration also recognises the
effects of IPR on prices of medicine. 41 Further, it emphasises that the TRIPS
Agreement should not prevent the member countries from taking measures to protect
public health. 42 The Doha Declaration declares that member countries have the right
to grant compulsory licences and the freedom to determine the grounds for granting
such licences to protect public health in their respective countries. Declaration
promotes and encourages technology transfer from developed country members to
LDC members as mandated by Article 66.2 of the TRIPS Agreement. 43
Another issue that is very relevant to developing countries stems from Article 27.3(b)
of TRIPS, which opens the opportunity to exclude genetic resources from patent
protection. Before the Doha Ministerial Conference, debate on this issue was about
whether plants and animals could be patented, the effective protection for new plant
varieties, and how to provide fair and equitable benefits sharing to the communities
or countries where genetic resources originate. 44 After Doha, the TRIPS Council was
mandated by the WTO Ministerial Conference to study the relationship between
TRIPS and Convention on Biodiversity (CBD) 45 and the protection of traditional
knowledge and folklore. The most current proposals discussed are about the
disclosure of the source of genetic materials and the traditional knowledge related to
them. 46
41
The ‘Doha Declaration’ para 3.
The ‘Doha Declaration’, para 4.
43
The ‘Doha Declaration’, para 7.
44
The World Trade Organization (WTO), Background and the Current Situation (16 July 2011)
<http://www.wto.org/english/tratop_e/trips_e/art27_3b_background_e.htm>.
45
Convention on Biological Diversity, opened for signature 5 June 1992, 1760 UNTS 79 (entered into
force 29 December 1993).
46
As at 16 July 2011. Ibid.
42
42
2.3.
Problematic Issues on the Implementation of TRIPS Agreement in
Developing Countries
This section highlights the problems of developing countries in implementing the
TRIPS Agreement effectively in their countries. The discussion of such issues are
relevant for this thesis as it provides a background to understanding the general state
of IPRs in developing countries that hinders the effective implementation of TRIPS
standards in such countries. The general state of IPRs certainly affects SMEs, and
there may also be a problem for SMEs in integrating IPRs in their business activities.
Besides examining the problems of implementation, this section also wants to see
what has been offered by the TRIPS Agreement itself to help developing countries
and LDC apply the standards properly.
The implementation of international IP standards in developing countries is not
something that can be done easily and instantly. In most developing countries, IPRs
were first introduced by a foreign entity, either though colonisation or interaction
with international trade, and foreign direct investment (FDI). When developing
countries and LDC were colonies (and their independent governments did not yet
exist), the colonial rulers within the colony and in the colonising power largely
representing the same interests and legislated to protect those interests. Therefore, the
colonies often merely followed what had been done in the homeland of their colonial
rulers. If the colonial rulers passed IP legislation or signed international IP
agreements, normally the scope of the legislation and agreements also extended to
their colonies. For example, the first IP legislation in Indonesia was the Trademark
43
Act which was passed in 1885 by the Dutch colonial government. 47 India shares the
same story as the first IP legislation in the country, the Literature Copyright Act of
1842, was imposed as the extension of the scope of the British copyright legislation
to all regions then under the British Crown, including India. 48 Thus, it can be
concluded that colonialism excluded most of the local population from IP related
debate, so there was little general familiarity with it after independence.
For other developing countries that were never colonised, such as Thailand, or
countries have started largely from scratch after expelling colonial powers, such as
China and Vietnam, IPRs have been introduced more latterly through the
development of FDI or international trade. Developed countries or private entities
which engaged trade activities with developing countries often included IPRs
protection as one of the terms and conditions in their trade agreements or contracts.
The presence or otherwise of IPRs protection has also been also one factor that has
influenced the decision to invest in a particular country. As developed countries or
multinational corporations possessed financial and knowledge resources, their
position was stronger than that of developing countries. Some developed countries
employed coercive strategies 49 to make developing countries comply with their IP
protection standards.
47
Affifah Kusumadara, Analysis of the Failure of the Implementation of Intellectual Property Laws in
Indonesia (PhD Thesis, University of Sydney, 2000) 36; Christoph Antons, Intellectual Property Law
in Indonesia (Kluwer Law, 2000) 43.
48
Tanuja Garde, 'India' in P. Goldstein and J. Straus (eds), Intellectual Property in Asia: Law,
Economics, History and Politics, MPI Studies on Intellectual Property, Competition and Tax Law
(Springer, 2009) vol 9, 55, 70–1.
49
Susan K Sell, 'Intellectual Property and Antitrust in the Developing World: Crisis, Coercion and
Choice' (1995) 42(2) (315-349) International Organization 316.
44
The trade sanctions imposed by the US through the US Trade Act 1984 on countries
which did not comply with the US standards of IP protection are an example of this
practice. The threat of trade sanctions has also been employed to expedite the process
of TRIPS negotiations, which had slowed because developing countries, like India
and Brazil, repeatedly rejected the ideas coming from developed countries. 50 This
practice continues until the present time as the Office of the US Trade Representative
(USTR) still creates the ‘Watch List’, which each year evaluates the status of a
number of countries, and lists those the USTR considers to have low IP protection
standards. 51
The ways in which IPRs has been introduced to developing countries have created a
negative image of TRIPS in the eyes of developing countries and LDC. Despite the
fact that all members of the WTO are required to adjust their IP system to comply
with TRIPS standards, most of the developing countries are reluctant to fully
implement the standards. At present, major changes in IP systems in developing
countries designed to ensure legislation is compliant have been mostly completed.
Yet, as Vogel concluded, ‘the question whether or not the enforcement can be
managed is left open’. 52 Developing countries are still struggling to enforce the
standards set out in TRIPS effectively.
50
See Chapter 2 (section 2.2.); Drahos and Braithwaite, above n 25, 85–107.
The Office of the United States Trade Representative, '2009 Special 301 Report' (The United States
2009)
Trade
Representative,
<http://www.ustr.gov/sites/default/files/Full%20Version%20of%20the%202009%20SPECIAL%2030
1%20REPORT.pdf>.
52
Carsten Vogel, 'The Impact and the Implications of TRIPS in a Knowledge-based Global Economy:
A Developing Country's Perspective' (2006) 2(1) Asia-Pacific Trade and Investment Review 47, 67.
51
45
Enforcement has always been a problem in developing countries. For developing
countries to be able to enforce IP protection standards as required in TRIPS, it is
necessary for them to enhance their institutional capacities. As many developing
countries’ current administrative and judicial systems lack the capacity to guarantee
the effective enforcement of IPRs, developing countries need to establish reliable
administrative and judicial institutions. The administrative institution must be
competent and efficient in managing and examining the registrations of IPRs. 53 The
judicial institution needs to be independent, capable and familiar with the legal
aspects of IPRs protection. 54 In addition, it is expected that such administrative and
judicial institutions are free from corruption practices, which are commonly found in
the bureaucracy of a developing country. All these things are really needed, not only
to make TRIPS standards work properly, but also to attract business owners,
particularly SMEs, in developing countries, to apply IPRs in their businesses.
Setting up and maintaining such institutions, however, involves high costs which are
difficult for developing countries to afford. A study undertaken by the World Bank
(WB) and the United Nations Conference for Trade and Development (UNCTAD)
estimated that the set up costs alone could reach millions of dollars, and maintenance
costs can be more than USD 1 million per year. 55 Some developed countries and
international economic organisations, such as the World Bank, as required in Article
67 of TRIPS, provide ‘technical and financial cooperation’ to assist developing
countries dealing with this matter. For instance, the World Bank funded some IPR-
53
Carlos A Primo Braga, Carsten Fink and Claudia Paz Sepulveda, 'Intellectual Property Rights and
Economic Development' (World Bank, March 2000) 44.
54
Ibid 45.
55
J Michael Finger and Philip Schuler, 'Implementation of Uruguay Round Commitments: The
Development Challenge' (World Bank 1999) 50–1.
46
related projects in Brazil, Mexico and Indonesia during the period from 1992 to 2003
at a total cost of USD 50.8 million.56
Although there is obligation under Article 67 of the TRIPS Agreement to provide
assistance related to the enforcement of TRIPS standards in developing countries, the
wording of the Article says that the assistance is based on a ‘mutual agreed terms’.
Besides that, the IPRs related project assistance is only for certain limited time. Once
the project is finished, developing countries are expected to run, maintain and
improve independently those administrative and judicial systems that have been set
up to support the implementation of TRIPS standards in their countries. Facing an
abundance of far more complex domestic problems, however, governments in
developing countries and LDC have not viewed implementing TRIPS standards and
maintaining all these systems as a main concern. Consequently, although there have
been changes TRIPS implementation in developing countries and LDCs, the pace of
change is slow and implementation still far from effective.
In addition to Article 67, two other articles that assist developing countries and LDC
in implementing the IP standards contained in TRIPS. In recognition of the great gap
in development issues between developing and developed countries, Article 65(2)
provides that developing country members of TRIPS can delay the implementation
of TRIPS for five years in total since the date of entry into force of the Agreement
Establishing the WTO 57 on 1 January 1995. 58 For LDC, Article 66(1) provides that
they are entitled to a 10 years postponement from one year after the general date of
56
Ibid 48–9.
TRIPS Agreement art 65(1).
58
UNCTAD-ICTSD Project on IPRs and Sustainable Development, Resource Book on TRIPS and
Development (Cambridge University Press, 2005) 712 (‘UNCTAD-ICTSD Resource Book’)
57
47
entry into force of the Agreement Establishing the WTO (that is, from 1 January
1995, a total of 11 years. 59 This transitional period was intended to allow time for
governments in developing countries and LDC to build capacities and infrastructures
before having to fully implement TRIPS in their countries. Further, Article 66(2)
obliges developed member countries to provide incentives to enterprises and
institutions in their regions for the purpose of promoting and encouraging the transfer
of technology to the LDCs to enable them creating ‘a sound and viable technological
base’.
2.4.
Potential Effects of Stronger IP Protection Standards on SMEs in
Developing Countries
Proponents of stronger IP protection standards have mentioned the benefits of such
protection to the economy of the IP holders or the countries where the holders are
domiciled. This section of the thesis would like to argue that some of these
arguments are not only irrelevant for SMEs in developing countries, but also may
have contrary effects on them. In this discussion it is significant to identify the
potential real effects of stronger IPRs protection, as embodied in the TRIPS
Agreement, on SMEs in developing countries generally.
The first argument analysed here is the positive link between stronger IPRs
protection and foreign direct investment (FDI). Increased protection of IP in a
country is deemed important to attract overseas investment in that country,
59
TRIPS Agreement art 66(1).
48
particularly from developed countries. There are some studies that support this
argument. For example, two studies — one conducted by Jeong-Yeon Lee and
Edwin Mansfield 60 and one by Robert Sherwood 61 (the latter also cited in the writing
of Evelyn Su) 62 confirm the existence of a positive relationship between stronger IP
protection and an increase in FDI. However, another study, this one by Mansfield as
sole author, 63 reveals that such a relationship does not exist in all types of FDIs and
in all industrial sectors. The positive correlation between increased IP protection and
FDI is more likely to be found in research and development (R&D) related
investment and firms in the chemical, pharmaceuticals, agricultural chemicals,
machinery, and electrical equipment industries. 64 Similarly, in relation to the TRIPS
Agreement, Sherwood’s study finds the impact of the Agreement differs among
countries depending on their economy and level of technological sophistication. 65
Another report, from the United Kingdom (UK) Commission on IPR 66, reached a
similar conclusion to the above mentioned studies. The Report by teak Commission
on IPR finds that there is some evidence that IPRs may be a significant factor in
determining investment in a country; however, it is only the case for certain
industries, such as chemicals, and for particular activities, such as research and
60
Jeong Yeon Lee and Edwin Mansfield, 'Intellectual Property Protection and U.S. Foreign Direct
Investment' (1996) 78(181) Review of Economics and Statistics 181.
61
Robert M Sherwood, 'Intellectual Property Systems and Investment Stimulation: The Rating of
Systems in Eighteen Developing Countries' (1997) 37(261) IDEA 351.
62
Evelyn Su, 'The Winner and the Losers: The Agreement on Trade-Related Aspects of Intellectual
Property Rights and Its Effects on Developing Countries ' (2000) 23(1) Houston Journal of
International Law 169, 210–1.
63
Edwin Mansfield, 'Intellectual Property Protection, Direct Investment, and Technology Transfer 2'
(1995) (27) International Finance Corporation Discussion Paper , cited in ibid 209.
64
Su, above n 63.
65
Robert M Sherwood, 'Intellectual Property Systems and Investment Stimulation: The Rating of
Systems in Eighteen Developing Countries' (1997) 37(261) IDEA 351, cited in Su, above n 63, 212.
66
UK Commission on Intellectual Property Rights, 'Integrating Intellectual Property Rights and
Development Policy ' (UK Commission on Intellectual Property Rights, 2002)
<http://www.iprcommission.org/papers/pdfs/final_report/CIPRfullfinal.pdf>.
49
development. 67 For most low technology industries, however, IPRs are unlikely to be
a determinant factor in investment decision-making in regard to a particular
country. 68 The determining factors for FDI consist of availability of scientists and
engineers engaged in R&D, governmental macroeconomic policies, and availability
of appropriate infrastructure, including power, communication, and legal and judicial
institutions.69
These studies may be irrelevant for SMEs, which rarely deal with FDI; however, it is
important to highlight that the studies acknowledge the effect of the IP system can
not be generalised. IP system or TRIPS standards might have various effects on
countries at different states of economic development and at varying levels of
technological development. At a domestic level, the effects of an IP system or TRIPS
standards would be determined by industrial sector, size of industry and type of
activities. The Report of the UK Commission on IPR maintains that IP protection at
the levels mandated by TRIPS are only suitable as an essential determinant of growth
for countries with strong scientific and technological infrastructure, which generally
are not countries in the low income or developing countries or LDC categories. 70
Moreover, the UK IPR Commission also finds that patents are hardly used by SMEs
in most sectors in many developed countries as a mean of promoting their
innovation. 71 If this is the case in developed countries, which are advanced scientific
67
Ibid 27.
Ibid.
69
Kumariah Balasubramaniam, 'Access to Medicines: Patents, Prices and Public Policy - Consumer
Perspectives' in Peter Drahos and Ruth Mayne (eds), Global Intellectual Property Rights: Knowledge,
Access and Development (Palgrave Macmillan, 2002) 90, 102.
70
UK Commission on Intellectual Property Rights, above n 67, 25–6.
71
Ibid 25.
68
50
and technological states, SMEs in developing countries could be expected to use
them even less frequently than that.
In the trade sector, the UK IPR Commission Report concludes that there is some
evidence that in particular industries which are IP sensitive, such as pharmaceuticals
and chemicals, trade flows into developing countries are influenced by the strength
of IP protection. The stronger the IP protection exists in a developing country, the
more trade transactions on such IP sensitive products flow from developed countries.
This would not only make developing countries dependent on imported goods from
overseas, 72 but also reduce the number and production volumes of local ‘imitation’
(‘patent ignoring’ or ‘patent breaking’) industries in their countries. 73 Consequently,
the direct impact of this reduction is the loss of significant employment in such
industries. 74 Most firms involved in such industries are within SME category, which
normally do not perform complex R&D activities as do larger manufacturing
industries because of their limited financial resources, and lack of technical
knowledge and human resources. Therefore, in this instance, rather than having a
positive effect, stronger IP protection may potentially harm SMEs in developing
countries.
Furthermore, TRIPS standards may also have an impact of the raising the prices of
IPRs protected products and services. The costs of pursuing and defending IPRs,
particularly patents, are expensive, and most producers of IPR protected goods or
72
Keith E Maskus and Mohan Penubarti, 'How Trade-related are Intellectual Property Rights?' (1995)
(39) Journal of International Economics 227.
73
UK Commission on Intellectual Property Rights, above n 67, 26.
74
Keith E Maskus, 'Intellectual Property Rights and Economic Development' (2000) 32 Case Western
Reserve Journal of International Law 471, 485.
51
services pass these costs on to the consumers. As the prices become higher, the
capacity of people in developing countries to access such products would be
lessened. The situation becomes much worse when some of the products are
essentials, required by people in developing countries. These essential products
include: medicines for diseases (such as HIV/AIDS), 75 and education materials (such
as books and computer software). As users of IPRs, SMEs with limited financial
capacity in developing countries are also affected directly and indirectly by the
higher prices of products or services protected by IPRs.
Another argument in support of stronger IP protection standards maintains that the
implementation of TRIPS would encourage a transfer of technology from developed
countries to developing countries through FDI and licensing. Although the argument
may be true in some cases, it is important to note that IPRs are not the only
determinants of effective technology transfer to a country. Effective transfer of
technology depends on the ability of countries to absorb knowledge and then make
use and adapt it for their own interests. 76 All of these are obtained through the
improvement of education, and research and development system in developing
countries. Imposing stronger IP protection to boost research and development (R&D)
activities may be one way to improve the quality of education in developing
countries. However, as argued earlier, at the same time, such stronger protection
would also impede developing countries from gaining access to technology,
education and research materials from developed countries that are protected by
75
Martin Khor, 'Rethinking Intellectual Property Rights and TRIPS' in Peter Drahos and Ruth Mayne
(eds), Global Intellectual Property Rights: Knowledge, Access and Development (Palgrave
Macmillan, 2002) 201, 202.
76
International Centre for Trade and Sustainable Development (ICTSD) and United Nations
Conference for Trade and Development (UNCTAD), Intellectual Property Rights: Implications for
Development (2003) 129; UK Commission on Intellectual Property Rights, above n 67, 29.
52
IPRs. Again, as the user of IPRs protected products, services and technologies which
mostly come imported from developed countries, this would also limit access of
SMEs to the use of such things.
In relation to technology transfer from developed countries as a promise in return for
paying for the use of IP protected technologies, goods or services, SMEs in
developing countries have little chance of getting a direct benefit from that. As
discussed previously, FDI — which becomes the channel of technology transfer to
developing countries — is mostly relevant to high-technology industries. When a
foreign entrepreneur establishes an enterprise, either independently or jointly with
local entrepreneurs, in one country, this enterprise is unlikely to be small or medium
in size since there is a minimum requirement in regard to quantities of investment
funds that must be satisfied to establish this kind of enterprise. As recommended by
the OECD Report, such an enterprise may work with local SMEs and plays a role as
a vehicle for SMEs to access international market. In particular, the OECD
recommends the inclusion of local SMEs in the supply chains of multinational
enterprises and in indirect involvement in exporting activity, which leads to a
diffusion of technology and more efficient business models. 77 This recommendation
may work in the OECD countries, which are nearly all categorised as high-income
(developed) countries; 78 yet, with all the limitations of resources and problems of
77
Organisation for Economic Co-operation and Development (OECD), 'Promoting Enterpreneurship
and Innovative SMEs in a Global Economy: Towards a More Responsible and Inclusive
Globalisation' (OECD, 3-5 June 2004) <http://www.oecd.org/dataoecd/5/24/31919590.pdf>.
78
Only three member countries of the OECD, i.e. Chile, Mexico and Turkey, are classified as uppermiddle-income economies by the World Bank. See World Bank, Country and Lending Groups (2011)
<http://data.worldbank.org/about/country-classifications/country-and-lending-groups>.delete
extra
space before <
53
lack of infrastructure in developing countries, it is difficult to expect this
recommendation to work out in a developing country or LDC.
2.5.
International Efforts to Make TRIPS Beneficial to SMEs
This section would like to look at the efforts of international organisations (which
have concerns about the implementation of international IP standards) to help the
uptake of IPRs by SMEs in developing countries. As the WTO and WIPO are two
major international organisations that deal with the international IP system, this
section would like to present initiatives have been undertaken by these two
international organisations in helping the uptake of IPRs by SMEs. Apart from these
two organisations, ASEAN initiatives will also be discussed here. The selection of
ASEAN for discussion in this section is based on two reasons. First, Indonesia is
member of this organisation; thus, the initiatives of ASEAN would have impact on
Indonesian SMEs. Secondly, ASEAN has special paid attention to the issues of IP 79
and SMEs, which manifested in the formation of IP and SMEs sectorial bodies. 80
2.5.1. The WTO Framework
Despite the significant role of SMEs in the economy and trade activities in a country,
little efforts have been made by the WTO in relation to SME matters. In general, the
WTO does not have a specific body or program dedicated to SME interests in the
multilateral trading system. The only area in the WTO negotiations in which SMEs
79
The ASEAN Secretariat, Intellectual Property (2009 ) <http://www.aseansec.org/19965.htm>.
The
ASEAN
Secretariat,
SME
Developments
in
ASEAN
(2009)
<http://www.aseansec.org/19976.htm>.
80
54
drew attention is in the issue of Trade Facilitation, which was agreed upon during the
1996 Singapore Ministerial Conference. The statement of Italy’s Minister of Foreign
Trade, Ambassador Augusto Fantozzi, on the Singapore Ministerial Conference
explicitly acknowledged SMEs as ‘the true driving force behind international
trade’. 81 However, this issue only focuses on the matter of import trade
administration, customs procedures and documentation requirements. 82 The trade
facilitation issue did not link SMEs with the IPRs issue.
Regarding assistance for developing countries, the WTO, occasionally, organises
programs that are aimed to build the capacity of its developing member countries and
gain the benefits of its trade agreements. 83 One program that is specifically related to
IPRs is the colloquium for IP teachers working in developing countries and countries
with economies in transition. This program has been convened annually since 2004
by the WTO with WIPO as a joint-organiser. 84 In the first three annual programs, the
SMEs Division representative was invited to make a presentation on the issue of IP
in relation with SMEs. 85
81
Italy - Statement by the Right Honourable Augusto Fantozzi-Minister of Foreign Trade, WTO Doc
No WT/MIN(96)/ST/10 (Statement of the representative for Italy, WTO Ministerial Conference,
Singapore, 9 December 1996).
82
Thunder Lake Management Inc., 'Small and Medium Sized Business in the Context of WTO
Reform' International Trade Issues Briefing <http://www.thunderlake.com/briefings/smes.doc>.
83
Ibid.
84
World Intellectual Property Organization, Invitiation to Apply to the WIPO-WTO Colloquium for
Teachers
of
Intellectual
Property
(2009)
<http://www.wipo.int/academy/en/forms/wipo_wto_colloquium/index.html>.
85
World Intellectual Property Organization, World Intellectual Property Organization (WIPO) Small
and Medium Sized Enterprises (SMEs) Division: List of Main Activities January-December 2004
(2005) <http://www.wipo.int/export/sites/www/sme/en/activities/pdf/activities_report04.pdf>; World
Intellectual Property Organization, World Intellectual Property Organization (WIPO) Small and
Medium-Sized Enterprises (SMEs) Division: List of Main Activities January-December 2005 (2006)
<http://www.wipo.int/export/sites/www/sme/en/activities/pdf/activities_report05.pdf>; and World
Intellectual Property Organization, World Intellectual Property Organization (WIPO) Small and
Medium-Sized Enterprises (SMEs) Division: List of main Activities January-December 2006 (2007)
<http://www.wipo.int/export/sites/www/sme/en/activities/pdf/activities_report06.pdf>.
55
Efforts by the WTO in assisting the uptake of IPRS by SMEs in developing countries
must be seen in relation to Article 67 of the TRIPS Agreement. This Article speaks
explicitly of the obligation of the WTO members to provide technical and financial
cooperation to assist developing countries and LDC to facilitate the implementation
of the agreement on a mutually agreed basis. However, nothing in this Article refers
specifically to SMEs in developing countries. In fact, it is important to understand
that the assistance provided for developing countries as required in Article 67 are not
given within the organisational framework. The wording of Article 67 clearly
provides that members of the WTO which are in the category of developed countries
are the ones which are responsible to provide assistance to developing countries. It
means that the WTO, in general, and the TRIPS Council, in particular, does not have
any legal obligation to provide assistance for developing countries, let alone SMEs.
Therefore, this explains why the WTO, as the organisation which administers the
TRIPS Agreement, and the TRIPS Council, as the monitoring body within the WTO
for the implementation of TRIPS, have made little effort to give more attention to the
issue of IPRs and SMEs in developing countries.
2.6.2. The WIPO Framework
Although TRIPS belongs to the WTO, there is strong connection between these two
IP organizations — the WTO and WIPO. The Preamble of the TRIPS Agreement
states that one of the aims of the Agreement is ‘to establish a mutually supportive
relationship between the WTO and the World Intellectual Property Organization
56
(WIPO) as well as other relevant international organizations’. 86 Article 2 of the
TRIPS Agreement confirms this connection by requiring member countries to comply
with some Articles in the Paris Convention and the provisions in the TRIPS
Agreement shall not derogate the existing obligations under the Paris Convention,
the Berne Convention, the Rome Convention and the Washington Treaty. All of
these IP conventions are administered under WIPO.
Another connection is established through Article 68, which deals with the Council
for Trade-Related Aspects of IPRs. Under this Article, the TRIPS Council has the
functions to monitor the operation of the Agreement and to provide consultations on
TRIPS matters to member countries, especially in the context of dispute settlement
procedures. In carrying out these functions, the Council is to consult with and seek
information from any appropriate source, which includes WIPO. Then, the Article
specifies that with regard to the consultation, the Council was to establish appropriate
arrangements for cooperation with bodies of WIPO within a year of its first meeting.
The appropriate arrangements have already been established by the Agreement
between the WIPO and the WTO 1995, which entered into force on 1 January
1996. 87
Unlike the WTO, WIPO has bigger interests and makes more efforts related to SME
issues. WIPO member countries have understood that, despite the significant role of
SMEs in their economy, SMEs often underutilise the IP system. On 3 October 2000,
86
TRIPS Agreement, Preamble.
Agreement between the World Intellectual Property Organization and the World Trade
Organization, signed 22 December 1995, 35 ILM 754 (entered into force 1 January 1996)
87
57
WIPO members approved a proposal 88 to begin a new program of activities, focusing
on the IP-related needs of SMEs worldwide. This program of activities aims to
promote a more effective use of the IP system by SMEs, to raise awareness of the
importance of IP for SMEs worldwide, and to make the IP system more accessible,
less complicated and more affordable for SMEs. 89At the same time, WIPO
established a division dedicated to SMEs related to IP matters. In WIPO’s
organisational structure, the SMEs division is one of eight permanent branches 90 of
the Cooperation for Development Sector.
WIPO’s SMEs Division’s main objectives are to:
-
promote a more active and effective use of the Intellectual property system
by SMEs;
-
strengthen the capacity of national governments to develop strategies,
policies and programs to meet the intellectual property needs of SMEs;
-
improve the capacity of relevant public, private and civil society institutions,
such as business and industry associations, to provide IP-related to SMEs;
-
provide comprehensive web-based information and basic advice on IP issues
to SME support institutions worldwide. 91
88
WIPO General Assembly, Program For Assisting Small and Medium-Sized Enterprises (SMEs),
WO/GA/26/5, 26th (12th Extraordinary) sess (25 September - 3 October 2000).
89
World
Intellectual
Property
Organization,
About
the
SMEs
Division
(<http://www.wipo.int/sme/en/about_sme.html>.
90
The eight branches of Cooperation for Development Sector are the Technical Assistance and
Capacity Building Bureau for four regions, namely Africa, Asia and the Pacific, Latin America and
the Caribbean and Arab countries, and four divisions for SMEs, Least-Developed Countries, Certain
Countries in Europe and Asia, and Legislative and Legal Advice. See World Intellectual Property
Organization,
'WIPO-SMEs
Organigram
'
(2009)
<http://www.wipo.int/aboutwipo/en/strategic_realignment/organigram/october_2009/visio-cds.pdf>.
91
Ibid.
58
To achieve these main objectives, the SMEs Division has undertaken a range of
activities. Some key activities of SMEs Division include:
- development of comprehensive and user-friendly promotional information
materials, guides and training packages;
- organisation of training seminars for specific target audiences (in partnership
with relevant international and national institutions);
- commission and completion of research studies on issues relating to the
business use of IP in various countries;
- provision of assistance to SME support institutions, such as innovation centres,
‘incubators’, chambers of commerce, R&D institutions and others to establish
IP-related support services for their members and clients;
- creation and maintenance of an SME website with articles, studies and best
practices, targeted to entrepreneurs and SME support institutions; and
- circulation of a monthly electronic newsletter on intellectual property for
SMEs. 92
The above activities have largely been conducted by the SMEs Division in
collaboration with government agencies and organisations working to promote SMEs
development at local, national and international levels. For training, seminars and
workshops, the SMEs Division organises these on a regional basis, because the needs
and focus of each region is different.
92
Ibid.
59
Regarding IP education, there is a WIPO Academy which dedicated to cater to the
demand for knowledge and skills in IP. The WIPO Academy was established in 1998
and serves as ‘a center of excellence in teaching, training and research in IP’. 93 It has
five core programs, which comprise professional training, distance learning, policy
development, teaching and research, education and degree in IP. 94 Although the
programs of the WIPO Academy are not particularly designed for SMEs, the target
audiences of the programs may include SME actors. Moreover, in 2007–2008, the
WIPO Academy planned to conduct a number of new specialised/advanced courses
focused on application of IP via a distance learning program. One of the proposed
new courses is ‘IP and Small and Medium Sized Enterprises’. 95 While the course did
not start in 2009 as predicted, it is an evidence of the efforts of WIPO for SME
issues. 96
2.5.2. The ASEAN Framework
ASEAN is a regional organisation, which consists of 10 countries (Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand
and Vietnam) located in the South East region of Asia. The organisation was
established in 1967 with the original five members being Indonesia, Malaysia,
Philippines, Singapore, and Thailand. 97 ASEAN’s aims and purposes are to build
economic, social, cultural, technical and educational cooperation among its member
93
World
Intellectual
Property
Organization,
WIPO
Worldwide
Academy
(<http://www.wipo.int/academy/en/index.html>.
94
Ibid.
95
World Intellectual Property Organization, 'WIPO Worldwide Academy: Distance Learning Program
2007-8' (2007) 2009(5 October )
96
In 2010 and 2011, the course still has not commenced. See World Intellectual Property
Organization, Course Catalog (2011) <http://wipo.int/academy/en/courses/rp_catalog/index.jsp>.
97
The Agreement Establishing the Association of South-East Asian Nations, 5 ILM 985 (signed and
entered into force 8 August 1967) ('Bangkok Declaration').
60
countries, to promote the regional peace and stability through an abiding respect for
justice and the rule of law, and adherence to the principles of the United Nations
Charter. 98
As mentioned above, ASEAN has established a number of sectorial bodies under the
purview of the ASEAN Economic Minister (AEM) that work on IP issues since
1995. In that year, the member countries signed the ASEAN Framework Agreement
on Intellectual Property Cooperation. 99 Some objectives of the Agreement are to
promote cooperation in the field of IP among government agencies, private sectors,
and professional bodies of ASEAN; to explore the possibilities of creating ASEAN
patent and trademark systems; and to explore the possibility creating ASEAN
standards and practices which comply with international standards. 100
Besides this agreement, there is another document on IP issue, namely the ASEAN
Intellectual Property Right Action Plan (AIPRAP) 2004–2010, which also
demonstrates the importance of IP issues for ASEAN. In this action plan, member
countries of the ASEAN have pledged to work together to improve the regional
framework, its policies and institutions relating to IP and IPRs), to promote IP
cooperation and dialogues in the region; and to broaden and deepen regional human
resources, institutions, and public awareness of issues and implications, relating to IP
and IPRs. 101 The action plan has three focus programs and projects, that is, Fostering
IP Asset Creation in ASEAN, Developing a Framework for Simplification,
98
The ASEAN Secretariat, The Founding of ASEAN (2009) <http://www.aseansec.org/7069.htm>.
The ASEAN Secretariat, ASEAN Framework Agreement on Intellectual Property Cooperation,
Bangkok, Thailand, 15 December 1995 (2009) <http://www.aseansec.org/24526.htm>.
100
Ibid.
101
The ASEAN Secretariat, ASEAN Intellectual Property Right Action Plan 2004-2010 (2009)
<http://www.aseansec.org/7980.htm> (‘ASEAN IPR Action Plan’).
99
61
Harmonization, Registration and Protection of IPRs, and Promoting Greater
Awareness and Building up IP Capacity.
Under the programs and projects for ‘Fostering IP Asset Creation in ASEAN’, there
are several targets, one of which is ‘maximizing the contribution of IPR to the
growth and competitiveness of firms, including SMEs’. 102 To reach this target, there
are two activities to be undertaken. The first activity is to develop strategic plans and
policy measures for the promotion of innovation within firms, including SMEs, with
the focus on promotion of innovation activities, IP assets and IP ownership of firms
and the compiling of customised action plans to enable SMEs developing business
plans and services that are related to IP and IPR issues. 103 The next activity is to
encourage better a working knowledge of enterprises (including SMEs), science and
technology, R&D institutions, universities, and other stakeholders on effective
strategies for IP asset management through training and seminar activities. 104 The
first and the second activities were planned for completion in 2004–2006 and 2005–
2010, respectively.
In undertaking these activities, ASEAN has active cooperation with the dialogue
partner, donor countries and agencies, and private sector organisations, which
include the ASEAN Intellectual Property Association, World Intellectual Property
Organization, Australia, the EU and the Japan Patent Office. 105 For instance,
cooperation between ASEAN and the Australian government was embodied in the
ASEAN-Australia Development Cooperation Program (AADCP), which includes the
102
Ibid 7.
Ibid.
104
Ibid.
105
The ASEAN Secretariat, Intellectual Property (2009 ) <http://www.aseansec.org/19965.htm>.
103
62
Regional Economic Policy Support Facility (REPSF) as one of its three
components. 106 The REPSF funds research projects conducted by ASEAN and
Australian and New Zealand researchers on regional economic policy analyses for
the ASEAN Secretariat. 107
The SME issue (as well as IPRs) is managed by a sectorial body under the purview
of the AEM. This sectorial body has a similar planning document to the AIPRAP in
IP sector, namely the ASEAN Policy Blueprint for SME Development (APBSD)
2004–2014, which consists of strategic work programmes, policy measures and
indicative output for SMEs in the ASEAN region. 108 One of its focus programmes
and activities areas is access to technology, with a program of SME technology
upgrades and transfers of innovative technology. This program has as one of its
activities to collect and disseminate the best practices at the enterprise and policy
levels in technology upgrading and transfers, and IP matters involving SMEs within
and beyond the ASEAN region during the period of APBSD. 109 Outputs expected
from this kind of activity include on-line disseminated documentation on success
stories, and good and superior practices at the levels of enterprises, and policy in the
two matters (namely technology upgrades and transfers, and IP involving SMEs),
and regular exchanges of views and experiences on the above matters among all the
stakeholders, including large and multinational enterprises. 110
106
The other two components are the Program Stream and the Regional Partnerships Scheme. See The
ASEAN Secretariat, About REPSF (2008) <http://www.aseansec.org/aadcp/repsf/aboutrepsf.html>.
107
Ibid.
108
The ASEAN Secretariat, ASEAN Policy Blueprint for SME Development (APBSD) (2004)
<http://www.aseansec.org/pdf/sme_blueprint.pdf>.
109
Ibid 5.
110
Ibid 21.
63
2.6.
Conclusion
Since the emergence of an idea which associated IPRs with trade issues, with this
idea late, was included in TRIPS, there has been a long debate between developed
and developing countries. TRIPS had a long and rocky history before it was
concluded as an international agreement under the WTO. On the one hand,
developed countries — which have enormous intellectual assets and have become
victims of IP infringements and piracies — demanded that the issues of IPRs related
trade be regulated under a stringent international agreement which would have
stronger standards of protection and binding dispute settlement mechanisms. On the
other hand, developing countries — which were concerned about the effects of
stronger IP protection on their development — opposed the idea at the beginning.
However, the strategies of coercion which were used by the US made developing
countries agree to ratify the Agreement Establishing the WTO and TRIPS in 1994.
TRIPS officially entered in force on 1 January 1995; however, for developing
countries and LDC, it entered into force five and 10 years later respectively after that
date. The obligation under TRIPS is for the adoption of further reforms to the IP
system in many developing country members. The new IP system does not only
include TRIPS standards, but also other IP standards beyond TRIPS, such as petty
patent, traditional knowledge (TK) and traditional cultural expressions (TCE).
After several years, it seems the new IP system has not yet been successfully
implemented in developing countries and LDCs. The pace of the process of
transforming any existing IP regime in developing countries is slow and is a difficult
task. For most of the developing countries, the idea of IPRs is foreign and was
64
introduced through colonisation, which left the issues of formulating the initial IP
system in the hands of the colonial powers. When the colonial powers left, most
developing countries did not have much knowledge of how to manage their IP
systems effectively in their respective jurisdictions. In many cases, although
developing countries are free to choose not to follow the global IP system, they do
not have many options if they want to participate in the international trading system,
and to do so under the auspices of the WTO.
To make it worse, developing countries also lack the capacities to enforce global IP
standards effectively. They need to establish strong and effective judicial and
administrative institutions to support the effective implementation of the global IP
system in their countries. This is certainly expensive and needs highly skilled human
resources. Although developing countries have received financial and technical
assistance from developed countries to establish these institutions, in the long term,
they are expected to be independent and to run and maintain these institutions
without assistance.
Regarding SMEs in developing countries, TRIPS does not have any provision that
makes particular mention of SMEs. However, several parts in TRIPS do have
indirect impacts on SMEs in developing countries. When developing countries
reformed their domestic IP legislation, such legislation would have an effect on
SMEs as key economic players in the country. Standards of protection are the parts
of TRIPS that have major impacts on SMEs in developing countries indirectly.
65
Just as developing countries call for international financial and technical assistance to
implement TRIPS effectively and gain benefits from the adoption of TRIPS, SMEs
also need such assistance, though on a smaller scale. Two global IP organisations,
the WTO and WIPO, are expected to provide such assistance to SMEs in developing
countries. Of these two organisations, WIPO has the more active role in providing
assistances to SMEs, although most of its efforts are not especially designed for
SMEs in developing countries. WIPO also established a special formal body within
its organisation for SMEs. The WTO, as an organisation which embraces TRIPS,
provides nearly none type of assistance for SMEs in developing countries. However,
the WTO depends on the initiatives of its members from developed countries to
provide such assistance to SMEs in developing countries. Besides cooperating with
the global organisation, developing countries could also work together in the
framework of a regional organisation, such as ASEAN, to make TRIPS standards
effectively integrated in SME business strategies in their region. Surely, to make it
happen, such regional organisation needs to apply IP policies which will benefit
SMEs.
66
CHAPTER 3
INTERNATIONAL STANDARDS OF INTELLECTUAL
PROPERTY RIGHTS AND THEIR RELEVANCE TO SMALL
AND MEDIUM ENTERPRISES IN DEVELOPING COUNTRIES
3.1. Introduction
The national IP system in a country exists primarily as a consequence of its
obligations under international, multilateral, bilateral or regional agreements. 1 As the
most comprehensive international agreement on IPRs, the Agreement on Trade
Related Intellectual Property Rights 2 (TRIPS) has an important role in designing
national IP laws of WTO member countries. It stipulates a set of minimum IP
protection standards that may be implemented differently in member countries. 3
After the rules or principles stipulated in TRIPS are transformed into national laws,
they are binding on all entities in the country, including SMEs. Therefore, indirectly,
the implementation of TRIPS does have an impact on SMEs in a country.
Although there were long debates on various IP issues between developed and
developing countries during the TRIPS negotiations, almost none of the issues,
except transfer of technology, was related to the concerns of SMEs, particularly
1
Michael Blakeney, International Intellectual Property Jurisprudence after TRIPS
Intellectual Property in the New Millennium: Essays in Honours William R. Cornish
(Cambridge University Press, 2004) 3.
2
The Agreement on Trade-Related Aspects of Intellectual Property Rights forms Annex 1C to the
Agreement Establishing the World Trade Organisation, opened for signature 15 April 1994, 1867
UNTS 3 (entered into force 1 January 1995) ('TRIPS Agreement' or 'TRIPS').
3
Carlos M Correa, Trade Related Aspects of Intellectual Property Rights : A Commentary on the
TRIPS Agreement (Oxford University Press, 2007) vii.
67
those located in developing countries. Since SMEs also have the potential to develop
new and innovative products and services, 4 IPRs are certainly important for
protecting their IP assets as well as those of large enterprises. However, comparing to
large enterprises, SMEs do not command the levels of resources required to access,
create and maintain IP systems properly. 5 Also, for SMEs in developing countries,
their problems related to IP are more complex than for those in developed countries
as well as for larger entities in their own countries. With a lack of support from
government and problematic legal infrastructure, standards of IP protection imposed
by TRIPS could be a burden for SMEs operating in developing countries. Thus, the
absence of SME issues from the initial and subsequent discussions on TRIPS
provisions (which are crucially relevant for SMEs) provides some evidence that the
TRIPS standards have been set only to satisfy the needs of large enterprises.
TRIPS covers copyright and related rights, trademarks, geographical indications,
industrial designs, patents, plant variety protection (PVP), layout designs
(topographies) of integrated circuits, and undisclosed information (trade secrets). The
minimum standards, together with the scope and the use of these rights, are detailed
in Part II (Articles 9–40) of the TRIPS text. In general, this part presents the subjectmatter protected, the rights to be granted, the exceptions to those rights and the
minimum duration of protection of each IPR covered in TRIPS. 6 The standards come
mostly from the substantive obligations of the existing primary WIPO conventions,
4
Organisation for Economic Co-operation and Development (OECD), OECD SME and
Entrepreneurship Outlook (The Secretary-General of the OECD, 2005) 38.
5
Ibid.
6
The World Trade Organization, TRIPS: A More Detailed Overview of the TRIPS Agreement
(<http://www.wto.org/english/tratop_E/trips_e/intel2_e.htm>
68
that is, the Paris Convention for the Protection of Industrial Rights,7 the Berne
Convention for the Protection of Literary and Artistic Works, 8 the Rome Convention
for the Protection of Performers, Producers of Phonograms and Broadcasting
Organisations, 9 and the Washington Treaty on Intellectual Property in Respect of
Integrated Circuits, 10 Besides refining the existing obligations, this part also inserts
the new rights. Those are rental rights, geographical indications, trademarks and
service marks, and the protection of trade secrets. 11
Although it has been suggested that the appropriate integration of IPRs in business
strategies may enhance the competitiveness of SMEs worldwide, there are some
IPRs, such as layout designs (topographies) of integrated circuits and patents, which
are not much used by SMEs, particularly in developing countries. Patents and layout
designs (topographies) of integrated circuits protect high technology innovations are
rarely developed by SMEs in developing countries because of their limited resources
to conduct complex research and development activities required. Correa, however,
suggests that small numbers of innovative SMEs in particular sectors, such as the
biotechnology and pharmaceutical sectors, need the patent system to survive. 12
Using a survey of literature, this chapter summarises standards provisions of all IPRs
covered in TRIPS (with the sole exception of layout design (topographies) of
7
See the TRIPS Agreement art 2(1).
See the TRIPS Agreement art 9(1).
9
Certain conditions, limitations and exceptions permitted by the Rome Convention are incorporated in
Article 14 of the TRIPS Agreement.
10
See the TRIPS Agreement art 35.
11
Daniel Gervais, The TRIPS Agreement: Drafting History and Analysis (Sweet & Maxwell, 2nd ed,
2003), 62.
12
Carlos M Correa, 'Do SMEs Benefit from Patent Protection?' in Carlo Pietrobelli and Arni
Sverrisson (eds), Linking Local and Global Economies: The Ties that Bind (Routledge, 2004) 220,
221.
8
69
integrated circuits) and examines their relevance to SMEs in developing countries.
This chapter also discusses plant variety protection rights, which is only covered
incidentally in TRIPS, and two other IPRs, namely petty patents and traditional
knowledge, which are not included in the TRIPS Agreement but have a connection
with the issue of TRIPS and SMEs in developing countries. As mentioned at the
beginning of this sub-section, TRIPS standards and international standards on petty
patents, TK and TCE are transformed into national IP laws of most countries in the
world. Therefore, discussion on such international IP standards, whether within or
beyond TRIPS, needs to be included in a thesis under the central theme of the uptake
of IPRs by SMEs in developing countries in a particular country, as it is in this
thesis.
3.2. Intellectual Property Rights Governed in the TRIPS Agreement
3.2.1. Copyrights
Copyright protects works based on scientific and creative ideas. Protection of
copyright is certainly needed for businesses, including SMEs, working in
information technology (IT), local publishing and in creative industries, such as the
batik industry.
The first Article in Part II of the TRIPS Agreement recognises the importance of the
Berne Convention in providing basic copyright standards. It provides that each
‘member shall comply with Articles 1–21 and the Appendix of the Berne Convention
70
(1971)’. 13 As demanded by the US in the negotiation process, TRIPS excludes
Article 6bis of the Convention concerning moral rights. 14 Article 9(2) defines the
scope of copyright protection as limited only to expression ‘not to ideas, procedures,
methods of operation or mathematical concepts as such’. Article 2(1) of the Berne
Convention, however, gives examples of the types of works that would be protected
under copyright and includes books, pamphlets, lectures, addresses, sermons, dramamusical works, choreography, musical composition, drawing, painting, sculpture,
engraving and lithography, and so on.
Limitations and exceptions to exclusive copyrights are found in Article 13. It
requires members to restrict ‘limitations or exceptions to exclusive rights to certain
special cases which do not conflict with a normal exploitation of the work and do not
unreasonably prejudice the legitimate interests of the right holder’ 15. The wording in
this article, also known as the ‘three step’ test, comes from Article 9(2) of the Berne
Convention, which is only intended for rights of reproduction. The TRIPS
Agreement, however, extends the application of the ‘three step’ test to all forms of
exclusive rights attached to copyright, such as rental right and rights of distribution.
Regarding the period of copyright protection, rather than stating it explicitly, TRIPS
follows what has been stated in Article 7(1) of the Berne Convention. The Article
sets a minimum term of copyright protection, which is the life of the author/s plus an
additional 50 years, 16 50 years after the works have been published, 17 or 25 years
13
The TRIPS Agreement art 9(1).
Ibid.
15
Ibid art13.
16
The Berne Convention art 7(1).
17
Ibid arts 7 (2)–(3).
14
71
after the making of photographic and applied art works. 18 Yet, it does not specify the
duration of copyright protection for a work where a natural person cannot be
identified. Article12 of TRIPS clarifies this by explaining that when the term of
copyright protection for a work, other than a photographic work or work of applied
art, is calculated on a basis other than the life of natural person, the term shall be no
less than 50 years from the end of the calendar year of authorised publication.
Alternatively, if there is no authorised publication within 50 years after the making,
the work shall be protected for 50 years from the end of the calendar year of
making. 19
Copyrights have significant impacts on issues of development. Like a coin with two
sides, copyright could affect development issues either in a positive or a negative
way. On the positive side, as postulated in some theories of justification for the
imposition of copyright, copyrights provide a just reward for the creators’ labour
which leads further to the stimulation of creativity. 20 In contrast, copyright on some
products, such as scientific literature and television programs, could impede the
diffusion of knowledge in developing countries. As copyrights provides rewards for
the rights holders by putting in rental and use fees to be paid by users, the price of
products or services, with which they are associated, would be more expensive than
otherwise would be the case. In many cases, the price of these copyrighted products
or services are unaffordable for people living in developing countries, especially the
poorer ones. The diffusion of knowledge is important to improve education and to
reduce health and other problems associated with poverty in such countries. For
18
Ibid art 7(4).
UNCTAD-ICTSD, Resource Book on TRIPS and Development, UNCTAD-ICTSD Project on IPRs
and Sustainable Development (Cambridge University Press, 2005) 185.
20
Correa, A Commentary on the TRIPS Agreement, above n 3, 115.
19
72
instance, copyright may restrict researchers in developing countries in their attempt
to gain a comprehensive knowledge on studies which could solve health or
agriculture problem in their countries. 21 Although, as stated above, copyrights have
limitations and exceptions which permit people to use them in a certain way for noncommercial purposes, these are not effective enough to deal with the development
issues that arise in relation to the implementation of stronger copyright standards.
Despite these general positive and negative effects, copyrights also have effects on
business, including SMEs. In theory, copyrighted works enable a business to control
the commercial exploitation of its original creative works, which generate income
and raise funds from financial institutions. 22 In addition to that, a business that holds
copyrights and related rights could take action against infringers and claim monetary
compensation for any infringements. 23 Nevertheless, these advantages would only be
obtained when there are effective laws and a strong administrative and judicial
system to support the implementation of copyrights and related rights in a country.
Most developing countries do not have these support systems to assist them to gain
the full benefits of copyrights and related rights. Consequently, in many instances,
SME owners in developing countries see copyrights as having little benefit for their
businesses and therefore the integration of such rights in their businesses is not seen
as particularly urgent.
21
Charles Clift, 'The Development Impact of Rich Countries' Policies: The Case of Intellectual
Property Rights' in Roberto Picciotto and Rachel Weaving (eds), Impact of Rich Countries' Policies
on Poor Countries' (Transaction Publishers, 2004) 161, 164.
22
World Intellectual Property Organization, Creative Expression: An Introduction to Copyright and
Related Rights for Small and Medium-sized Enterprises, Intellectual Property for Business (World
Intellectual Property Organization, 2006) 5.
23
Ibid.
73
3.2.2. Trademarks
Compared to other IPRs, the trademark is the most familiar IPRs for all sizes of
businesses and types of industry. Trademarks are an identifier, which distinguish
products or services of one enterprise from those of its competitors. 24 Besides that, a
trademark is also a guarantee of consistent quality of a product or service. It means
that, unlike other IPRs, the trademark has an important role to assist in the marketing
of the products. As the trademark has this marketing function, it is needed by
businesses, regardless of their size and type of industry, from the early stages of an
enterprise’s existence. Although there may be many SMEs in developing countries
that could begin the operation of their businesses without trademarks, it is more
likely that SMEs will integrate trademarks in their businesses as it brings instant
benefits for their businesses, in comparison to other IPRs.
The provisions that discuss trademark standards in TRIPS stated in Articles 15 to 21.
These provisions govern the subject matters protected by trademarks, rights
conferred, exceptions, duration of protection and requirement of use. Article 15(1)
defines the subject matters protected as a trademark under the TRIPS Agreement,
that is, any signs or any combination sign which are capable of distinguishing goods
or services. This may include personal names, letters, numerals, figurative elements,
combination of colours and any combination of such signs. However, if the signs are
not capable of distinguishing related goods or services, the distinctiveness
requirement may be acquired through the use of signs as a trademark. Another
condition is that the signs must also be visually perceptible.
24
World Intellectual Property Organization, Why are Trademarks Relevant to the Success of Your
SME? (2010) <http://www.wipo.int/sme/en/ip_business/marks/tm_relevance.htm>.
74
Article 15(2) provides limitations of the subject matters defined in the previous
paragraph. It allows member countries to deny registration of a trademark on other
grounds as long as such grounds do not derogate from the provisions of the Paris
Convention (1967). 25 This paragraph is consistent with Article 6(1) of the Paris
Convention (1967) which asserts that the conditions for the filing and registration of
trademarks will be determined by the legislation of each member country.
Nevertheless, the Convention also refers to two other grounds to refuse or to
invalidate and to prohibit the use of armorial bearings, flags, and other State
emblems, of the member countries of the Paris Convention, official signs and
hallmarks indicating control and warranty adopted by them, and any imitation from a
heraldic point of view, without authorisation by the relevant authorities, as
trademarks or as elements of trademarks. 26 This also applies for the use of ‘armorial
bearings, flags, other emblems, abbreviations, and names, of international
intergovernmental organizations of which one or more member countries’ 27 of the
Paris Convention members.
Article 16 deals with rights conferred to trademark holders. It grants trademark
holders the right to prevent all third parties unauthorised use — in the course of trade
— of identical or similar signs for goods or services to those in respect of which the
trademark is registered, where such use would result in a likelihood of confusion. 28
With regard to internationally well-known trademarks, the Article provides that
25
The Paris Convention for the Protection of Industrial Property (1967), opened for signature 13
January 1968, 828 UNTS 305 (entered into force 26 April 1970) (‘Paris Convention’).
26
The Paris Convention art 6ter (1)(a).
27
Ibid art 6ter (1)(b).
28
Ibid art 16(1).
75
Article 6bis of the Paris Convention (1967) 29 shall apply to goods or services which
are not only similar 30 but also not similar 31 to those in respect of which a trademark
is registered. The use of trademark in dissimilar goods or services, however, must
indicate a connection between those goods or services and the owner of the
registered trademark and that it would likely damage the interests of the owner of the
registered trademark. 32 In addition, this Article also provides that the knowledge of
the trademark in the relevant sector of the public as a result of the promotion in that
member country would be considered as one factor to determine whether a trademark
is ‘well-known’. 33
Limited exceptions to the rights conferred are found in Article 17, which requires
such exceptions consider the legitimate interests of the trademark holder and the
third parties. Then, Article 18 provides that the protection of a registered trademark
shall be given for at least seven years and the registration of a trademark is definitely
renewable. Article 19 maintains a trademark may be cancelled only after it is not
used for a continuous period of a minimum of three years, unless there are valid
reasons based on obstacles to such use shown by trademark holders. Such valid
reasons may include import restrictions on or other government requirements for
goods or services protected by the trademark. 34
29
Article 6bis of the Paris Convention (1967) requires member countries ‘to refuse or to cancel the
registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a
translation, liable to create confusion’, of a well-known mark in the country of registration that is used
for identical or similar goods. This Article also allows a period of a minimum of five years from the
date of registration to cancel such a mark. However, for a mark registered or used in bad faith, there is
no time limit for requesting the cancellation or the prohibition of such a mark.
30
The TRIPS Agreement art 16(2).
31
Ibid art16(3).
32
Ibid.
33
Ibid art16(2).
34
Ibid art 19(1).
76
Before the negotiation of TRIPS, there were many national trademark laws,
particularly in developing countries, which contained other requirements regarding
the manner in which trademarks could be used. 35 Article 20 prohibits such
requirements which burden unjustifiably the use of a trademark in commercial
activities. These include ‘use with another trademark, use in a special form or use in
a manner detrimental to its capability to distinguish the goods or services of one
undertaking from those of other undertakings’. 36 However, this Article allows the
mark or name of the producers to be included with that of the trademark owner. In
addition, Article 20 provides that local enterprises not use its mark ‘without linking it
into the trademark’. This article is intended to recognise the role of local producers in
supplying the goods or services, but at the same time, prevents them from taking
unfair benefit of the foreign-origin trademark. 37
In the context of trademark infringement, the position of SMEs is quite unique in
Indonesia. As the owner of a business, small and medium entrepreneurs are not only
the ones who become the victim of trademark infringement, but in many cases, they
are also the infringers of others’ well-known trademarks. In the past, there were
many cases of Indonesian local entrepreneurs, particularly SMEs, registering foreign
well-known trademarks in Indonesia without the intention to use the trademarks.
They had the intention of selling back the registered well-known trademarks to the
actual foreign owners who had just started their business activities in Indonesia. 38 In
other cases, local entrepreneurs, particularly those who just started their business on
35
UNCTAD-ICTSD, Resource Book on TRIPS, above n 19, 246.
The TRIPS Agreement art 20.
37
UNCTAD-ICTSD, Resource Book on TRIPS, above n 19, 247.
38
Aries Margono et al, 'Menyapu Mafia Pedagang Merek [Wipe Off Trademark Entrepreneurs
Mafia]', Tempo (Jakarta), 1 August 1992, 38.
36
77
a small and medium scale, took a ‘free ride’ ‘on the back’ of well-known trademarks
by counterfeiting well-known trademark products, their higher recognition and
reputation often guaranteeing increased sales and profits to the ‘imitation
manufacturer’).
3.2.3. Geographical Indications
For a country like Indonesia which is spread over a large archipelago and includes
diverse instances of regional uniqueness, a geographic indication (GI) is relevant to
protect products which originated from these particular regions. GI protection
guarantees the unique quality and reputation of the products from a particular region.
Besides that, GI also protects a regional product from misappropriation of foreign
entities by preventing a GI from being registered as a trademark in another country.
Needless to say, regional products are not only manufactured by large enterprises,
but also SMEs in that region. Batik and jamu are examples of products which bear
unique regional characteristics and are also produced by SMEs. 39
TRIPS defines ‘geographical indications’ as ‘indications which identify a good as
originating in the territory of a Member, or a region or locality in that territory, where
a given quality, reputation or other characteristic of the good is essentially
attributable to its geographical indication’. 40 TRIPS requires its member countries to
provide the legal means to prevent the use of any GI that misleads the public as to the
39
For detailed discussion on the unique regional characteristics of batik and jamu, see chapters 6 and
7.
40
The TRIPS Agreement art 22(1).
78
geographical origin of the good 41 and constitutes an act of unfair competition (as it
trades on the reputation of products or services from the area indicated). 42 A TRIPS
member country is expected to refuse or to invalidate the registration of a trademark
that contains a GI which is not related to the true place origin of goods. 43 Moreover,
TRIPS prohibits any use of a GI which, ‘although literally true as to the territory,
region, or locality in which the goods originate, falsely represents to the public that
the goods originate in another territory’. 44 This provision applies where two
territories or localities have the same name and one of them has a reputation as the
origin of GI goods. In this situation, the territory or locality which has the same name
but is not true origin of the GI goods must not use a corresponding GI to take
advantage of the reputation of another territory or locality. 45
Article 24 details a list of exceptions to the obligation to protect geographical
indications which are contained in Articles 22–23. Paragraph 5 provides that this
section does not apply to a trademark that is identical with, or similar to a GI but has
been (i) applied or registered in good faith or (ii) has been used before the application
of TRIPS or before the GI was protected in its country of origins. 46 Moreover,
member countries are not obliged to apply the provisions in this section to a GI of
another member with regard to a good or service where such a good or service is
identical to one in their own jurisdiction and to which the term ‘customary’ in the
common language in their territories applies. 47
41
Ibid art 22(2)(a).
Ibid art 22(2)(b).
43
Ibid art 22(3).
44
Ibid art 22(4).
45
UNCTAD-ICTSD, Resource Book on TRIPS, above n 19, 295.
46
The TRIPS Agreement art 24(5).
47
Ibid art 24(6).
42
79
Regarding any request made by member countries to refuse or to invalidate a
trademark as stated in Articles 22(3) and 23(2), Article 24(7) allows this request to
be made within a five year period after the GI has become ‘generally known’ in the
country where the request is made. Alternatively, the request may be made within
five years after the registration of trademark, if it is earlier than the date on which the
adverse use of the GI became known. 48
The Article also confirms the right of any person to use his or her name or the name
of his or her business predecessor in the commercial activities to be excluded from
the application of this section, provided that the use of such name does not mislead
the public. 49 Further, the last paragraph in this Article states that no protection shall
be given for GI which (i) are not protected or cease to be protected or (ii) are not
used in their country of origin. 50
In a manner similar to trademarks, GI has functions as an identifier and a quality
guarantor in the market. Although sharing similar functions, GI has characteristics
which are different to trademarks. First, it only applies to goods, not services. 51
Secondly, the GI holder is relevant producers from the geographical location,
representative of community from those areas, or association of customers, rather
than an individual. 52 Thirdly, a trademark distinguishes the products or services of
48
Ibid art 24(7).
Ibid art 24(8).
50
Ibid art 24(9).
51
Correa, A Commentary on the TRIPS Agreement, above n 3, 217.
52
Blakeney, Michael Blakeney, Trade Related Aspects of Intellectual Property Rights: A Concise
Guide to the TRIPS Agreement (Sweet & Maxwell, 1996), 72.
49
80
one enterprise from those of others, while a GI identifies a good as originating from
some specific territory. 53
In some countries, GI is considered as a part of trademarks system. For instance, the
U S Patent and Trademark Office requires that GI protection be obtained through the
trademark system. 54 In Indonesia too, the GI provisions are included in the 2001
Trademark Law. 55 Another example is China, where GI protection for non-food
products is obtained through the Trademark Law. 56 In these examples this means that
in order to obtain protection, there is registration requirement for GI. In fact, TRIPS
does not set out such requirement for a GI, 57 and it does not even specify the
methods of GI protection. Yet, the common practice, as occurs in most countries in
the world, requires a registration to obtain GI protection. Every registration process
in each country involves bureaucratic elements, the quality of which varies in terms
of job performance. When such performance is poor, as is usually the case in
developing countries, registration could pose problems for business, especially
SMEs, which have limited resources, and may have to deal with inflexible processes
prolonged by bureaucratic inadequacies or ignorance, and particularly where funds
(additional to those fees legitimately imposed by the various government entities) are
expected by elements within the bureaucracy to expedite processes (a situation that
can also apply in developing countries and LDC).
53
Correa, A Commentary on the TRIPS Agreement, above n 3, 218.
Sarah M Faria, Producers' Perspectives towards the Geographical Indication Recognition Process
in Brazil: An Analysis of Difficulties Found in the Process and Possible Improvements (Master of Arts
Thesis,
Ohio
University,
2010)
<http://etd.ohiolink.edu/sendpdf.cgi/Faria%20Sarah%20M.pdf?ohiou1280298282>.
55
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark]
(Indonesia)arts 56–58.
56
Gui Hong Wang, 'Application of Geographical Indication Systems in China: Jinhua Ham Case
Study'
(Food
Agricultural
Organization,
2008)
<http://www.foodqualityorigin.org/documents/JinhuaHam.pdf>.
57
Blakeney, A Concise Guide to the TRIPS Agreement, above n 52, 72.
54
81
Once the registration process is complete, however, the protection of GI could be
exercised beyond the jurisdiction of country that has granted such protection. As
stated in Article 22, members of the WTO shall provide protection for the party
concerned
to
prevent
the
use
of
GI,
either
as
a
trademark
or
a
designation/presentation of a good, which misleads the public as to the true place of
origin. 58 When the term or sign is considered as GI, it cannot be registered as
trademark or used in the course of trade in all WTO member countries. 59
Accordingly, these provisions ensure that a business enterprise, including an SME,
can rely on the GI system to prevent the use of its GI as a trademark or other use in
the course of trade in other WTO countries.
3.2.4. Industrial Designs
Industrial design is another form of IPRs that is relevant for all sizes of business,
from small to large enterprises. Since industrial design protects ornamental or
aesthetic aspects of a product, there are a wide variety of products of industry, which
are suited to be the subject matter of its protection. Despite its large scope of usage
and in comparison with other IPRs, the degree attention on industrial design given in
the text of TRIPS is little. TRIPS contains only two Articles on industrial designs,
namely Article 25 on the requirements for protection, and Article 26 on the extent of
exclusive rights, the admissible exceptions and the duration of protection.
58
59
The TRIPS Agreement art 22(3).
Ibid.
82
Article 25(1) requires TRIPS member countries to provide protection for
independently created industrial designs that are new or original. Although this
paragraph sets out requirements for industrial designs protection, it does not provide
the type of subject matter that constitutes industrial designs. The Article leaves the
option to members as to whether to use the criterion of novelty or originality for
obtaining the protection of industrial designs. 60 Members, however, may rule that
‘designs are not new or original if they are not much different from known designs or
combination of know designs features’. 61 Since there is no definition of industrial
designs in TRIPS, all types of aesthetic, useful and functional designs including
subject matter protected as work of applied art under copyright law or as utility
models can be referred to as industrial designs under Article 25. 62 In addition, works
can include indigenous and folkloric icons, symbols and designs. 63
While paragraph one provides requirements for general protection of industrial
designs, paragraph two is aimed at textile designs, which had become the concern of
developing countries in the TRIPS negotiations. 64 Regarding textile designs, TRIPS
member countries are required to ensure that the requirement of industrial designs
protection — particularly concerning any cost, examination and publication —
should not damage the opportunity to seek and obtain such protection.
Once the protection is obtained, the owner of a protected industrial design has the
right to stop third parties not having the owner’s authorisation, in trade activities,
60
UNCTAD-ICTSD, Resource Book on TRIPS, above n 19, 332.
The TRIPS Agreement art 25(1).
62
UNCTAD-ICTSD, Resource Book on TRIPS, above n 19, 329.
63
Ibid.
64
Duncan Matthews, Globalising Intellectual Property Rights: The TRIPs Agreement, Warwick
Studies in Globalisation (Routledge, 2002) 57.
61
83
from making, selling or importing goods, which goods contain a design that is a copy
or significantly similar to the protected design 65, for at least 10 years. 66 On the other
hand, members may provide limited exceptions to the right given above, if such
exceptions do not conflict with normal exploitation and legitimate interests of the
owner and the third party of the protected design. 67
Industrial design was not a significant issue that was given enough attention during
the TRIPS negotiation process. This lack of attention is reflected in the existence of
just two Articles in the TRIPS Agreement that govern industrial design issues.68
During the TRIPS negotiations, it was openly acknowledged that the attitude of
negotiating countries, particularly those from developed countries, toward an issue
was influenced by the interests of large enterprises. It seems, however, that this was
not the case when industrial design issues were discussed in the TRIPS negotiations.
The users of industrial design are mostly SMEs, which do not have as influential
position as large corporations in patent and copyright issues. One WIPO statistic of
the data collected in 2008 finds that the level of domestic applications of industrial
design in the top six countries (China, Germany, South Korea, Japan, USA and Italy)
is, with the exception of the US, higher than the level for foreign applications.69
Although the statistic does not reveal the size of domestic enterprises which applied
for industrial design protection, it is likely that SMEs are the major applicants for
industrial designs in these six countries.
65
The TRIPS Agreement art 26(1).
Ibid art 26(3).
67
Ibid art 26(2).
68
Jeremy Phillips, 'Protecting Values in Industrial Designs' in Carlos M Correa and Abdulqawi A
Yusuf (eds), Intellectual Property and International Trade: The TRIPS Agreement (Kluwer Law
International, 1998) 179, 179; Correa, A Commentary on the TRIPS Agreement, above n 3, 257.
69
World Intellectual Property Organization (WIPO), World Intellectual Property Indicators 2010
(World Intellectual Property Organization, 2010) 104.
66
84
Unlike copyright, instead of ‘originality’, industrial design requires ‘novelty’. Thus,
industrial design is suitable for application in goods related to TCE, such as batik,
which is mostly produced by SMEs. With some minor alterations from traditional
designs, the goods could satisfy the novelty requirement for industrial design. 70 This,
however, becomes one flaw of industrial design in the eyes of the majority of
business owners. Because it is easy to satisfy the novelty requirement in industrial
design protection, the level of legal protection given to design is narrow. 71 The
design monopoly is easy to circumvent by making some other minor changes to a
product’s shape or appearance. 72 It is also more difficult to enforce industrial design
protection than patent and trademark. 73 Since the incentive offered by industrial
design protection is smaller but the cost and the length of registration process are not
significantly different, 74 industrial design is — unsurprisingly — far less frequently
sought than patent and trademark. The 2010 World Intellectual Property Indicators
shows that only 656,000 industrial design applications 75 were filed around the world
in 2008 as against 1.91 million patent 76 and 3.3 million trademark 77 applications.
3.2.5. Patents
Although patents are an important form of IPRs and had much attention during the
negotiation of TRIPS, this kind of IPRs is not really relevant to SMEs in developing
70
Phillips, above n 68, 180.
Ibid.
72
Ibid.
73
Correa, A Commentary on the TRIPS Agreement, above n 3, 257.
74
Ibid.
75
WIPO, World IP Indicator, above n 69, 98.
76
Ibid 34.
77
Ibid 74.
71
85
countries. Patents deal with high technology inventions, which are not normally
produced or developed by SMEs. However, as SMEs in developing countries are
users of high-technology, patents could affect them in a negative sense. As discussed
in Chapter 2 (sub-section 2.4), the cost for obtaining and defending patents is high
and adds a further burden to the consumer price of this patented technology. It causes
the price that has to be paid by consumers for using patented technology to be more
expensive than would otherwise have been the case. For SMEs in developing
countries with limited financial capacity, it hinders their access to the use of this kind
of technology.
Patent provisions in the TRIPS text are stated in Articles 27 to 33. Article 27
enumerates the subject matters that can be protected under patent. Paragraph 1
provides patents are available for any invention, either products or processes, in all
fields of technology which satisfy the industrial application requirements, namely the
novelty requirement, involve an inventive step, and are capable of industrial
application. Moreover, it also guarantees that patents shall be enjoyed without
discrimination which is related to the place of invention, the field of technology and
whether products are imported or locally manufactured.
The next two paragraphs detail the exclusion to patentability which may be
established by member countries in their domestic laws. According to paragraph 2,
member countries may not grant patent if the inventions are contrary to ordre public
or morality. Although ordre public may be interpreted as being narrower than ‘public
order’ or ‘public interest’ in this provision, there is no generally accepted principle of
86
ordre public. 78 Similarly to other terms such as ‘novelty’, ‘inventive step’ and
‘invention’, order public is left undefined by TRIPS, and member countries have the
flexibility to define which situations are covered under ordre public, depending on
the members’ conception of what their own public values require to be protected. 79
For example, the Guidelines for Examination of the European Patent Office (EPO)
links ordre public as a justification of rejection of patent application to matters of
security (such as riot, public disorder) and inventions that may lead to criminal or
other generally offensive behaviour. 80
The rights conferred on patent holders are presented in Article 28. The provision
separately details the rights conferred to patent product and process holders.
Paragraph 1 provides that the right of the holder of product patents prevents third
parties not having the patentee’s consent from ‘making, using, offering for sale or
importing for those purposes the product’. Holders of process patents are granted the
rights to prevent third parties from the act of using the process without their consent,
and from the acts of using, offering for sale, selling or importing ‘the product
obtained directly by that process’. The patent holders are also conferred with the
right to assign or transfer patents and to conclude licensing contracts. 81
Article 29 deals with the disclosure of the claimed invention, which requires a patent
applicant to disclose the invention in ‘a manner sufficiently clear and complete for
the invention to be carried out by a person skilled in the art’. 82 Since the level of
78
Correa, A Commentary on the TRIPS Agreement, above n 3, 287.
Ibid 288.
80
Ibid.
81
The TRIPS Agreement art 28(2).
82
Ibid art 29(1).
79
87
technology is different among member countries, this provision should be interpreted
as that the information must be presented in a form understandable for individuals
working in different technological contexts, including in developing countries with
unsophisticated innovation systems. 83 In paragraph 2, member countries are also
allowed to require a patent applicant to provide information concerning their
corresponding foreign applications and grants. This requirement may help to
facilitate the examination of applications and the decisions on the invalidation of
patents. 84 It is certainly important for patent offices and courts in developing
countries, which normally lack the human resources and infrastructure to deal with
the complex problems of patent granting and judicial review. 85
Regarding the disclosure requirement, there has been an initiative by a group of
developing countries, including countries with huge biodiversity resources, to amend
Article 29. 86 The proposed amendment would introduce an obligation to disclose the
origin of biological resources in patent applications. The main aim of this
amendment is to assist interested parties monitoring patent application containing
such resources and to comply with the benefit-sharing provisions of the Convention
on Biological Diversity (CBD). 87 Since the materials of jamu are plants and herbs, a
disclosure requirement would be relevant to such an industry. It would ensure the
participation of jamu industry, particularly large enterprises, in providing a benefitsharing system to the local community living in the areas where the plants are grown.
83
Correa, A Commentary on the TRIPS Agreement, above n 3, 301.
Ibid 302.
85
Ibid.
86
Ibid.
87
Ibid.
84
88
This proposal, however, is still being debated in the WTO forum as it has been
resisted by developed countries. 88
Article 30 provides exceptions to the exclusive rights of patent in very general
wording. It contains three conditions that must be fulfilled before member countries
grant such exceptions. First, the exceptions must be limited; secondly, they should
not unreasonably conflict with a normal exploitation of the patent; and thirdly, they
should not unreasonably prejudice the legitimate interests of the patent owner. In
applying these three conditions, the legitimate interests of third parties must also be
taken into account. According to Correa, based on comparative law and other
proposals, there are several usual exceptions that may be applied to the exclusive
rights of patent holders. 89 These include acts done for a non-commercial purpose; use
of the invention for research and teaching purposes; experimentation on the invention
to test or to improve it; prior use; experiments made for the purposes of seeking
regulatory approval for marketing of a product after the expiration of a patent; and
preparation of medicines under individual prescriptions. 90
The last article discussed here is Article 33. This provides that the minimum duration
of patent protection shall be granted for 20 years from the filing date. 91 TRIPS,
however, does not oblige member countries to extend patent protection beyond this
88
As at 16 July 2011. Issues related to the Extension of the Protection of Geographical Indications
Provided for in Article 23 of the TRIPS Agreement to Products Other Than Wines and Spirits and
Those Related to the Relationship Between the TRIPS Agreement and the Convention on Biological
Diversity, WTO Doc WT/GC/W/633 (21 April 2011) (Report by the Director General) para 27, 4.
89
C. M. Correa, 'Patent Rights' in Carlos M Correa and Abdulqawi A Yusuf (eds), Intellectual
Property and International Trade: The TRIPs Agreement (Kluwer Law International, 1998) 189, 208.
90
Ibid.
91
The TRIPS Agreement art 33.
89
term for any reason. 92 The TRIPS negotiations failed to include a provision that
would allow the duration of patents in developing countries or LDC to be decided by
national legislation. 93
As mentioned earlier, patent rights are not really relevant for SMEs. This conclusion
is based on a number of observations. First, the subject matter protection and the
process of obtaining patents often prevent SMEs from utilising patents. Patents
protect high-technology products or processes, which normally are not developed
and commercialised by SMEs because of their limited resources for conducting large
scale research and development activities. Secondly, innovations by SMEs mostly
focus on a product or process with short life cycle, while the process to obtain patent
protection is usually lengthy, between two to six years depending on the country. 94
Consequently, in most cases, patent protection is not much needed by SMEs.
Nevertheless, there are some SMEs in high-technology related industries, such as
pharmaceuticals, veterinary, agricultural chemicals and biotechnology, which may
need patent protection for their businesses.
Macdonald reports a survey, carried out in the United Kingdom in 1996, which
supports this assertion. Participants of the survey comprised approximately 35 per
cent of 165 selected small firms which had been granted at least one patent in the UK
or Europe in 1990 (n = 58). 95 It revealed that half of them (n < 29) did not apply for
92
Correa, ‘Patent Rights’, above n 89, 216.
Julie Chasen Ross and Jessica A Wasserman, Trade-Related Aspects of Intellectual Property Rights,
The GATT Uruguay Round: A Negotiating History (1986-1992) (Kluwer Law and Taxation, 1993)
50.
94
Correa, ‘Do SMEs Benefit from Patent Protection?’, above n 12, 223.
95
Stuart Macdonald, 'Exploring the hidden costs of patents' in Peter Drahos and Ruth Mayne (eds),
Global Intellectual Property Rights: Knowledge, Access and Development (Palgrave Macmillan,
2003) 13, 17.
93
90
second patents in 1996, even on their patentable inventions. 96 Although two thirds of
participants had developed their invention since patenting it in 1990 (n = 39), 87 per
cent of these (n = 34) said that they would have developed the invention even
without a patent. 97 Another survey, conducted in France in the same year, produced a
similar result. Only 10 per cent of 1016 micro-firms that participated in this survey
had registered a patent (n = 102) and a little more than 50 per cent of these (n = 51)
said the right was irrelevant to them. 98 A quarter of participants (n = 250?)
considered access to patent system was prevented by the expense involved.
On top of that, the process to obtain patents, as governed in Article 27, require a set
of examinations, which have the impact of further complicating the patent
application procedure. The procedure is certainly too complicated to be done by
SMEs owners, who mostly lack IPRs expertise. They, certainly, need to hire an
expert to assist them in making use of the patent system. Experts assist in processes,
such as drafting the patent specification and claims, contributing to additional high
costs. 99 The costs to obtain and to enforce patents are overly expensive for SMEs. In
the patents registration process, there are several formal charges, such as the fees for
filing, registration and maintenance that have to be borne by applicants. 100 If there is
litigation, either to exercise the patent against infringers or to defend it against
validity claims, costs of litigation are involved, which is also costly for SMEs, and
they are incurred without any guarantee of victory in the court. 101
96
Ibid 19.
Ibid.
98
Philippe Kaminski, 'How can Very Small Technology Firms be Helped?' in OECD (ed), Innovation,
Patents and Technological Strategies (OECD, 1996) 131, cited in Correa, ‘Do SMEs Benefit from
Patent Protection?’, above n 12, 225.
99
Correa, ‘Do SMEs Benefit from Patent Protection?’, above n 12, 223.
100
Correa, A Commentary on the TRIPS Agreement, above n 3, 277.
101
Ibid.
97
91
3.2.6. Undisclosed Information (Trade Secrets)
Trade secrets are a form of IPRs which protect information which has commercial
value used in a business. Before TRIPS, trade secrets were protected under common
law rules set by courts or under unfair competition statutes. 102 Doubts about the
availability of effective protection for trade secrets in developing countries became
one reason to include the protection for trade secrets in the TRIPS Agreement. Every
business, including SMEs, must possess essential and commercially valued
information that becomes either the core or the support of the business. Therefore,
the protection of trade secrets is needed for SMEs, whether they are located in
developed or developing countries.
The protection of undisclosed information or trade secrets is granted in Article 39 of
the TRIPS Agreement. This is the first time that the issue of undisclosed information
has been governed specifically by international intellectual property convention
beyond the general obligation in Article10bis of the Paris Convention, which
requires member countries to assure their nationals of effective protection against
unfair competition. 103 During the TRIPS negotiations, the protection of confidential
information became the subject of controversial debate between developed and
developing countries. On the one hand, developing countries, such as India and
Brazil, opposed the inclusion of confidential information in the TRIPS agreements,
as it was not a category of intellectual property. Therefore, the protection under
Article 10bis of the Paris Convention would suffice. On the other hand, developed
countries’ standpoint on this matter was best reflected in the submission of the Swiss
102
103
UNCTAD-ICTSD, Resource Book on TRIPS, above n 3, 522.
Blakeney, A Concise Guide to the TRIPS Agreement, above n 52, 102.
92
delegation during the negotiations. It considered the protection of proprietary
information as representing the central idea of IPR protection that is ‘the exclusive
commercial use of information created by investment of time, human and financial
resources’. 104
Paragraph 1 of Article 39 requires member countries to protect undisclosed
information in order to ensure effective protection against unfair competition as
provided in Article 10bis of the Paris Convention. Paragraph 1 of Article 39
mentions Article 10bis of the Paris Convention; however, there is no reference
within the Article to the protection of undisclosed information as an aspect of unfair
competition. Further, although undisclosed information is considered to be a form of
intellectual property and included in the TRIPS, it does not entail the existence of a
property right. 105 Therefore, TRIPS does not imply any obligation to confer rights on
undisclosed information, and Article 39(1) only protects it against unfair competitive
practices.
The simple definition, provided in Article 10bis (2) of the Paris Convention, defines
an act of unfair competition as ‘any act of competition contrary to honest practices in
industrial and commercial matters’. An echo of this paragraph is found in Article
39(2) of the TRIPS Agreement, which provides natural and legal persons with the
possibility to prevent the disclosure, the acquisition and the use of ‘information
lawfully within their control’ and ‘without their consent in a manner contrary to
honest commercial practices’. A footnote to the paragraph explains ‘a manner
contrary to honest commercial practices’ as ‘practices such as breach of contract,
104
105
Ibid.
Correa, A Commentary on the TRIPS Agreement, above n 3, 368.
93
breach of confidence and inducement to breach, and includes the acquisition of
undisclosed information by third parties who knew or were grossly negligent in
failing to know, that such practices were involved in the acquisition’.
Paragraph 2 further specifies the requirements for proprietary information to obtain
protection under the TRIPS Agreement. It must be ‘secret’, which means the
information is not ‘generally known among or readily accessible to persons within
the circles that normally deal with the kind of information in question’. The
information also must have commercial value because of its secret nature, and the
person, who has legal control over it, must already be taking reasonable steps to keep
the information secret.
Protection of undisclosed information, perhaps, is the most relevant form of IPRs for
SMEs. With no registration requirement to obtain protection, the problems
surrounding registration process — such as complicated procedures and expenses
involved — would never be experienced by SMEs to obtain protection of
undisclosed information. The requirements to obtain the protection stipulated in
paragraph 2 are not difficult for SMEs to fulfill. Even, the third requirement, ‘taking
reasonable steps to keep the information secret’, has been practised by SMEs long
before undisclosed information became a category of IPRs. SMEs have their own
methods to preserve the confidentiality of their valuable business information, which
may not involve any legal instrument, such as a contract. For example, one study
which analysed methods of trade secret protection in the Indonesian pharmaceutical
manufacturing industry in 2000 discovered that most of Indonesian SMEs in
traditional herbal drug industry keep their trade secrets only within their close family
94
circle, and they assign their employees with different works to prevent them knowing
the whole process of production. 106
3.2.7. Plant Varieties Protection
Breeder’s rights, which provide protection of new plant varieties, are relevant for
SMEs with their core business in the agricultural or biotechnology industry. It
provides assurance for entrepreneurs, either from SMEs or large enterprises, working
in related industries that they have the rights to authorise the production or
reproduction, commercial exploitation, importation or exportation of their protected
plant varieties.
Plant variety protection was not addressed specifically in the TRIPS text. Instead,
this issue is mentioned incidentally in Article 27.3(b), which requires member
countries to protect plant varieties under patents, an effective sui generis regime or a
combination of both. 107 The text does not refer the specific sui generis legal regime
that would protect plant varieties. The absence of specific standards in the TRIPS
makes most of the member states look to a breeder’s right regime 108, as established
in the International Union for the Protection of New Varieties of Plants Convention
(UPOV). 109 UPOV is the only existing international agreement that governs this
106
Cita Citrawinda Priapantja, Budaya Hukum Indonesia Menghadapi Globalisasi: Perlindungan
Rahasia Dagang di Bidang Farmasi [Legal Culture of Indonesia in Encountering Globalization:
Trade Secret Protection in Pharmaceutical Industry] (Chandra Pratama, 3rd ed, 2005).
107
Correa, A Commentary on the TRIPS Agreement, above n 3, 37.
108
Ibid.
109
International Convention for the Protection of New Varieties of Plants, opened for signature 2
December 1961 , 815 UNTS 109 (1961); revised by 815 UNTS 89 (1991) (entered into force 24 April
1968) ('UPOV Convention').
95
subject. It has been in existence since 1961 and has been revised three times, in 1972,
1978, and 1991.
According to UPOV, to be eligible for protection, a plant variety must meet several
requirements, as follows:
1. Novelty: the plant variety must not have been sold or otherwise disclosed to
others, with the consent of the breeder, in the state where the applicants seek
protection no earlier than one year before the filing application date, or not for the
maximum of four years before that date in any other area of jurisdiction. In case
of trees or vines, it must be not more than six years prior to the date of the filing
of the application. 110
2. Distinctness: to be considered distinct, the variety must be clearly distinguishable
from any other common existing variety at the time of the filing of the
application. 111
3. Uniformity: Subject to the variation that may be expected from the particular
features of its breeding, the variety must be sufficiently uniform in its relevant
characteristics. 112
4. Stability: To be deemed stable, the variety must have relevant characteristics,
which remain unchanged after repeated breeding or in the case of a particular
cycle of propagation, at the end of such a cycle. 113
5. Denomination: In order to be identified, the variety must be also given a
denomination which in accordance with the provisions of Article 20 of UPOV.114
110
UPOV Convention arts 6(1)(i)-(ii).
Ibid art 7.
112
Ibid ar 8.
113
Ibid article 9.
114
Ibid art 5(2).
111
96
The denomination must not mislead or confuse people on the characteristics,
value or identity of the new variety or the identity of the breeder. 115
Member countries of the WTO are also free to choose sui generis systems other than
UPOV that are suitable for their countries’ needs. For example, India’s Protection of
Plant Varieties and Farmers’ Rights legislation is the combination of some provisions
and concepts in TRIPS, UPOV, the International Undertaking on Plant Genetic
Resources (adopted by the Food and Agricultural Organization) and the Convention
on Biological Diversity (CBD). 116 Other countries, such as Indonesia and Thailand,
also have sui generis system to protect plant varieties. Both these countries first
drafted their PVP laws based on the UPOV model but Indonesia’s PVP law was
modelled after the 1991 version of the UPOV Convention, while the Thai PVP
legislation was based on the 1978 version. 117 Nevertheless, the PVP laws of the two
countries contain provisions that are different from or not included in the UPOV
Convention. For instance, while the UPOV criteria stated above make it almost
impossible for existing local varieties to be protected by a PVP system, the PVP laws
of Thailand 118 and Indonesia 119 include provisions that provide protection for such
varieties.
Yet, for SMEs, as breeders’ rights require application for the grant of protection, they
may face the same problems that they endured in relation to other IPRs that require
115
Ibid art 20(2).
Shaila Seshia, 'Plant Variety Protection and Farmers' Rights in India: Law-Making and the
Cultivation of Varietal Control' (2002) 37(27) Economic and Political Weekly 2741, 2743.
117
Rajeswari Kanniah, 'Plant Variety Protection in Indonesia, Malaysia, the Philippines and Thailand'
8(3) Journal of World Intellectual Property 283.
118
Thailand's Plant Varieties Protection Act B.E. 2542 (Thailand) arts 3, 43, 44, 46, 47.
119
Undang-Undang No 29 Tahun 2000 tentang Perlindungan Varietas Tanaman [Law No 29 of 2000
on Plant Variety Protection] (Indonesia) art 7(1).
116
97
the same thing. SMEs may be burdened with rigid requirements, procedures and cost
of registration to obtain PVP. In terms of benefits, there may be few for SMEs in
developing countries as the seed industry in most of such countries is just emerging.
Before proprietors of SME in relevant industries decide to access and use PVP, they
may consider both advantages and disadvantages of using the rights. When they see
the costs of registration are higher than the direct benefits they would receive from
breeder’s rights, they would probably refuse to apply for such rights.
3.3.
Intellectual Property Rights beyond the TRIPS Agreement
3.3.1. Petty Patents (Utility Models)
Many new simple technological innovations cannot satisfy the requirements of
patents (novelty, non-obviousness and usefulness of application) 120 yet, in a practical
sense, not all innovations protected by patents strictly satisfy these three
requirements. Because of loose criteria and excessive flexibility in assessing the level
of non-obviousness, novelty and usefulness of application that may apply in a
country, and shortcomings in examination procedures, there are many patents
granted that have not achieved significant technical developments. 121 It means
patents could be sought for any innovations, either with sophisticated or simple
technical developments. As mentioned previously, however, the complicated
procedures of and the high costs of patent registration and maintenance have become
impediments to obtaining patent protection. Apart from that, if there is litigation,
120
121
Correa, ‘Do SMEs Benefit from Patent Protection?’, above n 12, 229.
Ibid.
98
either to enforce patent against infringement or to defend it from validity challenges,
there is no guarantee of winning the case, and certainly such a move involves
litigation costs, which may be expensive, and there may also be damages claims
made by the other party or parties, which may be not low. 122
The category of ‘petty patents’ (PP) (known in some countries as ‘utility models’)
offers the solution to this problem. It provides protection for minor or incremental
innovations, particularly in mechanical fields. 123 Unlike patents, the requirements for
getting protection for PP or utility models are more flexible than for patents.
Although ‘novelty’ and ‘usefulness of application’ requirements still have to be
fulfilled, the requirement for ‘non-obviousness’ could be far more loose and
sometimes not be present in procedures for obtaining petty patents protection.124
Because patent offices in most countries do not conduct an examination on substance
in such matters, the registration process for PP is simpler and faster than for patents,
with an average of just six months from date of application to that of registration.125
In terms of costs, obtaining and maintaining petty patents is far less expensive than
for patents. 126 Despite all these things, PP can only protect product patents in some
countries and has a shorter term of protection, one which varies from one country to
another, 127 for a term from seven to ten years without the possibility for renewal. 128
122
Ibid 230.
Ibid.
124
World Intellectual Property Organization, Protecting Innovations by Utility Models (2011
) <http://www.wipo.int/sme/en/ip_business/utility_models/utility_models.htm>.
125
Ibid.
126
Ibid.
127
Ibid.
128
Ibid.
123
99
Despite its many advantages for SMEs, PP are, unfortunately, not covered in the
TRIPS Agreement. Although there is an argument that asserts that all of the Paris
Convention provisions, including Article 1(2), 129 are related to PP and are to also be
applied in WTO member countries by reference to Article 2(1) of the TRIPS
Agreement, 130 members of WTO or signatories of the Paris Convention are not
obliged to provide PP law. 131 Yet, they are free to do so. Currently, PP protection has
been adopted in about 75 countries, 132 both developed and developing, such as
Australia, Argentina, Brazil, Denmark, Estonia, Ethiopia, Kazakhstan, Kenya,
Malaysia, Indonesia, the Philippines, Poland, Spain, Trinidad and Tobago, and so
on. 133 Some studies conducted in various countries demonstrate the positive impact
of PP protection on promoting incremental innovation and productivity growth. For
example, a study conducted in Brazil found that PP protection has helped local
producers to obtain a major share of the farm-machinery markets by encouraging the
adaptation of foreign technologies to local circumstances. 134 In Philippines, PP
legislation promoted the successful adaptive invention of rice threshers. 135 In the
case of Japan, the Japanese Patent System (JPS), which applied between 1960 and
1993, was designed to promote incremental and adaptive innovation and diffusion of
technical knowledge into the economy. The system encouraged many PP
applications, which were then confirmed as having positive impact on real total
129
Article 1(2) of Paris Convention 1967 maintains patents, utility models, industrial designs,
trademarks, service marks, trade names, indication of source or appellations of origin, and the
repression of unfair competition as the objects of the industrial property protection.
130
Article 2(1) of TRIPS Agreement provides that member countries of the WTO ‘shall comply with
Articles 1 through 12, and Article 19, of the Paris Convention (1967)’.
131
Uma Suthersanen, 'Utility Models and Innovation in Developing Countries' (ICTSD-UNCTAD,
2006) <http://www.unctad.org/en/docs/iteipc20066_en.pdf>.
132
Ibid 1.
133
World Intellectual Property Organization, Where Can Utility Models Be Acquired?
(<http://www.wipo.int/sme/en/ip_business/utility_models/where.htm>.
134
World Bank, 'Global Economic Prospects and the Developing Countries 2002: Making Trade
Work
for
the
World's
Poor'
(World
Bank,
2001)
<http://siteresources.worldbank.org/INTGEP2002/Resources/05--Ch5--128-151.pdf>.
135
Ibid.
100
productivity growth over the period since as they were a main source of technical
change and information diffusion. 136
SMEs, with their limited research and development resources and skills, tend to
develop new innovations with minor or incremental technical developments. These
new simple technological innovations are suitable subject matter for PP protection.
In addition, all the features available in PP protection could solve most problems
related to financial and bureaucratic issues that make SMEs reluctant to use IPRs.
3.3.2. Traditional Knowledge (TK) and Traditional Cultural Expressions
(TCE)
Regarding TK and TCE, there is no single definition of either term that is accepted at
international level. The Intergovernmental Committee on Intellectual Property and
Genetic Resources, Traditional Knowledge and Folklore (IGC) of WIPO, however,
provides that the general scope of the subject matter of TK is
the content or substance of knowledge resulting from intellectual ability in a
traditional context ... that form part of traditional knowledge systems, and
knowledge
embodying traditional lifestyles of indigenous and local
communities. 137
136
Ibid.
Protection of Traditional Knowledge: Revised Objectives and Principles,
WIPO/GRTKF/IC/12/5(c) 12th sess (6 December 2007) art 3 (2).
137
101
It may include agricultural, environmental and medicinal knowledge and knowledge
associated with genetic resources, though it is not limited to any specific technical
field. 138
Prior to that, another IGC document included a definition of TCE/expressions of
folklore in 2006 as ‘any forms, whether tangible and intangible, in which traditional
culture and knowledge are expressed, appear or are manifested’. 139 Further, it
provides examples of TCE, which include expressions that are verbal (that is,
expressions such as stories, epics, legends, and so on.); musical (that is, expressions
such as songs and instrumental music); action (that is, expressions such as dances,
plays, ceremonies, and so on); and tangible (that is, expressions such as carving,
body paintings, sculptures, textiles, and so on.). 140
TK and TCE are two fields beyond TRIPS, which are still debated to this day at
international level. In relation to TRIPS, the 2001 Doha Declaration instructed the
Council for TRIPS to examine the protection of TK and TCE in a review of TRIPS
implementation. 141 Discussion in the Council for TRIPS mainly focused on the issue
of the right forum for TK protection. Developing countries support the idea of
protecting TK and TCE within TRIPS, as they consider that other forums, including
WTO, would be ineffective in the enforcement of such rights. On the other hand,
developed countries insist that TK and TCE should be discussed by the IGC of the
WIPO (see below), as they consider that the IGC as having the expertise to address
138
Ibid.
Ibid art 1(a).
140
Ibid.
141
UNCTAD-ICTSD, Resource Book on TRIPS, above 19, 399.
139
102
TK and TCE issues properly, and as an option preferable to adding the matters to the
already overloaded Doha Declaration agenda of the WTO. 142
Presently, there is no binding treaty that protects TCE and TK. However, there is the
non-binding 1982 Model Provisions for National Laws on the Protection of Folklore
against Illicit Exploitation and Other Prejudicial Actions, which was prepared by the
United Nations Educational, Scientific and Cultural Organization (UNESCO) and
WIPO that has been recommended by the organisations for adoption by all
countries. 143 In the field of TK, WIPO published the WIPO Report on Fact-Finding
Missions on Intellectual Property and Traditional Knowledge (1998-1999) 144 in
2001, which has functioned as the main source of factual information on TK issue.
The publication of this report was then followed by the establishment of the WIPOIGC in 2000. The establishment of IGC has the objective of producing a draft of an
international legal instrument that will ensure the effective protection of TK, TCE
and genetic resources.
TK and TCE play an important role in preventing the misappropriation of the local
community owned objects of TK and TCE by foreign parties or parties outside those
local communities. Currently, TK and TCE are developing a growing industrial
presence, such as in the jamu and batik industry, which predominantly involves
142
Ibid.
P V Valsala G Kutty, 'National Experiences with the Protection of Expressions of Folklore/
Traditional Cultural Expressions: India: Indonesia and the Philippines' (World Intellectual Property
Organization, 2002) <http://www.wipo.int/tk/en/studies/cultural/expressions/study/kutty.pdf>.
144
Matthias Leistner, 'Analysis of Different Areas of Indigenous Resources: Traditional Knowledge'
in Silke von Lewinski (ed), Indigenous Heritage and Intellectual Property (Kluwer Law International,
2004) 49, 121.
143
103
SMEs in developing countries. As a direct consequence of their commercial
exploitation, the objects of TK and TCE need to be protected by IPRs. 145
3.4.
Conclusion
The IP standards of protection provisions both within and beyond the TRIPS
Agreement discussed in this chapter are relevant for SMEs in developing countries;
however, because of the different nature of protection, the level of relevance of such
IPRs varies between one industry and another. Copyright, trademarks, GI, industrial
designs, trade secrets, PP, TK and TCE have been significant forms of IPRs to
protect assets of SMEs working in the various industries which normally exist in
developing countries, such as handicrafts, traditional herbal medicines, and small
manufacturing industries. On the other hand, patents and plant breeders’ rights which
protect new inventions in the areas of high technology and new plant variety may not
be so relevant for SMEs in developing countries because such SMEs rarely develop
products that can be granted patents and plant breeders rights.
Even though these IPRs provide benefits for SMEs, the requirements that must be
fulfilled to obtain protection under such IPRs could pose problems for SMEs in
developing countries. The challenge for SMEs to obtain IPRs protection is not only
to satisfy substantive requirements, but also administrative ones. Substantive
requirements include, for instance, the originality requirement to obtain copyright
protection. This has proved impossible for those involved in the traditional batik
145
Kutty, ‘National Experiences with the Protection of TCE’, above n 143, 4.
104
industry due to the fact that many traditional batik motifs have been known for
centuries. To satisfy administrative requirements, such as registration, SMEs may
also face problems such as an inefficient bureaucracy and corruption problems
surrounding the IPRs registration process in developing countries.
105
CHAPTER 4
INTELLECTUAL PROPERTY SYSTEM IN INDONESIA AND
SOCIO LEGAL ISSUES THAT AFFECT THE
IMPLEMENTATION OF INTELLECTUAL PROPERTY
RIGHTS RELEVANT TO SMALL MEDIUM ENTERPRISES
IN INDONESIA
4.1. Introduction
In general, this chapter discusses two main issues. First, it depicts the intellectual
property (IP) system in Indonesia and its implementation in the country. The
depiction includes the development of the Indonesian IP system before and after the
implementation of TRIPS in 2001, and an overview of IP legislation as well as
judicial enforcement of IP in Indonesia. The year 2001 is selected as a milestone as
this was the year that Indonesia accepted its full obligation to implement the TRIPS
Agreement. However, before coming to the discussion on the IP system in Indonesia,
this chapter starts with a brief legal history of Indonesia from the pre-colonial period
to the current period of reform. The particular intention is to provide an illustration of
the complexity of Indonesia’s plural legal system, which is frequently blended with a
chaotic political and economic situation. Secondly, it addresses socio legal issues that
affect the implementation of the IP system in Indonesia, namely problems associated
with an inefficient bureaucracy and corruption. This issue has been identified as an
indirect reason for the low uptake of IPRs by Indonesian SMEs. Problems created by
an inefficient IP administration and corruption are here treated as factors that
106
contribute to the complicated, time consuming and expensive procedure that SMEs
and others face when attempting to obtain IP protection by registration.
It is important that all the issues discussed in this chapter are conveyed to the readers
of this thesis. The first issue, the IP system in Indonesia and its implementation,
provides a background to understanding the problems of SMEs dealing with the
implementation of IPRs in the country as presented in the subsequent chapters. Since
the IP system is part of a country’s legal system, the discussion on legal history of
Indonesia is necessarily present in this chapter to help lay readers comprehend the
position of the IP system in Indonesia’s legal system. The second issue that of
problems created by an inefficient bureaucracy and corruption, completes the
knowledge of readers on factors beyond the IP system that have adversely affected
the uptake of IPRs by SMEs in Indonesia.
4.2. A Brief Legal History of Indonesia
Indonesia, the fourth most populous country in the world, with a population of more
than 240 million 1, considerable ethnic and cultural diversity, and rich in natural
resources, is a dynamic and interesting subject of study for many reasons. Indonesia
was established as a sovereign state on 17 August 1945 when the country won its
freedom from the Dutch colonial powers. In practice, however, Indonesia’s unilateral
independence was only recognised by the international community after the Dutch
agreed to surrender their control over Indonesia on 27 December 1949. The first
1
Central Intelligence Agency (CIA), Indonesia: People (2009)
<https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>.
107
encounter of Indonesia with IPRs occurred during the period under Dutch colonial
administration. Since then, IP system has developed as part of the whole legal system
within the history of Indonesia as a state.
The history of the Indonesian legal system began before the arrival of the first
Europeans in Southeast Asia in the early 16th century. 2 There were many independent
legal systems in the archipelago in the form of rules derived mainly from animist
beliefs and, later, from Hinduism and Islam. These rules were passed down from one
generation to the next by word of mouth and as practised in daily life. This legal
culture, created during both the Hindu and Islamic kingdom eras became the
foundation of Indonesian customary law, called adat law. Some of these laws still
survive today and are incorporated into the formal law of Indonesia, mostly in the
field of family, inheritance, and land laws.
In 1596, 3 the first Dutch ship landed in the East Indian archipelago (now known as
the Republic of Indonesia). The Dutch had control over the archipelago for almost
350 years. They provided a framework for Indonesia as a state and had a great
influence on almost every aspect of life, including the legal system, an influence
which continues even today. For example, from the 19th century until the end of its
colonial administration period, the Dutch applied a legal segregation policy for
purposes of law based on race. In the beginning, the policy applied both in civil and
criminal law, however, later it was only relevant to civil law, particularly in regard to
family law issues, such as marriage, divorce, inheritance and adoption. This policy
2
M C Ricklefs, A History of Modern Indonesia Since c. 1200 (Stanford University Press, Fourth ed,
2008) 26.
3
Ibid.
108
divided the population of the Dutch East Indies into three legal groups: European,
Foreign Orientals (consisting primarily of Indian, Chinese and Arabs), and natives of
the archipelago. While the European group was subject to Dutch laws, the two other
groups followed their own customary laws. In exceptional cases, natives could
declare a voluntary submission to Dutch law. 4
The Dutch colonial era concluded in 1942 when the Japanese military occupied the
Dutch East Indies. During the period of the Japanese Occupation, which only lasted
for three and half years, the Japanese military government made significant changes
by abolishing the division of the judicial system based on race, which had been
applied by the Dutch. The dual court system was replaced by a single court system
with a hierarchy consisting of three levels, and it applied the procedural code which
used to be employed in the native court. 5 Officials in the Dutch judicial and related
institutions were removed and the vacant positions were filled by locals. 6 Legal
pluralism in the area of private law, however, was maintained by the Japanese
military government, and adat law was still considered as the basis for indigenous
Indonesians. 7
After the country’s independence, the Dutch laws and legal system were preserved
through Article II of the Transitory Regulations of the 1945 Constitution and the
4
Christoph Antons, Intellectual Property Law in Indonesia (Kluwer Law, 2000) 15 (‘IPL in
Indonesia’).
5
Daniel S Lev, 'Judicial Unification in Post-Colonial Indonesia' in Daniel S Lev (ed), Legal Evolution
and Political Authority in Indonesia: Selected Essays (Kluwer Law International, 2000) 33, 39
(‘Judicial Unification in Indonesia’).
6
Ibid 40.
7
Ibid 37; Sudargo Gautama and Robert N Hornick, An Introduction to Indonesian Law: Unity in
Diversity (Revised ed, 1983) 181 (‘An Introduction to Indonesian Law’).
109
Government Decree of 10 December 1945. 8 The Article and the government decree
provided that all laws made in the colonial period would remain in effect in
Indonesia after independence provided they were not in contradiction of the 1945
Constitution. When the 1945 Constitution was replaced by the 1950 Provisional
Constitution, the transitory Article in the earlier constitution was also transferred into
the new constitution. When the Presidential Decree of 5 July 1959 re-enforced the
earlier 1945 Constitution, the Article was brought back once again.
In 1965, there was great political turmoil because of the murder of six Indonesian
army generals by the Communist Party (Partai Komunis Indonesia – PKI). This
marked a turning point in the history of Indonesia and ended the ‘Old Order’ era
under the first president, Soekarno, a year later. His successor was Soeharto, an army
general, who began what was then called the ‘New Order’, which that lasted for 32
years. When the Old Order era ended, the country was left in economic, political and
legal chaos. Of all these problems, the New Order regime chose to focus on a
program of economic recovery. Shortly after the transfer of power to the New Order
in February 1967, the Inter-Governmental Group on Indonesia (IGGI) was formed to
renegotiate the country’s debts and to attract foreign investment. 9 The organisation
consisted of Western developed states and international donor organisations. 10
8
See Antons, IPL in Indonesia, above n 4, 53.
Richard Robison, Indonesia: The Rise of Capital (Equinox Publishing, 2009) 137.
10
At the outset of the IGGI, its members were the US, Great Britain, the International Bank of
Reconstruction and Development (IBRD), the International Monetary Fund (IMF), the Organization
for Economic Cooperation and Development (OECD), the United Nations Development Program
(UNDP), and the Asian Development Bank (ADB). See Sugeng Bahagijo, 'Indonesia: Governance
within the Consultative Group On Indonesia: Partnership or Domination?' in Judith Randel, Tony
German and Deborah Ewing (eds), Reality of Aid 2004 (Ibon Books & Zed Books, 2004) 100, 100.
9
110
At the Paris IGGI Conference in December 1966, Indonesia made a statement in
which it promised to support a free market economy and to end the discriminatory
treatment of private enterprises. 11 To convince investors, it not only enacted two
capital investment laws 12, but also undertook in the First Annual Plan of Indonesia to
abide by the rule of law, as a stated commitment of the New Order government. 13
This commitment required reforms in many legal areas, including Intellectual
Property (IP); however, in practice, law never became the focus of the New Order. In
this era, the legal reform process was slow, and Indonesia continued to apply the
laws left by the Dutch colonial government. The efforts to modernise and to create
national laws were not serious and were only aimed at supporting economic
development and political stability. 14
Meanwhile, due to the New Order’s focus on economic development, the country’s
economic condition improved. The best period for the country’s economy occurred
between 1967 and 1975; however, this was mainly due to the export of basic
commodities, with oil as the major export, accounting for 70 per cent of the national
budget. 15 In 1982, Indonesia received the welcome news that the World Bank had
elevated the country, with its estimated per capita income of around USD 600 per
11
Robison, above n 9, 137–38.
These two pieces of legislation were Undang-Undang No 1 Tahun 1967 tentang Penanaman Modal
Asing [Law No 1 of 1967 on Foreign Capital Investment] (Indonesia) and Undang-Undang No 6
Tahun 1968 tentang Penanaman Modal Dalam Negeri [Law No 6 of 1968 on Domestic Capital
Investment] (Indonesia). Both are now abolished and are merged into Undang-Undang No 25 Tahun
2007 tentang Investasi [Law No 25 of 2007 on Investment] (Indonesia).
13
Gautama and Hornick, above n 7, 191.
14
Abdul Hakim G Nusantara, Politik hukum Indonesia (Yayasan Lembaga Bantuan Hukum
Indonesia, 1988) cited in Affifah Kusumadara, Analysis of the Failure of the Implementation of
Intellectual Property Laws in Indonesia (PhD Thesis, University of Sydney, 2000) 22.
15
Gordon R Hein, 'Indonesia in 1982: Electoral Victory and Economic Adjustment for the New Order'
(1983) 23(2) Asian Survey 178, 183.
12
111
year, to the level of the world’s middle income countries. 16 The period of economic
growth did not last long as Indonesian economic performance declined again when
oil prices dropped in the mid 1980s.
In mid-1997, the economic crisis hit Asian countries, including Indonesia. This
caused Indonesia to experience its lowest economic point, with an overall 13 per
cent fall in growth, a 12 per cent unemployment rate, interest rates of over 75 per
cent per annum and the rupiah falling from a high of IDR 6000 to the US dollar to a
low of IDR 18,000 by May 1998. 17 Economic pressures had also triggered political
turbulence in Indonesia. The Indonesian people, particularly university students and
members of the middle-class, who had long suffered from the repressive New Order
regime, rallied in the streets to demand Soeharto’s resignation. After a series of
incidents of racial violence against Chinese Indonesians in several cities, 18 Soeharto
eventually announced his resignation on 21 May 1998, and B J Habibie, his VicePresident, was sworn in as the new president of Indonesia. 19
During the New Order’s last days, there was substantial economic law reform. As
Indonesia sought financial assistance from the International Monetary Fund (IMF),
Indonesia had to follow the IMF policy agenda which was one that embodied
conditionality, and part of which required Indonesia to draft new bankruptcy laws
and to establish separate commercial courts to deal with bankruptcy cases. On 20
16
Ibid 184.
Tim Lindsey and Mas Achmad Santosa, 'The Trajectory of Law Reform in Indonesia: A Short
Overview of Legal System and Change in Indonesia' in Tim Lindsey (ed), Indonesia: Law and Society
(Federation Press, 2nd ed, 2008) 2, 11–12 (‘Trajectory of Law Reform in Indonesia’).
18
Jemma Purdey, 'Legal Responses to Violence in Post-Soeharto Indonesia' in T. Lindsey (ed),
Indonesia: Law and Society (The Federation Press, 2nd ed, 2008) 515, 517.
19
Ricklefs, above n 2, 380–1.
17
112
April 1998, Indonesia enacted the Government Regulation Replacement Act
(Peraturan Pemerintah Pengganti Undang-Undang – Perpu) No 1 of 1998 on
Amendments to the Law on Bankruptcy 20 to complement the colonial bankruptcy
regulations, the Faillissements Verordening. This was followed by the establishment
of a new Commercial Court in Jakarta in 1998 and, in 1999, in four other cities
(Medan, Surabaya, Semarang and Makassar). In 2000, the jurisdiction of the
Commercial Courts was extended to cover most areas of intellectual property. 21
The resignation of Soeharto ended the New Order era and marked the beginning of a
new one which is known as the Reformasi era. It was named Reformasi as Indonesian
people expected that the new era could reform political, economic and legal aspects
of Indonesia as a state. After being repressed under the New Order regime for 32
years, at the outset the Reformasi era was full of reformist ideas and high
expectations of an ideal Indonesia. People expected stable political conditions in
which the government could provide democracy and transparency in the running of
state life, and establish the supremacy of the law. In a practical sense, people hoped
that the new government could end economic calamity and revive economic growth
in the country. Despite positive assessment of the growth of the Indonesian economy
by the international community, 22 however, people’s hopes are still far from being
20
The Perpu became Law No. 4 of 1998 on 9 September 1998 after it was approved by Indonesian
legislative power, the House of Representatives (Dewan Perwakilan Rakyat – DPR). Perpu is a
government regulation which had the function of a law during an emergency situation in Indonesia.
21
For further discussion on the competency of the Commercial Court, see Diani Sadiawati, 'Eksistensi
Pengadilan Niaga dan Perkembangannya dalam Era Globalisasi (Existance of the Commercial Court
and its Development in Globalization Era)' (2004) 1(3) (3 December) Info Kajian Bappenas (Info of
National Planning Agency's Study)
22
The World Factbook 2010, published electronically by the US Central Intelligence Agency (CIA),
has assessed the economy of Indonesia in the first half of 2009 as surpassing its regional neighbours.
In addition, the New York Times praised Indonesia as the largest economy in Southeast Asia with
annual economic growth at a rate of 6.2% in the second quarter of 2010. See Aubrey Belford, 'After
Years of Inefficiency, Indonesia Emerges as an Economic Model', New York Times (New York ), 5
113
realised. In today’s situation, besides enduring corruption scandals, Indonesia still
faces the continuing challenge of improving the poor infrastructure that hinders the
country’s attainment of higher economic growth. 23 More importantly, the
government still has a duty to improve the low status of Indonesia on the human
development index which indicates the inability of the Indonesian people to enjoy
the benefits of economic growth. 24
4.3. Development of Intellectual Property System in Indonesia
4.3.1. Before TRIPS: A Neglected Period
An IP system has been known in Indonesia as early as the first half of 19th century. It
was the Dutch colonial administration which introduced IP protection in the Dutch
East Indies through the implementation of some IP legislation 25 and the ratification
of some international IP agreements which not only bound to the country, but also
had legal effect in its colony, the Dutch East Indies which was later known as
Indonesia. After achieving independence in 1945, Indonesia inherited a set of
national IP laws and international agreements which had been passed and ratified
August 2010 <http://www.nytimes.com/2010/08/06/business/global/06ihtrupiah.html?pagewanted=all>; Central Intelligence Agency (CIA), Economy: Indonesia (2010)
<https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>.
23
Agustinus Prasetyantoko, 'Negeri yang Lupa Investasi Sosial (State which Forgets Social
Investment) ', Kompas (Jakarta), 18 August 2010
24
Ibid.
25
The first legislation introduced in the East Indies was an Act of the Granting of Exclusive Rights to
Inventions, Introductions and Improvements of Objects of Art and of the People’s Diligence, which
was previously implemented in the Netherlands in 1817 and extended to the colony in 1844. After
that, in 1871, provisions on trademark were first introduced providing that a deposit of seals, stamps
and trademarks were protected in the Criminal Code. Fourteen years later, in 1885, a complete
trademark law was passed in the East Indies. See Christoph Antons, 'Indonesia' in Paul Goldstein and
Joseph Straus (eds), Intellectual Property in Asia: Law, Economics, History and Politics (Springer,
2009) 87, 87 (‘Indonesia’).
114
during the Dutch colonial times. At a domestic level, Indonesia continued to apply
the Copyright Law of 1912, the Trade Mark Law of 1912, and the Patent Law of
1910. At an international level, Indonesia was a party to the Paris Convention of
1883 on Industrial Property 26, the Hague Agreement of 1925 on the International
Deposit of Industrial Designs 27, the 1911 Washington revision of the Madrid
Agreement of 1891 on the Repression of False or Deceptive Indications of Source on
Goods 28 and the Berne Convention of 1886 on the Protection of Literary and Artistic
Works. 29
During the Old Order period, Indonesia — as a young developing country —
perceived IPRs as an impediment to the transfer of knowledge and technology from
developed countries when these were seriously needed to build the country. The Old
Order regime had a hostile perception of foreign investments and of the free market
as well. 30 In the first decade of the President Soeharto’s administration, the
conditions for IPR in Indonesia was not much different from before; however, unlike
the Old Order, this regime invited the Western industrialised countries to support
26
Paris Convention for the Protection of Industrial Property (1967), opened for signature 13 January
1968, 828 UNTS 305 (entered into force 26 April 1970) (‘Paris Convention’).
27
Hague Agreement of 1925 on the International Deposit of Industrial Designs (1925), opened for
signature
28
Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods of
April 14, 1891, revised at Washington on June 2, 1911, at The Hague on November 6, 1925, at
London on June 2, 1934, and at Lisbon on October 31, 1958, opened for signature 31 October 1958 ,
828 UNTS 11848 (entered into force 1 June 1963) ('Madrid Agreement')In 1935, the Dutch
government declared that the Madrid Agreement was terminated in the East Indies on the basis that
there was little use of registration of trademarks in the colony. Besides that, the system that was
employed by the Madrid Agreement required substantial administrative efforts and was very costly to
maintain. See Antons, IPL in Indonesia, above n 4, 44.
29
Berne Convention for the Protection of Literary and Artistic Works, opened for signature 24 July
1971, 828 UNTS 221 (entered into force 31 January 1972).
30
Indonesia was not a socialist country during the Old Order era; however; the close relationship
between Soekarno and his counterparts in socialist countries, such as China, Vietnam and the Soviet
Union, had generated an unfriendly attitude towards Western capitalist countries, particularly in
regard to their use of foreign aid. Christoph Antons, 'Technology Transfer in Indonesia' in Christopher
Heath and Kung-Chung Liu (eds), Legal Rules of Technology Transfer in Asia (Kluwer Law
International, 2002) 227, 228.
115
Indonesia financially through international financial organisations, like the IMF and
the World Bank. 31 The involvement of Indonesia in these international financial
organisations was intended to attract foreign investment to the country; however,
despite the fact that legal certainty in the area of IPRs would support foreign
investment policy, the government continued to neglect these issues at that time.
Compared to international standards, the legal protection of IPRs in Indonesia was
inadequate and, to make matters worse, enforcement was also weak.
As mentioned in the previous sub-section, in the mid-1980s, the oil prices which had
become the primary income of the country dropped significantly, causing an
economic crisis in Indonesia. To recover from this crisis, Indonesia had to find nonoil sources of income and attract as much foreign investment into the country as
possible. This situation left no option for Indonesia except to adjust its economic
policies in favour of the investors, one of whose concerns was the inadequacy of IPR
protection in the country. At the same time, US concern about the infringements of
its IPRs in developing countries increased. The US government employed persuasive
and coercive strategies to stop the infringements of US intellectual property in
developing countries. Due to the high level of IP infringements of the US products in
Indonesia, the country became the target of these strategies. Besides almost
continuous rounds of diplomatic meetings between these two countries with an
agenda of improving IP protection in Indonesia, 32 the US government also threatened
to impose trade sanctions. For example, in 1986, the US threatened to cancel the
Generalized System of Preferences (GSP) 33 if Indonesia did not improve its IP
31
Antons, IPL in Indonesia, above n 4, 31.
Ibid.
33
For definition of GSP, see Chapter 2 (section 2.2.)
32
116
protection by October 1987. Then, in 1989, the Special 301 Report 34 which assessed
IP protection in the US trading partner countries was first published and included
Indonesia in its Watch List.
As the result of the US’ strategies, the government of Indonesia began to show more
interest in protecting IPRs within its borders. Even before the 1986 US threat,
Indonesia had already passed a copyright law in 1982; however, the law was still
considered weak by the standards of the Berne and Rome Conventions. In patent
area, the response of Indonesian government was to pass the first national Patent
Law in the 1989. Previously, in 1953, the government of Indonesia had passed two
regulations on the provisional filing of patent applications. These two regulations
were the Decree of the Minister for Justice No JS. 5/41/4 and the Decree of the
Minister for Justice No JG. 1/2/17 which provided for the provisional registration of
domestic and foreign patent applications respectively. Both legal instruments served
as provisional rules to fill the legal hiatus that had emerged in the patent
administration as the 1910 Patent Law made by the Dutch colonial government was
no longer relevant in Indonesia. The Patent Law of 1910 was in contradiction of
Indonesia’s sovereignty since it provided that the substantive examination of patent
34
The Special 301 Report is released by the Office of the United States Trade Representative (USTR)
annually pursuant to Section 182 (Special 301) of the Trade Act of 1974 which requires them to
identify US trading partner countries which do not provide effective and adequate IP protection in
their countries. The Report will categorise the countries in a Watch List (WL) and a Priority Watch
List (PWL) based on the countries’ IP protection performance each year. Countries included in the
WL and PWL will be the focus of increased bilateral negotiation concerning the problem areas. See
Office of the United States Trade Representative, '2009 Special 301 Report' (The United States Trade
Representative, 2009)
<http://www.ustr.gov/sites/default/files/Full%20Version%20of%20the%202009%20SPECIAL%2030
1%20REPORT.pdf> (‘2009 Special 301 Report’).
117
application had to be performed in the Netherlands and the Patent Office in Jakarta
would be only a branch that could not grant patents. 35
On the other hand, trademark is the only IP area which was not neglected before the
1980s. Unlike the two other areas of IP, Indonesia had already enacted a national
Trademark Law in 1961, which had mainly adopted the provisions of the colonial
Trademark Law of 1912. 36 However, the foreign investment countries were not
content with protection provided by the law, which applied the ‘first to use’ rather
than the ‘first to file’ approach in its trademark registration system. At that time,
there were massive infringements of well-known trademarks and production of
counterfeit products in the country37 which raised protests from international wellknown trademark owners and made the US put pressure on the Indonesian economy.
In response to the protests and the pressure, the Indonesian government revised the
1982 Copyright Law in 1987 38 and the Minister for Justice issued two decrees in
1987 and 1991 to protect foreign well-known trademarks for both the same and/ or
different kinds of goods. 39
Following the issuing of the Ministerial Decree of 1991, Indonesia passed a new
Trademark Law in 1992, which came into force on 1 April 1993. The Law employed
the ‘first to file’ system which replaced the ‘first to use’ system of trademark
35
See Gautama and Hornick, ‘An Introduction to Indonesian Law’, above n 7, 8; Affifah
Kusumadara, Analysis of the Failure of the Implementation of Intellectual Property Laws in Indonesia
(PhD Thesis, University of Sydney, 2000) 55.
36
Antons, IPL in Indonesia, above n 4, 204.
37
Among the cases, there were two famous cases involving ‘Pierre Cardin’ and ‘Levis’ trademarks.
All levels of Indonesian court made decisions which upheld the local company’s registration of those
two international well-known trademarks. See Kusumadara, above n 35, 108–109; Andrew Rosser,
The Politics of Economic Liberalisation in Indonesia: State, Market and Power (Curzon, 2002) 155
(‘Politics of Economic Liberalisation in Indonesia’).
38
Antons, IPL in Indonesia, above n 4, 54.
39
Ibid 205.
118
registration applied under the previous Trademark Law. The 1992 Trademark Law
was the last effort made by the Indonesian government in response to the coercive
strategies of the US and the demands of foreign investor countries for Indonesia to
improve IP protection in the pre-TRIPS period. In 1994, Indonesia joined the World
Trade Organization. This necessarily involved the ratification of the TRIPS
Agreement. Following this ratification, Indonesia revised both the 1992 Trademark
Law and the 1987 Copyright Law in 1997. These two actions were early attempts to
comply with the TRIPS Agreement. The revision of the 1992 Trademark Law added
chapter IXA which protected geographical indication and indications of origin and
provided the protection of well-known trademarks. 40 Meanwhile, the new copyright
legislation included two new parts which deal with licences and neighbouring rights
to copyright as well as introducing rental rights for cinematographic works and
computer programs. 41
4.3.2. After TRIPS: An Unfocused Reform Period
Through Law No 7 of 1994 on the Ratification of the Establishment of World Trade
Organization Agreement 42 (WTO) which came into force in 1995, Indonesia became
a member of TRIPS. 43 As a developing country, Indonesia was entitled to delay the
implementation of TRIPS for up to 5 years. However, because the country was not
40
Ibid 206.
Ibid 54.
42
TRIPS is one of a package of agreements within the WTO, which means membership in the WTO
constitutes membership of all of the WTO agreements as well.
43
For an explanation on the emergence of the TRIPS Agreement and when it entered into force, see
Chapter 2 (section 2.2.).
41
119
yet ready at that date, the agreement took effect fully a year later in 2001. 44 As
implied in the title, this part would like to argue that despite efforts by the
government of Indonesia to reform its IP system to comply with TRIPS, the reforms
made are neither adequately focused nor thorough. The reforms may bring the
Indonesian IP system closer to TRIPS standards; however, they still cannot bring the
utmost benefits of TRIPS to the country.
4.3.2.1. Legislative Reforms
Shortly before the government of Indonesia accepted its full obligation to implement
TRIPS in 2001, a package of IP laws that are adjusted to match TRIPS minimum
standards were enacted. These IP laws are: Law No 29 of 2000 on Plant Variety
Protection, Law No 30 of 2000 on Trade Secrets, Law No 31 of 2000 on Industrial
Design, Law No 32 of 2000 on Integrated Circuit Layout Design, Law No 14 of 2001
on Patent Law, and Law No 15 of 2001 on Trade Mark. One year later, the new
copyright law which complies with TRIPS standards, Law No 19 of 2002, was
passed.
Besides enacting the core IP legislations, the government also enacted additional
legislation and regulations that support IP system in the country. One example of this
is Law No 18 of 2002 on the National System for Research, Development and the
44
'Indonesia Admits Failure in Implementing WTO Commitments
', The Jakarta Post (online), 22 December 1999
<http://www.thejakartapost.com/news/1999/12/22/indonesia-admits-failure-implementing-wtocommitments.html>.
120
Application of Science and Technology. 45 The Law encourages the use of IPRs in
managing research findings that have the potential to be commercialised. The Law
also considered IP as an asset for universities or institutions devoted to research and
development (R&D). 46 Further, Article 13(3) of this law requires every university
and R&D institutions to establish Sentra HKI. 47 The implementing decree for this
law, Government Regulation No 20 of 2005 provides the details of the scheme on
technology transfer of IP and the management of income resulting from the IP
commercialisation of research activities.
Although the laws that form the core IP legislation have been issued and finalised,
the implementation of this legislation has never been effective. Part of the problem is
the time it takes to issue the required implementing decree 48 for IP. 49 Despite the fact
the core legislation has been passed several years earlier, some legislation for crucial
IP issues, such as patent compulsory licence 50 and well-known trademarks 51 still lack
the necessary implementing decree. One possible explanation for the issuance of
such implementing decree having been so slow is that the government believes it
45
Undang-Undang No 18 Tahun 2002 tentang Sistem Nasional Penelitian, Pengembangan dan
Penerapan Ilmu Pengetahuan dan Teknologi [Law No 18 of 2002 on the National System for
Research, Development and the Application of Science and Technology] (Indonesia) (‘Law No 18 of
2002’).
46
Law No 18 of 2002 art 11(1).
47
According to the elucidation of that article, Sentra HKI is a working unit that has the function not
only to manage and utilise IP assets, but also to be an information and service centre for IPRs. The
discussion on Sentra HKI will be presented later, in Chapter 5 (section 5.3.4.).
48
This decree contains details of practical implementation to enable legislation to work properly in
Indonesia.
49
Christoph Antons, 'Intellectual Property Law in Southeast Asia: Recent Legislative and Institutional
Developments' (2007) 1(Special Issue) (8 May 2007 ) Journal of Information, Law and Technology 1,
3 (‘IPL in Southeast Asia’).
50
An implementing decree for a compulsory licence has been requested to regulate compulsory
licence issues in Indonesia in the 2001 Patent Law: Elvani Harifaningsih and Suwantin Oemar,
'Lisensi Wajib Terbentur PP (Compulsory License is Hindered by Government Regulation)', Bisnis
Indonesia (Jakarta), 12 June 2009.
51
Implementing decree for well-known trademark has been required by the 1997 Trademark Law and
then again by the 2001 Trademark Law. Suwantin Oemar, 'Jangan Gantung PP Merek Terkenal (Don't
Delay Government Regulation on Well-Known Trademark)', Bisnis Indonesia (Jakarta), 24 June 2008
<http://haki.depperin.go.id/advokasi-hukum/cetak.php?id=100>.
121
needs to prioritise other issues that are far more crucial to the country than IPR. As
the country has not recovered fully from the economic and political turmoil that has
occurred since the late 1990s, the government is overwhelmed by an abundance of
complex issues, such as poverty, politics, and natural disasters, which need to be
given attention first. It reflects a state of affairs where IPR has not been a highly
prioritised issue according to the perspective of Indonesian government.
4.3.2.2. Administrative Reforms
In the administrative sector, there has been progress after the power to receive
application for IPR was transferred to the branch agencies of the Department of Law
and Human Rights in the provincial and district level. 52 Before 2001, the applications
for IPR were only submitted to the central office of the Direktorat Jenderal Hak
Kekayaan Intelektual (Directorate General of Intellectual Property Rights - DGIPR)
in Tangerang-West Java. 53 Consequently, this made it difficult for applicants who
lived in regions remote from the central office to process their IP registration. A
further implication was that centralisation of the application lodgement made the cost
of IP registration higher since there were extra costs to submit the application
documents to the central office in Tangerang. As sending the applications via post
was unreliable, most of the applicants preferred to travel directly to Tangerang or
used the service of other parties, such as an IP agent, to act on their behalf when
52
Minister of Justice and Human Rights Decree No M.11.PR.07.06 of 2003 of 4 November 2003 on
The Assignment of the Regional Office of Department of Justice and Human Rights to Receive IPR
Application.
53
Antons, IPL Law from Inonesia, above n 4, 4.
122
filing an IP application. Both options involved extra costs that were by no means
small.
Although the initiative of giving the Regional IP Offices authority to receive IP
application is positive, it is doubtful whether it has worked well so far. It may make
the process of IP registration easier for applicants living far from the central office;
however, it is still not effective in make the IP registration process is faster and low
cost. Lack of technological assistance and a paucity of skilled human resources,
particularly in the regional areas, ensure that many applicants from remoter areas still
prefer to submit their applications directly to the central office. Besides that, the
regional office only functions as an office to simply receive and to forward IP
applications to the central office, which remains as the government agency which
grants final approval of IPRs. It means that the burden on the central office of
processing IP registrations from all over Indonesia is still huge. 54
Another development in the administrative sector is the issuance of Government
Regulation No 2 of 2005 on IP Consultants. This government regulation requires the
registration of IP consultants in Indonesia to DGIPR. Previously, this requirement
only applied to patent agents who could re-register until June 2005 under this new
registration system. 55 To be registered in DGIPR as an IP consultant, all applicants
must be Indonesian citizens with permanent residency in Indonesia, hold a bachelor
degree from any field, be proficient in English, not have public servant status, and
54
55
Further discussion about registration issues will be presented in the subsequent part of this chapter.
Antons, IPL in Indonesia, above n 4, 5.
123
participate in the training course for IP consultants. 56 The registration requirement is
important to control the quality of service provided by IP agents or consultants. It
could, in addition, help to narrow the operation of calo 57 that provides services to
take care of IP registration but while making unreasonable charges and adopting
illegitimate practices. However, in 2008, in the third year of operation of the new
registration system, a magazine reported that the number of calo that represents IP
applicants was still substantial. 58 The current situation is probably not really so
different from that prevailing two years ago.
4.3.2.3. Court Proceeding Reforms
Since the enactment of the new IP legislation in 2000–2002, IP disputes — including
copyright, patents, trademarks, industrial designs and the layout design of integrated
circuit — have no longer been settled at first instance by the District Courts, and the
Commercial Courts now decide these kinds of IP disputes. However, the District
Courts are still responsible for settling criminal, trade secrets and plant varieties
protection cases. For customs border control measures, which were previously settled
56
Peraturan Pemerintah No 2 Tahun 2005 tentang Konsultan HKI [Government Regulation No 2 of
2005 on IP Consultants] (Indonesia) art 3.
57
Calo is the common term for a profession that provides services to take care various matters (such
as a broker) through illegitimate practices. In most cases, a calo bribes government officers to cut
back the normal administrative procedure in one government office on behalf of his or her clients. A
calo gets a commission from this service. See 'Menjadikan Calo Musuh Bersama (Making Calo as
Public Enemy)', Haluan (Padang), 8 January 2011 2011
<http://harianhaluan.com/index.php?option=com_content&view=article&id=402:menjadikan-calomusuh-bersama&catid=13:haluan-kita&Itemid=81>.
58
Asnil Bambani Amri, 'Banyak Calo di Pengurusan Hak Kekayaan Intelektual (Many Scalpers in IP
Registration Process)', Kontan (Jakarta), 24 October 2008, 36
<http://kontan.realviewusa.com/default.aspx?iid=22518&startpage=page0000036>.
124
in the District Court, these now become the responsibility of the Commercial
Courts. 59
In terms of procedural law, the current IP legislation on copyright, patents,
trademarks, industrial designs and the layout design of integrated circuit also
introduce simpler procedural laws than the previous legislative regime. Prior to the
enactment of the current legislation, appeals in an IP case (except trademark cases} 60
must first have been submitted to the High Court, then, to the Supreme Court for
cassation with the possibility of requesting a judicial review process in the Supreme
Court if all previous efforts were unsuccessful. Now, all of the IP appeal requests,
except in cases related to trade secrets and plant variety protection, can skip the
appeal process in the High Court and go directly to the Supreme Court. It has the
effect of shortening the time required to settle the disputes.
The current copyright, trademark, patents and industrial designs legislations also
include an interlocutory injunction mechanism, 61 which is known as Anton Pillar
order. This mechanism originated from the common law system and was introduced
here as an effort to design Indonesian IP legislations that is in line with Article 50 of
the TRIPS Agreement. 62 The Indonesian Civil Procedural Code 63 contains a similar
59
This transfer is based on Undang-Undang No 17 Tahun 2006 Tentang Perubahan atas UndangUndang No 10 Tahun 1995 Tentang Kepabeanan [Law No 17 of 2006 concerning amendments to
Law No 10 of 1995 on Customs Matters] (Indonesia). Antons, ‘Indonesia’, above n 25, 167.
60
Appeals in a trade mark case under the latest trademark legislation has the same procedure as in the
previous legislation. According to Article 53(1) of Law No 14 of 1997 on Amendment of Law No 19
of 1992 on Trademark, a trademark case only cannot request an appeal to the High Court, rather than
directly to the Supreme Court for cassation or judicial review.
61
An injunction is an immediate and effective order issued by a Commercial Court to prevent further
infringements, particularly to stop items in question entering the market, and to avoid the
disappearance of evidence.
62
Simon Butt and Timothy Lindsey, 'TRIPS and Intellectual Property Law Reform in Indonesia: Why
Injunctions Aren't Stopping Piracy' (2005) (2) (Winter) Harvard Asia Pacific Review 14, 15.
125
provision with an injunction that is known as a putusan serta merta (provisional
decision). However, a provisional decision is slightly different since it can only be
granted a few months after the hearing of the main case has started. Therefore, as a
provisional decision does not provide an immediate remedy to plaintiff, it is not
really useful for IP infringement cases.
Although the Anton Pillar injunction is a very useful tool for plaintiffs in IPR
infringement cases, its application is rare in Indonesia. Indonesian judges are
reluctant to apply it because they are not familiar with Anton Pillar order injunctions.
As a country that belongs to a Code Law legal tradition, on the matter of Pillar
injunctions there are few details are provided in the Indonesian Civil Code, nor are
there implementing regulations or judicial decisions on this matter. In this situation,
judges are expected to be progressive and proactive to fill in the gaps. However,
most of senior judges find it inconvenient to do so without clear directions on how to
deal with injunctions. Moreover, if they apply an Anton Pillar injunction, there is no
guarantee that the decision would be followed by other judges in later decisions on
similar cases since in civil law system, precedents do not play an important role in
determining the content of court decision. 64 If pressured, judges would simply apply
the existing regulations and practice on putusan serta merta 65 to the injunction. 66
63
The Civil Procedural Code which applies currently in Indonesia is derived from two colonial
regulations, namely the Indonesian Renewed Procedural Law (Het Herziene Indonesische Reglement
– HIR) and the Procedural Law for the Areas beyond Java and Madura (Het Rechtsglement
Buitengewesten – RBg). Provisional provisions are contained in Article 180 of HIR and Article191 (1)
of RBg.
64
Simon Butt and Timothy Lindsey, 'TRIPS and Intellectual Property Law Reform in Indonesia: Why
Injunctions Aren't Stopping Piracy' (2005) (2) (Winter) Harvard Asia Pacific Review 14, 15.
65
Ibid.
66
In late 2009, the government made a promise to issue a regulation on how to implement injunctions
in IP infringement cases by the Supreme Court soon. However, as at 30 June 2011, the regulation had
not yet been issued. Elvani Harifaningsih, 'MA Atur Injunction Kasus HaKI: Peraturan itu Berdampak
pada Penegakan Hukum (The Supreme Court Regulate Injunction on Intellectual Property Case: This
126
4.3.2.4. IP Enforcement Reforms
In relation to IP enforcement, the establishment in 2006 of the National Team on the
Tackling of Infringements of IPRs (Tim Nasional Penanggulangan Pelanggaran Hak
Kekayaan Intelektual - Timnas PPHKI), 67 was a positive development. Timnas
PPHKI was a task force established based on Presidential Decree No 4 of 2006 on 27
March 2006. The task force has five duties: 1) to formulate national policies on
tackling IPR infringements; 2) to establish necessary steps for the tackling IPR
infringements; 3) to determine and evaluate dispute resolutions and strategic issues to
tackle IPR infringement, including the prevention and the legal enforcement
undertaken, in line with the respective main duties and functions of the related
institutions; 4) to provide guidance and direction as well as priorities of IPR
socialisation and education to the related institutions and organizations, as well as to
the public through various activities in order to eliminate IPR infringement; and 5) to
perform and enhance bilateral, regional and multilateral co-operations in order to
combat IPR infringement. 68
The establishment of Timnas PPHKI was a positive initiative of the government of
Indonesia, particularly of President Susilo Bambang Yudhoyono, in response to the
Regulation will Affect on Law Enforcement)', Bisnis Indonesia (Jakarta), 17 December 2009
<http://www.bisnis.com/servlet/page?_pageid=127&_dad=portal30&_schema=PORTAL30&vnw_lan
g_id=2&ptopik=A61&cdate=17-DEC-2009&inw_id=709980>.
67
The National Team was lead by the Coordinating Minister for Political, Security and Legal Affairs
(Menteri Koordinator Bidang Politik, Hukum dan Keamanan – Menkopolhukham) and the
Coordinator Minister for Economic Affairs as Deputy Chairman. Acting as its Chief Executive is the
Minister of Law and Human Rights and the Minister of Trade as Chief Executive Deputy. The team
members are ministry level officials in a number of relevant government agencies in Indonesia. They
work under and are responsible to the President of Indonesia. See Article 3 of the Presidential Decree
No 4/ 2006.
68
Directorate General of Intellectual Property Rights - Department of Law and Human Rights, 'Report
2006' (Directorate General of Intellectual Property Rights - Department of Law and Human Rights,
2007).
127
allegations by foreign countries, particularly the US, that the government is not
sufficiently committed to combating IPR infringements or to its enforcement of the
country’s obligations under TRIPS. The selection of important figures from relevant
government agencies to work in the team demonstrates the seriousness of the
Indonesian government to comply with the TRIPS Agreement and the demands of its
trading partners. It is also anticipated that the establishment of Timnas PPHKI could
resolve the problem of entrenched poor coordination among the Indonesian
government agencies tackling IPR legal enforcement issues. The most important
thing is that Timnas PPHKI could raise the image of Indonesia as a country which is
very concerned with IPR issues. In the five years since it was established, the
performance of the team is covered in the discussion below.
In the first three years, the performance of the team was considered good by
domestic and foreign stakeholders. Because of its good performance and other
improvements in IP sectors, such as the implementation of Ministerial of Trade
Decree No 05/M-/DAG/PER/4/2005 on the Regulation of Imports of Machinery,
Machine Accessories, Raw Material and Optical Discs, which was intended to stop
the production of pirated CDs and DVDs by controlling the licensing of factories,
and the conducting of raids against the facilities used to produce pirated optical disc
and against retail outlets, 69 in November 2006, the USTR altered the position of
Indonesia from being on the Priority Watch List (where Indonesia had languished
since 1996) to being on the Watch List, a far more favourable position. 70
69
Ibid.
International Intellectual Property Alliance (IIPA), Appendix D: Chart of Countries' Special 301
Placement (1989-2005) and IIPA 2006 Special 301 Recommendations (13 February 2006)
<http://www.iipa.com/pdf/HISTORY%20OF%20USTR%20DECISIONS%202006%20Sp%20301%2
0021106.pdf>.
70
128
After the first three years, however, the performance of the team deteriorated. On 30
April 2009, the USTR was released its 2009 Special 301 Report which elevated
Indonesia into the Priority Watch List once again. 71 In the Report, the USTR
acknowledged that there had been some slight improvement, yet the performance of
Indonesia on IPR protection and enforcement was still assessed negatively. One
indicator of the USTR assessment is optical disc regulation. Here the USTR
evaluated that regulation had not been implemented effectively as the government of
Indonesia still issued licences for suspect production lines. Moreover, the USTR
observed that the government of Indonesia had failed to revoke permanently licences
of factories that had already been convicted of committing piracy activities nor had
the authorities confiscates their equipment and materials which were used to produce
pirated optical discs. 72 In the 2010 Special 301 Report, Indonesia still remains on the
Priority Watch List. 73 The Report mentioned the weak IPR enforcement system,
including an unreliable judicial system for IPR cases, a low number of criminal
prosecutions, and non-deterrent penalties, as concerns in the Indonesia’s 2010 IPR
performance. 74
In regard to the performance of Timnas PPHKI, there was a significant difference in
perception between the USTR and the government of Indonesia. In 2009, Timnas
71
Ibid.
Ibid. See, also The Office of the United States Trade Representative, '2009 National Trade Estimate
Report on Foreign Trade Barriers' (The United States Trade Representative, March 2009)
<http://www.ustr.gov/sites/default/files/uploads/reports/2009/NTE/asset_upload_file255_15479.pdf>,
254.
73
Office of the United States Trade Representative, USTR Releases 2010 Special 301 Report on
Intellectual Property Rights (Press Release, April 2010) <http://www.ustr.gov/about-us/pressoffice/press-releases/2010/april/ustr-releases-2010-special-301-report-intellectual-p>.
74
Office of the United States Trade Representative, '2010 Special 301 Report' (Office of the United
States Trade Representatives, , 2010) <http://www.ustr.gov/webfm_send/1906>, 27.
72
129
PPHKI formulated the National Policy on Intellectual Property (Kebijakan Nasional
Kekayaan Intelektual – KNKI), 75 which had as a target a recommendation that the
USTR remove Indonesia from the Watch List in 2008 to the Off List in 2009. The
recommendation was based on the government evaluation of IP infringement cases
that had occurred in Indonesia over the previous three years. The percentage of IP
infringement cases in Indonesia had dropped from 87 per cent in 2005 to 85 per cent
and 84 per cents 76 in 2006 and 2007 respectively. 77 However, the USTR assessed the
performance of the team as ineffective. 78 The USTR in its assessment noted that
Timnas PPHKI had undertaken little concrete action to improve the IPR system in
Indonesia over the period. In 2008, the USTR had seen IP infringement cases being
decided slowly and only small number of cases successfully convicted, and with
sanctions limited to light fines which could not have a deterrent effect on frequent
infringers. 79 Therefore, rather than removing Indonesia to the Off List, the USTR
decided to return the county to the Priority Watch List in 2009.
Despite the government’s self-confidence, in reality, the development of IP
enforcement in Indonesia had not been significant. The number/percentage of IP
infringements that had been reduced by the efforts of Timnas PPHKI over the past
three years had been small. The large-scale police raids that had been highly
publicised are mainly aimed at end-user piracy of software and optical disc pirate
75
Andi Mattalatta, 'Pidato Menteri Hukum dan HAM RI Awal Tahun 2009 (Speech of Minister of
Law and Human Rights of the Republic of Indonesia in the Early 2009) ' (2009)
<http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=25&id=2064&type=0>.
76
There is no explanation whether the percentage of IP infringement cases here is a percentage of the
total number of court cases or of the number of cases instigated in Indonesia. Ibid.
77
Mattalatta, ‘Pidato Menteri Hukum dan HAM 2009’, above n 72.
78
Ibid.
79
Office of the United States Trade Representative, ‘2009 Special 301 Report’, above n 34, 19.
130
production 80, whereas large corporations which produce the pirated software or
optical discs were rarely touched by these raids, 81 a situation that continues largely to
be the case) Moreover, according to the 2009 International Intellectual Property
Alliance (IIPA) Special 301 Report, the enforcement process in Indonesia in 2008
lacked transparency and was enveloped in problems of corruption. 82
4.4. Overview of Indonesian Intellectual Property Law
This sub-section provides an overview of the laws that govern the intellectual
property rights regime in Indonesia. Although Indonesia has already passed seven
intellectual property laws, the discussion in this sub-section is limited to the six
laws 83 that govern copyright, trademark, industrial design, patent, trade secrets, and
plant variety protection. It will analyse provisions in each of six laws which are
relevant to SMEs in Indonesia. Such analysis is needed to understand how IP laws
work in Indonesia and their relationship with Indonesian SMEs.
80
International Intellectual Property Alliance, Indonesia: IIPA 2009 Special 301 Report on Copyright
Protection and Enforcement (2009) International Intellectual Property Alliance
<http://www.iipa.com/rbc/2009/2009SPEC301INDONESIA.pdf>. (‘IIPA 2009 Special 301 Report on
Copyright’).
81
M A Maulidin, 'Pemerintah Kecewa Masuk Priority Watch List (Government Disappointed Joined
Priority Watch List)', Warta Ekonomi (Jakarta), 5 May 2009 2009
<http://www.wartaekonomi.co.id/index.php?option=com_content&view=article&id=1829%3Apemeri
ntah-kecewa-masuk-priority-watch-list-&catid=53%3Aaumum&Itemid=62>.
82
International Intellectual Property Alliance, IIPA 2009 Special 301 Report on Copyright, above n
80, 71.
83
It does not discuss Undang-Undang No 32 Tahun 2000 tentang Desain Tata Letak Sirkuit Terpadu
[Law No 32 of 2000 on Layout Design of Integrated Circuit] (Indonesia) because this form of IPRs
protects high technology innovation which is not frequently developed by SMEs in developing
countries, particularly Indonesia. See also Chapter 3 (section 3.2.).
131
4.4.1. Law No. 19 of 2002 on Copyright 84
As mentioned in Chapter 3, sub-section 3.2.1., copyrights are relevant to protect
businesses of any size that manufacture and trade products that are based on creative
ideas, such as the handicraft industry. In Indonesia, SMEs have dominated the
manufacturing sector of the handicraft industry, 85 and the batik industry is
categorised as one of its sub-sectors. 86 In relation to batik, it is worth distinguishing
between modern and traditional works as they have different forms of IPRs
protection. When batik is produced using modern techniques and not applying
traditional motifs, it is called ‘modern batik’ which is the object protection of
copyright. On the other hand, ‘traditional batik’ which is produced in the traditional
manner and applies traditional motifs is protected under traditional cultural
expressions (TCE). Both the protection of copyrights and TCE are governed in Law
No 19 of 2002 on Copyright.
Prior to the enactment of this law in 2002, earlier legislation had existed: the 1982
Copyright Law and two amendments of the law in 1987 and 1997. The Copyright
Law of 1997 was a response to Indonesia’s joining the WTO and the TRIPS
Agreement. The present Copyright Law, however, contains some provisions which
are more compliant with the TRIPS Agreement, such as the inclusion of a data base
84
Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002 on Copyright]
(Indonesia) (‘Copyrigth Law 2002’).
85
Kelompok Kerja Indonesia Design Power - Departemen Perdagangan (Working Group of Indonesia
Design Power - Department of Trade), Rencana Pengembangan 14 Subsektor Industri Kreatif 20092015 (Development Planning of 14 Sub-Sectors of Creative Industry 2009-2015) (Department of
Trade, 2008) 99.
86
Ibid 101.
132
as one of works protected by copyright, dispute settlement through mechanism
outside the Commercial Court, arbitration, and the availability of injunctions. 87
The Copyright Law 2002 does not provide an exhaustive definition of the subject
matter protected under copyright; however, it does state that what is protected under
copyright is an original work in the field of science, arts and literature. 88 Like Article
2(1) of the Berne Convention on the Protection of Literary and Artistic Works,
instead of providing a definition, the Law lists the kinds of works that are protected
under copyright. These works include: books, computer programs, pamphlets,
typographical arrangement of published works and all other written works; sermons,
lectures, addresses and other works of utterance; visual aids made for educational
and scientific purposes; songs or music with or without lyrics; dramas, musical
dramas, dances, choreographic works, puppet shows, pantomimes; all forms of art,
such as paintings, drawings, engravings, calligraphy, carvings, sculptures, collages
and applied arts; architecture; maps; batik art; photography; cinematographic works;
translations, interpretations, adaptations, anthologies, data-bases and other works as a
result of changing form of mode. 89
The protection of copyright is obtained through an automatic system, which does not
require registration. However, in Indonesia, the Copyright Law contains a noncompulsory registration provision. 90 While this means that a work is still entitled to
copyright protection, even if it does not register, 91 registration can prove valuable as
87
Elucidation of Copyright Law 2002: General.
Ibid art 1(3).
89
Ibid art 12(1).
90
Ibid art 35(1) and( 4).
91
Ibid elucidation of Article 35(4).
88
133
the certificate of copyright can serve as evidence in the Court when a copyright
dispute emerges. The protection of copyright is valid for the life of the author and 50
years after his or her death. 92 After this term expires, the protection cannot be
renewed and the work concerned shall become public domain.
In addition to copyright, the Copyright Law 2002 also contains provisions that
protect traditional cultural expressions (TCE) or folklore. Under the heading
‘Copyright to Works of Unknown Authors’, Article 10(2)–(3) is specifically
designed for this purpose. Article 10(2) provides that the state shall hold the
copyright for folklores and works of popular culture that are commonly owned, such
as stories, tales, legends, fairy tales, chronicles, songs, handicrafts, choreography,
dances, calligraphies and other artistic works. Article 10(3) provides that foreigners
or non-Indonesian citizens must get permission from the relevant authority to bring
to public or reproduce such works. From these two provisions, it is obvious that the
state is positioned as the defender of national culture to ‘prevent actions by foreign
parties which could damage the relevant culture values’. 93 The role of the state as
defender of the national culture of Indonesia is also stated in Article 32(1) of the
Indonesian Constitution. It is ironic, however, that local communities as the owners
of TCEs or folklores do not have a role in protecting their own properties. Besides
that, a government regulation needs to be issued in order to implement these two
provisions. 94 Unfortunately, such government regulation has never yet been issued.95
The absence of such a government regulation, however, does not stop the Indonesian
92
Ibid art 2(1).
Ibid elucidation of Article 10(2).
94
Ibid art 10(4).
95
As at 16 July 2011.
93
134
government, particularly at regional level, from obtaining copyright protection for
community TCEs.
For batik industry, obviously, the protection of copyright and TCE is important. Both
protect the core products of the industry from illegal copying acts of its competitors.
Interestingly, in regard to Indonesian SMEs, either making modern or traditional
batik, there is permissive attitude toward copying actions. 96 For some small and
medium entrepreneurs, copying has even become a habitual source of material that
fuels the industry. 97 For many years, batik SMEs in many regions of Indonesia have
made no complaint when their batik motifs are copied by their local competitors.
Until the dispute over the ownership of batik between Indonesia and Malaysia
emerged a few years ago, 98 the protection of copyrights and TCE had never been an
issue among Indonesian SME owners in batik industry. Nevertheless, even in today’s
competitive situation, and although Indonesian SMEs in batik industry are more
aware about copying issues, they are more concerned when batik is claimed and
copied by foreign countries or persons 99 than when it is copied by their local
competitors.
96
Tatiek Sudaryanti, 'Jiplak Menjiplak Motif Batik (Copying Batik Motifs)', Suara Merdeka
(Semarang), 12 September 2009 2009
<http://suaramerdeka.com/v1/index.php/read/cetak/2009/09/12/80374/JiplakmenjiplakMotifBatik>
97
Interviews with 14 SME owners in the batik industry in Pekalongan in March 2009 (on file with
author).
98
'Get Rid of Malaysia's Claim! Happy Batik Day, Indonesia ', Kompas (Jakarta), 2 October 2009
2009
<http://english.kompas.com/read/2009/10/02/08344141/Get.Rid.of.Malaysias.Claim.Happy.Batik.Day
..Indonesia.>. For more detail discussion on Batik and IPRs, see Chapter 6 (section 6.4.).
99
Jodhi Yudono, 'Batik Indonesia Diharapkan Lebih Dihargai Dunia (Indonesian Batik is Expected to
be Respected in the World)', Kompas (Jakarta), 11 September 2009 2009
<http://tekno.kompas.com/read/2009/09/11/02182741/batik.indonesia.diharapkan.lebih.dihargai.dunia
>.
135
In addition to its protection function, copyright and TCEs when exploited provide
rewards for their owners. However, in terms of rewards, the position of modern batik
makers is better than that of those who make traditional batik. Modern batik makers
are protected under copyright, which allows individual ownership, and thus the
owners can enjoy the rewards of copyright exploitation; while the ownership of
traditional batik in Indonesia is in the hands of state, which means its makers cannot
easily enjoy the rewards coming from copyright exploitation as do modern batik
makers.
4.4.2. Law No. 15 of 2001 on Trade Mark 100
Trademark is important for either large or small and medium businesses. It functions
to protect the reputation of a business and as an identifier that distinguishes one
product from another. For SMEs, unlike other IPRs, trademark with its identifier
function is needed at the early stage of their businesses. Like trademark,
geographical indication (GI) also has protection and identifier functions with
different applications. GI is granted for products that have a regional reputation.
Batik and jamu are example of products with strong local content which possess
regional uniqueness.
The current trade mark law in Indonesia, Law No 15 of 2001, which was enacted on
1 August 2001. It is a second attempt after Law No 14 of 1997 which amended Law
No. 19 of 1992 on Mark was still considered below the TRIPS protection standards.
The scope of Law No 15 of 2001 is quite broad since it is includes trademarks,
100
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark]
(Indonesia) (‘Trademark Law 2001’)
136
service marks, geographical indication and appellation of origins. The last two
subjects were not contained in the previous trademark legislation.
To obtain trademark protection, a trademark needs to be registered by the DGIPR by
fulfilling the definition of mark and the prerequisites of registration stipulated in the
2001 Law. According to Article 1 on definitions, a mark is a sign in the form of a
picture, name, word, letters, numerals, composition of colours, or a combination of
these elements, which have distinguishing features and are used in the course of trade
in goods or services. An applicant who seeks to register his/her trademark must not
do so in bad faith, 101 that is, with the intention of making other well-known marks
suffer, and/or to create unfair competition and/or to mislead consumers. 102
A trademark cannot be registered if it is against the prevailing rules and regulation,
the morality of religion and public order. 103 This means that the use of a trademark
must not injure feelings regarding good manners or religion of the public in general
or of certain parts of the society. 104 For instance, trademarks which contain
pornographic depictions, nudity and those that would promote inducing abortion and
tax evasion. 105
Other things that may prevent the ability of a trademark to be registered include
having no distinguishing features 106 and being within the public domain.107 A
101
Ibid art 4.
Ibid elucidation of Article 4.
103
Ibid art 5(a).
104
Ibid elucidation of Article 5(a).
105
Antons, IPL in Indonesia, above n 4, 219–20.
106
Ibid art 11(1).
107
Ibid art 5(c).
102
137
trademark is considered as having no distinguishing features if the mark is too simple
or too complicated. 108 For example, a trademark which contains only one straight
line or dot as a sign would be considered too simple. 109 For a trademark to be
considered in the public domain, the elucidation mentions the sign of skull on top of
two crossed bones, which is well-known as the sign of danger, as an example. 110
Further, a mark that constitutes information, or is related to the goods or services for
which registration requested, also cannot be registered. 111 Examples of this are the
word for or picture of coffee for the products of coffee itself. 112
The 2001 Law also rules that the registration must be refused if the trademark in
question has a similarity in its essential part or in entirety to a mark 113 or a wellknown mark 114 that has previously been registered or owned by another party for the
same kind of goods and/or services. Regarding the similarity with a well-known
trademark, it must be determined first whether the trademark in question is wellknown. The elucidation explains that the trademark needs to be well-known because
of intensive and extensive promotional activities, investments in some countries in
the world by the owner, which is accompanied by evidence of trademark
registrations in several countries.
A trademark application shall also be refused when it has similarity in its essential
part or in its entirety to a known geographical indication (GI). 115 This ground makes
108
Ibid elucidation of Article 5(b).
Ibid elucidation of Article 5(b).
110
Ibid elucidation of Article 5(c).
111
Ibid art 5(d).
112
Ibid elucidation of Article 5(d).
113
Ibid art 6(a)
114
Ibid art 6(b).
115
Ibid art 6(c).
109
138
clear that GI is considered as something similar to trademark in this law. Although
TRIPS does not require GI to follow a trademark system, some countries (including
Indonesia) include GI as part of their trademark system.
In addition to these grounds, a trademark application could also be refused if, without
the written permission of the party concerned, it constitutes or resembles the name of
famous person, a photograph and the name of a legal entity belongs to another
party. 116 The trademark must also not constitute or resemble a name or abbreviation
of a name, flag, coat of arms, symbol, an emblem a state, a national or international
institution,117 an official sign, seal or stamp used by a state or a government
institution.118
This law employs the ‘first to file’ system of registration, which means the first one
who registers the trademark would be deemed as the legal owner. Unlike ‘first to
use’ system of registration, it does not consider whether the registrants would like to
use the trademarks for their businesses. However, a trademark which has not been
used for three consecutive years in the course of trade from the date of registration or
of the last use, except there is an acceptable excuse, may be deleted from the General
Register of Marks on the initiative of DGIPR. 119 Once registered, a trademark shall
enjoy 10 years of renewable protection. 120
116
Ibid art 6(3)
Ibid art 6(3)(b)
118
Ibid art 9(3)(c)
119
Ibid art 61(2)(a).
120
Ibid art 28.
117
139
As mentioned previously, this law also covers GI. The protection of GI is provided
after registration, which is similar to the trademark system. 121 The registration of GI
may be filed by an institution that represents a local community in the area, which
produces goods of natural resources, agricultural products, handicraft or industrial
products, or merchants who sell the goods concerned. 122 In addition, an authorised
institution123 and groups of consumers 124 may also be entitled to register the products
concerned for GI protection.
As is the case for trademark, GI registration shall be refused if the sign contradicts
morality, religion, public order, is likely to deceive or mislead people as to its
characteristics, such as features, quality, source of origin, process of production or its
usage. The protection of GI shall last as long as the features and or the quality for
which the protection has been conferred continue to exist. 125 The procedures for GI
registration are further regulated in Government Regulation No 51 of 2007 on
Geographical Indications.
In Indonesia, there are many counterfeiting trademark cases. In the past, Law No 21
of 1961 on Trademark was blamed as being the cause of the high incidence of
counterfeiting cases. The law applied a declarative system which does not require a
substantive examination in the trademark registration procedure. Once a trademark
application satisfied the administrative requirements, the application would be
approved. This system became an opportunity for trademark entrepreneurs to register
121
Ibid art 56(3) maintains Articles 21–25, which describe the procedure of trademark registration,
are applied to GI.
122
Ibid art 56(2).
123
Ibid art 56(2)(b).
124
Ibid art 56(2)(c).
125
Ibid art 56(7).
140
well-known overseas trademarks before the actual owners registered them in
Indonesia. 126 Then, when the actual owners wanted to register their overseas
registered trademark in Indonesia, the registered trademark owners simply sold it
back to them. 127 Since 1993, the declarative system has been changed to a
constitutive system which requires substantive examination. This new system helps
in reducing the number of trademark disputes caused by counterfeiting actions.
However, an article in 2009 reports that the number of counterfeiting trademark
cases was still high in 2007 128 and 2008. Counterfeiting is also found in the jamu
industry. In 2006, some cases of counterfeiting jamu trademark were reported to
have occurred in Central Java. 129 Although there is no precise information, it is
reasonable to assume that the perpetrators of such action are mostly SMEs. 130
Regarding geographical indication, GI brings benefits to SME owners in terms of
giving protection and becoming an identifier for GI products collectively. However,
when it comes to economic benefit generated from the exploitation of GI, SMEs
cannot enjoy it directly. Collective groups or the government who owns the GI are
126
Aries Margono et al, 'Menyapu Mafia Pedagang Merek [Wipe Off Trademark Entrepreneurs
Mafia]', Tempo (Jakarta), 1 August 1992, 38.
127
Ibid.
128
In 2007, it was reported there were 67 counterfeiting trademark cases in the Jakarta Commercial
Court. This number is similar with 92 per cent of the total IP cases settled in the Jakarta Commercial
Court. This number dropped by 61 cases in 2008. See, Hukum Online, 'Melawan Kenakalan di Balik
Pendaftaran Merek (Fighting Bad Things behind Trademark Registration)' (2009)
<http://www.hukumonline.com/berita/baca/hol22440/melawan-kenakalan-di-balik-pendaftaranmerek>.
129
'Dua Orang Ditetapkan Tersangka: Kasus Pemalsuan Merek Jamu (Two People was Charged:
Jamu Counterfeiting Cases)', Suara Merdeka (Banyumas), 20 November 2006 2006
<http://www.suaramerdeka.com/harian/0611/20/ban02.htm>.
130
'Polisi Limpahkan Tersangka Pemalsuan Merek (Police Handed Over the Suspect of Trademark
Infringement)', Riau Mandiri (Pekanbaru), 11 June 2011 2011
<http://www.riaumandiri.net/rm/index.php?option=com_content&view=article&id=18086:polisilimpahkan-tersangka-dugaan-pemalsuan-merek&catid=36:hukum-a-kriminal&Itemid=54>; 'Lagi,
Pemalsu Merek "Eager" Dibekuk (Again, "Eager' Trademark Counterfeiting Perpetrators Arrested)'
(2011) (7 April)
<http://portalkriminal.com/index.php?option=com_content&view=article&id=12100:1858-lagipemalsu-merek-qeagerq-dibekuk&catid=38:kriminal-daerah&Itemid=41>.
141
the ones who benefit from its exploitation. Although the focus of GI protection is not
providing rewards to the owners, the issue of benefit sharing still exists.
Unfortunately, both Indonesian trademark law and government regulation on GI are
silent on this issue.
4.4.3.
Law No. 31 of 2000 on Industrial Design 131
Industrial design which protects ornamental aspects of a product is relevant for
SMEs since products manufactured by such enterprises include things suited to
protection under industrial design rights. The easy requirements for obtaining
industrial protection are also suitable for SMEs, which often have only limited
resources.
The present law that regulates industrial design right in Indonesia is Law No 31 of
2000. It is the first piece of legislation in the field of industrial design in Indonesia.
Prior to this law, a general design work in Indonesia was protected through copyright
regime. 132 The protection of design for industrial products is also provided by Law
No 5 of 1984 on Industry and it continues to apply. 133 After joining the WTO and
ratifying the TRIPS Agreement, Indonesia passed Law No 31 of 2001, sui generis
legislation in the field of industrial design. In addition to this law, the protection of
131
Undang-Undang No 31 Tahun 2000 tentang Desain Industri [Law No 31 of 2000 on Industrial
Design] (Indonesia) (‘Industrial Design Law 2000’)
132
A Zen Umar Purba, 'Strategi Pemerintah Dalam Melaksanakan Undang-undang tentang Rahasia
Dagang, Desain Industri, dan Desain Tata Letak Sirkuit Terpadu (Government Strategy in
Implementing the Laws on Trade Secret, Industrial Design, and Layout Design of Integrated Circuit) '
(2001) (13 April 2001) Hukum Bisnis 9 in Ansori Sinungan, Perlindungan Desain Industri:
Tantangan dan Hambatan Dalam Praktiknya di Indonesia [Protection of Industrial Design: Practical
Challenge and Impediment in Indonesia] (PhD Thesis, University of Indonesia, 2009) 333.
133
Undang-Undang No 5 Tahun 1984 tentang Industri [Law No 5 of 1984 on Industry] (Indonesia) art
17.
142
industrial design in Indonesia is also provided by Government Regulation No 1 of
2005 on the Implementation of Law No 31 of 2000 concerning Industrial Design.
In Law No 31 of 2000, industrial design is defined as a creation in the shape,
configuration, or the composition of lines or colors, or the combination thereof in a
three or two dimensional form, which gives aesthetic image and can be materialised
in a three or two dimensional pattern for manufacturing products, goods or an
industrial commodities and handicrafts. 134 An industrial design fitting the above
specifications needs to be registered to obtain protection. The protection is only
granted for a new industrial design, which is not the same as any previous
disclosures 135 in mass and electronic media or exhibition 136 on the filing date. 137
The law does not consider the industrial design has been published if, in the
maximum duration of 6 months before the filing date, it has been shown in a national
or international exhibition in Indonesia or overseas. 138 The exhibition must be
organised by the government of Indonesia or at least with approval obtained from the
government. 139 The industrial design is also not deemed as having been published if
the designer has used it in Indonesia for the purpose of education, research and
134
Industrial Design Law 2000 art 1(1).
‘Previous disclosures’ means that the industrial design has been announced or used in Indonesia or
overseas on the filing date or the priority date, if the application is submitted with Priority Rights. See
Article 2(3) of the Industrial Design Law 2000Undang-Undang No 31 Tahun 2000 tentang Desain
Industri [Law No 31 of 2000 on Industrial Design] (Indonesia). Whereas priority right is the right of
applicants from member countries of the Paris Conventions to file application for industrial rights, i.e.
trademarks, industrial design and patents, in the destination countries, which are also member of the
Paris Convention. The date of filing in the destination country will be the same as the first date of
filing in the home countries. See Article 1 (12) of 2000 Industrial Design Law; Article 1(14) of 2001
Trademark Law.
136
Industrial Design Law2000 elucidation of Article 2(1).
137
Ibid art 2(1).
138
Ibid art 3(a).
139
Ibid elucidation of Article 3(a).
135
143
development. 140 Although meeting all of these requirements, an industrial design
shall not receive protection if it is in contradiction of the valid law and regulations,
public order, religion or morality. 141 Although the law does not provide examples for
such kinds of industrial design, the examples provided in the copyright law is
presumably applied to industrial design.
The application for registration of an industrial design may be filed for a single or
‘one whole’ industrial design. 142 In this instance, this means that the industrial design
applies to the whole product created. For example, the industrial design application
for a cup as a single industrial design would include the ornaments, the handle, shape
of the cup, combination colors, and so on. 143 Besides ‘one whole’ industrial design,
the wording of Article 6(1)(g) of Government Regulation No 1 of 2005 implies that
protection of industrial design rights may also be given to partial design. In this case,
the ornaments or the handle of the cup can be used as example of partial design. 144
The last type of industrial design that can be granted protection is to a ‘set of
designs’. The law requires this set of designs must have a unity of an industrial
design or be in the same class. 145 The word ‘class’ here refers to the international
classification of industrial design contained in the WIPO Locarno Agreement. 146
Although Indonesia did not ratify the agreement, in practice, the Locarno Agreement
is used as the main reference in the examination process. 147 Examples of this type are
140
Ibid art 3(b).
Ibid art 4.
142
Ibid art 13(a).
143
Gladys Mirandah, Protection of Industrial Design in Indonesia (2008)
<http://mirandah.com/en/categories/item/195-protection-of-industrial-design-in-indonesia.html>.
144
Ibid.
145
Industrial Design Law 2000 art 13(b).
146
Locarno Agreement Establishing an International Classification for Industrial Design, opened for
signature 8 October 1968 , 828 UNTS 435 (entered into force 27 April 1971 ) (‘Locarno Agreement’).
147
Ibid elucidation of Article 13(b).
141
144
a cup, saucer and pitcher the design for which can be filed for industrial design
protection. 148 All this type of industrial designs shall have 10 years protection from
the filing date. Similarly to copyright, the protection cannot be extended after the 10
year term has expired. 149
Because of the many benefits offered by industrial design protection for SMEs in
Indonesia, the government encourages SMEs to have industrial design protection.150
The government even provides a special discount rate for Indonesian SMEs that want
to register their industrial designs. 151 However, unfortunately, the numbers of
applications coming from SMEs are few. For example, in 2010, industrial design
applications by SMEs were only 2.4 per cent (or 85 applications) of the total number
of applications made for protection available Law No 31 of 2000 concerning
Industrial Design. 152
4.4.4. Law No. 31 of 2000 on Patents 153
The present Patent Law is Law No 14 of 2001 which complements the previous
patent legislation (Law No 6 of 1989 and Law No 13 of 1997) in Indonesia. This new
148
Mirandah, above n 143.
A Zen Umar Purba, Hak Kekayaan Intelektual Pasca TRIPs (Intellectual Property Rights after
TRIPs) (Alumni, 2005), 154.
150
Interview with SY, an officer of the Directorate General of Intellectual Property (DGIP) Office
(who was in charge of IPR programs intended for SMEs) in Tangerang-Indonesia on 21 February
2009.
151
See, Peraturan Pemerintah no 38 Tahun 2009 Tentang Pendapatan Negara Bukan Pajak yang
Berlaku di Departemen Hukum dan Hak Asasi Manusia [Government Regulation No 38 of 2009 on
the Non-Tax State Revenues which Applied in the Department of Law and Human Rights]
(Indonesia)..Further discussion on this issue will presented in Chapter 8 (section 8.2.2.).
152
'Desain UKM Hanya 2,4% (SMEs Designs are Only 2.4 %)', Bisnis Indonesia (Jakarta), 14 January
2010 <http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=2663&ctid=23&id=2900&type=2>.
153
Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents] (Indonesia)
(‘Patents Law 2001’).
149
145
Patent Law contains provisions which comply with the TRIPS Agreement. There are
two kinds of patents stipulated in this Law, namely Patents, and Petty Patents (also
called Utility Model Patents). Patents which protect highly technological inventions
are not really relevant for SMEs in Indonesia. Not many SMEs in Indonesia work in
industries involving sophisticated technology. However, patents are still needed since
there are many SMEs in Indonesia that are the users of patented high technology
inventions. On the other hand, petty patents are important for the development of
SME businesses. Many SMEs in Indonesia that invent new technology cannot satisfy
the requirements necessary to be protected under patents. Petty patents, with their
lower requirements and standards of protection, are the solution for the level of
technology that is produced by many SMEs in Indonesia.
Patents protect both tangible and intangible inventions in the form of a product or
process. Patents are granted for invention in the field of technology which is novel,
involving inventive step and is susceptible of industrial application. 154 The ‘novelty’
requirement required to obtain patent protection means the invention is not the same
in technical features 155 with any previous technological disclosure, 156 which has been
published in Indonesia or overseas in writing, oral explanation, demonstration or in
other ways which enable an expert to implement the invention, on the filing date or
the priority date of the application. 157
154
Ibid art 2(1).
Ibid elucidation of Article 3(1).
156
Ibid art 3(1).
157
Ibid art 3(2).
155
146
An invention is not considered as prior art if it has been shown in an official 158
national and international exhibition in Indonesia and overseas in the period of a
maximum of six months before the filing date. 159 In addition, an invention which has
been used in Indonesia by its inventor in experiments for the purpose of research and
development during the above-mentioned time frame is also not considered as prior
art. 160 If there is other party, who breaches the obligation to keep the confidentiality
of the invention, publicising the invention within a period of no more than 12 months
duration before the filing date, the invention is still considered novel. 161
To meet the ‘inventive step’ requirement, an invention needs to be non-obvious to a
person skilled in the art. 162 The state of art at the time the first application was filed
must be considered to determine whether or not the invention is non-obvious.163
Regarding the requirement for being ‘susceptible to industrial application’, this is
satisfied if an invention is able to be implemented in industry as explained in the
application. 164 If the invention in the form of product, it must be able to be produced
in great numbers and frequently. 165 If it is a process, the invention must be able to be
run or employed in practice. 166
The law contains provisions that prohibit the grant of patent protection to an
invention subject to certain conditions. A patent shall not be granted to an invention,
158
Similar with industrial design, an official exhibition is defined as an exhibition organized by
government of Indonesia. If the exhibition organized by community, it must be acknowledged and get
permission by the government of Indonesia. See, ibid elucidation of Article 4(1).
159
Ibid 4(1)(a).
160
Ibid art 4(1)(b).
161
Ibid art 4(2).
162
Ibid art 2(2).
163
Ibid art 2(3).
164
Ibid art 5.
165
Ibid art elucidation of Article 5
166
Ibid.
147
either process or product, for which the announcement and use or implementation
conflicts with the prevailing rules and regulations, religious morality, public order,
and ethics 167 and as part of any theory and method in the field of science and
mathematics. 168 In compliance with Article 27(3)(a) of the TRIPS Agreement, the
law also provides that any method of examination, treatment, medication, and/or
surgery applied to humans and/or animals shall not protected by patents. 169 This
provision is limited only to the method and it is not extended to medical equipments,
materials, or medicines. 170
Petty patents are only given to any invention in the form of a product or device
which is new and has practical use and value due to its shape, configuration,
construction, or components. 171 An invention that is protected under petty patents
must possess utility or a function which is more practical than the prior invention and
must be in tangible form. 172 It also means that a process or a method could not be
granted petty patent right under the law. 173 With regard to the ‘new’ requirement, to
obtain petty patent protection, it must be universal. 174 Similarly to the novelty
requirement, an invention seeking petty patent registration must demonstrate that it is
unknown by an expert in the state of arts, both at national and international levels. To
obtain petty patents’ protection, an invention needs to be examined on its novelty
factor before it is registered. 175 The protection of patents is given for a period of 20
years, and for petty patent for a period of 10 years, after the date of filing. Both
167
Ibid art 7(a).
Ibid art 7(c ).
169
Ibid art 7(b).
170
Ibid art elucidation of Article 7(b).
171
Ibid art 6.
172
Ibid elucidation of Article 6
173
Ibid elucidation of Article 6
174
Ibid general elucidation.
175
Ibid art 105(5).
168
148
patents and petty patents protection cannot be extended when the first term of
protection expires. 176
As in many other developing countries, the substantive and administrative
requirements to obtain patents protection are difficult for SMEs to fulfill in
Indonesia. Therefore, petty patents would be more suitable to protect simple
innovations developed by SMEs. However, despite its benefits, statistics show that
the number of domestic petty patents application in Indonesia for the period from
2001 to 2008 only number around 200 applications per year. 177 Although there is no
information on how many domestic petty patents applications are coming from
SMEs, it can be assumed that the uptake of petty patents is correspondingly low
among SMEs in Indonesia.
4.4.5. Law No. 30 of 2000 on Trade Secrets 178
Trade secrets legislation protects undisclosed information which has commercial
value for a business. It is important for business of any size, including SMEs, since
every business certainly owns information which is a fit subject matter for protection
under trade secrets legislation. The protection of trade secrets guarantees that other
parties cannot use such information without permission of the owners and cause
harm to the owners’ businesses.
176
Ibid art 9.
Statistik Permohonan Paten 1991-2008 [Statistic of Patents Applications from 1991 to 2008] (on
file with author).
178
Undang-Undang No 30 Tahun 2000 tentang Rahasia Dagang [Law No 30 of 2000 on Trade
Secrets] (Indonesia) (‘Trade Secrets Law 2000’).
177
149
Trade secrets are regulated in Law No 30 of 2000 on Trade Secrets which came into
force on 20 December 2000. It is the first legislation particularly dealing with trade
secrets. The enactment of the law was prompted by the requirement to implement
fully TRIPS Agreement in 2001. Before joining the TRIPS-WTO, trade secrets were
protected in Indonesia under Article 1365 of the Civil Code on general torts and
Article 382bis of the Criminal Code on unfair business practice. 179 Since TRIPS
includes undisclosed information or trade secrets as one form of IPRs and requires its
protection, Indonesia and other WTO members, passed sui generis law to govern
trade secrets.
Under the legislation, trade secrets protection is provided for information which is
confidential, has commercial value, and is properly guarded by the owner or the
party who have control over it. 180 The information protected may include methods of
production, processing (preparation) and selling or other information in the field of
technology and/or business. 181 Such information is considered confidential if it is
only known by certain people or is not revealed to the public in general. The
‘commercial value’ requirement is tested on the ability of such confidential
information to run commercial activities or businesses or to increase economic
profits of businesses. Such information is deemed to be guarded properly when the
owner has undertaken the necessary and proper actions to protect such information.
These actions include internal standard procedures on how the information is
179
Cita Citrawinda Priapantja, Budaya Hukum Indonesia Menghadapi Globalisasi: Perlindungan
Rahasia Dagang di Bidang Farmasi [Legal Culture of Indonesia in Encountering Globalization:
Trade Secret Protection in Pharmaceutical Industry] (Chandra Pratama, 3rd ed, 2005)
180
Trade Secrets Law 2000 art 3(1).
181
Ibid art 2.
150
guarded and who is responsible to keep the confidentiality of such information in a
company. 182
The law does not detail the methods of trade secrets protection. It gives freedom to
the owners or the holders regarding how they protect their trade secrets. Once the
information fulfills all the requirements above, it enjoys the protection of trade secret
automatically. The protection ends when the information loses its confidentiality and
commercial value and is not guarded properly by the owner or the party who has
control over it. In practice, the owners or the holders of trade secrets normally
include a clause that requires their employees to keep the confidentiality of
information related to the employing enterprise or their employment in an
employment agreement.
The flexible requirement for trade secret status which does not need registration is
suitable for SMEs in Indonesia. SMEs in Indonesia rarely use formal legal methods
in running their businesses, including in protecting trade secrets. Many of them use
traditional methods of keeping trade secrets, such as not letting their employees
understand the employer’s process of production. Although such a method is not a
formal one, trade secrets owned by SMEs in Indonesia are still protected by law as
long as the method works to preserve the confidentiality of the valuable information.
4.4.6. Law No. 29 of 2000 on Plant Variety Protection 183
182
Ibid elucidation of Article 3(1).
Undang-Undang No 29 Tahun 2000 tentang Perlindungan Varietas Tanaman [Law No 29 of 2000
on Plant Variety Protection] (Indonesia) (‘PVP Law 2000’).
183
151
The right of protection for plant variety is given to a person who develops new plant
variety. The holder of Plant Variety Protection (PVP) rights is given the right to
authorise the production or reproduction, commercial exploitation, importation or
exportation of their protected plant varieties. Persons who develop a new plant
variety sometimes may be a farmer or a group of farmers. When this farmer or group
of farmers exploits their new plant varieties, their commercial activity can be
categorised similarly to SME business activities. Thus, plant variety protection is
also relevant for such SMEs.
Like protection for trade secrets and industrial designs, plant variety protection is a
new legal regime in Indonesia. As Article 27(3)(b) of the TRIPS Agreement requires
the protection of plant varieties under patents, an effective sui generis system or a
combination of both systems, Indonesia introduced the PVP legislation, Law No 29
of 2000. Although Indonesia is not a party to, nor a member of, any UPOV
Convention, in practice more than 80 per cent of the provisions in Law No 29 of
2000 adopted the rules provided in the 1991 UPOV Convention. 184 Unlike other IPR
legislations which only focus on TRIPS, Law No 29 of 2000 has taken into account
other non-IP legislations, such as the Convention on Biological Diversity (CBD), the
Patent Law, the Plant Cultivation System Law (Law No 12 of 1992), the
Management of Environment Law (Law No 23 of 1997) and the Forestry Law (Law
No 41 of 1999). 185
184
Sinar Tani, 'UPOV Inginkan Indonesia Masuk Anggota (UPOV Wants Indonesia To Be Its
Member)' (2010) Sinar Tani <http://www.sinartani.com/nasional/upov-inginkan-indonesia-masukanggota-1279602547.htm>.
185
Nurul Barizah, Intellectual Property Implications on Biological Resources; Indonesia's Adoption
of International Intellectual Property Regimes (PhD Thesis, University of Technology Sydney, 2009),
254.
152
The 2002 Plant Variety Protection Law provides protection for any type of plant
varieties which are new, unique, uniform, stable and labeled 186 through a registration
procedure. A variety is considered as ‘new’ if, at the time of application for PVP, the
propagation material or the harvest products have never been traded, or may have
been traded in Indonesia for less than one year, or have been traded overseas for not
more than four years for seasonal plant and six years for annual plant. 187 To be
regarded as a ‘unique variety’, the plant variety must be clearly distinguished from
other existing varieties which are publicly known. 188 The requirement to be uniform
means that the main or important features of a variety demonstrates uniformity,
although varied as a result of the different planting methods and environment.189
Stability of a variety could be seen when its characteristics do not experience any
changes after planted repeatedly; or for varieties which are replicated through a
specific reproduction cycle, it does not change at the end of every cycle. 190
Regarding the label of variety, it must be used even after the term of protection is
expired 191 and must not mislead people concerning characteristics of the variety. 192
The label needs to be registered by the PVP Office 193 and it can be used as
trademark. 194
186
PVP Law 2000 art 2(1).
Ibid art 2(2).
188
Ibid art 2(3).
189
Ibid art 2(4).
190
Ibid art 2(5).
191
Ibid art 2(6)(a).
192
Ibid art 2(6)(b).
193
Ibid art 2(6)(c).
194
Ibid art 2(6)(f).
187
153
The duration of protection is for 20 years for seasonal plants and 25 years for annual
plants. 195 Annual plants here refer to trees and vines, which can be harvested after
one year, while seasonal plants are other plants outside these two types of plant.196
Unlike other IPRs, such as trademark, patents, industrial designs, which require
registration to obtain protection, the protection of PVP is granted to a variety on the
date of registration, 197 not on the date of filing. From the date of filing until the date
of registration, a plant variety is granted provisional protection. 198
Similar to patents applications, the process for PVP applications for registration is
not a simple one. There are many technical requirements that have to be fulfilled by
applicants to obtain PVP. As has been noted earlier, SMEs in Indonesia have a
limited capacity to meet these technical requirements. In addition to that, the
administrative process to obtain PVP in Indonesia is a disadvantage for SMEs as it is
long, complicated and costly.
4.5. Judicial Enforcement of Intellectual Property in Indonesia
There are two kinds of judicial enforcement of intellectual property in Indonesia,
namely criminal and civil. Each piece of Indonesian IP legislation contains
provisions that govern both proceedings. This section presents an overview of IP
criminal and civil proceedings in Indonesia. It will complete the previous discussion
on IP legislation in Indonesia. In studying one particular legal system, the discussion
195
Ibid art 4(1).
Ibid elucidation of Article 4(1).
197
Ibid art 4(2).
198
Ibid art 4(3).
196
154
of both legislation and enforcement issues is necessary to gain a comprehensive
understanding of the system.
To give a deterrent effect, each piece of the IP legislation provides criminal sanctions
for anyone who infringes a protected IP rights (that is, a right owned by other
people). The criminal sanction for this offence is imprisonment and/or fine. In the
trademark area, the sentence of imprisonment ranges from a minimum of four years
to a maximum five years. 199 In terms of monetary sanctions, the lowest fine
applicable is IDR 800 million (USD 93,240) and the highest IDR 1000 million (USD
116,550). 200 In regards to sanctions available in the copyright area, a copyright
infringer shall be sentenced to imprisonment ranging from at least one month to at
most seven years and/or fine from a minimum of IDR 1000 million (USD 116,550)
to a maximum of IDR 5000 million (USD 582,750). 201 Anybody who infringes the
moral right of the owner of an industrial design right shall be sentenced to
imprisonment for at least one year and/or fine of, at most, IDR 45 million (USD
5244), 202 while the infringer of an economic right in this field shall receive up to a
four years maximum period of imprisonment and/or fine up to a maximum of IDR
300 million (USD 34,965). 203 For the infringer of a petty patent right, the sanctions
comprise a maximum custodial sentence of two years of imprisonment and/or up to a
maximum fine of IDR 250 million (USD 29,137). 204 In relation to trade secrets, the
criminal sanction for its infringer is up to a maximum of two years imprisonment
199
Trademark Law 2001 arts 90–91.
Ibid.
201
Copyright Law 2002 art 72(1)–(9).
202
Industrial Design Law 2000 art 54(2).
203
Ibid art 54(1).
204
Patents Law 2001 art 131.
200
155
and/or a fine of up to a maximum of INR 300 million (USD 34,985). 205 The
infringers of PVP will be sentenced to a term of imprisonment ranging from five to a
maximum of seven years and/or a fine between IDR 2500 million(USD 291,545)
and a maximum of IDR 1000 million (USD 116,618). 206
For infringement in trademark, industrial design, patents, trade secrets areas, the
owner of infringed rights needs first to make complaint to the authority, in this
instance, the Indonesian Police Force. 207 Without that complaint, the Indonesian
Police Force shall not take any action against the trademark infringement. However,
in copyright and PVP infringement cases, a complaint from the owner of copyright
or PVP rights is not required and police could take legal action against the infringer
without any such complaint. 208
The investigators of criminal offences in all of the aforementioned IP areas shall be
either the Indonesian Police Force and/or civil servants at the relevant agencies. 209
The civil servant investigators have similar roles and authority to that of the
Indonesian Police Force in conducting investigations in these IP fields, such as in
regards to the collection of information and evidence and the inspection of locations
at which evidence, books, records and other documents are to be found. However,
205
Trade Secrets Law 2000 art 17.
PVP Law 2000 arts 71–5.
207
Trademark Law 2001 art 95; Industrial Design Law 2000 art 54(3); Patents Law 2001 art 133;
Trade Secrets Law 2000 art 17(2).
208
PVP Law 2000 art 75. See also Syarif Nurhidayat, 'Politik Pidana pada Undang-undang terkait Hak
Kekayaan Intelektual (Criminal Politic on Intellectual Property Legislation)
' (2010) (8 May) Buah Pena Syarif_Enha <http://esenha.wordpress.com/2010/05/08/politik-pidanapada-undang-undang-terkait-hak-kekayaan-intelektual/>.
209
For trademarks, copyrights, patents, industrial design and trade secrets, civil servants who work at
the DGIP office shall be granted authority to act as investigators of IP criminal offences. In the PVP
area, civil servants who may act as criminal investigators are those working for the PVP Centre Office
under Department of Agriculture.
206
156
the civil servant investigators do not have the authority to arrest and take legal action
against the infringers. They need to inform the Indonesian Police Force of the results
of their investigations, 210 and, then, these results are also reported to the Public
Prosecutor through the Indonesian Police Force and the matter may continue to a
legal prosecution in accordance with Article 107 of the Law No 8 of 1981 on
Criminal Proceedings (Criminal Code). 211
Financial sanctions for IP offences provided in the current laws are more severe than
those available in previous legislation. Although the USTR was not satisfied with the
prosecution of IPR crimes and raids on pirated and infringed materials in 2009,212
this still represents better performance compared to the period before 2000. After
2000, IP criminal cases, at least in the patent area, 213 fell, the sanctions are more
severe, 214 and the police conducted raids more frequently. However, this did not
significantly reduce the number of IP criminal cases in Indonesia.
210
Trademark Law 2001 Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on
Trademark] (Indonesia)art 89(3); Copyright Law 2002 art 71(3); Industrial Design Law2000 art 53(3);
Patents Law 2001 art 129(3).
211
Trademark Law 2001 art 89(4); Copyright Law 2002 art 71(3); Industrial Design Law 2000 art
53(4); Patents Law 2001 art 129(4).
212
Office of the United States Trade Representative, ‘2009 Special 301 Report’, above n 34, 19. See
also above Chapter 4 (section 4.3.2.4.).
213
Data from the Directorate of Patents shows that before 2000, patent criminal cases were very rare
with an average of only one case per year, except in 1995 and 1999, when four and two criminal cases
for patent infringements respectively were reported. Between 2000 and 2008, the number of patent
criminal cases has ranged from one in the year 2001 to 23 cases in 2008. See Direktorat Paten
[Directorate of Patents] - Direktorat Jendral Hak Kekayaan Intellectual (Directorate General of
Intellectual Property Rights - Ministry of Law and Human Rights) Republic of Indonesia, Daftar
Perkara Pidana 1994-2008 di Direktorat Paten [List of Criminal Cases from 1994 to 2008 in
Directorate of Patents] - On File with Author (2008) Direktorat Jenderal Hak Kekayaan Intelektual Kementerian Hukum dan HAM [Directorate General of Intellectual Property Rights - Ministry of Law
and Human Rights].
214
In the area of trademark, the previous trademark law, Law No 19 of 1992 on Mark provided that
the fine for trademark infringers ranged from IDR 50,000,000 (50 million rupiahs) to IDR
100,000,000 (100 million rupiahs). However, in terms of imprisonment, the law provided severe
sanctions which ranged from five to seven years. Infringers of petty patents were only sentenced to
terms of imprisonment of a maximum of five years and a maximum fine of IDR 50,000,000 (50
million rupiahs). For copyrights infringers, the maximum term of imprisonment provided under the
former Copyrights Law is same as that in the new one; however, the earlier fine was only IDR
157
Turning to civil proceedings, Indonesian IP legislation in trademark, copyright,
industrial designs and patents contains similar civil proceeding provisions. For IP
areas which already had existing legislation before the present one, such as
trademark, copyright and patent, the power to settle civil disputes has been shifted
from the District Court to the Commercial Court. 215 For industrial design, the present
Law which is the first legislation in that field provides the same as the three other
piece of legislation. 216 All the proceedings of IP cases in these four areas only allow
a kasasi 217 appeal to be submitted directly to the Supreme Court. 218 These provisions
are intended to accelerate the process of trademark cases that took years to be settled
in the past.219 The current legislation in the areas of copyright 220, patents221,
trademark 222 and industrial design, 223 patents and industrial design, dare to assert the
maximum time to settle a civil lawsuit.
100,000,000 (100 million rupiahs). See Undang-Undang No 19 Tahun 1992 tentang Merek [Law No
19 of 1992 on Trademark] (Indonesia)art 81, Undang-Undang No 13 Tahun 1997 tentang Paten [Law
No 13 of 1997 on Patents] (Indonesia) art 126 ; Undang-Undang No 7 Tahun 1987 tentang Hak Cipta
[Law No 7 of 1987 on Copyrights] (Indonesia) art 44(1).
215
Trademark Law 2001 art 76(2); Copyright Law 2002 art 56; Patents Law 2001 art 117(1).
216
Industrial Design Law 2000 art 46(2).
217
Kasasi is from the French cassation, which means an appeal, which deals only with question of
law from decisions of the Commercial Court. See, Antons, ‘Indonesia’. above n 25, 109.
218
Trademark Law 2001 art 79; Copyright Law 2002 art 62(1); Patents Law 2001 art 122; Industrial
Design Law 2000 art 40.
219
For instance, the ‘Scotch Whisky’ case was filed for an appeal to the Supreme Court in 1988 and
was only settled in 1994; the ‘Scooby Doo’ case which was filed in 1989 took six years to reach a
decision in the Supreme Court. See Antons, ‘Indonesia’, above n 25, 87; Sudargo Gautama and Reza
Winata, Pembaharuan Hukum Merek Indonesia dalam Rangka WTO, TRIPS 1997 [Trademark Law
Reform in Indonesia related to the WTO, TRIPS 1997] (Citra Aditya Bakti, 1997).
220
Articles 59 and 61 (2) of the Copyright Law 2002 state that a decision on a copyright lawsuit shall
be made within a maximum of 90 days, but add that such period may be extended by a further
maximum of 30 days if such an extension is approved by the Chief Justice of the Supreme Court.
221
The decision of patent lawsuit is to be within a maximum of 180 days after the registration date of
the lawsuit. See Patents Law 2001 art 121(2).
222
In the area of trademark, cancellation cases have a deadline aof maximum of 90 days after the
filing date. See Trademark Law2001 art 80(8).
223
For industrial design cancellation cases, the decision must be made within a maximum of 90 days
after the filing date. See Industrial Design Law 2000 art 39(8).
158
The shifting from the District Court to the Commercial Court has positive effect on
improving the time required to settle an IP case and the quality of decisions.
Deadlines created in the legislation have mostly been met by the Commercial Court
and with fairly good decisions. 224 At the appeal level, the average time for the
Supreme Court to take a decision is between four and five months. 225 Although the
average time is beyond the 90 days or three months deadline which has been
prescribed in trademarks, copyright and industrial design legislation, the current
situation is far better than the lengthy proceedings in the past. 226 Besides that, the
quality of decision on IP cases both in the Commercial Court and the Supreme Court
has generally improved and are generally consistent. 227
Another new feature in proceedings, the injunction mechanisms (penetapan
sementara), was introduced in these four pieces of IP legislation as a prompt and
effective measure to prevent the entry of goods allegedly infringing the trademark,
copyright, industrial design and patent rights and to preserve evidence relating to an
infringement. 228 In the trademark area, the request for an injunction should be filed in
writing with the Commercial Court and shall fulfill several requirements, including
evidence of the trademark ownership 229 and paying a guarantee in the form of cash
or a bank guarantee. 230 For three other IP rights, although it is not stated clearly in
224
IP lawyers in Jakarta have been reported to be quite satisfied with the performance of the
Commercial Court with its improved service on IP cases settlement compared to the District Court.
See Sara Holder and Lisa Yong, Indonesia: Rethinking Indonesia (2006)
<http://www.managingip.com/Article/1321298/Supplements/Indonesia-RethinkingIndonesia.html?supplementListId=58720>.
225
Antons, ‘Indonesia’, above n 25, 109.
226
See ibid.
227
Ibid.
228
Trademark Law 2001 art 85; Copyright Law 2002 art 67; Industrial Design Law 2000 art 49;
Patents Law 2001 art 125.
229
Trademark Law 2001 art 86(1)(a).
230
Ibid art 86(1)( e).
159
the relevant legislation, the same requirements also apply to the request for an
injunction.
Besides dispute settlement through the Court, the law allows arbitration and an
alternative dispute resolution mechanism to settle civil disputes in these four IP
areas. 231 Alternative dispute resolution mechanisms include any of the following:
negotiation, mediation, conciliation and other methods agreed by the parties which
are not contrary to the prevailing legislations. 232 Indonesia established the first IP
Arbitration Center, which will handle IP civil disputes through the mediation and
arbitration mechanism, in 26 April 2010. 233
Two other IP areas which are relevant to SMEs — trade secrets and PVP rights —
have different civil court proceedings to the abovementioned four IP areas. Civil
cases for trade secrets and PVP rights are tried in the District Court 234 and, then, they
follow the general civil court procedure, which is based on the Herziene Indonesich
Reglement (HIR) and the Rechtsreglement Buitengewesten (Rbg), 235 two civil
procedure rules which were passed in the Dutch colonial period, and Law No 4 of
2004 on Judicial Power. The general civil procedure usually involves three levels of
courts that have to be passed through, namely the District Court, the High Court and
the Supreme Court. However, in the case of trade secrets and PVP, like other IPRs,
231
Trademark Law 2001 art 84; Copyright Law 2002 art 65; Industrial Design Law 2000 art 47;
Patent Law 2001 art 124.
232
Elucidations of Article 65 of Copyright Law 2002; Industrial Design Law 2000 art 47; Patent Law
2001 art 124.
233
Brett McGuire, Indonesia Launches an IP Arbitration Center (2010)
<http://www.managingip.com/Article/2577875/Search-Results/Indonesia-launches-an-IP-arbitrationcentre.html?Keywords=indonesia+IP+cases&Quick=True&OrderType=1>.
234
PVP Law 2000 and Trade Secret Law 2000.
235
The general provisions of these two colonial legal products, for example for evidence-taking or the
formalities to be observed in submitting the claim, are also followed by the Commercial Courts
proceedings. See, Antons, ‘Indonesia’, above n 25, 105.
160
the decisions of the District Court can only be submitted to the Supreme Court for a
kasasi appeal with the possibility of filing for a Judicial Review. To be permitted to
undergo Judicial Review process, new evidence in the case is required and/or
situation where the judges are considered to have wrongly applied the laws in the
case. 236 Unlike in the Commercial court, there is no deadline for the processing of IP
cases in the District Court. Normally, it takes a longer time to reach decisions since
the cases are greater in number than in the Commercial Court. 237
Regarding alternative dispute resolutions and injunctions, the trade secrets legislation
provides an opportunity to use the mechanism of settling trade secret cases outside
the court, 238 however it does not say anything on injunctions. In contrast, legislation
on PVP rights does not contain alternative dispute resolution provisions, while the
use of the injunction mechanism is permitted 239.
Since the IP system was introduced in Indonesia, SMEs have been involved in many
IP cases settled in the court, either as a plaintiff or as a defendant. Although there is
no precise figure on the number of IP cases in which Indonesian SMEs are involved,
it is likely that the number of SMEs acting as defendant in the court is the higher
figure. It happens particularly to SMEs at the early stage of their business. Many of
them want to get the benefits of IPRs owned by others without making efforts to
create or invent and to maintain their own IPRs. Another possible reason why
Indonesian SMEs rarely act as a plaintiff is related to the depressing image of the
236
Undang-undang No 4 Tahun 2004 tentang Kekuasaan Kehakiman [Law No 4 of 2004 on Judicial
Powers] (Indonesia) art 23 and the elucidation of 23(1).
237
See Christoph Antons, 'The Protection of Well-known Marks in Indonesia' in C. Heath and K.C.
Liu (eds), The Protection of Well-known Marks in Asia (Kluwer Law International, 2000) 199.
238
Trade Secrets Law 2000 art 12.
239
PVP Law 2000 art 68(1).
161
judicial system in Indonesia. Most Indonesian people, including SME owners, are
sceptical about dealing with the court system, which is always associated with
corruption and inefficiency. 240 SME owners think that the costs of initiating and
continuing IP court proceedings, including costs in terms of money, time and energy,
are not comparable with the benefits of IPRs which they might gain. 241 Further, as in
many Asian countries which tend to avoid open dissent, 242 Indonesian SMEs prefers
to settle their disputes through amicable mechanisms outside the court. When a
conflict arises, they try to settle through compromise or conciliation. For
Indonesians, including SME owners, these two ways are the least damaging and
humiliating solution for their personal conflict. 243
4.6. Inefficient Public Service and Corruption: Entrenched Problems in
Indonesia
Issues of an inefficient public service and corruption in Indonesia deserve to be
discussed specifically in this part. As part of the whole administration system,
government agencies that run the IP system in Indonesia are not immune to these two
issues. This is confirmed when most of SME owner interviewees complained about
240
Lilian Budianto, 'Indonesia's Judicial System Rated the Worst in Asia: Survey', The Jakarta Post
(Jakarta), 15 September 2008
<http://www.thejakartapost.com/news/2008/09/15/idonesia039sjudicial-system-rated-worst-asia-survey.html>. See also the discussion in Chapter 3, sub-section 3.5:
‘Inefficient Public Service and Corruption: Entrenched Problems in Indonesia’.
241
Interview with 27 SME owners in the Jamu and Batik industries (Semarang, Pekalongan and
Yogyakarta, between March and April 2009).
242
Peter Ganea and Sadao Nagaoka, 'Japan' in Paul Goldstein et al (eds), Intellectual Property in Asia:
Law, Economics, History and Politics (Springer 2009) 129.
243
Daniel S Lev, 'Judicial Institutions and Legal Culture' in Daniel S Lev (ed), Legal Evolution and
Political Authority in Indonesia (Kluwer Law International, 2000) 161, 186–8 (‘Judicial Institutions
and Legal Culture’).
162
inefficient services provided by government agencies in relation to IP issues.244
Moreover, there are also indications of corrupt practices in the DGIPR Office that
contribute to inefficiencies in the process of registering to obtain IPRs. For example,
it was reported that IP applicants need to bribe examiners in that office to accelerate
the process of IP examinations. 245
It is common knowledge that it is not easy to deal with Indonesia’s government
agencies because of the complex and inefficient bureaucracy. For example, in the
2010 Doing Business Report 246 which was published by the World Bank, Indonesia
is ranked 161 for the category of ‘Starting a Business’ and at 122 for the overall
‘Ease of Doing Business’. 247 The ‘Starting a Business’ section of the Report, which
investigates the regulations and procedures of a domestic SME in 183 countries,
states that the time required to start a business in Indonesia is 60 days at a cost of
around IDR 5 million. 248
Since the World Bank’s annual Doing Business Report was published for the first
time in 2004, the status of Indonesia has fluctuated somewhat but there has been a
stable improvement in the last two years, 2009–2010. The most significant
improvement in the area of ‘Starting Doing Business’, however, occurred in 2007
when Indonesia shortened the time required to set up a business in the country from
244
Interview with 27 SME owners in the Jamu and Batik industries (Semarang, Pekalongan and
Yogyakarta, between March and April 2009).
245
Hukum Online, 'Melawan Kenakalan di Balik Pendaftaran Merek (Fighting Bad Things behind
Trademark Registration)' (2009) <http://www.hukumonline.com/berita/baca/hol22440/melawankenakalan-di-balik-pendaftaran-merek>.
246
The data used in the 2010 Doing Business Report are current as of 1 June 2009.
247
World Bank Group, Explore Economies: Indonesia (2010)
<http://doingbusiness.org/ExploreEconomies/?economyid=90>.
248
World Bank Group, Starting a Business in Indonesia (2010)
<http://doingbusiness.org/ExploreTopics/StartingBusiness/Details.aspx?economyid=90>.
163
151 days in 2006 to 97 days in 2007. The World Bank assessed Indonesia as one of
the most rapid reformers among emerging countries, together with China, Egypt,
India, Turkey, and Vietnam. By 2007 Indonesia had implemented a number of
significant reforms second only to China; 249 however, despite this positive
improvement, the reforms do not seem to touch all the necessary areas of governance
affairs and were not long-lasting.
A recent (2010) survey conducted by the Political and Economic Risk Consultancy
(PERC) ranked the performance of 12 Asia and Pacific investment destination
countries and territories on bureaucracy. According to this survey, Indonesia’s
bureaucracy, which scored 8.59 out of 10, is the second worst after India. 250 The
survey also links the inefficient bureaucracy with widespread corrupt practices
among Indonesian bureaucrats and politicians. 251 Along with collusion and nepotism,
corruption has caused the inefficient public service in the country to be even worse
than would otherwise be the case. It is common knowledge in Indonesia that most
public servants receive bribes in return for their assistance in accelerating the
bureaucratic process. When not bribed, they have many ways to delay the requested
service. One foreign observer, who spent some time in the Ministry of Justice,
reports public servants went so far as to pretend to be busy shuffling papers in order
to delay giving the requested service. 252 Others just ignored people who come for
249
Ibid.
Jakarta Globe, Indonesia’s Bureaucracy Among Worst in Asia: Survey (2010)
<http://www.thejakartaglobe.com/home/indonesias-bureaucracy-among-worst-in-asiasurvey/378341>.
251
Ibid.
252
Paul H Brietzke, 'Administrative Reforms in Indonesia?' in Tim Lindsey and Howard Dick (eds),
Corruption in Asia: Rethinking the Governance Paradigm (Federation Press, 2002) 109, 115.
250
164
assistance by reading the newspaper, sitting idle between chats or playing games on
the computer. 253
Corruption in Indonesia has deeply infiltrated government institutions at every level
and in every area, from the central to the regional government and from the highest
to the lowest level of bureaucracy. Another survey by PERC, conducted in the same
year, rated Indonesia as the most corrupt of 16 key countries which are investment
destinations in Asia and the Pacific. 254 According to the theory of the separation of
powers, the functions of state institutions — judicative, executive and legislative —
are equal and control each other based on a system of checks and balances. 255 When
one branch of government does something wrong, such as engaging in corruption,
the other two branches should be able to control and repair the damage done;
however, corrupt practices conducted in and by executive institutions in Indonesia
cannot be settled by the institutions which perform the legislative and judicative
functions since these are as corrupt as the executive. Research conducted by
Transparency International, a non-governmental organisation (NGO) which focuses
on issues related to fighting corruption, revealed in 2008 that it is the parliament or
the legislature, as an institution, which is perceived by respondents as the most
affected by corruption in Indonesia. 256
253
Ibid.
Metro TV, Survei PERC: Indonesia Terkorup di Asia Pasifik [PERC Survey: Indonesia is the Most
Corrupt Country in Asia and the Pacific] (2010) Metro TV,
<http://metrotvnews.com/index.php/metromain/news/2010/03/10/12480/Survei-PERC-IndonesiaTerkorup-di-Asia-Pasifik-/>; N Wong-Anan, Indonesia Most Corrupt of Key Asian Nations - PERC
(2010) Reuters <http://in.reuters.com/article/idINIndia-46740620100308>.
255
Alamo D Laiman et al, The Indonesian Legal System and Legal Research (2009) Hauser Global
Law School <http://www.nyulawglobal.org/globalex/Indonesia.htm>.
256
J Riano, R Hodess and A Evans, 'Global Corruption Barometer 2009' (Transparency International
2009) 6.
254
165
Moreover, corruption practices also are also to be found in the legal profession,
among judges, police, lawyers, and prosecutors. A 2007 study by the Indonesian
office of Transparency International ranked the judiciary as the second most corrupt
institution after the police. 257 A similar survey conducted by the Komisi
Pemberantasan Korupsi (KPK – Corruption Eradication Commission) in 2008,
ranked the Attorney General’s Office as the least reliable institution for fighting
corruption, followed by the courts and the police. 258 Consequently, the Indonesian
public, both locals and expatriates, put little trust in the judicial system or the legal
profession. This assertion was supported by a PERC survey conducted in 2008. It
requested 1537 corporate executives working in Asia to rate the judicial systems in
the countries where they resided. The survey positioned Indonesia as the worst
judicial system among 12 countries in Asia. 259
Corruption has existed in Indonesia for a very long time, even as far back as during
the colonial period. It is often said that ‘Indonesia has a corruption culture’ 260 which
could be interpreted as meaning that Indonesians are permissive and tolerate such
practices. 261 Gifts, either in the form of money or luxury goods, given to officers of a
public institution are justified as an expression of gratitude. 262 For this reason, it is
not easy to determine which gifts affect the decisions or actions of the receivers and
257
Lilian Budianto, 'Indonesia's Judicial System Rated the Worst in Asia: Survey', The Jakarta Post
(Jakarta), 15 September 2008 <http://www.thejakartapost.com/news/2008/09/15/idonesia039sjudicial-system-rated-worst-asia-survey.html>.
258
Ibid.
259
Ibid.
260
Mohammad Hatta, the first Vice-President of Indonesia, was the first person who said this and he
did so a long time ago. It has often been repeated by others, such as Todung Mulya Lubis, a prominent
Indonesian lawyer. See Gary Goodpaster, 'Reflections on Corruption in Indonesia' in Tim Lindsey and
Howard Dick (eds), Corruption in Asia: Rethinking the Governance Paradigm (The Federation Press,
2002) 87 , 87.
261
Ibid.
262
Mardjono Reksodiputro, 'Corruption in the Indonesian Legal System' in R. Holloway (ed), Stealing
from the People: 16 Studies on Corruption in Indonesia (Aksara Foundation, 2002) vol 2, 27–33.
166
which are merely tokens of appreciation. 263 Nevertheless, it must be said that this is
another form of bureaucratic corruption, 264 and it seems to be a part of the culture in
the government offices of Indonesia. Such bureaucratic corruption is often accepted
as a harmless practice, but, in fact, it has a significant effect on the work ethic of civil
servants and becomes the cause of inefficiency in the Indonesian bureaucracy,
including the DGIPR office.
Throughout the history of Indonesia as an independent state, there have been several
anti-corruption pieces of legislation. The first anti-corruption legislation in Indonesia
was Law No 3 of 1971, which was passed during the New Order era. Besides passing
the anti-corruption law, Soeharto, who became President during that period, actually
showed his serious intention to eradicate corruption by taking initiatives such as the
setting up of an anti-corruption team and the issuing of Presidential Decree No 52 of
1970, which obliged high-ranking officials in the government as well as in the
Indonesian Armed Forces to report their assets. 265 Yet, when corruption also
involved Soeharto’s family and cronies, such initiatives were discontinued and the
anti-corruption law became a powerless legal instrument.
The new war against corruption, collusion and nepotism was declared in 1999. 266 In
the middle of reform euphoria, Law No 28 of 1999 on the establishment of a state
free from corruption, collusion and nepotism was passed. It was then followed by the
263
Ibid, 34.
Ibid, 31.
265
Arry Anggadha, Anti-corruption Day Reflection: Rising Corruption Cases in Soeharto's Era;
Soeharto Once Recommended that People Should Lead A Simple Life. (9 December 2008
<http://en.vivanews.com/news/read/13669-rising_corruption_cases_in_soeharto_s_era>.
266
Saldi Isra, 'Getting Rid of Corruption in Indonesia: The Future', The Jakarta Post (Jakarta), 11
April 2006 .
264
167
enactment of Law No 31 of 1999, as amended by Law No 20 of 2001, on the
eradication of corruption by making it a criminal offence. Much stronger support for
the eradication of corruption was provided when the KPK, an independent state
commission with more power than the state prosecutor to investigate corrupt conduct
involving state institutions, was established through Law No 30 of 2002. Another
important piece of legislation assisting the KPK is Law No 15 of 2002 on anti-money
laundering.
As part of initiatives designed to combat corruption and to create efficient public
services in judicative sector, Law No 35 of 1999 on Judicial Powers was enacted.
The law mandated the separation of judicative and executive powers within a period
of five years from the law’s inception, 267 and granted the Supreme Court managerial
control over all courts in Indonesia, and including organisational, financial and
administrative control. 268 This initiative ended debate, which had been going on
since the 1970s, 269 over the dependency of judicial institutions in Indonesia on
executive power due to their previous position as an institution under the Department
of Justice, which is responsible to the President. After that, in a number of moves
designed to reduce corruption and increase efficiency, the Indonesian government
raised salaries for the judiciary, increased the budgetary allocation for the courts, and
instituted the nomination of a substantial number of non-career judges to the
Supreme Court. 270 These nominations brought fresh air, openness and transparency
267
All these judicial institutional reforms were finalized in 2004 under the administration of Megawati
Sukarnoputri, the fifth president of Indonesia.
268
Lindsey and Santosa, Trajectory of Law Reform in Indonesia, above n 17, 13.
269
For further discussion on the struggle of the Indonesian judicial organization to gain its
independence, see Daniel S Lev, 'Judicial Authority and the Struggle for an Indonesian Rechtsstaat'
(1978) 13 Law & Society Review 37–34.
270
Lindsey and Santosa, ‘The Trajectory of Law Reform in Indonesia’, above n 17, 15.
168
to the courts because nine of the non-career judges developed seven unprecedented
judicial reform blueprints. 271 These blueprints have been implemented and have
proven to be effective in gradually reforming deep-rooted Indonesian judicial
traditions which were incompetent, corrupt and not transparent. 272
Realising that corruption is the biggest obstacle hindering the development of
Indonesia, nearly every presidential election campaign since 1999 has made the
eradication of corruption a priority issue. 273 The current president of Indonesia,
Soesilo Bambang Yudhoyono, has instituted several initiatives to fulfill his campaign
promise of combating corruption in the government that he leads. Early in his first
presidency, Yudhoyono launched the National Movement for the Eradication of
Corruption 274 at the same time as the International Corruption Eradication Day’s
commemoration on 9 December 2004. Simultaneously, the president also issued
Presidential Instruction No 5 of 2004 on accelerating the eradication of corruption,
which attempts to coordinate law enforcement, legal reform and an improvement in
public service in order to combat government corruption. 275
In the law enforcement sector, the president instructed two government institution
heads, the chief of the Indonesian Police Force and the attorney general, to be serious
in investigating corruption cases, to prevent police officers and prosecutors from
271
Ibid.
Ibid.
273
Isra, above n 266.
274
Some six years after the national movement was launched, it seems that it is not sufficient to
combat systemic bureaucratic corruption in Indonesia and which is reflected in various international
surveys cited above. To make it worse, more recently, there has been widespread institutional rivalry
among the three government agencies that are responsible for tackling the corruption problem in
Indonesia: the Indonesian National Police (Polri-Polisi Republik Indonesia), the Office of Prosecutor,
and the KPK. The rivalry has made their duties to eradicate corruption in Indonesia seem impossible.
275
Isra, above n 266.
272
169
abusing their powers, and to impose heavy penalties on those who do abuse such
powers. He also expected that the police cooperate with the prosecutor’s office and
other relevant state agencies, such as the Development and Finance Comptroller
Agency (BPKP – Badan Pengawas Keuangan dan Pembangunan) and the Center for
Financial Reporting and Financial Transactions Analysis (PPATK – Pusat Pelaporan
dan Analisis Transaksi Keuangan) in eradicating corruption and regaining all lost
state funds. 276 This last matter appears to allude not so much to the appropriation of
funds from members of the public but of funds rightly belonging to the government
or its agencies but wrongly utilised for private purposes by various in the government
and associated institutions. In the meantime, to reform the corruption legislation,
Yudhoyono instructed the Minister of Justice and Human Rights to prepare the draft
of an amendment to the anti-corruption legislation in order to synchronise and
maximise efforts to stamp out corruption and to institute the necessary regulations to
support the implementation of anti-corruption related laws. 277
In order to improve the public service, the president ordered the Minister for State
Apparatus to formulate policy for (i) improving the quality of public services; (ii)
setting down a working stipulation on the performance of government officials; (iii)
the application of the good governance principle. Moreover, the Minister for State
Apparatus was also directed to make recommendations for the improvement of the
civil service system. 278 Since the presidential instruction aimed to improve the
bureaucratic system of the Indonesian civil service, in 2005 the previous Ministry for
State Apparatus was formally renamed the Ministry for State Apparatus and
276
Instruksi Presiden No 5 Tahun 2004 Tentang Percepatan Pemberantasan Korupsi [Presidential
Instruction No 5 of 2004 on Accelerating the Eradication of Corruption] (Indonesia).
277
Ibid.
278
Ibid.
170
Bureaucracy Reforms. The new state ministry has a vision to make the state
apparatus professional, effective, efficient and accountable in the implementation of
bureaucracy reform in accordance with the principles of good governance. 279
Five years has passed since the new ministry was instigated. It has taken a number of
initiatives in the attempt to achieve its vision. For instance, in relation to the
discipline of public servants, every year since 2005, the ministry has issued a circular
letter ordering public servants to work immediately after the holiday of Idul Fitri.280
The negative report by PERC, however, concerning the performance of Indonesia’s
bureaucracy in 2010 proves that the ministry is still not performing its functions
effectively. A similar assessment of the bureaucratic reform program in Indonesia
has also been given by domestic elements. 281 Even Vice-President Boediono
acknowledges the failure of the bureaucratic reform program, which had been
initiated as far back as the reform period in 1998. In particular, he criticises the
remuneration program which has not proven effective in improving the performance
of bureaucracy in Indonesia. 282 The remuneration program arose from the
bureaucratic reform in Indonesia which provided for improvement in public servants’
279
Kementerian Negara Pendayagunaan Aparatur Negara dan Reformasi Birokrasi (State Ministry of
State Apparatus and Bureaucracy Reforms), Visi & Misi (Vision and Mission) (2008)
<http://www.menpan.go.id/index.php?option=com_content&task=view&id=23&Itemid=58>.
280
Idul Fitri is the biggest Muslim holiday and it is celebrated every year at the end of the fasting
month of Ramadan. In the past, it was common that public servants did not come to their office for
about a week after the formal Idul Fitri holidays and to do so without giving any notice to their
offices.
281
See Inggried Dwi Wedhaswary, 'Kasus Gayus Bukti Reformasi Birokrasi Belum Berhasil [Gayus'
Case is A Proof of Unsuccesful Bureucracy Reforms]', Kompas (Jakarta), 5 April 2010
<http://megapolitan.kompas.com/read/2010/04/05/11153643/Kasus.Gayus.Bukti.Reformasi.Birokrasi.
Belum.Berhasil>; Antique Putra and Agus Dwi Darmawan, 'Anggito: Reformasi Birokrasi Belum
Berhasil [Anggito: Bureaucracy Reforms Has Not Successful Yet]', VivaNews (Jakarta), 26 May 2010
2010 <http://bisnis.vivanews.com/news/read/153666_pejabat_kemenkeu_kok_masih_jadi_komisaris_>; Gede Suardana, 'Boediono: Reformasi Birokrasi
Belum Berhasil [Boediono: Bureaucracy Reforms Has Not Been Succesful Yet]', DetikNews (Jakarta),
14 July 2010 2010 <http://us.detiknews.com/read/2010/07/14/224759/1399438/10/boedionoreformasi-birokrasi-belum-berhasil>
282
Suardana, above n 281.
171
salaries as a reward for their good performance. The program was launched in 2007
and, so far, there are three government agencies which have already benefited from
the program: the Department of Finance, the Audit Board Office (Badan Pemeriksa
Keuangan - BPK) and the Supreme Court (Mahkamah Agung – MA). 283
In 2008, the Ministry of State Apparatus and Bureaucracy Reform Regulation No 15
of 2008 on general guidelines for bureaucracy reform was enacted and contained the
‘grand design and road map’ for bureaucracy reform in Indonesia According to the
‘road map’, there are four phases for the entire bureaucracy reform process in
Indonesia. Phases I (2005–2010) and II (2010–2015) are focused on preparation and
implementation. The two later phases, Phases III (2016–2020) and IV (2021–2025)
are, respectively, a stabilisation period of institutional, business process and human
resource restructuring, and a development period of sustainability of bureaucracy
reform. In each phase, detailed plans and programs of bureaucratic reforms with a
focus on institutional/ organisational, business process and human resources are
created. Although this road map seems quite comprehensive, it has been criticised for
not having ‘a conceptually systematic design and structure’ or ‘clear causal linkages
between activities and between phases’. 284 Although the government, particularly the
Ministry of State Apparatus and Bureaucracy Reforms, is striving to realise the road
map by promising the reform at central level will be completed in 2011 at the latest,
and further promising that such reform will be started at regional level in 2013;285
283
Putra, above 281 270.
Jin Wook Choi, 'What Holds Indonesia Back? Structural Roots of Corruption and Reform' (Paper
presented at the Korean Association for Public Administration International Conference, Incheon,
South Korea, 22-24 October 2009) 14.
285
Public Relations of State Ministry of State Apparatus and Bureaucracy Reform, Reformasi
Birokrasi Berorientasi Outcomes (Outcomes Oriented of Bureaucracy Reform) (2010)
<http://www.menpan.go.id/index.php?option=com_content&task=view&id=228&Itemid=1>.
284
172
judging by Indonesia’s condition in 2010286 (the final year of the preparation period
(Phase I)), it is doubtful whether the government can keep its promises.
During the first months of his second presidency (which started in September 2009),
Yudhoyono’s administration was shaken by two corruption scandals involving highprofile officials in the country. The first scandal, known as cicak (gecko) vs. buaya
(crocodile), 287 demonstrates the sharp rivalry between the Corruption Eradication
Commisssion (KPK) on the one side, and the Indonesian National Police, on the
other. It all started when the KPK investigated a bribery allegation in regard to
tendering processes for an integrated radio communication system, and which
involved a partner company and several high-ranking officials at the Forestry
Ministry. 288 When the KPK suspected the involvement of Police Commissioner
General Susno Duaji in the bribery case, the Indonesian National Police retaliated by
charging two KPK leaders, Bibit Rianto and Chandra Hamzah, with abuse of power
for imposing and then lifting travel bans on two corruption suspects and receiving
bribes from them. 289 Although the two KPK leaders were later re-instated to their
286
There is still an abundance of corruption and bribery cases unsettled in 2010, such as the cases of
Cicak vs Buaya (Gecko vs Crocodile) and Gayus which involve a tax officer who became a broker for
multi-billion rupiah tax evaders. The slow and complicated legal process for corruption and bribery
cases makes people pessimistic about the readiness and seriousness of Indonesia in implementing the
‘Road Map of Bureaucracy Reform’.
287
The term ‘Cicak vs. Buaya’ was first introduced by the Police Commisioner-Genera,l Susno
Duadji, which compared the technology to tap his mobile phone employed by the KPK to a gecko,
an animal which is smaller than a crocodile, or the technology used by the Indonesian National Police
to detect the tapping action. This term was also interpreted differently by the public, however, as
representing the authority possessed by these two institutions in combatting corruption. Cicak is the
representation of the KPK, while buaya represents the Indonesian National Police. See Wayan Adi,
'Pertarungan Cicak vs. Buaya Semakin Panas [Fighting between Gecko vs. Crocodile is Getting
Hotter]', Era Baru (Jakarta), 10 September 2009 <http://erabaru.net/nasional/50-jakarta/4711pertarungan-cicak-vs-buaya-semakin-panas>.
288
Tim Liputan 6 SCTV, Cicak vs. Buaya (Gecko vs. Crocodile) (2009)
<http://berita.liputan6.com/progsus/200911/249958/Cicak.Vs.Buaya>.
289
The Jakarta Post, 'Public Support KPK Deputy Chairmen' (2009) ( ) The Jakarta Post
<http://www.thejakartapost.com/news/2009/10/31/public-support-kpk-deputy-chairmen.html>,
173
positions 290 and the indictment process was halted by the Attorney General’s
Office, 291 the scandal paints a gloomy picture of the whole corruption eradication
effort in Indonesia.
A few months after the first scandal subsided, the second scandal, regarding bailout
funds for the Century Bank, erupted. It had an even greater impact on Yudhoyono’s
cabinet and is associated with his name as one of the witnesses called. Two
prominent members of his cabinet, Sri Mulyani, the then Minister of Finance, and
Vice-President Boediono, the then Governor of the Central Bank of Indonesia,
recommended releasing IDR 6700 million in bailout funds to save the Century Bank
(Bank Century). Although the procedure for releasing the funds was already in
accordance with Law No 24 of 2004 on saving security authority, the DPR only
approved bailout funds of IDR 1300 million.292 The conduct of Sri Mulyani and
Boediono led to suspicions that they had received something in return for their
recommendation. Since Boediono and Sri Mulyani are popular as anti-corruption and
pro-reform figures in the government, however, it is difficult for the public in
Indonesia to give credit to this suspicion. The Century Bank case is not simply a
corruption case, but has developed into a big political issue with the potential to
shake the current government of Indonesia.
290
Irawaty Wardany, 'Bibit, Chandra Reinstated, Hit the Ground Running', The Jakarta Post (Jakarta),
9 December 2009 <http://www.thejakartapost.com/news/2009/12/09/bibit-chandra-reinstated-hitground-running.html>.
291
Dicky Christanto, 'Bibit and Chandra’s Fate at Mercy of Prosecutors
' The Jakarta Post <http://www.thejakartapost.com/news/2010/06/04/bibit-and-chandra’s-fatemercy-prosecutors.html>
292
'Transparansi dalam Kasus Bank Century (Transparency in Bank Century Case)' (2009) (1
September) Media Indonesia,
<http://www.mediaindonesia.com/read/2009/09/09/93403/70/13/Transparansi-dalam-Kasus-BankCentury>.
174
The future of the corruption eradication movement in Indonesia may be not bright;
however, Yudhoyono’s will to combat corruption in the country is real. During the
first term of his presidency, the anti-corruption movement tried many high profile
corruption cases, including a the case against one of the president’s own relatives. 293
As a leader, he at least sets an example by living a modest life and, as far as the
public knows, his close family does not engage in any business activity in the
country. He has implanted an awareness in most of lower government officials that
corruption is a serious criminal matter. Corruption involving high level officials may
still be difficult to eliminate since it requires solid cooperation among all aspects of
governance in Indonesia, but it would appear that the image of the Indonesian public
service has been gradually changed. Even though people still have to endure long
and complicated processes to obtain public services, the front desk officials do not
dare to ask openly for bribes in the manner they did in even the relatively recent past.
In relation to IPRs and SMEs, as mentioned at the beginning of this section, corrupt
practices cause inefficient procedure for IP registration in the DGIPR office. Corrupt
practices, such as giving bribe money to examiners or to the officers who process the
IP registration, is behind the long and inefficient processing of IP registration. To
make it worse, corrupt officers also become an impediment to effective IP
enforcement. A study on deviant patterns in IP criminal cases found various types of
corruption that have been effected by police officers when processing IP criminal
cases. For instance, the police officers receive money from IP infringers to let them
293
Irawaty Wardany, '2009 was a Disappointing Year for Corruption Eradication Efforts', The Jakarta
Post (Jakarta), 28 December 2009
175
freely operate their illegal businesses. 294 In another case, police officers demand
money from IP infringers who are caught by them so that the case does proceed
further, that is, to the prosecutor office. 295
4.7. Conclusion
From an historical perspective, there are three different periods, namely the precolonial, the colonial and the post colonial, that have shaped the contemporary legal
system of Indonesia and which recognise a pluralistic legal system in the areas of
private law. In the situation today, the implementation of legal rules in Indonesia has
become more complicated as it is blended with chaotic political situations and
gloomy economic conditions in the country.
In the field of IP law, it can be concluded that many reforms have been made in
Indonesia to comply with TRIPS standards. Indonesia has introduced four new IP
laws, in which three of them (industrial design, trade secret, and plant variety
protection) are relevant to Indonesian SMEs and discussed briefly in this chapter.
Despite these reforms, the implementation of the IP system in Indonesia is still not so
effective as to push down the number of IPR infringements and piracies and to bring
the utmost benefits of IPRs to Indonesian SMES.
294
Imam Soegianto, Penyelidikan Tindak Pidana Bidang HKI dan Pola-Pola Penyimpangannya
[Investigation of Intellectual Property Criminal Cases and Its Deviation Pattern] (Master of Police
Studies Thesis, University of Indonesia, 2002), 154–8.
295
Ibid 164–9.
176
The widespread corruption has been identified as an impediment to many aspects of
governance in Indonesia, including the legal system in general and the
implementation of IP system in particular. In the past, corruption and bribery were
commonly practised by government officials at every level and made public services
even worse. Currently, although high profile corruption is still present, unlike in the
past, petty corruption or small bribery to accelerate the process of getting public
services is less common. Despite these improvements, the public service in
Indonesia, including in the administrative management of IP, is not efficient and
processes still take time and sometimes involve ludicrous bureaucratic procedures. In
terms of enforcement, the situation is not much different, as the officers who deal
with IP infringement cases are also often corrupt. With SMEs having limited
financial capability and the widespread diffusion of corruption practices surrounding
the administration of IPRs, the uptake of IPRs by Indonesian SMEs is
understandably low.
177
CHAPTER 5
SMALL AND MEDIUM ENTERPRISES IN INDONESIA:
THEIR INTELLECTUAL PROPERTY RIGHTS (IPRS)
MANAGEMENT AND GOVERNMENT AGENCIES’ IPRRELATED PROGRAMS FOR THEM
5.1. Introduction
Small and Medium Enterprises (SMEs) in Indonesia have been praised as the
backbone of the country’s economy. With their limited resources and simple
business methods, they survived during Indonesia’s economic downturn period of
1997–1998. Although, in theory, intellectual property rights (IPRs) have a significant
role in protecting and commercialising intellectual property (IP) assets, the uptake of
IPRs among SMEs in Indonesia is still low. For a thesis which questions the effects
of the current IP system on SME uptake of IPRs, a chapter to discuss the profile of
Indonesian SMEs, their management of SME issues, and government programs that
are related to IPRs for SMEs in Indonesia is necessary. This chapter is expected to
provide background understanding on the initiatives that have been undertaken by
the Indonesian government to assist SMEs in the uptake of IPRs.
Using interviews with relevant government officers and survey of literature, this
chapter examines the management and the programs and policies for SMEs in
Indonesia related to the Intellectual Property (IP) system. The first section will
provide a profile of SMEs in Indonesia, not only at present, but also during the
economic crisis. Then, the next section will look at the position of SME and IP issues
178
in various government agencies that are concerned with the issue. This is followed
by a discussion of IPRs programs for SMEs in Indonesia, initiated and run by either
the Indonesian government or foreign agencies. Since decentralisation and regional
autonomy policies in Indonesia affect the implementation of programs and policies
related to IP and SMEs issues at regional level, the discussion on such issues will be
presented in the last section
5.2. Profile of Small to Medium Enterprises (SMEs) in Indonesia
5.2.1. The Significance of SMEs in Indonesia
It is thought that SMEs have a significant role in developing countries. The World
Bank acknowledges that SMEs can function as an agent of economic growth and
development in developing countries for three reasons. 1 First, SMEs increase
competition and entrepreneurship and this has benefits in regard to growth in
efficiency, innovation and productivity. Secondly, SMEs are more productive than
large enterprises (LEs) and, if the failures in financial markets and other related
institutions together with a non-conducive macro-economic environment do not
hamper them, then their development can be better than LEs. Lastly, in terms of
labour absorption, SMEs, which are more labour intensive, perform better than LEs. 2
1
World Bank, 'World Bank Group Review of Small Business Activities' (World Bank, 2002); World
Bank, 'World Bank Group Review of Small Business Activities' (World Bank, 2004).
2
Ibid; Tulus Tambunan, 'Development of SMEs in A Developing Country: The Indonesian Story'
(2007) (19) (October ) Journal of Business and Entrepreneurship 18, 61 (‘Development of SMEs’).
179
In Indonesia, SMEs are important for the economy of the country. Recent data
demonstrates that the number of SMEs 3 in Indonesia is substantial, accounting for
49,824,123 units in 2007 and 51,257,537 units in 2008. These numbers comprise
almost 100 per cent of the total number of business units in Indonesia in both years
(see Table 2 below). Because of their enormous number, SMEs contribute
significantly to the Gross Domestic Product (GDP) and have become massive
providers of employment in Indonesia. Despite the fact that, prior to 2008, the data
on SMEs presented by the Central Statistic Bureau (Biro Pusat Statistik - BPS) and
State Ministry of Cooperatives and Small Medium Enterprises (SMoCSMEs) are
sometimes inconsistent, 4 it is confirmed that the SME contribution in Indonesia as a
percentage of GDP and in terms of labour absorption has always been considerable.
3
This number is a combination of the number of MIEs, SEs and MEs. For definition of all the
categories of these enterprises in this thesis, see Chapter 1 (sub-section 1.6.).
4
The lack of consistency was due to the different parameters applied in these two agencies before
Law No 20 of 2008 was enacted. Compare the data of the SMoCSMEs in this chapter with that of the
BPS in Chapter 1 (section 1.1.2.).
180
Table 2: The Number of Business Entities by Size of Business 2007–2008
Number (Units)
Growth
No
Size of Business
2007
2008
Per Cent
1.
Micro Enterprises (MIEs)
49,287,276
50,697,659
2.86
2.
Small Enterprises (SEs)
498,565
520,221
4.34
3.
Medium Enterprises (MEs)
38,282
39,657
3.59
4.
Large Enterprises (LEs)
4,463
4,372
(2.04)
Source: Statistic of SMEs 2007–2008 – BPS & SMoCSMEs
During 2007 and 2008, SMEs contributed more than IDR 8.4 trillion to Indonesia’s
GDP. In each of these years, the percentage of SMEs contribution to the total GDP is
more than 50 per cent of the total national GDP. Of the three categories of SMEs,
MIEs contributed the largest portion of national GDP and accounted for more than
IDR 1 trillion each year (see Table 3 below). With regard to labour absorption, SMEs
provided employment to 90,491,930 people in 2007 and the number increased (3.7
per cent) to 94,024,278 in the following year (see Table 4 below), Again, during
2007–2008, the largest job provider was MIEs with more than 80 million people
employed by business entities in this category.
181
Table 3: Growth of GDP by the Size of Business 2007–2008
Value of GDP Contribution in a Given Year
No
(IDR)
Size of
Business
1.
MIEs
2.
Growth
2007
2008
Per Cent
1,209,622,500,000
1,510,955,800,000
19.94
SEs
386,404,300,000
472,830,300,000
18.27
3.
MEs
511,841,300,000
630,339,900,000
18.79
4.
Les
1,637,681,200,000
2,080,582,900,000
21.28
3,745,549,300,000
4,693,809,000,000
20.20
Total of GDP
Source: Data Perkembangan Usaha Mikro, Kecil, Menengah (UMKM) dan Usaha
Besar (UB) Tahun 2005–2009 – 5 (Development of Micro, Small, Medium and
Large Enterprises Data between 2005 and 2009)
Table 4: Growth of Labour Absorption by the Size of Business 2007-2008
Number (People)
Growth
No
Size of Business
1.
MIEs
2.
2007
2008
Per Cent
84,452,002
87,810,366
3.82
SEs
3,278,793
3,519,843
6.80
3.
MEs
2,761,135
2,694,069
(2.48)
4.
Les
2,535,411
2,756,205
8.01
93,027,341
96,780,483
3.87
Total Labour Absorption
Source: Perkembangan Data Usaha Mikro, Kecil, Menengah (UMKM) dan Usaha
Besar (UB) Tahun 2005-2009
5
Kementerian Negara Koperasi dan Usaha Kecil Menengah [State Ministry of Cooperatives and
Small Medium Enterprises], Perkembangan Data Usaha Mikro, Kecil, Menengah (UMKM) dan
Usaha Besar (UB) Tahun 2005-2009 [Data Development of Micro, Small and Medium Enterprises
and Large Enterprises in 2005-2009] (14 October 2010 2010) Kementerian Koperasi dan Usaha Kecil
Menengah (Ministry of Cooperatives and Small Medium Enterprises)
<http://www.depkop.go.id/index.php?option=com_phocadownload&view=file&id=199:perkembanga
n-data-usaha-mikro-kecil-menengah-umkm-dan-usaha-besar-ub-tahun-2005-s.d.-2009&Itemid=93>.
182
The positive performance of SMEs in Indonesia can also be seen to have occurred in
the past. During the period of rapid economic growth which started in the late 1960s
and lasted until the onset of the economic crisis in 1997,6 their performance was
outstanding. In 1992, for instance, the number of SEs was 33.4 million, and, by four
years later, the number of SEs in Indonesia had increased by 16 per cent to 3.9
million.7 Another example is taken from the BPS data on the manufacturing sector in
the period 1974–1997. Between 1974 and 1997, SEs absorbed more than 50 per cent
of the labour force in the manufacturing sector. 8
5.2.2. Indonesian SMEs during the Economic Crisis of 1997–1998
When Indonesia was hit by economic crisis in 1997–1998, there was an impression
that SEs responded positively to the crisis better than larger enterprises (LEs).
Although 1998 figures from the SMoCSMEs shows that SE sales increased by 34.9
per cent in 1998 and only decreased slightly (-0.3 per cent) in 1999 (see Table 5
below), because there was no other convincing evidence, many scholars in this field
doubted this figure. 9 This doubt was supported by another survey in April 1998,
6
In mid-1997, Indonesia and other East Asian countries (i.e. South Korea, Malaysia and Thailand)
were hit by an economic crisis. Of these countries, Indonesia was the worst affected, not only in its
economy but also in its social and political life. For a more thorough discussion of this issue, see Hal
Hill, The Indonesian Economy in Crisis (Allen & Unwin, 1999) (‘Indonesian Economy in Crisis’)
7
Tulus Tambunan, 'The Performance of Small Enterprises during Economic Crisis: Evidence from
Indonesia' (2000) 38(4) Journal of Small Business Management 93, 94 (‘Performance of SEs during
Economic Crisis’).
8
Ibid.
9
There are two interpretations worth mentioning here as to why SMEs remained strong during the
economic crisis. First, Jellinek and Rustanto argue that the positive growth of SMEs during the crisis
was because the crisis the shifted consumption pattern back to products and services offered by SEs,
and LEs no longer had as easy access to capital and markets as was the case during the New Order
era. Alternatively, most of scholars, like Hill, Sandee, Berry and Rodriguez, believe that the positive
growth of SMEs during the economic distress period should be seen in conjunction with the fact that
their good performance before the crisis enabled them to respond more quickly and flexibly to the
crisis. See Lea Jellinek and Bambang Rustanto, 'Survival Strategies of the Javanese during the
Economic Crisis' (World Bank, 1999); Albert Berry, Edgar Rodriguez and Henry Sandee, 'Small and
183
which was conducted by the SMoCSMEs through its regional office and involved
approximately 176,000 SEs in 9 sectors. The survey was conducted mostly in rural
areas in all 27 provinces of Indonesia. It discovered that 75,638 SEs (43 per cent of
the sample) had closed their business, 43,976 SEs (25 per cent) had suffered a
decline in their business, and 31,662 SEs (18 per cent) had ceased activity but had
not yet closed the business 10 (see Table 6 below).
Table 5: Industrial Value Added per Worker by Firm Size (Sales-based
Definition)
Firm Size
(Sales Definition)
Sales (RP)
1997
Growth (% p.a.)
1998
1999
1998/97
1999/98
Total Industry
12,358
12,639
12,605
2.3
-0.3
Small
2,899
3,911
3,901
34.9
-0.3
7,045
5,131
5,116
-27.2
-0.3
341,526
323,154
322,844
-5.4
-0.1
(<IDR 1 billion)
Medium
(IDR 1-50 billion)
Large
(>IDR 50 billion)
Source: SMoCSMEs (1999) 11
Medium Enterprise Dynamics in Indonesia' (2001) 37(3) Bulletin of Indonesian Economic Studies
363, 375; Hill, Indonesian Economy in Crisis, above n 6, 44; Henry Sandee, Roos Kities Andadari and
Sri Sulandjari, 'Small Firm Development During Good Times and Bad: The Jepara Furniture Industry'
in Chris Manning and Peter van Diermen (eds), Indonesia in Transition: Social Aspects of Reformasi
and Crisis (Institute of Southeast Asian Studies, 2000) 184, 188
10
Tambunan, above n 7, 97.
11
The table was presented in Berry, Rodriguez and Sandee, above n 9, 374.
184
Table 6: Impact of the Crisis on SEs in Selected Sectors (April 1998)
Sector
Per cent of Firms
Per cent of Firms
in Decline
Closed
Husbandry
42
31
Mining
50
23
Manufacturing
28
35
Construction
12
5
Trade, hotels, restaurants
20
5
6
10
41
4
Transportation
and
Communication
Services
Source: (1998). 12
There were also a few studies, however, which discovered that SMEs fared well
during the economic crisis period. A study by Sandee, Berry and Rodriguez found
that the furniture industry in Jepara, which was dominated by SMEs, had done well
since the economic crisis began. There had been significant growth in the number of
enterprises between 1996 and 1998 (inclusive). During these three years, the number
of enterprises in the Jepara furniture industry increased by almost 800 units.13
Another study, conducted by Peter van Diermen et al in 1998, found a similar pattern
among SMEs in the traditional lurik cloth-weaving industry located in Ceper, Klaten
(Central Java), which had also developed positively during the economic crisis. 14
Therefore, it can be concluded that no generalisation is possible about the impact of
the economic crisis on SMEs in Indonesia. Due to ‘the diversity of their activities,
the variety of products produced, differences in market orientation, and their
12
The table was presented in Tambunan, above n 7, 97.
Sandee, Berry and Rodriguez, above n 9 , 193.
14
Peter van Diermen et al, The IMF 50-Points Program: Evaluation of the Likely Impact on SMEs
(The Asian Foundation, 1998) as cited in Tambunan, Performance of SEs during Economic Crisis,
above n 7, 94.
13
185
geographical spread across the vast archipelago’, 15 the effect of the crisis varied from
one SME to another in the country.
To cope with the crisis, SMEs applied various strategies, including diversification or
change of the product, change in the market orientation from domestic to export, and
so on (see Table 7 below). LEs also applied these strategies during the economic
crisis period; however, since they were bigger in size, they were not as flexible as
SMEs. Flexibility is one of SMEs’ strengths and it is important in the face of rapidly
changing market conditions, such as sudden economic downturns. 16
15
16
Tambunan, Performance of SEs during Economic Crisis, above n 7.
Berry, Roderiguez and Sandee, above n 9, 364.
186
Table 7: Strategy/Response of the Individual Producers by Size
Size Group
Strategy/Response
MIEs
Stop Business
Change occupation (for example, become a trader)
Reduce the quality of the product by changing/reducing use of
expensive raw materials
Change the product
SMEs
Reduce the scale of production or working hours
Keep the price of outputs as before while decreasing the
quantity of goods produced
Increase the price of output by 20–25 per cent
Diversify the product
Shift from imported raw materials to locally sourced materials
Maintain production using old stock of raw materials
Change the market orientation from domestic to export
Use US Dollar to determine the selling price of product
Pay back bank loan and try to substitute funds from other
sources for it
Source: AKATIGA (1998) as presented in Tambunan (2000) 17
From these strategies observed to have been adopted by the various entities and
reported in the existing studies, the typical characteristics of Indonesian SMEs that
fared better during the economic crisis, can be construed. First, SMEs which focused
on export markets fared better than those which concentrated on the domestic
market. 18 Secondly, SMEs which typically make use primarily of local raw
17
Tambunan, Performance of SEs during Economic Crisis, above n 7, 99.
18
Ibid, 94; Berry, Rodriguez and Sandee, above n 9, 376.
187
materials 19 were not too badly affected by the crisis. It was also important for SMEs
to not depend heavily on bank loans or formal credit to survive the economic crisis. 20
Lastly, those who were quick to decide on their best strategy required in the
circumstances and flexible in its application were the ones who survived the crisis.
5.3. Government Agencies Responsible for the Issues Regarding SMEs and
IPRs in Indonesia
That SMEs have been recognised as an important matter in Indonesia is a given,
since the government has had a special government agency that manages issues
related to them since 1978. The first special agency managing SME matters in
Indonesia was the Directorate General for Small-scale Industry-Ministry of Industry
(DGSMI), which was set up in 1978. 21 At present, the government agency that has
primary responsibility for SMEs is the State Ministry of Cooperatives and SMEs
(SMoCSMEs). In addition, there are several other government agencies at the
national level, such as the Ministry of Trade (MoT); the Ministry of Industry (MoI);
the Directorate General of Intellectual Property Rights (DGIPR), and the State
Ministry of Research and Technology (SMoRT), which also focus on IPRs and SME
issues. Since the implementation of regional autonomy in 1999 22, there has also been
a government agency that is responsible for SME problems at the regional level. The
following section illustrates the profile of national and regional government agencies
which are responsible for or concerned with SMEs and IPRs in Indonesia.
19
Berry, Rodriguez and Sandee, above n 9.
Ibid; Tambunan, above n 7, 93.
21
Hal Hill, 'Small and Medium Enterprises in Indonesia: Old Policy Challenges for A New
Administration' (2001) 41(2) Asian Survey 248, 251 (‘SMEs in Indonesia’).
22
Regional autonomy in Indonesia was based on the Law No 22 of 1999 which was replaced a few
years later by Law No 32 of 2004 on Regional Governance.
20
188
5.3.1. State Ministry
of Cooperatives
and
Small-Medium Enterprises
(SMoCSMEs)
The SMoCSMEs is one of the ministries in the current Indonesian Cabinet. The
ministry has a long history dated back to the pre-independence period, when it was
established by the Dutch colonial government in 1930 as an agency under the
Ministry of Internal Affairs, and had the main function of registering and legalising
cooperatives, a function previously exercised by a notary. During the Old and New
Order periods, its position in the government structure changed frequently. Once it
was positioned as a ministry; however, at other times its position was lower and it
was a directorate general under a ministry or it was merged into another ministry. In
1983, it was re-established as an individual ministry which specifically dealt with
cooperatives, namerly the Kementerian Koperasi dan Usaha Kecil Kecil Menengah
Republik Indonesia (the State Ministry of Cooperative and Small-Medium
Enterprises Republic of Indonesia or ). 23 In 1999, however, it was again restructured
as a state ministry 24 and it has continued thus up to the present time. 25
As a state ministry (rather than a national ministry), the SMoCSMEs has limited
authority. State ministries do not have branch agencies at the regional level.
23
Kementerian Negara Koperasi dan Usaha Kecil Menengah Republik Indonesia [State Ministry of
Cooperatives and Small Medium Enterprises Republic of Indonesia], Kronologis Sejarah
Perkembangan Instansi yang Membidani Koperasi, Usaha Kecil Menengah [The Chronology of
History and Development of Institution which Initiated Cooperative and Small Medium Enterprises]
(2009) Kementerian Koperasi dan Usaha Kecil Menengah Republik Indonesia
<http://www.depkop.go.id/profil-kementerian-negara-kukm.html> (‘Kronologis Sejarah’).
24
Peraturan Presiden No 9 Tahun 2005 tentang Posisi, Tugas, Fungsi dan Struktur Organisasi dan
Manajemen Kementerian Negara Republik Indonesia [Presidential Regulation No 9 of 2005 on the
Position, Duty, Function, Structure of Organization and Management of State Ministries of Republic
of Indonesia] (Indonesia) art 3.
25
Ibid art 11.
189
According to the spirit of regional autonomy, which has been implemented in
Indonesia since 1999, the function of the SMoCSMEs at the regional level is
performed by both the provincial and district/city governments. 26 This is in
accordance with Article 9(4) of Law No 39 of 2008 on a State Ministry27 which does
not include an agency that performs their main duties at regional level in the
organisational structure of a state ministry. In light of the position of the SMoCSMEs
in the present cabinet, Article 5(3) of Law No 39 of 2008 classifies the SMoCSMEs
as a ministry which works on, coordinates and synchronises government programs. 28
As a ministry in this category, the position of the SMoCSMEs is rather weak, since
Article 6 provides that government matters in this category do not have to be
managed by one particular ministry. It means that one day the ministry could be
merged with another ministry or, indeed, abolished. 29
Initially, the institution only dealt with issues relating to cooperatives. Over the
years, in addition to managing cooperatives, the institution has managed other bodies
and issues. For example, in 1960 this agency was turned into a Ministry which was
also in charge of transmigration 30 and rural community development programs. In
1978, it also managed trade and became the MoT and Cooperatives. Then, in 1993,
26
Undang-Undang No 32 Tahun 2004 tentang Pemerintah Daerah [Law No 32 of 2004 on Regional
Government] (Indonesia) arts13, 14.
27
Undang-Undang No 39 Tahun 2008 tentang Kementerian Negara [Law No 39 of 2008 on State
Ministries] (Indonesia).
28
Ibid art 4(2)(c).
29
'Koperasi (Bakal) Jadi Anak Tiri (Cooperative (Is To) Become Step Child)' (2009) (February 2009)
Pusat Informasi Perkoperasian <http://www.majalahpip.com/majalah2008/readstory.php?cR=1263967928&pID=40&stID=1825>.
30
The transmigration program was initiated in the early 20th century, during the Dutch colonial period;
however, it has flourished in the New Order period. The program has goals to move people from
densely populated inner islands (Java, Bali and Madura) to less densely populated islands of
Indonesia, in order to alleviate poverty by providing lands and new opportunities to participants, and
to exploit effectively the potential of outer islands. See M Adriana Sri Adhiati and Armin Bobsien,
'Indonesia's Transmigration Programme: An Update' (Down to Earth, 2001)
<http://dte.gn.apc.org/ctrans.htm#theips>
190
managing small enterprises became part of its duties, and, five years later, its
responsibilities were enlarged again to include medium-scale enterprises. Since that
year, the SMoCSMEs has continued to be responsible for the tandem issues of
cooperatives and SMEs, despite changes of government. 31
As a formal government institution in the present cabinet, the SMoCSMEs operates
based on several regulations. One of these regulations, Presidential Regulation No.9
of 2005, maintains that the SMoCSMEs has the duty to assist the president in
formulating and coordinating policy in the area of cooperatives and SMEs. 32 In
performing its duty, the main function of the SMoCSMEs is to formulate and to
coordinate the implementation of government policies in this field and to deliver
evaluation reports, suggestions and consideration in the areas of its duty and function
to the president. 33 To accomplish all of its functions, the has the authority to: (i)
make policy to support macro-development, (ii) provide guidance to decide
minimum standards of service for agencies which are responsible for cooperatives
and SMEs in the district or city, and (iii) have input into the national macro-plan for
cooperatives and SMEs. Apart from these functions, the SMoCSMEs is also
responsible for implementing international agreements which are signed by
Indonesia in the field of cooperatives and SMEs, and for supporting the development
31
Kementerian Koperasi dan Usaha Kecil Menengah Republik Indonesia (State Ministry of
Cooperatives and Small Medium Enterprises Republic of Indonesia), Kronologis Sejarah, above n 25.
32
Peraturan Presiden No 9 Tahun 2005 tentang Posisi, Tugas, Fungsi dan Struktur Organisasi dan
Manajemen Kementerian Negara Republik Indonesia [Presidential Regulation No 9 of 2005 on the
Position, Duty, Function, Structure of Organization and Management of State Ministries of Republic
of Indonesia] (Indonesia) art 94.
33
Ibid art 95.
191
of the distribution systems of and the cooperation between cooperatives and SMEs
and other private entities and public agencies. 34
In the structure of the SMoCSMEs, the ministry does not have an individual unit
dedicated to IP issues. However, the assistant deputy of productivity and quality
affairs under the deputy of business development and restructuring has some
programs to assist cooperative and SMEs in Indonesia to manage IP issues. The
programs aim to promote and to disseminate information about the importance of
IPR to cooperatives and SMEs in Indonesia. Besides that, the programs also assist
cooperatives and SMEs in Indonesia to manage their IP assets by selecting products
of cooperatives and SMEs with the potential for gaining IPR registration and helping
the SMEs to process their IP applications. 35 Apparently, the programs only focus on
the legal aspects before IPRs are granted and do not deal with IPR economic issues,
that is, strategies for managing or commercialising these IPRs after the rights are
granted.
In running its IP related programs, the SMoCSMEs cooperates with DGIPR, as the
primary government agency dealing with IPR issues. In July 2006, both agencies
signed a memorandum of understanding (MoU) which strengthened cooperation
between them. One program in the MoU is the acceleration of the registration
process in the field of industrial design for SMEs under the assistance programs of
34
Kementerian Koperasi dan Usaha Kecil Menengah [State Ministry of Cooperatives and Small
Medium Enterprises], Tugas, Fungsi dan Wewenang [Duty, Function and Authority] (2009)
<http://www.depkop.go.id/Tentang%20KKUKM%20%20Tugas,%20Fungsi%20dan%20Wewenang.html> (‘Tugas, Fungsi dan Wewenang’).
35
Interview with Dr Choirul Djamhari, Deputy of Business Development and Restructuring (Jakarta,
20 April 2009).
192
the SMoCSMEs. 36 Between 2005 and 2007, the SMoCSMEs had a program for
obtaining industrial design certificates for 100 products of SMEs and to promote
design products of SMEs in five provinces, namely East Java, Central Java,
Yogyakarta, Banten, and North Sumatra, with a total budget of IDR 94,500,000
(equivalent to USD 11,072). 37
There is no clear explanation as to why industrial designs were chosen to be the
focus of the program. When the question was asked during the interview, the answer
was simply that industrial design rights are important and very relevant to SME
business activities. 38 As MoT had already introduced the plan to promote Indonesia’s
creative industries in 2002, 39 it was natural for other government agencies to have
programs which synergise with the plan. The protection of industrial designs rights
for products of creative industries is considered as an initiative of the government to
promote creative industry in Indonesia. 40 Therefore, the program of the SMoCSMEs
to help the industrial design right registration of 100 SMEs in five provinces supports
MoT’s plan.
At the regional level, as explained above, the SMoCSMEs does not have a unit to
implement its programs. Instead, it works together with the regional units in charge
36
Ibid.
Kementerian Negara Koperasi dan Usaha Kecil Menengah [State Ministry of Cooperatives and
Small Medium Enterprises], 'Revitalisasi Koperasi dan UKM Sebagai Solusi Mengatasi
Pengangguran dan Kemiskinan' [Revitalization of Cooperatives and SMEs as Solution to Overcome
Unemployment and Poverty]
' (2007), 69 (‘Revitalisasi Koperasi dan UKM’)
38
Besides industrial designs, there are other IPRs, including trademark, petty patents, copyright , trade
secrets and plant variety protection rights, which are also relevant to the business activities of SMEs.
For a detailed discussion on this issue, see Chapter 4 (section 4.3).
39
See, below Chapter 5 (section 5.3.2.) 22.
40
Departemen Perdagangan [Department of Trade], Rencana Pengembangan Ekonomi Kreatif
Indonesia 2009-2015
[Development Planning of Indonesia Creative Economy 2009-2015]
(Department of Trade, 2008) 6.
37
193
of SMEs and IP. Because the regional units are not their subordinates, 41 however, the
SMoCSMEs cannot directly request them to implement its programs in the regional
areas. Moreover, in order to expect the regional units to implement the SMoCSMEs
programs, there must be formal institutional cooperation in the form of a MoU
between the SMoCSMEs and these regional units. 42
5.3.2. Ministry of Trade (MoT)
MoT is one of several government agencies in Indonesia concerned with SMEs.
Unlike the SMoCSMEs, this ministry does not consider SMEs as the primary subject
to be managed. Even so, MoT has a unit dedicated to SMEs called the Small and
Medium Trade Center (SMTC).
In the organisational structure of MoT, the SMTC is under the supervision of the
secretariat general of the ministry. This unit was established in 2004 when MoT was
separated from the Ministry of Industry. 43 The duties of the SMTC include providing
assistance and facilitating business cooperation for SMEs, 44 helping SMEs in
Indonesia to be ready to export their products to foreign markets, 45 and facilitating
the marketing of SME products on domestic markets. 46 This unit gives more
41
Undang-Undang No 39 Tahun 2008 tentang Kementerian Negara [Law No 39 of 2008 on State
Ministries] (Indonesia) art 26.
42
See above, Chapter 4 (section 4.6).
43
Biro Umum dan Humas Kementerian Perdagangan [General and Public Relations Bureau - Ministry
of Trade], Depdag Kerjasama dengan Peritel Modern dan Perbankan untuk Memberdayakan UKM
[Ministry of Trade Cooperates with Modern Retailers and Banks to Empower SMEs] (2005)
<http://www.depdag.go.id/files/publikasi/siaran_pers/2005/20051121.htm>.
44
Ibid.
45
Interview with VR and AP, officers of the SMTC (Jakarta, 13 February 2009).
46
Pusat Dagang Kecil Menengah Kementerian Perdagangan [Centre of Small Medium Trade Ministry of Trade], Visi dan Misi [Vision and Mission]
(2010)
<http://pdkm.depdag.go.id/new/index.php?option=com_content&view=article&id=41&Itemid=67>
194
attention to SMEs that are just starting their businesses and for enterprises that are
more in the form of street vendors. 47
At the provincial level, the position of MoT is similar to that of the SMoCSMEs. 48
The SMTC relies on the Trade Agency at the provincial and district/city level to
implement its programs, including IP-related programs, in regional areas. As the
trade agency at the provincial level is under supervision of the regional government,
the SMTC and other MoT units need to follow formal cooperation procedures before
requesting this unit to implement their programs.
Regarding IP issues, the SMTC has already prepared an IP awareness program for
SMEs in 2009; however, an interview with two officers of the SMTC in 2009
revealed that it was the first program related to IPR that had ever been planned by the
SMTC. Although there is one page dedicated to IP consultation matters on the
SMTC website, until now this has remained a blank page. 49 This is ironic since MoT
is one of two ministries in the cabinet which have direct links with the WTO and
TRIPS. Together with personnel from the Ministry of Foreign Affairs, officials from
both ministries have become key members of the Indonesian delegation at all the
WTO negotiations.
In the organisational structure of the MoT, there is a Directorate of Multilateral
Cooperation, which works under the Directorate General of International Trade
47
Ibid.
Undang-Undang No 39 Tahun 2008 tentang Kementerian Negara [Law No 39 of 2008 on State
Ministries] (Indonesia) arts 5(2); 9(2).
49
As at 19 October 2010.
48
195
Cooperation. 50 One of the functions of this directorate is to prepare the formulation
of multilateral trade cooperation and negotiation policies, guidance, standards,
norms, criteria and procedures in the field of IPRs. 51 This directorate has a special
sub-directorate for IPRs 52 to carry out this function: however, as of 2009, there was
no clear policy or guidance on how the TRIPS Agreement could benefit Indonesian
trading activities operated by either small, medium or large enterprises. 53
Meanwhile, MoT has a vision of promoting and developing a creative economy in
Indonesia, and it is expected to be flourishing by 2025. The creative economy, which
includes creative industries, is believed suitable for Indonesia which has rich and
diverse cultures and a great deal of creative human resources. In 2007, MoT
established a working group which conducted research on the issue of the creation of
such a creative economy in Indonesia, and the group has so far published four
volumes of their research findings. Patent, copyright, trademark, and industrial
design rights are mentioned in the publications as relevant IPRs to support and give
protection to creative industries in Indonesia. 54 Therefore, it can be seen that the IPR
50
Direktorat Jenderal Kerjasama Perdagangan Internasional - Kementerian Perdagangan [Directorate
General of International Trade Cooperation - Ministry of Trade], Bagan Organisasi Direktorat
Jenderal Kerjasama Perdagangan Internasional Departemen Perdagangan [Organization Structure
of Directorate General of International Trade Cooperation - Department of Trade] (2007) Directorate
General of International Trade Cooperation - Department of Trade
<http://ditjenkpi.depdag.go.id/index.php?module=news_detail&news_category_id=3&news_sub_cate
gory_id=17&&load_file=dk_multilateral_02.htm>.
51
Kementerian Perdagangan [Ministry of Trade], Tugas Pokok dan Fungsi Organisasi Direktorat
Jendral Kerjasama Perdagangan Internasional [Main Duties and Organizational Functions of
Directorate General of International Trade Cooperation] (2010)
<http://www.depdag.go.id/index.php?option=organisasi&task=tupoksi&itemid=0101&id=06>.
52
Direktorat Jenderal Kerjasama Perdagangan Internasional, above n 50.
53
Interview with GPA, Head of Service Market Access and IPRs Sub-Directorate-MoT (Jakarta, 8
February 2009).
54
Departemen Perdagangan [Department of Trade], Rencana Pengembangan Ekonomi Kreatif
Indonesia 2009-2015
[Development Planning of Indonesia Creative Economy 2009-2015]
(Department of Trade, 2008) 35.
196
issue is included as one of the targets for creative industry policy in Indonesia (see
Table 8 below).
Table 8: Target of Creative Industries in Indonesia related to IPRs Sector
Mission of Creative
Foundation and Pillar
Acceleration Period
Economy
Reinforcement Period
(2015–2025)
(2008–2014)
Creating economic values
of
creative
including
innovation,
those
4% growth in registered
Maintaining the growth of
domestic patents
registered domestic patents
sourced
from cultural inheritance
and wisdom
at 4%
38.94% growth in
Maintaining the growth of
registered domestic
registered domestic
copyrights
copyrights at 38.94%
6% growth in registered
Maintaining the growth of
domestic trademarks
registered domestic
trademarks at 6%
39.7% growth in registered
Maintaining the growth in
domestic industrial design
registered domestic
rights
industrial design rights at
39.7%
Reinforcement of creative
Creating 200 local
Creating 325 local
trademarks, either new or
trademarks, either new or
services as an attempt at
existing, which are
existing, which are
‘National Branding’ or
trustworthy, legally
trustworthy, legally
image for Indonesia as a
registered in the DGIP
registered in the DGIP
state in the international
Office and trademark
Office and trademark
world.
offices in the export
offices in the export
destination countries.
destination countries.
image on products or
Source: Rencana Pengembangan Industri Kreatif 2009-2015(Creative Industry Development
Plan 2009-2015). 55
55
Ibid 39.
197
IPRs infringement or piracy has been identified as one of main problems in the
assessment of the current condition of the creative economy’s ‘foundation and
pillars’ 56 in Indonesia. The assessment also recognises that IPR protection in
Indonesia is still weak and the government needs to strengthen it. 57 Then, in order to
reap the benefits from the idea of the creative economy by 2025, Indonesia must
reinforce the conditions of its foundation and its six pillars by 2015. 58 The aim is to
shape an open-minded society which makes use of local creative products. 59 One way
to reach this target is with the creation of an appreciation of IPRs and recognition of
their benefits to the economy. 60
The idea of developing the creative economy of Indonesia is a serious one and is
reflected in Presidential Instruction No 6 of 2009 on the development of the creative
economy. 61 In this instruction, President Yudhoyono requests the officials who head
27 government agencies 62 and all heads of regional governments (governors and
regents/mayors) to support the policy of The Development of Creative Economy
56
There are six pillars of the creative economy in Indonesia which are assessed in the research,
namely: people, industry, technology, resources, institution and financial intermediaries. See ibid 77.
57
Ibid 90.
58
Ibid 95.
59
Ibid 97.
60
Ibid.
61
Instruksi Presiden No 6 Tahun 2009 tentang Pengembangan Ekonomi Kreatif [Presidential
Instruction No 6 of 2000 on the Development of the Creative Economy] (Indonesia).
62
These government agencies are: the Coordinating Ministries for People’s Welfare; Economic
Affairs; and Ministries of Trade; Industry; Finance; Justice and Human Rights; Agriculture;
Communication and Information; Culture and Tourism; National Education; Foreign Affairs; Home
Affairs; Manpower and Transmigration; Public Works; Forestry; Marine Affairs and Fisheries;
Energy and Mineral Resources; Transportation; National Development Planning; Cooperatives and
Small Medium Enterprises; Research and Technology; State-Owned Enterprise; Environment;
Agency for the Assessment and Application of Technology (Badan Pengkajian dan Penerapan
Teknologi – BPPT); the Indonesian Institute of Sciences (Lembaga Ilmu Pengetahuan Indonesia LIPI); Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM); and
National Standarisation Agency of Indonesia (Badan Standarisasi Nasional).
198
2009–2015, 63 which focuses on 14 sub-sectors of creative industry 64 mentioned
above. Yudhoyono also instructed every head of a regional government to create an
‘action plan of creative economy’ in their region and to make the Year of Creative
Indonesia 2009 successful. 65 The instruction also includes IPRs as a target, direction
and strategy for the development of a creative economy between 2009 and 2015 (see
Table 9 below). Since the programs to realise the idea of a creative economy only
began in 2009, it is too early to give an assessment of the IPR-related programs here;
however, the programs are real and it is expected that they could reach all
participants in the Indonesian economy.
63
Instruksi Presiden No 6 Tahun 2009 tentang Pengembangan Ekonomi Kreatif [Presidential
Instruction No 6 of 2000 on the Development of the Creative Economy] (Indonesia) s 1.
64
Ibid s 2.
65
Ibid s 3.
199
Table 9: Target, Direction and Strategy of Development of Creative Economy
related IPR Issues 2009–2015
Target
Community
which
appreciates
IPRs and
makes use
of local
creative
products
Direction
Creating an
appreciation
of and a
dissemination
of the
importance of
IPRs
Strategy
Campaigning for the
significance
of
creativity and IPRs as
primary
assets
to
compete
extremely
well in the era of the
creative economy
Encouraging
eradication of creative
product piracy
Preparing and
implementing IPR
policy consistently
Consolidating business
interaction between
company and creative
actors in the form of
standard business
contracts which values
IPRs.
Providing community
service in the form of
IPR education and
information.
Responsible Agencies
Ministry of Justice and
Human
Rights
(coordinator);
Ministry of Agriculture;
Ministry
of
National
Education;
Ministry of Communication
and Information.
Ministry of Justice and
Human Rights
(coordinator);
Ministry of Communication
and Information;
Ministry of Industry;
Ministry of Trade;
Ministry of Agriculture
Ministry of Justice and
Human Rights
(coordinator);
Ministry of Communication
and Information;
Ministry of Trade;
Ministry of Industry;
Ministry of Agriculture
Ministry of Trade
(coordinator);
Ministry of Justice and
Human Rights;
Ministry of Industry;
Ministry of Communication
and Information;
Ministry of Agriculture;
Capital Investment
Coordinating Board.
Ministry of Justice and
Human Rights
(coordinator);
Ministry of National
Education.
Source: Presidential Instruction No 6 of 2009 on Development of Creative Economy
200
5.3.3. Ministry of Industry (MoI)
Like the Ministry of Trade, the Ministry of industry (MoI) is also concerned with
small and medium enterprises. Although SMEs are not the main concern of the MoI,
in its organisational structure there is a specific unit, the Directorate General of Small
and Medium Industries (DGSMI), which is responsible for the industrial aspects of
SMEs. The main duty of the DGSMI is to formulate and implement policy and
technical standardization in the field of small and medium industries. 66 To do this,
DGSMI has a number of functions: to assist in the formulation of policies and to
implement the policies of MoI in regard to small medium industries in the field of
foods, textiles, chemicals, construction materials, metals, electronics, and
handicrafts. In addition, DGSMI also functions as a unit which formulates standards,
norms, criteria and procedures, and provides technical guidance and evaluation for
SMEs in the aforementioned industries. 67
In relation to IPR issues, MoI is involved in the National Team on the Tackling of
Infringement of IPRs (Timnas PPHKI). 68 As a member of Timnas PPHKI, MoI
attempted to reach its target which has been set up by maximising the performance of
the IPRs Consultation Clinic for Small Medium Trade and Industry (hereinafter the
IPRs Consultation Clinic), and by forming a special team to handle IPR issues in the
industrial
sector
based
on
Ministry of
Industry Regulation
No
35/M-
IND/PER/6/2006. 69 After the special team was disbanded on 21 June 2007, the
66
Kementerian Industri [Ministry of Industry], Direktorat Jenderal Industri Kecil dan Menengah
[Directorate General of Small and Medium Industries] ((2011)) <http://ikm.kemenperin.go.id/>.
67
Ibid..
68
Timas PPHKI was also discussed in Chapter 4 (section 4.3.2.4).
69
Pusat Manajemen HKI - Departemen Perindustrian [Centre for Intellectual Property Rights
Management - Department of Industry], Profil Pusat Manajemen Hak Kekayaan Intelektual
201
Centre of IPRs Management was established on 12 July 2007 by the Ministry of
Industry Regulation No 59/M-IND/PER/2007 in order to continue the work that had
been done by the special team. The main duty of the Centre of IPRs Management is
to coordinate the work of the units dealing with IPR issues in each directorate
general of MoI. 70 There are five IPR units 71 which work under the Centre of IPRs
Management. In each of these units, there is an IPR consultation clinic.
The Centre of IPRs Management and all units that are in charge of IPR issues in MoI
have to work in accordance with a detailed plan of action (published in 2006) called
the Policy of Implementation and Preservation of Intellectual Property Rights in
Department of Industry 2007–2011 72 to tackle IPR Infringements. According to this
policy, by 2011 the Ministry of Industry expects that: 1) a minimum of 50,000
industrial companies would register and protect their products under the IPR system
(patents, industrial designs and copyright); 2) 100,000 industrial companies would
utilise the services of the Centre of IPRs Management; 3) 10,000 IP facilitators,73
investigators 74 and consultants 75 would be
available to serve the needs of the
Departemen Perindustrian [Profile of Centre for Intellectual Property Rights Management Department of Industry] (2008) 2 (‘Profil PM-HKI’).
70
Ibid.
71
These five IPRs units are located in the Directorate General of Small and Medium Industries; the
Directorate General of Manufacturing Industry Basis; the Directorate General of Agri-Industry; the
Directorate General of High Technology Based Superior Industry; and the Agency for Industrial
Research and Development. See Kementerian Industri, above n 66.
72
Pusat Manajemen HKI - Departemen Perindustrian [Centre for Intellectual Property Rights
Management - Department of Industry], Kebijakan Penerapan dan Pembinaan Hak Kekayaan
Intelektual (HKI) Departemen Perindustrian Periode 2007 Sampai Dengan 2011 Dalam Rangka
Penanggulangan Pelanggaran HKI [Policy of Implementation and Assistance of Intellectual Property
Rights (IPRs)-Department of Industry for Period 2007 to 2011 in the Framework of IPRs
Infringement Prevention]
(Sekretariat Jenderal-Departemen Perindustrian 2006) (‘Kebijakan PM-HKI 2007-2011’).
73
An IP facilitator is a mediator of the government agency which has the function of explaining the
IPR concept to the industrial community at both central and regional levels. IP facilitators are
normally public servants who receive IP training. Ibid 6.
74
An IP investigator is a government officer who investigates IP criminal cases. In Indonesia, IP
investigators can be police officers or public servants, who have authority similar to that of police
officers in investigating IP criminal cases. The provisions for such matter are contained in Law No 30
202
industrial community. 76 In addition to those targets, there are two further targets to
be realised by 2011. First, industrial entrepreneurs are to produce intellectual works
with commercial value in the fields of technology, science, art and literature. Second,
industrial entrepreneurs are to be ready to accept and implement the concept of IPR
in order to encourage free trade. 77
The plan of action also provides strategies to realise these targets. The strategies are
clustered into four groups, that is, awareness; guidance and counselling; the training
of IP facilitators; and follow-up assistance in commercialising IP products. In
awareness cluster of strategies, the targets would be reached through gradual,
multilevel and sustained campaigns about IPR issues. A gradual campaign means
that the information on IPR is not given all at once, but separately in numerous
events. Then, the targets of the campaign must be multilevel, from local to national
levels, from central to regional government offices. Further, the campaign needs to
be done continuously and involve the existing social institutions in the Indonesian
community, such as the kelurahan (village), the school and the religious leaders. 78
The strategies for the guidance and counselling cluster embrace three activities:
identification, diagnosis, and a plan for action. The first activity is targeted at
community groups or industrial companies that have the potential to be inventors or
of 2000 on Trade Secret, Law No 31 of 2000 on Industrial Design, Law No 14 of 2001 on Patent, Law
No 15 of 2001 on Trademark and Law No 19 of 2002 on Copyright.
75
An IP consultant is a person who has expertise in IP and provides services, particularly those n
relation to submitting and handling IP applications to the DGIPR. To practice as an IP consultant in
Indonesia, a person must be registered in the DGIPR. See, above Chapter 4 (section 4.3.2.2.), and
Peraturan Pemerintah No 2 Tahun 2005 tentang Konsultan HKI [Government Regulation No 2 of
2005 on IP Consultants] (Indonesia).
76
Pusat Manajemen HKI-Departemen Perindustrian, Kebijakan PM-HKI 2007-2011, above n 73, 7,
11.
77
Ibid.
78
Ibid 13.
203
IPR users. Using the result of the identification activity, raw materials, process and
products are to be assessed against IPR criteria to satisfy the needs of both the
industrial community and the inventor. The last activity, the action plan, aims to
share the duties and functions of providing assistance and counselling with the
community group and the industrial company involved in the two activities above. 79
The third group of activates, centred on the training of IP facilitators, has a strategy
similar to the multilevel campaign mentioned earlier. MoI, in particular the Centre of
IPRs Management, will train IP facilitators at the beginner and mid-levels. The midlevel IP facilitators will help to prepare IP facilitators in every directorate general of
MoI and later in the provinces. Similarly, the beginner level IP facilitators will assist
to prepare facilitators at the district and city levels. In addition to these two types of
training, the Centre of IPRs Management will also coach IP motivators, who will
work in the field and deal directly with IP users. 80 The last topic in this cluster,
follow-up assistance, has strategies to provide IP users with knowledge about how to
market their inventions. It includes activities such as providing business information,
technical guidance to produce and process a patent, and to develop the market for
buying and selling the inventions. 81
IP issues related to SMEs become the responsibility of the IPRs Consultation Clinic.
Although the IPRs Consultation Clinic is organisationally positioned under the
Centre of IPRs Management, the clinic was, in fact, established in 1997 before the
existence of the centre as a response to Indonesia’s ratification of the TRIPS
79
Ibid 16.
Ibid.
81
Ibid.
80
204
Agreement in 1994. 82 The IPRs Consultation Clinic aims at upgrading knowledge,
vision and services related to IPR issues through information dissemination,
guidance, consultation, promotion and making available legal assistance to relevant
government officials and business actors. 83 To achieve its goals, the IPRs
Consultation Clinic has been active in various programs which include education and
consultation regarding IPR matters with government officials and SME owners over
the telephone, via e-mail, mail or in person. 84 In addition, the IPRs Consultation
Clinic also provides legal assistance for SMEs to settle IP disputes, including such
things as the refusal of their IPR application as well as IPR infringements or piracy. 85
In running all of its programs, the IPRs Consultation Clinic actively cooperates with
other government and non-government organisations which have responsibility for or
are concerned with, IPR issues in Indonesia, such as the DGIP, the Police Force,
Indonesian universities, and the Office of Prosecution. 86
MoI is a government agency, outside the DGIPR, one which has well-structured
institutions, policies and plans for IPR issues related to the industrial sector in
Indonesia. MoI not only pays attention to IPR issues regarding large industrial
enterprises but also SMEs. The action plan set up in 2007 has been implemented at
regional and national levels; however, difficulties arise in implementing it at the
regional level because of the decentralisation policy which prevents the Centre of
IPRs Management from having direct access to regional agencies. Like the MoT and
82
Ibid 1.
Klinik Hak Kekayaan Intelektual Industri Kecil dan Menengah [Intellectual Property Clinic for
Small and Medium Industry], Buku Panduan Klinik Kekayaan Intelektual Industri Kecil dan
Menengah [Guidance Book of Intellectual Property Clinic for Small and Medium Industry]
(Direktorat Jenderal Industri Kecil dan Menengah - Departemen Perindustrian (Directorate General of
Small and Medium Industry - Department of Industry), 2009) 5.
84
Ibid 10–11.
85
Ibid 12.
86
Ibid 12–13.
83
205
the SMoCSMEs, MoI depends on external cooperation with provincial, district or
city governments to implement its action plan at the regional level. MoI does not
have control over these provincial, district or city governments and this makes the
implementation of the action plan less effective at the regional level. For example,
the regional officers who have been trained to be IP facilitators by the Centre of IPRs
Management or the IPRs Consultation Clinic are often transferred into other units
which do not deal with IP issues. It makes the training of local IP facilitators by the
Centre of IPRs Management and the IPRs Consultation Clinic a never-ending task. 87
5.3.4. State Ministry of Research and Technology (SMoRT)
As the government agency with the primary responsibility of organising government
research, science and technology activities to assist the president 88, SMoRT
coordinates 12 non-departmental government agencies, included the Indonesian
Institute of Sciences (Lembaga Ilmu Pengetahun Indonesia - LIPI), the Agency for
Assessment and Application of Technology (Badan Pengkajian dan Penerapan
Teknologi - BPPT), and the Research Centre for Science and Technology
(PUSPITEK), which actively develop objects that are protected by IPRs, particularly
patents. For this reason, SMoRT has an obvious interest in IPR issues. This interest is
demonstrated by having a position, the Assistant Deputy of Intellectual Property and
Standardisation of Science and Technology, under the Deputy of Science and
Technology Resources to manage IPR issues. One of the responsibilities of this
87
Interview with Un, the Head of the IPRs Consultation Clinic-MoI (Jakarta, 12 March 2009) (on file
with author).
88
Kementerian Negara Riset dan Teknologi [State Ministry of Research and Technology], Organisasi
Kementerian Riset dan Teknologi [Organization of Ministry of Research and Technology] (2010)
<http://www.ristek.go.id/?module=Profile&id=2>.
206
position is to deal with the industrial sector and this includes SMEs and
cooperatives. 89
In addition to the special position, SMoRT also has special programs dedicated to
IPRs. First, in 2000, SMoRT became the coordinator of a program to encourage the
establishment of IP Centres (Sentra HKI) in universities, technical colleges and
research and development agencies throughout Indonesia. 90 Initially, the aim of the
Sentra HKI was to look for any matter with IP potential in research centres, to assist
inventors with patent application and to market patented inventions. 91 Later,
however, they also began to serve the community near their locations when people
needed help due to IP difficulties. 92 In the same year (2000), SMoRT also initiated a
financial assistance program, the Incentives for Sentra HKI, 93 to help establish
Sentra HKI. The second initiative of SMoRT related to IPRs was organising the
Obtaining Patent Program, a program which was designed to stimulate researchers to
patent their invention by offering incentives of up to a maximum of IDR 5,000,000
(equivalent to USD 585). 94 Another IPRs-related program of SMoRT included
incentives in regard to technology insurance, the Technology Incentives Insurance
(ASTEKNO) Program. This program paid the premiums for SMEs that collaborated
with researchers who had patents (for product or process) for insurance to
89
Kementerian Negara Riset dan Teknologi [State Ministry of Research and Technology], Struktur
Organisasi Deputi Sumber Daya Iptek [Organization Structure of Deputy of Science and Technology
Resources] (2010)
<http://www.ristek.go.id/?module=File&frame=File/profil/struktur2010/dep_sumber_daya_krt.pdf>.
90
Interview with ST, Head of IP Unit in the SMoRT (Jakarta, 31 May 2010).
91
Christoph Antons, 'Technology Transfer in Indonesia' in Christopher Heath and Kung-Chung Liu
(eds), Legal Rules of Technology Transfer in Asia (Kluwer Law International, 2002) 227–34
(‘Technology Transfer in Indonesia’).
92
Interview with Leo Tukan, the former Chair of Sentra HKI of Diponegoro University
(Semarang,Indonesia, 5 March 2009); interview with Theresia Anita, the Chair of Sentra HKI of Atma
Jaya Yogyakarta University (Yogyakarta, 6 March 2009).
93
For further discussion on this program, see below 44–9.
94
Dicky R Munaf, Sosialisasi Hak Kekayaan Intelektual [Dissemination of Intellectual Property
Rights] (2001) <http://www.ristek.go.id/?module=News%20News&id=569>.
207
compensate such SMEs if the patents failed to work in the scaling-up process from
laboratory to industry. 95 All of these IP-related programs ran between 2000 and
2005. In 2005, following the appointment of a new Minister of Research and
Technology and criticism that such programs were ineffective, 96 SMoRT stopped all
programs related to IPRs. When the present cabinet was formed in 2009, the ministry
revived an incentive program for IPRs in2010. 97
5.3.5. Directorate General of Intellectual Property Rights (DGIPR)
The DGIPR is a government agency under the Ministry of Law and Human Rights.
The main duty of this government agency is to formulate and implement policy and
technical standardisation in the field of IPRs. 98 To perform its obligations, the
DGIPR has the roles of preparing ministry policies; implementing these policies;
formulating standards, norms, guidance, criteria and procedures in all areas of IP
law, cooperation and development, and information technology. 99 To accomplish
this, the DGIPR is assisted by a secretariat and five directorates:
Copyrights,
Industrial Designs, Layout Design of Integrated Circuit and Trade Secrets; Patents;
Marks; and Cooperation and Development and Information Technology. 100
As the government agency with the main responsibility for managing the
implementation of IP laws in Indonesia, the DGIPR has strong links with SME
95
Ibid.
Interview with ST, Head of IP Unit in the SMoRT (Jakarta, 31 May 2010).
97
Ibid.
98
Peraturan Menteri Hukum dan Hak Asasi Manusia No M.03-PR.07.10 Tahun 2005 Tentang
Organisasi dan Tata Kerja Kementerian Hukum dan Hak Asasi Manusia Republik Indonesia
[Minister of Law and Human Rights Regulation No M.03-PR.07.10 Year 2005 on Organization and
Job Description of Ministry of Law and Human Rights of Republic of Indonesia] (Indonesia) art 666.
99
Ibid art 667.
100
Ibid art 668.
96
208
issues, especially because the DGIPR is the partner for all government agencies that
have programs related to SMEs and IP issues. So far, the DGIPR has signed MoUs
with two government agencies which manage SME issues, the SMoCSMEs 101 and
MoI, 102 to cooperate in upgrading the understanding and utilisation of the IPR system
for the industrial sector, cooperatives and SMEs. Most of the joint programs are
related to IP awareness campaigns in which the role of the DGIPR is to provide
SMEs with IP knowledge and information regarding the function of IPRs and the
procedures for registering IPRs.
The DGIPR rarely runs its own specific programs for SMEs in Indonesia in addition
to the joint programs listed above. The DGIPR does not have a specific unit to deal
with SME and IPR issues. Programs intended for SMEs become a secondary
responsibility for officers of the DGIPR from the Sub-Directorate of National
Cooperation under the Directorate of Cooperation and Development. 103
5.3.6. Agencies at the Regional Level: the Trade and Industry Agency (AoTI)
and the Agency for Cooperatives and SMEs (AoCSME)
The AoTI and the AoCSME are two of the regional government agencies which are
responsible to the head of regional governments. In the past, the AoTI and the
101
Nota Kesepakatan No M-09-UM.06.07.TH.2006 06/NK/M.KUKM/IV/2006 Antara Direktorat
Jenderal Hak Kekayaan Intelektual dengan Kementerian Negara Koperasi dan UKM [MoU No M09-UM.06.07.TH.2006 06/NK/M.KUKM/IV/2006 Between the DGIPR and the SMoCSMEs]
(Indonesia), which was valid from 12 July 2006 to 12 July 2010.
102
Nota Kesepakatan No M-09-UM.06.07 TH.2006 601/M-IND/7/2006 Antara Direktorat Jenderal
Hak Kekayaan Intelektual dan Kementerian Industri [MoU No M-09-UM.06.07.TH.2006 601/MIND/7/2006 Between the DGIPR and Ministry of Industry] (Indonesia) which was valid from from 11
July 2006 to 11 July 2010.
103
Interview with SY, a DGIPR officer who managed programs intended for SMEs in the directorate
(Jakarta, 21 February 2009) (on file with author).
209
AoCSME were the regional offices of SMoCSMEs, MoI and MoT; in 1999, the
decentralisation policy was applied in Indonesia 104 and the central government
relinquished some of its responsibilities to the regional governments. Two of these
were the cooperatives and SMEs, and trade and industry affairs. 105 Since then, each
regional government, including provinces, regencies and municipalities, has
established such agencies.
The duties of the AoTI and the AoCSMEs are similar to their previous duties as
regional offices of the SMoCSMEs, MoI and MoT. Generally, the AoTI has the
function of developing trade and industry potential at the provincial, district and city
levels. In most situations, SMEs dominate the trade and industry sectors at the
regional level. Meanwhile, the AoCSMEs is focused on helping cooperatives and
SMEs at the regional level to develop. Since SMEs are considered to hold potential
for IPRs, the AoCSMEs and the AoTI also have the goal of promoting the integration
of IPRs in SME business strategies. In attaining this goal, the AoTI and AoCSMEs
run IPR programs aimed at SMEs, such as IP awareness campaigns and the provision
of administrative assistance for IP registration of selected SMEs’ products.
Sometimes, the AoTI and AoCSMEs have their own budget, though limited, to
finance the cost of IP registration for selected SME products. Thus, most of the
programs related to IPR and SMEs at regional level are initiated by these two
agencies. In running the programs however, these two agencies cooperate with the
104
The decentralisation system was legalised in Indonesia by Law No 22/ 1999 on Regional
Governance which then was superseded by Law No 32 of 2004 on Regional Governance.
105
See below Chapter 5 (section 5.5.)..
210
government agencies at the central level that also have responsibility for SMEs, such
as the SMoCSMEs and MoI. 106
5.4.
Programs related to IPRs for SMEs in Indonesia
This section discusses IPRs programs that have SMEs as their target in Indonesia.
Programs discussed here are not only initiated by the government of Indonesia, but
also instigated by foreign donor agencies. Such discussion is needed to understand
initiatives that have been undertaken to integrate IPRs into SMEs activities in
Indonesia.
5.4.1. Foreign and Domestic Agency Initiatives
When the TRIPS Agreement was first implemented, there were various IP-related
programs created by government agencies with the assistance of foreign countries.
Australia, Japan and the European Union (EU) were all concerned about IP issues in
Indonesia and provided assistance programs. The Australia Agency for International
Development (AUSAID) through the Indonesia-Australia Specialised Training
Project (IASTP) Phase II 107 provided training programs for university lecturers in
106
Interview with Sh, a staff member of the Dinas Perindustrian (the regional agency of Industry) of
the Central Java Province (Semarang, 5 March 2009).
107
The program has been running since 1995; however, the IP program became the core of a project in
the IASTP Phase II which occurred between 1998–2003. In 2008, IASTP Phase III again organised
training programs dedicated to IP issues. See Direktorat Jenderal Hak Kekayaan Intelektual Kementerian Hukum dan Hak Asasi Manusia [Directorate General of Intellectual Property Rights Ministry of Law and Human Rights of Republic of Indonesia], Pelatihan Hak Kekayaan Intelektual
(HKI) Dalam Rangka Indonesia Australia Specialized Training Project (IASTP) Phase III [Training
on IPR in the Framework of Indonesia Australia Specialized Training Project (IASTP) Phase III]
(2010) <http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=25&id=1936&type=0>.
211
Indonesia to increase their understanding of IP issues and TRIPS. 108 Japan also
created several capacity-building programs to assist the implementation of the TRIPS
Agreement in Indonesia through the Japan International Cooperation Agency (JICA)
in 2001–2003. 109 In 1993, the EU established an IP project under the framework of
the European Commission-Association of Southeast Asian Nations (ASEAN)
Intellectual Property Cooperation Programme (ECAP) I (1993–1997) in the ASEAN
countries, including Indonesia.
110
This was succeeded by ECAP II (2000–2007) 111
and III (2010 onwards). 112 ECAP activities focus on improving IP administration and
enforcement, making IP laws in ASEAN countries comply with minimum standards
of protection in TRIPS, and raising awareness of the importance of IP in the
region. 113
Besides programs instigated by foreign agencies, as discussed in the section 5.4,
there are some programs initiated and run by government agencies. Among such IP
programs, only few are specifically designed for SMEs. The type of IP-related
programs for SMEs that are run by these government agencies are IP-awareness
programs through seminars, discussions and consultations. In addition, these
government agencies sometimes provide budget assistance to finance IP registration
108
Ibid.
Japan International Cooperation Agency (JICA), Box A1-1: WIPO Capacity Building Program for
Implementing WTO Agreements (2006)
<http://gwweb.jica.go.jp/km/FSubject1101.nsf/3b8a2d403517ae4549256f2d002e1dcc/64650140151f4
37e49256f42000824db?OpenDocument>.
110
ECAP I focused on helping ASEAN countries to strengthen their system regulating industrial
property rights (patent and trademarks). It was started in 1993 and ended in 1997. The ECAP II
Programme (2000) <http://www.ecap-project.org/archive/ecapii_prog.html> .
111
The focus of ECAP II embraced all types of IPRs with the emphasis on the enforcement in ASEAN
countries. The project began in 2000 and ended at the end of 2007. Ibid.
112
ECAP III which focused on assisting ASEAN countries to provide protection of intellectual
property rights (ECAP III) was started on 1 January 2010. A welcome by Stephane Passeri, ECAP III
Director, PMU Manager (2010) <http://www.ecap-project.org/ecap3.html>.
113
ECAP II (2007) European Patent Office <http://www.epo.org/about-us/office/internationalrelations/projects/ecap.html>.
109
212
of SME products or services. In 2006, for example, the SMoCSMEs provided free
trademark registration for 200 products of SMEs in 10 provinces, 114 and, in 2007,
free industrial design registration for 100 products of SMEs in 5 provinces 115. These
programs were the initiative of central and regional government agencies, and
sometimes both government agencies collaborated to run such programs. These
programs have not been conducted as a national program; they are sporadic, not well
designed and not implemented on the national scale. Moreover, these programs also
depend mainly on the annual budget of these government agencies provided by the
Finance Ministry. If the annual budgets of these government agencies are cut, the
running of these programs has a low priority that year. 116
5.4.2.
Incentives for the Sentra HKI program
In sub-section 5.3.4., as was already stated, SMoRT took the initiative in 2000 of
establishing the Sentra HKI in the government research and development agencies
and public universities. Later, this initiative was imitated by many non-government
institutions, such as private universities and research institutions. The initiative was
only formalised two years later, however, when Article 13(3) of Law No 18 of 2002
on National System of Research, Development and Implementation of Technology
and Science required that every university and research and development (R&D)
institution establish a Sentra HKI. According to the elucidation of that article, a
114
'UMKM Berebut Daftarkan Merek (Micro and SMEs Race to Register Trademark) ', Banjarmasin
Post (Banjarmasin), 6 November 2006 <http://www.lipi.go.id/>.
115
Kementerian Koperasi dan Usaha Kecil Menengah, Revitalisasi Kopearsi dan UKM, above n 37,
69.
116
Interview with SY, the person in charge of IPR programs intended to SMEs in the DGIPR (Jakarta,
21 February 2009).
213
Sentra HKI is a working unit that has the function not only to manage and utilise IP
assets, but also to be an information and service centre for IPRs.
These Sentra HKIs were located mostly in universities and R&D institutions, though
a few of them were established in government institutions across Indonesia. Initially,
the aim of the Sentra HKI is look for any IP potential in research centres, to assist
inventors with patent applications and to market the patented invention to industry. 117
Later, however, the Sentra HKIs, particularly those located in universities, 118 also
began serving members of the community in the local area who need assistance in
regard to IP matters. 119 Such assistance can take the form of the dissemination of IP
knowledge through training, seminars or workshops, free consultation on IP matters
or help with IP registration. Meanwhile, the Sentra HKIs in government agencies
provide assistance to members of the public who need IP protection in the areas of an
agency’s main duties. 120 For instance, the Sentra HKI in MoI has programs focused
on assisting industry owners in dealing with IP issues.
117
Antons, ‘Technology Transfer in Indonesia’, above n 91, 227-–34.
The service provided by the Sentra HKI in universities to communities beyond their campuses is an
activity which reflects the third duty of the Tri Dharma Perguruan Tinggi. The Tri Dharma
Perguruan Tinggi are the three duties of higher education institutions in Indonesia. The first duty is to
teach and the second is to conduct research. The third duty is to serve the community in their capacity
as the source of knowledge and information. See Article 20(2) of Undang-Undang No 20 Tahun 2003
tentang Sistem Pendidikan Nasional [Law No 20 of 2003 on National Education System] (Indonesia).
119
Interview with LT, the former Chair of Sentra HKI of Diponegoro University (Semarang,
Indonesia, 5 March 2009); interview with TA, the Chair of Sentra HKI of Atma Jaya Yogyakarta
University (Yogyakarta, 6 March 2009).
120
Ansori Sinungan, Perlindungan Desain Industri: Tantangan dan Hambatan Dalam Praktiknya di
Indonesia [Protection of Industrial Design: Practical Challenge and Impediment in Indonesia] (PhD
Thesis, University of Indonesia, 2009) Ansori Sinungan, Perlindungan Desain Industri: Tantangan
dan Hambatan Dalam Praktiknya di Indonesia [Protection of Industrial Design: Practical Challenge
and Impediment in Indonesia] (PhD Thesis, University of Indonesia, 2009) 223.
118
214
Although the establishment of Sentra HKIs is intended not merely for SMEs, in
practice, SME owners become frequent clients of Sentra HKIs located in universities,
R&D institutions and government agencies. For SMEs, the Sentra HKI has an
important role since most of them are not aware of IP issues, although their
businesses need IP protection. Moreover, since the Sentra HKI has many contacts
with SME owners in the area, it becomes the partner of government agencies at the
central or local level that have IP programs for SMEs in their area. 121
Realising the importance of the Sentra HKI, SMoRT once had a program, known as
the Incentives for Sentra HKI program that supported the development of the Sentra
HKI. The program, which ran between 2000 and 2005, provided incentives to
establish or to enhance the existing Sentra HKI. 122 A year after the program was
launched, on 10 August 2001, the SMoRT also initiated the establishment of the
Association of Sentra HKI (ASPEKI). Its role is to coordinate Sentra HKIs all over
Indonesia.
After the incentives program ended in 2005, the growth and performance of Sentra
HKIs declined due to budget constraints. 123 They have to finance the activities using
the limited budget provided by their own institutions. 124 Initially, there were only 28
121
Interview with LT, the former chair of Sentra HKI of Diponegoro University (Semarang, 5 March
2009).(on file with author) ; Interview with TA, the Chair of Sentra HKI of Atma Jaya Yogyakarta
University (Yogyakarta, 6 March 2009).
122
Kementerian Negara Riset dan Teknologi [State Ministry of Research and Technology], Program
HKI Kementerian Ristek 2001 [IP Programs of Ministry of Research and Technology 2001] (2001)
<http://www.ristek.go.id/?module=News%20News&id=318>.
123
Christoph Antons, 'Indonesia' in Paul Goldstein and Joseph Straus (eds), Intellectual Property in
Asia: Law, Economics, History and Politics (Springer, 2009) 87, 126.
124
Valerie Selvie Sinaga, 'University Intellectual Property in Indonesia: A Case Study of Three StateOwned Legal Universities' (2007) 19(3) Mimbar Hukum 399.
215
Sentra HKI units benefiting from the program; however, the number expanded to 89
units in 2005. 125 In 2010, the total number of Sentra HKIs in Indonesia is
approximately 121 units 126 and of that number, over 100 units joined ASPEKI in
2007. 127 A survey conducted by BPPT in 2008, however, found that of that number
only 10 Sentra HKIs are still active in reality. 128 Most of the remaining Sentra HKIs
are only units with no or few IP-related activities.
Moreover, since its inception, only a few Sentra HKIs or similar IP units have lived
up to the ideal. Sentra HKIs are meant to have the holistic function of assessing the
potential for IP in the outcomes of research, to provide free information and
consultation regarding IP issues, to assist in obtaining IP registration and to
commercialise innovation resulting from the research activities of its main
institution. 129 Only a few Sentra HKIs or similar IP units, however, have carried out
these functions. 130 Most Sentra HKIs do not perform their marketing function
properly. 131 Not many of them have successfully commercialised the IP assets of
125
Universitas Negeri Jakarta, 'Panduan Program Inotek [Guideline for Inotek Program]' (2004) 2.
Suwantin Oemar, 'Aspeki akan Tawarkan Paten ke Industri Pangan (Aspeki Offers Patent to Food
Industry)', Bisnis Indonesia (Jakarta), 12 January 2010 <http://bataviase.co.id/detailberita10503540.html>.
127
Sinungan, above n 120, 223.
128
Interview with AP, Assistant Deputy of IP and Standardization of Research and Technology - the
SMoRT (Jakarta, 31 May 2010); interview with ST, Head of IP Unit of the SMoRT (Jakarta, 31 May
2010).
129
These ideal functions of Sentra HKI are reflected in the Elucidation of Article 13(3) of UndangUndang No 18 Tahun 2002 tentang Sistem Nasional Penelitian, Pengembangan dan Penerapan Ilmu
Pengetahuan dan Teknologi [Law No 18 of 2002 on the National System for Research, Development
and the Application of Science and Technology] (Indonesia)
130
A study conducted in 2008 found that IP offices in the Institut Teknologi Bandung dan Institut
Pertanian Bogor are among the few Sentra HKIs that perform all functions of an ideal Sentra HKI.
Sinaga, above n 124.
131
Sabartua Tampubolon, Sentra HKI dan Peningkatan Inovasi (Sentra HKI and Innovation Growth)
(2008) <http://www.ristek.go.id/?module=News%20News&id=3213>.
126
216
their institution or created a synergy between their research institution and
business. 132
Lack of support from their main institution is perceived as one of the causes of
Sentra HKIs failing to function effectively in Indonesia. Without sufficient human
resources, financial and infrastructure support from the main institution, 133 Sentra
HKIs cannot perform their functions well. In addition, there is no national directive
regarding the position of Sentra HKIs in the structure of an organisation. For
example, in some universities, the Sentra HKI is located under the Research and
Community Service Institute; however, there are also many universities which locate
the centre under a faculty. 134 In government agencies, the Sentra HKI is placed as a
non-structured unit under the legal bureau or attached to another existing structural
unit. 135
The limited support provided by government and the uncertain position of a Sentra
HKI in its main institution could be seen as evidence that its existence was not
considered important. This is paradoxical as the government official rhetoric
highlights the significance of IPRs in enhancing creativity and innovation with the
goal of creating a strong trade environment in order to improve the Indonesian
economy. 136 Certainly, given their position as players in the Indonesian economy but
132
Interview with AP, Assistant Deputy of IP and Standardization of Research and Technology - the
SMoRT, and ST, Head of IP Unit of the SMoRT (Jakarta, 31 May 2010) (on file with author).
133
Ibid.
134
IP Centre in University of Indonesia is one example of Sentra HKI which place under a faculty.
Sinaga, above n 124, 408.
135
Tampubolon, above n 131.
136
Direktorat Jenderal Kerjasama Perdagangan Internasional - Kementerian Perdagangan [Directorate
General of International Trade Cooperation - Ministry of Trade], Bagan Organisasi Direktorat
217
with their limited resources, SMEs require strong government commitment to help
them in dealing with and getting the benefits of IPRs. Therefore, it is important that
the government provide more support to the Sentra HKIs or similar initiatives that
assist SMEs in these matters.
In mid-2010, SMoRT brought back the incentive program that had ceased in 2005. It
is now considered that the previous incentive program was useful for encouraging
the establishment and maintenance of the operations of Sentra HKIs in Indonesia.
The new program operates the same scheme as the previous one, providing two
incentives for the establishment 137 and registration 138 of IPRs. 139
Although the new incentive program is a good initiative and useful for giving greater
opportunity for SMEs to protect their IPRs, this program seems too limited to serve
the needs of SMEs, which are located all over the country. The number of incentives
and the amount of money provided each year are not commensurate with the number
of SMEs in Indonesia. Again, the commitment of the Indonesian government to
make IPRs a central issue for encouraging industry and the economy of Indonesia is
questionable.
Jenderal Kerjasama Perdagangan Internasional Departemen Perdagangan [Organization Structure
of Directorate General of International Trade Cooperation - Department of Trade] (2007) Directorate
General of International Trade Cooperation - Department of Trade
<http://ditjenkpi.depdag.go.id/index.php?module=news_detail&news_category_id=3&news_sub_cate
gory_id=17&&load_file=dk_multilateral_02.htm>.
137
For the Sentra HKI establishment program, there are five incentives of IDR 100 million (USD
11,716) each, to be allocated on a competitive basis in 2010. SMoRT plans to allocate 15 incentives in
this category over the coming years.
138
For registration scheme, incentive in this category is IDR 10 million (USD 1171) for each selected
Sentra HKI each year. In 2010, the SMoRT will select only 15 Sentra HKIs, but over the coming
years, the number of Sentra HKIs selected to receive the incentive will be doubled.
139
Interview with ST, Head of IP Unit in the SMoRT (Jakarta, 31 May 2010) (on file with author) .
218
5.5. Decentralisation Policy as a Challenge to the Implementation of IP
Programs for SMEs in Indonesia
Since the decentralisation policy was implemented in 1999, the policy has affected
the quality of public services in Indonesia. A 2005 survey conducted by the World
Bank on the experience of some East Asian countries in implementing a
decentralisation policy shows that, in Indonesia, over one third of firms that
participated in the survey maintained ‘informal’ corrupt payments had grown under
decentralisation, while less than 15 per cent reported improvements. 140 In addition,
these Indonesian firms also pay 64 per cent more in informal payments to regional
than national officers on average and spend 15 per cent more of their time dealing
with regional regulations than with national ones. 141
As part of the whole administration system in Indonesia, the implementation of IP
system at regional level is certainly affected by decentralisation policy. Similarly to
the issue of inefficient public services and corruption discussed in the Chapter 4
(sub-section 4.6), relevant government officers who were interviewed during
fieldwork reported some problems because of this policy. For instance, they
mentioned poor coordination between central and local governments that prevent the
effective implementation of IP programs for SMEs at regional level. For that reason,
this issue is important and will be discussed in this section.
140
Jose Edgardo Campos and Joel S Hellman, 'Governance Gone Local: Does Decentralization
Improve Accountability?' (World Bank, 2005)
<http://siteresources.worldbank.org/INTEAPDECEN/Resources/dc-full-report.pdf>.
141
Ibid 244.
219
The relationship between central and regional government has been a key issue since
the early stages of Indonesian independence. As an important issue, it was included
in Article 18 of the original 1945 Constitution which maintained the division of the
area of Indonesia into large and small territories, together with its administrative
structure, declaring that this shall be prescribed by statute and with consideration to
the principles of deliberation in the government system and the traditional rights
which are recognised to have a special character. The Article goes on to explain that
the territories of Indonesia shall be divided into provinces and smaller regions 142
which do not have the character of ‘states’ like the central state, Indonesia. 143 It
confirmed the statement of Article 1 of the 1945 Constitution about the form of
Indonesia as a unitary republic and not a federal state.
Throughout the history of Indonesia as an independent state, there have been several
legislative Acts dealing with the relationship between the central and regional
governments. These have varied, depending on the political conditions when they
were enacted; however, all decentralisation legislation prior to 1999 has nevertheless
reinforced strong central government authority to curb regional powers. For example,
there is a triple supervision system, that is, general, 144 preventive, 145 and repressive, 146
142
Undang-Undang Dasar 1945 [Constitution of 1945] (Indonesia) art 18(1).
Ibid.
144
General supervision is the central government control over all aspects of regional government
activities: Undang-Undang No 5 Tahun 1974 tentang Pemerintah Daerah [Law No 5 of 1974 on
Regional Government] (Indonesia) art 71.
145
Preventive supervision requires legal products of regional governments to be authorised by
relevant officials. The Minister of Internal Affairs is the authorised official for first level region
(province) legal products, while a governor’s authorisation is required for second level region
(district/city) products. See Undang-Undang No 5 Tahun 1974 tentang Pemerintah Daerah [Law No
5 of 1974 on Regional Government] (Indonesia) arts 68, 69.
146
Repressive supervision allows the authorised officers to suspend or nullify regional regulations or
decisions of the head of regions which are contradictory to the public interest, laws or regional
143
220
employed by Law No 5 of 1974 on regional government which weakened regional
capability, and the financial sharing system which it established made the regional
government dependent on the central government. 147 Moreover, together with Law
No 5 of 1979 on village government 148, Law No 5 of 1974 provided a comprehensive
system of regional government which extended control of the central government to
the village level.
With the emergence of the reform period in 1998 came a demand to give more
authority to regional governments. Legislation on regional government was among
the first batch of laws that were amended during the Reform Period. In 1999, Law
No 22 on regional government 149 and Law No 25 on balancing finances between the
central and regional government 150, which supplanted it, were passed. They each in
turn abolished previous legislation. 151 These laws established a system of broad
regional autonomy which was different from the system recognised in the previous
legislation. For example, instead of dividing the regions hierarchically into first and
second levels, 152 the new law introduced two kinds of regions, province and
regulation of higher level. The authorised officers here may be the governor, head of region, or
minister of internal affairs: Undang-Undang No 5 Tahun 1974 tentang Pemerintah Daerah [Law No 5
of 1974 on Regional Government] (Indonesia) art 70(1)-–(2).
147
Bagir Manan, Menyongsong Fajar Otonomi Daerah [Welcoming the Dawn of Regional Autonomy]
(Fakultas Hukum UII 2001) 29.
148
Undang-Undang No 5 Tahun 1979 tentang Pemerintahan Desa [Law No 5 of 1979 on Village
Government] (Indonesia).
149
Undang-Undang No 22 Tahun 1999 tentang Pemerintahan Daerah [Law No 22 of 1999 on
Regional Government] (Indonesia).
150
Undang-Undang No 25 Tahun 1999 tentang Perimbangan Keuangan antara Pemerintah Pusat
dan Daerah [Law No 25 of 1999 on the Fiscal Balance between the Central and Regional
Government] (Indonesia).
151
Undang-Undang No 5 Tahun 1974 tentang Pemerintah Daerah [Law No 5 of 1974 on Regional
Government] (Indonesia); Undang-Undang No 5 Tahun 1979 tentang Pemerintahan Desa [Law No 5
of 1979 on Village Government] (Indonesia).
152
Undang-Undang No 5 Tahun 1974 tentang Pemerintah Daerah [Law No 5 of 1974 on Regional
Government] (Indonesia) arts 3, 72 , and the General Elucidation of this law/
221
district/city, both having equal autonomy153 In addition, the supervision system was
changed so that it did not employ general or preventive supervision, but preserved
only repressive supervision. 154
In light of the distribution of power, Article 7 of Law No 22 of 1999 clearly
determined that the authority of regional governments embraces all areas of
administration except foreign affairs, defence and security, courts, monetary and
fiscal policy, and religious fields, all of which are elements of the policy regarding
the national development plan. 155 In another article, 156 the law specifically designated
11 areas of responsibility to be delegated to the districts and cities. These included:
public works, health, education and culture, agriculture, transportation, industry and
trade, capital investment, environment, land affairs, cooperatives, and manpower,
When the current regional government legislation enacted in 2004 157 the mandatory
functions of regional governments were revised and expanded into sixteen
competencies, among which is that of developing cooperatives and SMEs in their
jurisdictions. 158
Although Indonesia already passed new decentralisation legislation that attempts to
improve upon the previous law, in practice, the implementation of decentralisation in
Indonesia is still considered ineffective. In a 2006 report prepared by the United
153
Undang-Undang No 22 Tahun 1999 tentang Pemerintahan Daerah [Law No 22 of 1999 on
Regional Government] (Indonesia) arts 2(1), 4(2).
154
Ibid art 114(1).
155
Amzulian Rifai, 'Regional Autonomy: The Implications for the Legal Systems' in Minako Sakai
(ed), Beyond Jakarta: Regional Autonomy and Local Societies in Indonesia (Crawford House, 2002)
15, 31.
156
Undang-Undang No 22 Tahun 1999 tentang Pemerintahan Daerah [Law No 22 of 1999 on
Regional Government] (Indonesia) art 11.
157
Undang-Undang No 32 Tahun 2004 tentang Pemerintah Daerah [Law No 32 of 2004 on Regional
Government] (Indonesia)
158
See, ibid arts 13, 14.
222
States Agency for International Development (USAID), the implementation of Law
No 32 of 2004 on regional government was assessed to be weak in terms of its legal
frameworks, thus causing a lack of harmonisation among legal instruments,
particularly regarding decentralisation, sectoral laws and village regulations.159
Another relevant issue that is highlighted in the USAID report is a lack of
coordination among relevant government agencies at both central and regional levels
in the implementation of the national plan and ‘insufficient consultation with
stakeholders and experts’. 160 This report, further suggests that a better functioning
institutional mechanism is needed to promote coordination among relevant agencies
in the development of the decentralised administration system. 161
Lack of coordination among relevant government agencies has been infamous in
Indonesia. Each government agency in Indonesia apparently performs its own
programs which often overlap with other agency programs. This issue was
complicated by Law No 32 of 2004 162 and Law No 33 of 2004, 163 which implement a
‘de-concentration’ policy. This policy requires the central government to transfer
some of its authority to the governor as representative of the central government
and/or to a local agency in the region. If coordination among government agencies at
the same level is difficult, then it is obvious that coordination among agencies at
different levels would be even more difficult to realise.
159
USAID Democratic Research Support Program (DRSP), 'Decentralization 2006, Stock Taking on
Indonesia's Recent Decentralization Reforms - Summary of Findings ' (United States Agency for
International Development, 2006) <http://pdf.usaid.gov/pdf_docs/PNADH311.pdf> 3.
160
Ibid.
161
Ibid 7.
162
Undang-Undang No 32 Tahun 2004 tentang Pemerintah Daerah [Law No 32 of 2004 on Regional
Government] (Indonesia) art 20(2).
163
Undang-Undang No 33 Tahun 2004 tentang Perimbangan Keuangan antara Pemerintah Pusat
dan Daerah [Law No 33 of 2004 on Fiscal Balance between the Central and Regional Governments]
(Indonesia) arts 89–93.
223
Moreover, the de-concentration policy is also related to the implementation of Law
No 39 of 2008 on the state ministry, which provides that certain ministry offices
must not have branches in regional areas. All government agencies, except for the
DGIPR, 164 which deal with IP and SMEs issues discussed in the section 5.4., do not
have branches at regional level. 165 Therefore, according to de-concentration policy,
their functions will be performed by similar agencies that are under the control of the
regional government. This means that such government agencies at the central level
do not have the authority to implement its macro-policy at the regional level. Such
government agencies are required to cooperate with the regional government, both at
the provincial and the regency/city level, if they want their policies or programs to be
implemented at the regional level. Apart from causing longer bureaucracy
procedures, it also makes the implementation of a policy unsustainable because
control over it is in the hands of different level agencies. 166 On the positive side, this
policy grants freedom for regional governments to undertake initiatives in the form
of policy or programs which can be applied in its regional jurisdiction. Sometimes,
however, the competency of regional government officers in understanding and
managing an issue is not as good as that of central government officers and this
makes it difficult for them to undertake such initiatives. 167
164
DGIPR is under the Ministry of Law and Human Rights which has branches at regional level. See
Undang-Undang No 39 Tahun 2008 tentang Kementerian Negara [Law No 39 of 2008 on State
Ministries] (Indonesia) art 9(3).
165
Ibid arts 5(2)(3), 9(2)(4).
166
Interview with Un, the Head of the IPRs Consultation Clinic-MoI (Jakarta, 12 March 2009) (on file
with author).
167
Ibid.
224
From the perspective of agencies managing IPRs programs for SMEs at the central
level, the lack of coordination between central and regional governments has
negative effects on the effectiveness of such programs. On the other side, people who
become the target of programs, in this case Indonesian SMEs, often experience a
double burden of bureaucracy, both at the central and regional levels. This burden
would keep Indonesian SMEs away from utilising the IPRs programs intended for
them.
5.6. Conclusion
SMEs play a significant role in the economy of Indonesia. Given their large numbers,
SMEs make a big contribution to the Indonesian GDP and act as the provider of a
very great share of employment opportunities in Indonesia. Although only SMEs
with certain qualities were able to survive during the economic crisis that began in
1997, the flexibility of SMEs during the crisis period was better than that of LEs.
The role of SMEs has been well-recognised in Indonesia since 1960s. There are five
government agencies, SMoCSMEs, MoT, MoI, SMoRT and DGIPR at national
level, and AoTI and AoCSMEs at regional level, which are concerned with SME
issues. Of these agencies, only some have programs to assist SMEs dealing with
IPRs. In running such programs, these government agencies work with DGIPR. Most
of the programs are intended to make SMEs understand the benefits of IPRs for their
businesses through seminars, discussions and consultations. In addition, there are
also programs which provide administrative and financial assistance for SMEs to
225
register their IPRs. However, compared to other programs for SMEs, particularly
financial assistance programs, attention given by the relevant government agencies to
IP programs is insufficient. Such programs are given a low priority in terms of
budget, poorly designed, and are not implemented on a national scale.
Decentralisation policy, which has been implemented in Indonesia since 1999, has
also had an impact on the effectiveness of IP programs for SMEs. In 2004, Law No
32 of 2004 on Regional Government has transferred the power to manage SME
issues from central to regional governments. Implementation of decentralisation
policy under the law has been assessed weak. It causes widespread corruption at
regional level, double the bureaucracy burden as well poor coordination among
government agencies at central and regional level. All of these general problems of
the decentralisation policy also become a challenge for relevant government agencies
to implement IPRs programs for SMEs at regional level.
226
CHAPTER 6
THE BATIK INDUSTRY AND INTELLECTUAL PROPERTY
SYSTEM IN INDONESIA: THE CASE OF BATIK SMALL
AND MEDIUM ENTERPRISES IN PEKALONGAN AND
YOGYAKARTA
6.1.
Introduction
As noted in Chapter one, there are two industries in Indonesia that will be presented
as case studies. The first industry is batik, which is well-known as an icon of
Indonesian traditional textiles both nationally and internationally. Batik and issues
related to it have been subjects of study since as early as the nineteenth century. 1 The
studies on batik have been conducted mostly by non-Indonesians who have been
enchanted by the beauty of batik textile as a piece of artwork and fascinated by the
social development of its industry which frequently interacted with and reflected the
history of Indonesia as a state.
The integration of IPRs as a business strategy as the potential to benefits all sizes of
enterprises if such rights are managed properly. Batik entrepreneurs, mostly are from
SMEs category, need to protect their assets by using IPRs in order to enhance the
operation of their enterprises in Indonesia. The batik industry, which is mostly based
on traditional creative ideas, contains plenty of things that can be the subject matter
of copyright, industrial design, trademark, geographical indication, trade secrets and
traditional cultural expression protection. Although there are various IPRs that can
1
Sir Thomas Stanford Raffles was the first writer who wrote about Javanese batik in detail in 1817.
See Thomas Stanford Raffles, The History of Java (Oxford University Press, first published 1817,
1978 ed).
227
potentially benefit the batik industry, it seems that the IP system have many
requirements that are difficult for SMEs in that industry to fulfil.
Using data collected from various sources, both primary (laws and regulations) and
secondary (including books, journal articles, newspaper and magazine articles, theses
and various government and industry reports, hard copy and web-based resources),
national and international, this chapter analyses the benefits and challenges of
relevant IPRs for batik industry and its SMEs. In addition, the chapter — based on
the data collected from interviews conducted by the author — also examines the real
attitudes of SME owners in the batik industry to dealing with IPR issues.
Understanding SMEs’ attitudes towards IPR issues is important in order to get a
balanced perspective of the benefits and challenges of IPRs for SMEs in batik
industry both theoretically and in practice.
This chapter consists of two parts. The first part of this chapter will explain briefly
the nature of Indonesian batik. Then, it will also talk about the history of the batik
industry in Indonesia and the relationship between the batik industry and IPRs. The
discussion on the relationship between the batik industry and IPRs will include the
explanation of the types of IPRs that are relevant to the batik industry and present the
challenges for entrepreneurs working in this industry including IPRs as part of their
business strategies. The second part of this chapter will be based on interviews with
14 SME owners in the batik industry in 2009. This section begins with the
geography, demography, economy and administration profiles of Pekalongan and
Yogyakarta, and then presents the attitudes of 14 batik SME owners in Pekalongan
and Yogyakarta in regard to issues of IPRs administration in Indonesia.
228
6.2. A Glance at Indonesian Batik
Batik is traditionally created using a resist-dye technique, with wax used in making
certain designs on dyed or non-dyed fabrics that are then further dyed to create the
decorative patterns characteristic of the finished fabrics when the wax is removed.
Although such a technique is also known in other parts of the world, such as in
Africa, China, Japan and Turkestan, 2 batik is well-known as an icon of Indonesia in
the international forum. 3 There are three different types of batik made in Indonesia
today. The first type is batik tulis (hand-drawn batik) which is drawn by hand using a
canting, a small copper applicator tipped container with a wooden handle is used to
draw patterns and motifs on the fabric with wax.4 Batik tulis is the finest type of
batik which has a high aesthetic quality and is created using a long and complicated
process. Consequently, this type of batik is expensive.
There is also batik cap (stamped batik) which is made using a cap, a handheld copper
stamp to apply patterns and motifs with wax on the fabric. In terms of price, batik
cap is not as expensive as batik tulis; however, it is of inferior aesthetic quality. The
most recent type of batik is batik printing, which is actually a fabric printed with
batik patterns. Unlike two other types of batik, it does not use the traditional waxresist dyeing technique, rather it adopts the patterns of batik but uses modern fabric
2
Michael Hitchcock, Indonesian Textiles (British Museum Press, 1991) 83.
United Nations Educational, Scientific and Cultural Organization (UNESCO) announced its
recognition of the batik of Indonesia as one of the world’s intangible cultural heritages in 2009. 'Batik
Akhirnya Resmi Masuk Daftar Warisan UNESCO [Eventually Batik is Included Officially in the List
of UNESCO's world heritage]', Kompas (Jakarta), 1 October 2009
<http://nasional.kompas.com/read/2009/10/01/1949569/batik.akhirnya.resmi.masuk.daftar.warisan.un
esco>.
4
Nian S Djoemena, Ungkapan Sehelai Batik [Batik: Its Mystery and Meaning] (Margaret M Alibasah
trans, Djambatan, 1990) 1.
3
229
printing techniques. Although sometimes the layperson cannot see the difference, the
aesthetic quality, prestige and price of batik printing are certainly not as high as batik
tulis and cap.
On top of the method of production, Indonesian batik is also distinguished on the
basis of its regions of production. There are three main regions of batik production in
Indonesia, namely central Java, south-west Java, and the north coast of Java. 5 The
regions of Central Java include Yogyakarta and Surakarta, where the ‘court style’ of
batik cloth is produced. Both areas are well-known for their production of finest
batik cloth with classic motifs that are full of meaning, such as kawung 6 and semen,7
though they also make modern batik style cloth, which is much loved by foreigners.
The court style of batik is a style which is orderly, controlled and usually geometric. 8
Batik from Yogyakarta and Surakarta can also be distinguished from other batik by
the colour of batik which they produce. It is not easy for lay people to distinguish
between batik of Yogyakarta and Surakarta as they are strongly influenced by the
Javanese courts that have the same roots; however, they do have differences in
colour and the combination of motifs. Yogyakarta batik is dominated by the colours
of chocolate brown and dark blue against a white background, while Surakarta batik
mainly uses chocolate brown on a pale yellow background. 9 In terms of the
5
Hitchcock, above n 2, 92.
Kawung is an ancient motif of batik, which was in the past only used by the royalty of Yogyakarta
courts. There are many variations of kawung motif; however, the basic pattern is a group of four
circles or ovals that almost touch each other. See Ministry of Trade of Republic of Indonesia,
Yogyakarta Traditional Patterns (2009) <http://www.indonesiaatworldexpo.com/media/yogyakartatraditional-batik-patterns/>.
7
Semen is a pattern characterised by non-geometric motifs inspired by nature in the forms of flowers,
leaves, animals and mountains. This motif group is usually worn on special occasions. See ibid.
8
Inger McCabe Elliott, Batik: Fabled Cloth of Java (Clarkson Potter, 1984) 64.
9
Hitchcock, above n 2, 92.
6
230
combination of motifs, the batik of Surakarta tends to be characterised by small
geometric and non geometric shapes and patterns, while the batik of Yogyakarta
combines a number of different geometric shapes and large patterns. 10
Batik produced on the north coast of Java, which stretches from Anyer on the Straits
of Sunda to Banyuwangi on the eastern coast, 11 is known as pasisir (coastal) style. In
contrast with the batik of central Java, pasisir batiks are identified by their variety of
bright colours and unique motifs. Since there are numerous trading and fishing ports
in the north coast region, foreign influences on motifs are easily found in this
region’s batik textiles. The motifs of pasisir batik are mainly derived from Chinese
and Dutch cultures, with slight Javanese influence. 12 Pekalongan is the leading
production centre of pasisir batik textiles in Indonesia. However, they are also
produced in other areas, such as Lasem, Cirebon, and Tuban.
Batik textiles of southwest Java have combination of the characteristics of both the
court and pasisir styles. Although the motifs of central Javanese batik and the use of
blue and brown colour are also found in batik produced in south-west Java, they also
use bright colours and motifs of pasisir batik. In terms of colour, the batik of
southwest Java involves a greater variety of colours than the batik of central Java,
although they are not as colourful as pasisir batik. For instance, the batik of
Tasikmalaya (which are also produced in small factories in Garut and Ciamis) use a
variety of reds, greenish-blues and black. 13 Another city which produced south-west
batik, Banyumas, utilises a golden brown against a dark blue background on its
10
Djoemena, above n 4, 21.
Hitchcock, above n 2, 94.
12
Djoemena, above n 4, 59–67.
13
Hitchcock, above n 2, 92.
11
231
fabric. 14 In terms of motifs, as the region is on the border between the West and
Central Java provinces, batik produced in this region has been subject to and reflects
the many influences from the cultures of its surrounding areas. As a result, besides
motifs of central Javanese batik, motifs derived from nature (flora and fauna), and
Islamic (calligraphy), Chinese (phoenix and dragon) and Sunda (calung, a Sundanese
musical instrument) cultures 15 are to be found in the batik textiles from this region.
Beyond these three regions, there are other regions in Indonesia which also produce
batik. In Jakarta, batik started to be produced and traded by non-indigenous migrants
to Central Java, mostly Chinese and Arabs, in the late 19th century. 16 Batik produced
in Jakarta is normally batik cap and the production is not as high as in central,
southwest and north Java regions of Indonesia. Besides its colour which has a
similarity to the batik of Banyumas, 17 in terms of motifs, Jakarta batik does not have
specific characteristics like other regions. The motifs of batik produced in Jakarta
depend on where the workers of batik-making factories are from. For instance, if the
majority of workers are from Pekalongan, then the factory would produce batik with
Pekalongan motifs and so forth. Although the production of batik is not welldeveloped, batik trading activity is extremely active in this city. Almost all batik
produced in Indonesia are brought to and traded in Pasar Tanah Abang, a prime
textile and batik market in Jakarta, before they are re-distributed to markets in the
outer reaches of Java. 18
14
Ibid.
Djoemena, above n 4, 31–58.
16
Sularso et al, 60 Tahun Gabungan Koperasi Batik Indonesia [Sixty Years of Indonesia Batik
Cooperatives Association] (Gabungan Koperasi Batik Indonesia, 2009) 36.
17
Ibid.
18
Ibid.
15
232
Other areas that produce batik are Madura and Jambi. In these areas, batik textiles
are similar to the pasisir batik style, which is colourful and their motifs betray
exposure to foreign cultural influences. Strong colours are used (such as red, dark
red, dark blue, dark green, black and white, brown, blue black), while the influence
of India, Arab and Islamic cultures are strongly represented in the motifs of the
Madura and Jambi batik. 19 Interestingly, batik textiles of these two regions are not
mass-produced using cap (stamp) technique. 20 All of their batik productions are
hand-drawing batik (batik tulis). It is probably one reason why these two types of
batik are not widely known, except in their own regions.
Apart being representative of a characteristic regional identity, batik was the subject
in the 1950s of an initiative by the first President Soekarno to make it a part of the
national identity. Soekarno approached and encouraged a young promising batik
designer at that time, Hardjonagoro, to design ‘Batik Indonesia’, a batik that was
characterised by a blend of colours and motifs from different regions in Indonesia. 21
Hardjonagoro’s effort was successful, and Batik Indonesia was copied and marketed
enthusiastically by batik enterpreneurs. 22 However, Soekarno’s idea to make batik
characteristic of the national identity was never realised during his period of
ascendency as batik was still identical to, and strongly identified with, Javanese
culture, 23and people from other ethnic groups were reluctant to wear it. In the 1980s,
with the advent of television, batik was re-popularised through modern fashion
19
Djoemena, above n 4, 76–90.
Ibid.
21
Philip Kitley, 'Batik and Popular Culture' (1987) 43 (March) Prisma 8, 15.
22
Ibid.
23
Although most batik producers are located on the islands of Java and Madura, there is some small
production of batik in Jambi, a province located in the southern part of the island of Sumatra.
20
233
shows. 24 Since then, the attitude has changed. Regardless its region of origin, batik
has been developed as a part of the national identity. Currently, batik are popular in
Indonesia and produced not only in their classical form, as sarongs, but also utilised
in a large range of fabrics, such as fabrics for non-traditional clothing for men and
women (for example, shirts, frocks), and interior design textiles (for example,
upholstery, wall hangings, bedding), or the motifs may be used in paintings and so
on.
However, the popularity of batik reached its peak in Indonesia over the last few
years, when Malaysia, a neighbouring country that shares many cultural similarities
with Indonesia also claimed batik as its heritage. 25 In recent years, batik from various
regions in Indonesia, has been worn by employees of state-owned companies and
government institutions on every Friday of the week. 26 This practice is also carried
out by most private company employees and school students in Indonesia. One could
say that the dream of Soekarno to make batik part of the national identity has been
fulfilled when one looks at the popularity of batik among Indonesians today.
6.3. History of the Batik Industry in Indonesia
The origin of batik has been debated by scholars. Some scholars believe that it was
not originally from Java since the word batik is not known in the Old Javanese 27.
There is theory that batik was brought to Java from India through the textile trading
24
Kitley, above n 21, 16.
Peter Gelling, 'Score One for Indonesia In the War over Batik', New York Times (New York), 14
September 2009 <http://www.nytimes.com/2009/09/15/world/asia/15iht-batik.html?_r=1>.
26
'Get Rid of Malaysia's Claim! Happy Batik Day, Indonesia', Kompas (Jakarta), 2 October 2009
<http://english.kompas.com/read/2009/10/02/08344141/Get.Rid.of.Malaysias.Claim.Happy.Batik.Day
..Indonesia.>.
27
Hitchcock, above n 2, 83.
25
234
channels sometime in the 14th and 15th centuries; 28 although there is no surviving
Javanese batik textile from to support that theory; however, there is evidence of a far
earlier presence in the archipelago. Javanese stone sculptures which were crafted in
the 13th and 14th centuries that definitely show the influence of Indian ‘batik-style’
fabric patterns. 29 On the other hand, since there are also batik designs that are not
known in Indian culture, such as parang rusak and semen designs, some writers 30
argue that batik is native to Java. 31
Although its origins may remain somewhat obscure, there is one thing that is certain:
the Javanese batik industry started in Java, developed its specifically Javanese
character and then spread its influence out into other parts of Indonesia and then
overseas as well, taking with its specific techniques and patterns and continuing to
add to that repertoire of techniques and designs as time passed and cultures mingled.
The early history of batik in Java is not clear until the 17th century. The late
Hardjonagoro, a well-known Javanese batik expert, maintains that batik was not
prominent court dress in the Majapahit kingdom of the late 13th to early 16th
centuries. 32 The art of batik flourished and found its formal shape during the reign of
Sultan Agung Hanyokrokusumo of Mataram in the early 17th century. 33 At that time,
the type of batik produced was batik tulis which was expensive due to the long and
complicated process involved in its making, and its high aesthetic quality. Until the
28
Susan Arensberg, Javanese Batiks (Museum of Fine Arts, Boston, 1970-1983) 15.
Ibid.
30
This argument was presented in one book by Nursyiwan Tirtaadmidjaja. See N Tirtaadmidjaja,
Batik Pola & Tjorak Pattern & Motif (Djambatan, 1966).
31
Arensberg, above n 28, 15.
32
See Justine Boow, Symbol and Status in Javanese Batik (Asian Studies Centre, University of
Western Australia, 1988); Chor Lin Lee, Batik: Creating an Identity (National Museum of Singapore,
2nd ed, 2007) 18.
33
Lee, above n 32, 18.
29
235
late 19th century, batik tulis remained a luxury item that was worn exclusively by
men and women of the upper classes. 34
The transfer of control over the East Indies archipelago from the Dutch to British
administration in 1811 significantly affected the dissemination of the knowledge of
batik making to the Europeans. Thomas Stanford Raffles, a Lieutenant Governor of
Java who had deep interest in and understanding of Javanese arts and crafts wrote
detailed notes on the process of making of batik in his book, ‘The History of Java’. 35
With the knowledge from this book and samples of batik textiles collected by Raffles
during his period of service, English firms were able to make imitation batik textiles,
which were lower in quality and cheaper than the originals. 36 Imitations of batik
were also made by other European firms, which sold in Europe or were imported into
Java.
Local firms in Java could not compete with the low cost imitation batik imports until
the invention of cap (stamp) in the late 19th century. The cap (stamp) technique
significantly reduced the time spent to make batik, lowering the labour costs and
hence the price of domestically produced batik. The invention of cap can be said to
have marked the beginning of batik mass production in Indonesia. Because of it was
both lower priced and of a higher quality than the imported imitation batik from
Europe, batik cap became popular and was highly in demand in the Javanese local
markets. 37 To meet this demand, many batik factories were established, not only in
the court regions of Yogyakarta and Surakarta, but also in the northern coastal and
34
C Poensen, 'Iets over de kleeding der Javanen' (1887) XXI Tijdschrift voor Zendingswetenschap
'Mededeelingen' 1. As cited in Kitley, above n 21, 9.
35
Raffles, above n 1, 168–70
36
Kitley, above n 21, 11; Hitchcock, above n 2, 86.
37
Kitley, above 21, 12.
236
southwest regions of Java, such as Pekalongan and Banyumas. These areas are wellknown as the main batik producers in Indonesia today.
From the 19th century, the batik industry was no longer the monopoly of the
indigenous Javanese portion of the population. The Chinese and Arab communities
were involved in the batik making industry through their role as middlemen in the
trading of imported textiles (including the cambric used in the production of batik)
on the north coast and in Central Java. 38 In Semarang, a Eurasian woman established
and ran a batik factory as early as 1830. 39 This was followed by some Eurasian
women in Pekalongan, who also introduced and developed a new typically ‘Dutch’
batik style which used buketan (Dutch floral) designs. 40 In their hands, batik, which
here mainly took the form of a woman’s sarong, was not merely a trading
commodity, but also a piece of artwork, which was valued on account of its finest
quality and extraordinarily high price. 41 Moreover, to add an exclusive flavour, one
of these Eurasian women of Pekalongan, Eliza van Zuylen, became a pioneer in
identifying their products by putting a ‘signature label’ on their products. This
functioned essentially as a trademark.
The involvement of non-indigenous persons in the batik industry generated business
competition among racial groups, particularly between Javanese and Chinese
entrepreneurs, in Java. The Dutch treated the Chinese entrepreneurs favourably by
giving them control over the supplies of raw materials and finished goods which
38
Boow, above n 32, 39.
Kusnin Asa, Batik Pekalongan dalam Lintasan Sejarah [Batik Pekalongan on History] (M A
Syahrial and Fajar Idayawati trans, Paguyuban Pecinta Batik Pekalongan Dewan Koperasi Indonesia,
2006) 231.
40
Ibid 233.
41
Boow, above n 32, 38.
39
237
allowed them to dominate the whole industry in Java. 42 In the early 20th century,
indigenous entrepreneurs established traders associations to confront the domination
of industry by Chinese. 43 One of the traders associations was the Sarekat Dagang
Islam (SDI), which was established in 1905, and received support from many
Javanese Moslem batik merchants. Although SDI developed into quite influential
organisation which unified indigenous Moslem entrepreneurs in Java, it did not have
a substantial effect on the batik industry. This was because the Chinese and Arab
entrepreneurs controlled the greater volume of batik production, although the
indigenous batik entrepreneurs outnumbered them. 44
SDI may have had little success in taking over control of batik industry from nonindigenous entrepreneurs; however, it implanted for the first time the idea of
organised cooperatives as a method of opposing the monopoly of non-indigenous
middlemen in the batik industry. The idea of cooperatives continued to live long after
SDI was no longer existed. In the 1930s, there were several batik cooperatives
established in batik centres all over Java. 45 In Pekalongan, the first three batik
cooperatives there, namely the Pekajangan, Setono, and Wonopringgo cooperatives,
were established between 1937 and 1939. 46 In Yogyakarta, the first batik cooperative
there, Persatuan Pengusaha Batik Bumi Putera (PPBBP) was founded in June 1934
(and later renamed the Persatuan Perusahaan Batik Indonesia (PPBI) in 1937). 47
42
Kitley, above n 21, 12.
Boow, above 32, 40.
44
The report of De Kat Angelino stated that there were 4384 batik firms in Java and Madura in the
1930s. Of this number, 12 enterprises were owned by Europeans, 3515 belonged to indigenous
entrepreneurs, 727 by Arabs and 130 by Chinese. P De Kat Angelino, Batikrapport: Rapport
betreffende eene gehouden enquete naar de arbeitstoestanden in de batikkerijen op Java en Madoora
(Publicaties van het Kantoor van Arbeid 1st ed, 1930) as cited in Boow, above n 32, 40.
45
Boow, above n 32, 43; Sularso, above n 16, 53.
46
Sularso, above n 16, 53.
47
See ibi 50.
43
238
Entering the independence period, these batik cooperatives merged into a new union
of Indonesian batik cooperatives, named the Gabungan Koperasi Batik Indonesia
(GKBI) in 1948. 48 The cooperatives in Pekalongan and Yogykarta, mentioned above,
became the key players in the GKBI. In 1949, the PPBI founded NV Batik Trading
Company (BTC), a GKBI importing company which had licence to import cambrics
independently. 49 Three Pekalongan cooperatives also owned shares in BTC with
other GKBI members. 50
During the Old Order administration, indigenous entrepreneurs, including those in
the batik industry, received preferential treatment from the government. The period
between 1952 and 1964 is noted as the period of prosperity for the batik society in
Indonesia. Through GKBI, the government provided a subsidy to primary
cooperatives which became the members of GKBI. For example, in 1952, GKBI was
granted exclusive rights by the government to distribute cotton textiles (cambric) for
its members at a very much reduced price. 51 Although in theory, all Indonesian
citizens could be members of GKBI, in practice, the members of GKBI were mostly
indigenous Indonesians. If there were non-indigenous members, they received
different and discriminatory treatment, such as being allocated significantly smaller
portions of raw materials than indigenous members. 52
48
Ibid 56.
Ibid 57.
50
Boow, above n 32, 43.
51
Gustav F Papanek, 'The Pribumi Entrepreneurs of Bali and Central Java (or How Not to Help
Indigenous Enterprise)' (2006) 42(1) Bulletin of Indonesian Economic Studies 79, 82.
52
Ibid.
49
239
GKBI expanded its business activities by establishing two cambric factories in Java
in 1955 53 and 1960. 54 The expansion of GKBI had decreased the numbers of nonindigenous entrepreneurs who owned batik factories at that time. However, despite
all of these efforts, the control over the vast majority of raw materials remained in
the hands of Chinese merchants. 55 This control, combined with the greater access to
capital of such Chinese entrepreneurs, once again allowed them to dominate the
modern batik industry. 56 In the early 1970, in Solo, two Chinese entrepreneurs
established modern large scale batik production and distribution companies, that is,
Batik Keris and Batik Semar. 57
In the New Order era, batik cooperatives, which were protected and pampered during
the Old Order era, disintegrated. Although the New Order administration focused on
the improvement of Indonesia’s economy, small-scale industries and businesses did
not receive any real attention. The enactment of the 1967 Foreign Investment Law 58,
which allowed foreign capital to control import substitution manufacturing, led to the
establishment of large-scale production of they are very fine looking, and this
combined with their low price made batik printed products rapidly gain in popularity
on the domestic market. Soon, large-scale batik printing factories multiplied and
continued to grow in Java. The number and output of the many small batik making
53
Boow, above n 32, 43.
Sularso, above n 16, 59.
55
Boow, above n 32, 43; Matsuo Hirashi, The Development of Javanese Cotton Industry (The Institute
of Developing Economies, 1970) 100.
56
Boow, above n 32, 43.
57
Fajar Kusumawardani, Sejarah Perkembangan Industri Batik Tradisional di Laweyan Surakarta
[History of Traditional Batik Industry Development in Laweyan Surakarta] (Bachelor of Education
Thesis, Universitas Negeri Semarang (Semarang State University), 2006) 87–8.
58
Undang-Undang No 1 Tahun 1967 Tentang Penanaman Modal Asing [Law No 1 of 1967 on
Foreign Investment Law] (Indonesia). This law was superseded by Undang-Undang No 25 Tahun
2007 Tentang Penanaman Modal [Law No 25 of 2007 on Investment] (Indonesia).
54
240
enterprises, particularly those for hand-drawn batik, which were not able to compete
with their larger competitors, declined steadily in the 1970s and 1980s. 59
In the case of GKBI, during the early years of the New Order era, as the biggest
incorporated batik cooperatives, it actively participated in the government foreign
investment program. For example, GKBI and its Japanese partner opened a joint
venture textile factory in 1970, which not only supplied cambric for GKBI members,
but was also exported to Japan, the US and Europe. 60 Although GKBI was one of the
beneficiaries of the government’s economic programs and policies, the primary
cooperatives (koperasi primer) which became members of GKBI experienced many
difficulties throughout the 1970s and 1980s.
The difficulties encountered by its members and sub-members also affected the
condition of GKBI. In 1985, GKBI was nearly bankrupt since it had business losses
of IDR 17 billion and debts of IDR 47 billion, which could not all be covered by
GKBI assets. Because GKBI played an important role in the cooperatives movement
and indigenous business in Indonesia, the government saved GKBI. Besides
borrowing money to pay its debt in foreign currency, the government took over the
management of GKBI for four years. 61 After these efforts, the condition of GKBI
gradually improved. At present, with its valuable assets 62 and good management,
GKBI has returned to being a healthy and prominent incorporated cooperative.
59
Ibid.
Sularso, above n 16, 73.
61
Ibid 96.
62
One of valuable assets is a 37 storey building located in the Central Business District, Sudirman
street, in Jakarta. Besides that, in 1993, GKBI also founded a business company, PT GKBI
Investment, which is operated on profit-based principle. See Sularso, above n 16,106,110.
60
241
The general condition of the batik industry today is not really very different from the
past four decades. Learning from the previous inefficient programs and policies, the
Reformasi government provides ‘market-oriented, demand-driven programs based on
efficiency considerations’. 63 However, the effectiveness of these new programs and
policies still cannot be predicted as they were implemented just a short time ago.
Currently, the competition in textile domestic and international markets is even more
intense as Indonesia participates in various free trade arrangements. At present,
mass-produced and inexpensive batik printed textiles imported from China are
popular in Indonesia, and they are considered a threat to the national batik printing
industry. 64 Batik printed textiles produced by Indonesian SMEs and imported
Chinese textiles printed with batik motifs compete with each other in the domestic
market. 65
6.4. Batik Industry and Intellectual Property Rights
There are various forms of IPRs that are relevant for the batik industry in Indonesia,
namely copyright, industrial design, trade secrets, trademark, and geographical
indications. This part of the chapter will explain which of the forms of IPRs are
relevant to the batik industry, particularly SMEs, and analyse the position of these
rights in the IP law in Indonesia. It will also contain discussion of the problems
63
Kian Wie Thee, 'Policies for Private Sector Development in Indonesia' (Asian Development Bank
Institute, 21 March 2006) <http://www.adbi.org/discussionpaper/2006/03/21/1727.private.sector.development.ind/> 35.
64
'Batik China Cemaskan Perajin Batik Printing Pekalongan [Craftmans of Batik Printing from
Pekalongan are Concerned about China Batik Printing]', Antaranews (Pekalongan), 30 September
2008 <http://www.antaranews.com/view/?i=1222770104&c=EKB&s=>.
65
'Batik Printing Paling Terancam AC-FTA [Batik Printing is the Most Threatened Product by ACFTA]', Solopos (Solo), 10 January 2010 <http://www.solopos.com/2010/ekonomi-bisnis/batikprinting-paling-terancam-ac-fta-11499>.
242
encountered by SMEs in the batik industry in obtaining effective protection of
relevant IPRs in Indonesia.
6.4.1. Copyrights and the Protection of Traditional Cultural Expressions
(TCE)
In the 2002 Copyright Law, there are some provisions that are relevant to the
protection of batik products. Batik art is mentioned as one object of copyright
protection in Article 12(1)(i), 66 which lists works protected under copyright. The
elucidation of this Article explains that batik art is protected because it has artistic
value in its motifs, patterns and colour composition. However, the Article is not only
intended to protect batik, as the elucidation considers other Indonesian traditional
textiles, such as songket 67 and ikat 68 in the same category as batik art. As the subject
of copyright, batik art is protected for a lifetime of the creator plus 50 years after the
creator’s death, 69 whether or not the art is registered to the Director General of
Intellectual Property Rights (DGIPR) Office. Although the 2002 Copyright Law does
not state explicitly, the batik art that is mentioned in Article 12(1)(i) refers
specifically to the modern version of batik. Unlike traditional version, modern batik
66
Article 12(1)(i) of the Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002
on Copyright] (Indonesia) (‘Copyright Law 2002’) states:‘In this law, a work that is protected shall be
the work in the field of science, arts and literature which includes:…i. batik art;’
67
Songket is a traditional weaving fabric from South Sumatra which is decorated using gold and silver
threads. See, Hitchcock, above n 2, 40.
68
Ikat is a traditional weaving fabric which is well-known in the eastern Indonesian islands of Flores,
Sumba, Savu, Rote, Timor, Lembata and the Maluku. See ibid 74.
69
Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002 on Copyright]
(Indonesia) art 29(2).
243
is an individual work, which is able to satisfy the originality requirement 70 for
copyright protection.
Regarding the traditional versions of batik, where the motifs have long been known
publicly and their creators are today unknown, Article 10(2) 71 of the Copyright Law
2002 rules that the ownership of such motifs shall be in the hand of the State. 72 The
duration of copyright protection for this kind of material is given without specifying
a time limit, that is, the copyright protection is indefinite. 73 In addition, to protect
traditional batik and other Indonesian TCE from the ownership claims from foreign
parties, Article 10(3) 74 requests foreigners to obtain a licence from the relevant
authority if they want to publish or reproduce any TCE materials mentioned in
Article 10(2).
The government of Indonesia through Articles 10(2) and (3) provides the centralised
administration of copyright for Indonesian TCE. The government of Indonesia
positions itself as an owner and defender of national cultures. This approach is in line
with Article 32(1) of the Indonesian Constitution, which requires the state ‘to
advance the national culture of Indonesia by assuring the freedom of community to
preserve and develop cultural values’. It is obvious here that the government of
Indonesia perceives that the potential for abuse of TCE materials comes largely from
outside and from foreigners, such as tourists and collectors of cultural art from rich
70
Ibid art 1(3).
Article 10(2) of ibid states: ‘The state shall hold the copyright for folklores and works of popular
culture that are commonly owned, such as stories, legends, folk tales, epics, songs, handicrafts,
choreography, dances, calligraphies and other artistic works.’
72
Ibid art 10(2).
73
Ibid art 31(1)(a)
74
Article 10(3) of ibid provides: ‘To publish or reproduce the works as referred to in paragraph (2),
any person who is not the citizen of Indonesia shall, firstly, seek permission form the institution
related this matter.’
71
244
countries. 75 Besides that, the centralised approach is needed because a relatively
young state like Indonesia needs national symbolism to consolidate the unity of the
nation against separatist tendencies — TCE plays an important role in such national
symbolism. 76 Although the intention of the government is positive, the position of
local communities as the real producers of TCE, it is not so clear, particularly on how
revenues coming from the exploitation of their TCE materials are to be distributed to
them. 77
According to Article 10(4), copyright that is held by the State, as referred to in
Article 10(2), shall be regulated further in a government regulation. Until now,
however, the relevant government regulation has never been issued. In practice, the
claim of Malaysia on batik and some other Indonesian TCE as its cultural heritage a
few years 78 has prompted local governments to be more aware of their cultural
assets, particularly batik motifs, and prompted copyright registration action. For
example, by 2008, the city government of Solo has already filed 415 batik motifs as a
specialty of the city. 79 The city government of Pekalongan also filed for copyright
registration 96 unique motifs of batik Pekalongan with the DGIP in 2004. 80 Of these
numbers, certificates for 10 applications have already been issued. 81 However, the
75
Christoph Antons, 'What Is "Traditional Cultural Expression"? International Definitions and Their
Application in Developing Asia' (2009) (1) The WIPO Journal: Analysis and Debate of Intellectual
Property Issues 103 (‘What is TCE?’).
76
Ibid 112.
77
Ibid 111; Christoph Antons, Intellectual Property Law in Indonesia (Kluwer Law, 2000),87.
78
See Chapter 6 (section 6.2.).
79
'Pemkot Solo akan Patenkan 140 Motif Batik [City Government of Solo will Register 140 Motifs of
Batik]', Kompas (Jakarta), 19 June 2008
<http://nasional.kompas.com/read/2008/06/19/22081811/Pemkot.Solo.akan.Patenkan.140.Motif.Batik
>.
80
Interview with MW, an officer in the IPRs Office of Pekalongan City Government (Pekalongan, 18
March 2009).
81
Perdagangan Dinas Perindustrian, Koperasi dan UMKM Kota Pekalongan (Industry, Trade,
Cooperatives and Micro, Small and Medium Enterprise Agency of the City of Pekalongan) Motif
Batik Pekalongan - Sertifikat Hak Cipta [Batik Pekalongan Motifs - Copyright Certificates] (2011)
245
registration does not mean to stop batik entrepreneurs in other areas in Indonesia
from producing batik textiles with such registered motifs. 82 These batik motifs are
registered as communal right of people in relevant regions and of the Indonesian
people as a whole.
Although the absence of a copyright implementing regulation does not stop the
initiative of the regional governments in protecting their folkloric materials, it is still
needed in order to give more assurance on the protection of Indonesian TCE. In
addition, such government regulation is expected to contain provisions that would
clarify the position of local communities on their enjoyment of the benefits of the
exploitation of their folkloric materials.
The claim of Malaysia, mentioned above, is an example of TCE misappropriation by
foreign countries that has become a growing concern among Indonesian local
communities. As discussed in Chapter 2, protection of TCE is not included in the
TRIPS Agreement; however, countries are free to adopt their own law and
mechanisms to protect their own TCE. Although the government of Indonesia
provides protection for TCE under its copyright regime, this is insufficient. At the
moment, the government of Indonesia is still working on a draft sui generis law to
protect TK and TCE in comprehensive manner. 83 However, even if such a sui
generis draft law is completed ad is given parliamentary assent, this kind of
protection only works at a national level. It cannot be effective in protecting TCE
Dinas Perindustrian, Perdagangan, Koperasi dan UMKM Kota Pekalongan
<http://perindagkop.pekalongankota.go.id/index.php?option=com_phocagallery&view=category&id=
24&Itemid=83>.
82
Interview with MW, an officer in the IPRs Office of Pekalongan City Government (Pekalongan,18
March 2009).
83
Antons, ‘What is TCE?’, above n 75, 112.
246
from acts of misappropriation that are done mainly at an international level. Without
international standards of TCE protection, the problem is impossible to resolve.
In relation to SMEs, many SMEs in the batik industry cannot enjoy copyright
protection under Article 12(1)(i) for their batik products. Although SME owners
actively create new batik motifs, they find it difficult for these motifs to satisfy the
originality requirement for copyright protection. Most of these new motifs contained
substantial elements of batik motifs long known publicly in Java, such as kawung
and semen. 84 Batik entrepreneurs, especially those who run SMEs, rarely make
much variation on these traditional motifs. 85 In addition, these SME owners are also
accustomed to copy batik motifs created by other artists or entrepreneurs and to add
these motifs to their own works. Therefore, new designs utilised on batik textiles
frequently lack original creativity and hardly meet the requirement for originality.
6.4.2. Industrial Designs
Besides copyright, industrial design protection is also relevant for the batik industry.
As there is an element of the batik industry, batik which is mass-produced in factory
— such as batik cap and printing, the designs of such batik textiles, including their
motifs and colours — that falls within the definition of industrial design 86 in Article
84
For information on what is kawung and semen, see texts in above n 6 and n 7.
Interview with seven Pekalongan SME batik owners (Pekalongan, 21 March 2009) and seven
Yogyakarta SME batik owners (Yogyakarta, 25–27 March 2009).
86
Article 1(1) of the Undang-Undang No 31 Tahun 2000 tentang Desain Industri [Law No 31 of 2000
on Industrial Design] (Indonesia) (‘Industrial Design Law 2000’) provides ‘industrial design shall
mean a creation on the shape, configuration, or the composition of lines or colours, or lines and
colours, or the combination thereof in a three or two dimensional form which gives aesthetic
impression and can be realized in a three or two dimensional pattern and used to produce a product,
goods, or industrial commodity and a handy craft’.
85
247
1(1) of Law No 31 of 2000 on Industrial Design. Protection of industrial design is
granted through registration for a period of 10 years after the filing date. 87 In order to
be protected by industrial design rights, a design must be ‘new’. 88 This is a little bit
different than the ‘originality’ requirement of copyright protection. Although there
are many batik designs produced today that contain traditional motifs, if the creators
add other new elements, such designs may be able to obtain industrial design
protection. However, there is a view that questions the benefit of industrial design
right as protection for intangible assets of batik enterprises. Based on the experience
of one SME owner, the life cycle of a single batik design in the market is usually
only for three months. 89 After the three month period, most of batik designs only
have little power to attract buyers in the market. In this case, the protection industrial
design rights, which requires at least a four or five month registration process, 90 is
inappropriate given the marketing cycle in batik enterprises. Therefore, many batik
enterprises, particularly SMEs, do not have any interest in acquiring industrial design
right protection.
6.4.3. Trade Secrets
Turning to trade secrets right, information on the technique and colouring process of
batik making, including the equipment (such as cantings and various motif stamps),
are certainly the subject of trade secret protection. The protection of trade secret is
provided as long as the valuable information is still secured as a secret by the owner.
87
Ibid art 5(1).
Ibid art 2(1).
89
Interview with one Pekalongan SME batik owner (Pekalongan, 21 March 2009).
90
See Chapter 8 (section 8.2.1.c), which discusses the procedure of industrial design right registration
in detail.
88
248
However, the information must also have economic value, and the owner must make
sufficient effort to protect the secrecy of such information. Again, batik making
process and its equipments has been long-time known by public and become a
popular subject of research by various international scholars. Unlike today situation,
at the beginning of batik industry history, IPRs, including trade secret, were not an
issue for the industry. At that time, batik makers were happy to share their
knowledge on all aspects of batik to others, including foreigners, without any
concerns that such people would copy their works. Although there are still many
followers of this view 91, batik makers, including SMEs, are more aware on IPRs of
their works.
6.4.4. Trademarks
The next form of IPRs to be discussed is trademark. Although the batik industry has
a few issues when dealing with copyright, industrial design and trade secrets rights,
the industry has no problem in being protected under trademark. In fact, regardless of
their size and core of business, all businesses will certainly need a trademark in
marketing their products. Trademark is like a mark of identity which is important in
distinguishing their goods from those of others. Besides acting as an identifier, a
trademark serves as a guarantor of consistent quality of the products provided by the
business. People who feel they are satisfied with the quality received under one
particular trademark would normally be loyal customers for the products bearing that
trademark. Since trademark is very influential in the marketing process of a product,
91
Interview with seven Pekalongan batik SME owners (Pekalongan, 21 March 2009) and seven
Yogyakarta batik SME owners (Yogyakarta, 21–25 March 2009).
249
the value of a trademark could be beyond the total assets of its business. 92 ‘CocaCola’ is often mentioned as a good example of a strong trademark with the value of
over USD 70 billion.93 The importance of a trademark for a business requires that the
owner protect it through registration.
A registered trademark is protected for 10 years in Indonesia and such registration
can be renewed. 94 Currently, there are several well-known trademarks in batik
industry in Indonesia, such as Batik Keris and Batik Danar Hadi. Both trademarks
are owned by two large enterprises (LEs), which centrally located in Solo but have
branch stores in big cities all around Indonesia. Unlike LEs, many SMEs in batik
industry do not protect their trademarks. There are various reasons why SMEs
choose not to register their trademark. Apart from the absence of the knowledge of
the importance of a trademark for their businesses, a large number of SMEs mention
the complexity of the registration procedure and its cost as the reasons for their not
seeking protection of their trademark under the registration procedure provided by
the government. 95
Besides these external causes, interestingly, some batik small enterprises, particularly
at the cottage industry level, although interested in having and registering their own
trademarks, think that a trademark is not suitable for their small businesses. 96 Rather
than using modern marketing methods which need a trademark, such small batik
92
World Intellectual Property Organization, Why are Trademarks Relevant to the Success of Your
SME? (2010) <http://www.wipo.int/sme/en/ip_business/marks/tm_relevance.htm>.
93
William Busse, The History of Coca-Cola Trademark (2 January 2011)
<http://www.brighthub.com/office/entrepreneurs/articles/64586.aspx>.
94
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark] (Indonesia)
art 28.
95
See, the discussion of these issues in Chapter 8.
96
Interview with five small batik enterprises (Giriloyo village,Yogyakarta, 25 March 2009).
250
enterprises sell their products through direct order from medium and large batik
enterprises. Such medium and larger enterprises then put their trademark label on the
textiles before selling them in the market. This subcontracting system is commonly
practised in the batik industry. It has existed in the batik industry since the 19th
century through the Alapan or contract system, which was usually controlled by
Chinese commission merchants. 97 Under the Alapan system, the commission
merchants supplied raw materials to the batik makers and in return received finished
batik textiles, the value of which had been established under the contract on a basis
consistent with the exchange rate at the time of supply. 98 Modern day commission
entrepreneurs do not supply raw batik materials, but rather pay the wholesale price of
batik textiles that they have ordered for the sub-contractors. For small-cottage
enterprises who are involved in the subcontracting system, a trademark loses its
attractiveness as an identifier and quality guarantor of a product in the market.
6.4.5. Geographical Indications
In addition to trademark, geographical indication (GI) is also relevant IPR for the
batik industry. GI protection is provided under the same law 99 that governs
trademark, Law No 15 of 2001 on Mark. In the elucidation of Article 56, it is clearly
stated that GI protection is given to goods that are produced by nature, agriculture,
and the process of industry and handicraft. GI protection is certainly suitable for
goods produced by the batik industry, which are either processed by machine, using
97
Hirashi, above n 55, 82.
Ibid.
99
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark] (Indonesia)
arts 56-59.
98
251
stamps, or hand-drawn. In the case of the batik industry, GI protection is obtained
through a registration system. 100 People who make batik goods, or an institution that
represents local communities in the area that produce such goods, file an application
for registration. The protection of batik products under GI could prevent
misappropriation act by foreign parties as TRIPS standards guarantee the protection
of the use of any GI which misleads the public as to the geographical origin of the
good 101 and constitutes an act of unfair competition 102 at an international level.
However, the protection of GI in Indonesia, for which registration is required in
order to obtain it, may be a burden for SMEs in batik industry, who wish to employ
GI in their business strategy. As is the case with other IPRs which require
registration, the bureaucracy in Indonesia makes the process of GI registration
lengthy and complicated. In addition, GI ownership, which cannot be given to
individual, may not be useful for an individual SMEs’ businesses.
6.5. General Comments on the Appropriateness of IPRs to SMEs in the Batik
Industry
From the above discussion, it is clear that IPRs, on the one hand, bring benefits to
batik industry; on the other hand, it is also clear that there are a number of challenges
in making IPRs work effectively for Indonesian SMEs in such an industry. The
challenges are not only because the requirements to obtain relevant forms of IPRs are
100
Ibid art 56(2).
The Agreement on Trade-Related Aspects of Intellectual Property Rights forms Annex 1C to the
Agreement Establishing the World Trade Organisation, opened for signature 15 April 1994, 1867
UNTS 3 (entered into force 1 January 1995) ('TRIPS Agreement' or 'TRIPS') art 22 (2)(a).
102
TRIPS art 22(2)(b).
101
252
difficult for batik SMEs to fulfil, but also due to the particular state of the batik
industry in Indonesia.
Copyright provides protection only for batik art in which the motifs are a new
creation and do not belong to and area’s traditional heritage. However, for traditional
batik art, the 2002 Copyright Law provides protection as folklore or TCE. The law
states the ownership of Indonesian folklore, including batik, is in the hands of State
and every non-Indonesian citizen needs to ask permission before exploiting them.
Although these provisions prevent unfair exploitation of Indonesian folklores which
does not share the benefits to the local owners, they are not really useful for
individual batik enterprises as they are not the owners. Therefore, these provisions
too provide little benefit for SMEs in such an industry as the majority of them
produce traditional batik products where ownership is vested in the state.
Industrial design, which provides protection for new designs produced on a massive
scale in industry, are the relevant right to protect batik cap and printed products. In
addition, the requirements to obtain industrial design protection are quite easy for
batik SMEs to satisfy. However, the time required to process industrial design
applications in Indonesia, which is four or five months, does not match with briefer
life cycle of batik products, which is only three months. After three months, batik cap
or printing products normally have little power to attract buyers. Unlike LEs, batik
SMEs in Indonesia do not have marketing unit whose duty is to register industrial
design before a company launches a new batik design product.
253
The method for obtaining trade secret protection, which lacks a registration
requirement, suits batik SMEs because they have limited resources to deal with the
bureaucracy and the administrative burden that involves. Some SMEs have already
adopted the strategy of trade secret protection and have applied it for many years.
However, as the batik industry has been widely known since the 19th century, nearly
all important information related to the batik industry is already disclosed to the
public.
In comparison with the utilisation of other forms of IPRs, the level of trademark
utilisation by Indonesian SMEs is higher. Besides protecting their business
reputation, trademark has the function as an identifier of products in the market,
which is absolutely needed by every product in the market. However, in the batik
industry, not all SMEs need a trademark. Because many batik SMEs, particularly
micro enterprises, do not have marketing channels for their products, they simply
produce and sell batik to LEs through a sub-contracting system. In the market, the
buyers would then put their own trademarks on the batik products so produced for
them. Such batik micro enterprises, therefore, do not need a trademark in their
businesses.
GI protects handicrafts with specific regional characteristics like batik. Yet, the
ownership of GI cannot be given to an individual but is provided to an institution
which represents local communities making or developing the products or a group of
product consumers. Therefore, similarly to the situation of folklore and TCE
protection, GI provides little benefit for developing business of individual
enterprises, including SMEs.
254
Because each relevant form of IPRs to the batik industry possesses both advantages
and disadvantages for SMEs in such an industry, the government of Indonesia must
adopt an initiative to adjust IP legislation and policy in order to meet the needs of
Indonesian SMEs, particularly those in the batik industry.
6.6. Setting the Scenes: Profiles and the Batik Industry in Pekalongan and
Yogyakarta
Chapter one has already mentioned that the case study part of this thesis would
mostly rely on data which are collected from the field. The case study part in this
chapter used data obtained through the semi-structured interview of 14 batik SMEs
owners or managers in two provinces, Central Java and Special Region of
Yogyakarta. However, since there are many batik production regions in the Central
Java province, during the field research it was decided to select batik SMEs in
Pekalongan as a sample of similar enterprises in the provincial areas. Besides,
Pekalongan is well-known as a leading batik production region in Indonesia, and the
batik of Pekalongan represents the pasisir or coastal style that differs from the court
style of Yogyakarta batik. Since their emergence, the two different styles of batik
have been influenced by the unique social and economic condition of people in each
region. Therefore, the selection of research locations that represent both styles of
batik is important for it enriches the research and makes the discussion more
interesting by including the unique social conditions of the batik industry in each
province and illustrating both the similarity and the differences of circumstances that
are encountered by the industry.
255
Figure 2: Pekalongan (Regency and City) and Yogyakarta Province*
*Map was prepared by I Made Andi Arsana, a surveyor by training
256
6.7. Pekalongan Region:
6.7.1. Its Geography, Demography, Economy and Administrative Profile
The region of Pekalongan is part of the Central Java province and is located on the
western side of the north coast of Java (see Figure 1 above). Administratively, the
region is divided into a regency and a city of Pekalongan, which have different
administration regions. The Pekalongan regency borders the city of Pekalongan and
regencies of Batang on the east, Pemalang on the west, Banjarnegara on the south,
and the Java Sea to the north. The total areas of Pekalongan regency is 836.13 km²,
and consists of 283 villages in 19 districts. 103 Whereas the city of Pekalongan has a
smaller administrative region of just 45.25 km², and it is divided into 46 villages
which are scattered across four districts. 104 The Pekalongan regency and city have a
population of 889,562 105 and 267,574, 106 respectively.
In 2007, the gross regional domestic product (GRDP) of the Pekalongan regency was
IDR 5,062,021,350,000 (equivalent to USD 593,089,789). The data collected in 2007
show the manufacturing industry as the most dominant sector in the regency with its
contribution to the gross regional domestic product (GRDP) measuring more than 25
103
Kabupaten Pekalongan dalam Angka: 2008 [The Regency of Pekalongan in Numbers: 2008]
(Bappeda Kabupaten Pekalongan & BPS Kabupaten Pekalongan
2009).
104
Kota Pekalongan dalam Angka: 2005 [The Municipality of Pekalongan in Figure: 2005] (2005)
Bappeda Kota Pekalongan & BPS Kota Pekalong
<http://bappeda.pekalongankota.go.id/dataweb/web_bappeda/dda05/index.htm> (‘Kota Pekalongan
dalam Angka’)
105
Soegeng Sarjadi Syndicate and Konrad Adenauer Stiftung, Kabupaten Pekalongan (2009)
<http://www.cps-sss.org/web/home/kabupaten/kab/Kabupaten+Pekalongan>
106
Ibid.
257
per cent. 107 Of the many products in the manufacturing sector, batik is the
commodity with the highest production value. In the category of medium, both
formal and informal, and household industry, batik had the highest production value,
namely IDR 617,124,032 (equivalent to USD 72,305) in total for 2007. 108 While in
the category of small formal and informal industry, the production value of batik is
ranks second after ready to wear clothing products. 109 In this category, the value of
batik production value amounted to IDR 101,209,563 (equivalent to USD 11,858).
On the other hand, the GDRP of Pekalongan city, based on data collected in 2002,
was IDR 1,766,080,866 (equal to USD 206,922). 110 Similarly to the situation
prevailing in the regency of Pekalongan, the manufacturing industry sector in the city
of Pekalongan is the biggest sector, contributing 24.95 per cent to the city’s
GDRP; 111 however, unlike the data provided by the Pekalongan regency, the city of
Pekalongan does not provide data which reveals the contribution made by the batik
industry to its GRDP.
Regarding administration of SMEs, in the regency of Pekalongan, it is the
responsibility of Dinas Koperasi, Usaha Mikro, Kecil dan Menengah, Industri dan
Perdagangan (Cooperatives, Micro, Small and Medium Enterprises, Industry and
Trade Agency). 112 A similar agency also exists in the city of Pekalongan, the Dinas
Perindustrian, Perdagangan, Koperasi dan Usaha Mikro, Kecil dan Menengah
107
Ibid.
Ibid.
109
Ibid.
110
Kota Pekalongan dalam Angka, above n 104.
111
Ibid.
112
Pemerintah Kabupaten Pekalongan (Pekalongan Regency Government), Struktur Organisasi
[Structure of Organization] (2006)
<http://www.pekalongankab.go.id/web/index.php?option=com_content&task=blogcategory&id=26&I
temid=50&lang=en>.
108
258
(Industry, Trade, Cooperatives and Micro, Small and Medium Enterprises
Agency). 113 Both agencies are called AoCSMES hereinafter.
The centres of the batik industry in the regency of Pekalongan are located in the
districts of Wiradesa, Tirto, Kedungwuni, Wonokerto, Buaran, Doro, Siwalan and
Sragi. In the city of Pekalongan, there are 15 SME batik clusters 114 which are located
in all four districts of the city. The six SME batik clusters of the West Pekalongan
district are found in the villages of Pasirsari, Tegalrejo, Pringlangu, Tirto, Medono
and Kragen. 115 In the districts of East and North Pekalongan, the five of SME batik
clusters are located in the villages of Kauman and Landungsari (East Pekalongan)
and Krapyak Lor, Degayu, and Pabean (North Pekalongan). 116 The last district,
South Pekalongan, has four SME batik clusters, which can be found in the villages of
Buaran, Jenggot, Banyuurip Alit, and Banyuurip Ageng 117 (see Figure 2 below).
113
Dinas Perindustrian, Perdagangan, Koperasi dan UMKM Kota Pekalongan [Industry, Trade,
Cooperatives, Micro and SMEs Agency of Pekalongan City] (2009)
<http://perindagkop.pekalongankota.go.id/index.php?limitstart=36>.
114
An SME cluster is defined as an agglomeration of small-medium firms producing products or
services in the same subsector. See Henry Sandee, Brahmantijo Isdijoso and Sri Sulandjari, 'SME
Clusters in Indonesia: An Analysis of Growth Dynamics and Employment Conditions' (International
Labour Organization (ILO), 2003) <http://www.oit.org/wcmsp5/groups/public/---asia/---ro-bangkok/--ilo-jakarta/documents/publication/wcms_123971.pdf> 5.
115
Dinas Perindustrian Perdagangan Koperasi dan UMKM Kota Pekalongan, Sentra Batik [Batik
Clusters] (2010)
<http://perindagkop.pekalongankota.go.id/index.php?view=category&id=58%3Asentraindustri&option=com_content&Itemid=107>.
116
Ibid.
117
Ibid.
259
Figure 3: The Location of Batik SMEs in Pekalongan Regions (City and
Regency)*
*Map was prepared by I Made Andi Arsana, a surveyor by training
6.7.2. The Development of the Batik Industry in Pekalongan
Batik art was introduced to Pekalongan when the region became part of the Islamic
Mataram kingdom under Sultan Agung Hanyokrokusumo in 1620.118 However, since
the royal court was located far from Pekalongan, the influence of batik court rules,
except for those of the high ranking elite, was weak. The batik artists of Pekalongan
were free to create various motifs and patterns using their imagination and creativity,
118
Asa, above n 39, 219.
260
which produced materials different from those which were produced in accordance
with the batik court rules. 119 In creating their designs, batik artists from Pekalongan
were influenced by the multicultural setting of the region.
There are three styles of batik Pekalongan which were formed during the 19th
century. The earliest style that emerged in the region is batik pribumi, which was
manufactured by Javanese enterpreneurs to suit the taste of native Indonesians,
particularly the Javanese. 120 (The batik entrepreneurs of Indo-Arabian ethnic were
also included in this group because of religion connection and similar taste of both
ethic groups). The second earliest category, batik encim, was created by the ChineseJavanese (peranakan) entrepreneurs of mixed heritage to meet customer demand
from those of this ethnic group. 121 Peranakan entrepreneurs drew Chinese motifs,
such as the dragon and phoenix, and used typically Chinese colours in their batik
designs. Batik Londo, which was designed and made by some Eurasian women,
became the last batik style created during that period. 122 This style utilises European
motifs, such as those of the Dutch floral bouquet, bird, butterfly, and flying cupids, to
their batik fabrics. 123 This style appealed to European customers, either Eurasian or
strictly European, who also wore batik sarongs in the East Indies for reasons of
practicality. 124
119
Elliott, above n 8 , 94.
Marsam Kardi, 'Sejarah Perbatikan Indonesia [History of Batik Industry in Indonesia]' (Paper
presented at the Jejak Telusur dan Pengembangan Batik Pekalongan [Traces and Development of
Batik Pekalongan], Pekalongan, 18-19 Maret 2005), 68.
121
Ibid.
122
Ibid 69.
123
Elliott, above n 8, 106.
124
Rens Heringa, 'Batik Pasisir as Mestizo Costume' in Rens Heringa and Hermen C Veldhuisen
(eds), Fabric of Enchantment: Batik from the North Coast of Java (Weatherhill, 1996) 46, 53 (‘Batik
Pasisir’).
120
261
By the middle of 19th century, Pekalongan had become an important region for batik
production, mostly batik tulis, in the East Indies. 125 The early batik industry in
Pekalongan was characteristically a home–based family business. 126 Peranakan
entrepreneurs began the entrepreneurial mode of batik production by buying drawn
textiles with wax and dyeing them in the backyard of their own homes. 127 The
business involved the whole family and there was a division of labour based on
gender. In most cases, the women of the family were responsible for the batik
making process largely conducted in their homes. It required time consuming labour
and a meticulous attention to detail as well as aesthetic skill. Their work included
applying the grand motifs to the fabrics using a canting filled with melted wax to
prevent areas from being exposed to the dye to be used, as well as preparing the dyes
in which the prepared fabric was to be dipped. 128 Male members of family took care
of the business’s financial affairs, such as purchasing raw materials, marketing and
distributing their batik products, outside their homes. 129
Around 1860, 130 Eurasian women entrepreneurs began to set up batik tulis businesses
in Pekalongan. 131 Batik tulis textiles produced by these Eurasian female
125
Hermen C Veldhuisen, 'From Home Craft to Batik Industry' in Rens Heringa and Hermen C
Veldhuisen (eds), Fabric of Enchantment: Batik from the North Coast of Java (Weatherhill, 1996) 38,
40 (‘From Home Craft’)
126
Elliott, above n 8, 94.
127
Veldhuisen, ‘From Home Craft to Batik Industry’, above n 125, 40.
128
Ibid 40–41.
129
Although, later, in the the early of 20th century, there were some male Peranakan entrepreneurs
who also took the role of the female in designing batik textiles. See, Hermen C Veldhuisen, 'The Role
of Entrepreneurs in the Stylistic Development of Batik Pasisir' in Rens Heringa and Hermen C
Veldhuisen (eds), Fabric of Enchantment: Batik from the North Coast of Java (Weatherhill, 1996) 70,
80 (‘The Role of Enterpreneurs’)
130
Veldhuisen, ‘From Home Craft’, above n 125, 40.
131
In Semarang, there were some Eurasian women who started batik businesses before the year 1880.
The earliest recorded batik industry established by Eurasian women in Semarang was in 1830. See
Asa, above n 39, 231 and Veldhuisen, ‘The Role of Entrepreneurs’, above n 129, 72.
262
entrepreneurs were extremely expensive and exclusive. 132 To add to the exclusive
image and to distinguish their products from others, these Eurasian entrepreneurs
also introduced a signature on the batik fabrics that they designed and produced. 133
Although they did not use trademarks at that time, this signature had a function
similar to that of a trademark today. This practice was also followed by Peranakan
entrepreneurs in 1910.
The establishment of SDI in the early 20th century in Solo had inspired native batik
entrepreneurs in other regions, including Pekalongan, to work together in the
framework of cooperatives. When GKBI was formed in 1948, the cooperatives of
Pekalongan had active role in the organisation. The glory period of native batik
entrepreneurs began when Indonesia gained independence in 1945. During the first
two decades that followed, native batik entrepreneurs enjoyed special treatment from
the Old Order administration. As was the case with other regions of batik production
centres in Java, the batik industry in Pekalongan entered a gloomy period in the
1970s. The emergence of batik prints, which are very fine looking and inexpensive,
was blamed as one cause of the decline of the batik industry in Pekalongan. 134
From the 1970s until the present day, the batik industry in Pekalongan has survived
many events. However, whether the events are good or bad, there is one thing for
sure, the batik industry never dies in Pekalongan. People who visit the Pekalongan
region can easily spot the existence of the batik industry in almost every corner of the
132
Boow, above n 32, 38.
Veldhuisen, ‘The Role of Entrepreneurs’, above n 129, 72.
134
Asa, above n 39, 253.
133
263
region. The governments of both the Pekalongan regency 135 and city136 still rank
batik as one of the primary products to be promoted to investors. In 2009, the
Pekalongan regency administration recorded the presence of 6,122 business units
which actively produced batik textiles in various formats or designs, ranging from
long cloth (kain panjang) to designer interior accessories, such as bedspreads and
tablecloths. 137 Of this number, 3433 units are within the SMEs category. 138 In the
city of Pekalongan, while the total number of batik firms operating in the city is not
known, the number of SMEs which produce batik textiles was reported as 631 units
in 2008. 139 Combined with the production of batik textiles from Yogyakarta and
Solo, batik textiles from Pekalongan meet almost the entire demand for traditional
Indonesian batik in Indonesia and overseas.
135
Pemerintah Kabupaten Pekalongan [Pekalongan Regency Government], Potensi Unggulan
Kabupaten Pekalongan 2009 [Primary Potency of Pekalongan Regency in 2009] (2009)
<http://www.pekalongankab.go.id/web/index.php?option=com_content&task=blogcategory&id=96&I
temid=141>.
136
Dinas Perindustrian Perdagangan Koperasi dan UMKM Kota Pekalongan, Data IKM Produk
Unggulan Kota Pekalongan [Data of Primary Products of Small and Medium Industry in Pekalongan
City] (2 July 2010)
<http://perindagkop.pekalongankota.go.id/index.php?option=com_content&view=article&id=176&Ite
mid=122>.
137
Pemerintah Kabupaten Pekalongan [Pekalongan Regency Government], Potensi Unggulan
Kabupaten Pekalongan 2009 [Primary Potency of Pekalongan Regency in 2009] (2009)
<http://www.pekalongankab.go.id/web/index.php?option=com_content&task=blogcategory&id=96&I
temid=141>.
138
Ibid.
139
Dinas Perindustrian Perdagangan Koperasi dan UMKM Kota Pekalongan, Data IKM Produk
Unggulan Kota Pekalongan [Data of Primary Products of Small and Medium Industry in Pekalongan
City] (2 July 2010)
<http://perindagkop.pekalongankota.go.id/index.php?option=com_content&view=article&id=176&Ite
mid=122>.
264
6.8. The Special Province of Yogyakarta
6.8.1. Its Geography, Demography, Administration and Economy
The province of Yogyakarta is located in the central part of Java and is bordered by
the Indonesian Ocean to the south and surrounded by the regencies of the Central
Java province, including Klaten to the north east, Wonogiri to the south east,
Purworejo to the west, and Magelang to the north west 140 (see Figure 1 above). The
province has total area 3,185.8 km² and it is the second smallest province in
Indonesia after the Special Capital Region of Jakarta. 141 It consists of four regencies,
namely Kuloprogo, Bantul, Gunung Kidul, and Sleman, and one municipality,
Yogyakarta. 142 In 2007, the population of the Yogyakarta province was recorded as
3,434,534. 143
Regarding the administration of SME issues, the Dinas Perindustrian, Perdagangan,
Koperasi dan Usaha Kecil Menengah (Industry, Trade, Cooperative, and SME
Agency) in the Yogyakarta province, 144 called Dinas KUKM hereinafter, is an
agency with the responsibility to manage SME issues. It also has a coordinating role
for other similar agencies in the four regencies (Bantul, Kulon Progo, Gunung Kidul,
140
Biro Pusat Statistik Daerah Istimewa Yogyakarta [Central Bureau of Statistic - DI Yogyakarta
Province], Daerah Istimewa Yogyakarta Dalam Angka [The Special Province of Yogyakarta in
Figures],
(Biro Pusat Statistik Daerah Istimewa Yogyakarta 2008) (‘DIY Dalam Angka’).
141
Ibid 3.
142
Ibid 3–4.
143
Ibid 3.
144
Pemerintah Provinsi Daerah Istimewa Yogyakarta [The Government of the Special Province of
Yogyakarta], Instansi dan Struktur Organisasi [Agencies and Organization Structure]
(<http://www.pemda-diy.go.id/>.
265
and Sleman) and one municipality (the city of Yogyakarta), 145 which are also
responsible to support and promote the activities of SMEs in their regions.
The 2008 official statistics report shows that the total GDRP of the Yogyakarta
province in 2007 was IDR 32,916,736,000,000 (equivalent to USD 3,856,676,742)
with GDRP per capita of IDR 9,584,047 (equivalent to USD 1,122). 146 The highest
contributor to the province’s economy was from services sector, which reached about
19.79 per cent of the total GDRP of the province in 2007. The manufacturing sector,
which normally includes the textile industry (including batik production), is in the
fourth highest position, contributing around 13.06 per cent to GDRP of the province.
According to the official website of the province, batik is one of the primary
commodities which is promoted by the provincial government. 147 Another official
website which is run by Dinas Perindustrian, Perdagangan, Koperasi dan Usaha
Kecil Menengah Provinsi Yogyakarta reports that the total number of batik SMEs in
the province is 129 business units. 148 However, this number may not represent the
real number of batik SMEs established in Yogyakarta as it is too small for a province
which is well-known as one of the batik industry centres in Indonesia. It is likely the
number shown on the website only covers formal SMEs which are registered by the
agency that runs the website. In reality, there is an abundance of micro or small batik
145
Dinas Perindustrian Perdagangan Koperasi dan Pertanian Kota Yogyakarta, Dinas Perindustrian,
Perdagangan, Koperasi dan Pertanian Kota Yogyakarta [Agency of Industry, Trade, Cooperative and
Agriculture of Yogyakarta City] (2010) <http://umkm.jogjakota.go.id/direktori/index.php/cabangindustri-kerajinan-dan-umum-di-yogyakarta/table/45/html.html?resetfilters=0&&limitstart45=0>.
146
Biro Pusat Statistik-Daerah Istimewa Yogyakarta, DIY Dalam Angka, above n 140, 520.
147
Pemerintah Provinsi Daerah Istimewa Yogyakarta [The Government of the Special Province of
Yogyakarta], Potensi Unggulan: Selayang Pandang Daerah Istimewa Yogyakarta [Primary Potency:
the Special Province of Yogyakarta at Glance] (2002) <http://www.pemda-diy.go.id/>.
148
Dinas Perindustrian Perdagangan Koperasi dan Pertanian Provinsi Daerah Istimewa Yogyakarta,
IKM Sandang dan Kulit [Small and Medium Industry in Textile and Leather] (2010)
<http://202.169.224.84/jogjabisnis/index.php/ikm-sandang-dan-kulit>.
266
enterprises which are run without having undertaken any formalities or dealing with
the government agency.
The batik industry centres are dispersed in the areas of the four regencies and the city
in the Yogyakarta province. In the city of Yogyakarta, the batik industry is located in
Rotowijayan, Ngasem, Nagan, Panembahan, and Tirtodipuran dan Karangkajen. 149
The locations of the batik industry centres in the regency of Bantul are Ngestiharjo,
Pajangan, Sanden, Kretek, Wonokromo, and Imogiri. 150 Other regencies, those of
Sleman, Gunung Kidul, and Kulon Progo, have batik industry centres located in
Mlangi and Demakijo; Sumberan; and Gegulun and Wates, respectively. 151
149
A N Suyanto, Sejarah batik Yogyakarta (Rumah Penerbitan Merapi, 2002) 24.
Ibid.
151
Ibid.
150
267
Figure 4: The Location of the Batik SMEs in the Yogyakarta Province (City and
Regencies)*
*Map was prepared by I Made Andi Arsana, a surveyor by training.
6.8.2. The Batik Industry in the Yogyakarta Province and Its Dynamics
Yogyakarta province is the home of two Javanese courts, Kasultanan Yogyakarta
Hadiningrat and Kadipaten Pakualaman, which were established in the 18th152 and
152
Kasultanan Yogyakarta Hadiningrat was established in 1756 after the Giyanti Agreement was
signed between Sunan Pakubuwono III and Sultan Hamengkubuwono I in 1755. The Agreement,
which was suggested by the Dutch colonial government, divided the region of Mataram kingdom into
two equal parts and created two courts of Mataram, the new state Kasultanan Yogyakarta and the
remains of the state of Mataram, which was called Kasunanan Surakarta. See ibid 15; Boow, above n
32, 70.
268
19th153 centuries. As part of the Mataram kingdom, these two courts have preserved
traditions of the Mataram kingdom, including the making of batik as official dress
for royals and for formal court events. Therefore, the influence of the courts’ rules on
the batik of Yogyakarta was unavoidable.
Initially, over two hundred years ago, batik was made only for family use. 154 In the
aristocratic households, the making of batik was an activity of wives and daughters
during their leisure time. 155 They produced hand-drawn batik which was worn by
family members to work in the palace or to attend court events. At that time, most of
aristocratic men in Yogyakarta worked in the palace as courtiers of the kings of Java.
Despite the fact that this job was a highly respected in Javanese society, these
noblemen were paid badly. 156 The women of their household, especially wives, had
to find additional sources of income to ensure their families survived. 157 Due to
reasons of prestige, the only job that was acceptable for women in their echelon of
society was trading batik and jewellery. 158
Batik trading activities of these noblewomen became the embryo of the batik
industry in Yogyakarta. These noblewomen established batik workshops in the
suburbs around the palace, namely Kauman, Prawirotaman, Karangkajen,
153
In 1812, because of internal conflict among the royal family, the region of Kasultanan Yogyakarta
was divided again and a new court was established, the Kadipaten Pakualaman, in Yogyakarta. See
Suyanto, above n 149, 17.
154
Ibid.
155
Suzanne April Brenner, The Domestification of Desire: Women, Wealth and Modernity in Java
(Princeton University Press, 1998) 34.
156
Elliott, above n 8, 64.
157
Ibid.
158
Chusnul Hayati, 'Gender dan Perubahan Ekonomi: Peranan Perempuan dalam Industri Batik di
Yogyakarta 1900-1965 [Gender and Economic Change: The Role of Women in Batik Industry in
Yogyakarta 1900-1965]' (Paper presented at the Konferensi Nasional Sejarah [National History
Conference], Jakarta, 13-16 November 2006)
<http://www.geocities.ws/konferensinasionalsejarah/chusnul_hayati.pdf> 3.
269
Brontokusuman, Mantrijeron, Yudonegara, Ratawijayan, Ngadisuryan, Kadipaten,
and Tamansari. 159 However, noblewomen/entrepreneurs who began the batik
businesses did not set up a workshop to work in them themselves, rather they
outsourced their batik making works, and only provided their own motifs to the
female villagers who did the initial waxing in their places. For the dyeing process,
they sent the unfinished batik fabrics out to Javanese or Chinese who specialised in
this type of work. 160 Then, the last process of re-waxing was performed again by the
women in their villages. 161
Such division of labours made the art of batik making known beyond the palace wall.
The female villagers may have had the knowledge to make batik, but that did not
make them start their own businesses. 162 These female villagers did not have the
capital 163 or the social connections 164 to market luxury items like the batik textile
they now knew how to create. On the other hand, in common with other batik centres
in Java, Chinese entrepreneurs became active business players in Yogyakarta.
Chinese entrepreneurs, who entered the industry in the late 19th century, 165 made
significant changes in the Yogyakarta batik industry. They had dominant role as the
pathfinders
in
marketing
batik
cloths
to
wider
markets.
Like
the
noblewomen/entrepreneurs, Chinese entrepreneurs also used female labours from
villages. 166
159
Today, some of these locations, such as Prawirotaman, Brontokusuman, and Ratawijayan, are still
functioning as batik centres in Yogyakarta. Ibid 9.
160
Leslie H Palmier, Social Status and Power in Java (Athlone Press, 1960) 86.
161
Ibid.
162
Ibid.
163
Ibid.
164
Ibid 87.
165
Boow, above n 32, 57.
166
Palmier, above n 159, 86.
270
After stamp or cap was invented, initially, batik cap was manufactured and traded
mostly by non-Javanese entrepreneurs, that is, Chinese, Eurasian, and Arab
entrepreneurs as well as Javanese commoners. 167 Unlike their counterparts in
Pekalongan, despite their active role in batik industry in Yogyakarta, non-Javanese
entrepreneurs did not create any distinctive styles of batik. Most of them supported,
developed and produced only batik in the court styles. 168 However, in the 1900s, two
Eurasian ladies established a batik firm, which produced batik not as clothing but for
use in the production of household goods, such as tablecloths, cushion covers,
women’s bags and so forth. 169 They followed the style of the Dutch Art Nouveau
with the court motifs and used the Javanese batik making technique. 170
In the early 20th century, during the World War I, the production of batik textiles in
Yogyakarta deteriorated. The war made the importation of batik raw materials from
the Netherland difficult, but between 1920 and 1926, the batik industry of
Yogyakarta flourished once again. De Kat Angelino reported that the number of
batik firms reached its peak in 1920 with 212 firms which employed 3428
workers. 171 However, this promising period was not to last long because the industry
was severely affected by Great Depression, a worldwide economic crisis that began
in the late 1920s and lasted throughout the 1930s. In his book, Hirashi wrote that
Yogyakarta had 150 batik factories in 1929 which later fell to just 54 units by
1935. 172
167
Boow, above n 32, 37.
Ibid 40.
169
Hermen C Veldhuisen, Batik Belanda 1840-1940: Dutch Influence in Batik from Java History and
Stories (Gaya Favorit Press, 1993) 118; Hayati, above n 158, 10; Suyanto, above n 149, 58.
170
Veldhuisen, above n 169, 118; Hayati, above n 158, 10; Suyanto, above n 149, 58.
171
De Kat Angelino, above n 44, 67 as cited in Hayati, above n 158, 6.
172
Hirashi, above n 55, 84.
168
271
During the Old Order era, the batik industry, particularly those businesses run by
indigenous entrepreneurs, also experienced a ‘glory time’ because they received
preferential treatment from the government. In the 1970s, however, the batik industry
of Yogyakarta was threatened by batik printing. Nevertheless, during the same
decade, another form of batik art, batik painting, was started to blossom in
Yogyakarta, which had a growing tourist market. Since then, batik paintings
workshops have grown rapidly around the tourist centres, such as Malioboro and
Prawirotaman, in Yogyakarta.
Today, the batik industry still exists in Yogyakarta. As Yogyakarta is one of major
tourist destinations in Indonesia, the batik and tourism industries have a mutually
beneficial relationship. Batik art, which has become an icon of Yogyakarta, is one of
primary tourist attractions for those visiting Yogyakarta. Therefore, in order to
satisfy the tastes of foreign and local tourists in batik art, batik entrepreneurs in
Yogyakarta have had to be creative and make innovation in terms of media and
design. For example, following the success of batik paintings (using the medium of
fabric), batik artist in Yogyakarta made successful experiments in drawing typically
batik designs on other media, such as wood and leather, in the 1990s. 173 Batik, which
is drawn on wood and leather, has become popular souvenirs in Yogyakarta today.
6.9. The Story behind the Interview Process
173
Suyanto, above n 149, 97.
272
To understand the attitudes of batik SMEs, some of them were interviewed between
March and April 2009 in Pekalongan and Yogyakarta. However, before reporting the
interview outcomes, for the sake of greater understanding it is worth recounting how
the interviews were begun and conducted in the field.
The fieldwork interviews involved 14 batik entrepreneurs in two locations,
(Pekalongan and Yogyakarta) in total or seven entrepreneurs in each region. The
sample selection is based on the definition of small and medium enterprises stated in
Law No 20 of 2008 on Micro, Small and Medium Business 174, which employs the
criteria of assets and annual turnover to determine the size of an enterprise. 175 At the
beginning of the research, it was proposed that the quota of participants in this
category (SME owners/managers) be 10 enterprises in each region or 20 in total and
that there would be an equal distribution between small and medium enterprises.
However, since not all of the batik enterprises that were contacted agreed to
participate in the interview process, the number of interview participants lessened
and the equal distribution between the categories of small and medium enterprises
was unable to be secured.
In Pekalongan, interviews were conducted with the assistance of SS, a high profile
official in the branch office of a national private bank in Pekalongan. Following the
recommendation of the Central Bank of Indonesia to distribute part of its fund for
small business credit, 176 the bank has provided loans for SME owners in the batik
174
Undang-Undang No 20 Tahun 2008 tentang Usaha Mikro, Kecil dan Menengah [Law No 20 of
2008 on Micro, Small and Medium Enterprises] (Indonesia).
175
See Chapter 1 (section 1.6.).
176
A Setyobudi, 'Peran Serta Bank Indonesia dalam Pengembangan Usaha Mikro, Kecil, dan
Menengah (UMKM) [The Role of Central Bank of Indonesia in Developing Micro, Small and
273
industry in Pekalongan. SS kindly introduced the author to the bank’s clients whom
he knows personally. Upon the author’s request, he contacted more than 10 of his
clients; however, unfortunately, only seven were available to be interviewed on the
date which had been fixed. Table 1, below, provides a brief profile of the batik SME
owners who were interviewed in Pekalongan.
Table 10: Profile of Interview Participants in Pekalongan Region from the Batik
SME Owners Category
Name of enterprises/ owners
KD
MR
DP
NC
AR
KJ
HMT
Products
Batik tulis, cap and sutra
(silk)
Batik tulis
Batik tulis and other
traditional
textiles
(jumputan and songket)
Batik tulis (85 per cent)
and cap (15 per cent)
Batik printing and cap
Batik printing and cap
Batik
printing
and
household
fabrics
(tablecloth,
bedcover,
etc)
Type of enterprises
Small enterprise
Medium enterprise
Medium enterprise
Medium enterprise
Medium enterprise
Medium enterprise
Medium enterprise
In Yogyakarta, there were two key informants who assisted in contacting the
interviewees. The first key informant was, AH, son of the owner of BP, a mediumsized batik enterprise in Prawirotaman, who has been an acquaintance of the author
for quite a long time. Through him, the process of contacting other batik enterprises,
which were mostly medium in size, was far easier. Nevertheless, of the five batik
Medium Enterprises]' (2007) 5(2) (August 2007) Buletin Hukum Perbankan dan Kebanksentralan 29,
33. See also Peraturan Bank Indonesia No 3/2/PBI/2001 Tentang Pemberian Kredit Usaha Kecil
[Central Bank of Indonesia Regulation No 3/2/PBI/2001 on the Grant of Small Business' Credit]
(Indonesia).
274
enterprise owners, only one consented to participate in the interview. Altogether with
BP, there were only two batik firms which were interviewed through AH stream.
Another contact was BH, the chairperson of governing board of the Institute for
Research and Empowerment (IRE), a non-government organisation (NGO) based in
Yogyakarta. Between August 2007 and August 2008, IRE and Australia-Indonesian
Partnership (AIP) 177 had a project named ‘Revitalizing Craftswomen of Batik
Cottage Industry in Bantul’. 178 This project was intended to develop the
craftswomen’s skills in Wukirsari village, Imogiri, 179 the part of Bantul regency,
whose enterprises collapsed due to the earthquake in May 2006. It provided training
and guidance for these women to improve their capacity to manage batik enterprises,
expanding their access to networks, strengthening their control over the production
technology and capital, and increasing their knowledge so that they could market
their products. 180 BH allowed me to contact the participants in IRE’s program in
Wukirsari village.
In 2008, there were 185 households in Dusun181 Giriloyo-Wukirsari village involved
in the batik making business. All of them are within the category of cottage industry
or micro enterprise, which in this research is also considered as small enterprises
(SEs) 182. The project conducted by IRE and AIP was divided the batik makers in the
177
AIP is the acronym of the Australian bilateral aid program to Indonesia which was created in May
2006. The program has a budget of around AUD 2 billion over a five year period. See Australian
Agency for International Development (AusAID), About AusAID in Indonesia (2010) Commonwealth
of Australia <http://www.indo.ausaid.gov.au/aboutausaid.html>.
178
Institute for Research and Empowerment, Experiences in Implementing Programs and Projects
(2002-2010) <http://www.ireyogya.org/en/about/pengalaman-862c04.html>.
179
Ibid.
180
Ibid.
181
Dusun is the smallest part of administrative unit and becomes part of the village.
182
See, Chapter 1 (section 1.6.).
275
area into four groups, namely Sekar Arum, Sekar Kedhaton, Sido Mukti and
Sungging Tumpuk. Each group consisted of around 20 households which making
batik. However, at the time the interviews conducted, only two group leaders who
were able to participate. Three other interview participants were approached by
asking the two existing participants to recommend other batik SMEs in their areas.
Details of all participants are presented in the table 2 below.
Table 11: Profile of Interview Participants in the Special Province of
Yogyakarta from Batik SME Owners Category
Name of
Groups
BP
BL
SM
SA
SKM
GL
SK
Enterprises/ Products
Batik tulis and cap
Batik cap and combination
between tulis and cap
Batik tulis
Batik Tulis
Batik tulis
Batik tulis and cap
Batik tulis
Type of enterprises
Medium enterprise
Medium enterprise
Micro/Small enterprise
Micro/ Small enterprise
Micro/ Small enterprise
Small enterprise
Micro/ Small enterprise
6.10. The Attitudes of Batik SMEs in Pekalongan and Yogyakarta on
Intellectual Property Issues: The Interview Outcomes
All 14 interview participants in Pekalongan and Yogyakarta were asked to respond to
several questions which covered the issues on IPRs knowledge, the use of IPRs in
their business strategy, the methods adopted to protect IPR aspects of their business,
and whether they received any assistance from the government and/or NGOs on IPRs
matters, and their expectations of the government regarding IPR issues. Questions
were also asked regarding any problems experienced in obtaining and maintaining
IPRs protection. Only three participants include IPRs in their businesses strategy, and
276
all of their responses are related to the long and complex application process and the
expense of registration. For other participants who have not hold IPRs, these have
become their concerns too. However, the legislative requirements and administrative
processes to obtain relevant IPRs protection for the batik industry will be dealt with
in chapter 8. 183 Therefore, the responses on such issues will not be presented again
here. Below are the interviewees’ responses on the other areas that are covered by the
questions asked.
a. Knowledge about IPRs
The first question being asked was about Hak Kekayaan Intelektual (HKI), the
Indonesian term for Intellectual Property Rights (IPRs). Almost all participants,
except SM, said that they have heard the term of HKI. However, 11 (KD, MR, DP,
NC, Ar, HMT, BL, SM, SA, SKM, GL and SK) admitted that they do not have deep
knowledge about the IPRs. They only heard from many sources that IPRs,
particularly trademark, copyright and industrial design right, are important for their
businesses. The sources of information on IPR issues for the participants included
mass media (TV news, magazines, and newspapers), friends, and government
agencies. Six participants (DP, SM, SA, SKM, GL, and SK) also confessed that they
did not know how to obtain IPRs for their products.
Sometimes, the limited knowledge creates a misleading perception of IPRs by the
participants. Four participants (KD, MR, SM and BL) said they did not think that
protecting their IP assets is important for their businesses because they only run
183
See Chapter 8, section 8.2.
277
small (and medium) enterprises. Finding the effective methods to market their
products was more important for them. Two other participants (NC and DP) link
trademark with other issues. NC perceived trademark as only important for SMEs
that wish to export their products. DP expressed concern that registering trademark
would increase the tax payment of his enterprise to the government.
b. Use of IPRs in the Business and the Reasons Not To Use Them
Knowing about the importance of IPRs to their businesses does not mean that the
participants, then, include IPRs as part of their business strategies. Only three (KJ,
NC and BP) of the 14 participants have already registered their trademarks. Of these
three participants, only BP had the initiative to register his trademark of his own
accord. The owners of KJ and NC registered their trademarks because the cost of
registration was partly funded (50 per cent) by Dinas KUMKM in the regency of
Pekalongan. Apart from that, NC registered his business’ trademark because his
foreign buyers kept on asking about the trademark of his products. Meanwhile, as the
manager of BP, AH, who has law degree, has understood the function of trademark
for his parents business and took initiative to register their trademark in 2007.
There are various reasons why the 11 other participants did not register their
trademarks. Apart from the four participants (KD, MR, SM, and BL) who mentioned
the small size of their businesses as the reason not to register their trademarks, six of
participants (DP, AR, SA, SKM, GL, and SK) stated that their limited knowledge on
the nature of and procedure to obtain trademark prevented them using IPRs for their
businesses. Even, the owner of KD said she did not register her trademark because
278
other batik entrepreneurs whom she knows do not register theirs either. A different
reason was presented by the owner of HMT who stated that he purposely does not
register trademark because he makes batik textiles based on outsourcing orders for
other labels or trademarks.
Compared to trademark, copyright, industrial designs and trade secrets were not
really popular for the participants. All interview participants did not register
copyright or industrial designs for their products and did not use trade secret
methods 184 to protect their businesses. The reasons why the participants were
reluctant to register copyright and industrial design are more or less similar with the
reasons given above for trademark. However, one reason is related to the lack of new
creativity in the motifs and designs of their products. Two participants in Yogyakarta
(SK and BL) said that they rarely produce new motifs or designs as the supply of
existing batik motifs and designs would not be exhausted for quite some time to
come. Other participants in the two regions said although they made new motifs or
designs for their batik products, the new motifs or designs are mostly based on
traditional designs with only a few added pieces of ornamentation. Moreover, three
participants (GL, SA and BP) dared to say that the motifs or designs of their products
are the common property of Indonesian people which can be used by anybody. Other
participants (KD, MR, HMT, GL and SK) said that their businesses are not
threatened if other batik entrepreneurs made batik textiles with the same or similar
motifs with their products. However, two of them (NC and KJ) pronounced their
objections if their motifs are used by foreign entrepreneurs, like Malaysian, to
produce batik textiles.
184
Further discussion on trade secret issues will be presented later in the ‘The Methods to Protect IP
Assets’ part of this chapter.
279
Copying seems to be endemic in this industry. According to Kadir, 185 there are two
books, one written by Rouffaer 186 and another by De Kat Angelino, 187 that have
reported on this matter. In the past, particularly in Pekalongan, where batik textile
became a major trading commodity, it was common that if one motif or designs sold
well in the markets, then other batik entrepreneurs would copy and produce the
textiles with or without new variations. Not only motifs or designs were copied, the
signature label of van Zuylen, 188 which had a function similar to a trademark, had
also been infringed in the past. 189 However, there was no report about legal action
being taken. In the modern setting, one participant (HMT) mentioned there was a
case which involved one batik entrepreneur of Pekalongan who was alleged to have
copied batik motifs that had been created by BK of Solo. However, this case was
settled out of court. The legacy of a permissive attitude toward copying in this
industry is still found today and this was confirmed through the above response of
the participants.
To the three participants who had already registered their trademarks, a question
about the effect of their registered trademark on their businesses was asked. The
owner of KJ and BP said that there was no effect on their business after registering
their trademarks. For them, registering the trademark is not related to their sales
expansion, rather, it is done as a precaution action for the future. On the other hand,
185
Fatchiyah A Kadir, 'Perkembangan Industri Batik Pekalongan dari Abad 19 sampai Sekarang
[Development of Batik Industry in Pekalongan From 19th Century Until Now]' (Paper presented at the
Jejak Telusur dan Pengembangan Batik Pekalongan [Traces and Development of Pekalongan Batik],
Pekalongan, 18-19 Maret 2005), 93–4.
186
G P Rouffaer, De Voornamste Industrien der Inlandsche Bevolking van Java en Madoera (1904).
187
De Kat Angelino, above n 44.
188
See Chapter 6 (section 6.3.).
189
Kadir, above 185, 94.
280
NC admitted that there was a rise in his products sale after registering trademark;
however, he stated that the registered trademark does not contribute significantly as
the quality of his products is making the sales volume rise. Similarly with KJ and BP,
NC considered registering his trademark as an anticipatory action to counter
trademark infringement of his products.
c. The Methods to Protect IP Assets
As 11 participants (KD, MR, DP, Ar, HMT, BL, SM, SA, SKM, GL, and SK) did
not include IPRs as part of their business strategies, the question about methods to
protect their IP assets was asked. All of them said that they do not use any legal
method to protect their IP assets. They run their businesses based on trust in their
employees and buyers. Interestingly, when it was explained that the risk of not
appropriately protecting their IP assets with a legal method is that their products can
be easily copied by competitors with a very limited chance to pursue legal action and
get compensation from these competitors, some of them (KD, SKM and GL) said
that they did not really care about that. Other participants (MR, DP, Ar, HMT, BL,
SM, SA and SK) stated that they only have little concern on this matter. As
mentioned above, the copying habit in this industry has existed since time
immemorial and it is hard to change it today. Therefore, with such habit, it is not
surprising that the participants have only little concern when their products are
copied by other competitors.
281
Regarding trade secrets, the 14 participants said that they do not apply other legal
methods, 190 such as a secrecy agreement or an employment agreement with a secrecy
clause. Once again, most of them, except SM, did not feel that their businesses were
threatened if other people know their trade secrets. However, three participants (NC,
KJ, and HMT) applied other methods to protect their IP assets. NC said that he does
not let his employees, particularly the new ones whom he does not trust, know the
whole colouring process. A similar method has been adopted by the owner of KJ,
who only reveals some parts of the whole production process information to her
employees. Hence, there will be no employee who understands the production
process from the start till finish. Meanwhile, to protect his business trade secret, the
owner of HMT only allows his family members to work on and manage something
that he considers as a secret in his business.
d. Assistance from Government Agencies and/or NGOs on IPR issues
Regarding the assistance from government agencies, two participants from
Pekalongan (NC and KJ) mentioned the Agency of Cooperatives and SMEs
(AoCSMEs) in their regions as the one which provided them with IPRs information
through information dissemination seminars. One participant from Yogyakarta (SA)
stated that Balai Besar Kerajinan dan Batik (Center for Handicraft and Batik) under
the Ministry of Industry runs seminars on IPR issues. However, the assistance of
government agencies was limited only on providing information on IPRs to the
interviewees. Only two participants (from Pekalongan) experienced being the
190
For detailed discussion on legal method of trade secret protection applied in Indonesia, see Chapter
4 (section 4.4.5.).
282
recipients of the AoCSMEs program, which, they noted, took care of all the
administrative matters and provided 50 per cent financial assistance to cover the cost
of their trademarks registration.
All participants showed their interest in participating in a government program
related to IPRs, if there is any. However, lack of information on such programs
prevented them participating. The owner of KJ said that she could access the
government program for the first time through one of her relatives by marriage who
received an Upakarti award. 191 The AoCSMEs officer informed her relative of the
opportunity to participate in the program, and the relative then asked her to join the
program. However, NC participated in the government programs for the first time
after he searched for information and proactively asked about such assistance
programs at the relevant government agencies. After participating successfully in one
trade fair which was organised by AoCSMEs, he was invited to join various other
government assistance programs, including the assistance to register his trademark.
Although he was grateful to join the program, he admitted that registering trademark
through the assistance of AoCSMEs took a long time to complete. Later, he tried to
use the service of an IP lawyer to register his other trademarks. He was quite content
as the registration process was faster than the previous one.
From these two stories, there are two things that are worth discussing. Some
informants indicate that information on the programs is inaccessible. One participant
191
The prestigious award presented by the President of Republic of Indonesia in appreciation for those
who have served and made a substantial contribution to small and medium industry. See 'Menteri
Perindustrian Puji Amirul Raih Upakarti [Ministry of Industry Praised Amirul Who Received
Upakarti]
',
Kendari
Ekspres
(Kendari-Indonesia),
8
January
2009
<http://kendariekspres.com/content/view/907/43/>.
283
from Pekalongan, MR, even suspected that the government agency, in this case
AoCSMEs, favours certain SMEs as the information on such programs was not
shared equally among all batik SMEs in Pekalongan. However, the NC’s story
reveals that a good entrepreneur needs to actively seek for something that he or she
needs. It is a reflection of strong personal initiative, which is thought of as one of the
characteristics of a successful entrepreneur. 192 A person who has strong personal
initiative ‘acts independently and initiates action without any simulation or support
from others’. 193 In conclusion, although the government officers are required to
demonstrate transparency in creating equal opportunity for their stakeholders, it is
also the responsibility of the one who wants to enjoy such assistance programs to
actively look for such opportunity.
Regarding IP assistance programs from NGOs, no participants received such
assistance. Even, IRE which had a program in the Wukirsari village between 2007
and 2008 did not provide assistance related to IPR matters for small enterprises that
took part in their program. However, one participant (SM) mentioned that university
students who conducted field service (KKN - Kuliah Kerja Nyata) had once planned
to assist in registering trademarks of small enterprises in her village; however, it
seems the plan never eventuated.
e. Expectations of the Government Related to IPR issues
192
193
John B Miner, The 4 Routes to Entrepreneurial Success (Berret-Koehler Publishers, 1996) 11.
Ibid.
284
There are two major issues that the participants expected action from the government
in relation to IPR issues. First, almost all of the participants, except GL, mentioned
that they need the government to provide them with clear information related to the
importance of IPRs to their businesses, the procedure to obtain IPRs, and how to
make their IP assets useful for their business. Two of them (NC and HMT) expected
that the government could share information on IPR issues continually with the batik
small medium entrepreneurs. Moreover, MR and BL suggested that the government
establish a kind of organisation for batik small and medium entrepreneurs that deals
with IPR issues. SKM even expected that the government have a program that not
only provides entrepreneurs with information, but also guides them in dealing with
IPR issues.
Sharing of information on IPRs is indeed important for the participants. It is
demonstrated by their enthusiasm during the interview process to listen to a brief
explanation on the nature of and the procedure to obtain IPRs, and the importance of
IPRs to their businesses. Five entrepreneurs (DP, SKM, AM, SA and SK) even said
that they are really interested in registering their trademarks and would learn to
include IPRs seriously as part of their business strategies.
The second major issue is related to the procedure to obtain IPRs, particularly
trademark registration. As discussed in Chapter 4, there are two concerns related to
the procedure to obtain IPRs which was remarked upon by the participants, namely
the long and complicated procedure involved and the cost of registration. Regarding
the long and complicated procedure to obtain IPRs, particularly trademark, the
participants expected that the government, in this case Directorate General of
285
Intellectual Property Rights (DGIPR), could make the procedure simpler and shorter.
The owner of SKM said that if all the registration application could be submitted
collectively through the AoCSMEs, it would be great for batik SMEs. Actually, what
SKM said is something that has been done by the regional office of DGIPR at
provincial level since 2001. 194 However, the lack of information on this matter made
the owner of SKM think that he needs to go the central office to register his
trademark.
The costs of IP registration can be divided into compulsory and non-compulsory
costs. At first, most of participants (except NC, KJ, BP and DP) assumed that the
costs of IP registration are extremely high. However, after the compulsory cost of
registration was revealed, all of them considered it is not too expensive. Perhaps, if
such businesses knew that the actual cost of registration (which includes not only the
formal fee, but also the ‘informal’ fee), 195 the participants would have different
responses. ‘Non-compulsory’ costs of registration could not be predicted, however,
and deterred some people from registering their IP assets.
Besides these two major issues, there is another issue that was commented upon by
two participants (AR and SKM). These two participants imagined that the
government could provide financial assistance to all SMEs in registering their IPRs.
Although the AoCSMEs had such program, the reach of such assistance program is
not extensive. The program only touched a limited number of SMEs in that area.
194
Further discussion on this matter, see Chapter 4 (section 4.3.2.2.).
Detailed discussion on the formal and informal cost of registration is given in Chapter 8 in the
‘Onerous Costs’ part.
195
286
6.11.
Conclusion
The batik industry in Indonesia has a long and dynamic history of dealing with
social, economic, legal and political changes in the country. As part of the state’s
business laws, IPRs certainly have impact on business in Indonesia, regardless of the
nature of industry. However, despite the fact that some IPRs, such as geographical
indication, trademark, copyright, industrial designs right, and trade secret, are
relevant and useful to the batik industry, batik SMEs in Pekalongan and Yogyakarta,
the two centres of batik industry in Indonesia, have not included them in their
business strategies. Apart from the lack of information on the nature of IPRs and
their importance to a business, there are some conditions that hamper batik SME
owners actively applying IPRs in their businesses. These conditions include the
permissive attitude toward copying, a practice presented since the beginning of the
industry, the lack of guidance and assistance from other parties who are more
experienced with IPRs, and the long, complicated and sometimes expensive
procedure to obtain IPRs.
287
CHAPTER 7
THE JAMU INDUSTRY AND INTELLECTUAL PROPERTY
SYSTEM IN INDONESIA: THE CASE OF JAMU SMALL AND
MEDIUM ENTERPRISES IN SEMARANG AND
YOGYAKARTA
7.1. Introduction
The Jamu (traditional herbal medicines) industry is the second case study presented
in this thesis. Like batik, jamu is closely connected with Javanese traditional
knowledge (TK), existing from ‘time immemorial’, and today it is also preserved as
part of the national cultural heritage of Indonesia. In terms of commercialisation,
although the jamu and batik industries did not begin at the same time, both were
established as industries (generally at a cottage or micro level, particularly in relation
to jamu) long before the period of independence. However, while batik has been a
familiar subject of study, not much has been written about jamu and its related
industry.
For that reason, although not claiming to be a fully comprehensive coverage of jamu
and its industry, this chapter — which is based on data collected from library,
internet and during 2009 fieldwork in Semarang and Yogyakarta — should be seen
as a contribution to the existing literature on the subject, particularly in relation to
intellectual property rights (IPRs) issues.
Such discussion is important because the jamu industry consists of objects of IPRs
protection, such as copyright, trademarks, petty patents, geographical indications
288
(GI), trade secret and plants variety protection (PVP), traditional knowledge (TK)
and traditional cultural expression (TCE). For that reason, it is important that IPRs be
integrated into the industry. However, the utilisation of IPRs among jamu SMEs in
Indonesia is low. This chapter would like to discuss why jamu SMEs hesitate to
integrate IPRs in their business activities. The assessment would examine whether
the requirements to obtain protection stipulated in the relevant IPRs legislation are
difficult for jamu SMEs in Indonesia to satisfy. It also presents the attitudes of jamu
SMEs towards the IPRs issues.
This chapter begins with a general discussion on the origin, nature and early
development of Indonesian jamu. The next part will present an analysis of the
development of industry, the regulations that govern it, and issues that the industry
encounters today. The relationship between IPRs and the jamu industry will be a
centre of debate in the subsequent part. Of the various IPRs, those rights relevant to
the jamu industry in Indonesia will be discussed. This part will also explain the
requirements of these relevant rights under Indonesian IP laws and the limitations
toad the problems of Indonesian jamu SMEs in satisfying these requirements. The
next part, which gives a general description of the industry and more specifically
supplies a brief profile of the jamu industry in Semarang and Yogyakarta, will
introduce the last part of the chapter, a discussion on the attitudes of the 13 jamu
SMEs in Semarang and Yogyakarta to dealing with IPR issues in their business
activities.
289
7.2. Jamu of Indonesia: A Brief Discourse
The term ‘jamu’ refers to traditional herbal medicines that are well-known in several
countries in the Southeast Asian where a large population of ethnic Malays live.
They include Indonesia, Malaysia, Singapore, and Brunei Darussalam. 1 In each of
these countries, there are local recipes and methods to prepare jamu which are based
on their local tradition. 2 However, generally, jamu is made from a blend of medicinal
plants, which can be fresh, dried, powdered, or extracted. Most jamu are a mixture of
up to 40 different medicinal herbs. 3
In general, jamu are considered most effective in curing minor ailments, such as:
colds, headaches and fatigue; to heal ailments traditionally identified as skin diseases
(rather than as viral contagions whose symptoms may include rashes of various
types), such as measles, mumps and chickenpox; to improve sexual performance; and
to ease female reproductive problems encountered during menstruation, in pregnancy
and during the post-natal period. 4 Examples of jamu formula that are well-known
treatments of other kinds of health problems are: Beras Kencur, with its main
ingredients rice and resurrection lily (kencur; kaempferia galanga) for tiredness; and
Kunir Asem, made mostly from turmeric and tamarind, for general tonic and
obesity. 5 Apart from their curative powers, jamu also function as cosmetics to care
for women’s beauty ‘from top to toe’. For this purpose, there is, for instance, lulur,
1
Christine Tuschinsky, 'Jamu' in H Selin (ed), Encyclopaedia of the History of Science, Technology,
and Medicine in Non-Western Cultures (Springer, 2008) 1151, 1151.
2
Ibid.
3
Ibid 1152.
4
Roy Jordaan, 'Jamu: Traditional Javanese Herbal Tonics' in Java Indonesia, Periplus Adventure
Guide Series (Periplus, 1997) 84, 85 (‘Jamu: Traditional Javanese’).
5
Susan Jane Beers, Jamu: The Ancient Indonesian Art of Herbal Healing (Periplus, 2001) 180.
290
an abrasive herbal paste, made from rice, mashed bark and flowers, to give soft,
clean, smooth and glowing skin. 6
Although jamu have therapeutic effects, they differ from modern synthetic
medicines. Jamu represent a holistic approach dealing with health problems. A jamu
formula is intended to treat a particular problem in one organ of the body while
considering its effects on the whole body. 7 Traditional healers of Indonesia believe
that there should be a balance between ‘hot’ and ‘cold’ elements in the human body.
This idea has resulted in jamu formulae being divided into categories of either ‘hot’
and ‘cold’ 8 on the basis of their contrasting healing effect. 9 For instance, ‘hot’ jamu
formulae are for curing ‘cold’ illness. In addition, instead of curing the illness
immediately like modern synthetic medicines, jamu heal gradually with minimal side
effects. 10 One needs to consume jamu regularly to obtain the best therapeutic
effects. 11
In Indonesia, it is believed that jamu originated from the ancient palaces of Java. The
existence of stone reliefs in Borobudur temple (established around AD 800–900),
depicting some herbs being pounded to make mixtures for feminine health and
beauty, strengthens this theory. Besides that, the Javanese royal courts in the two
cities, Yogyakarta and Surakarta, retain collections of ancient books and writings,
such as the Usada (‘Book of Healing’), Serat Kawruh Bab Jampi-jampi (‘A Treatise
on All Manner of Cures’) and Serat Centhini (‘Book of Centhini’), as well as
6
Ibid 141.
Ibid 29.
8
Jordaan, above n 4, 85.
9
Beers, above n 5, 29.
10
Ibid 30.
11
Ibid
7
291
manuscripts (Primbon Jawa) that contain information ranging from the use of jamu
in the daily life of the Javanese during that time, and jamu recipes with notes on their
efficacy. 12
During the Dutch colonial era, native Indonesians, particularly the Javanese, were
not the only ethnic group who were interested in studying, making and using
traditional herbal medicine. History records the involvement of some persons of
Dutch or Eurasian (mixed Dutch and native Indonesian) descent as well as ethnic
Chinese descendants or Peranakan, who lived or worked in the Netherland East
Indies, in developing traditional herbal medicine that is today better-known as jamu.
For instance, in the early 1900s, Mrs Kloppenburgh-Versteegh, a Eurasian woman,
who had extensive knowledge of traditional herbal medicines, wrote a book on
medicinal plants which was accompanied by a plant atlas with drawings of the
plants, and methods of preparation of traditional remedies. 13 Her writings, also
translated into Malay, gained wide readership in the Indies at that time 14 and they
were still being reprinted up to the late 1990s. 15
12
Ibid 14–19.
J M C Kloppenburgh-Versteegh, Indische Planten en Haar Geneeskracht [Indies Plants and Their
Healing Properties] (Marsman & Stroik, 1907), also available just a few years later in Malay: Hans
Pols, ‘European Physicians and Botanists, Indigenous Herbal Medicine in the Dutch East indies, and
Colonial Networks of Mediation’ (2009) 3 East Asia Science, Technology and Society 173, 174 n 1,
191, 193, 194, 198, 206 (‘European Physicians and Botanists’); Hans Pols, 'The Triumph of Jamu'
(2010) 100 Inside Indonesia
<http://www.insideindonesia.org/stories/the-triumph-of-jamu26061327>.
14
Pols, ‘Triumph of Jamu’, above n 13.
15
Beers, above n 5, 16. Among earlier books printed were two written by women in the 1870s: Pols,
‘European Physcians and Botanists’, above n 13, 172, 179.
13
292
About a century ago, jamu was made and used mostly in Java 16. However, people on
the neighbouring islands of Bali 17 and Madura, 18 where there was strong historical
connection with Java, have long been familiar with jamu. In the colonial period, the
dissemination of jamu beyond Java and its neighbouring islands occurred in parallel
with the Dutch resettlement and colonisation policy, which moved 200,000 people
from rural Java between 1905 and 1940. 19 Following independence, the post 1950
transmigration programme has resettled persons living in the more densely populated
islands of Java and Bali to other less populated regions of Indonesia, 20 also played
and continues to play an important role in the spreading of jamu to other areas of
Indonesia.
At the beginning, jamu were made and consumed exclusively by the royal families in
Java; however, later, people living beyond the palaces could have access to jamu as
well. This was because commoners who worked in the palace brought the knowledge
of making jamu to their communities. Since then, jamu have been produced at home
to look after health problems of family members. The mother of the household was
the one who traditionally has the responsibility to fulfil such a duty. The knowledge
of making jamu was generally passed to her by her mother and she in turn would
16
Christoph Antons and Rosy Antons-Sutanto, 'Traditional Medicine and Intellectual Property Rights:
A Case Study of the Indonesian Jamu Industry' in Christoph Antons (ed), Traditional Knowledge,
Traditional Cultural Expressions and Intellectual Property Law in the Asia-Pacific Region (Wolters
Kluwer, 2009) 363, 368.
17
Beers, above n 5, 14.
18
Roy E Jordaan, Folk Medicine in Madura (Indonesia) (PhD Thesis, University of Leiden, 1985)
(‘Folk Medicine’).
19
Walter R Erdelen et al, 'Biodiversity, Traditional Medicine and the Sustainable Use of Indigenous
Medicinal Plants in Indonesia' (1999) (November) Indigenous knowledge and Development Monitor
<http://www.iss.nl/ikdm/ikdm/ikdm/7-3/erdelen.html>.
20
N Setiawan, 'Satu Abad Transmigrasi di Indonesia: Perjalanan Sejarah Pelaksanaan, 1905-2005
[One Century of Transmigration Programme in Indonesia: The Historical Journey of Programme,
1905-2005]' (2009) (March ) Pustaka Ilmiah Universitas Padjajaran <http://pustaka.unpad.ac.id/wpcontent/uploads/2009/03/satu_abad_transmigrasi_di_indonesia.pdf>.
293
pass it on to her daughters. 21 The daughters of family became more proficient in
making jamu by observing and helping their mothers preparing jamu mixtures. 22
When they grew up, it was customary that these women exchanged recipes for jamu
among female villagers to further develop their jamu making skills. Making jamu
was considered an essential skill that they needed to acquire before entering married
life. 23
The commercialisation of jamu began when the surplus of jamu made in the family
kitchen was sold to outsiders. The homemade jamu — which was sold door to door
by women who walked and carried the bottles of jamu with their long batik scarf or
selendang — is known as jamu gendong. Jamu gendong still exists today and is
familiar sight on the streets of Indonesia, especially on the island of Java. Although
most jamu gendong vendors individually peddle their jamu products, jamu
production often involves the whole family. 24 In jamu gendong enterprises, women
play a significant role from the preparation stage through to peddling the finished
products. Jamu gendong is an example of micro enterprises of the jamu industry in
Indonesia. There are also larger sized enterprises in the jamu industry of Indonesia.
Examples of jamu enterprises in this category are PT Jamu Iboe Jaya, PT Nyonya
Meneer, PT Jamu Jago and PT Sido Muncul.
Along with the development of the jamu industry, the form of jamu also changes.
Jamu gendong are sold in the form of a decoction. For reasons of practicality, bigger
jamu enterprises produce jamu in more modern forms, such as powders, tablets, and
21
Antons and Antons-Sutanto, above n 16, 369.
Ibid.
23
Beers, above n 5, 143.
24
Ibid,132.
22
294
capsules for internal use; and in the forms of ointments, oils, tonics or compresses for
external use. 25 Moreover, since 1963, the government of Indonesia has regulated the
jamu industry by imposing some formalities to the industry and their products. For
example, Law No 7 of 1963 on Pharmacy 26 contrasts the definition of obat
(medicine) with that of obat asli Indonesia (indigenous medicines of Indonesia), and
further allows categorises jamu as obat asli Indonesia. 27 The government also
requires the producers of jamu to obtain a registration number from the Indonesian
Food and Drug Control Directorate (Badan Pengawasan Obat dan Makanan –
BPOM) before selling the products to the public. 28 Obviously, to be registered, the
jamu products need to be tested by government laboratories and satisfy a set of
requirements. 29
Jamu has so massive a popularity in Indonesia that hardly an Indonesian can be
found who n has ever consumed jamu in their lifetime. Apart from claims for
efficacy and minimal side effects, jamu are popular in Indonesia as they are
inexpensive and easy to obtain. Compared to modern medicines, both imported and
locally made, the price of jamu is lower and they can be obtained without a
prescription being obtained from medical practitioner. However, despite this fact and
the pride that Indonesians feel for jamu as the cultural heritage of Indonesia,
Indonesian medical practitioners have been sceptical of the effectiveness of jamu to
cure diseases. In their professional point of views, unlike Western medicines, the
25
Tuschinsky, above n 1, 1152.
Undang-Undang No 7 Tahun 1963 Tentang Farmasi [Law No 7 of 1963 on Pharmacy] (Indonesia).
27
Obat asli Indonesia is defined as medicines that are obtained directly from natural materials found
in Indonesia, processed in a simple manner based on experience and used in traditional therapies.
While obat is medicines which are made from animals, plants, minerals, and synthetic medicines. See
Undang-Undang No 7 Tahun 1963 Tentang Farmasi [Law No 7 of 1963 on Pharmacy] (Indonesia) art
2(c).
28
Beers, above n 5, 46.
29
Ibid.
26
295
claims for jamu are difficult to prove scientifically. To the present time, most are
reluctant professionally to suggest recourse to jamu or to prescribe jamu to their
patients. 30
7.3. The Jamu Industry in Indonesia: Its Development, Regulation and
Current Issues
Although the traditional herbal medicines of Indonesia were already widely-known
from both ancient Indonesia and the early colonial period, the early 20th century is
often cited as the starting date of the modern jamu industry in Indonesia. 31 The large,
modern jamu enterprises mentioned above (PT Jamu Iboe, 32 PT Nyonya Meneer 33
and PT Jamu Jago, 34) were established around that time. These businesses began as
cottage industries where the founders manufactured simple jamu formulas at home. 35
Interestingly, these enterprises were mostly set up by Peranakan entrepreneurs 36 in
the Central and East Java provinces. Because these entrepreneurs had cultural
connections to China, Afdhal and Welsch presume that they manufactured jamu that
30
Ibid 38.
Ahmad Fuad Afdhal and Robert Welsch, 'The Rise of the Modern Jamu Industry in Indonesia: A
Preliminary Overview' in Sjaak Van Der Geest and Susan Reynolds Whyte (eds), The Context of
Medicines in Developing Countries (Kluwer Academic Publishers, 1988) 149, 154.
32
PT Jamu Iboe Jaya, with its trademark, Djamoe Ibu Tjap 2 Njonja, was established in 1910 by two
Peranakan women, mother and daughter, in Surabaya. See Mengenai Kami [About Us] (2007)
<http://www.jamuiboe.com/kami.php>.
33
PT Nyonya Meneer was pioneered by Mrs Meneer, a Peranakan woman, in Semarang in 1919.
Profile Nyonya Meneer (2008) PT. Nyonya Meneer <http://www.nyonyameneer.com/english/profilehistory.php>.
3434
PT Jamu Jago was founded in 1919 by a male Peranakan entrepreneur in Semarang. Company
Profile (2009) PT. Jamu Jago
<http://www.jago.co.id/index.php?option=com_content&view=frontpage>.
35
Afdhal and Welsch, above n 31, 154.
36
Antons and Antons-Sutanto, above n 16, 372.
31
296
did not rely solely on the old Javanese recipes; 37 rather they developed jamu which
combined the basic Javanese recipes with those of China. 38
The emergence of the jamu industry in Indonesia was inspired by imported
pharmaceuticals from Europe and other parts of Asia, which overflowed markets in
Java from the mid 19th century onwards. 39 While some imported pharmaceuticals
contained complicated chemical substances, many others were simply made from
plants like jamu. 40 This encouraged people in Java who had knowledge of medicinal
herbs to begin producing simple medicines using plant materials. These products are
now classified as jamu. Moreover, it seems that the recommendation of Head of the
Health Bureau, Willem Bosch, in the Dutch colonial administration in 1847 that use
be made of indigenous jamu for treatment of community diseases 41 provided
encouragement and confidence for these early jamu manufacturers to compete with
imported pharmaceuticals.
However, up to the 1930s, it appears that the word of jamu had a meaning limited to
‘tonic’, that is, something which is only good for the maintenance of health but
lacking the curative effects of obat (medicine). 42 For reasons of competition these
early jamu entrepreneurs used the term obat (medicine) for their products rather than
37
Afdhal and Welsch, above n 31, 154.
Ibid 169.
39
Ibid 154.
40
Ibid.
41
Siti Chaerani Djen Amar, Gunem Catur in the Sunda Region of West Java: Indigenous
Communication on the MAC Plant Knowledge and Practice within the ARISAN in Lembang,
Indonesia (PhD Thesis, Leiden University, 2010)
<https://openaccess.leidenuniv.nl/bitstream/1887/16092/1/IBU+POPPY'S+DISSERTATION+FINAL
-FINAL+28.9.10.pdf>.
42
Afdhal and Welsch refer to ‘A Dictionary of Malayan Medicine’ written by Gimlette and Thomson
in 1971 for the meaning of jamu and ubat: Afdhal and Welsch, above n 31, 169 n 9.
38
297
marketing them under the label of jamu. 43 At that time, jamu were already
manufactured in the form of bubuk (powder) which was more practical to consume
than their original jamu form as a decoction. Again, the reason for this action in
regard to products targeting minor health problems was to compete in the market
with imported medicines which attracted consumers because of their convenient
packaging. 44
Between 1942 and 1949, Indonesia (then the Dutch East Indies) endured two periods
of war. First, Japanese military forces occupied the Dutch East Indies between 1942
and 1945; and then came the struggle for independence between 1945 and 1949.
These years provided ‘a period of hunger, sickness and want’ 45 for people living in
the region. During these critical years, all regions of the Netherland Dutch East
Indies
experienced
difficulty
in
accessing
imported
goods,
including
pharmaceuticals. While the needs of medical services for pharmaceuticals increased,
the stocks of imported synthetic pharmaceuticals — even the very basic, standard
ones — ran out with limited hopes of replenishing them anytime in the near future. 46
In the midst of this dire situation, medical professionals in the Dutch East Indies,
particularly those native-born, had no choice but to replace western pharmaceuticals
with traditional ones which were made from plant materials ‘found in their own
backyard’.
43
Afdhal and Welsch, above n 31, 155.
Ibid.
45
Ibid 156.
46
Ibid, 156.
44
298
However, because most of Indonesian indigenous physicians were trained at Dutchoriented medical schools 47, they lacked knowledge in traditional herbal medicines or
jamu. Around that time, there were two important efforts to acquire more knowledge
on traditional herbal medicines or jamu. First, the Vereeniging van Indische Artsen
(Society of Indies Physicians) 48 that invited two traditional herbal medicine
practitioners to explain about jamu at their second congress to be held in 1939 in
Surakarta. 49 Secondly, during the Japanese Occupation, the Japanese military
government (which was also interested in jamu) established the Indonesian
Traditional Committee in June 1944.50 Under the guidance of Professor Sato, Chief
of the Government Department of Health, the committee appointed the head of the
Society of Indies Physicians to coordinate with the jamu producers. 51
Entering the period of independence, the jamu industry developed quite well in the
early years of the New Order era. The first President of Indonesia, Soekarno had
personal interest in traditional herbal medicine 52 and supported its production and
use in Indonesia. 53 His policy emphasising the importance of Indonesian people
being self-supporting also contributed to that support. 54 Following his directive,
imported goods, including Western pharmaceutical chemicals, were extremely hard
to obtain and, consequently, the prices of imported synthetic medicines skyrocketed. 55 Most Indonesian people on low incomes could not afford to buy modern
47
Pols, ‘European Physicians and Botanists’, above n 13, 200.
Society of Indies Physicians (SIP) was formed in 1911. See ibid.
49
Pols, ‘Triumph of Jamu’, above n 13, 200.
50
Beers, above n 5, 21.
51
Ibid.
52
Amar, above n 41, 124.
53
Antons and Antons-Sutanto, above n 16, 374.
54
Beers, above n 5, 21.
55
Ibid.
48
299
medicines and, thus, jamu once again became a convenient alternative to treat their
health problems.
Although jamu was accepted as a substitute for imported medicine during the years
of crisis, the positive attitude of Indonesian medical professionals towards jamu did
not last long. After the access to imported western medicines was re-opened,
Indonesian doctors were quick to revert to doubting the efficacy of jamu. 56 As
mentioned previously, in the eyes of most Indonesian medical practitioners, jamu
were not as reliable as imported synthetic pharmaceuticals (already tested
scientifically in the laboratory) were in terms of curing major illness, nor were the
prepared materials as convenient to use. 57
In the 1963, however, the government passed Law No 7 of 1963 on Pharmacy 58,
which was the first legislation to recognise traditional medicine (in Indonesia, and
jamu falls within this category. The law contains some provisions related to jamu and
its industry which are of interest to the discussion here. First, Article 2 provides the
definition of modern synthetic pharmaceuticals (obat modern) and traditional
Indonesian medicine (obat asli Indonesia), which formalises the distinction between
these kinds of medicines. 59 Further, the wording of the elucidation of Article 2 could
be interpreted as placing obat asli Indonesia subordinate to obat modern in medical
treatments. 60 Article 7 speaks of the government providing guidance and supervision
for obat asli Indonesia businesses, for which the implementation would be regulated
56
Afdhal and Welsch, above n 31, 157.
Beers, above n 5, 38.
58
Undang-Undang No 7 Tahun 1963 Tentang Farmasi [Law No 7 of 1963 on Pharmacy] (Indonesia).
59
Ibid art 2.
60
The Elucidation of art 2 of ibid.
57
300
in further regulations. The elucidation of Article 7 explains that the purpose of such
government guidance and supervision is to avoid the harmful effect of taking obat
asli Indonesia. 61 From these two Articles and their elucidations, it is obvious that the
government’s standpoint on jamu and its industry is somewhat negative. In this law,
the government perceives obat asli Indonesia or jamu as different, inferior and
unsafe when compared to obat modern or modern synthetic pharmaceuticals.
Although the law implies derogatory attitude, it at least provides legal recognition of
obat asli Indonesia as pharmaceuticals, and the jamu industry as one entitled to
government support. 62
The government’s position in the Law No 7 of 1963 was clearly influenced by the
medical community’s standpoint on jamu. This is not surprising since the
government most likely sought the organisation’s advice on health matters and
regulatory needs. 63 One of their main reasons for doubting jamu was still the lack of
scientific research on the use and efficacy of the ingredients of jamu. This is obvious
from one of the decisions of the 1964 National Seminar to Find Indonesian Sources
for Pharmacy in Yogyakarta which recommended that more scientific research on
jamu was needed, and that the practical experiences between 1942 and 1949 with
jamu must be collected and studied. 64 This recommendation is somewhat bizarre
since, as Afdhal and Welsch maintain, the medical community itself has always been
in the best position to conduct such research. 65 However, it is recognised that the
61
The Elucidation of Article 7 of ibid.
Afdhal and Welsch, above n 31, 159.
63
Ibid 158.
64
Ibid
65
Ibid.
62
301
collection and collation of results, would need to be supported by the government
funding.
In the late 1960s, the Old Order period ended and the New Order period began.
Unlike the Old Order, the new regime focused on policies concentrating on economic
and politic stability. This had a positive impact on business activities, including the
jamu industry. In the 1970s and the 1980s, the growth of jamu industry was
impressive. 66 The 1970s saw the beginning of the modern jamu industry, which was
marked by the expansion of the types of production of larger jamu enterprises from
powdered jamu to more modern forms, particularly capsules, tablets, and pills. 67
Besides the forms of products, they also diversified their products to include not only
jamu with curative effects but also traditional cosmetics. During that period, two
leading enterprises in traditional cosmetics, PT Mustika Ratu and PT Martina Berto,
were established. PT Mustika Ratu was founded in 1975 by Mooryati Soedibyo, 68
and in 1981, Martha Tilaar, set up her company, PT Martina Bertho. 69
The modernisation of large and medium-sized jamu enterprises was also followed by
the establishment of many new firms involved in the manufacture of jamu. In the late
1980s, the number of jamu enterprises, particularly small ones, exploded, with this
trend continuing through the 1990s. To regulate the traditional medicine industry and
their products, the Minister of Health issued Regulation No 246/Menkes/Per/V/1990
on Business Licence for Traditional Medicine Industry and Traditional Medicine
66
Ibid 159.
Ibid.
68
Antons and Antons-Sutanto, above n 16, 374.
69
Ibid 375.
67
302
Registration 70. Under this regulation, there are four categories of the traditional
medicine industry in Indonesia, namely the Traditional Medicine Industry (Industri
Obat Tradisional - IOT), Small Traditional Medicine Industry (Industri Kecil Obat
Tradisional - IKOT), Compound Jamu Enterprise (Usaha Jamu Racikan - UJR) and
Jamu Gendong Enterprise (Usaha Jamu Gendong - UJG). IOT and IKOT are
industries which manufacture traditional medicines and are classified based on the
value of their total assets, other than that of land and buildings, owned by an
enterprise. While the total assets required to be IOT is more than IDR 600 million, an
IKOT enterprise must have total assets less than that amount. UJRs and UJGs,
however, are defined not using the total assets criterion, but rather by their type of
activities. According to Article 1(4) of this regulation, a UJR is a small-sized
business that prepares, mixes and processes traditional medicines in the form of cut
leaves, powder, liquid, pilis, 71 plasters or ointments, and the products are be sold in
one place without designation or trade mark. 72 A UJG is a similar business to a UJR;
however, the activity of a UJG also involves distribution of the production using the
peddling method where the products can be used straightaway. 73 Another difference
is that UJG sellers do not sell cut leaves like UJR. 74
70
Peraturan Menteri Kesehatan No 246/Menkes/Per/V/1990 Tentang Lisensi Industri Obat
Tradisional dan Registrasi Obat Tradisional [Minister of Health Regulation No
246/Menkes/Per/V/1990 on Business Licence for Traditional Medicine Industry and Traditional
Medicine Registration] (Indonesia).
71
Pilis is ‘camphor-based compresses applied to forehead’. See John M Echols and Hassan Shadily,
Kamus Indonesia Inggris [An Indonesian-English Dictionary] (PT. Gramedia, 3rd ed, 2003) 428.
72
Peraturan Menteri Kesehatan No 246/Menkes/Per/V/1990 Tentang Lisensi Industri Obat
Tradisional dan Registrasi Obat Tradisional [Minister of Health Regulation No
246/Menkes/Per/V/1990 on Business Licence for Traditional Medicine Industry and Traditional
Medicine Registration] (Indonesia) art 1(4).
73
Ibid art 1(5).
74
Ibid.
303
To set up a UJR or a UJG, there is no government licence required, 75 while a licence
from Minister of Health 76 is compulsory for establishing an IOT 77 and an IKOT. 78
Traditional medicines manufactured, distributed and exported by an IOT must be
registered to gain approval of the Minister of Health, 79 who delegates his/her
authority to the Head of the National Agency of Food and Drug Control (Badan
Pengawasan Obat dan Makanan – BPOM), while the products of a UJR and a UJG
are not required to fulfil this requirement. 80 On the other hand, although the products
of an IKOT are also given an exemption from such requirement, the products of an
IKOT in the form of powder and liquid still have to be registered. 81 Moreover,
traditional medicines, which are not required to be registered by BPOM, must be
made using only the specific ingredients listed in an annex to the regulation, 82 which
is compiled by BPOM. 83 UJRs and UJGs are also prohibited from using materials
beyond this prescribed list. 84
Besides this regulation, there are two other relevant regulations that are worth
mentioning in this discussion. First, the Regulation of Head of BPOM No
75
Ibid art 2(2).
Article 5 (2) of ibid provides that the Minister of Health delegates his/ her authority to grant such
licence to Director General. The Director General here is the head of Directorate General of Drug and
Food Control which has been renamed to be the National Agency of Food and Drug Control since
2001. See also Wimar Witoelar, Dra. Kustantinah Apt. M. App.Sc.: Melindungi Masyarakat dari Obat
dan Makanan Berbahaya [Dra. Kustantinah Apt.M.App.Sc: Protecting Community from Dangerous
Drug and Food] (2 August 2010) <http://www.perspektifbaru.com/wawancara/749>.
77
Peraturan Menteri Kesehatan No 246/Menkes/Per/V/1990 Tentang Lisensi Industri Obat
Tradisional dan Registrasi Obat Tradisional [Minister of Health Regulation No
246/Menkes/Per/V/1990 on Business Licence for Traditional Medicine Industry and Traditional
Medicine Registration] (Indonesia) art 2(1).
78
There is no Article in the regulation that states clearly the requirement to obtain a Minister of Health
licence for starting IKOT business activities. However, it can be implied from Article 5 that an IKOT
needs a licence from Minister of Health to operate its business. Ibid art 5(1),(2).
79
Ibid art 3(1).
80
Ibid art 3(2)(b), (2)(c).
81
Ibid art 3(2)(a), (3).
82
Ibid art 4(1).
83
Ibid art 4(3).
84
Ibid art 4(2).
76
304
HK.00.05.4.1380 on the Method of Producing the Right Traditional Medicine 85 was
issued to replace a similar 1991 regulation. It contains requirements and directions
from the Minister of Health on how to produce the right traditional medicines. This
involves all aspects of business, such as buildings, human resources, equipment,
laboratory, sanitation and hygiene, quality control and packaging. Under the 2005
regulation, an IOT has to apply all the prescribed methods by 1 January 2010 at the
latest. 86 On the other hand, IKOTs are given liberty to implement the prescribed
methods gradually and as appropriate to their capacity. 87
The second regulation is the Minister of Health Decision No 661/Menkes/VII/1994
on the Requirements of Traditional Medicine. 88 This regulation contains guidance
from BPOM on what ingredients must or must not be included in each form (pill,
capsule, powder, plaster, camphor-based compress, liquid) of traditional medicine.
Apart from these regulations, if one searches using keywords ‘obat tradisional’ on
the BPOM website, there are 12 other regulations that govern business activities of
Indonesian domestic entrepreneurs who manufacture traditional medicines, including
jamu. 89 These regulations govern various issues, ranging from internal production to
labelling process. Some of them also forbid manufacturers making traditional
85
Peraturan Kepala Badan Pengawasan Obat dan Makanan No HK.00.05.4.1380 Tentang Pedoman
Cara Pembuatan Obat Tradisional yang Baik [Regulation of the Head of BPOM No HK.00.05.4.1380
on the Method of Producing the Right Traditional Medicine] (Indonesia).
86
Peraturan Kepala Badan Pengawasan Obat dan Makanan No HK.00.05.4.1380 Tentang Pedoman
Cara Pembuatan Obat Tradisional yang Baik [Regulation of the Head of BPOM No HK.00.05.4.1380
on the Method of Producing the Right Traditional Medicine] (Indonesia).
87
Ibid art 3(b).
88
Peraturan Menteri Kesehatan No 661/Menkes/VII/1994 Tentang Persyaratan Obat Tradisional
[Minister of Health Decision No. 661/Menkes/VII/1994 on the Requirements of Traditional Medicine]
(Indonesia).
89
Pencarian Peraturan Perundang-undangan [Searching of Regulations and Legislations] (2010)
<http://www.pom.go.id/search/query2.asp?cmdScroll=Page2&qs_materi=t_hukumPerundangan&qs_s
earch=%20obat%20tradisional&qs_TX=1>.
305
medicines that contain a number of herbal materials that have adverse effects on
human health. The existence of such regulations provides a general picture of the
complexity of jamu industry in Indonesia and how firm is the control of government
over the industry.
Such control is required as there have been many reported cases of the dangerous
effects of jamu. As competition in the jamu industry intensifies, many entrepreneurs,
particularly from small enterprises, mix their jamu with chemical substances to make
their products have immediate effects like those of the modern synthetic drugs. 90 The
adulteration of herbal jamu materials with chemical substances may make jamu
harmful for consumption According to Campbell, reports of adulteration had started
to appear in the national press as early as 2001. 91 In the early 1999, however, BPOM
(then Directorate General of Food and Drug Control) had already found 14
adulterated jamu brands and issued warnings to the producers to withdraw their
products. 92 Since then, BPOM has issued public warnings almost every two years on
traditional medicines containing chemical substances, which is accompanied by a list
of relevant products. 93
Before such cases emerged, as discussed earlier, concerns about the real effects of
jamu formula had long been expressed by Indonesian medical professionals. They
demanded that efficacy claims for jamu should be verified using clinical trials, which
90
Caroline Campbell, Health, Healing and the Quest for Wellbeing in Ponorogo Regency, East Java
(PhD Thesis, University of Newcastle, 2009) 127; Beers, above n 5, 48–9.
91
Campbell, above n 90, 127.
92
'Bila Jamu Terlalu Mujarab (If Jamu is too Effective)' (5 February 2001) Tempo Online
<http://majalah.tempointeraktif.com/id/arsip/2001/02/05/KSH/mbm.20010205.KSH77491.id.html>.
93
Peringatan Publik [Public Warning] (13 August 2010)
<http://www.pom.go.id/public/peringatan_publik/default.asp>.
306
are based on reliable pharmacological principles. 94 The government has made active
efforts in this regard to persuade the Indonesian medical professionals to give more
recognition to jamu. In 1981, it established eight herbal testing centres in Java,
Sulawesi, Sumatra and Bali for the development and application of traditional
medicine. 95 These centres conducted scientific studies to determine whether the
claims for jamu products made in the market were valid. 96 Further, in the late 1980s,
the University of Gadjah Mada, a state top university located in Yogyakarta, one of
jamu centres of Indonesia, set up the Research Centre for Traditional Medicine.
Apart from evaluating jamu, this centre also provides training for jamu technical staff
of large enterprises and for small entrepreneurs in many villages around its location
to improve the hygiene and quality of their products. 97
Another important effort to increase the acceptance of traditional medicine, including
jamu, among Indonesian medical professionals is the introduction of the
Phytopharmaca (literally, ‘Active Plant Ingredients’) 98 through the Minister of
Health Regulation No 760/Menkes/Per/IX/1992 on Phytopharmaca and the Minister
of Health Decision No 761/Menkes/SK/IX/1992 on Guidance of Phytopharmaca.
The Phytopharmaca contains a list of medicine or traditional medicine which has
already been scientifically tested and found to be safe and effective to consume. To
qualify for phytopharmaca status, a jamu formula needs to satisfy three tests, namely
toxicological, pharmacological and clinical tests. 99
94
Beers, above n 5, 33.
Ibid 34.
96
Ibid.
97
Ibid.
98
Ibid 35.
99
S Pramono, 'Development of Indonesian Traditional Medicines' (Paper presented at the 18th
Advanced Course in Pharmaceutical Sciences, Yogyakarta, 5−8 July 2010)
95
307
As most Indonesian jamu consist of many ingredients, it is impossible to conduct
phytopharmaca testing on a jamu formula based on all of its ingredients. To simplify
the testing, the regulation only requires jamu formula to be tested on as many as five
essential ingredients, whose efficacy is already known based on experience. 100 Jamu
formulae which gains phytopharmaca status would be treated the same as modern
synthetic drugs that are normally prescribed by Indonesian doctors. 101 It means that
they are accepted by medical professionals in Indonesia as alternative medications to
cure some serious illnesses.
However, this set of tests must be conducted according to the same criteria as
modern drugs, which certainly involves high costs. The expense of these tests does
not suit jamu producers, especially small and medium enterprises, who sell their
products at low retail prices. To assist them, in 1995, the government set up Research
Centres for the Development and Application of Traditional Treatments to
authenticate any claims proven during official tests 102 in 12 provinces. 103 Although
the costs are lower than for clinical trials for synthetic drugs, the costs are still
considered unaffordable by most jamu producers. Thus, it is no wonder that in 2008
it was reported that there have been only five jamu products that have passed the
<http://farmasi.ugm.ac.id/acps2010/PDF%20Files%20of%20ACPS2010/Mr.%20Suwijiyo's/DEVEL
OPMENT%20OF%20INDONESIAN%20TRADITIONAL%20MEDICINES.pdf>.
100
Beers, above n 5, 35.
101
'Selama 12 Tahun, Baru 5 Produk Jamu Lulus Uji Fitofarmaka [For 12 Years, Only 5 Jamu
Products Passed Phytopharmaca Test]' (2008)
<http://www.pdpersi.co.id/?show=detailnews&kode=4729&tbl=cakrawala> (‘Selama 12 Tahun’).
102
Beers, above n 5, 36.
103
Soemantri Endardjo, 'Pengembangan Industri Obat Tradisional dan Fitofarmaka' (1996) 31 Buletin
Dewan Riset Nasional 610.
308
phytopharmaca tests. 104 Of these, just one product is made by jamu large enterprise,
the others are produced by pharmaceutical companies. 105
During the last two decades of the 20th century, the number of jamu enterprises
increased rapidly in Indonesia. Along with the development of the jamu industry,
there was awareness among the jamu enterprise owners that they should establish an
association where they could work together to resolve their mutual business
problems. In 1989, the Association of Indonesian Jamu and Traditional Medicine
Enterpreneurs (Gabungan Pengusaha Jamu dan Obat Tradisional – GP JAMU) was
established 106 with support from the government. After 21 years, there are around
1247 jamu enterprises registered as members of GP JAMU in 2010. 107 Of these,
1037 enterprises fall within the SMEs category. However, these figures do not
represent the total jamu entrepreneurs in Indonesia as most are micro jamu
entrepreneurs (such as jamu gendong sellers), who have not completed the
formalities to operate as business entities in Indonesia and do not become members
of the association. It was estimated that there were 80,000 jamu gendong sellers in
2001. 108
GP JAMU has branches in some provinces in Indonesia, such as Central Java,
Yogyakarta, Jakarta, Jambi and North Sumatera, and members of this organisation
104
‘Selama 12 tahun’, above n 101.
Ibid.
106
'Sejarah Berdirinya Koperasi Jamu Indonesia Kabupaten Sukoharjo (The Establishment History of
Indonesian Jamu Cooperative in the Regency of Sukoharjo)' (2009) Koperasi Jamu Indonesia
(KOJAI) Sukoharjo <http://jamusukoharjo.wordpress.com/2009/11/27/sejarah-berdirinya-koperasijamu-indonesia-kabupaten-sukoharjo/>.
107
'Jamu Indonesia masih Sulit Tembus India (Jamu of Indonesia are Still Difficult to Enter Indian
Market)
' (2010) (24 November 2010) Media Indonesia <http://bataviase.co.id/node/469325>.
108
Beers, above n 5, 134.
105
309
come from all sizes of business, large, medium and small. The association has
actively worked with public and private sectors to promote the wider acceptance of
jamu among Indonesian medical professionals. The association also works with the
government to campaign in support of the ban on adulterated jamu. The active
campaign by the current chairman of GP JAMU, Dr Charles Saerang, on this issue
has reaped protests from small jamu entrepreneurs in Cilacap and Banyumas (Central
Java) who consider that the statements of Saerang in the mass media regarding GP
JAMU action against adulterated jamu somehow discredited their products. 109
The annual turnover of the jamu industry was IDR 8.5 trillion in 2009, making it no
longer a small industry, and it was estimated to reach IDR 10 trillion in 2010.110
However, while there is no confirmation on the actual 2010 annual turnover of jamu
industry, jamu industry representatives have expressed their concern that such
turnover estimates might not be reached due to an influx of lower priced herbal
products from China. It was feared that these would flood and dominate Indonesian
markets due to the impact of the ASEAN – China Free Trade Agreement (AC-FTA),
which began to be implemented in the ASEAN countries, including Indonesia, in
January 2010. Dr Charles Saerang predicted that the jamu industry in Indonesia
would suffer the loss of IDR 4 trillion in turnover in 2010 due to the impact of
Chinese herbal medicines on the Indonesian market. 111
109
'Ribuan Perajin Jamu Unjuk Rasa (Thousands of Jamu Entrepreneurs Protest)', Suara Merdeka
(Cilacap), 18 December 2006 <http://www.suaramerdeka.com/harian/0612/18/nas06.htm>
110
Jafar M Sidik, 'Omzet Industri Jamu Tahun Ini Bisa Rp10 Triliun [Turnover of Jamu Industry in
This Year Could Be Rp. 10 Trillion]', Antaranews (Kendal), 6 January 2010
<http://www.antaranews.com/berita/1262765232/omzet-industri-jamu-tahun-ini-bisa-rp10-triliun>.
111
Ibid.
310
Jamu producers are also encountering another problem —the continuing shortage of
medicinal plants from the forests of Indonesia. 112 The Indonesian rainforest is second
in area only to the Amazon in Brazil, exhibits immense biodiversity and a similar
level of endemic species, providing unparalleled resources for jamu (and, more
recently, prospects for bioprospecting) — some of Indonesia’s flowering plant
species are used for jamu ingredients. 113 The high demand for traditional medicinal
plants from local and overseas herbal medicine producers make such plants
excessively harvested 114 with little emphasis given on their re-growth or
cultivation. 115 Consequently, many such medicinal plants, for instance Purwoceng
(Pimpinellapruatjan) and Kayu Angin (Usnea misaminensis), are now endangered. 116
7.4. Intellectual Property Rights and the Jamu Industry in Indonesia
IPRs protect a business from competitors that want to benefits illegally from IP
assets owned by others. A business that does not have sufficient legal protection,
such as that provided by IPRs, is difficult to expand. In addition, if the protected IP
assets were commercialised correctly, this would further enhance the value of the
assets. There are several forms of IPRs that are likely to protect traditional
medicines, like jamu. The discussion below will include, firstly, which IPRs are
relevant for the jamu industry and their position in Indonesian IP law; and, secondly,
the limitations to and problems with integrating the relevant IPRs into jamu industry.
112
Antons and Antons-Sutanto, above n 16, 379.
Ibid 363.
114
Ibid 379.
115
Elfahmi, Phytochemical and Biosynthetic Studies of Lignan with a Focus on Indonesian Medicinal
Plants (PhD Thesis, Rijksuniversiteit Groningen, 2006)
<http://dissertations.ub.rug.nl/FILES/faculties/science/2006/elfahmi/14_thesis.pdf>.
116
Antons and Antons-Sutanto, above n 16, 379.
113
311
7.4.1. Copyrights and the Protection of Traditional Cultural Expressions
(TCE)
Copyright may not be suitable to protect jamu for three reasons. Firstly, objects
protected under copyright are only in the field of science, arts and literature which
does not include jamu. 117 Secondly, copyright is granted to an individual, while the
knowledge on traditional medicines, including jamu, is considered mostly as the
collective heritage of local communities. 118 Thirdly, copyright protects the
expression of idea, not the idea itself. 119 It means copyright cannot prevent others
from using the knowledge about jamu disclosed in a media by an illegitimate
party. 120 Copyright only protects the media of transmission. Therefore, copyright
could not provide effective protection for traditional medicinal knowledge, in
particular jamu.
However, copyright is relevant to protect the media to transmit jamu or traditional
medicines, such as ancient texts and folkloric instruction booklets 121 from illegal use.
The media to transmit jamu can be categorised as part of TK 122 in general or TCE, in
117
Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002 on Copyright]
(Indonesia) art 1(3).
118
Karin Timmermans, 'TRIPS. CBD and Traditional Medicines: Concepts and Questions' (National
Agency for Drug and Food Control
World Health Organization, 13-15 February 2001) <http://apps.who.int/medicinedocs/en/d/Jh2996e/>
(‘TRIPS, CBD and Traditional Medicines’).
119
Ibid.
120
Ibid.
121
Christoph Antons, 'The International Debate about Traditional Knowledge and Approaches in the
Asia-Pacific Region' in C. Antons (ed), Traditional Knowledge, Traditional Cultural Expression and
Intellectual Property Law in the Asia-Pacific Region, Max Planck Series on Asian Intellectual
Property Law (Kluwer Law International, 2009) 39, 55.
122
Since jamu is a traditional medicine, it is considered as one of TK categories defined by the World
Intellectual Property Organization (WIPO). This organisation employs the term TK in a broad sense to
refer all literary, artistic, or scientific works created from intellectual activities which are based on
knowledge systems, creations, innovations and cultural expression which have been transmitted from
one to another generation, regarded as relevant to particular people or its territory, and always
evolving following the changing environment. See, World Intellectual Property Organization,
312
particular. In the 2002 Copyright Law, as discussed in Chapter 6, 123 Article 10(2)
and (3) are designed to protect folklore, which is part of TK. Folklore, such as Serat
Centhini, an ancient manuscript, and stone reliefs at the famous Borobudur
temple, 124 have been used as the media to pass on the knowledge of jamu from one
generation to another. Although jamu cannot satisfy the originality requirement,
Article 10(2), which maintains the copyright ownership of folklore expression is in
the hands of State, could overcome the second limitation regarding individual
ownership of copyright. However, this places copyright beyond the IPRs of
individual SMEs, which can only benefit indirectly. In addition to this provision,
Article 10(3) could also protect such traditional transmission media of jamu from the
claims of foreign entities by requesting every non-Indonesian citizen who wishes to
publish or reproduce them to seek permission from a relevant authority. This
provision brings benefits indirectly to jamu SMEs in Indonesia, as it prevents
traditional jamu formula from being reproduced by non-Indonesians using the
information obtained from the transmission media of jamu without benefit-sharing
with Indonesia and its citizens.
7.4.2. Trade Secrets
Regarding trade secrets, this is suitable for the protection of secret recipes and the
process of making jamu. Although jamu have been known since time immemorial in
Indonesia, each region could have different recipes for jamu. Depending on
'Intellectual Property Needs and Expectations of Traditional Knowledge Holders' (World Intellectual
Property Organization, 2001) <http://www.wipo.int/tk/en/tk/ffm/report/final/pdf/part1.pdf>.
123
See, Chapter 6 (section 6.4.1.)
124
Beers, above n 5, 13 and 17.
313
individual creativity, it is also possible that some people could have a secret formula
to make jamu which are different from the usual recipes known in their region.
Unlike most IPRs which require registration using a complex process, trade secret
protection is simply given to the holders who make a substantial effort not to disclose
their valuable business knowledge or information to the public. 125 It means that the
object of protection does not have to be novel and there is no time limit for trade
secret protection as long as the information remains as a secret. 126
While trade secret protection might be appropriate for small entrepreneurs who
produce non-standardised jamu using secret formulae, there is one problem that
prevents standardised jamu to obtain such protection. As mentioned in the previous
section, 127 the jamu industry is governed by a number of regulations. Among these is
the Minister of Health’s Regulation No 246/Menkes/Per/V/1990 on Business Licence
for Traditional Medicine Industry and Traditional Medicine Registration which
obliges all products of IOT enterprises to be registered in the BPOM. 128 Each IOT
product that has already obtained a registration number 129 must include that
information in a label attached to the container. 130 Information that needs to be
written on the label includes the composition of the traditional medicine inside the
125
Undang-Undang No 30 Tahun 2000 tentang Rahasia Dagang [Law No 30 of 2000 on Trade
Secrets] (Indonesia) art 3(1).
126
Cita Citrawinda Priapantja, Budaya Hukum Indonesia Menghadapi Globalisasi: Perlindungan
Rahasia Dagang di Bidang Farmasi [Legal Culture of Indonesia in Encountering Globalization:
Trade Secret Protection in Pharmaceutical Industry] (Chandra Pratama, 3rd ed, 2005) 52.
127
See, Chapter 7 (section 7.3.).
128
Peraturan Menteri Kesehatan No 246/Menkes/Per/V/1990 Tentang Lisensi Industri Obat
Tradisional dan Registrasi Obat Tradisional [Minister of Health Regulation No
246/Menkes/Per/V/1990 on Business Licence for Traditional Medicine Industry and Traditional
Medicine Registration] (Indonesia) art 3(2)(b), (c).
129
Ibid art 28(1).
130
Ibid art 32(1), (2).
314
container. 131 Jamu, as a kind of traditional medicine, certainly have to comply with
this regulation. As a consequence, it is difficult for the producers of standardised
jamu to acquire trade secret protection because they are legally required to reveal the
composition (ingredients) of their jamu in order to be able to market their products in
Indonesia. Although the composition of jamu does not have to be exact, it may be
sufficient for other enterpreneurs manufacturing the same products to understand the
information protected by the owners of trade secrets.
7.4.3. Geographical Indications
As mentioned above, 132 traditional herbal medicines or jamu are known in almost
every regions of Indonesia with particular stereotypical qualities and benefits
claimed for their jamu. For example, Madura’s jamu is well-known as women’s
aphrodisiac, Kalimantan jamu for male products and Javanese jamu for tonics and
elixirs.133 However, the advertising of regionally specific jamu was once prohibited
under the centralised government of Soeharto in the late 1980s, because the
government demanded all jamu must reflect a national Indonesian quality, rather
than regionalism. 134 The decentralisation policy, which started to apply in the early
2000s, has changed that situation. Currently, as part of regional autonomy system,
regional governments are permitted to exploit their local resources, including jamu,
commercially in order to manage their local economy. Therefore, in this situation,
geographical indications, which have become available through Law No 15 of 2001
on Trade Marks and Government Regulation No 51 of 2007 on Geographical
Indications, is also relevant for the jamu industry in Indonesia.
131
Ibid art 34.
See, Chapter 7 (section 7.2.).
133
Afdhal and Welsch, above n 31, 165–6.
134
Ibid 166.
132
315
The term ‘geographical indication’ is defined in the above mentioned legislation as a
sign which indicates the place of origin of goods, which due to its
geographical environment factors, including the factors of the nature, the
people or the combination of the two factors, gives a specific
characteristics and quality on the goods produced therein. 135
In this case, it would not be difficult for local jamu producers to obtain the protection
of geographical indication for their products, as they are made according to local
recipes and using medicinal plants cultivated in their local surroundings. 136 However,
it is important to note that GI protection is not provided to individuals, but to a group
which represents the producers, sellers or consumers of the product in a particular
area. 137
Moreover, the widespread of jamu throughout the regions of Indonesian due to past
transmigration programmes 138 around 60 years ago has blurred the regional origin of
jamu. It means there is also potential for conflicting ownership claims between one
and another region in Indonesia. 139 The problem of conflicting ownership claims
does not only happen at national, but also international level. Since Indonesia shares
culture and traditions, language, historical connections and migration, conflicting
claims over jamu among Indonesia and its neighbouring countries, such as Malaysia,
135
See Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark]
(Indonesia) art 56(1); Peraturan Pemerintah No 51 Tahun 2001 Tentang Indikasi Geografis
[Government Regulation No 51 of 2001 on Geographical Indication] (Indonesia) art 1(1).
136
Antons and Antons-Sutanto, above n 16, 382.
137
See Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark]
(Indonesia) art 56(2); Peraturan Pemerintah No 51 Tahun 2001 Tentang Indikasi Geografis
[Government Regulation No 51 of 2001 on Geographical Indication] (Indonesia) art 5(3).
138
Antons and Antons-Sutanto, above n 16, 382. See also, Chapter 7 (section 7.3).
139
Ibid.
316
Singapore and Brunei, are very likely to emerge in the future. 140 This problem may
not be the concern of Indonesian jamu SMEs currently, as they rarely export their
products. However, in the future, it is very likely that jamu SMEs could export their
products. When the time comes, collective Indonesian IPRs, such as GI protection,
will be important to Indonesian SMEs from an international competition perspective.
7.4.4. Trademarks
Besides geographical indication, trademark is also relevant for the jamu industry.
Like other businesses, the jamu industry, particularly medium and large sized jamu
enterprises, need trademark to identify their products in the markets. Some large
jamu producers, such as PT Nyonya Meneer, PT Jamu Jago and PT Sido Muncul,
have successfully maintained reputation through their trademarks since the early 20th
century. Some other trademarks, like Mustika Ratu and Sari Ayu, were developed
about three decades ago and have becomes well-known trademarks in Indonesia.
However, for micro jamu producers or jamu gendong sellers, who mostly have not
satisfied the formalities for running businesses, the complex process to obtain
trademark registration hinders their enjoyment of the benefits of trademark.
Moreover, although trademark is good, the limited area of marketing of jamu
gendong sellers makes the functions of trademark not really evident. When they
expand their businesses, trademark would bring the benefits.
140
Ibid.
317
7.4.5. Petty Patents
Even though the majority of jamu products are made based on traditional recipes,
there are some jamu manufacturers or healers creating new and simple jamu
formulae, processes or forms. For instance, PT Mustika Ratu, one of large jamu
enterprises, invented one of its jamu products, namely ‘Slimming Tea’, in the form
of tea bag. 141 Although the formula is not new, there had never been a slimming
jamu in such a practical format before it was launched in 1992. For such a simple and
practical invention like this, petty patent is likely to provide protection.
Petty patent is easier to obtain, but also has a shorter protection of time than patents.
There is no single international standard 142 governing petty patent regimes, so each
country has its own rule on petty patents. 143 Some countries require an examination
before granting petty patent registration, while some others simply grant registration
without examination.144
In Indonesia, as discussed in Chapter 4, 145 the only factor to be examined is
‘novelty’. 146 Novelty here means the invention is not only different in technical
specifications, but also it has more practical function or use than the previous
141
Marketing Department PT. Mustika Ratu Tbk., A Golden Brand (2008) <http://www.mustikaratu.co.id/news/a-golden-brand.html>.
142
Petty patent or utility model is included as the object of protection in the Paris Convention for the
Protection of Industrial Property; the 1971 Strasbourg Agreement on the International Patent
Classification and the Patent Cooperation Treaty. See Uma Suthersanen, 'Utility Models and
Innovation in Developing Countries' (ICTSD-UNCTAD, 2006)
<http://www.unctad.org/en/docs/iteipc20066_en.pdf> 3.
143
Timmermans, ‘Trips, CBD and Traditional Medicines’, above n 118.
144
Ibid.
145
See Chapter 4 (section 4.4.4.)
146
Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents] (Indonesia) art
105(5).
318
invention. 147 Similarly to patent, this requirement is difficult to satisfy for jamu,
which are based on formulae known for many years or are in the traditional forms,
such as liquid concoction, or the more modern forms of powder, pill, capsule and so
on. As mentioned earlier, petty patent is only suitable for a simple new invention on
the formula, process or forms of jamu products. Therefore, if a jamu SME had a new
invention which is able to pass the substantive examination for the universal novelty
requirement, petty patent is certainly relevant for its business.
7.4.6. Plant Variety Protection (PVP)
PVP is relevant for the protection of the raw ingredients of jamu, which mostly are
traditional medicinal plants cultivated by local communities. The International Union
for the Protection of New Varieties of Plants Convention (UPOV), which provides
the main model for sui generis protection of plant variety in many member states of
the WTO, requires a plant variety to meet five criteria — namely novelty,
distinctness, uniformity, stability and denomination — to be eligible for
protection. 148 The UPOV criteria make it difficult for wild plants or plants cultivated
by local communities to be protected by PVP system. First, such plants are not new
plants and must have been disclosed to public long ago. Secondly, plants cultivated
by local communities are normally genetically diverse. 149 Besides that, one particular
variety of plants living in the wild in nature is not sufficiently uniform in its relevant
characteristics, since factors, such as soils, temperature and altitude, change their
qualities. For example, the plant ‘resurrection lily’ (known as kencur in Indonesia)
147
The elucidation of Article 105(5) of ibid.
Detail information on PVP is discussed in Chapter 3 (section 3.2.7.).
149
Timmermans, ‘Trips, CBD and Traditional Medicines’, above n 111.
148
319
and a main jamu ingredient, has a different taste depending on its area of cultivation.
While kencur from Jakarta and Batam are not suitable as a jamu ingredient, kencur
sown in Central Java tastes delicious and is good for making such traditional
medicine. 150
Although the UPOV Convention 1991 is the model of the 2000 Plant Varieties
Protection Law, Indonesia has a sui generis system to protect its plant varieties. 151
One of the sui generis provisions in the 2000 Plant Varieties Protection Law of
Indonesia is Article 7(1), which states that the local community’s varieties are
controlled by the state. The law explains that ‘local varieties’ in this Article refers to
existing plant varieties that are cultivated by local farmers from one generation to the
next and belong to the community living in their areas of cultivation. 152 State control
over local varieties is undertaken by government 153 and includes regulation of the
right to payment and the use of such varieties related to PVP and other efforts for
conservation of genetic resources. 154 Similar to the protection of transmission media
of jamu under copyright, the protection of local plants which are the ingredients of
jamu does not directly benefit individual jamu SMEs. However, it cannot be denied
that in the middle of a scarcity of traditional medicinal plants in Indonesia, this
provision would help to protect jamu industry indirectly.
150
Beers, above n 5, 78.
For detailed discussion on this topic, see Rajeswari Kanniah, 'Plant Variety Protection in Indonesia,
Malaysia, the Philippines and Thailand' 8(3) Journal of World Intellectual Property 283
152
Elucidation of Article 7 (1) of Undang-Undang No 29 Tahun 2000 tentang Perlindungan Varietas
Tanaman [Law No 29 of 2000 on Plant Variety Protection] (Indonesia)
153
Ibid art 7(2).
154
The elucidation of Article 7(2) of ibid.
151
320
Further, Article 5(2) of Government Regulation No 13 of 2004 on Denomination,
Registration and the Use of Original Varieties for Development of Essentially
Derived Varieties states that regional head/mayor or governor is to register the
denominated local varieties to PVP Office. Regarding utilisation of local varieties,
any party that wishes to use a local variety as initial variety shall make an agreement
in advance with regional head/mayor, governor or PVP office as representative of the
owner of local varieties. 155 If the agreement regulates benefit sharing with the
community which owns the local varieties, the benefit shared should be used to
improve the welfare of such community and conserve the relevant local varieties and
other existing genetic resources in that area. 156 The management of such benefit
sharing shall be performed by regional head/mayor, governor or PVP office. 157
Although all these provisions are positive initiatives that could prevent
misappropriation of Indonesian medicinal plants 158 that are the main ingredients of
jamu, like copyright, it does not protect jamu as end-product or the medicinal
formulation.
7.5. General Comments on the Issue of Intellectual Property Rights and the
Jamu Industry in Indonesia
155
Peraturan Pemerintah No 13 Tahun 2004 Tentang Penamaan Pendaftaran dan Penggunaan
Varietas Asal untuk Pembuatan Varietas Turunan Esential [Government Regulation No 13 of 2004 on
Denomination, Registration and the Use of Original Varieties for Development of Essentially Derived
Varieties] (Indonesia) art 9(1).
156
Ibid art 10(1).
157
Ibid art 10(2).
158
Karin Timmermans, 'Intellectual Property Rights and Traditional Medicine: Policy Dilemmas at
the Interface' (2003) 57(4) Social Science & Medicine 745, 751 (‘IPRs and Traditional Medicine’).
321
From the discussion above, it is found that according to Indonesian IPR laws, the
ownership of IPRs on various components of jamu industry is apportioned to various
stakeholders. There are some IPRs, such as the protection of TCE under copyright,
geographical indication (GI), and the protection of TK under PVP, where the owner
is the state, regional governments or local communities. The various components of
the jamu industry, which are protected under such IPRs, are considered communal
property and the IPRs are not granted to individuals. In other fields, such as petty
patents, trade secrets and trademark, the ownership of such IPRs on some
components of the jamu industry is the individual.
When the ownership is not given to individual, it does not directly affect small and
medium entrepreneurs. As a business entity, they are more concerned with IPRs that
will provide them with individual rights to assist them expand their businesses. It is
acknowledged, however, that the communal ownership could prevent foreign entities
misusing or misappropriating their traditional assets, which have become the core of
the jamu industry. In addition, the communal ownership could also prevent regional
disputes that are likely to arise because of the nature of the region. Various
ethnicities in Indonesia share their cultures and have evolved common traditions, this
could potentially be a source of the conflict of IPRs ownership on their traditional
knowledge. The trans-border ethnic distribution could also lead to conflict over IPRs
at an international level, where persons of the same ethnicity and traditional culture
and sharing the same or very similar traditional knowledge or cultural expressions
attempt to characterise it as belonging to a group within a particular region within a
modern state (the boundaries of which may reflect colonial activities rather than
ethnic and cultural distribution) rather than a region that spans national boundaries
322
and reflects the actual historical TK and TCE distribution. This can also be a source
of IPRs disputes at an international level.
In Indonesia, although some IPR legislation, which governs on the issues of
copyright, and PVP already include protection for TCE and TK, they are still unable
to protect the jamu industry effectively. The copyright and PVP systems have their
own limitations and problems in relation to being integrated into the jamu industry. It
seems that the only suitable form of IPRs for protecting TK, the core of jamu
industry, is trade secrets. However, the protection of trade secrets may not be enough
for the TK of the jamu industry in Indonesia. Therefore, it has been strongly
recommended that the protection of traditional knowledge (TK) or traditional
cultural expression (TCE) objects should be regulated via sui generis TK/TCE
legislation, not only as part of IPR legislation. 159 As Timmermans suggests, the focus
of sui generis TK/TCE law should not be ‘to provide exclusive rights for the
exploitation of TK/TCE, but to link ... commercial, conservational and
developmental goals, to formalise and to reinforce the moral rights of the holders’. 160
Turning to the second issue mentioned above, the overall assessment finds that each
IPR has its own limitations and problems in relation to being integrated into the jamu
industry. Of the existing IPRs, there is no form that is able to provide comprehensive
and effective protection to the jamu industry.
159
See Christoph Antons, 'What Is "Traditional Cultural Expression"? International Definitions and
Their Application in Developing Asia' (2009) (1) The WIPO Journal: Analysis and Debate of
Intellectual Property Issues 103, 112; Timmermans, ‘IPRs and Traditional Medicines’, above n 158,
751.
160
Timmermans, ‘IPRs and Traditional Medicines’, above n 158.
323
7.6. Profile of the Jamu Industry in Semarang and Yogyakarta
Semarang, the capital city of the province of Central Java, is identified with the jamu
industry. There are many jamu enterprises of various sizes running their businesses
from Semarang. There are at least three large and modern jamu enterprises, namely
PT Jamu Jago, PT Nyonya Meneer, and PT Sido Muncul, which were established
and have been operating in Semarang since the early 20th century. Products of
various jamu enterprises in Semarang have penetrated almost all markets in
Indonesia, and some of them have been exported to China, India, Taiwan, Holland,
and Saudi Arabia, as well as to some neighbouring countries, such as Singapore,
Malaysia, and Brunei. 161 To illustrate how big the jamu industry in Semarang is, the
Central Statistic Bureau stated that the annual turnover of the jamu industry in
Semarang reached IDR 521.7 billion (equal to around USD 61 million) in 2006. 162
The jamu entrepreneurs of Semarang, especially from medium and large enterprises,
are mostly from Peranakan group. Ethnic Chinese have been known to have lived in
Semarang since the 15th century, 163 and they have influenced strongly the society of
Semarang up to the present day. During the Dutch colonial era, the status of
Semarang as a major port and trading city lured many entrepreneurs, particularly
Peranakan, to live and to set up their businesses there. Peranakan female
entrepreneurs of Chinese-Indigenous heritage learned the knowledge of making jamu
161
'Ekspor Jamu Terdorong Permintaan dari Negara Tetangga [Export of Jamu is Encouraged by the
Demand of Neighbouring Countries]', Koran Jakarta (Jakarta), 19 October 2009 <http://dhi.koranjakarta.com/berita-detail.php?id=29182>.
162
Ibid.
163
Leo Suryadinata, 'Zheng He, Semarang and the Islamization of Java: Between History and Legend'
in L Suryadinata (ed), Admiral Zheng He and Southeast Asia (Institute of Southeast Asian Studies and
International Zheng He Society, 2005) 72.
324
from their Javanese mothers. 164 Moreover, they had status as ‘Foreign Orientals’
which made them subject to the Dutch Commercial Code of 1847. 165 With that
knowledge and their familiarity with the Dutch colonial legal system, it was not
really difficult for Peranakan female entrepreneurs set up jamu firms under Dutch
company law. 166 They started jamu firms as a small family businesses making and
selling jamu in the early 20th century, and these enterprises have grown to become
major players in the Indonesian jamu industry today. The success stories of large
jamu enterprises have inspired other entrepreneurs to start their own jamu
enterprises. The jamu industry in Semarang is dynamic, with many players in the
industry of various sizes, from micro to large enterprises.
Although the jamu industry in Yogyakarta is not as lively as in Semarang,
Yogyakarta should be mentioned when one discusses the industry. Yogyakarta is the
region where two Javanese royal courts are located. 167 As mentioned previously,
making jamu is a knowledge that originated in these two Javanese courts together
with two other royal palaces of Surakarta. 168 Surely, this fact has influenced the
development of the jamu industry in Yogyakarta. The label of being the original
source of Javanese jamu has been attached to the jamu of Yogyakarta and has been
useful in attracting loyal consumers throughout Indonesia. In contrast to Semarang,
there is no particular ethnic group that has become the major players in Yogyakarta;
164
Antons and Antons-Sutanto, above n 16, 373.
Ibid.
166
Ibid.
167
The two royal courts are Kasultanan Yogyakarta Hadiningrat and Kadipaten Pakualaman. Further
information on this topic, Chapter 6 (section 6.7.2.), n 152.
168
Two other royal courts in Surakarata, namely Kasunanan Surakarta Hadiningrat and Puro
Mangkunegoro.
165
325
the members of the GP JAMU branch in Yogyakarta consist of entrepreneurs of
Javanese, Peranakan and Arabic descent. 169
Although the jamu of Yogyakarta enjoys its reputation as the original Javanese jamu
in the eyes of Indonesian consumers, the industry’s economic growth is not really
significant. While there are no specific economic figures for the jamu industry in
Yogyakarta provided on the websites of the relevant government agencies, 170 its
insignificance can be presumed from the absence of large national jamu enterprises
in Yogyakarta. Most jamu enterprises in Yogyakarta are from the micro, and small
and medium categories.
7.7. Background Notes to the Interview Process
The process of interviewing the owners or managers of jamu SMEs began in Jakarta
with an examination of the website of GP JAMU. 171 It contained information on how
to contact the organisation, which has its main office in Jakarta. The next step was to
contact its chairman, CS, who is also the owner of a large and modern jamu
enterprise in Indonesia. He was keen to help the research. Not only did he volunteer
to be interviewed, he also shared important contacts with GP JAMU branches in the
Central Java and Yogyakarta provinces.
169
Interview with BP and BS, the chairman and secretary of GP JAMU Yogyakarta respectively
(Yogyakarta, 6 March 2009).
170
Such websites include, for example, the provincial government of Yogyakarta <www.pemdadiy.go.id> and Yogyakarta Agency of Industry and Trade <www.indag-diy.go.id>.
171
Gabungan Pengusaha Jamu (2007) <http://www.gp-jamu.com>. Unfortunately, the website has
been no longer active since February 2009.
326
In the Central Java province, the contact was GMS, the Director Executive of GP
JAMU in the Central Java, who is based in Semarang. He also enthusiastically
assisted the research and immediately provided a list of potential interviewees based
on the criteria given. Besides the criteria of size of enterprises, location is another
decisive criterion to determine interviewees. It was then decided that the location of
interviewee’s businesses should be in the areas of Semarang, both the city and the
regency. Of the 24 members of GP JAMU located in Semarang, there are 10
enterprises that match the criteria set for this research. Unfortunately, of 10 potential
interviewees, there were only 5 who were willing to participate in the interviews.
Table 1 (below) provides brief details of research participants in Semarang, Central
Java.
Table 12: Profile of Interview Participants in Semarang, Central Java
Name of enterprises/owners
UDW
Products
Traditional
medicine
Type of enterprises
Small enterprise
(including jamu)
JI
Traditional
medicine Small enterprise
(rubbing oil) and jamu
AS
Jamu
Small enterprise
DE
Jamu
Small enterprise
DS
Jamu
Medium enterprise
In the Yogyakarta province, the initial contacts were the chairman, BP, and the
secretary, BS, of GP JAMU in that province. Like GMS in Semarang, the two key
informants in Yogyakarta showed an eagerness to assist the research. Most of the GP
JAMU members in the province of Yogyakarta, including BP and BS, fall within the
327
criteria for participants in this research. Apart from being willing to participate as
interviewees, BP and BS offered an invitation to meet directly with potential
interviewees at their monthly GP JAMU gathering. Although Yogyakarta branch
membership totals 44, the meeting was only attended by 15 members. For a variety
of reasons, only five people wanted to be interviewed. In total, there are seven SME
jamu owners in the Yogyakarta province that took part in the interviews, which took
place in Yogyakarta on 6 March and 28 March 2009. Basic information on the
interviewees is presented in Table 2 below.
Table 13: Profile of Interview Participants in Yogyakarta
Name of enterprises/ owners
Products
Type of enterprises
BP
Jamu
Small enterprise
BS
Traditional medicines
Small enterprise
NA
Jamu
Small enterprise
SI
Jamu
Small enterprise
SK
Jamu
Small enterprise
ES
Jamu (rubbing ointment) Small enterprise
KK
Jamu
Small enterprise
SR
Jamu
Medium enterprise
7.8. The Attitudes of Jamu SMEs Enterpreneurs on Intellectual Property
Issues: Findings from the Interviews
Similarly to the interview process for the batik industry, there are several questions
that were asked of participants. These questions are open ended, which gives a
clearer picture of the level of the participants’ IP knowledge, the involvement of
328
IPRs in their business activities, the methods adopted to protect their IP related
assets, and the assistance received from or offered by the government and/or NGOs
on IPR issues, and an indication of what they expect from the government
concerning IP issues. As in the interview process for batik SME owners, those
participants who already included IPRs in their jamu SMEs 172 were also asked about
problems encountered in obtaining legal protection for and maintenance of their IPR,
particularly trade marks. The answers to such questions all relate to the complexity,
length, and the high costs associated with the IPRs application process and more or
less repeated the responses of interviewees in batik industry. For that reason, the
responses of these questions are not presented in this chapter. Instead, it becomes
part of the more detailed discussion on IPR legislative requirements and
administrative processes contained in Chapter 8. 173
a.
Knowledge of IPRs
The level of IPRs knowledge of jamu SMEs in Semarang and Yogyakarta is no
better than their counterparts in the batik industry. Although all SMEs personnel who
were interviewed knew the term Hak Kekayaan Intelektual (Intellectual Property
Rights), most of them do not have a deep understanding on how IPRs work and what
were the benefits of IPRs for their businesses. The most familiar IPRs for these
participants are trademark and patents as some of them already registered and hold
172
Of the 13 participants in these interviews, there are 7 jamu SME owners who hold or have applied
for trademarks, and one owner who holds petty patents. See, below, the discussion on the ‘Use of
IPRs in Business and the Reasons Not To Use Them’
173
See, Chapter 8 (section 8.2.).
329
these two rights. Of all the interviewees, only AS confidently said that she had
advanced knowledge of IPRs. due to her previous experience in taking care of IPR
applications in a large jamu enterprise before she set up her own small jamu firm. On
the other hand, although three jamu entrepreneurs (JI, UDW and BS) did not claim a
higher level of understanding on IPR issues, they had already registered their
trademark more than 10 years earlier. From their practical experience dealing with
trademark, they could be considered as having more knowledge on IPRs than other
participants.
Regarding sources of information for participants, the mass media (newspaper,
magazine, and TV news) have been the first and major agent in the dissemination of
knowledge on IPR issues to participants. Because the mass media of Indonesia some
years back highlighted disputes between Indonesia and Malaysia over cultural
heritage, which was said could be solved if Indonesia protected its national assets
through IPRs, 174 all participants have a perception that IPRs are only needed to
protect businesses rather than produce immediate profit. This perception makes them
reluctant to include IPRs among their strategies when their businesses are in the early
stages and still not making much profit. This issue will be discussed further in the
part ‘Use of IPRs in Businesses and the Reasons for Not Using Them’ below. 175
174
In recent years, there have been a number of Malaysia claims over some cultural heritage,
includingmaterial that has long been widely acknowledged as Indonesian original heritage, such batik,
angklung, Rasa Sayange folksong, and Pendet dance. See, above Chapter 6 (section 6.2.); 'Get Rid of
Malaysia's Claim! Happy Batik Day, Indonesia', Kompas (Jakarta), 2 October 2009
<http://english.kompas.com/read/2009/10/02/08344141/Get.Rid.of.Malaysias.Claim.Happy.Batik.Day
..Indonesia.>.
175
See, Chapter 7 (section 7.8. b.).
330
Reliable positive information is important for creating a good image and assisting
people to decide on an action. If one receives misleading negative information on
IPRs, a person would have misperceptions and be reluctant to deal with IPRs. One
example of this regards the cost of registration. UDW said that a biro jasa (a private
agent who assists with the government related applications and normally has the
cooperation of corrupt facilitators) 176 offered to take care of his trademark
application for other products at a cost of IDR 5 million in 2007 (equal to USD 585
in 2011). This was far in excess of the formal cost at that time which was only IDR
450 thousand (equivalent to USD 52 in 2011) per goods or service. 177 Although the
cost probably included the fee of biro jasa and other ‘informal’ costs 178 expected to
be incurred during the application process, this information misled UDW and other
people into thinking that the costs of IPR registration are very high.
b.
Use of IPRs in Business and the Reasons for Not Using Them
Compared to those in the batik industry, jamu entrepreneurs are more familiar with
the use of IPRs, particularly trademarks and petty patents, in their business activities.
Seven of the participants (JI, UDW, DS, BP, BS, SI and ES) said that they had
already registered trademarks for their products. JI and BS had even renewed their
trademark once, which means that these enterprises already have held their
176
Corrupt facilitators are known in Indonesian language as calo. Further discussion on calo can be
found in Chapter 8 (section 8.2.2.b.).
177
See, Peraturan Pemerintah No 19 Tahun 2007 Tentang Perubahan Atas Peraturan Pemerintah
Republik Indonesia No 75 Tahun 2005 Tentang Jenis dan Tarif atas Penerimaan Negara Bukan Pajak
yang Berlaku pada Departemen Hukum dan Hak Asasi Manusia [Government Regulation No 19 of
2007 on Amendment of Class and Tarriff of Non-Tax Revenue which Applied on Department of Law
and Human Right] (Indonesia) art 5.
178
See, above Chapter 4 (section 4.3.2.2.).
331
trademarks for more than 10 years. There is SI, who has applied for trademark
registration, but the application had not been granted at the time of the interview.
Turning to petty patents, only SK had already gained protection under such rights for
his two traditional medicines, namely a capsule and tea of sirih merah (red betel), the
main use of which is to treat diabetes mellitus patients. 179 However, it is quite
unusual 180 that, although SK holds petty patents for these two products, he has not
registered these products for trademarks. Other IPRs relevant for the jamu industry,
such as trade secret and copyright or industrial designs for the packaging of jamu,
were not mentioned by participants in these interviews.
For other participants (DE, AS, NA, KK and SR), who did not include any IPRs in
their businesses activities, they gave various reasons for not doing so. Besides a lack
of knowledge of how to obtain trademark rights, DE perceived that the cost of
trademark registration was not suitably offset by the profit on the sale of his
products. Similar reasons were given by AS, NA, KK and SR, who also considered
other aspects of businesses, such as marketing and capital fund, to be more important
than IPRs. The emergence of these reasons may be because there is a misperception
among jamu SMEs that the cost of IPR registration is high, the process is
complicated and IPRs only provide protection for businesses and not economic
benefit.
179
Interview with SK, the owner of a small jamu enterprise (Yogyakarta, 28 March 2009).
Since the requirements for obtaining a trademark are easier to satisfy than those for petty patent
registration and as a trademark is useful from the early stages of their businesses, entrepreneurs
normally seek trademark protection first. From the interview, it was revealed that SK registered his
products for petty patents because he was a recipient of a regional government assistance program that
helped SMEs to prepare to meet IPRs administrative registration requirements and paid all the costs of
IPRs registration.
180
332
Such misperceptions do not only apply to SMEs who have not included IPRs in their
business activities, some SME entrepreneurs, who had already registered and
obtained a trademark, do not register all of their products in the market for trademark
status. Of the 50 jamu products that BP manufactures, he only has a registered
trademark for one product. The same thing applies to DS, which has only registered
trademarks for its three primary products. For BP and DS, when the sales figure for
product is promising then it is time to register trademark of this product. Moreover,
DS informed the author, if one wants to start selling jamu or traditional medicine in
Indonesia, it is more important to obtain a registration number from BPOM first, than
to obtain trademarks protection. Once a product receives its registration number,
BPOM would secure its trade name and refuse the later applicants using the same
trade name, even though it has not registered as a trademark.
c.
Methods to Protect Trade Secrets
This question was intended to determine the method used by participants to protect
their trade secrets. Although one of them (SK) has gained petty patents protection for
his products, which means he has already disclose the trade secrets to the public,
most participants still retained them. Therefore, it is interesting to know how they
protect the valuable information of their businesses.
Of the 13 interviewees, only SI and KK have used legal methods to protect their
trade secrets. Both of them require people who work for them to sign an agreement
which prohibits them disclosing the enterprises’ valuable information to any third
333
party. The agreement made by SI does not contain provisions for legal consequences
if the person fails to abide by it. SI did not know that although employment contract
does not say anything about sanctions for breaching the agreement, by law, he still is
entitled to sue the person who committed such action. 181 Fortunately, SI had never
had to deal with any breach of contract dispute when the interview occurred. In
contrast, although KK includes legal sanctions in his employment contract, there was
one person who committed a breach. However, KK did not pursue legal action.
Instead, he used negotiation as the way to resolve the dispute.
Rather than using legal methods, the rest of the participants preferred to apply other
methods which are commonly practised among Indonesian SMEs, including in those
in the batik industry. Three participants (AS, JI and UDW) provided similar answers
on how to keep their trade secrets. They never let their employees know the secrets
of their jamu formulae and restrict knowledge of the trade secrets to themselves or
their close families. Meanwhile, DE and BS give their employees different job
assignments in order to prevent them knowing the whole production process of their
products. On the other hand, DS, BP, NA, ES, SK and SR do not apply any method
to protect their trade secrets. They said that their business activities are based on trust
and they are not afraid that other competitors will steal their jamu formula and
produce the same products. Interestingly, BP considers his jamu making knowledge
should be disseminated to help others; however, because he read and heard about
many cases involving bio piracy and TK claims by foreigners, BP does not allow
foreigners to see the making process of his products. All these things were also
181
Undang-Undang No 30 Tahun 2000 tentang Rahasia Dagang [Law No 30 of 2000 on Trade
Secrets] (Indonesia) art 11(1).
334
mentioned in similar research conducted by Cita Priapantja 182 more than a decade
ago. It is very disappointing to see that the situation today is not much changed.
d.
Assistance from Government Agencies and/or NGOs on IPR issue
Unlike those in the batik industry, only one participant in the jamu industry has
received assistance from a government agency to deal with IP issues. SK becomes
one of the Yogyakarta Trade and Industry Agency program’s recipients. As a
recipient of the program, he received administrative assistance to arrange his petty
patents application matters. However, in terms of NGO assistance on IP issues, the
experience of participants in the jamu industry paralleled that of those in the batik
industry — they never received assistance to deal with IP issues from NGOs.
The low level of participation of jamu SME owners may be because they rarely
receive information on such programmes. It is often the case that in Indonesia the
opportunity to participate in a government programmes is not announced properly.
The internet infrastructure in Indonesia, especially in rural areas, is not really good,
and the announcement is only published in newspapers. However, if a government
agency lacks the budget for this kind of publication, the officers in charge with the
programmes will only circulate the announcement to other government agencies.
Therefore, in order to participate in such government assistance programmes, it is
important to know people who work in the relevant government agencies.
182
Priapantja, above n 126, 348–9.
335
The lack of enthusiasm of jamu SME owners to participate in government assistance
programmes could stem from another reason. Unlike some of their counterparts in
the batik industry, all participants in the jamu industry interviewed are not really
interested in participating in a government assistance related IP program. For them,
IP issues are not an important and urgent business matter. If they think their
businesses cannot fulfil the requirements for IPRs registration, including issues
related to money, they will postpone it. However, when they feel ready, they will
register for IP protection whether there is government assistance or not.
e.
Expectations to the Government Related to IPR issues
The responses of the jamu SME owners who participated in the interviews are more
or less similar to those of the batik SME owners. Most of them (BP, BS, DE, AS, JI,
NA, SI and KK) expect the government agencies to have a program to disseminate
detailed information on IPRs. Although they state that they are not really interested
in government assistance programs related to IP issues, they nevertheless wish the
government to provide such a program. In particular, they say they need an
assistance program which will help them deal with administrative matters involved in
the complicated IPR application process.
Another expectation is related to the procedure to obtain IPRs, specifically
trademark. All participants, except SK, and SR, stated that they hoped that the
government would make the registration process easier for SMEs. Specifically, they
want the government to cut the time for processing trademark registration which,
from their experience, took three years on average to complete. Related to that, DE
and DS wish that the registration of IPRs could be processed entirely in the region,
336
rather than at the central office of DGIPR in Tangerang. In terms of money, NA, ES
and KK wish that the government provide special lower cost IP registration for
SMEs. Interestingly, from his own experience dealing with calo and biro jasa, UDW
expects that the government clean up the IPRs registration procedure, increasing its
efficiency and eliminating bribery, in order to accelerate the process and also to cut
the costs of registration. Moreover, SI also emphasised that, in order to make IPRs
more attractive for business activity, the government needs to affirm legal sanctions
for those who infringe IPRs owned by others. All of these expectations show the
interest of participants in including IPRs in their business activities in near future.
However, there are two participants who responded negatively to this question. SK
and SR said that they do not have any expectation of the government regarding IP
issues. They considered IPRs are not really important for their businesses and other
SMEs. SR even stated that, at this stage, he is focusing on developing his small jamu
enterprises, instead of protecting them by IPRs. Ironically, although SK considers
IPRs are not important, he holds petty patents for two of his products. When he was
asked about this, he said that he had had to make minimal effort in the petty patents
registration process because almost all administrative matters were managed by the
Trade and Industry Agency of the Yogyakarta Province. He received assistance
because he was one of the government IP assistance program recipients. These two
negative responses reflect a lack of enthusiasm of these SME owners for IPRs.
7.9. Conclusion
337
The commercialisation of jamu began in the early 20th century and since then jamu
industry become increasingly more commercialised. Although most Indonesians are
proud of jamu as their cultural heritage, the majority of Indonesian medical
professionals are wary of suggest jamu as the cure of their patients’ illness, as they
are sceptical regarding the efficacy of many jamu products. The disbelief of
Indonesian medical professionals in the effectiveness of jamu, as well as doubts
relating to the reliability and purity of its composition (including issues of
adulteration) as well as the recent cases of poisonings involving jamu 183 have made
the government of Indonesia cautious about the jamu industry. The government has
issued a lot of regulations to rule the industry. Consequently, jamu entrepreneurs,
particularly SME owners, are hampered by these regulations in the expansion of their
businesses.
IPRs are considered by jamu entrepreneurs as another form of regulation, which have
little benefit for their businesses. Moreover, since their businesses still can be
operated as usual without IPRs, jamu entrepreneurs, especially SME owners, think
IPRs are not an urgent matter and are only needed when their businesses or products
are already profitable, not during the early stages of business development. However,
the exposure of SMEs in jamu industry to IPRs as compared to that of batik SMEs is
better, as the interview outcomes show more than half of the participants own or
have registered for trademarks or petty patents. Although not all of the participants
who own or have registered IPRs understand the real benefits of the rights, better
183
'Awas, Jamu Beracun Beredar di Pasaran [Be Careful, Poisonous Jamu are in the Market]', Jurnal
Berita (Tuban), 2 June 2011 <http://jurnalberita.com/2011/06/awas-jamu-beracun-beredar-dipasaran/>; 'Ribuan Bungkus Jamu Beracun Disita [Thousand Packagings of Poisonous Jamu are
Confiscated]' (16 July 2008) Metro TV News
<http://www.metrotvnews.com/read/newsvideo/2008/07/16/62728/-Ribuan-Bungkus-Jamu-BeracunDisita-/82>.
338
exposure with IPRs could be assumed for jamu SME owners as they are more
experienced in such issues. Another interesting fact revealed by the interview
responses was that most of the jamu SMEs participants are not really enthusiastic in
participating in a government financial assistance IP related program. This reflects
the pro-active attitude of jamu SME owners, who do not want to merely wait and
rely on the government to assist the development of their own businesses, but rather
seek to be independent finding the solution for their problems related to utilization of
IPRs into their businesses. Nevertheless, it has to be admitted that the government
still has to improve a lot of things, such as the long, complicated and corrupt process
of IPR registration, in order to make IPRs are more attractive to SMEs. This in turn
would have a positive impact on their development and on the health of the industry,
and the economy, more generally.
339
CHAPTER 8
LEGISLATIVE REQUIREMENTS AND ADMINISTRATIVE
PROCESESS FOR INTELLECTUAL PROPERTY RIGHTS
(IPRS) IN INDONESIA: CHALLENGES FOR INDONESIAN
SMES IN ACQUIRING IPRS
8.1. Introduction
The two previous case study chapters described the experiences of those in the batik
and jamu industries in dealing with IP issues in Indonesia. The interviews with a total
of 27 SME owners in the batik and jamu industries, revealed that obtaining the
protection of IPRs is one issue that causes them concern. Almost all interview
participants complained about the complicated procedure and the time-consuming
and expensive process involved in IPRs registration. They were particularly
concerned about the registration issue in the field of trademark, which is the most
familiar of the IPRs to Indonesian SMEs. Since they are small in size and have few
resources, SMEs would prefer s procedure to obtain IPRs that was uncomplicated
and did not require too great an expenditure of their limited resources.
This chapter examines problems behind the cumbersome process to obtain IPRs
protection in Indonesia that in itself discourages SMEs from making use of IPRs. It
analyses whether the government rules and policies on procedural and money issues
for obtaining IPRs protection matches the needs of SMEs. Discourse on these issues
will be approached by looking at the black letter rules in the relevant legislation,
beginning with an overview of the current registration procedure, the costs of IPRs
registration and other relevant costs in each IPR. The discussion then will centre on
340
whether they adequately accommodate SMEs’ interests or whether a shorter, simpler
and inexpensive registration procedure would be better suit their needs. This chapter
will, in addition, discuss other administrative factors, namely the role of regional
office, human resources, information technology and budget, that are very possibly
negatively affecting the administrative processes involved in obtaining the relevant
IPRs.
8.2. Problems behind the Burdensome Process to Obtain IPRs Protection in
Indonesia that are Relevant to SMEs
8.2.1. Rules of Procedure
As discussed in chapters 6 and 7 in relation to the batik and jamu industries
respectively, there are some forms of IPRs — namely copyright, protection of
traditional knowledge (TK) and traditional cultural expressions (TCEs), industrial
design, trademark, trade secrets, geographical indication (GI) and petty patents —
that are relevant for such industries. This section would like to discuss the legislative
requirements regarding IPRs and the administrative processes involved in obtaining
the relevant IPRs for the batik and jamu industries. The discussion below, however,
only focuses on IPRs that grant individual ownership as these provide direct benefits
to SMEs. Since Indonesian IPRs legislation provides that the ownership of several
forms of IPRs are in the hands of State and regional governments or the community,
341
this section does not discuss protection of TK, 1 TCE 2 and geographical indication
(GI). 3
a.
Trademarks 4
Figure 5: Procedure for Trademark Registration in the absence of any Objection
from Another
Party
In Law No 15 of 2001 on Mark, there are four stages in the trade mark registration
procedure, that is, filing, administrative and substantive examination, and
publication. After applicants file their applications and complete all administrative
requirements, 5 they will receive a filing date 6 which completes the administrative
examination. Then, a substantive examination will be begun within a maximum of 30
1
In Indonesia, the protection of TK, in particular wild medicinal plants as the main ingredients of
jamu, is included in Law No. 29 of 2000 on Plant Variety Protection. See Chapter 7 (section 7.4.6.).
2
The protection of TCE, in particular traditional batik art, is covered in Law No. 19 of 2002 on
Copyright. See Chapter 6 (section 6.4.1.).
3
The protection of GI is governed in Law No. 15 of 2001 on Trademarks. See Chapter 6 (section
6.4.5.) and Chapter 7 (section 7.4.3.).
4
See Chapter 4 (section 4.4.2.).
5
Administrative requirements in trade or service mark application are provided in Articles 7, 8, 10,
11, and 12 of Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark]
(Indonesia).
6
Ibid art 15(1).
342
days from the filling date. 7 The substantive examination will determine whether the
mark for which registration is sought is not within the criteria of excluded subject
matter outlined in the Act. 8 The substantive examination stages lasts for up to nine
months. 9
When the Directorate of Trademark concludes as a result of substantive examination
that the mark cannot be registered, the applicant or their IP agents will be officially
informed in writing. 10 The applicant for rejected mark or GI has the opportunity to
submit an objection to contest the Trademark Office’s decision within a maximum of
30 days after the date of receipt of the Official Notice of Rejection. 11 If the
application for a trademark to be registered is accepted, then, the mark will be
published in the Official Trademark Gazette. 12 If the objection is not accepted, the
applicant will be notified in writing. 13
The duration of the publication stage is three months after the date of acceptance of
the application. 14 During the publication stage, any parties may file a written
opposition (objection) to the Trademark Office 15 and within 14 days, the Trademark
Office will send a Notice of Opposition to the applicant or their IP agent. 16 Then, the
applicant or their IP agent may also file a rebuttal to the opposition within the
7
Ibid art 18(1).
See Chapter 4 (section 4.4.2.).
9
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark]
(Indonesia)art 18(3).
10
Ibid art 20(2).
11
Ibid art 20(3).
12
Ibid art 20(5).
13
Ibid art 20(7).
14
Ibid art 22(1).
15
Ibid art 24(1).
16
Ibid art 24(3).
8
343
maximum period of 2 months from the date of the Notice of Opposition. 17 In case of
an opposition and/or a rebuttal, the Trademark Office will re-examine the
application, 18 with such re-examination to be complete within two months from the
date of expiry of the publication. 19 Where the re-examination process concludes that
the rebuttal is accepted, the mark is then registered in the General Register of Marks
and the DGIP will issue a Mark Certificate within a period of no more than 30 days
from the date of the registration in the General Register of Marks. 20
However, in case of rejection of the rebuttal, the Directorate of Trademark will notify
the applicant and its IP agent in writing that the mark has been refused registration.
In such a case, the applicant or their IP agent will be given an opportunity to file an
appeal petition 21 to the Trademark Appeal Commission within a period of no more
than three months from the date of the Official Notification of the Rejection. 22 The
decision of the Commission will be made within the maximum period of three
months from the date of receipt of the appeal petition. 23 If the applicant is not
satisfied with the Commission’s decision, an action regarding this matter may be
brought to the Commercial Court. 24 If the result of substantive examination
concludes that the mark is approved for registration, it will be published in the
Official Trademark Gazette 25 for three months. 26 In case of no objection being
received during the publication period, the DGIP will issue a Mark Certificate to the
17
Ibid art 25(1)(2).
Ibid art 26(1).
19
Ibid art 26(2).
20
Ibid art 26(5).
21
Ibid art 26(4).
22
Ibid art 30(1).
23
Ibid art 31(1).
24
Ibid art 31(3).
25
Ibid art 20(1).
26
Ibid art 22(1).
18
344
applicant or their IP agent within 30 days from the date of expiry of the publication
period. 27 Therefore, in total, the time needed for the registration process without
hearing and opposition stages is 14 months and 10 days.
Regarding the procedure of trademark registration, Law No 15 of 2001 contains only
general provisions on that issue. Article 9 of the Law provides that the requirements
and application procedure to register trademark will be further governed by a
Government Regulation. The Government Regulation which is implied by Article 9
is Government Regulation No. 23 of 1993 concerning The Procedure of Trademark
Registration Application. The relevant Government Regulation was issued on 31
March 1993, 28 and sets out the requirements and the procedure for trademark
registration in detail, and also other trademark application details, such as extension
of protection period of a registered trademark, registration of change of name and
address of a registered trademark owner, and removal of trademark registration by a
registered trademark owner. 29
While the procedure for obtaining trademark right contained in the current trademark
law is not as complicated as that for patent, it is still considered too long and
confusing for SME owners, who mostly do not have sufficient knowledge on
trademark. As mentioned above, the total period required for obtaining trademark
rights is 14 months and 10 days under the current trademark law, and then only if
27
Ibid art 27(1).
The Government Regulation was issued on the basis of the previous trademark law (Law No 19 of
1992). It still exists today on the basis of Article 99 of the Trademark Law 2001 which maintains that
all implementing regulations issued on the basis of the previous trademark law are still valid if they
are not in contradiction to the present law. The Government Regulation adopts a constitutive
registration system which is identical with Law No 15 of 2001.
29
The Elucidation of Peraturan Pemerintah No 23 Tahun 1993 Tentang Prosedur Permohonan
Pendaftaran Merek [Government Regulation No 23 of 1993 on the Procedure of Trademark
Registration Application] (Indonesia): General.
28
345
there is no opposition or hearing. In practice, however, the minimum process to
obtain a new trademark right is on average two years. 30 The delay could be worse if
the application is not submitted directly to the central office of DGIP in Tangerang,
West Java. This is because the application needs to get through another bureaucratic
procedure at the regional office before it is submitted, together with other
applications, to the central office. 31 Such a lengthy time frame has been mentioned
by SME owners who participated in the interviews as one reason that makes them
reluctant to register their trademarks.
Although the time to complete one trademark application is too long in practice, the
position of batik and jamu SMEs applicants is guaranteed in relation to later
applications for the same trademark. Later applications for the same trademark
would be rejected by examiners, even while the first trademark is still in the
registration process. However, this guarantee is not applied to ‘bad faith’ first
trademark applicants. This means that batik and jamu SMEs who register trademarks
of others without permission are still able to be challenged during the publication
stage or even after their trademarks are approved.
In the near future, it is planned to shorten the registration process into 11 months.
The Bill for the new Trademark law proposes that the duration for substantive
examination be a of just maximum of six months, 32 which means cutting three
months from the current substantive examination time. The Bill also proposes to
30
Asnil Bambani Amri, 'Banyak Calo di Pengurusan Hak Kekayaan Intelektual (Many Scalpers in IP
Registration
Process)',
Kontan
(Jakarta),
24
October
2008,
36
<http://kontan.realviewusa.com/default.aspx?iid=22518&startpage=page0000036>.
31
Interview with BBS, officer of Intellectual Property Rights Section, the Regional Office of Ministry
of Law and Human Rights in Central Java (Semarang, 16 March 2009).
32
Rancangan Undang-Undang Merek [Trademark Bill] (Indonesia) art 22.
346
change the sequence of the trademark registration procedure. In the present
trademark law, the administrative examination is followed directly by substantive
examination with the next stage being publication. The Bill proposes that the
sequence of trademark registration procedure should be administrative examination
followed by publication and, following that, substantive examination. 33
The proposed procedure will accelerate the registration procedure because the
publication stage opens the opportunity for other parties to file an objection to the
trademark application, which could then be a consideration in granting or rejecting
the application. Further, letting the objection of other parties emerge first means that
the burden on DGIP to perform substantive examination on all submitted trademark
applications will be reduced. For trademark applicants, particularly SMEs, this
proposed procedure would save their time because the outcome of the publication
stage would give them an immediate answer on their trademark application. Apart
from that, the proposed procedure would also eliminate the re-examination 34 stage of
the present law. Since the substantive examination currently precedes publication
stage, re-examination is required when there is an objection from other party during
the publication stage. The re-examination would no longer need under the new
proposed procedure as its function would be replaced by the substantive
examination. Therefore, this system will reduce the burden on the DGIP officers;
furthermore it would definitely reduce the time required to obtain trademark right.
33
This procedure was actually first contained in the 1992 Trademark Law and also included in the
1997 Trademark Law. It is now re-introduced in the new draft of the Trademark Law. In the general
part of the elucidation of the 2001 Trademark Law, it is explained that this procedure was removed to
create certainty on whether the application is accepted or not with such a decision and its notification
coming earlier and to provide opportunity for other parties to file objection to the application which is
ready to register. See Articles 14–28 of the Undang-Undang No 19 Tahun 1992 tentang Merek [Law
No 19 of 1992 on Trademark] (Indonesia)
34
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on Trademark] (Indonesia)
art 26.
347
The adoption of simplified procedures able to accelerate the trademark registration
process is very important for SMEs, particularly those in the batik and jamu industry.
As they have limited financial resources, SMEs expect to have turnover (and a
return) as soon as possible from their businesses. Because trademark functions as a
marketing tool that could help to boost sales of products in the market, trademark is
really needed by SMEs, both in the early or advanced stage of their business
activities. However, in many cases, because of complicated and lengthy process to
obtain trademark protection, Indonesian SMEs tend to delay the application of
trademark for their businesses. When their businesses are flourishing and making
much money, then that is the time when most SMEs consider applying for trademark
registration.
348
b.
Copyrights 35
Figure 6: Procedure for Copyright Registration in the absence of any Objection
from Another Party
As mentioned in Chapter 3, 36 the protection of copyrights is not obtained through
registration. Once an author creates a copyright work, the protection under copyright
on the work emerges automatically. In Indonesia, the 2002 Copyright Law regulates
the Directorate of Copyright to accept registration for copyright works 37 for the
purpose of evidence when there is a dispute. However, the registration is not
compulsory and, whether or not it is registered, a work shall be entitled for copyright
protection in Indonesia. 38 Further, the Law asserts that the registration of copyright
35
See Chapter 4 (section 4.4.1).
See ibid.
37
Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002 on Copyright]
(Indonesia) art 35(1).
38
Ibid art 35(4).
36
349
does not mean the Directorate of Copyright endorses the substance of a work and,
therefore, the registered rights can still be contested. 39
Regarding the details of copyright registration procedure, the Law provides that it
shall be regulated further in a Presidential Decree. 40 However, the existing regulation
regarding that matter is not in the form of Presidential Decree. Instead, it is regulated
in Minister of Justice’s Ministerial Regulation No M.01-HC.03.01 41 of 1987 on
Copyright Registration. 42 The procedure for copyright registration is simpler than for
other IPRs since it does not involve substantive examination. As explained earlier,
copyright registration is not a ground for obtaining protection 43 and does not mean
that the DGIP approves the content of a work. Therefore, substantive examination is
not needed in the copyright registration procedure. However, similarly to other types
of IPRs (such as trademark and patents), when a work is registered for copyright
protection, the opportunity to challenge is opened. The party who is the more entitled
to the copyright of the work may file a request to cancel the registration of the work
with the Commercial Court. If the Court approves the request, the cancellation
request shall annul the legal force of the registration. 44 Apart from that, the expiry of
39
Ibid art 36.
Ibid art 37(6).
41
Peraturan Menteri Kehakiman No M.01-HC.03.01 of 1987 Tentang Pendaftaran Hak Cipta
[Minister of Justice Regulation No M.01-HC.03.01 of 1987 on Copyright Registration] (Indonesia).
42
Although it is only the matter of title, this inconsistency is confusing and is in conflict with Law No
10 of 2004 concerning Drafting of Legislation. According to that law, the legal instrument that
contains materials to put a law into effect is government regulation. Therefore, rather than a
Presidential Decree or Ministerial of Justice Regulation, it should be regulated further in a
Government Regulation. See Article 10 of Undang-Undang No 10 Tahun 2004 Tentang Pembentukan
Peraturan Perundang-undangan [Law No 10 of 2004 on the Drafting of Legislation] (Indonesia)
43
It means, in theory, even without a registration, batik SMEs cannot copy and produce their
counterpart’s batik motifs without permission.
44
Article 44 (a) of Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002 on
Copyright] (Indonesia) art 44(a).
40
350
the term of copyright protection shall become the grounds for invalidating the
copyright registration. 45
Since the process is simpler, the time needed to complete the copyright registration
process is also shorter. Yet, it still takes a maximum of nine months after the date of
filing to complete the registration process. 46 There is no further explanation in the
Copyright Law 2002 and the Minister of Justice’s Ministerial Regulation No M.01HC.03.01 of 1987 on Copyright Registration that justifies the maximum period of
nine months. The elucidation of Article 37(3) of the Copyright Law 2002 merely
asserts that this period of registration process is intended to give legal certainty to the
applicant. In the Bill of new Copyright Law, this provision is still preserved without
any change, both in the body article and the elucidation. 47
In the absence of a convincing explanation, one can say that the period of nine
months is overly long for copyright registration. Compared to trademark, copyright
registration procedure (which does not require a substantive examination stage)
should be finished in a far shorter time. If the total duration of the trademark
registration procedure with a nine months substantive examination stage is 14
months and 10 days, then the time needed to complete the procedure for copyright
registration should only be about five months or less. 48 As a comparison, the
45
Ibid art 44(b).
Ibid art 37(3).
47
Rancangan Undang-Undang Hak Cipta [Copyright Bill] (Indonesia) art 37(3).
48
Substantive examination in trademark registration process takes nine months to complete.
Therefore, if the total official process mentioned in the 2001 Trademark Law says 14 months and 10
days, a copyright registration that does not have a substantive examination should only take around
five months.
46
351
copyright registration in China and India could be finished only within 30 days 49 and
two or three months 50 respectively from their receiving the application.
Although copyright registration is not compulsory, it is important for Indonesian
businesses, including SMEs. The certificate issued after the registration is a real and
simple evidence to prove copyright ownership for lay people before the court.
Registration would bring legal certainty, which is important for business entities,
regardless of their size. Therefore, the acceleration of the copyright registration
process in Indonesia is absolutely demanded by the owners of copyrights who are
engaged in business activities, especially those in the creative industries.
49
China IPR SME Helpdesk, Copyright in China: Application Process (2008) <http://www.chinaiprhelpdesk.eu/faqs.php>.
50
Copyright Office - Government of India, Copyright: Frequently Asked Questions (2009)
<http://copyright.gov.in/frmFAQ.aspx>.
352
c.
Industrial Designs 51
To obtain protection under industrial design rights, an industrial design shall be
granted based on an application, 52 accompanied by the required documentations,
filed with the DGIP. According to the Law, the details of the application procedure
shall be regulated further in a Government Regulation. 53 The implied regulation is
Government Regulation No 1 of 2005 on the Implementation of Law No. 31 of 2000
concerning Industrial Design. 54
Figure 7: Procedure for Industrial Design Registration in the absence of any Objection
from Another Party
As with the trade mark application procedure, there are administrative and
substantive examinations in the industrial design application procedure; however,
substantive examination in the industrial design application procedure is only needed
51
See Chapter 4 (section 4.4.3.).
Undang-Undang No 31 Tahun 2000 tentang Desain Industri [Law No 31 of 2000 on Industrial
Design] (Indonesia) art 10.
53
Ibid art 11(7).
54
Peraturan Pemerintah No 1 Tahun 2005 tentang Pelaksanaan Undang-undang No 31 Tahun 2000
tentang Desain Industri [Government Regulation No 1 of 2005 on the Implementation of Law No 31
of 2000 concerning Industrial Design] (Indonesia).
52
353
if there is an objection lodged against that industrial design application. 55 After the
administrative examination is completed and the application fulfils all the
documentation requirements, notification shall be published for a maximum period
of three months after the date of application receipt in special media that can be
spotted easily by public 56 as well as in the Official Gazette of Industrial Design. 57
During the period of publication/notification, there is opportunity for another party to
file an objection to the application, which in turn leads to a substantive examination.
If there is no objection before the end of publication period, the DGIP shall issue and
grant the industrial certificate within 30 days thereafter. 58 Although there is no
indication as to how long the administrative process should take, it could be assumed
that the whole registration process of design industry rights stated in the law could be
completed, if there is no objection from other party, within four or five months.
However, in practice, it can take two or three years to obtain the design industry
certificate. 59
The procedure for industrial design registration in the 2000 Industrial Design Law is
a combination of registration procedure under the copyright and patent regimes. 60
This is reflected in both Articles 29(1) and 26(5) which provide that industrial design
right is granted immediately if there is no objection until the end of publication
55
Ibid art 26(5).
Ibid art 25(1).
57
Ibid the Elucidation of Article 25(1).
58
Ibid art 29(1).
59
Zakaria, 'Waktunya Lama, Enggan Mengurus HKI [Long Time Process, Reluctant to Register
IPRs]', Koran Tempo (Jakarta), 4 October 2009
<http://hukumham.info/index.php?option=com_content&task=view&id=3439&Itemid=99999999>
60
Ansori Sinungan, Perlindungan Desain Industri: Tantangan dan Hambatan Dalam Praktiknya di
Indonesia [Protection of Industrial Design: Practical Challenge and Impediment in Indonesia] (PhD
Thesis, University of Indonesia, 2009) 342.
56
354
period; however, if there is an objection lodged before the end of that period, there
will a substantive examination against that application.
It is understandable that because design employed in an industry is changed rapidly,
the area of industrial design needs a simple, short procedure. Making substantive
examination no longer a compulsory stage would certainly reduce the time required
for procedure. However, in practice, this has been a source of problems in
implementing industrial design law. 61 Even though the Industrial Design Law 2001
still opens the opportunity for a substantive examination, though this is subject to an
objection being lodged by another party, this condition is considered as limiting
examiners power to perform substantive examinations, for without substantive
examination, the DGIP could not control whether an industrial design application
satisfies the requirement of novelty as stated in Article 2(1) of the Industrial Law
2001.
The non-substantive examination system in Indonesia needs active public
participation to file opposition (lodge objections) to products which do not deserve to
be granted industrial design rights. 62 However, the time to publicise the works for
which applications for industrial design rights have been filed is only three months.63
If this period is compared to trademark and patent, which require 6 and 18 months
publication period respectively, the publication period in industrial design
registration procedure is too short. Moreover, the methods to announce works for
61
Ibid 440.
Robinson Sinaga, 'Sistem Pemberian Hak Desain Industri (System of the Grant of Industrial Design
Rights)' (2005) II(2) (April 2005) Media HKI 14.
63
Undang-Undang No 31 Tahun 2000 tentang Desain Industri [Law No 31 of 2000 on Industrial
Design] (Indonesia) art 25(1).
62
355
which applications for industrial design rights have been filed do not attract much
attention from the public. Despite a requirement that special media be utilised that
can be spotted easily by public, it is often the case that besides notification being
published in the Official Gazette of Industrial Design, 64 the public notification of
industrial design and other applications has often been limited to notices attached to
some display boards around the central office of the DGIP area in Tangerang. 65
Since the IPDL (Intellectual Property Digital Library) launched a few years ago, the
DGIP also uses this medium to publish the announcement of IPRs applications.
However, it is doubtful that IPDL is effective to be alternative medium for
announcing the new industrial designs applications, because many people, and
particularly SMEs, are in regional area where internet access is limited. 66 Such a
short period of time and less than optimum methods of the notification/publication
will prevent other parties from understanding about existence of applications for
industrial design rights. Consequently, there are many applications that have been
granted industrial design rights without proper examination67 and this broadens the
potential for disputes and the level of acrimony that may be involved.
From the perspective of SMEs, however, this short period of registration time is
positive, but if this short period of time is not balanced with a thorough procedure of
examination that prevents further disputes in the future, it is certainly also ineffective
for SMEs.
64
Ibid elucidation of Article 25(1).
Sinaga, above n 62, 18.
66
Further discussion on IPDL will be presented later in this chapter.
67
Sara Holder and Lisa Yong, Indonesia: Rethinking Indonesia (2006)
<http://www.managingip.com/Article/1321298/Supplements/Indonesia-RethinkingIndonesia.html?supplementListId=58720>.
65
356
Here, there is dilemma in determining the best registration system that would
accommodate the demand of the applicants. On one hand, the registration process is
required to be fast and simple to satisfy the demand of the business sector,
particularly SMEs. On the other side, however, there are concerns that a registration
process which does not include sufficient time for and methods of announcement and
substantive examination would be unreliable and open the opportunity for future
disputes. Therefore, to resolve the dilemma, it is proposed that Indonesia applies both
non-substantive and substantive examination system of registration, such as has been
applied in South Korea since 1998. 68 In that country, the criteria used to determine
which system should apply to an application for industrial design rights is the life
cycle of products. If the life cycle of the products for which application is made for
industrial design rights is short, then it does not have to follow a substantive
examination system. 69 This criterion is suitable for batik products, which only has a
three months life cycle in the market. 70 For batik products, a non-substantive
examination system with less than a three months time of registration would benefit
SMEs in that industry.
d.
Petty Patents 71
Petty patents are more relevant given the situation of Indonesian SMEs. Their limited
resources in terms of skills and knowledge, finance and facilities have made them
unlikely to invent something that is suitable to be patented in the standard form.
68
Korean Intellectual Property Office, Industrial Design: Application Procedure (2010)
<http://www.kipo.go.kr/en/>.
69
Sinaga, above n 62, 18.
70
See Chapter 6 (section 6.4.2.).
71
See Chapter 4 (section 4.4.4.).
357
Generally, the procedure to obtain petty patents is similar to that for patent — both
require registration. 72
Figure 8: Petty Patent Registration Procedure in the Absence of any Objection
from Another Party
There are four stages in the petty patent registration procedure, which involves filing,
administrative examination, publication and substantive examination. Petty patent
application is filed in writing in Indonesian to the DGIP, 73 with documents required
in the registration process attached. This application form and all its attached
documents will be examined in the administrative examination stage. After this stage
is completed, the application is published in the Official Gazette of Patent 74 and/ or a
special media, such as newspaper advertisements, and on notice boards around the
DGIPRs Office. 75 This publication stage takes place immediately after three months
72
Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents] (Indonesia) art
104.
73
Ibid art 24(1).
74
Ibid art 43(1)(a).
75
Ibid art 43(1)(b).
358
has elapsed since the date of filing. 76 The publication period for petty patent
application will then last for three months after the initial date of publication. 77
During the publication period, there is an opportunity for other parties to challenge in
writing and lodge the relevant document with DGIPR. The party who expresses an
objection must declare the reason. 78 DGIP will deliver this objection to the
applicant 79 who is entitled to submit a rebuttal or explanation in writing to DGIPR. 80
Then, DGIPR will consider any objection and rebuttal as additional information in
the substantive examination. 81
After the publication stage, the application must be examined substantively. The
substantive examination shall be requested in writing to DGIPR 82 at the same time
with the filing date or within the maximum of 6 months from the date of filing. 83 The
fee will be applied on the substantive examination application. 84 If the examiners
decide that the invention has satisfied the requirements, then DGIPR will issue a
petty patent certificate to either the applicant or their proxy. 85 If the decision is
negative, the applicant could file an appeal with the Appeal Commission in writing 86
within three months from the date of sending the letter of notification informing the
applicant that their application had been rejected. 87 The Patent Law 2001 states that
76
Ibid art 42(2)(b).
Ibid art 44(1)(b).
78
Ibid art 45(1).
79
Ibid art 45(2).
80
Ibid art 45(3).
81
Ibid art 45(4).
82
Ibid art 48(1).
83
Ibid art 105(2).
84
Ibid.
85
Ibid art 55(1), (2).
86
Ibid art 60(2).
87
Ibid art 61(1).
77
359
the registration of petty patent shall be finalised at the latest 24 months 88 from the
filing date. 89
Unlike the substantive examination requirement for patent, 90 the substantive
examination in regard to a petty patent application assesses only novelty and
industrial applicability requirement. 91 The novelty requirement for petty patents
application is applied universally, which means one could not easily register an
invention that is already known previously anywhere in the world for petty patent in
Indonesia. 92
Novelty and industrial applicability requirements are easier to satisfy than inventive
step, which is also required in patent registration. In the patents application, it is
likely to involve the assistance of an expert in the field of relevant technology to
prepare the documents of application, because to demonstrate that the particular
invention involves inventive step generally requires knowledge in the relevant field
of technology, and such knowledge is usually only possessed by an expert in that
field. However, for petty patent application, this is not necessary. Even so,
completing petty patents applications and providing the required supporting
documentation can be difficult for people — such as the majority of SME owners in
the regional Indonesia — who do not have experience dealing with formal
administrative procedures,.
88
This is 12 months shorter than time required to finalize patent registration. See Undang-Undang No
14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents] (Indonesia) art 54(a).
89
Ibid art 54(b).
90
Novelty, inventive step and applicable to industry are three requirements that must be satisfied for a
product or process to be protected under patent. See ibid art 2(1); and Chapter 4 (sub-section 4.4.4.).
91
Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents] (Indonesia) art
105(5). Details on these two requirements have been discussed in Chapter 4 (section 4.4.4.).
92
Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents] (Indonesia)
general part of the elucidation.
360
According to Article 108 of the 2001 Patent Law, petty patent shall be regulated
further in a government regulation. The existing regulation referred in this law is
Minister of Justice’s Ministerial Decision No M-01.HC.02.10 of 1991 of 31 July
1991 on Petty Patent. This implementing decision is not only out of date and in
conflict with Law No 10 of 2004 93, it also contains provisions that are in
contradiction with what has been set out in the 2001 Patent Law. Article 105(5) of
the 2001 Patent Law states that the substantive examination of petty patent
application shall only test the novelty and the industrial applicability requirements,
while Article 3 of this ministerial decision asserts that ‘the requirement for novelty,
inventive steps and industrial applicability are the same for standard and petty
patents’. This contradiction has already pointed out by Christoph Antons in one of
his publications 94 where he suggested that the Ministerial Decision should be
replaced. 95. Unfortunately, this confusing provision is still valid. According to the
theory of law applicable here, the position of Article 105(5) of the 2001 Patent Law
is higher and supersedes the conflicting provision in the ministerial decision.
However, in order to avoid confusion, it still needs action from the government to
invalidate this misleading decree.
Although petty patent is relevant for SMEs in the jamu industry, there are only few
SMEs developing new products that could satisfy the novelty requirement. Many of
SMEs do not have research facility to invent new jamu products. If they create an
innovation which is able to satisfy the two requirements of petty patents, it is
93
See, above n 42.
Christoph Antons, Intellectual Property Law in Indonesia (Kluwer Law, 2000) 94 (‘IP Law in
Indonesia’).
95
Ibid 197.
94
361
doubtful that they could register the products successfully without the assistance of
people who understand the process. It is not easy to find such assistance for SMEs
located in regional areas. Besides that, the administrative cost for petty patents,
which combines a registration fee and annual maintenance costs for 10 years, is quite
expensive. For SMEs which only sell jamu into a small (local) market, 96 petty patent
protection with the excessive procedure and expensive costs is probably not really
worth the expenditure involved.
e.
Trade Secrets 97
Like copyright, trade secret protection does not require a formal process. Trade
secret protection will be attached as long as the information still has the qualities of
trade secrets mentioned in Article 3 of the Law. Therefore, there is no time limit to
the trade secrets protection. However, in Indonesia, all administrative matters related
to the licensing agreement and the transfer of trade secrets to another party need to be
recorded at the DGIPR Office with the payment of fee, 98 otherwise, all of the forms
of transfer and licensing shall not have any legal consequences for any third party. 99
The licensing agreement, however, must not contain provisions that harm the
Indonesian economy or cause unfair competition, 100 and the DGIPR office has right
96
Such jamu SMEs are enterprises which are in the category composite jamu enterprise (UJR) and
jamu gendong enterprise (UJG). UJR and UJG are two kind of jamu enterprises which have a very
limited area of marketing. Their products are normally sold in the areas surrounding their enterprises.
See Chapter 7 (section 7.3.).
97
See Chapter 4 (section 4.4.5.).
98
Undang-Undang No 30 Tahun 2000 tentang Rahasia Dagang [Law No 30 of 2000 on Trade
Secrets] (Indonesia) arts 5(3).
99
Ibid art 8(2).
100
Ibid art 9(1).
362
to refuse to record of licensing agreement that contains such provisions. 101 Similar to
the requirement to record in copyright, this requirement seems needed to serve as
evidence of the transfer and licensing transaction. In this case, the record is useful to
enhance the protection of trade secrets as the rights of the original holders of trade
secrets are transferred to the new holders through the licensing and transfer
mechanisms.
As stated previously, the nature of trade secret protection does not involve great
period of time and only involves a little formality and is pertinent for SMEs’
business activities. SMEs in Indonesia have long practised their own traditional
methods to protect the trade secrets of their business. The most common traditional
methods used are simply not trusting anyone else with the relevant information or
rather keeping information in regard to materials and method secret in a closed
circle 102 and letting a few people know different pieces of the secret information of
the business. 103 Because these traditional methods have proved to be effective, SME
owners are reluctant to apply more complex and modern legal protection methods,
such as secrecy agreements, employment contracts, equity, and so on, to protect their
trade secrets. 104 One large enterprise owner in the jamu industry even doubted the
effectiveness of using modern legal method of trade secret protection for his
business. 105
101
Ibid art 9(2).
Cita Citrawinda Priapantja, Budaya Hukum Indonesia Menghadapi Globalisasi: Perlindungan
Rahasia Dagang di Bidang Farmasi [Legal Culture of Indonesia in Encountering Globalization:
Trade Secret Protection in Pharmaceutical Industry] (Chandra Pratama, 3rd ed, 2005) 348.
103
Interview with SME owners in the batik (14 firms) and jamu (13 firms) industries in Yogyakarta,
Pekalongan and Semarang between March and April 2009. For detailed discussion on the methods of
keeping trade secret of all interviewed SME owners in these two industries, see Chapters 6 and 7.
104
Ibid.
105
Interview with CS, the owner of PT Jamu Nyonya Meneer (Jakarta, 12 March 2009).
102
363
Regarding the transfer of rights and licensing transactions, nothing can be said on
how many SMEs have done these kinds of legal transactions. Although there is an
obligation to record these transactions, data on the matters are not available on the
website of DGIPR. In an email communication, one officer of the DGIPR Office
informed the author that no single request to record the transactions of trade secrets
had ever submitted to the Office since its inception in 2000. 106 It also means that
Indonesian SMEs still do not engage in the transactions to transfer their trade secrets
and to grant licence to other party. Another interpretation from this fact is most of
Indonesian SME owners still apply traditional family methods in running their
businesses, which does not involve letting their trade secrets go to outsiders.
However, inheritance, 107 one of the transactions that falls within the transfer of rights
category, is commonly practised in family type businesses in Indonesia. From the
fact that there is no record of inheritance of trade secrets transactions, it can be
assumed that business owners, including those from SMEs, do not really see the real
benefits and implications of the rules on their businesses.
Such thinking is quite logical as the sanctions for not following the rules are not
serious. Although the law provides that a licensing agreement, which is not recorded
at the Directorate General of Intellectual Property Rights (DGIPR), does not have
legal effect for the third party, 108 there is no system that can control the
implementation of such rule. Only when there is a dispute that is settled through the
court, can the unrecorded transfer of rights and licensing agreement be detected by
106
Email from Robinson Sinaga, an officer of the DGIP Office, to Selvie Sinaga, 11 January 2010 (on
file with author).
107
Undang-Undang No 30 Tahun 2000 tentang Rahasia Dagang [Law No 30 of 2000 on Trade
Secrets] (Indonesia) art 5(1).
108
Ibid art 8(2).
364
relevant authority. However, as discussed previously, 109 SMEs are reluctant to settle
their disputes through the courts as the image of Indonesian courts is negative and
the traditional culture is one that tends to avoid open dissent in the court.
8.2.2. Onerous Costs
A major concern expressed by Indonesian SMEs regarding IPRs registration is about
its cost. 110 All IPRs’ registration involves money, though the amount varies with
each IPR. There are two categories of cost that need to be met by the applicant,
namely the compulsory and non-compulsory. Compulsory costs mean the actual
administrative fees for IPRs registration, which need to be paid to the government
agencies that process the application. The compulsory costs in the registration
process normally consist of registration, substantive examination and certificate fees.
Apart from that, once the IPRs are granted, the holders have to pay an annual
maintenance fee in the case of patent and a renewal fee in the case of trademark for
the duration of protection time. Non-compulsory costs are those incurred in relation
to the IPRs registration procedure. It can be in the form of IP agent/ consultant fee111
or other costs in preparing the application of registration, such as those involved in
photocopying documents and travelling to the government agency which processes
the application.
109
See Chapter 4 (section 4.4.5.).
See Chapter 6 (section 6.10.) and Chapter 7 (section 7.8.).
111
The fee for IP agent/consultant in Indonesia is not standardised by its professional organisation,
Asosiasi Konsultan Hak Kekayaan Intelektual – AKHKI (established in 2006), nor is it on the agenda
of its 2010-2013 working program. See Asosiasi Konsultan Hak Kekayaan Intelektual (Association of
IPR Consultant), Program Kerja (2010) <http://akhki.or.id/tentang-kami/program-kerja/>.
110
365
a.
Compulsory Governmental Costs
The compulsory costs associated with IPRs registration are determined by the
government and included in a regulation. For IPRs that are managed by the DGIPR
Office, such as trademark, copyrights, patents, industrial design rights, and trade
secrets, the costs are based on Government Regulation No 38 of 2009 on Non-Tax
State Revenues which are Applied in the Department of Law and Human Rights. 112
Government Regulation No 38 of 2009 is the latest regulation which deals with state
revenues which are earned from services provided by the Ministry of Law and
Human Rights. This government regulation is issued almost every couple of years
and contains an updated list of types and tariffs applying to those seek services from
the Ministry of Law and Human Rights. One of the non-tax revenues mentioned in
this government regulation is that from all related IP fees, including the fees for IP
registration, patent and trademark maintenance, issuance of IPRs certificate, and
changing names and address of the registered IP rights holders. Table 1 provides the
costs of registration and other related costs to obtain legal protection under
trademarks, copyrights, industrial designs, petty patents and trade secrets in
Indonesia.
112
Peraturan Pemerintah no 38 Tahun 2009 Tentang Pendapatan Negara Bukan Pajak yang Berlaku
di Departemen Hukum dan Hak Asasi Manusia [Government Regulation No 38 of 2009 on the NonTax State Revenues which Applied in the Department of Law and Human Rights] (Indonesia).
366
Table 14: Compulsory Registration Costs of IPRs and Other Associated Costs
in Indonesia.
IP Area
Trademarks
Remarks
Fees
Registration for maximum three IDR 600,000.00/application/class of
kinds of goods or services
goods or services
Issuance of Certificate
IDR 100,000.00/certificate
Extension of Trademarks rights:
- Small Business
IDR 1,000,000.00/class of goods or
services
- Non-Small Business
IDR. 2,000,000.00/class of goods or
services
Copyright
Registration
IDR 200,000.00/ application
Issuance of Certificate
IDR 100,000.00/certificate
Industrial
Registration:
Designs
- Small Business
IDR 300,000.00/application
- Non-Small Business
IDR. 600,000.00/application
Issuance of Certificate
IDR 100,000.00/certificate
Petty Patents
Registration:
- Petty Patents
IDR 125,000.00/application
Issuance of Certificate
IDR 200,000.00/certificate
Application for Patent Searching
which Announced in
- Domestic
IDR 250,000.00/subject
- Overseas
USD 100/subject
Substantive Examination:
- Petty Patents
IDR 350,000.00/application
Maintenance Service for Petty Patent
Per Year:
- 1st to 4th Years:
a. Basic
IDR 550,000.00/petty patent
b. Cost Per Claim
IDR 50,000.00/claim
367
- 5th Year:
a. Basic
IDR 1,100,000.00/petty patent
b. Cost Per Claim
IDR
50,000.00/claim
- 6th Year:
a. Basic
IDR 1,650,000.00/petty patent
b. Cost Per Claim
IDR
50,000.00/claim
th
- 7 Year:
a. Basic
IDR 2,200,000.00/petty patent
b. Cost Per Claim
IDR
50,000.00/claim
- 8th Year:
a. Basic
IDR 2,750,000.00/petty patent
b. Cost Per Claim
IDR
50,000.00/claim
- 9th Year:
a. Basic
IDR 3,300,000.00/petty patent
b. Cost Per Claim
IDR
50,000.00/claim
- 10th Year:
Trade Secrets
a. Basic
IDR 3,850,000.00/petty patent
b. Cost Per Claim
IDR
50,000.00/claim
Issuance of Certificate
IDR
100,000.00/certificate
- Small Business
IDR
200,000.00/application
- Non-Small Business
IDR
400,000.00/application
Record of Trade Secrets Rights:
Record of Trade Secret Licensing
Agreement:
- Small Business
IDR 150,000.00/application
- Non-Small Business
IDR 250,000.00/application
Sources: Government Regulation No 38 of 2009 on the Non-Tax State Revenues which Applied in the
Department of Law and Human Rights
As can be seen from the above table, the total registration fees for trademark,
copyright, industrial design and trade secrets are not really that high. The total
compulsory fees for the first time trademark and copyright registration are IDR
700,000 (USD 82) and IDR 300,000 (USD 35) respectively. In the field of industrial
368
designs and trade secrets, an applicant, who owns a small business, receives special
rate. The fees for industrial design registration and the record of transfer of trade
secrets are around 40 per cent lower than for non-small business applicants.
In contrast with the costs presented above, those for petty patents are far higher. The
current rate for the whole of a petty patents registration are IDR 675,000.00 (USD
79), which includes the fees for application, substantive examination, and issuance of
patent certificate. 113 After the application is approved and granted patents, the
holders need to pay a maintenance fee every year of the 10 years period of petty
patents protection. At the current cost, it is estimated that the total of petty patent
maintenance fees that must be paid for 10 years is IDR 17,550,000 (about USD
2060).
It is good to see that the existence of SMEs as one of the users of IPRs is
acknowledged in the Government Regulation No 38 of 2009 114 through the
discounted IP and other related fees that apply to them. Unfortunately, this policy is
not applied to all IP areas in Indonesia. In the Government Regulation, discounted
fees for SMEs are only provided in the areas of industrial design, trade secrets, and
trademark. 115 However, in the trademark area, rather than a special rate being
113
These costs do not include patent searching costs, which are divided into two categories – domestic
and overseas, as not all applicants for petty patent require that service. This service is actually
important in the petty patent registration process to make sure the products being registered satisfy the
novelty requirement. Since the novelty requirement in petty patent is universal, both domestic and
overseas patent searching is required. Applicants can themselves do patent searching; however, it is
doubtful that SME owners can do it without any assistance. For discussion about the universal novelty
requirement in petty patent, see Chapter 4 (section 4.4.4.).
114
This policy was already included in Government Regulation No 50 of 2001, which was replaced by
Government Regulation No 38 of 2009.
115
The reduced fee for small business is also provided for the registration in the field of layout design
of integrated circuit which is 40 per cent lower than the fee for non-small business applicant.However,
369
available for first time registration, a special rate for small business is only offered on
the renewal of trademark after the first 15 years protection has expired.
A policy that reduces fees for small business applicants in all the above areas rather
than a few could stimulate greater use of IPRs by SMEs in Indonesia for their
businesses. It is not clear why the government limits the application of this policy to
only certain areas of IPRs. When enquiries were made concerning the reason for this
policy, the relevant officer 116 simply said it was limited to these forms of IPRs
because they (industrial design, trade secret, layout design of integrated circuit and
trademark) are important for Indonesian SMEs. This answer is not convincing as
there is copyright and petty patents, 117 which are also important for Indonesian
SMEs, but they are not included in any fees reduction policy. Consequently, SMEs in
the batik and jamu industry could be discriminated against by this policy when they
register their copyright or petty patent, as opposed to those incorporating other forms
of IPRs among their business strategies. Moreover, in the trademarks area, although
small businesses receive a discounted fee, this does not apply for the first time
registration, which is where the need is greatest so as to encourage SMEs’ interest in
registering and using trademarks.
After almost a decade of application, the effectiveness of this policy in raising the
number of IPRs registration among SMEs is difficult to determine. The only area of
since the right is not really relevant to Indonesian SME business activities so far, it is not discussed in
this thesis.
116
Interview with SY, a DGIPR officer who managed programs intended for SMEs in the directorate
(Tangerang, 21 February 2009).
117
Plant Variety Protection is certainly important for SMEs in agribusiness industry, such as farmers.
However, in regard to the jamu industry, the only relevant provision in the Indonesian PVP law is
Article 7(1) which protects traditional medicinal plants, the main ingredients of jamu. See Chapter 7
(section 7.4.6.).
370
IPRs that could attest the effectiveness of this policy is industrial design rights
because there is no official data on SMEs category in other forms of IPRs. 118.
However, industrial design (though an area of more limited application for SMEs
compared to petty patents and so on) is an area where the policy is implemented and
it has shown some positive outcomes.
Since the introduction of industrial design legislation in Indonesia in 2000, the
number of applications continues to increase every year. There is a significant
difference between the total numbers of industrial design right application in 2002,
when only 2868 applications were recorded and the figure for 2009, when
applications reached 4200. The figure has increased substantially, but not yet
doubled. 119 On the other hand, while the figures remain low overall for SME
applications, in terms of raw data and as a proportion of overall industrial design
applications in one year, the increase is certainly worth noting, with figures for
industrial design application under the SMEs category rising from just 13 in 2002 to
79 in 2009. 120 This represents a greater than six-fold increase in the number of
industrial design applications from SMEs. The figures also reveal that SME
applications as a proportion of the total rose over the period from a minuscule less
than half of one percent of to almost 2 per cent of total industrial design applications.
Thus, although the applications coming from SMEs category remain low compared
118
Statistics on IPR registration made by the DGIPR Office, except in industrial design category, do
not contain information about the size of the enterprises which applying for IPRs: interview with SS,
officer in the statistic unit of DGIPR (Tangerang, 22 February 2009).
119
Directorate General of Intellectual Property Rights - Department of Justice and Human Rights of
Republic of Indonesia, Statistik Pendaftaran Desain Industri yang Didaftarkan dan Ditolak Dari
tahun 2001 Sampai Dengan Tahun 2009 (Statistic of Industrial Design Registration which Accepted
and Rejected From 2001-2009) (2009) Directorate General of Intellectual Property Indonesia
<www.dgip.go.id.ebscript/publicportal.cgi?.ucid=376&ctid=5&type=0&id=143>.
120
This number does not include the application data from 2006 as the DGIP website does not provide
that data.
371
to the total applications for industrial designs, its five-fold increase outstrips that of
the less than two-fold increase for industrial design sector overall. This suggests that
the policy could work better when it is properly applied and that SMEs could benefit
from its broader application across all areas of IPRs.
The policy’s method of application also contributes to its limited effectiveness To
obtain the reduced rate of registration fee, a SME applicant must be recommended by
a relevant government agency in their industry. 121 Such government agencies are the
Ministry of Industry, State Ministry of Cooperatives and Cooperatives, Ministry of
Trade at the national level, and the Agency of Trade and Industry (AoTI) and the
Agency of Cooperatives and Small Medium Enterprises (AoCSMEs) at a regional
level. 122 Normally, SMEs have to be a participant in one of the programs organised
by such government agencies to access such assistance. 123 Apart from the limited
budgets of the IPR-SME programs, the information on such programs is also likely
distributed unevenly. 124 Accordingly, only small number of SMEs participate in the
programs and are recommended to have the benefit of the reduced fee for
registration.
121
Interview with SY, an officer of the DGIP Office, who was in charge of IPR programs intended to
SMEs (Tangerang, Indonesia, 21 February 2009).
122
Detailed discussion about these government agencies is presented in Chapter 5 (section 5.3.).
123
Interview with SH, a staff member of the AoI in the Central Java Province (Semarang, 5 March
2009); interview with owner of KJ, a batik medium enterprise (Pekalongan, 21 March 2009).
124
Interview with owner of KJ, a batik medium enterprise, and NC, and MR, owners of medium batik
enterprises (Pekalongan, 21 March 2009). For more detail, see Chapter 6 (sub-section 6.10.).
372
b.
Additional Non-Compulsory Costs
Regarding non-compulsory fees and expenses, it is difficult to determine their total in
an IPR registration procedure. Unlike compulsory costs, there is no certain amount of
non-compulsory costs as it depends on the circumstances of each applicant.
However, sometimes the non-compulsory costs are higher than the formal costs. For
instance, the normal fee for consultation and making an application that is charged
by IP agents range from USD 400 to USD 1000. 125 Although there is no obligation in
the legislation to use IP agent services, making an application for patents rights can
be a challenging task for an applicant who does not have sound knowledge of
technological as well as the legal and procedural issues involved accessing and
utilising in IPRs in their business. Moreover, using IP consultants could enable an
applicant avoid IP legal problems in the future. 126 Therefore, in some areas of IP
(such as patents), consulting with an expert (such as IP consultants) is extremely
important to increase the possibility of an applicant’s success in obtaining the desired
IPRs. In other areas, using the services of IP consultants could make the process of
making IP applications less painful.
As discussed previously, besides IP agents, there are calo, illegitimate brokers who
provide services to take care all sorts of IPRs administrative processes, including
registration, in the central office of DGIPR. Calo charge a service fee lower than an
125
Amri, above n 30, 36. Apparently, the expensive fee mentioned above is related to the patent
application. Another source reports that the fee for IP consultant to register a trademark is much less
expensive ranging from IDR 900,000 to IDR 1,500,000. See Elvani Harifaningsih, 'Kasus Merek
Dominasi Perkara HKI (Trademark Cases Dominate IP Cases)', Bisnis Indonesia (Jakarta), 5 May
2009 <http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=23&id=2173&type=2>
126
Amri, above n 29, 36.
373
IP consultant 127 and provide a faster service as well. 128 They use their connections
inside the central office of DGIPR to accelerate the administrative process requested
by people who use their services. 129 Their connections are normally officers who
work in the relevant government agency, in this case the DGIPR office, who get
bribes from the calo to give priority to the administrative requests from the calo’
clients. 130 This causes delays to other people’s requests that have already been
submitted. In other cases, if applicants do not use the service of calo, sometimes they
still have to ‘give something’, with that contribution mostly in the form of money,131
as a token of gratitude to the relevant officials who have assisted them by
accelerating the process of their IPR application. In the case of an IPR application,
the amount of money given to the relevant individual official is small; 132 however,
cumulatively, such payments often become quite a large amount of money, as they
are usually given to officials at every stage of the IPR application procedure.
In the end, the combination of compulsory and non-compulsory costs of IPRs
application is no longer inexpensive for majority of Indonesians, including SME
owners, who on average have an income per capita of less than USD 2000 per year
(in 2008, the figure was USD 1880 of gross national income (GNI) per capita). 133
127
For example, in 2008, the fee for filling and checking trademark registration forms services
provided by a calo was IDR 300,000, while the formal fee for trademark registration valid in that year
was IDR 450,000. See Amri, ibid.
128
Ibid.
129
Ibid.
130
This information is based on the personal experience of the writer dealing with calo, which exist in
various Indonesian government agencies, such as the Immigration Office and Police Stations.
131
It is commonly known in Indonesia as uang rokok (‘money for buying cigarettes’), which amount
varied according to the value of the service purchased. See Mardjono Reksodiputro, 'Corruption in the
Indonesian Legal System' in R. Holloway (ed), Stealing from the People: 16 Studies on Corruption in
Indonesia (Aksara Foundation, 2002) vol 2, 27, 32.
132
Based on personal observations of author, the amount of ‘gratitude money’ is between IDR 50,000
(USD 5) and IDR 100,000 (USD 11).
133
World Bank, GNI Per Capita, Atlas Method (Current US$) (2010)
<http://data.worldbank.org/indicator/NY.GNP.PCAP.CD>
374
Even though the non-compulsory costs are not an obligatory part in the IPR
application procedure, on many occasions, they are a decisive factor in getting
through the IPRs bureaucracy process effectively in Indonesia. 134 For most SME
owners on low incomes, the registration and other IPR costs has deterred them from
utilising IPR system for their business, a decision that may not often be in their own
best interests 135
8.2.3. Administrative Factors: the Role of the Regional Office, Human
Resources, Information Technology, and the Budget
Apart from the regulatory procedure and cost structure, there are four other
administrative issues which also have effect on the process of IPR registration. These
issues, namely the role of regional office, human resources, information technology
(IT) infrastructure and budget, are inter-related. Improvement in these areas could
assist the acceleration of the IP registration process which is not only needed by
applicants from SMEs but also from bigger enterprises.
a.
The Role of the Regional Office
As stated in the section on administrative reform, 136, the role of the regional office as
the place for submission of IPR application began 1999, when the Minister of
134
Hukum Online, 'Melawan Kenakalan di Balik Pendaftaran Merek (Fighting Bad Things behind
Trademark Registration)' (2009) <http://www.hukumonline.com/berita/baca/hol22440/melawankenakalan-di-balik-pendaftaran-merek>
135
Interviews with 7 and 10 SME owners in the jamu and batik industries respectively (Yogyakarta,
Semarang and Pekalongan, March–April 2009).
136
See Chapter 4 (section 4.3.2.2.).
375
Judiciary Ministerial Decree No M.09-PR.07.06 Year 1999 was replaced by Minister
of Justice and Human Rights Ministerial Decree No M.11.PR.07.06 of 2003 which
gives authority to regional offices of the Department to receive IPR applications and
forward them to the central offices in Tangerang-Banten. Still, after more than a
decade, the number of applications from regional offices has not flourished, as
indicated in the table on trademark 137 applications below.
137
The Table only presents one form of IPR, i.e trademarks, because the data on other forms of IPR
are not as comprehensive as that in the trademark area. For example, the data on copyright application
submissions via regional offices are only available for the years 2001, 2002, 2008, 2009, 2010 and
2011 during which there were 1277 applications in total. For patents, applications coming from
regional offices are only reported for the year 2008, 2009, 2010 and 2011. Until May 2011, there have
been only 53 patent applications submitted via regional offices. Data for industrial designs
applications submitted via regional offices are only available for the year 2008, 2009 and 2010, in
which there have been 186 applications in total. For geographical indications, applications submitted
via regional offices are rare and were only reported one in 2009. See Direktorat Jenderal Hak
Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusial [Directorate General of
Intellectual Property Rights - Ministry of Law and Human Rights], Jumlah Permohonan Paten 1991
s.d. Juni 2010 [The Numbers of Patent Application from 1991 to June 2010] (2010)
<http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=2&type=0&id=110>; Directorate
General of Intellectual Property Rights - Ministry of Law and Human Rights Republic of Indonesia,
'DGIPR Insight Annual Report 2009' (Directorate General of Intellectual Property Rights - Ministry of
Law and Human Rights Republic of Indonesia, 2010), 26; Directorate General of Intellectual Property
Rights - Ministry of Law and Human Rights Republic of Indonesia, Permohonan Hak Cipta melalui
Kanwil Tahun 2011 [Applications of Copyright Submitted via Regional Offices 2011] (2011) ;
Direktorat Jendral Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia Republik
Indonesia (Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights
Republic of Indonesia), Statistik Laporan Tahunan 2010 (Statistic - Annual Report of 2010) - On File
with Author (2010) ; Direktorat Paten [Directorate of Patents] - Direktorat Jendral Hak Kekayaan
Intellectual [Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights]
Republic of Indonesia, Laporan Tahunan Direktorat Paten 2011 [Annual Report of Directorate of
Patents 2011] (2011) ..
376
Table 15: Trademarks Application Submitted to the Regional Office of
DGIPR 138
Applications
Year
Percentage
From Regional Offices
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
(until
May)
Domestic
223
327
372
526
514
450
731
628
0
1176
456
26,128
20,423
28,317
35,626
30,734
36,644
32,181
33,555
37,759
43,269
19,833
0.85
1.60
1.30
1.40
1.60
1.20
2.27
1.80
0
2.71
2.29
Source: Directorate Trademarks of Directorate General of Intellectual Property Rights - Department of
Justice and Human Rights of Republic of Indonesia 2009.
The role of regional offices, which merely involves forwarding applications to the
central office without any authority to make decisions, does not reduce the
administrative burden of the central office. If regional offices were granted authority
to do the complete process of some of the central office administrative authorities,
they would have the potential to be an answer to the administrative problem of IP in
Indonesia. Since regional offices lack of staff members who have expertise in
138
Directorate General of Intellectual Property Rights - Department of Justice and Human Rights of
Republic of Indonesia, Statistik Permohonan Pendaftaran Merek Baru dan Perpanjangan Tahun
2001-November 2009 (Statistic of New and Renewal Trademark Registration Applications: 2001November 2009) (2009) Directorate General of Intellectual Property Rights-Department of Justice and
Human Rights of Republic of Indonesia; Directorate General of Intellectual Property Rights - Ministry
of Law and Human Rights Republic of Indonesia, 'DGIPR Insight Annual Report 2009' (Directorate
General of Intellectual Property Rights - Ministry of Law and Human Rights Republic of Indonesia,
2010); Direktorat Jendral Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia
Republik Indonesia (Directorate General of Intellectual Property Rights - Ministry of Law and Human
Rights Republic of Indonesia), Statistik Laporan Tahunan 2010 (Statistic - Annual Report of 2010) On File with Author (2010) ; Directorate General of Intellectual Property Rights - Ministry of Law
and Human Rights Republic of Indonesia, Data Statistik Merek Januari-Agustus 2011 [Trademark
Statistic Data January-August 2011] - On File with Author (2011)
377
specific IP fields (such as patent examiners), the administrative division of the
central office should hand over to them only those matters which do not require the
assistance of specific IP experts. For example, they could be in charge in the full
process of copyrights registration application or the renewal of trademarks rights.
b.
Human Resources
Another issue behind the slow process of IPR registration in the DGIPR central
office is the lack of adequate human resources to deal with the task in hand. The
central office has six directorates, namely the Secretariat; the Directorate of
Copyright, Industrial Design, Layout-Design of Integrated Circuits, and Trade
Secrets; the Directorate of Patents; the Directorate of Trademarks; the Directorate of
Cooperation and Promotion; the Directorate of Information Technology and the
Directorate of Investigation. 139 Three of these directorates deal directly with
registration applications, namely the Directorate of Copyright, Industrial Design,
Layout-Design of Integrated Circuits, the Directorate of Patents, and the Directorate
of Trademarks.
139
Minister of Law and Human Right Decree No M.HH-05.OT.01.01 Tahun 2010 on Organization
and Working System in the Ministry of Law and Human Rights art 678.
378
Figure 9: Organisation Chart of the Directorate General of Intellectual
Property Rights 140
DGIPR central office staff members total 517 employees (as per August 2009). 141 Of
this number, the staff members of Directorate of Copyright, Industrial Design,
Layout-Design of Integrated Circuits, and Trade Secrets are 66, 142 while there are
130 and 146 employees in the Directorate of Patents and Directorate of Trademarks
respectively. Although the number of employees in the two busiest subdivisions, the
Directorates of Trademarks and Patents, is larger than in other directorates, it is not
commensurate with their workloads. The Directorate of Trademarks has been
overloaded, with around 45,000 applications annually for the past two years. 143 The
140
Direktorat Jenderal Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia
[Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights], Organisasi
dan Tata Kerja DJHKI [Organization and Working System of DGIPR] (2011)
<http://www.dgip.go.id/images/ORTA_2010/orta_djhki.jpg>.
141
Direktorat Jenderal Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia
[Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights], Profil
Sumber Daya Manusia [Profile of Human Resources] (2010)
<http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=30&id=247&type=0>
142
Ibid.
143
Direktorat Jenderal Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia
[Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights], Statistik
379
patents applications submitted to the Directorate of Patents range from 3500 to 5400
per year from 2001 to 2009. 144 Meanwhile, the Directorate of Copyright, Industrial
Design, Layout-Design of Integrated Circuit and Trade Secrets in 2009 had to deal
concurrently with 9023 applications for copyrights registration and 4201 applications
for industrial design registration.
The lack of human resources causes a backlog of IPR registration applications. To
resolve this problem, the number of employees working in the central office of
DGIPR should be increased in the near future. 145 Moreover, they need to be given
opportunity to upgrade their knowledge on subject matters relevant to their work, as
this would further expedite processing of applications and increase the reliability of
decisions and recommendations made, further benefitting the business community
and the Indonesian economy.
c.
Information Technology (IT) Infrastructure
The efforts to utilise and integrate IT system into DGIPR began in 1990, when the
Directorate General of Intellectual Property Right (DGIPR) developed automated IP
systems using a Relational Database Management System (RDBMS) with priority
Permohonan Pendaftaran Merek Baru dan Perpanjangan Tahun 2001-November 2009 [Statistic of
New and Renewal Trademark Registration Applications: 2001-November 2009] (2009) Directorate
General of Intellectual Property Rights-Ministry of Justice and Human Rights of Republic of
Indonesia
144
Direktorat Jenderal Hak Kekayaan Intelektua - Kementerian Hukum dan Hak Asasi Manusial
[Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights], Jumlah
Permohonan Paten 1991 s.d. Juni 2010 [The Numbers of Patent Application from 1991 to June 2010]
(2010) <http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=376&ctid=2&type=0&id=110>.
145
In December 2010, the Minister of Law and Human Rights issued a ministerial decree that
established a new directorate, namely the Directorate of Investigation. The establishment of the new
directorate is one of initiatives to share the existing workloads of DGIPRs. However, this new
directorate does not deal with the issue of registration, instead it focuses on tackling IPRs
infringements.
380
given to the Directorates of Patents and Trademarks. 146 In 1998, DGIPR received a
part of the World Bank loan to the Indonesian government which was used to finance
the first phase of office automation project. The scope of the first phase project
covered procurement of infrastructure facilities, hardware and applications; and
training for DGIPR staff members. When the project was completed in December
2002, the Directorate of IT proposed the second phase of or extension works for the
initial phase. 147
The second phase project was focused mainly on the creation of the Intellectual
Property Digital Library (IPDL) and links to regional offices (DGIPnet). 148 IPDL is a
web-based searchable digital library which enables the international IP community to
access and exchange IP information. Information contained in IPDL comprises
bibliographical data, full-text and drawings/images of national and international
applications collected from various sources (including DGIPR gazettes), the data
bases of WIPO, EPO, and other IP offices. 149 The IPDL project was completed in
2007 with the assistance from Japan’s International Cooperation Agency. At present,
IPDL only provides information on the existing applications and registrations in
patents, petty patents, trademarks, copyrights and industrial design rights from as
146
Andi N Sommeng, 'Country Report: DGIPR Information Technology Infrastructure Project:
Current Position and Future Perspectives' (Paper presented at the 5th Seminar and Workshop on IP in
ASEAN countries within the Framework of JICA-NOIP joint promotion program Hanoi-Vietnam, 2324 January 2002).
147
Ibid 3.
148
Ibid 4.
149
Andi N Sommeng, 'Access to and use of relevant IP Information' (Paper presented at the ECAP II
Workshop Civil versus Criminal Remedies, Jakarta, 23-24 May 2006) <http://www.ecapproject.org/fileadmin/ecapII/pdf/en/activities/national/indonesia/civil_criminal_may_06/andy_access_
eng.pdf> (‘Access to and use’).
381
early as the year 1944. 150 In the registration process, IPDL functions as a research
tool to find whether the product/service in question has already been registered
before an IP application is filed. It is useful for IP consultants, examiners,
stakeholders and applicants, particularly from SMEs, since it prevents them filing an
IP application which has little chance of being approved.
Another project, DGIPnet, is a national digital information network which facilitates
secured information and data exchange between the central office with regional
offices. 151 It would make the process of submitting applications from the regional
offices easier and faster. Although the project was intended to cover all DGIPR
regional offices in Indonesia, it was decided at the outset of the project to restrict the
usage of DGIPnet based on the number of applications submitted. It means DGIPnet
can only be accessed by regional offices that have large numbers of IPR applications.
In 2008, it was reported that DGIPnet was only available to 17 regional offices of the
total 33 branches.
152
The current situation is probably not much different from that
of 2008. This project is ongoing with the ultimate goal of making DGIPR a modern
IP office.
Both projects are positive initiatives to utilise IT systems as a solution for the
administrative problems of DGIPR. However, since both projects depend on internet
150
Directorate General of Intellectual Property Rights - Department of Justice and Human Rights of
Republic of Indonesia, Intellectual Property Digital Library
(<http://ipdl.dgip.go.id/ipdl_ext/TopjaxServletH2H>.
151
Sommeng, ‘Acces to and use’, above n 149.
152
Direktorat Jenderal Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi Manusia
[Directorate General of Intellectual Property Rights - Ministry of Law and Human Rights], 'Laporan
Tahunan Direktorat Jenderal Hak Kekayaan Intelektual Tahun 2008 [Annual Report of the
Directorate General of Intellectual Property Rights: Year 2008]' (Direktorat Jenderal Hak Kekayaan
Intelektual - Kementerian Hukum dan HAM Republik Indonesia (Directorate General of Intellectual
Property Rights - Ministry of Law and Human Rights of Republic of Indonesia),, 2009) (‘Laporan
Tahunan DJHKI 2008’).
382
connection, they might not be useful for all in the Indonesian IP community. It is
common knowledge that IT infrastructure in Indonesia is poor and that internet
penetration and use is low. 153 In September 2009, there were 30 million of
Indonesian people using the internet but this represents just 12.5 per cent of the
country’s population of 242 million. 154 Most IT infrastructure and internet
connections are only available in urban areas. Consequently, most of those in the IP
community (including SME owners) who domicile in regional areas are unlikely to
experience the benefits of these projects.
d.
Budget of the DGIPR Office
Allocation of the DGIPR budget has a causal relationship with the lack of human
resources and poor IT infrastructure in the agency. The central government allocates
a regular annual budget, the amount of which varies in accordance with the previous
year’s workload, to finance the operational costs of the DGIPR Office. 155 There is
also another budget allocated for the IP office and it is sourced from fees for IPRs
registration. The fees for IPRs registration are one of the non-tax based incomes for
national budget. Each year, the DGIPR office contributes quite large amount of
money to the government treasury. For example, it was reported that the DGIPR
Office contributed around IDR 58.3 billion 156 of the total non-tax based income of
153
'Indonesia Must Connect to Compete', The Jakarta Globe (Jakarta), 28 June 2010.
Internet World Stats, Usage and Population Statistics: Indonesia (2010)
<http://www.internetworldstats.com/asia/id.htm>
155
Sri Sajuti Tedjo Murwani, Effektifitas Penerimaan Negara Bukan Pajak pada Direktorat Jenderal
Hak Kekayaan Intelektual terhadap Kinerja Direktorat Paten (Effectiveness of Non-Tax Based State
Revenues in Directorate General of Intellectual Property Rights to the Work of Directorate of
Patents) (Magister Sains Thesis, University of Indonesia, 2003) 71.
156
Ibid.
154
383
IDR 88.4 trillion in the 2002 national budget. 157 In return, the DGIPR is allowed to
spend 25 per cent of such non-tax based state revenue to finance their operational
activities every year. 158 However, the budget is not enough to provide the better
services that are always being demanded by the public. With such a limited budget, it
is not surprisingly that the IP applications pending backlog is difficult to end.
Therefore, in its 2008 of annual report, the DGIPR Office proposed to increase the
use of the non-tax based revenue from 25 to 60 per cent, 159 though that has yet to be
approved. Although the increase that the DGIPR requested is huge, their demand is
reasonable as they earned money from the services that they provide to public, and,
besides that, an increased budget is necessary to finance the improvement of their
services.
8.3. Conclusion
There are three factors, namely procedure, costs and administrative, which have been
mentioned by SMEs in the batik and jamu industries as the causes that reduce their
interest in using IPRs in their businesses. The registration procedure in the four
forms of IPRs, namely trademark, copyrights, industrial design rights, petty patents,
and trade secrets, that grant individual rights and therefore benefit directly to batik
and jamu SMEs, are complicated and lengthy. The rules of procedure need to be
simplified without lessening the quality of examination in the areas of trademark,
157
Badan Kebijakan Fiskal - Kementerian Keuangan (Fiscal Policy Institution- Ministry of Finance),
Anggaran Pendapatan dan Belanja Negara (State Revenue and Expenditure Budget) (2002)
<http://www.fiskal.depkeu.go.id/webbkf/apbn/default.asp?x=IAccLap0>.
158
Surat Keputusan Menteri Keuangan No S-178/ MK-0 17/ 2000 tentang Ijin Penggunaan Sebagian
Dana PNBP ada Departemen Hukum dan Perundang-undangan (Minister of Finance Decree No S178/MK-0 17/ 2000 on the Permission to Use Part of Non-Tax based State Revenues at Department
Law and Legislations).
159
Direktorat Jenderal Hak Kekayaan Intelektual, Laporan Tahunan DJHKI 2008, above n 152.
384
industrial design and petty patents. The simplification of the rules of procedure is
expected to shorten the time taken to finalise the IPRs registration process. Currently,
there is inconsistency between the rules and the reality. For example, the maximum
time to process a trademark application is about 14 months in the Indonesian
legislation; however, in reality it requires two years to process a trademark
application. In addition, for the batik industry, the time to finalise a copy right or
industrial design registration does not match the life cycle of the batik business.
Because the new batik textile design has around a three months life-cycle 160 in the
market, the process of copyright and industrial design registration, which lasts up to
nine months and five months respectively, is too long. By the time their registration
approved, SMEs no longer really need the protection of copyright and industrial
design for that batik design.
Regarding the cost of registration, apart from the inexpensive compulsory fees of
registration, there are non-compulsory fees, especially the costs imposed by
bureaucracy corruption, which are higher than the compulsory costs. If one wants to
improve the quality of IPRs registration procedure, corrupt practices needs to be
eliminated from the DGIPR Office.
In addition, to encourage a greater uptake of IPRs by SMEs, the government needs to
create a policy that provides incentives or a discounted rate for every IPRs
application comes from SMEs. The current ‘special rate’ policy is discriminatory in
relation to SMEs in batik and jamu industries as it does not provide a special
160
After three months sold in the market, a batik design normally does not attract much customer
interest.
385
registration rate for SMEs in the areas of copyright and petty patents which are
extremely relevant IPRs for such industries.
Other administrative factors — such as inefficient role of the regional office, lack of
human resources in quality and quantity, poor IT infrastructure and limited budget —
are also factors that contribute to procedural inefficiency. There is a strong need to
improve in the areas of these remaining factors (that is, human resources, IT, and
budget) so as to ensure that the administration of IPR registration works effectively
in Indonesia. All of these improvements must be undertaken at both at the central and
regional offices of DGIPR. The role of regional offices should be enhanced by giving
them authority to process and to decide IPR applications that do not require
substantive examination, such as copyright applications. Unless regional offices are
granted the same level of facilities as the central office, SMEs in the batik and jamu
industries, which mainly are located in the regional areas, will find it difficult to
utilise relevant IPRs.
386
CHAPTER 9
CONCLUSION
9.1. Introduction
Despite the many alleged benefits of intellectual property rights (IPRs) for SMEs, the
number of Indonesian SMEs which integrate relevant IPRs in their business activities
is insignificant. This study explores the obstacles and challenges that hinder the
uptake of relevant IPRs by Indonesian SMEs. It also examines the approaches and
measures that been taken by the government of Indonesia in the management of
intellectual property (IP) that strengthen the integration of IPRs in SMEs business
strategies. To do this, the study takes a social legal approach by interviewing people
in the field and places the interview data in the context of the literature, which was
analysed from an historical perspective and based on legal academic and regulatory
studies. The study is divided into two parts which discuss the theoretical frameworks
of IP standards at international level, which are adopted in Indonesia currently, and
the case studies, which examine SME experiences in two selected iconic Indonesian
industries, batik and jamu, and deal with IP issues and how these experiences shape
SMEs attitudes towards the IP system and its administration in Indonesia.
It was important that this study be undertaken because the correct utilisation of IPRs
has great potential to enhance the competitiveness of and wealth creation by
Indonesian SMEs. In addition, studies that examine how the TRIPS-derived domestic
IP system in a developing country affects SMEs in their uptake of IPRs are rare. For
that reason, this study could fill a gap in the literature. The findings of this study
might be able to assist the Indonesian government in designing or reforming IP laws
427
and policies that better suit the situation of Indonesian SMEs. This study might also
be useful as a basis for comparison in helping other developing countries find the
most suitable approach to apply international IP standards that serve the needs of
SMEs in such countries.
Using the questions and sub-questions presented in the introductory chapter as
indicator, this chapter presents the summary of finding from the study. 1331 First, this
study asks about the international IP standards that potentially affect SMEs in
Indonesia in the international context and the articulation of these standards with
international treaties. Second, this study enquires about the implementation of IP
standards in Indonesia and focuses on the role of international organisations in
promoting the implementation of international IP standards in Indonesia and
initiatives that have been made by the Indonesian government to integrate IPRs with
SME activities. Third, this thesis questions the relevance of IPRs to Indonesian
SMEs, particularly in the two sample industries, batik and jamu. Benefits of and
problems posed by each relevant form of IPRs for these two industries are here
examined. Using interviews with 27 SME owners in the batik and jamu industries in
the provinces of Yogyakarta and Central Java, this study attempts to present the
attitudes of Indonesian SME owners towards the administration of the Indonesian IP
system and their reasons for not using IPRs in business activities. The last question in
this study is about the problems experienced by SMEs dealing with the current IP
system in Indonesia and other factors beyond the procedure in IP legislation of IP
system that impede the successful performance of the Indonesian IP administration
system in regard to SMEs. From these findings, this chapter further proposes some
1331
See Chapter 1 (section 1.3).
428
suggestions to improve the poor condition of IPRs management in Indonesia that
causes the problems for SMEs in obtaining IPRs.
9.2.
Summary of Findings
9.2.1. What are the International IP Standards that Potentially Affect SMEs in
Indonesia?
The Agreement of Trade Related Intellectual Property Rights (TRIPS) is the first and
the most comprehensive international legal instrument that links trade and IP issues.
Although TRIPS brings together these two issues, none of its provisions address the
particular issue of small medium enterprises (SMEs). Nor was this issue, except for
technology transfer, discussed during the lengthy negotiations period. Yet, as
mentioned in introductory chapter, there is no doubt that TRIPS has effects on SMEs
in its member countries. Principles, rules and standards contained in this agreement
have been adopted and embodied in the national IP legislation of each member
country. Certainly, as national law, this national IP legislation is binding as regards
all relevant elements in a country. This IP legislation is relevant to SMEs as
participants in trade and therefore bound to abide by the legislation.
Several studies have found that industries with large scale research and development
(R&D) activities, such as the pharmaceutical, chemical and film sectors, are more
reliant on IPRs and, therefore, IPRs are more relevant for this sector of industry.1332
1332
Studies on this issue include UK Commission on Intellectual Property Rights, 'Integrating
Intellectual Property Rights and Development Policy ' (UK Commission on Intellectual Property
429
Similarly, almost all IPRs work better for large enterprises, with their abundant
resources to conduct research and development activities, than in SMEs.1333 Some
forms of IPRs, such as patents and layout design of integrated circuit, may not
benefit or be relevant for SMEs, particularly in developing countries, as such
enterprises do not have the resources to conduct R&D activities as frequently as do
large enterprises. Other forms, such as trademarks, geographical indication (GI),
trade secrets, copyrights, plant variety protection (PVP) and industrial designs are
needed for both SMEs and large enterprises. However, unlike trademarks, GI, trade
secrets and industrial designs, the use of copyright and plant variety protection is
limited to SMEs working in creative and agricultural industry respectively. Both
industries are dominated by SMEs in developing countries.
Moreover, there are also petty patents, traditional knowledge (TK) and traditional
cultural expressions (TCE) which are relevant and important for SMEs, in
developing countries, including Indonesia, but are not included in the TRIPS
Agreement. There are many studies that support the assertion of the benefits of petty
patents to promote incremental and adaptive innovation and diffusion of technical
knowledge, which are mostly produced and developed by SMEs, into the
economy. 1334 Petty patents, which have lower requirements than patents, are suited to
protect in innovations in the fields of simple technology. Innovations in simple
Rights, 2002) <http://www.iprcommission.org/papers/pdfs/final_report/CIPRfullfinal.pdf>; Carlos M
Correa, 'Do SMEs Benefit from Patent Protection?' in Carlo Pietrobelli and Arni Sverrisson (eds),
Linking Local and Global Economies: The Ties that Bind (Routledge, 2004) 220.
1333
UK Commission on Intellectual Property Rights, 'Integrating Intellectual Property Rights and
Development Policy ' (UK Commission on Intellectual Property Rights, 2002)
<http://www.iprcommission.org/papers/pdfs/final_report/CIPRfullfinal.pdf>; Carlos M Correa, 'Do
SMEs Benefit from Patent Protection?' in Carlo Pietrobelli and Arni Sverrisson (eds), Linking Local
and Global Economies: The Ties that Bind (Routledge, 2004) 220.
1334
Discussion on petty patents and its relevance to SMEs has been discussed in Chapter 3 (section
3.3.1).
430
technology are usually developed by SMEs, which have limited capacity to develop
high technology inventions. Petty patents are mentioned in Article 1(2) of the Paris
Convention 1967 for the Protection of Industrial Design, to which Indonesia is a
party, as one of the objects of industrial property protection. Although TRIPS does
not include the protection of petty patents as one of its standards, members of the
WTO are free to provide petty patents protection in their countries.
Regarding the protection of TK and TCE, there is no binding international agreement
which protects them. Some developing countries, however, have developed law that
protects TK and TCE (as discussed in Section 9.2.3.a below). Such law is mostly
adopted from a model law that was produced by the World Intellectual Property
Organization (WIPO) and the United Nations Educational, Scientific and Cultural
Organization (UNESCO). WIPO also established the Intergovernmental Committee
on Intellectual Property and Genetic Resources, Traditional Knowledge and
Folklores (IGC), whose main duty is to produce a draft of an international legal
instrument on these issues. Nevertheless, as the debates between developed and
developing countries on the issues of TK and TCE protection are intense, the IGC is
still unable to produce a draft that is accepted by both developed and developing
countries.
The protection of both TK and TCE is important for SMEs in developing
countries. 1335 There are two reasons for that. First, most developing countries have
abundant varieties of biodiversity and much local knowledge. Second, in developing
countries most enterprises whose work is related to TK and TCE are SMEs.
1335
See Chapter 3 (section 3.3.2).
431
9.2.2. How are the International IP Standards Implemented in Indonesia’s IP
system?
a.
How do International Organisations Promote the Implementation of These
Standards in Indonesia?
In general, there are two major international organisations, WIPO and the WTO, that
deal with IPR issues. Both organisations have only an indirect role in promoting the
implementation of international intellectual property standards in Indonesia.
Although the first organisation, the WTO, manages the TRIPS Agreement, it does
not pay any special attention to the issue of SMEs and IPRs. It does not have any
program or a unit that is dedicated to taking care of the issue of SMEs and IPRs.
Even when during the negotiations for the TRIPS Agreement, discussion on almost
all issues (except for technology transfer) did not consider the relationship between
SMEs and IPRs. However, through Article 67 of the TRIPS Agreement, which
establishes an obligation for members of the WTO to provide assistance related to
the enforcement of TRIPS standards in developing and least-developed countries
(LDC), the WTO helps to promote indirectly the implementation of international IP
standards (contained in the TRIPS Agreement) in developing countries, such as
Indonesia. 1336
1336
See Chapter 2 (section 2.5.1).
432
Based on this Article, at least two developed countries provide assistance to
Indonesia on the correct implementation of TRIPS standards. Australia ran training
programs (administered by the Australian Agency for International Development
(AusAID)) for university lecturers in Indonesia, under the Indonesia-Australia
Specialised Training Project (IASTP) Phase II (in 1998–2003) and III (in 2008) to
increase their understanding of IP issues and TRIPS. Japan provided several capacity
building programs under administration of the Japan International Cooperation
Agency (JICA) in the period 2001–2003.
The projects run by Australia and Japan to help Indonesia to improve its IP system
are a positive initiative. The projects were at least delivered in Indonesian or using
Indonesian language materials, and therefore they were able to reach a wider range
of participants. Moreover, the projects provided opportunities for people in regional
areas to participate. For example, in IASTP Phase II, recipients of IASTP training
projects were usually middle level professionals in public and private sectors in all
provinces in the islands of Sumatra, Java, Kalimantan and Sulawesi and the
provinces of West Nusa Tenggara and East Nusa Tenggara. 1337 However, all of the
projects did not relate specifically to the issues of IPRs and SMEs.
Another international organisation that is concerned with IPRs is the World
Intellectual Property Organization (WIPO). WIPO has paid more direct attention to
SMEs and IPRs issues generally and in Indonesia. In 2000, it provided program
1337
Australian Agency for International Development (AUSAid), Indonesia Australia Specialised
Training Project Phase II (IASTP Phase II) Completed
(<http://www.indo.ausaid.gov.au/completedprojects/iastp.html>.
433
activities focusing on the needs of SMEs related to IPRs. 1338 However, for two
reasons, then it is doubtful that the benefits of the WTO programs were able to reach
Indonesian SMEs directly, particularly those located in regional areas. Firstly, in
implementing these programs, WIPO works only with the relevant central
government agency, in this case, the DGIPR. As the authority to manage SME issues
at regional level has been transferred from the central to regional government since
2004, 1339 it means that the programs of WIPO might not reach SMEs in regional
Indonesia. Secondly, some of the WIPO activities for SMEs, such as website,
monthly newsletters and some training course, use the internet to reach their users
and use languages other than Indonesian languages 1340 as the medium of instruction.
Certainly, it is almost impossible for the vast majority of Indonesian SMEs to benefit
from the program because internet connection in Indonesia, especially in regional
and rural areas, is poor; and in regard to language used for instruction, only a small
number of people living in the regional Indonesia can understand foreign languages,
and far fewer are sufficiently conversant in them as to understand the often highly
technical material being discussed.
At a regional level, the Association of Southeast Asian Nations (ASEAN), of which
Indonesia is a member, is the relevant organisation which provides special attention
on IPRs and SME issues. ASEAN produced two documents focused on IP issues.
One of these two documents, namely the ASEAN Intellectual Property Right Action
Plan (AIPRAP) 2004–2010, has three core programs and projects. One of the
1338
See, Chapter 2 (section 2.5.2).
See Chapter 5 (section 5.5).
1340
The languages used in the WIPO activities are Arabic, Chinese, English, Spanish, French and
Russian. See, World Intellectual Property Organization, Index (2011)
<http://www.wipo.int/portal/index.html.en>.
1339
434
programs is ‘Fostering IP Asset Creation in ASEAN’, which has as one of its targets
‘maximizing the contribution of IPR to the growth and competitiveness of firms,
including SMEs’. To reach this target, ASEAN runs two activities. The first is
developing strategic plans and policy measures for the promotion of IP assets and
ownership within firms, including SMEs. The second is to run training sessions and
seminars on effective strategies for IP asset management that encourage better
working knowledge among enterprises (including SMEs), science and technology
and R&D institutions, universities, and other stakeholders.
As a specific regional organisation, unlike the WIPO, ASEAN makes an effort to
match its programs and activities with the needs of SMEs in its member countries,
including Indonesia. To reach more participants, trainings and seminars organised by
ASEAN are conducted in both English and national language of the country where
the particular events are located. However, in common with WIPO, ASEAN only
cooperates with the central government agency. Therefore, for SMEs in the regional
areas, it is difficult to benefit from such programs.
b.
What are the Initiatives of the Indonesian Government to Integrate IP
Protection with SMEs Activities?
In relation to SMEs, there are four government agencies, namely the State Ministry
of Cooperatives and SMEs (SMoCSMEs), the Ministry of Trade (MoT), the Ministry
of Industry (MoI), and the State Ministry of Research and Technology (SMoRT),
which have duties in regard to SME issues at the national level in Indonesia. At a
435
regional level, there are one or two agencies, the Agency of Trade and Industry or the
Agency of Cooperatives and SMEs, which are responsible for managing SME issues,
including IPRs related matters. Each of these government agencies has their own
programs, mostly related to financial and marketing assistance, for SMEs. 1341
Regarding the integration of IPRs in SMEs business strategies, the above-mentioned
government agencies work with the Directorate General of Intellectual Property
Rights (DGIPR) in running the IPRS related programs. Most of the programs have
the objective of raising awareness of the benefits of IPRs for SMEs through
seminars, discussions and consultations. Moreover, there are also programs which
assist SMEs, both administratively and financially, in obtaining registration for their
IP assets. Compared to other programs for SMEs, particularly those providing
financial credit, little attention is given by the relevant government agencies to the
IPR programs. Apart from being poorly designed and sporadic, such programs are
also given low priority in terms of budget. In addition, the effective implementation
of such programs at a regional level is difficult as there is a lack of coordination
between the relevant central and regional agencies. Problems involved in running
such programs at a regional level are not only the lack of skilled human resources,
but also the complicated and ludicrous bureaucratic procedures for cooperation
between the central and regional government that have been created by the
application of decentralisation policy.
1341
See Chapter 5 (section 5.3).
436
In 2000, the State Ministry of Research and Technology (SMoRT) established the IP
Center (Sentra HKI), dedicated to managing IPR issues in the government research
and development agencies and public universities. At first, Sentra HKI aimed only at
looking for any IP potential in research centres, at assisting inventors with patent
applications, and at marketing patented inventions. These aims were expanded later
to include serving the community around their location regarding IP problems. The
second aim led other non-government institutions, such as private universities and
research institutions, to establishing Sentra HKI in their organisations. It was then
formalised in Article 13(3) of Law No 18 of 2002 on the National System of
Research, Development and Implementation of Technology and Science, which
requires that every university and research and development (R&D) institution
establish a Sentra HKI. 1342 This Article is actually an important development in the
uptake of IPRs by SMEs; however, at implementation level, not every university in
Indonesia complies with this Article and sets up a Sentra HKI.
Since the IP Center opened up opportunities to serve the community, the highest
number of potential clients, except researchers, has been SMEs, which have come to
ask assistance in dealing with IPRs registration. Seeing the benefits an IP Center
gives to a community, the SMoRT launched a financial assistance program, the
Incentives for Sentra HKI, to help the establishment of IP Center all over Indonesia.
In addition, the SMoRT initiated Technology Incentives Insurance (ASTEKNO), a
program which is intended to encourage collaboration between researchers who have
patents and SMEs in producing and marketing the patented product or process. The
program would pay the premium for technology insurance to compensate SMEs if
1342
See Chapter 5 (section 5.4.2).
437
the patents fail to work in the scaling-up process from laboratory to industry.
Although this program is a positive initiative from the Indonesian government to
promote the uptake of IPRs among SMEs and researchers, the ASTEKNO program
is actually not really that important for SMEs. As mentioned previously, most SMEs
in developing countries do not work in the industries that involve high-technology
products or processes.
All of these IP-related programs had been run between 2000 and 2005. In 2005,
because of the change of minister in the SMoRT, the ministry stopped all IPRs
related programs. When the present cabinet was formed in 2009, the ministry
resumed an incentive program to obtain IPRs in 2010.
Besides providing assistance programs and incentives for the establishment of IP
Center, the government also provide a special administrative rate for the registration
of IPRs by small businesses. However, such special rates are not given in all types of
administrative services nor in regard to all forms of IPRs. It is only given for
trademarks, industrial design, layout design of integrated circuit and trade secrets.
This special registration rate issue will be discussed later in this chapter (section
9.2.3).
In the author’s opinion, such discounted rate for SMEs policy has great potential to
raise the uptake of IPRs by SMEs in Indonesia. However, since it is not provided for
all relevant forms of IPRs for SMEs and for the incorrect types of registration
services, this policy seems extremely limited in its current form. This can be seen
438
from the number of applications coming from SMEs category in industrial designs.
Since the first year of this policy being implemented in 2002 until 2009, the annual
number of applications, while it has risen significantly, is coming off a low base and
remains less than 100 per annum. 1343
In layout design of integrated circuit (topographies), trademarks, and trade secrets,
the effectiveness of this policy is unknown because the DGIPR does not have the
data of SME applicants for registration in these forms of IPRs.
However, if the policy could be substantially improved by making it more broadly
available and seriously implemented, it offers a possible solution to the problem of
low uptake of IPRs by SMEs.
9.2.3. What is the Relevance of IP to Indonesian SMEs?
a.
Which IPRs Do Indonesian SMEs Use?
Currently, Indonesia has seven pieces of IP legislation that were designed to comply
with TRIPS standards. Of these seven laws, only six are relevant to SMEs, namely
Law No 29 of 2000 on Plant Variety Protection, Law No 30 of 2000 on Trade Secret,
Law No 31 of 2000 on Industrial Design, Law No 14 of 2001 on Patent Law, Law
No 15 of 2001 on Trade Mark and Law No 19 of 2002 on Copyright. Almost none of
1343
See Chapter 8 (sub-section 8.2.2.a).
439
the SMEs in Indonesia manufacture products that are within the protection of layout
of integrated circuit law, Law No 32 of 2000.
There are several forms of IPRs that are incorporated within the laws listed above but
are not governed in a specific law. The protection of TCE or folkloric expressions is
governed in Law No 19 of 2002 on Copyright, while TK for traditional local plants is
protected in Law No 29 of 2000 on Plant Variety Protection. For GI and petty
patents, these two forms of IPRs are included in Law No 15 of 2001 on Trade Mark
and Law No 14 of 2001 on Patent respectively.
Most of the Indonesian SMEs do not develop high technology products or processes.
With their limited capacity in terms of financial resources, knowledge and
information, it is easier for Indonesian SMEs to work in industries where they exploit
their TCE and TK. The batik and jamu industries are examples of industries which
are based on TK and TCE, two areas which have become a concern of developing
countries in relation to international IPR standards. 1344 The batik and jamu industries
were selected for the case study in this research because their products are known as
being of Indonesian origin both at a national and international level and are primarily
oriented to a market outside of the local community. Because the batik and jamu
industries have such special characteristics, they should be properly protected by
IPRs. However, in reality, these two industries receive poor protection under
Indonesian IP laws.
1344
See Chapter 6 and Chapter 7.
440
For the batik industry in Indonesia, there are a number of IPR forms — copyright,
protection of TCE, trademark, GI, industrial design and trade secrets — that are
needed by SMEs to protect and to develop their businesses. For the jamu industry,
copyright, protection of TK under the 2000 PVP Law, trademark, GI, petty patents,
and trade secrets are forms of IPRs that are needed for the industry. However, since
the current IP legislation which governs TK, TCE and GI, i.e. the 2000 PVP Law, the
2002 Copyright Law and the 2001 Trademark Law, do not provide ownership to the
individual but rather to community representatives or government, these forms of
IPRs are not really relevant to SMEs as individual enterprises.
(i)
Batik Industry
The originality requirement for a work to get copyright protection also applies in
Indonesia. The traditional batik industry finds this requirement difficult to satisfy as
most of its motifs are already known from generation to generation in Indonesia.
However, for batik with new motifs, batik is included as one object of copyright
protection in Article 12(1) of the 2002 Copyright Law of Indonesia. Unfortunately,
only a small number of batik SMEs in Indonesia is involved in modern batik
production. 1345
The protection of TCE which is included in the 2002 Copyright Law is relevant for
traditional batik industry. Articles 10(2) and (3) of the 2002 Copyright Law
respectively provide that the ownership of TCE or folklores is in the hands of state
and non-Indonesian citizens must get permission from the relevant authority to
1345
See Chapter 6 (section 6.4.1).
441
reproduce such works. Although these two Articles are a positive effort to protect
Indonesian TCE or folklores from an act of misappropriation by illegitimate party,
they are still awaiting an implementing regulation so that they can be applied
effectively in Indonesia.
Trademark is also an important form of IPRs for Indonesian batik SMEs. They need
trademark as a mark of identity and a guarantor of quality for their batik products. It
may be the most familiar form of IPRs for SMEs in Indonesia as the uptake level of
trademark by SMEs is higher than for other IPRs. However, the problem with
trademark is its registration requirements, which involve a complex, time-consuming
and expensive procedure. Although trademark benefits SMEs, some cottage batik
enterprises do not need trademark as they supply products for large enterprises under
a sub-contracting system.
GI, which is governed in the 2001 Trademark Law in Indonesia, is the most relevant
form of IPRs for the batik industry. GI is provided for goods produced by nature,
agriculture, the process of industry, and as a handicraft, and batik is categorised as
handicraft. In Indonesia, the protection of GI is obtained through a registration
system and the owner of such a GI is either a group of people who manufacture or
sell batik products or an institution that represents local communities in the area that
produce such goods. As with trademark, the complicated, long and expensive of
registration process discourages SMEs from applying for GI protection. Besides that,
for individual SME owners, GI protection is beyond their reach. 1346
1346
See Chapter 6 (section 6.4.5).
442
Industrial design can also be used in the Indonesian batik industry. It is suitable to
protect batik designs that are produced on a massive scale. However, since the design
which can be protected under industrial design rights must be new, only modern
batik products benefit from this form of IPRs. Besides that, the time required for
processing industrial design rights (which is normally four or five months) is not
suited to the rapid design turn-around of modern batik enterprises where a design
may be current and attractive in the market place for as little as 3 to 6 months. Thus
the rapid marketing cycle in batik enterprises acts against the adoption of industrial
design rights for protection in the industry.
The last relevant IPR for batik industry is trade secrets. It is suited to the protection
of any information of economic value in any sized business. In addition to that, trade
secret protection, which does not require registration to be obtained, meets the needs
of SMEs. However, almost all information in the traditional batik industry has
already been disclosed to public since batik has been a popular subject of research by
local and foreign scholars since the 18th century. Therefore, in contrast to jamu SMEs
(see below), traditional batik SMEs have almost no trade secrets to be protected.
(ii)
Jamu Industry
Turning to the jamu industry, the nature of copyright is only suitable to protect the
media that transmits jamu. This normally is in the form of ancient writings, pictures,
or acts. In this case, similarly to the traditional batik industry, such works are
considered as folklore or TCEs, which are protected under Article 10(2) and (3) of
the 2002 Copyright Law. Although TCE protection is relevant for the protection
443
from exploitation of such works by illegal parties which might potentially harm SME
businesses, it is not really relevant for individual jamu SMEs as TCE ownership is in
the hands of the state. 1347
PVP is relevant for the protection of the materials of jamu, which mostly are wild
plants or plants cultivated by local communities. Article 7(1) of the 2000 Plant
Variety Protection Law maintains local community varieties are controlled by the
state (that is, by the national government). However, as with the protection of TCE,
this protection does not have direct relevance for individual SMEs in the jamu
industry.
Although many jamu entrepreneurs uses trademarks in their businesses, trademark in
the jamu industry encounters the same problems as trademark in the batik industry. It
is useful as an identifier and as a quality guarantor; however, the registration
procedure to obtain trademark is difficult for SMEs to follow. In relation to GI, jamu
is known for its regional characteristics in Indonesia. Therefore, the protection of GI
is really relevant for jamu industry. However, the widespread of jamu throughout the
regions of Indonesia has blurred the origin of jamu, which potentially may lead to
conflicting ownership claims between regions of Indonesia. On top of that, as GI
cannot be owned by individual SMEs but only by local groups or by institutions
representing local communities, as in the case of TCE and TK protection for
traditional local plants, it does not offer any direct benefit to individual jamu SME
owners. 1348
1347
1348
See Chapter 7 (sub-section 7.4.1).
See Chapter 7 (section 7.4.3).
444
Patents may be not relevant for the jamu industry as the industry’s SMEs cannot
satisfy the novelty and non-obviousness requirements for obtaining patent protection.
However, petty patent can be applied to protect simple technological innovations that
are commonly found in jamu products. Petty patent requires the object of its
protection to be novel, possess utility or function which is more practical than the
prior invention and must be in tangible form. These requirements are simpler to
satisfy than those for patent protection. Therefore, petty patent protection suits the
situation of SMEs in Indonesia. However, for SMEs in the jamu industry, there are
the same problems as apply in the case of other forms of IPRs which require the
object of protection to be novel or new. Unless, these SMEs make a simple
innovation on their jamu products, they cannot obtain petty patent protection.
The last relevant form of IPRs for the jamu industry is trade secrets. For jamu SMEs
that produce non-standardised jamu according to a secret formula, they would need
to protect their trade secret in an appropriate manner, such as keeping knowledge of
it restricted to the inner circle of family. However, for producers of standardised
jamu, ‘secret keeping’ can be a problem as the requirement contradicts the
government regulation which requires the manufacturer to disclose the composition
of their products to obtain marketing approval from the government.
From the above discussion, it can be concluded that not all relevant forms of IPRs for
the batik and jamu industries directly benefit batik and jamu SMEs in Indonesia.
Because the Indonesian IP laws governing the ownership of TK, TCE and GI cannot
grant such rights to individuals or individual SMEs, these three forms of IPRs are of
little benefit to SMEs, and of less benefit that copyright, trademark, industrial design,
445
petty patent and trade secret. In addition, although these individual IPRs protect the
batik and jamu industry, it is difficult for these two industries to satisfy the necessary
requirements to obtain protection. If the government of Indonesia wants the batik and
jamu SMEs to utilise copyright, trademark, industrial design, petty patents and trade
secrets more frequently, these requirements need to be made more flexible and match
the situation of those industries.
b.
What are the Attitudes of Indonesian SME Owners, Particularly Those of
the Batik and Jamu Industry, towards Dealing with the Administration of
the IP system in Indonesia?
To assess the attitudes of Indonesian SMEs to IPRs, this study interviewed SMEs
owners or managers of batik and jamu SMEs. The batik industry was represented by
14 SME owners or managers, of which seven are from Pekalongan, in the province
of Central Java province, and seven others are from Bantul and Yogyakarta city,
which are part of the province of Yogyakarta province. Most of participants in the
Central Java province own or manage medium enterprises, whereas the participants
in the Yogyakarta province come from small/micro enterprises. 1349 In the jamu
industry, 13 SME owners or managers were interviewed. Five SME owners or
managers are from Semarang, Central Java, and most of them run small enterprises,
while 8 others are owners or managers of small enterprises from Yogyakarta city and
the Sleman regency, part of the Special Region of Yogyakarta. 1350
1349
1350
See Chapter 6 (section 6.9).
See Chapter 7 (section 7.7).
446
An examination of the interviews conducted for this research led to the conclusion
that Indonesian SME owners or managers have not seriously included IPRs as part of
their business strategies. As has been discussed above, the most familiar form of
IPRs for SMEs in the batik and jamu industries is trademark, which is also needed in
other industrial sectors. 1351 Some of these SMEs had already obtained registration for
their trademarks proactively or with the help of a government agency. Some others,
however, have not yet registered their trademarks. In the jamu industry, petty patent
has become the second most familiar form of IPRs used in the industry. Petty patent
is used to protect modern jamu products which combine a traditional formula with
technology acquired from innovative research and development process. 1352
Attitudes of Indonesian SME owners or managers towards IPRs depend on how
much information they have received on the subject. 1353 The more they receive
correct information on the benefits of IPRs for their businesses, the more positive
attitude they have toward IPRs. 1354 The interviews revealed that almost all of the
interview participants have heard about the term ‘intellectual property rights’ from
the mass media, conversation among colleagues or seminars organised by the
relevant government agencies, 1355 yet the information received on IPRs is often very
basic and sometimes inaccurate. 1356 Misleading and inaccurate information has in
many instances caused SME owners or managers to have negative attitudes about
IPRs. 1357
1351
See Chapter 6 (section 6.10(b)) and Chapter 7 (section 7.8(b)).
See Chapter 7 (section 7.8(b)).
1353
See Chapter 6 (section 6.10(a)) and Chapter 7 (section 7.8(a)).
1354
See ibid.
1355
Ibid,
1356
Ibid.
1357
Ibid.
1352
447
In general, the attitudes of Indonesian SME owners, particularly in the batik and
jamu industries, are negative towards the administration of IP system in
Indonesia. 1358 They do not show great interest in using the relevant IPRs in their
business activities. When SMEs decide to use IPRs, it is generally due to external
factors, such as receiving assistance from the government, or being promoted by a
request from a buyer or by government requirements. 1359 SMEs typically make
efforts to obtain IPRs protection after their businesses expand rather than at its
foundation. 1360 Most Indonesian SME managers think that IPRs are only needed to
protect business, rather than also to make profits needed at the early stage of
business. Such an idea shows that they do not have in-depth knowledge on IPRs and
their benefits to business.
c.
What are the reasons for the current pattern of Indonesian SME use of
IPRs?
Statistics show that the use of IPRs among Indonesian SMEs is low. This was
confirmed by the interviewees as most of them do not use IPRs in their businesses. In
the interviews, participants articulated their reasons for not using IPRs in their
businesses. Although the reasons were only given by SMEs in the batik and jamu
industries, the same reasons for inaction are likely to be given by other Indonesian
SMEs.
1358
See Chapter 6 (section 6.10(b)) and Chapter 7 (section 7.8(b)).
Ibid.
1360
Ibid.
1359
448
The reasons why participants are not enthusiastic in applying IPRs for their
businesses include:
1. Trademark does not have any effect on their businesses until they start
exporting. 1361 This is, whoever, not true since a trademark functions as an
identifier and marketing tool that are needed whether the product sold on the
domestic or overseas market.
2. IPRs may have benefit for SMEs; however, their owners or managers consider
IPRs are less important than effective marketing methods for their businesses.1362
As mentioned above, one of functions of a trademark is to help market the
product. Therefore, if SME owners or managers utilise trademarks, it could be
combined with other marketing strategies.
3. Trademark would increase the tax payment of SMEs. 1363 This statement is
unreasonable since trademark does not have any relationship with tax that has to
be paid by SMEs.
4. The sole function of IPRs is to protect businesses. Thus, the protection of IPRs is
only needed when the businesses have expanded and making a lot of profit. 1364
5. The costs of IPRs, particularly trademarks, are extremely high. 1365 Although, to
some extent, this perception is true given the imposts when applicants use the
services of agents or calos and/or make ‘informal’ payments (whether these be
bribes or gratuities), the actual compulsory costs of trademark registration are far
1361
See Chapter 6 (section 6.10(b)).
See Chapter 7 (section 7.8(b))
1363
See Chapter 6 (section 6.10(b)).
1364
See Chapter7 (section 7.8(b)).
1365
See Chapter 6 (section 6.10(b)).
1362
449
less than they interviewees thought. More importantly, most of participants said
they could afford these compulsory costs.
6. In the batik industry, some SME owners and managers were of the opinion that
copyright and industrial design rights, which theoretically are relevant to their
enterprises, could not work. Most of participants in the batik industry have been
very tolerant of the practice of copying that has occurred since the beginning of
the industry. 1366
7. In the jamu industry, many SME owners or managers, who have been the owners
of trademarks and sometimes patents rights, observed that IPRs are only another
obligation for running their businesses. They considered them, however, as an
obligation that must not be immediately fulfilled from the beginning of their
businesses’ operation or in regard to all jamu products. Before registering IPRs,
particularly trademark and petty patent, SME owners and managers tend to wait
until their enterprises are at a later stage of development and their manufactured
jamu have promising prospects in marketing. 1367
Some of the reasons 1368 provided by the interviewees were contrary to the facts and
demonstrated that they have received inaccurate and misleading information on how
the IP system works in Indonesia. While other reasons 1369 may be not accurate in
theory, the situation in the field makes them real. For instance, reasons number 2, 4
and 7 (the less benefit of IPRs to SMEs, the sole function of IPRs is to protect
business, and IPRs are only the obligation for running businesses) are true because
the SMEs compare the difficulties that hamper efforts to obtain IPRs registration,
1366
See Chapter 6 (section 6.10(b)).
See Chapter 7 (sub-section 7.8.(b)).
1368
Reasons nos 1 and 3.
1369
Reasons nos 2, 4, 5, 6, and 7.
1367
450
particularly in trademark and petty patents, with the benefits that they stand to gain.
If their businesses are in the early stage of their development, the benefit to cost ratio
is seen as unacceptably low. At such a stage, their businesses have very limited
financial resources and are focused on making the products as attractive as possible
to as many as buyers as possible in the market. For reasons number 5 and 6 (the
existence of additional non-compulsory costs 1370 and the weak legal enforcement)1371
makes this a reality in Indonesia.
9.2.4. What are the Problems with the Administration of the IP System in
Indonesia that Negatively Affect the Interests of SMEs in Using IPRs in
their Business Activities?
In the interviews, the participants explained that their problems in dealing with
Indonesian IP system are mainly related to the issue of obtaining each of the relevant
IPRs for their businesses. Participants in the interviews complained about (a) the
long and complex procedure, (b) the expense of IPR registration and (c) the
uncertainty and ineffectiveness of IPRs administration.
a.
Long and complex registration procedure
The complex procedure is a serious challenge for SMEs, which are not experienced
with and lack of accurate information on the IP system. Although the procedures to
obtain IPR registration do not differ greatly with those of other countries, the
1370
1371
See Chapter 8 (section 8.2.2(b)).
See Chapter 4 (sections 4.5 and 4.6).
451
government of Indonesia attempted to reform this complex procedure by introducing
or re-introducing a simpler registration procedure in the new Bill for copyrights,
trademarks, patents and industrial designs. 1372 In the meantime, in preparing their
IPR registration application, SMEs still need assistance and guidance on IP issues
from persons experienced and trained in that area. This can be obtained at an IP
clinic or from well-known Sentra HKI located in Indonesian universities. 1373
Regarding the long procedure for IP registration, although the relevant IP legislation
already mentions the maximum time required for such procedures, the experience of
applicants could be very different in reality. For example, the current Indonesian
trademark law determines the time required for the process of trademark right
registration to be 14 months and 10 days in total; however, in practice, the average
minimum time to obtain trademark is two years. 1374 There are some reasons why the
delay could be so long. First, most of the examination process of IPR registration is
centralised in the central office of DGIP in Tangerang, Banten. Although the regional
offices of Ministry of Law and Human Rights have been authorised to accept
applications for IPR registration in their working areas since 2000, their functions
have not been maximised to help reduce the backlog of applications in the central
office. They are only allowed to receive and forward application to the central office
without having power to process the application and give decision at their location,
so the numbers of applications at the central office simply continues to rise,
1372
See Chapter 8 (section 8.2.1).
See Chapter 5 (section 5.3.4).
1374
See Chapter 8 (section 8.2.1.(a)).
1373
452
regardless of whether the application is lodged at a regional office and forwarded or
directly lodged at the national office. 1375
Secondly, the central office of DGIP lacks of the human resources to process the IPR
applications that are submitted to their office. The number of staff working in the
central office of DGIP does not compare with the workload of the agency. 1376 The
data of August 2009 shows the central office of DGIP had 342 employees in three
directorate units that deal directly with the registration processes, namely the
Directorate Copyright, Industrial Design, Layout-Design of Integrated Circuits and
Trade Secrets (66 staff), the Directorate of Patents (30 staff) and the Directorate of
Trademarks (146 staff). On the other hand, the annual number of applications that to
be processed in 2009 was around 45,000 for trademarks, 4500 for patents, 9000 for
copyright and 4200 for industrial design rights. 1377
Thirdly, the staffs work to process the IPR registration applications with the limited
assistance of the information technology (IT) system. So far, the DGIPR has already
set up Intellectual Property Digital Library (IPDL) and DGIPnet, with links between
the central and regional offices of DGIPR. 1378 IPDL provides information on existing
applications and registrations in patents, simple patents, trademarks, copyrights and
industrial design rights from as early as the year 1944. IPDL is a useful tool to help
applicants and examiners search for whether the products/services in question are
already registered before making a decision. DGIPnet is a national digital
1375
See Chapter 4 (section 4.3.2.2.)
See Chapter 8 (section 8.2.3.(b)).
1377
Ibid.
1378
See Chapter 8 (section 8.2.3(c)).
1376
453
information network which facilitates data and information exchange between the
central office and the regional offices. Both projects are a positive initiative to utilise
IT systems as a solution for the administrative problems of DGIP. Yet, since both
projects depend on internet connectivity, they might not be as useful as they could be
until the problems of internet connectivity in Indonesia are solved. It is common
knowledge that internet connections in Indonesia are poor and that the internet and
this system is mainly available only in the regional offices located in big cities.
Problems of a lack of human resources, ineffective IT assistance and poor internet
infrastructure could be resolved if the DGIPR had the financial support required to
improve all of these problems. Unfortunately, despite the fact that the agency
contributes quite large revenues annually to the government treasury from the IPR
registration fees, the government only allows DGIP to spend 25 per cent of this
income to finance their operational activities every year. The budget is not enough to
provide facilities that are able to accelerate the IP application process. 1379
The conclusion that can be drawn here from the above discussion is that the IPRs
administrative support system in Indonesia is not prepared for the task in hand. There
are quite a number of improvements that need to be made in the areas of procedure,
IT, human resources and budget to ensure that the IPRs registration process works
efficiently and effectively. The uptake of IPRs by Indonesian SMEs would certainly
rise if these support systems were improved.
1379
See Chapter 8 (section 8.2.3(d)).
454
b.
High Cost of Registration
As mentioned above, there was a misperception among the participants of interviews
that the compulsory IP registration fees were expensive. The compulsory IP
registration fees are determined by the government and included in a regulation,
which is renewed regularly in accordance with the situation prevailing in Indonesia.
Among the relevant IPRs for SMEs, the cost of registration for petty patents is the
most expensive with fees amounting to IDR 925,000 (USD 108). For Indonesian
people, who had an annual gross per capita income of USD 1880 (based on annual
gross national income (GNI)) in 2008, the compulsory IPRs registration costs are
considered inexpensive. 1380
The costs of IP registration, however, are not limited to the compulsory fees, but also
involve non-compulsory components, the total amount of which could not be
determined at the beginning of the registration process. These non-compulsory costs
could be in the form of IP consultant/agent fees and other preparation expenses, such
as photocopying documents and transport to the government agency office. Besides
that, as noted above, there are calo fees and sometimes small gratuities given at
every stage to officials who process the applications. Although there is no
requirement for applicants to use the services of an IP agent and/or calo, or to give
gratuities to the officials, often it is these costs that are a decisive factor in
guaranteeing the successful processing of an IPR application in a reasonable period
of time. In the end, the combination of the compulsory and non-compulsory costs
1380
However, the total compulsory costs that have to be paid by petty patent owners for the period of
10 years protection is expensive. The total costs are estimated to be IDR 17,550,000 (USD 2060) and
consist of the registration and maintenance costs for 10 years.
455
means that the process of applying for IPRs is no longer a low-cost option for SME
owners. 1381
The government of Indonesia actually provides lower IP related fees for SMEs.
These are expected to stimulate the use of IPRs among Indonesian SMEs.
Unfortunately, this policy is only applied to some IPRs, such as industrial design,
trade secret, layout design of integrated circuit and trademark. In the trademarks area,
the special reduced rate for SMEs is not offered for activity related to initial
registration. It only applies to an extension after the expiration of the first 15 years
protection. 1382 This policy is not really effective in encouraging SMEs to use IPRs as
it does not apply on copyrights, petty patents and PVP, which are certainly relevant
to SME business activities. The availability of a discounted fee for the initial
trademark registration could prove crucial in persuading SMEs in register their
trademark. A low fee would also make the process more attractive at the time of
establishing the business.
c.
(i)
Uncertainty and Ineffectiveness in the IP Administration System in
Indonesia
Corruption
Beyond the administrative procedure itself, there are two other factors that hamper
the effective performance of IP administration system to SMEs in Indonesia —
1381
1382
See Chapter 8 (section 8.2.2.(b)).
See Chapter 8 (section 8.2.2.(a)).
456
inadequate and corrupt legal enforcement and an ineffective decentralisation policy.
It is common knowledge that legal enforcement in regard to IPRs infringement is
weak. Besides that, many of legal enforcement officers, such as police and
prosecutors, have permissive attitude towards IPR infringements in Indonesia. This
permissive attitude comes from copying habit which has become a culture in
Indonesia. To make it worse, the weak legal enforcement leads to corrupt practices,
which also extends to the Indonesian legal professions. Research conducted by the
Indonesian office of a foreign NGO in 2007 ranked the judiciary as the second most
corrupt institution in Indonesia after the police. 1383 All of these things create a
negative image of the judicial system in Indonesia and make many SME owners and
managers reluctant to seek justice through the court when their IPRs are infringed. In
their eyes, the costs of IP court proceeding, in terms of money, time and energy, are
not comparable to the benefits of IPRs. Therefore, SMEs in Indonesia are hesitant to
apply IPRs in their businesses since they may think relevant IPRs are unable to be
enforced effectively to protect their business interests.
(ii)
Decentralisation
Another factor that hampers the effective performance of the IP administration
system to SMEs is an ineffective decentralisation policy. The decentralisation policy
which has been applied more seriously in Indonesia since 1999 has a negative impact
on the implementation of IP programs that are dedicated to Indonesian SMEs at the
regional level. A 2005 survey conducted by the World Bank found that the
implementation of the decentralisation policy in Indonesia creates greater corruption
1383
See Chapter 4 (section 4.6).
457
in the regional bureaucracy. Besides that, as part of decentralisation, there is deconcentration policy (or policy of devolution) which causes the transfer of authority
in several sectors, including SME issue, from the central to regional government.1384
One obvious effect of de-concentration policy is that the relevant state ministries
which are concerned with the issue of IPRs and SMEs do not have branches at the
regional level. To implement their IP programs for regional SMEs, the central
agencies need to cooperate with the relevant regional agency. Because coordination
among government agencies in Indonesia is lacking, this creates another problem,
that of a bureaucratic duplification, another burden that hampers the effective
provision and implementation of SME related IPRs programs. However, this policy
has a positive aspect in that it grants freedom to regional agencies to undertake
initiatives in forming policy or programs at regional jurisdiction. Unfortunately,
sometimes the competency of regional government officers in understanding and
managing an issue is not as good as that of central government officers and this
makes it difficult for them to undertake such initiatives.
9.3. Recommendations for the Design of Relevant National IP Policies, and
Programs in the Best Interests of Indonesian SMEs
As mentioned in the introductory part of this chapter, 1385 this study explores the
obstacles and challenges that hamper the uptake of relevant IPRs by Indonesian
SMEs. This study concludes that SMEs in the batik and jamu industries do not
integrate relevant IPRs into their business activities because the procedures to obtain
1384
1385
See Chapter 5 (section 5.5).
See Chapter 9 (section 9.1).
458
relevant IPRs protection are complex, lengthy, costly, and uncertain. 1386 This study
also found factors that cause such a burdensome procedure are the complicated
administrative and substantive requirements, lack of support system (IT, human
resources and budget), uneven burden of work between the central and regional
offices of DGIPR, an ineffective policy on IP compulsory registration fees,
expensive additional non-compulsory registration fees and corruption. These findings
lead the author to propose some recommendations that might be able to amend the
procedure that makes Indonesian SMEs hesitant to utilise IPRs in their business
activities.
The recommendations presented here, surely require further research as they are
merely propositions. However, they are worth to consideration as potential solutions
to the problems facing SMEs in their utilisation of IPRs in Indonesia. Most of
recommendations here are aimed can only be put into action by the government of
Indonesia, particularly the DGIPR. However, there are some suggestions for both
private and public entities which have concerns on this issue.
9.3.1. Complexity 1387
On the complex procedure of registration, there is not much to say as the procedure
included in the Indonesian current IP legislation is more or less similar to the
practices in other member countries of TRIPS. Nevertheless, the government of
Indonesia has attempted to simplify this complex procedure in the proposed new
1386
1387
See Chapter 6 (section 6.10) and Chapter 7 (section 7.8).
See Chapter 8 (section 8.2.1).
459
IPRs Bill. Here are a few recommendations to add to the initiatives that have so far
been adopted by the government.
1. A specific SME focused unit dealing with IPRs. There could be a non-profit
organisation or a permanent unit in the relevant government agency which
focuses on assisting SMEs dealing with such complex procedure of IPRs
registration and provides good advice on IPRs. Currently, there are a few
organisations and unit in the government agency, for example, Sentra HKI and
the IPRs Consultation Clinic, which have such functions. However, they do not
have systematic scheme of duties or a permanent organisational position and they
lack the human and financial resources required to perform their functions
adequately and effectively.
2. More government facilities and encouragement for private service provision. The
government could provide more facilities and incentives for organisations beyond
the government structure, like Sentra HKI, and give more authority and an
increased budget for units within the government structure, like the IPRS
Consultation Clinic, so that their programs can work effectively at both the
central and regional level.
9.3.2. Lengthy Process 1388
The slow process of IP registration could be improved by applying the following
recommendations:
1.
Additional suitably trained staff. The analysis conducted in the study has
revealed that the source of the problem is the volume of IPR applications
1388
See Chapter 8 (sections 8.2.1, 8.2.3.b, 8.2.3.c, 8.2.3.d.).
460
received are out of proportion to the number of staff whose duty it is to process
such applications in the central office of the DGIPR. Recruiting more skilled
employees to work in this government agency could be the most immediate
recommendation for the solution to this problem. It would necessarily involved
additional funding.
2.
Optimal utilisation of IT systems. Another recommendation is the optimal
utilisation of IT systems to accelerate the processing work of staff. The adoption
of this and previous recommendation may make it possible to solve the problem
of the backlog of applications in the central office of DGIP; however, they are
expensive to implement, especially as regards the broader and more
comprehensive IT/communications infrastructure upgrade that would be
required for optimal improvement. Such an upgrade would, however, contribute
much not just to the efficiency of the DGIPR but to the modernisation and
growth of industry and the economy more generally.
3.
Greater
budgetary
allocation.
The
adoption
of
the
two
previous
recommendations (additional staff and a DGIPR IT systems upgrade) is
correlated with the operational budget of the DGIPR office. The central
government needs to raise the annual budget given to the central office of DGIP
for any improvement to be made. At the very least, the agency could be given
permission to retain up to 60 per cent of the revenue it obtains from its services
rather than those funds go to the government.
4.
Devolution of an increased range of application processing powers to regional
centres. On top of the above recommendations, it is suggested that the central
office of DGIP share the burden of processing with the regional offices. The
authority of the regional offices should not be limited to only accepting
461
applications from their areas and then forwarding them to the central office. The
regional offices could perform examination processes and determine whether the
applications are approved or rejected; however, this could only occur if the
regional offices were equipped with fine IT infrastructure and skilled human
resources. Again, this would depend on the budget from the central government
and/or financial assistance from developed countries. Nevertheless, in the
meantime, the regional offices could be assigned to process and to determine the
registration of copyrights, which does not involve substantive examination, or
other simple administrative works, such as the renewal of trademark application.
9.3.3. Cost 1389
The next issue regarding the application procedure is the high costs of the entire
process involved in IP registration from the perspective of the applicant, who is faced
with a combination of compulsory state-mandated fees and additional noncompulsory fees. There are two recommendations on this issue:
1.
Recommended IP agent fee structure, complaints office. The existence of calo
reflects situation where the system of IP agents is not working properly. This
may be on account of the expensive fees these agents charge which cannot be
afforded by SMEs. As an indication, UDW, one of the interviewees, stated that
the charges proposed by an IP agent in Semarang to ‘take care’ of his trademark
application were more than ten times higher than the official compulsory
costs. 1390 Although this agent may be not be a registered IP agent, it is
recommended that the professional organisation for IP agents in Indonesia,
1389
1390
See Chapter 8 (sections 8.2.2. a, 8.2.2.b).
See Chapter 7 (section 7.8.a.).
462
Asosiasi Konsultan HKI Indonesia (AKHI), 1391 rule on the amount of service
fees that can be requested by registered IP agent in Indonesia. AKHI also needs
to establish a bureau which processes complaints from public on the misconduct
of registered IP agents.
2.
Discounted compulsory fees. In terms of compulsory fees, in order to encourage
Indonesian SMEs to utilise IPRs in their business activities, the government
could issue a regulation that provides also special discounted fees for SMEs that
are making their initial registration of trademark, copyright and petty patents.
9.3.4. Uncertainty and Ineffectiveness 1392
While the problem of uncertainty in the IP administration system for SMEs in
Indonesia is caused by corrupt practices committed by some of the DGIPR officers
and members of the legal professions, the problem of ineffectiveness stems from the
decentralisation policy. Although the issues of corruption and decentralisation in
Indonesia are difficult to resolve without immense political will and societal change,
with the optimal courses determined by intense research, the author proposes a
number of recommendations that could help to reduce uncertainty and
ineffectiveness in the IP administration system for SMEs in Indonesia.
1.
Increased monitoring and enforcement regarding the elimination of gratuities.
Regarding the services of calo and gratuities given to the officers, Article 12B(1)
1391
AKHI was just established in 2006 as a response to the issuance of Government Regulation No 2
of 2005 on IP Consultants which requires registration for this profession. Before this government
regulation was issued, the profession of IP consultant or IP agent did not have any registration
requirement. See Chapter 4 (section 4.3.2.2).
1392
See Chapter 8 (sections 8.2.2.b, 8.2.3.a).
463
of Law No 20 of 2001 on the Eradication of Corruption Offence already states
that gratuities received by government officers are equivalent to an illegal bribe
and, therefore, attract legal consequences. 1393 However, this is difficult to
monitor in the field and to effectively enforce any prohibition. Thus, in order to
apply this provision effectively, there must be an effective method that monitors
the performance of officers in the central office of DGIP. These could involve
the establishment of an integrity commission as an internal organisation of the
DGIPR itself or in collaboration with the the State Ministry for State Apparatus
and Bureaucracy Reforms. whistle blower protection. In addition, there could be
a method that protects the whistle blowers for corrupt practices. Such protection
could encourage people to report corruption in the DGIPR Office related to the
IPRs registration process. More importantly, reports of the whistle blowers could
not be ignored and there could be an internal system to follow up the reports
effectively.
2.
Increased departmental and agency coordination at central and regional levels.
As has been discussed previously, 1394 Indonesian SMEs need supports from the
government both at the central and regional level to overcome the problems of
IPRs registration process. However, the decentralisation policy places the
authority to manage the issues of IPRs and SMEs in the hands of different levels
of government. While the authority to manage the issue of IPRs is in the hands
of a central national agency, in this case the DGIPR Office, 1395 the authority to
take care of issues of SMEs is under the control of the regional government via
the Agency of Trade and Industry (AoTI) or the Agency of Cooperatives and
1393
See Chapter 4 (section 4.6).
See Chapter 9 (section 9.2.4.c.ii).
1395
Although the DGIPR Office has branches at the regional level, the power to make decisions is still
in the hands of the central office. See Chapter 5 (section 5.5).
1394
464
SMEs (AoCSME). 1396 This creates gaps between these two agencies and
between them and the businesses they are attempting to serve. For example,
support programs for SMEs run by the central national agencies rarely reach
regional participants. Therefore, it is recommended that these agencies and
departments better coordinate and synergise their work plans in order to make
the support programs from both the central and regional government agencies
work effectively for SMEs in the area IPRs. In planning a support program for
regional SMEs, the central national agencies could discuss the program with
relevant regional agencies. In this discussion, a clear job description of the role
of each of the government agencies could be produced.
9.4. Final Remarks
Although it is acknowledged that some IPRs are very relevant to Indonesian SMEs,
particularly in batik and jamu industry, this study concludes that the current IP
system fails to facilitate the uptake of IPRs by Indonesian SMEs. For most forms of
IPRs, the first step in the utilisation of IPRs is registration. This study found that the
procedure to obtain relevant IPRs protection in Indonesia is complicated, lengthy,
costly, and plagued by uncertainty and ineffectiveness. There are various obstacles
that contribute to the procedure being so cumbersome, namely the excessive
administrative requirements, ineffective policeis on compulsory administrative fees,
poor IT systems and internet connectivity, lack of skilled human resources, and a
limited budget. Moreover, the lack of knowledge about IPRs and their benefits has
contributed to the lack of utilization of IPRs by Indonesian SMEs.
1396
See ibid.
465
Although there are many obstacles, the gradual industrialisation of Indonesia and its
integration into the global economy suggest that the role of IPRs in businesses,
including SMEs, can only grow in importance. For that reason, the national IP
registration system will need to be improved over time, so as to make it more
attractive to SMEs, which are the majority and form the backbone of Indonesian
business.
466
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Minister of Justice and Human Rights Decree No M.11.PR.07.06 of 2003 of 4
November 2003 on The Assignment of the Regional Office of Department of Justice
and Human Rights to Receive IPR Application.
Minister of Law and Human Right Decree No M.HH-05.OT.01.01 Tahun 2010 on
Organization and Working System in the Ministry of Law and Human Rights
Nota Kesepakatan No M-09-UM.06.07 TH.2006 601/M-IND/7/2006 Antara
Direktorat Jenderal Hak Kekayaan Intelektual dan Kementerian Industri [MoU No
M-09-UM.06.07.TH.2006 601/M-IND/7/2006 Between the DGIPR and Ministry of
Industry] (Indonesia)
Nota Kesepakatan No M-09-UM.06.07.TH.2006 06/NK/M.KUKM/IV/2006 Antara
Direktorat Jenderal Hak Kekayaan Intelektual dengan Kementerian Negara
Koperasi dan UKM [MoU No M-09-UM.06.07.TH.2006 06/NK/M.KUKM/IV/2006
Between the DGIPR and the SMoCSMEs] (Indonesia)
Peraturan Kepala Badan Pengawasan Obat dan Makanan No HK.00.05.4.1380
Tentang Pedoman Cara Pembuatan Obat Tradisional yang Baik [Regulation of the
Head of BPOM No HK.00.05.4.1380 on the Method of Producing the Right
Traditional Medicine] (Indonesia).
Peraturan Menteri Hukum dan Hak Asasi Manusia No M.03-PR.07.10 Tahun 2005
Tentang Organisasi dan Tata Kerja Kementerian Hukum dan Hak Asasi Manusia
Republik Indonesia [Minister of Law and Human Rights Regulation No M.03PR.07.10 Year 2005 on Organization and Job Description of Ministry of Law and
Human Rights of Republic of Indonesia] (Indonesia)
Peraturan Menteri Kehakiman No M.01-HC.03.01 of 1987 Tentang Pendaftaran
Hak Cipta [Minister of Justice Regulation No M.01-HC.03.01 of 1987 on Copyright
Registration] (Indonesia)
Peraturan Menteri Kesehatan No 246/Menkes/Per/V/1990 Tentang Lisensi Industri
Obat Tradisional dan Registrasi Obat Tradisional [Minister of Health Regulation No
246/Menkes/Per/V/1990 on Business Licence for Traditional Medicine Industry and
Traditional Medicine Registration] (Indonesia)
Peraturan Menteri Kesehatan No 661/Menkes/VII/1994 Tentang Persyaratan Obat
Tradisional [Minister of Health Decision No. 661/Menkes/VII/1994 on the
Requirements of Traditional Medicine] (Indonesia)
Peraturan Pemerintah No 1 Tahun 2005 tentang Pelaksanaan Undang-undang No
31 Tahun 2000 tentang Desain Industri [Government Regulation No 1 of 2005 on
the Implementation of Law No 31 of 2000 concerning Industrial Design] (Indonesia)
482
Peraturan Pemerintah No 2 Tahun 2005 tentang Konsultan HKI [Government
Regulation No 2 of 2005 on IP Consultants] (Indonesia)
Peraturan Pemerintah No 13 Tahun 2004 Tentang Penamaan Pendaftaran dan
Penggunaan Varietas Asal untuk Pembuatan Varietas Turunan Esential
[Government Regulation No 13 of 2004 on Denomination, Registration and the Use
of Original Varieties for Development of Essentially Derived Varieties] (Indonesia)
Peraturan Pemerintah No 19 Tahun 2007 Tentang Perubahan Atas Peraturan
Pemerintah Republik Indonesia No 75 Tahun 2005 Tentang Jenis dan Tarif atas
Penerimaan Negara Bukan Pajak yang Berlaku pada Departemen Hukum dan Hak
Asasi Manusia [Government Regulation No 19 of 2007 on Amendment of Class and
Tarriff of Non-Tax Revenue which Applied on Department of Law and Human
Right] (Indonesia)
Peraturan Pemerintah No 23 Tahun 1993 Tentang Prosedur Permohonan
Pendaftaran Merek [Government Regulation No 23 of 1993 on the Procedure of
Trademark Registration Application] (Indonesia)
Peraturan Pemerintah no 38 Tahun 2009 Tentang Pendapatan Negara Bukan Pajak
yang Berlaku di Departemen Hukum dan Hak Asasi Manusia [Government
Regulation No 38 of 2009 on the Non-Tax State Revenues which Applied in the
Department of Law and Human Rights] (Indonesia).
Peraturan Pemerintah No 51 Tahun 2001 Tentang Indikasi Geografis [Government
Regulation No 51 of 2001 on Geographical Indication] (Indonesia)
Rancangan Undang-Undang Hak Cipta [Copyright Bill] (Indonesia)
Rancangan Undang-Undang Merek [Trademark Bill] (Indonesia)
Surat Keputusan Menteri Keuangan No S-178/ MK-0 17/ 2000 tentang Ijin
Penggunaan Sebagian Dana PNBP ada Departemen Hukum dan Perundangundangan (Minister of Finance Decree No S-178/MK-0 17/ 2000 on the Permission
to Use Part of Non-Tax based State Revenues at Department Law and Legislations)
Thailand's Plant Varieties Protection Act B.E. 2542
Undang-Undang Dasar 1945 [Constitution of 1945] (Indonesia)
Undang-Undang No 1 Tahun 1967 Tentang Penanaman Modal Asing [Law No 1 of
1967 on Foreign Investment Law] (Indonesia)
Undang-undang No 4 Tahun 2004 tentang Kekuasaan Kehakiman [Law No 4 of
2004 on Judicial Powers] (Indonesia)
Undang-Undang No 5 Tahun 1974 tentang Pemerintah Daerah [Law No 5 of 1974
on Regional Government] (Indonesia)
483
Undang-Undang No 5 Tahun 1979 tentang Pemerintahan Desa [Law No 5 of 1979
on Village Government] (Indonesia)
Undang-Undang No 5 Tahun 1984 tentang Industri [Law No 5 of 1984 on Industry]
(Indonesia)
Undang-Undang No 7 Tahun 1963 Tentang Farmasi [Law No 7 of 1963 on
Pharmacy] (Indonesia)
Undang-Undang No 7 Tahun 1987 tentang Hak Cipta [Law No 7 of 1987 on
Copyrights] (Indonesia)
Undang-Undang No 10 Tahun 2004 Tentang Pembentukan Peraturan Perundangundangan [Law No 10 of 2004 on the Drafting of Legislation] (Indonesia)
Undang-Undang No 13 Tahun 1997 tentang Paten [Law No 13 of 1997 on Patents]
(Indonesia)
Undang-Undang No 14 Tahun 2001 tentang Paten [Law No 14 of 2001 on Patents]
(Indonesia)
Undang-Undang No 17 Tahun 2006 Tentang Perubahan atas Undang-Undang No
10 Tahun 1995 Tentang Kepabeanan [Law No 17 of 2006 concerning amendments
to Law No 10 of 1995 on Customs Matters] (Indonesia)
Undang-Undang No 18 Tahun 2002 tentang Sistem Nasional Penelitian,
Pengembangan dan Penerapan Ilmu Pengetahuan dan Teknologi [Law No 18 of
2002 on the National System for Research, Development and the Application of
Science and Technology] (Indonesia)
Undang-Undang No 19 Tahun 1992 tentang Merek [Law No 19 of 1992 on
Trademark] (Indonesia)
Undang-Undang No 20 Tahun 2003 tentang Sistem Pendidikan Nasional [Law No
20 of 2003 on National Education System] (Indonesia)
Undang-Undang No 20 Tahun 2008 tentang Usaha Mikro, Kecil dan Menengah
[Law No 20 of 2008 on Micro, Small and Medium Enterprises] (Indonesia)
Undang-Undang No 22 Tahun 1999 tentang Pemerintahan Daerah [Law No 22 of
1999 on Regional Government] (Indonesia)
Undang-Undang No 25 Tahun 1999 tentang Perimbangan Keuangan antara
Pemerintah Pusat dan Daerah [Law No 25 of 1999 on the Fiscal Balance between
the Central and Regional Government] (Indonesia)
Undang-Undang No 25 Tahun 2007 Tentang Penanaman Modal [Law No 25 of
2007 on Investment] (Indonesia)
484
Undang-Undang No 29 Tahun 2000 tentang Perlindungan Varietas Tanaman [Law
No 29 of 2000 on Plant Variety Protection] (Indonesia)
Undang-Undang No 30 Tahun 2000 tentang Rahasia Dagang [Law No 30 of 2000
on Trade Secrets] (Indonesia)
Undang-Undang No 31 Tahun 2000 tentang Desain Industri [Law No 31 of 2000 on
Industrial Design] (Indonesia)
Undang-Undang No 32 Tahun 2004 tentang Pemerintah Daerah [Law No 32 of
2004 on Regional Government] (Indonesia)
Undang-Undang No 33 Tahun 2004 tentang Perimbangan Keuangan antara
Pemerintah Pusat dan Daerah [Law No 33 of 2004 on Fiscal Balance between the
Central and Regional Governments] (Indonesia)
Undang-Undang No 39 Tahun 2008 tentang Kementerian Negara [Law No 39 of
2008 on State Ministries] (Indonesia)
Peraturan Bank Indonesia No 3/2/PBI/2001 Tentang Pemberian Kredit Usaha Kecil
[Central Bank of Indonesia Regulation No 3/2/PBI/2001 on the Grant of Small
Business' Credit] (Indonesia)
Peraturan Presiden No 9 Tahun 2005 tentang Posisi, Tugas, Fungsi dan Struktur
Organisasi dan Manajemen Kementerian Negara Republik Indonesia [Presidential
Regulation No 9 of 2005 on the Position, Duty, Function, Structure of Organization
and Management of State Ministries of Republic of Indonesia] (Indonesia)
Undang-Undang No 15 Tahun 2001 tentang Merek [Law No 15 of 2001 on
Trademark] (Indonesia)
Undang-Undang No 19 Tahun 2002 tentang Hak Cipta [Law No 19 of 2002 on
Copyright] (Indonesia)
Treaties
Agreement Establishing the Association of South-East Asian Nations, 5 ILM 985
(signed and entered into force 8 August 1967) ('Bangkok Declaration')
The Agreement on Trade-Related Aspects of Intellectual Property Rights forms
Annex 1C to the Agreement Establishing the World Trade Organisation, opened for
signature 15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995) ('TRIPS
Agreement' or 'TRIPS')
Berne Convention for the Protection of Literary and Artistic Works, opened for
signature 24 July 1971, 828 UNTS 221 (entered into force 31 January 1972)
485
Convention on Biological Diversity, opened for signature 5 June 1992, 1760 UNTS
79 (entered into force 29 December 1993)
Declaration on the TRIPS Agreement and Public Health, WTO Doc
WT/MIN(01)/DEC/2 (20 November 2001, adopted 14 November 2001) (Ministerial
Declaration)
Discussion of 8-31 July 1986, GATT Doc PREP.COM (86) SR/9 (26 August 1986)
(Record of Discussion)
General Agreement on Tariffs and Trade opened for signature 30 October 1947, 55
UNTS 187 (entered into force 1 January 1958) ('GATT').
International Convention for the Protection of New Varieties of Plants, opened for
signature 2 December 1961 , 815 UNTS 109 (1961); revised by 815 UNTS 89 (1991)
(entered into force 24 April 1968) ('UPOV Convention')
International Convention for the Protection of Performers, Producers of
Phonograms, and Broadcasting Organizations, opened for signature 26 October
1961, 496 UNTS 43 (entered into force 18 May 1964)
Locarno Agreement Establishing an International Classification for Industrial
Design, opened for signature 8 October 1968 , 828 UNTS 435 (entered into force 27
April 1971 )
Madrid Agreement for the Repression of False or Deceptive Indications of Source on
Goods of April 14, 1891, revised at Washington on June 2, 1911, at The Hague on
November 6, 1925, at London on June 2, 1934, and at Lisbon on October 31, 1958,
opened for signature 31 October 1958 , 828 UNTS 11848 (entered into force 1 June
1963) ('Madrid Agreement')
Paris Convention for the Protection of Industrial Property (1967), opened for
signature 13 January 1968, 828 UNTS 305 (entered into force 26 April 1970)
Treaty on Intellectual Property in Respect of Integrated Circuits, opened for
signature between 26 August 1989 and 25 May 1990, 28 ILM 1477 (not yet in force)
Others
'Awas, Jamu Beracun Beredar di Pasaran [Be Careful, Poisonous Jamu are in the
Market]',
Jurnal
Berita
(Tuban),
2
June
2011
<http://jurnalberita.com/2011/06/awas-jamu-beracun-beredar-di-pasaran/>
'Batik Akhirnya Resmi Masuk Daftar Warisan UNESCO [Eventually Batik is
Included Officially in the List of UNESCO's world heritage]', Kompas (Jakarta), 1
October
2009
<http://nasional.kompas.com/read/2009/10/01/1949569/batik.akhirnya.resmi.masuk.
daftar.warisan.unesco>
486
'Batik China Cemaskan Perajin Batik Printing Pekalongan [Craftmans of Batik
Printing from Pekalongan are Concerned about China Batik Printing]', Antaranews
(Pekalongan),
30
September
2008
<http://www.antaranews.com/view/?i=1222770104&c=EKB&s=>
'Batik Printing Paling Terancam AC-FTA [Batik Printing is the Most Threatened
Product
by
AC-FTA]',
Solopos
(Solo),
10
January
2010
<http://www.solopos.com/2010/ekonomi-bisnis/batik-printing-paling-terancam-acfta-11499>
'Bila Jamu Terlalu Mujarab (If Jamu is too Effective)' (5 February 2001) Tempo
Online
<http://majalah.tempointeraktif.com/id/arsip/2001/02/05/KSH/mbm.20010205.KSH7
7491.id.html>
Company
Profile
(2009)
PT.
Jamu
<http://www.jago.co.id/index.php?option=com_content&view=frontpage>
Jago
'Desain UKM Hanya 2,4% (SMEs Designs are Only 2.4 %)', Bisnis Indonesia
January
2010
(Jakarta),
14
<http://www.dgip.go.id/ebscript/publicportal.cgi?.ucid=2663&ctid=23&id=2900&ty
pe=2>
Dinas Perindustrian, Perdagangan, Koperasi dan UMKM Kota Pekalongan
[Industry, Trade, Cooperatives, Micro and SMEs Agency of Pekalongan City] (2009)
<http://perindagkop.pekalongankota.go.id/index.php?limitstart=36>
'Dua Orang Ditetapkan Tersangka: Kasus Pemalsuan Merek Jamu (Two People was
Charged: Jamu Counterfeiting Cases)', Suara Merdeka (Banyumas), 20 November
2006 2006 <http://www.suaramerdeka.com/harian/0611/20/ban02.htm>
ECAP II (2007) European Patent Office
us/office/international-relations/projects/ecap.html>
The
ECAP
II
Programme
project.org/archive/ecapii_prog.html>
<http://www.epo.org/about-
(2000)
<http://www.ecap-
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Encouraged by the Demand of Neighbouring Countries]', Koran Jakarta (Jakarta),
19 October 2009 <http://dhi.koran-jakarta.com/berita-detail.php?id=29182>
Gabungan Pengusaha Jamu (2007) <http://www.gp-jamu.com>
'Get Rid of Malaysia's Claim! Happy Batik Day, Indonesia ', Kompas (Jakarta), 2
October
2009
2009
<http://english.kompas.com/read/2009/10/02/08344141/Get.Rid.of.Malaysias.Claim.
Happy.Batik.Day..Indonesia.>
487
'Get Rid of Malaysia's Claim! Happy Batik Day, Indonesia', Kompas (Jakarta), 2
October
2009
<http://english.kompas.com/read/2009/10/02/08344141/Get.Rid.of.Malaysias.Claim.
Happy.Batik.Day..Indonesia.>
'Indonesia Admits Failure in Implementing WTO Commitments
',
The
Jakarta
Post
(online),
22
December
<http://www.thejakartapost.com/news/1999/12/22/indonesia-admits-failureimplementing-wto-commitments.html>
1999
'Indonesia Must Connect to Compete', The Jakarta Globe (Jakarta), 28 June 2010
Internet World Stats, Usage and Population Statistics: Indonesia (2010)
<http://www.internetworldstats.com/asia/id.htm>
Issues related to the Extension of the Protection of Geographical Indications
Provided for in Article 23 of the TRIPS Agreement to Products Other Than Wines
and Spirits and Those Related to the Relationship Between the TRIPS Agreement and
the Convention on Biological Diversity, WTO Doc WT/GC/W/633 (21 April 2011)
(Report by the Director General)
'Jamu Indonesia masih Sulit Tembus India (Jamu of Indonesia are Still Difficult to
Enter Indian Market)
' (2010) (24 November 2010) Media Indonesia <http://bataviase.co.id/node/469325>
'Lagi, Pemalsu Merek "Eager" Dibekuk (Again, "Eager' Trademark Counterfeiting
Perpetrators
Arrested)'
(2011)
(7
April)
<http://portalkriminal.com/index.php?option=com_content&view=article&id=12100
:1858-lagi-pemalsu-merek-qeagerq-dibekuk&catid=38:kriminal-daerah&Itemid=41>
Mengenai Kami [About Us] (2007) <http://www.jamuiboe.com/kami.php>
'Menjadikan Calo Musuh Bersama (Making Calo as Public Enemy)', Haluan
(Padang),
8
January
2011
2011
<http://harianhaluan.com/index.php?option=com_content&view=article&id=402:me
njadikan-calo-musuh-bersama&catid=13:haluan-kita&Itemid=81>
'Menteri Perindustrian Puji Amirul Raih Upakarti [Ministry of Industry Praised
Amirul Who Received Upakarti]
',
Kendari
Ekspres
(Kendari-Indonesia),
8
January
2009
<http://kendariekspres.com/content/view/907/43/>
'Pemkot Solo akan Patenkan 140 Motif Batik [City Government of Solo will Register
140
Motifs
of
Batik]',
Kompas
(Jakarta),
19
June
2008
<http://nasional.kompas.com/read/2008/06/19/22081811/Pemkot.Solo.akan.Patenkan
.140.Motif.Batik>
488
Pencarian Peraturan Perundang-undangan [Searching of Regulations and
Legislations]
(2010)
<http://www.pom.go.id/search/query2.asp?cmdScroll=Page2&qs_materi=t_hukumP
erundangan&qs_search=%20obat%20tradisional&qs_TX=1>
Peringatan
Publik
[Public
Warning]
(13
<http://www.pom.go.id/public/peringatan_publik/default.asp>
August
2010)
'Polisi Limpahkan Tersangka Pemalsuan Merek (Police Handed Over the Suspect of
Trademark Infringement)', Riau Mandiri (Pekanbaru), 11 June 2011 2011
<http://www.riaumandiri.net/rm/index.php?option=com_content&view=article&id=
18086:polisi-limpahkan-tersangka-dugaan-pemalsuan-merek&catid=36:hukum-akriminal&Itemid=54>
Profile
Nyonya
Meneer
(2008)
PT.
Nyonya
<http://www.nyonyameneer.com/english/profile-history.php>
Meneer
'Ribuan Bungkus Jamu Beracun Disita [Thousand Packagings of Poisonous Jamu are
Confiscated]'
(16
July
2008)
Metro
TV
News
<http://www.metrotvnews.com/read/newsvideo/2008/07/16/62728/-RibuanBungkus-Jamu-Beracun-Disita-/82>
'Ribuan Perajin Jamu Unjuk Rasa (Thousands of Jamu Entrepreneurs Protest)', Suara
Merdeka
(Cilacap),
18
December
2006
<http://www.suaramerdeka.com/harian/0612/18/nas06.htm>
'Selama 12 Tahun, Baru 5 Produk Jamu Lulus Uji Fitofarmaka [For 12 Years, Only 5
Jamu
Products
Passed
Phytopharmaca
Test]'
(2008)
<http://www.pdpersi.co.id/?show=detailnews&kode=4729&tbl=cakrawala>
Selected
EU
Terms
(2007)
Oxford
<http://www.oup.com/uk/orc/bin/qanda/books/05eu/terms/>
University
Press,
'Transparansi dalam Kasus Bank Century (Transparency in Bank Century Case)'
(2009)
(1
September)
Media
Indonesia,
<http://www.mediaindonesia.com/read/2009/09/09/93403/70/13/Transparansidalam-Kasus-Bank-Century>
'UMKM Berebut Daftarkan Merek (Micro and SMEs Race to Register Trademark) ',
Banjarmasin Post (Banjarmasin), 6 November 2006 <http://www.lipi.go.id/>
A welcome by Stephane Passeri, ECAP III Director, PMU Manager (2010)
<http://www.ecap-project.org/ecap3.html>
Akbar, Afrizal, 'Jumlah Pengusaha Indonesia Masih Rendah (The Number of
Indonesian Enterpreneurs is Still Low)', Kompas (Surabaya), 13 February 2010 2010
<http://bisniskeuangan.kompas.com/read/2010/02/13/12450552/Jumlah.Pengusaha.I
ndonesia.Masih.Rendah>
489
Amar, Siti Chaerani Djen, Gunem Catur in the Sunda Region of West Java:
Indigenous Communication on the MAC Plant Knowledge and Practice within the
ARISAN in Lembang, Indonesia (PhD Thesis, Leiden University, 2010)
<https://openaccess.leidenuniv.nl/bitstream/1887/16092/1/IBU+POPPY'S+DISSERT
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Amri, Asnil Bambani, 'Banyak Calo di Pengurusan Hak Kekayaan Intelektual (Many
Scalpers in IP Registration Process)', Kontan (Jakarta), 24 October 2008, 36
<http://kontan.realviewusa.com/default.aspx?iid=22518&startpage=page0000036>
Asosiasi Konsultan Hak Kekayaan Intelektual (Association of IPR Consultant),
Program Kerja (2010) <http://akhki.or.id/tentang-kami/program-kerja/>
Australian Agency for International Development (AusAID), About AusAID in
Indonesia
(2010)
Commonwealth
of
Australia
<http://www.indo.ausaid.gov.au/aboutausaid.html>
Australian Agency for International Development (AUSAid), Indonesia Australia
Specialised Training Project Phase II (IASTP Phase II) Completed
(<http://www.indo.ausaid.gov.au/completedprojects/iastp.html>
Badan Kebijakan Fiskal - Kementerian Keuangan (Fiscal Policy Institution- Ministry
of Finance), Anggaran Pendapatan dan Belanja Negara (State Revenue and
Expenditure
Budget)
(2002)
<http://www.fiskal.depkeu.go.id/webbkf/apbn/default.asp?x=IAccLap0>
Barizah, Nurul, Intellectual Property Implications on Biological Resources;
Indonesia's Adoption of International Intellectual Property Regimes (PhD Thesis,
University of Technology Sydney, 2009)
Biro Umum dan Humas Kementerian Perdagangan [General and Public Relations
Bureau - Ministry of Trade], Depdag Kerjasama dengan Peritel Modern dan
Perbankan untuk Memberdayakan UKM [Ministry of Trade Cooperates with Modern
Retailers
and
Banks
to
Empower
SMEs]
(2005)
<http://www.depdag.go.id/files/publikasi/siaran_pers/2005/20051121.htm>
Busse, William, The History of Coca-Cola Trademark (2 January 2011)
<http://www.brighthub.com/office/entrepreneurs/articles/64586.aspx>
Campbell, Caroline, Health, Healing and the Quest for Wellbeing in Ponorogo
Regency, East Java (PhD Thesis, University of Newcastle, 2009)
Central
Intelligence
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(CIA),
Economy:
Indonesia
(2010)
<https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>
Central
Intelligence
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(CIA),
Indonesia:
People
(2009)
<https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>
China IPR SME Helpdesk, Copyright in China: Application Process (2008)
<http://www.china-iprhelpdesk.eu/faqs.php>
490
Choi, Jin Wook, 'What Holds Indonesia Back? Structural Roots of Corruption and
Reform' (Paper presented at the Korean Association for Public Administration
International Conference, Incheon, South Korea, 22-24 October 2009)
Christanto, Dicky, 'Bibit and Chandra’s Fate at Mercy of Prosecutors
' The Jakarta Post <http://www.thejakartapost.com/news/2010/06/04/bibit-andchandra’s-fate-mercy-prosecutors.html>
Coleman, R. and D. Fishlock, 'Background and Overview of the Intellectual Property
Initiative' (2000) <www.info.sm.umist.ac.uk/esrcip/background.htm
>
Dewi, Mariani and Aditya Suharmoko, 'Indonesia to host symposium on 'Curcuma'',
The
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Post
(Jakarta),
26
May
2008
<http://www.thejakartapost.com/news/2008/05/26/indonesia-host-symposium039curcuma039.html>
Dinas Perindustrian Perdagangan Koperasi dan Pertanian Kota Yogyakarta, Dinas
Perindustrian, Perdagangan, Koperasi dan Pertanian Kota Yogyakarta [Agency of
Industry, Trade, Cooperative and Agriculture of Yogyakarta City] (2010)
<http://umkm.jogjakota.go.id/direktori/index.php/cabang-industri-kerajinan-danumum-di-yogyakarta/table/45/html.html?resetfilters=0&&limitstart45=0>
Dinas Perindustrian Perdagangan Koperasi dan Pertanian Provinsi Daerah Istimewa
Yogyakarta, IKM Sandang dan Kulit [Small and Medium Industry in Textile and
Leather] (2010)
<http://202.169.224.84/jogjabisnis/index.php/ikm-sandang-dankulit>
Dinas Perindustrian Perdagangan Koperasi dan UMKM Kota Pekalongan, Data IKM
Produk Unggulan Kota Pekalongan [Data of Primary Products of Small and
Medium
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July
2010)
<http://perindagkop.pekalongankota.go.id/index.php?option=com_content&view=art
icle&id=176&Itemid=122>
Dinas Perindustrian Perdagangan Koperasi dan UMKM Kota Pekalongan, Sentra
Batik
[Batik
Clusters]
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<http://perindagkop.pekalongankota.go.id/index.php?view=category&id=58%3Asent
ra-industri&option=com_content&Itemid=107>
Dinas Perindustrian, Perdagangan, Koperasi dan UMKM Kota Pekalongan (Industry,
Trade, Cooperatives and Micro, Small and Medium Enterprise Agency of the City of
Pekalongan) Motif Batik Pekalongan - Sertifikat Hak Cipta [Batik Pekalongan
Motifs - Copyright Certificates] (2011) Dinas Perindustrian, Perdagangan, Koperasi
dan
UMKM
Kota
Pekalongan
<http://perindagkop.pekalongankota.go.id/index.php?option=com_phocagallery&vie
w=category&id=24&Itemid=83>
Direktoral Jenderal Hak Kekayaan Intelektual - Kementerian Hukum dan Hak Asasi
Manusia Republik Indonesia (Directorate General of Intellectual Property Rights 491
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