Trademark similarity and bad faith in Indonesia

 

A dispute between local companies highlights a common ex-employee scenario. PT Krakatau Steel Tbk (Krakatau) is a huge publicly listed Indonesian steelmaker. One of its brands is KS POLE. A former officer established a company called PT Perwira Adhitama Sejati (Perwira) and registered the trademark IKS.

The Central Jakarta Commercial Court had to decide whether to cancel Perwira's IKS mark in early May. Kratatau's first argument that the marks are similar was dismissed. IKS was found to be different. Krakatau also claimed bad faith because a former Krakatau officer established Perwira and so Krakatau asserted they registered the brand just to piggyback on the fame of the brand owned Krakatau. There were some suspicious rebuttals by the defendant such as that it was an acronym, but this was not stated on the trademark application form as required. So whilst it smelt odd, no bad faith was established.

The newspaper reports are not exactly clear but the lessons are well known now with such cases. Absolute clarity and evidence on the bad faith conduct is required, not a general assertion.  And a caution on similarity for marks which are not internationally famous; similarity is not easy to prove where marks are already registered by the TMO.

Anatomy of an anti counterfeiting raid in Myanmar

It is such early days that IP enforcement is rare in this newly opening market. This case started with a 6 a.m. flight to to the historic city of Mandalay in the middle of Myanmar. We met with our enforcement lawyer, a Burmese lady who took us to meet the enforcement police.  We then conducted 2 raids against wholesalers of counterfeit shoes. During the raids, the counterfeiters showed us a copy of their own recorded identical trademark covering shoes, which clearly conflicted with the client's internationally known brand which had also been recorded and published in Myanmar. The infringer's mark had never been published as a cautionary notice so was unknown to anyone. 

At the Police station, the counterfeiters continued to argue that they had as much rights in the mark as our client. They sought support from a friendly ex-military officer. Ultimately after a long negotiation, they agreed to (i) deliver all their stock of fake shoes up, in addition to what had been seized [approx. 1300 copies] (ii) sign an undertaking to refrain from selling copies in the future (iii) disclose the identity of the manufacturer in China from whom they imported the products. 

 

Until the trademark law is enacted and a trademark registry with a full examination system is established later this year, enforcement will remain uncertain and complex. But there is great hope that Myanmar will be an effective place to enforce once the IP system is fully functional.

The counterfeit medicines landscape in Indonesia

The Jakarta Post reported recently that Indonesia remains a counterfeit medicines hotspot. Distribution is though both the Internet and also in pharmacies. “It is believed that these counterfeit drugs enter the pharmacies through freelance drugs salespeople.” said Indonesian Pharmacists Association (IAI) secretary-general Nurul Falah.

Research sponsored by Pfizer in the capital and surrounding cities as well as East Java and North Sumatra showed the wide availability of counterfeits. It focused on Pfizer's drug sildenafil (an erectile dysfunction drug usually sold as Viagra,) They analysed sales at drugstores, pharmacies, sidewalk stalls and via the Internet. Of 518 tablets found in 157 outlets some 45 % turned out to be counterfeit. They also identified  Jakarta's Pramuka Market a well known source of fake drugs. 

This is consistent with IP Komodo's understanding. Counterfeit pharmaceuticals are either made locally or sometimes imported; distribution is via wholesale markets like Pasar Pramuka, then through roving salesmen, on motorbikes, who sell their wares to pharmacies and medicine shops throughout cities. Despite being a regulated industry pharmacies themselves do not always observe rules, such as having a pharmacist present. They find no problem sourcing from roving salesmen.  The Department of Health officers that regulate pharmacies have made some efforts to investigate them, but few sanctions are ever given.

But the real problem is the scale of supply end in the wholesale markets where criminal elements rule the fake drugs industry. For this only police investigations will have any effect and unfortunately police IPR raids have all but ceased in Indonesia.

 

Vietnam seeks to improve Customs enforcement

Vietnam Customs' Anti-smuggling and Investigation Department issued an open letter last week to rights holders informing of their plans to improve Customs monitoring in Vietnam. Customs say that they are carrying out an intensive control plan to strengthen anti-smuggling, anti-counterfeiting and anti-infringing goods actions in relation to imported products. They will focus on fashion items, health related products (e.g. cosmetics, pharmaceuticals), toys and games etc, until the end of 2013.  Accordingly, Customs will step up container inspections.

They invite all rights holders to provide recordal information including on previous suspected targets. Its not clear if this is a response to the USTR report, or whether this had been planned previously.

Whatever, IP Komodo notes that Customs in Vietnam are quietly moving up the league table to the top tier of active countries in South East Asia. IP holders should be moving quickly to record their rights.

 

USTR Special 301 report 2013 - Vietnam and Philippines

Continuing from the earlier post, there are positive reviews for the Philippines and Vietnam this year.

 

The Philippines is on the Watch List. It has finally passed new copyright laws and customs procedures. It's challenges remain over Internet piracy, anti-evergreening rules in the patent law, poor protection of undisclosed confidential information and strengthening enforcement (such as criminal enforcement and predictability for search and seizure orders). There are many positives in the report, such as Madrid accession, illegal camcording reduction, improved court procedural rules and the efforts of IP officials in the government are praised. There is even a suggestion of a further review if the situation improves.

Vietnam gets a mixed report and remains on the Watch List. Despite a flurry of new rules, many areas remain weak. Internet piracy is growing now and needs to be addressed, physical counterfeit goods remain widely available, book piracy, software piracy (including on government computer systems), and cable and satellite signal theft continue to be widespread. Overall IP enforcement progress is low, with few criminal cases. Capacity restraints of enforcement agencies are weak.

IP Komodo comments that the Philippines is making some genuine reforms, driven by their proactive IP office, but they struggle to influence more distant ministries. Vietnam's problems are more emerging, as IPR commerce develops new challenges while the old ones are growing as the economy develops. Things may worsen before they improve.

 

2013 USTR Special 301 report - Indonesia and Thailand

This years report is out and for South East Asia the news is generally one of improvement.
 
Indonesia remains on the Priority Watch List (PWL). While there have been some educational and awareness steps, the copyright law (under amendment) remains deficient, but the real problems are around enforcement. Criminal remedies are weak, with inefficiencies in judicial and prosecutorial systems including a lack of transparency and deterrent sentences. There are specific industry concerns over internet infringement, media box piracy (preloaded disks & drives of content), product counterfeiting (especially pharmaceuticals), copyright piracy, cable theft, trade secret protection for agrochemical and pharma products and compulsory licensing of pharma products. Interestingly it refers to collaboration on an Action Plan to improve IPR protection and enforcement against the high levels of IPR infringement in Indonesia.
 
Thailand remains on the PWL too. But only by a whisker as a possible downgrade is mentioned. There is praise for the Anti-Money Laundering Act, which includes IPR offenses as a predicate crime, and the launch of the National IPR Center for Enforcement. The police and customs are well regarded by IP holders. One key barrier seems to be legislative delay in tacking landlord liability, unauthorized film camcording, Ex officio Customs authority, implementing the WIPO Internet Treaties and establishing improved legal mechanisms to address internet infringement. The report cites that IP violation remains widespread despite the improvements, especially for cable and satellite signal theft. The report also mentions the IP issues around access to medicine.  Overall the balance seems right, with Indonesia facing more fundamental problems, while the more sophisticated Thai system faces some more complex challenges. Improving an IP regime is not a defined step, but more of a process over time.    IP Komodo will continue with other SE Asia markets in the next post. 

Music industry losses due to piracy in Indonesia

Local companies lose as much through IP violation as MNCs, but its not often well appreciated. Partly their complaints don't register much outside their local markets.

The Indonesian music recording industry said last week that it suffers losses of Rp 16 billion (US$1.7 million) a day due to illegal downloads. The Indonesian Record Industry Association (ASIRI) said that they believe at least 6 million Indonesians illegally file share music on the web. That figure sounds like an estimate based on the price of the genuine product, and we all know that such numbers are suspect.

But they also added that genuine sales of CDs have plummeted from 90 million per year some years back to only 11 million a year now. What that means is that nearly 80 million purchases a year are no longer being made. Online music distribution is still very limited, so the assumption that vast numbers of illegal downloads are being made and that tens of millions are by people who used to buy and could afford CDs does seem accurate.

The lack of legitimate digital distribution in emerging markets is often far more debilitating than in the US and Europe. Local artists will be suffering the most.

EU analysis of IP regimes in South East Asia

The US has long been vocal about protection of IPRs around the world, with one element being the USTR's Special 301 review, an analysis countries' IP regimes. The EU tended to have a different approach, less around public measurement of others' IP systems. That seems to be changing with the EU Strategy for the Enforcement of IPRs in Third Countries and a recent EU survey on IP around the world. This survey led to an assessment of the situation of IP protection and/or enforcement and where it is the most detrimental to EU IP owners. The results were as follows.

Priority 1 - China
Priority 2 - India, Indonesia, the Philippines, Turkey
Priority 3 - Argentina, Brazil, Canada, Israel, Korea, Malaysia, Mexico, Russia, Thailand, Ukraine, USA, Vietnam.

The bold ones are all in SE Asia. The issues in these places in summary were:

Indonesia - the government makes the right noises; there have been small improvements in IP registration speed.  Poor criminal enforcement and low deterrence, weak training, failure to prosecute cases, low transparency, no public data on IP enforcement, no usable Customs IP system and severe digital piracy are problems. The EU has an EU Indonesia Business Dialogue, several trade projects involving IPR components, such as ECAP III and plans to open an ASEAN IPR SME Helpdesk.

Philippines - solid IP laws, lots of recent training and awareness activities and new IP litigation rules are recent improvements, backed by apparent political will.  Slow IP registration, lack of interagency cooperation prevents IPR enforcement improvements, little public data, difficult and slow enforcement procedures, very slow litigation, lack of court expertise in IP, few criminal arrests and prosecutions are concerns.  The ECAP III project is under way.

Malaysia - recent developments are the specialized IP Court, the amendment of the Trade Descriptions Act, and now the Copyright Act. Difficulties centre around political will, lack of clarity on Customs IP powers, an unimplemented patent term restoration, weak data protection and low deterrent penalties. An EU FTA is under negotiation.

Thailand - The DIP is recognized as cooperative and nationally Thailand has made IP a priority through its National Task Force. PCT membership and Customs improvements are recognized. Enforcement remains a key concerns, copyright law has insufficient rules for the digital world, patent pendency is poor, and compulsory licensing of medicines is mentioned. The EU dialogue with Thailand, technical assistance programs such as ECAP III are under way.

Vietnam - post WTO legislative amendments are good and IPR is increasingly recognized. But implementation of the new laws requires monitoring to ensure effectiveness. Awareness training is also needed. Complexity of rules and weak authority cooperation are problems, along with poor understanding of IPR issues by officials and weak resources. An FTA is being negotiated with an IPR chapter.

IP Komodo observes that they captured the IPR problems well, reflecting the different development stages and relative sophistications of the different IP/legal systems.

ASEAN's designs on Hague

The ASEAN secretariat office based in Jakarta has a number of IP initiatives ongoing as part of its journey towards the ASEAN Economic Community (AEC - see here) in 2015. It was initially suggested that the 10 ASEAN states should work on building a central designs filing office. However ASEAN changed policy and now proposes to have its members joins the Hague Convention. 

 
The Hague System for the International Registration of Industrial Designs involves a single central application via WIPO which can designate signatory member states of the Hague Agreement. The international registration has the same effect in each country as a national application unless protection is refused by the national office of that country when it examines the design. The main users are European companies, since US, China and Japan are not members.

 
ASEAN hopes to have 7 members join by 2015 although it does not specify which. Singapore is already a member. IP Komodo speculates that some of the least developed countries may not join, or perhaps Indonesia as the least developed of the larger markets.

Indonesia's IP law drafting process

Indonesia's various IP laws have been undergoing amendment for some time. After a first round of drafting, the drafts bills were at one point scheduled for passing by Parliament by including them in the 2012 National Legislative Schedule (called Prolnegas).

Then they were called back and in December further amendments have been made. Informal consultations continue. In theory soon they will be sent back to be scheduled in Prolnegas for enactment. However the 2013 legislation schedule is already running and the Penal Code is taking priority. The IPO has expressed some pessimism at their inclusion this year.

But time ticks away now to the 2014 presidential elections, so there is an increasing risk that it will be too late to schedule the amendments before the election. So in practice it means they probably won't be passed until 2015. That is the date when the ASEAN economic community starts; as well as the deadline for Madrid accession. The IP office is therefore also worried they will not be ready to put Madrid in place.

Civil IP damages in VIetnam

Last September, Tri Viet-First News, a publishing company, filed a lawsuit against the American International School of Foreign Language Training for the illegal copying of its training books. The matter has now been settled according to media reports, with the Defendant agreeing to pay compensation of VND700 million (approx. US$33,600).

In April 2012 Tri Viet-First News sued two companies (HCM City’s Australia International Language School and Viet Nam Australia Society English Centre) in the Ho Chi Minh City Peoples' Court for illegally copying thousands of its TOEFEL and TOEIC materials. It sought damages of VND380 million (approx. US$18,100) and stated that it would not settle, but intended to pursue the case to the end. In June 2012, however, it accepted compensation of VND380 million.

These are important precedents in Vietnam which has a very young civil IP docket. Firstly that damages were awarded in cases last year, which were for sensible not nominal amounts; then also that a defendant would settle on such a basis later on. This gives a clear indication of the deterrent value of damages awards. As is often the case, local companies have to fight and win cases to set the precedents.

R&D and patents in Indonesia

Indonesia's dependence on natural resources and cheap labour is creating a huge boom. But it faces stagnation one day (the so called 'middle income gap') unless it can create future competitiveness through developing higher value skills. The Foreign Investment Board (BKPM) has called for tax incentives for companies to invest in R&D and training. Its head M Chatib Basri is tipped to become the next Finance Minister, so there is a chance this will happen.

 

Meanwhile a delegation of Indonesian officials led by Law and Human Rights Minister Amir Syamsuddin visited Beijing this week, to talk about IPR protection with Chinese Deputy Law Minister Sujun Zhang, the State Intellectual Property Office (SIPO) and the All China Patent Attorneys Association (ACPAA). IP Komodo hopes they learned about China's National IP Strategy and how China incentivizes its businesses to create IPRs.

 

IP Komodo has long lamented the lack of focus on the knowledge economy, and so it is good to see government figures recognising it. This table of US patent filing data shows how far behind Indonesia is.

 

Thailand and the Philippines are accelerating the number of US patents filed by their residents in the last decade. But Indonesia's rise has been far smaller. In essence a lack of focus on R&D is leaving Indonesia behind, at levels near Vietnam.  

 

Singapore - the Asian IP hub?

With the Ministry of Law's IP Hub Master Plan report, Singapore is seeking to become the Asian centre for IP transactions, filings and dispute resolution.

The plan sets out various steps to encourage this such as boosting the patent profession (already well under way), developing IP strategy and financing expertise and tools, further improvements and specializations at IPOS and its excellent IP Academy, as well as specialized litigation dockets and IP arbitration at SIAC and new listing rules covering IP and tax benefits for IP activities performed in Singapore.

IP Komodo has long noted the increase in in-house IP counsel positions, based in Singapore. Hong Kong's role as a single central location is being bypassed by companies who feel that several IP specialists in Asia are needed, usually one in China and another elsewhere, which increasingly is Singapore.  IP Komodo expects Singapore will ultimately outpace other markets to become the centre of IP in Asia.

Myanmar IP events and new laws

The ASEAN IP Association held its first IP conference in Myanmar this weekend. Dr Thwe from the Ministry of Science and Technology (MOST) explained the latest on the creation of Myanmar's new IP laws.

The new laws covering trademarks (including GIs), patents, designs and copyright, are nearing completion. Since 2004 they have been through 7 drafts, with WIPO consultations under way now. For the Trademark Law this will culminate in another WIPO consultation in May and the expectation is that this law will pass by October.

The establishment of Myanmar IP office, probably with multiple sites in capital Napidaw, as well as the largest city Yangon (where newly invested businesses tend to headquarter) and perhaps the other major city of Mandalay is under way. Trademarks, GIs, designs, patents, utility models, even copyrights will be registrable.

The patent law contains exceptions for patents covering pharma and agrochemical products which will be delayed until Myanmar's LDC extension expires. Patent examination initially will be outsourced.

Copyright in more contentious. The MOST draft needs more work after WIPO input, so a new release is expected after May. A competing draft from the Ministry of Information was released, confusing matters. Further the Ministry of Information even set up a copyright registration office, the future of which is now unclear. A copyright association driven by local music and film industries is already active.

IP Komodo (long a Myanmar fan), is impressed by the government's eagerness and the conference was enjoyed by all.

 

Franchising headaches in Indonesia

Franchising is popular in Indonesia. Historically many sectors had market entry restrictions, so many companies preferred not to invest in the pre 1998 Soeharto era, as Indonesia was a rather unknown market. All that changed in recent years, even though investment in Indonesia is still a difficult process compared to more modern economies.

The franchise regulations are an example of how messy investment in Indonesia can be. The 1997 Franchise Regulation is the start of the problem.

Government Regulations 1997

The main thrust of the 1997 Government Regulations (No. 16 of 1997) is that franchise agreements and pre-contract prospectus disclosure needs to be registered by the franchisee with the Ministry of Industry and Trade.  Other noteworthy features are that Article 4 mandates the parties to make it a priority to use Indonesian produced material for the franchise operation.  (Later this requirement morphs into a new creature through a series of Ministerial Regulations.)

Government Regulations 2007

In 2007, the 1997 Government Regulations were replaced by Government Regulation No. 42 of 2007.  The 2007 Regulations put the onus on the franchisor to register the disclosure prospectus while it is for the franchisee to register the Franchise Agreement.  The transitional provisions in the 2007 regulations required pre-existing franchise agreements to be re-registered under the 2007 regulations and they have one year to do so from enactment of the 2007 Regulations.  Failure to comply with registration invites sanctions from the Ministry of Industry and Trade but the regulation is silent on legality of the agreements in the event of breach. On the requirement to use local products, the 2007 Government Regulations use the same broad language as the 1997 regulations: to "prioritize" use of local produce. Not surprisingly, there was no sanction to enforce compliance.

Ministerial Regulations 2008

In 2008, a set of Ministerial Regulations were passed by the Ministry of Trade pursuant to the 2007 Government Regulations.  The Ministerial Regulations were meant to provide the mechanism to implement the Government Regulations.  A problematic feature in the 2008 Ministerial Regulations is this. The franchisor is required to settle all disputes with an existing franchisee before a new franchise operation certificate can be issued to a new franchisee for the same geographical region.  If there is no resolution reached with the franchisee, the franchisor has to wait for six (6) months to pass before a new franchisee can be appointed for that same region. 

Ministerial Regulations 2012

In August 2012, the Minister of Trade signed off a new set of Ministerial Regulations (No. 43/M-DAG/PER/8/2012) to replace the 2008 regulations.  The 2012 Ministerial Regulations still draws its legitimacy from the 2007 Government Regulations although it also mentions a host of regulations on the preamble page apparently related.  The impetus for this set of Ministerial Regulations is apparently to support the local economy by putting in a clear minimum on goods that the franchisee must source locally. This is a move away from the earlier broad language the franchises need only to "prioritize" use of local products.  Article 19 of the Regulations requires 80% of the materials or services to be sourced locally. There is no mention of the measure – e.g. weight or dollar value.  Sanctions against non-compliance are by way of reprimand/fine. Exemption from compliance can be sought for but the criteria for exemption is unknown. 

There are a whole series of important requirements such as

Article 20 requires the Franchiser to "cooperate" with small and medium enterprises "as franchisees and/or suppliers". 
The franchiser and franchisee will need to file reports annually including as to its sourcing.
There are restrictions on terminations.
It is unclear if arbitration is an option.
Display of a new 'Certified Franchise' logo from the Trade Services Offices. 

Decree 7/2013
Another rule hit the newspapers this week. This specifies that master franchisees are limited to 250 outlets. The government's new Decree 7/2013 includes an aim to diversify ownership by putting a cap on owned outlets. KFC's business of 440 outlets and growing will be challenged by this if they are required to divest a large number of them. The government is hoping that this will ensure more owners will have equity in these operations, that it will boost small business ownership. But the industry points out that forcing divestment is pointless since few SMEs will be able to acquire substantial equity ownership of many quite valuable franchise operations.

It is going to be quite difficult for franchisers to comply with much of the rules; indeed existing franchisers need to review their agreements quickly to make sure they can match the new rules with their existing agreements.

Indonesia's government points out that the massive economic growth (40 million people in the middle class and growing fast) driven by the consumer boom will create opportunities for everyone, so is seeking to restrict dominance and ensure local sourcing.

Thailand NGOs flex muscles over FTAs

There is a healthy level of NGO activism in Thailand advocating public interest over IPRs. A variety of groups have been active lobbying the Thai government over the EU-Thai FTA. Their concerns centre around matters such as preventing patents from obstructing access to medicines in Thailand, especially HIV anti-retrovirals.
 
Now this group have expanded their focus elsewhere. In an open letter to India's government, a coalition of 18 Thai health care related NGOs led by FTA Watch, have objected to India signing an FTA with the EU. Specifically they say that almost all HIV/AIDS patients in low and middle income countries use generic antiretroviral drugs from India and that the Thai government's health authorities need to maintain a continuous supply of Indian generic medicines. They argue that an Indian-EU FTA could threaten this because it contains TRIPS+ provisions such as patent term extensions, data exclusivity, strengthened enforcement and Border measures.

IP Komodo notes that the public interest movement is already strong in India and expects that India will not accede to provisions that harm its generics industry. But it is interesting how Asian IP lobbying is changing.

 

Customs in Vietnam and challenges on the northern border with China

It has long been known that Vietnam's porous northern border with China is the route in for many fake goods. China is the major counterfeit source supplying most ASEAN countries, albeit with some product exceptions (e.g. textiles). IP Komodo recommends the book Poorly Made In China for a superb insight into why Chinese manufacturers sell more cheaply than anyone else, so can out-price South East Asian manufacturers. The same applies to counterfeiting.

The net result of the overland trade with Vietnam is that vast numbers of wholesalers selling fake Chinese goods are located in Vietnam’s Northern provinces. Of 6,000 shops noted in one recent news report 800 are run by Chinese nationals. These shops are able to supply retailers across the country with many types of product (smartphones, electronic devices, textiles, garments, etc.), bearing any brand required, in any quantity, at low prices. Goods sourced in China are mainly smuggled through the border by Vietnamese border residents then delivered directly where and when the buyers want. Smugglers interviewed by Thanh Nien News say they pay bribes to avoid seizures by border authorities. For their part, authorities say that because of a shortage of personnel (there are around 5,000 border officers), they are overwhelmed by the situation.  

Vietnam's IP Border protection system is gradually improving. Customs published some IP seizure numbers several years back as follows:

2008

-        16,104 cans of Ensure liquid mik;
-        912 cans (1kg) of Ensure powder mik;
-        936 cans of Glucerna liquid mik.

2009

- 3,756 kg of cell phone components (charge, battery, spare parts) bearing NOKIA mark.
- 800 cell phones bearing NOKIA mark.
- 7,729 bottles of different kinds of cosmetics;
- 93,820 packs of different kinds of tobacco (Vinataba, 555, White Horse and others)
- 300 bottles of different kinds of alcohol;
- 3,940 bottles of different kinds of lubricants (Vistra, Castrol, Honda);
- 3,006 tablets of counterfeit drugs bearing the Viagra mark;
- 5,875 kg of different kinds of sodium glutamate;
- 690 kg of counterfeit labels, marks and boxes.

They expect to publish 2010 - 2012 data soon, and based on IP Komodo's on the ground information the recent seizures will show a marked increase in activity. Several hundred marks have been now recorded with Vietnam Customs. So the progress is encouraging. But as with many South East Asian countries, smuggling and border corruption are also major contributing factors in of the problem.  

ARV compulsory licensing in Indonesia - more details emerge

Further details of Indonesia's latest round of compulsory pharmaceutical patent licensing is slowly coming to light. See here for previous reports on this and here for an earlier summary. It is supposed to be one of the largest ever examples of compulsory licensing yet seen. It will enable the generic manufacture of HIV anti-retroviral drugs (ARVs) by a local pharma manufacturer called Kimia Pharma. The ARV drugs are still under patent.

The presidential decree that set this in motion stated that the government would compulsorily license various patents for seven HIV/AIDS and hepatitis B medicines. The justification is the “urgent need” to control these diseases.

The goal is to reduce drug costs so reduce HIV mortality. The Indonesian Association of Physicians in AIDS Care is supporting the move publicly. The drugs in question are what are called second-line ARVs, such as tenofovir, emtricitabine, and lopinavir/ritonavir. These are apparently made by Atripla, Gilead and Abbott.

Although TRIPS allows compulsory licensing for public health purposes the pharmaceutical industry objects to it often as a 'thin end of the wedge' situation. In Indonesia it is arguable that HIV/AIDS is not at epidemic proportions, but it is growing fast having increased 25% in a decade when other countries began to control it. It appears more precautionary if the government data is accurate. That may not be the case however.

IP Komodo comments that healthcare is an area where Indonesia's government is unusually more forthright and proactive than some of its ASEAN neighbors. 

Thailand battles a Chinese company in a trademark case

 

Whilst in Chengdu, China, a Thai government official happened to note that that the signs on Wowo Inc.'s convenience stores (left) was similar to the Thai national flag (below). A complaint followed to the State Administration for Industry and Commerce and this led to revocation of Wowo's trademark.
 
As a result Wowo in March filed civil litigation in the Beijing courts to overturn decision, arguing there was no resemblance to the Thai flag.
 
IP Komodo readers can make their own minds up. The real issue is how Thailand is focusing ever more on IP, even to the extent of bringing cases in China. That has to be good for SE Asia's IP development.

The ASEAN Economic Community and IP

ASEAN is working to establish by 2015 an economic community (the AEC) for its 10 nations, to promote the free movement of goods, services, investment, skilled labour, and capital. There are a number of possible IP impacts.

Until now ASEAN IP policy was guided by the ASEAN IPR Action Plan 2004-2010 and the Work Plan for ASEAN Cooperation. Big challenges arise from the different stages of economic development ranging from supermodern Singapore to newly opening Myanmar. In the middle there are even significant differences between say resources focused Indonesia and technology investment savvy Thailand.

To achieve the AEC, ASEAN is now (in addition to the above plans) working on:

a. establishing a centralised designs filing system for ASEAN
b. all 10 members to accede to Madrid (so far only 3 have)
c. building IPR enforcement cooperation systems
d. developing Traditional Knowledge (TK), Genetic Resources (GR) and Cultural Traditional Expressions (CTE).

However other perhaps unintended impacts are expected, such as:

a. e-commerce is to be promoted, but without mention of copyright in the rules, likely leading to difficulties with content providers.

b. customs tariffs are to be dropped to open regional free trade. But customs have corruption problems in some ASEAN countries and smuggling is rife. Meanwhile the IP world is trying to encourage the implementation of IP border protection systems. Some ASEAN countries see IP border protection as a potential barrier to free trade, others see it as a bright new area for customs to focus on.  

c. SMEs are to be encouraged. That will lead to greater pressure to improve IP systems, since these companies will want protection, which is often not well afforded in the region at present.
 

IP interest in Myanmar continues to grow

Businesses continue to be interested in this new market. Despite the grant of an extension for Least Developed Countries to comply with TRIPS, Myanmar may still press ahead with implementation of its IP laws. Draft Trademark, Copyright and Patent laws are already in circulation. In fact there appears to be 2 competing draft Copyright bills, with some confusion as to which department will take the lead. The ASEAN IP Association is holding its biannual conference in Yangon in early April. Below are the trademark filing data for Myanmar (technically these are deposits since no actual IP office exists yet).

Years Foreign Domestic
2010   2149   3821
2011   2378   3048
2012   4068   3294

While domestic filings remain low, there has been a significant jump in foreign filings in the last year. The first GI was even deposited recently (Champagne)!  And recently the Yangon courts granted a preliminary injunction in an infringement case. So IP is moving fast in this most exciting of new markets.

Philippines landlord liability

 A new Philippines law, RA 10372, amending certain copyright provisions of the IP Code, was signed into law last 28 February 2013. It introduced, among other things, a basis for liability of landlords (such as mall owners) for the infringing activities of their tenants. Until now, IP owners can only take action against the owners of shops that directly commit copyright infringement.

Under Section 20 of RA 10372, amending Section 216 of the IP Code, a person (such as a landlord/mall owner) is liable for infringement if he (1) benefits from the infringing activity; (2) has been given notice of the infringing activity; and (3) has the right and ability to control the activities of the person committing the infringement.

If a complainant is able to show that all the elements above are present, landlords and mall owners may now be liable for copyright infringement under the IP Code.  Often landlords will have such liability where an IP holder has notified them through a warning letter, or cc of such. There may be questions around the benefit he obtains, but if the infringement is substantial the rent might suffice to amount to that. Modern commercial leases usually do enable landlords to exercise a level of control.

With this amendment IP owners have an added avenue to protect their rights against infringers at least in high end retail areas. However this only protects copyright works as that was the scope of the amendments.

Chinese brands make for good trademark piracy

Cancellation litigation at the Jakarta Commercial Court is pretty routine work. A large number of Indonesian trademark pirates file variants of usually well known marks and then sit back and defend when sued. Mostly these are famous western brands. So it is all the more interesting when Asian companies are affected. Of course local trademark pirates do not discern nationality, so there is a regular procession of Singapore and other Asian companies in the Commercial Court. This case is illustrative of the power of Chinese brands.

Tencent Holdings is a PRC online services company which operates the QQ instant messenger service. The company filed a cancellation to recover the mark QQ Kui Kui in class 9 against a local businessman Susanto. Tencent's business is services, but they succeeded in arguing bad faith.

Perhaps the most significant point is that Indonesian trademark piracy affects everyone, wasting time and effort on litigation. Legal costs are not recoverable in Indonesia, but more companies affected should file damages claims too. 



 

Asia's next top model (IP system)

Around this time of year it's time to dress up nicely and make your IP system look good in anticipation of the US government's April Special 301 report. 
 
In the Philippines, the government announced a crackdown on fakes by the NBI. Millions of fakes were seized and 40 or so traders have been charged. That sounds good right?

Thailand however went one step further. It is traditional to collect and destroy all the fake good seized in recent months in April, hoping the USTR judges will be swayed by such impressive efforts.   The Thai trump card was however to arrange for famous model and former Miss Universe, Natalie Glebova to help destroy the fakes. The deputy commerce minister led the charge, alongside the beauty queen, in the beach region of Phuket and they smashed, ripped, slashed and hacked millions of dollars worth of fake goods. The sight of Natalie brought the media flocking.

But will it make the USTR take them of the Priory Watch List? Find out in April!
 

Opt out protections from spam in Indonesia

Data protection is an increasingly hot topic. Individual privacy is ever more important in the online age of open accessible lives and data. ASEAN is working on harmonization slowly - see here. And national governments are working on ways to protect people from misuse of personal data. One aspect is the ability for people to opt out of online sales and marketing communications.

Indonesia has a rather messy collection of rules on this, which potentially leave a lot of gaps.

The ITE law

Article 26 of Law number 11 of 2008 concerning electronic information and transaction includes a "right to enjoy personal life and be free from any invasion." Possibly continued sending of marketing emails despite the recipient's opt out would contravene this right. The consequence of contravention would trigger a right to claim damages under article 26(2) although it is not a criminal offence.

Ministerial Decree from the Ministry of Communication and Information

SMS marketing is covered in a Ministerial rule which forbids sending SMSs to recipients that have opted out.  Article 20 provides for " administrative and/or criminal penalties in accordance with the prevailing law".  However as yet the government has not explained what these are.  SMS broadcast marketing must include an ability for recipients to opt out.

Another provision covers SMS messages that are contrary to the public interest, morality, security or public order which the government might also use in some cases.

Constitution of the Republic of Indonesia

Even the Constitution could protect an Indonesian citizen from "unwelcome" emails particularly after he has intimated his opt out because he “has the right to feel secure against and receive protection from the threat of fear to do or not do something that is a human right."  The application of this article in this context remains unclear though.

The Civil Code

There is a general provision in article 1365 of the Civil Code which enables a victim to claim damages for any legal wrong. It could apply to this situation.

Ideally Indonesia will bring all its data privacy laws together, as it will eventually be mandated to do if new ASEAN rules proposed come into force (see here).

 

Pirated software causes viruses

 Microsoft revealed an interesting South East Asia computer security study in Manila this week. They studied 216 laptops bought in December 2012 in Indonesia, Malaysia, Philippines, Thailand and Vietnam. For those with pre-installed pirated Windows software on the laptops, (pirated software is routinely offered as a freebie to laptop buyers by computer vendors in South East Asia), 68 per cent was found to contain viruses and malicious software (malware).

Microsoft pointed out that buying a name brand computer loaded with viruses was not  value for money. 5,601 types of malware were found which 3,703 were considered hostile and 1,898 items removed security features like firewalls.  They found trojans, worms, viruses, crack programs, hacker tools, rogue programs and password stealers.
The Business Software Alliance, reports that Vietnam has an 88 per cent piracy rate, Indonesia is 86 per cent, Thailand 72 per cent and Philippine 70 per cent, according to the study.
IP Komodo prefers worms and viruses in his lunch, but appreciates this clever educational approach to piracy.

Philippines IP lawyers take a stand against Madrid

  The Intellectual Property Association of the Philippines (IPAP) has filed a petition with the Supreme Court to block the Philippines' Madrid accession. The Philippines joined Madrid last year. The petition argues that the accession is unconstitutional due a series of procedural technicalities primarily around whether the requisite number of senators voted for it and the executive order mechanism used to enact it. The IPAP petition also argues that Madrid creates conflicts with the IP Code which requires foreign trademark applications to have a resident agent or representative. A temporary restraining order is sought to stop the handling of Madrid applications.

The Philippines is very litigious country. This seems to be an attempt by a local group of IP lawyers to delay the Madrid system, although of course it has long since started. IP Komodo presumes that constitutionality is not the real issue as the case is brought by an IP Association. It seems unlikely to succeed in the long run as Madrid is an ASEAN obligation. Perhaps this group hopes to delay it a few months by requiring the government to cure the defects (if they are proven) in the hope that fewer IP holders will use Madrid in that time, and continue to file national applications.

Meanwhile the Philippines business community seems to have the opposite view. Accordingly to the IPO director so far 23 Filipino companies have made Madrid applications designating hundreds of countries for their brands.

Indonesian judges get pay hike to combat corruption

Indonesian judges have been given a huge salary hike in an attempt to curb corruption. Until now a judge's salary ranged from between Rp 1.8 million to Rp 4.5 million ($186 to $465), under a 2007 government regulation.Now salaries will be raised to a minimum of Rp 10.5 million a month ($1,100), with increases up to Rp 45 million ($4,650) depending on rank. This increase of many multiples makes them some of the highest paid in Asia, said Supreme Court officials in a training program for judges in Bandung last week

Indonesian judges have a bad reputation. Several including Commercial Court IP judges have been caught red handed taking bribes. Indonesia Corruption Watch, an NGO, expressed doubt about whether the raise would have the desired effect. Social media and other comments have also been skeptical. 

But there is no doubt that absurdly low salaries were part of the problem. Of course some bad behaviours will not change overnight. But lets hope that in 12 months time, the practice of asking lawyers in one by one to 'discuss' the case with the judges, in the hope of receiving a thick envelope, will be significantly rarer.



 

In defence of the Philippines' IPR regime

IPO Director Blancflor

We are used to seeing petitions of complaint about IPR regimes to the US government at this time of the year as part of the USTR's Special 301 Review. The Philippines has been active in recent years, filing its own petitions in defence. This year their petition argues the Philippines should be removed from the Special 301 Watch List.

A number of points are made to support this :- 

- public comments from IP industry publications, certain IP holders and industry groups about IP protection in the Philippines
- the USTR's delisting of certain retail locations as Notorious Markets
- the holding of various anti piracy and IPR events/seminars
- a new procedure manual for enforcement officers
- a new Copyright bill
- the new Cybercrime Prevention Act
- a new bill covering cable and internet signal theft
- the new rules of procedure for IP cases
- the provision of free warehousing for seized fake goods
- the National Law Enforcement Coordination Committee's and IPO's Operation Centre activities to assist in IP coordination
- new penalties to cancel business permits for counterfeiters
 
They cite raid statistics such as the several thousand search warrants issued in 2012, (although the stats. don't seem to add up clearly), values of goods seized and so on. Those are always doubtful in value when fakes are still widely available. 

There is no doubt that the Philippines government and the IPO in particular has been highly active (one of the most active in the SE Asian region thinks IP Komodo). But they misunderstand the Special 301 Review if they believe a few fixes is what is needed. For example, there are no reported Customs seizures (because Customs seize virtually nothing at the borders). It is still agonizingly slow to get a prosecution case to trial. And getting a raid without requests for money from the authorities, is tough. So while this level of government activity is impressive, there is still an enormous amount to do. 5 years of the kind of progress made in 2012 would make a decent dent in the problem.

Apple retailer dispute reaches trial in Indonesia

PT Multicom Persada International owns a class 9 registration for the brand IBOX for various electronic products. PT Daya Citra Mandiri is an authorised reseller of Apple products and uses the name iBox at more than 20 outlets in Jakarta and major cities in Indonesia, many in top shopping malls (see picture). Multicom sued Daya Citra for trademark infringement and damages. Daya Citra has a registration for iBox in class 35 for retail services.

The Jakarta Commercial Court held in early February that the two marks differed. First they were not similar due to different placement of the letter i. iBox is composed of  a small "i" next to letters that form the word Box, all written horizontally. While the plaintiff 's IBOX brand consisted of a logo with "I" placed vertically and above the letters BOX.
 
More importantly the defendant's retail stores providings services in class 35 is not the same as the registration of the plaintiff in class 9.
 
Any trademark expert would ask a lot of questions of this decision. But perhaps there is justice in the somewhat weak arguments used by the court, when you read the general comments it made about how the defendant was not free riding on the Plaintiff's mark, and they did not disturb the Plaintiff's trade.  The case smells of Multicom looking to get leverage over Apple's powerful distribution agent.
 
PT Multicom Persada International Daniel Setiawan said it would appeal.

Indonesia's slow IP law amendment process continues

The 4 main IP laws are all under amendment :

- Trademark Law

- Copyright Law
- Designs Law
- Patents Law

This began around 4 years or so ago. The new draft Copyright Bill is undergoing public comment now, for what appears to be the second time. Also the Penal Code, which contains some criminal provisions relating to unfair competition, so is relevant to IP is also under amendment this year.

Under Indonesia's legislative process, usually a national law bill is prepared by either the related Ministerial, Legislation or other committee in Parliament. The IP laws all have a drafting team connected to the IP Office. Then it goes into the National Legislative Program timetable, called Prolnegas. Then it goes to a Parliamentary Committee Meeting of the House of Representatives. After the discussion in the committee concludes, the bill is discussed and approved by the Assembly. Then signed into law by the President.

Last year the 4 IP law drafts were all included in the 2012 Prolnegas, but were sent back for further drafting. So they appear to have undergone a further round of amendments. It is not yet certain if they will then be put back in the Prolnegas for 2013. The Penal Code bill is included in the Prolegnas for 2013.

There is however a general election in 2014 and this could potentially delay the IP law amendments as members of Parliament will be more focused on re-election.