Powered by Rouse

Powered by Rouse, the emerging markets IP firm. www.rouse.com

Tuesday, May 24, 2011

The fight against corruption and IP in Indonesia

The global fight against corruption is picking up pace. Despite local laws against corruption in most countries, when combined with weak governance, local businesses have sometimes ignored them. The US has for many years complained that this unfairly hurts US business. The US has it's Foreign Corrupt Practices act which criminalises in the US acts of corruption overseas. The SEC and DoJ regularly investigate and prosecute companies for overseas corruption. The 1997 OECD convention on bribery set out to push OECD states to enact laws against it. The UK has now put in place it's 2010 Bribery Act. The US and UK laws even bite on non US and UK companies committing acts of corruption abroad.

At the 2 day conference on international corruption in Bali last week, instances of corruption by Monsanto and Innospec came up. The legal system and impacts of corruption were addressed.

Indonesia has long suffered from a corruption problem, a legacy of the system created by previous President Soeharto, which started with his family's abuses and permeated throughout government. It will take decades to clean Indonesia from this endemic legacy. The Anti Corruption Commission is often attacked; it's officers have even been framed by the corrupt officials under investigation. There is criticism that President SB Yudhoyono's government has not delivered on its promises to clean up.

In the IP world Indonesia's courts are a key concern; in the 1990s and before IP cases were sometimes decided by the size of the envelope passed to the District Court judge. Litigation agents were used as brokers in the past to 'fix' cases. The 2001 establishment of the Commercial Court saw significant improvement for IP civil litigation.

The police remain one of the least reformed institutions, with an institutionalised system of victims paying for crimes to be solved, especially when they involve personal property.  Recent Tempo Magazine reports of millions found in senior police personal bank accounts caused an outcry, and the journalist was nearly beaten to death.

Prosecutors sometimes demand payment to prosecute crimes too, or ask the defendant for money to drop the case, leading to the failure of many IP prosecutions.

Customs do levy unofficial tariffs on importers, and when combined with the lack of regulations on IP border protection, it means they are ineffective at stopping the import of fake goods.

The IP office itself has a unique set of problems, from a tip box at the front desk, to requirements for facilitation payments for certain services. If it was fully funded (the government takes most of the IP fees into central coffers returning only a small proportion), it could pay higher salaries, improve it's operations and offer additional and better services for higher fees.

None of this will change overnight. IP holders often have policies in place. But that only goes so far if local businesses or even MNC subsidiaries still break rules, or if IP agencies do not or cannot comply. Market competition means there is always a new firm claiming to have the know how and relationships to solve IP issues. IP holders need to watch for red flags such as this.

No comments:

Post a Comment