The challenge of complex IP disputes in the criminal system in the Philippines

A Manila Prosecutor has thrown out a utility-model infringement and unfair competition complaint. A criminal case was filed by TouchPay payment system owner Manila Express Payment Systems Inc against the officers of BTI Payments Philippines and Electronic Transfer Advance Processing Inc. (eTAP). Both are also online payment and processing companies.

The case began with a raid by the National Bureau of Investigation (NBI) after a court granted search warrants against the two defendants in July 2020 on the basis of confusing similarity in the appearance of the automated payment machines.

The case passed to the Department of Justice but the Prosecutor rejected the complaint as prematurely filed. Criminal actions for utility model infringement may only be filed for repeated breaches of Section 76 (which covers Civil Infringement) of the IP Code (Republic Act 8293), after a civil judgment. 

Under the unfair competition charges the defendants were accused of misrepresenting the IP owner’s goods or services as their own. More specifically passing off eTAP’s Pay&Go automated payment terminal as the IP owner’s TouchPay machine. But the prosecutor decided there was not sufficient evidence as the physical appearance of eTAP’s Pay&Go machine looks different so no end consumers were misled. 

Utility model and unfair competition cases are extremely hard cases to press through any criminal system. A number of SE Asian countries allow criminal remedies in such cases, but in most developed countries a case like this would be filed through civil courts for an injunction and damages. Technicalities need a more detailed examination that prosecutors and criminal courts should be expected to spend time on. 

Compulsory licensing procedures in Indonesia revised (again)

Indonesia has been gradually building a system for compulsory patent licensing. However progress has been in stops and starts. The previous regulation is here. This has now been replaced.  

2 weeks ago the Minister of Law and Human Rights has issued Regulation No. 30 of 2019 called Procedures for the Granting of Compulsory Patent Licensing. The Regulation sets out detailed procedures for the granting of compulsory patent licenses. It replaces both the 2018 regulation mentioned above (details here) and a regulation on the penalties for non-working or implementing patents in Indonesia (details here).

The background briefly is that Indonesia has, since its first patent law in 1991 required patents to be worked or implemented in the country. For decades there was no sanction for non-working. The government recently announced that to encourage manufacturing patents must be worked or could be lost. A complex system to extend the non-working period and grounds was set out. Patent holders complained that many technologies simply could not be made in Indonesia either at all, or economically, so those patent owners faced losing their patents (possibly a breach of TRIPS).  One sanction for non working of a patent was to be compulsory licensing. 

This new 2019 regulation creates a slightly different framework. It covers full patents and simple patents. Three separate grounds for compulsory licensing are provided:

a. Failure to work a patent within 3 years
b. Implementation of a patent is contrary to public interest
c. It is not possible to implement a patent because of the existence of prior more basic patents

The first two grounds can be utilized by government or third parties. The third allows the government or a patent owned to seek a compulsory licence. Applicants for compulsory licenses must be able to demonstrate that they can and will use the patents to be licensed; and they have tried to seek a license already. The basis of a decision to grant one must be that it is economically feasible and must offer benefits to the general public.  Limits to the grant may be provided to avoid harming public interest.  There are special provisions for semi conductors, due to concerns from the smartphone supplier industry. After a grant royalties must be paid to the patent owner.

The differences over the previous system are twofold. One is that there appears to be far more detail about how and why a decision to grant a compulsory license will be made. Secondly, there appears to be a requirement of pubic benefit in Indonesia. This suggests a fairer procedure over and above the rather arbitrary sounding decision process contemplated previously. 

A detailed procedure is also set out; first a formalities review then a substantive examination of the issue by an expert team before the decision is made. What is not at present clear is how the patent holder is to be granted the right to make representations, which appears to be set out in the grounds. 

In principle this looks a more balanced system, but until we see applications and grants it will remain unclear. It is not really obvious which industries will use this, given Indonesia does not have advanced manufacturing in every tech sector. 

A further complexity relates to the requirement for patent owners to work their patents. This rule still exists, and patent owners can still apply to delay the working of any patent for up to 5 years by special application to the IP office. It remains critical to file these to defer the risk of compulsory licensing.  

Vietnam and technology investment

Vietnam continues to be a country of interest to technology owners in Asia; as the BBC reported this week start ups are increasing and the investment shift from China to Vietnam bodes well for economic growth.

A look at the patent filings there tells the story of growth with heavy Asian interest.  Patent filings in 2015 topped 5000 for the first time. Applications have been averaging 7% growth a year for the last 5 years. Japan files by far the most patents – in 2015 over a quarter of all the patents filed in Vietnam. The US was second, then Korea third. With China and Taiwan in the top 10 filers however, it is clear that Vietnam is a major market first and foremost for Asian technology companies.

Around 12% of the patents filed each year are by local applicants.  That is consistent with other emerging SEA countries.  A lack of support for local start ups, private R&D and technology business is typically blamed across the region.

The biggest technology areas are: pharma and chemistry, with the breakdown looking like this:

 

Thai company takes on Alibaba

Thailand's Elide Fire Ball Pro Company makes a fire-extinguishing ball sold in over 60 countries. It is patented by its Thai inventor and has won awards all over the world. Elide is now suing Hangzhou Alibaba Advertising Co and Jack Ma, the CEO of Alibaba personally for allegedly promoting the sale of fake goods. News reports are not clear but suggest the claim is the that fake goods infringe Elide’s patent.

Thailand’s government is driving innovation and the company sees this as a Thai IP holder fighting foreign IP violation. Thailand’s Central IP & IT Court will hear the case.  The specific allegation is that Alibaba is promoting the sale of the fake AFO fire-extinguishing balls, via its website. In addition its payment system AliExpress sells and delivers the fakes – on a global basis. They claim damages relating to safety of the fakes as well as lost sales. 

The case is interesting for several reasons. First according to news reports it is a patent case, and if so patent contributory liability should lay out some different issues from secondary liability for trademark and copyright infringing sales on the Internet. Secondly a Thai company suing a Chinese intermediary makes for some interesting dynamics.  The last reason that they are suing Jack Ma for personal liability makes for good headlines, but surely he had nothing to do with the acts personally.

Indonesian trade secrets litigation delivers record damages

A longstanding trade secrets fight has been rumbling back and forth through the courts for years. Indonesian engineering firm PT Basuki filed a claim in 2008 against a local divison of Hitachi Construction and several individuals for trade secrets infringement. The issue related to boiler construction. PT Basuki alleged Hitachi's Indonesian entity and the individuals used its trade secrets to create another boiler.

The case was filed in the Bekasi District Court. However the District Court decided that the Commercial Court rather than the District Court was the correct forum because the case concerned the trade secrets law, which is a special law relating to IP and most IP cases go to the Commercial Court. The courts had previously heard a related industrial design case between the same parties too. However, the Supreme Court overturned the District Court case stating that although many IP cases are heard in the Commercial Court, for infringement the correct court is the place of domicile of the defendant.

So the case was retried, and in 2015 the Bekasi District court found for the Plaintiff awarding just under USD100,000 equivalent in damages against Hitachi. The case was appealed and the damages were increased enormously by the Bandung High Court.  The basis of the damages was 50% of the lost profits of PT Basuki for a 2 year period 2005-2007. This amounted to around three quarters of a million USD. An appeal to the Supreme Court was filed in November last year. 

Trade secrets cases and very large damages awards are both rare in Indonesia. This was a successful local company which felt its trade secrets had been stolen, leading to one of the largest IP damages awards ever in the country. The Supreme Court decision will be watched closely.

Indonesian National Standard certification

Indonesian Law No. 20 of 2014 on Standardisation and Compliance Assessment is the first law to provide for standards. It covers manufactured goods, services, systems, processes, and individuals, and sets out the institutions that will carry out assessments, development, supervision, of the system.  The Indonesian National Standards (SNI) system was formulated by a technical committee and will be overseen by the BSN (National Standardization Agency).

The SNI is a standard that must be complied with for certain designated goods, services, systems and processes in Indonesia. The affixing of the SNI marking on the product or service is an indication that it meets the standard requirements to allow the product to be sold in Indonesia.  Currently there are 273 mandatory products that the SNI applies to and which must be labelled. These include electric, wood, rubber, automotive, agro and health products (e.g. medicine, cosmetics, health apparatus and traditional medicines).

Articles 62 up to 73 of the Law provide for criminal penalties in respect of SNIs. Importing any product, or trading and marketing without an SNI or unlawful use of the SNI attracts criminal penalties. This law is now the umbrella law for 37 other regulations relating standardisation, since none of them provide penalties.

The government may ban imports without SNI labels on the basis that they are unfit or unsafe. The BSN and Ministry of Trade are working together to monitor SNI label use in the market.

The standards system is hoped will improve quality in the run up to joining the ASEAN economic community and is part of Indonesia's attempt to build a bigger manufacturing industry. Producers and importers will need to understand which products fall into standards and produce appropriate product labelling.

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Vietnam civil trademark infringement litigation

Hoa Sen Group, a Vietnamese building material manufacturing group has sued Ho Tat Minh Enterprise for IP infringement in the Tay Ninh Province People's Court on 2 March 2015. Tay Ninh is 100 km NE of Saigon in the Southern part of Vietnam.

Hoa Sen Group alleges that Ho Tat Minh Enterprise has used their trademark on its signboard (left) and in price quotes. Although Hoa Sen Group arranged several meetings to try to resolve the dispute amicably, Ho Tat Minh Enterprise refused to settle. Ho Tat Minh Enterprise maintains that they are making fair use of the HOA SEN mark as they are selling Hoa Sen Group's products.

Hoa Sen Group, the plaintiff, registered the infringed mark at the National Office of Intellectual Property (NOIP) so have grounds for pursuing the case. Vietnam's legal system does not directly address the issue of "honest use", however, an equivalent is regulated in Article 125.2h of  Vietnam's Law on Intellectual Property, which states that IPR holders shall not have the right to prevent others from using in an honest manner people's names or marks descriptive of the goods or services. Tay Ninh Province People's Court is still considering the case.

Philippines IPO decisions forgiving of delays

IP Komodo has noticed a number of decision reports from the Philippines where the IP holder taking action has not always acted swiftly or effectively, but substantive justice is still granted.

In the case of Total SA v Bryan Distributors & Services, Total had sought numerous extensions of time to oppose a mark, yet still failed to oppose in time. It is not clear why or whether there was an error. The end result was that Bryan got a registration for PROTEC covering lubricants, a similar mark to Total's PROTEC mark.

Later when Total filed to cancel Bryan's mark, Bryan countered with an argument of inexcusable delay and that they should have dealt with this at opposition stage. The IPO's Bureau of Legal Affairs (BLA) held that delays and failure to oppose do not prevent cancellation actions being brought and found for Total that they had a prior right and cancelled Bryan's mark.

The case is notable for the fact that the IPO's BLA so starkly contrasts with the Philippines court system where endless delays, frequent procedural challenges and pointless challenges make getting substantive justice extremely difficult.

Patent enforcement in Thailand

A Thai company Soi Ha Inter Group Co., Ltd lost several patent invalidations against Honda Motor Co patents at the Central Intellectual Property and International Trade Court.

The case began with a criminal action by Honda through the Department of Special Investigations against Soi Ha for importation and distribution of mini 4-stroke engines which Honda asserted infringed its patents. Thailand is unusual in having a criminal patent enforcement system. As often happens to counter attack,  Soi Ha filed a civil case to invalidate three of Honda’s patents. The IP/IT Court made its decision on 26 March 2014 dismissing the case.

The Court ruled that the patents were valid. Weak evidence of lack of novelty and obviousness was presented by Soi Ha (merely going to general principles about engine parts from textbooks which did not even concern technical issues or in-depth academic principles or analysis). Further the patents were clearly capable of industrial application.

Thailand is developing a relatively strong and well organized patent enforcement system, and for mechanical patents the criminal system is working quite well.

The setting of the Philippines cement wars

A collection of disputes in the Philippines concerning the EAGLE cement brand appears to be coming to an end. The Bureau of Legal Affairs (BLA) recently decided a number of cases all in favour of Republic Cement Corporation (formerly Lloyds Richfield Industrial Corporation). Republic is now owned by French cement and construction materials giant Lafarge. The BLA consistently held that Republic is the owner of the mark EAGLE CEMENT, contrary to Respondent Eagle Cement Corporation’s assertions. Eagle was founded by Ramon Ang, the President of industrial conglomerate San Miguel Corporation. Its brand is shown here.

 

Republic Cement filed several oppositions and cancellation actions against trademark applications and registrations filed and owned by Eagle. Republic alleged that its predecessor Lloyds Richfield had first adopted the mark and used it since 1992 on cement products sold in the Philippines. In 1997, Lloyds Richfield had filed an application for the EAGLE CEMENT, but had failed to comply with formalities requirements, thus resulting in abandonment of the application. Lloyds Richfield and then Republic continued to use the mark notwithstanding the abandonment despite not having a proper registration. 

 

Eagle in June 2008 filed an application and acquired a registration for the mark EAGLE CEMENT & DEVICE. It started operations in 2010. It later filed several other applications for variations of the EAGLE CEMENT mark. Eagle contended in the dispute that Republic had no right to cancel its marks, as it had failed to file oppositions when the marks were published, and only belatedly filed cancellation actions. 

 

The BLA sensibly, and following its own previous decisions confirmed that registration was a presumption of ownership, which could be overcome by evidence to the contrary. It is not an application or registration that confers ownership of a mark, but it is actual ownership of the mark which confers the right to registration. 

 

In the cases, the BLA said that records and evidence clearly showed that Republic and Lloyds Richfield coined, appropriated and used the contested mark on cement products well before the Respondent adopted and filed applications for the exact same mark for use on identical goods.

It was perhaps a poor decision of Eagle to try and appropriate an existing mark; however Republic and Lloyds Richfield should really have got their rights in order before embarking on extensive trade. However Eagle Cement continues to trade according to its website and we can expect that while the first round has been won by Republic, Eagle with its deep pocketed backer will continue to fight until the war is over.  

Design infringement litigation in Indonesia

Design cases are always worth looking at to see how the court deals with the various complexities. Infringement cases help understand damages awards. So IP Komodo was curious about the story of one inventor's battle against a national champion.

M Rimba Aritonang filed a design for a Pipe Joint with features which protect natural gas pipe joints from catching fire due to presence of flames or through the sun. In November 2012 he filed a lawsuit at the Commercial Court of Central Jakarta against PNG, the Indonesian national gas company.  He alleged that PGN has been producing and using an apparatus using his design since 2006 without his authorization. Alleging breach of the Designs law he demanded compensation of IDR 132 billion (132 million USD).

PGN defended on the basis that the design registration should have not been granted by the Directorate of Industrial Designs (IPO) as it has absolutely no uniqueness or distinctiveness over prior disclosures, thus lacked novelty.
 
However the court found in April 2013 that PGN infringed the design and the judges decided that PGN must pay Rp.180 million (USD18,000) as compensation. 
 
The courts do struggle with novelty challenges and seem to generally presume that the IPO's examination must have been correct so few cases are rejected thus. The energy industry is prolific at patenting in Indonesia and there are many small inventors in this area who know how to leverage IP against the big boys. At least the damages award seems relatively sensible.

Trademark common law rights in Thailand

A trademark case in Thailand provides an interesting insight into how Thai law provides for a certain level of non statutory/common law rights. 

 

Tong Cheng Iron Works of Taiwan filed its SWAN mark for air compressors in class 7 in 1981. The mark was registered but later on not renewed, so it lapsed in 2001. A Thai company, Chumsin Inter filed an application for the same mark in the same class and the mark was registered in 2002. Then Tong Cheng Iron Works filed a new trademark application for SWAN which was rejected as it conflicted with Chumsin's mark.

Tong Cheng Iron Works filed a cancellation action at the Intellectual Property and International Trade (IP & IT) Court claiming a better prior right. Chumsin defended on the basis that it was in good faith. However the court found otherwise; that Chumsin had used and registered the mark in bad faith so they cancelled Chumsin's registration. Chumsin appealed.

 

In May 2013 the Supreme Court confirmed that Tong Cheng Iron Works had a better prior right to the SWAN mark, regardless of its non-renewal because they had continued to use the mark. There was extensive sales and marketing evidence from the early 2000s. The Supreme Court also said that Chumsin had not proven a better right to the mark. Lack of renewal was not automatic loss of ownership rights under the Trademark Act.

In some sense this decision enshrines a form of common law rights based on use into Thai trademark law.

 

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.

Patent litigation in Indonesia - novelty

The Indonesian Supreme Court decided a case last month between an energy industry services business called PT. Mitra Chemindo Sejati and two individuals Haryanto Wardoyo and Forrest Dale Standley over a patent for a "Composition Alkaline Phosphate Solution for Retaining Fluid Pressure with Salinity levels Customized for Wells of Oil and Gas”.

PT. Mitra Chemindo Sejati does R&D in chemical products and had apparently produced some new inventions which they intended to patent. But they discovered that Wardoyo and Standley had registered a patent for "Composition Alkaline Phosphate Solution for Retaining Fluid Pressure with Salinity levels Customized for Wells of Oil and Gas. The company filed a case at the Central Jakarta District Court that the invention was not novel and was in the public domain because the invention is common in the oil and gas industry. The lower court agreed, but the case got appealed.

The Supreme Court judge considered novelty but indicated that there was a different form of protection in the subject patent. from the prior art The Plaintiffs' patent protected a manufacturing process while the Defendant had in its novelty assertions referred to products. What also came out was that the parties had been in dispute before and that a settlement agreement existed, thus complicating the dispute.

It is unclear from the decision why the Supreme Court overruled the lower court's factual assessment of novelty. The case indicates that complex questions of patent law for example around prior art assessment are still in their early stages. Still too few patent cases make it to the Supreme Court for there to be sufficient jurisprudence yet.

 

Indonesia trademark disputes

The latest trademark cancellation disputes in the Jakarta Commercial court include -

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Johnson & Johnson sued PT Megasurya Mas to cancel its class 3 Avino mark alleging it was a bad faith copy of J&J's AVENO

 

Hager Electro SAS, a company from France, filed for cancellation against of the trade mark HI GER registered by local businessman, Hanlu on the basis that it is a bad faith copy of the 'well known' HIGER mark.

IP Komodo is often amused at these claims;  many are presumably applications made in bad faith but are these really well known trademarks justifying extra protection?

Anti counterfeiting in Indonesia

Several newspaper reports last week about an anti-counterfeiting raid in Jakarta shed light on the difficulties of IP enforcement in Indonesia. SKF a ball bearing manufacturer seized large quantities of industrial bearings of varying sizes (the largest as big as footballs...).  First the items indicate the breadth and diversity of fake goods in a booming economy. Fake goods is not just about handbags, but all kinds of goods even industrial ocmponents. It is unclear if these were locally made or imported from China (more likely).

Secondly the raid was conducted by the IP office Investigation Directorate, which has existed for many years but only properly consituted with a tiny budget a year or so ago. Until recently only the police could run raids, and a combination of difficulty dealing with the police and corruption meant this was an extremely difficult process. As a result the number of raids is miniscule cuasing great IP holder frustration. At a EuroCham meeting on Monday IP Office officials hinted that the Investigation Directorate would be expanded further in 2012.

Indonesia - trademark refusal appeals

The Central Jakarta Commercial Court has decided a trademark similarity case in favour of Japan's Sumitomo Rubber Industries Ltd. SRI had been refused registration of VEURO in class 12 both by the examiner then on appeal by the Trademark Appeal Commission.

In its decision, the panel of judges chaired by Judge Ennid Hasanuddin stated that the VEURO mark was not similar to EURO-R which was the basis of the refusal by the Trademark Appeal Commission. The judges decided that the marks are different when spoken.

One of the problems of the Trademark Appeal Commission is that it is staffed by other TMO examiners who almost never overrule their colleagues, which means most appeals have to go to court.  Something needs to be done about this lack of independant thinking, as it just delays trademark decisions, creating unecessary cost and delay to registrants.

Meanwhile a new Director of trademarks has been appointed in Indonesia and starts his posting today - Dr Mohamad Adri a longstanding IPO Office official, previously director of Co-operation and Promotion.