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August 30, 2024

Indonesian Court Extends Trademark Non-Use Period, Risking Far-Reaching Consequences

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Managing Intellectual Property

As in many other countries, registered trademarks in Indonesia that are not used for a given period of time can be canceled. A recent decision (Decision No. 144/PUU-XXI/2023) from the country’s Constitutional Court has extended the non-use cancellation period from three years to five years, applicable from July 30, 2024. This ruling could have a major impact on trademark holders in the country.

Background of the Case

Article 74 of Indonesia’s Trademark Law of 2016 specifies that trademarks can be canceled if they go unused in the trade of goods or services for three consecutive years from the date of registration or last use. This provision is aligned with the Paris Convention and the TRIPs Agreement.

On October 27, 2023, an Indonesian individual named Ricky Thio asked the Constitutional Court to examine the constitutionality of Article 74, arguing that it opened a pathway for third parties to eliminate trademarks owned by small and medium-sized enterprises (SMEs), and did not provide certainty to his registered trademark in terms of the period of protection. Additionally, he argued that the period of three consecutive years was burdensome for SMEs, and asked the court to void Article 74 and add force majeure circumstances—such as Covid-19—as an exemption to non-use cancellation.

Mr. Thio submitted this request while he was defending his trademark registration from a non-use cancellation request filed by Zhejiang Dahua Technology Co., Ltd. In his defense to that cancellation request, Mr. Thio explained that the non-use of the trademark was due to the Covid-19 pandemic. The cancellation case followed a different judicial pathway, and was under appeal before the Supreme Court at the time Mr. Thio filed his request for judicial review with the Constitutional Court.

Mr. Thio’s case also attracted the submission of an amicus brief—a relatively new trend in Indonesia—from two IP consultants in the country. Their brief argued that Mr. Thio did not have a valid reason to file the suit with the Constitutional Court, as no personal rights had been violated. Also, they noted that the Trademark Law provided sufficient means for protecting Mr. Thio’s rights and interests.

Constitutional Court’s Decision

After considering the evidence, the Constitutional Court issued Decision No. 144, amending the period of non-use cancellation from three to five consecutive years from the registration date or the date of last use. The Constitutional Court also added force majeure as an exemption from non-use cancellation.

In examining the request for judicial review of Article 74, the Constitutional Court noted that:

  • The TRIPS Agreement mentions the three-year period as a minimum (i.e., “…the registration may be canceled only after an uninterrupted period of at least three years of non-use…”).
  • A five-year non-use period would align with the period for filing a trademark invalidation action, as a lawsuit for trademark invalidation can be filed within five years of the application date.
  • Indonesia has the authority to establish laws that do not contradict international laws the country has ratified.
  • In general, common-law countries (e.g., Singapore, the United Kingdom) have a five-year period due to the first-to-use principle, while civil-law countries (e.g., Japan) have a three-year period due to the first-to-file principle. Indonesia’s fundamental philosophy, pancasila, should empower and assist SMEs by providing them with more time to prepare for using and producing goods or services bearing their trademarks.
  • SMEs take more time than large companies to develop their business and to gather capital, and the three-year period could be a tool enabling unfair competition against SMEs.

Impact

Decision No. 144 came into force immediately. Starting from July 30, 2024, plaintiffs in non-use cancellation lawsuits must provide evidence that the concerned registered trademark has not been used for five consecutive years. This means that any interested third party may need to wait and observe longer before filing a non-use cancellation action. Those who were in the process of preparing a non-use cancellation action must ensure that their market survey has gathered evidence of non-use for a consecutive five-year period, which may entail waiting for up to another two years.

Theoretically, it will also take more effort to gather evidence of use. On the other hand, the additional period adds more time for trademark owners (including startups and SMEs) to form and refine their business plans.

While Decision No. 144 has granted force majeure as an exemption, the government will need to issue an implementing regulation for this. Force majeure is not yet a valid reason for not using a trademark registration in Indonesia.

As for the question of whether Mr. Thio gains any benefit from Decision No. 144 on the non-use lawsuit filed by Zhejiang Dahua, it may not matter much, as Zhejiang Dahua’s lawsuit was considered defective due to the improper formalities in the first instance. In May 2024, the Supreme Court confirmed the Central Jakarta Commercial Court decision to deem the lawsuit not acceptable as it combined the request to delete the registration with a request to register the company’s own trademark.

Ironically, Mr. Thio’s trademark was registered on June 2, 2017. Hence, it is still vulnerable to a non-use cancellation action as it has gone unused for more than five years. It seems that Mr. Thio may not be able to rely on Decision No. 144 to overcome any future non-use lawsuit if the concerned trademark continues to go unused.

Final Considerations

It is interesting to note that the Constitutional Court continued its judicial review of Article 74 even though it knew Mr. Thio was a defendant in an ongoing non-use cancellation lawsuit. Ideally, the Constitutional Court would have refused Mr. Thio’s request for judicial review in its entirety, as there was a strong indication that the decision might be used for avoiding the existing non-use cancellation lawsuit.

Decision No. 144 may inspire other parties in the future to view revoking a relevant provision from the IP laws as an alternative route to win a case. If the Constitutional Court does not forbid parties involved in an active legal action from submitting judicial review requests, there could be similar cases in the future, with infringers or trademark squatters asking for relevant articles to be deleted instead of directly responding to IP lawsuits. These “creative” constitutional lawsuits could result in repeated changes to Indonesia’s IP laws, possibly even affecting public order through a lack of legal certainty.

This article first appeared in Managing Intellectual Property.

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