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July 8, 2014

Recordal of Trademark License Agreements in Indonesia: Reality Check

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Businesses who have greatly invested in the reputation of their trademarks may decide to license the use of their marks to third parties to benefit from royalties and to expand their existing product lines into sectors that they may not be able to enter into on their own. The license holders also benefit, with the opportunity to draw upon the market power of an established trademark to promote an increase in sales. Trademark License Agreements are made to accommodate such goals and to ensure that the relationships between the parties are in order. But what is the state of play for such legal-business arrangements in Indonesia?

In order to ensure that third parties are bound by the terms and conditions set out within a Trademark License Agreement—which relates to registered trademarks in Indonesia—a License Agreement must be recorded with the Directorate General of Intellectual Property Rights (DGIP), as stipulated in Article 43 (3) of the Indonesian Trademark Law (Law No. 15 Year 2001). Without such a recordation, the terms of a License Agreement cannot be enforced against and will not be recognized by any third parties.

Furthermore, if a Trademark License Agreement has not yet been recorded at the DGIP, the use of the registered trademark by a license holder would not be considered the same as the use by the proprietor of the registered marks (Article 46). This relates to the possibility of defending registered trademarks against non-use cancellations: failure to record the License Agreement could result in the registered trademark being cancelled if use of the trademark is only through the license holders, not the original rights holder, for three consecutive years. In addition, without properly recording the Trademark License Agreements, license holders would not be able to file lawsuits against trademark infringements, even if the suit is filed together with the proprietor of the marks (Article 77).

Thus, it is vital for license holders, as well as the owners of the registered marks, to have their License Agreements recorded. In this regard, Indonesia is similar to many other countries. In practice, however, problems arise due to the fact that the government has never issued any guidelines nor regulations to clarify the written laws that were enacted in Indonesia in 2001. To this date, it is still not possible to record License Agreements in Indonesia per se due to such lack of guidelines. As it stands, most trademark owners have to file their License Agreements at the DGIP to obtain an official stamp on papers as evidence of such recordal and to demonstrate their good faith. Although this practice is not considered to be an official recordation of a License Agreement and it is unclear how effective the practice is in reality, it is the best one can do to comply with the written law that currently has no supporting regulations in practice. So this is a point well worth remembering for any foreign company licensing their intellectual property to an Indonesian partner.

It is anticipated that the DGIP will take this matter into account when drafting a revised Trademark Law, which is supposed to be enacted within the near future.

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