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September 24, 2018

Implementing Regulations Provide Clarity on the Working Requirement in Indonesia

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BRICS & Beyond

Article 20 of Indonesia’s Patent Law requires patent owners to either manufacture their patented products in Indonesia or use their patented processes in the country.  Although controversial, the purpose of this working requirement is to drive foreign technology transfer, investment and stimulate local employment opportunities within the country.

If an invention is not worked within 36 months of grant, a third party can file an application for a compulsory license pursuant to Article 82, which is reproduced below:

Article 82 

(1) A compulsory license shall constitute license to implement a patent granted by the Minister upon request by reason of: 

a. Patent holder does not fulfill the obligation to make the product or using the process in Indonesia as referred to in Article 20 (1) within a period of 36 (thirty-six) months after being granted patent; 

b. Patents have been implemented by the patent holder or licensee in the form and manner that is detrimental to the public interest; or 

c. Patent resulting from the development of a patent that has been previously granted cannot be implemented without using another party’s patent that is still under protection.

(2) An application for a compulsory license referred to in paragraph (1) is free of charge.

As discussed above, an application for a compulsory license for failure to work an invention can be filed immediately after the expiration of 36 months from grant. However, an application for a compulsory license can be filed at any time if the patent owner implements the patent in a form and manner that is detrimental to the public interest or if the development of a patented product could not be implemented without the use of another party’s patent which is still under protection. According to Article 96, any person may apply for a compulsory license.

According to Article 83, examination of an application for a compulsory license is done by a team of experts assembled ad-hoc by the Ministry of Law. Once the experts provide the results of their examination, the patent owner is given a period of time to respond. When providing its response, the patent owner is afforded an opportunity to provide its own experts. If the patent owner does not respond to the opinion of the experts, or does not do so timely, then the compulsory license will be approved.

On July 11, 2018, implementing regulations were issued by the Indonesian Patent Office to provide more clarity on the working requirement. Specifically, these regulations allow patent owners that are not yet able to work their inventions to postpone the obligation to do so for a maximum period of five years by submitting an application to the Ministry of Law along with the reason(s) for postponement. Additionally, further postponement beyond the maximum period of five years may be granted upon request. Finally, a fee may be required for filing a request for postponement.  However, whether such a fee will be required and the exact amount have not yet be announced.

Procedurally, according to Indonesian Patent Law No. 13 (2016), an initial request for postponement must be submitted by a patent owner within three years from the date of grant. Thus, because the working requirement just recently came into effect on August 26, 2016, the three-year period to submit an application for postponement would be (at the earliest) August 26, 2019. However, the Indonesian Patent Office appears to have a different opinion regarding the date for the filing of such postponements. Specifically, according to the Indonesian Patent Office, because the implementing regulations are effective from the date of promulgation (namely, July 11, 2018), a patent owner can file a request for postponement beginning July 11, 2018. What this means is that all patents having a grant date after July 11, 2015, are subject to this requirement. However, readers should be aware that the procedures for filing such a request are still under discussion.

Some suggested wording that can be used when filing a request for postponement is provided below:

  1. If the product/process of the patent has not been used at all in Indonesia: “The patented product or process needs further development.”
  2. If the product of the patent has been imported or distributed in Indonesia but has not been manufactured domestically: “The patented product has been imported and distributed in Indonesia. However, taking into consideration the value of our product sales so far, the patent owner has not been able to make investment to bring the manufacturing technology into Indonesia.”
  3. If the patent relates to a process or method: “The patent owner does not have the facilities to implement the patented process, and until now, they do not have any cooperation or agreements with any local companies that are interested in using their patented process.”

Unlike the working requirement in India where patent owners and licensees are required to submit Form 27 by the March 31st every year detailing whether a patent was worked in India, there is no requirement under Indonesian Patent Law for patent owners and licensees to provide the Indonesian Patent Office/Ministry of Law with evidence that a patent is being implemented in the country. However, a patent owner will be expected to prove that his invention has been implemented in the event that an application for a compulsory license is filed by a third party. Therefore, it is important for patent owners to keep track and docket the 36-month deadline for working and timely request postponement of this requirement if necessary.

There are other consequences for not complying with the working requirement as well. According to Article 132, a patent can be revoked for noncompliance with the working requirement. However, only a public prosecutor or “other party that represents national interests” (and no other person) can request revocation if an invention is not worked. Interestingly, it appears that not working an invention will not automatically result in a revocation. Moreover, it seems unlikely that a public prosecutor will bring a revocation action against a patent unless it is against public interest. Nonetheless, it will be interesting to watch the case law develop in this area.

This article was written by Lisa Mueller of Casmir Jones and Indah Handayani of Tilleke & Gibbins. It has also been published on Lisa’s BRICS & Beyond blog.

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