Legal Alert: Leniency Of Postponement For Patent Holders To Manufacture Products Or Utilize Patented Process In Indonesia

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Author: Selvana Stella Oviona, Fahdli Ramadhan Suriyana

The Ministry of Law and Human Rights (“MOLHR”) has finally issued MOLHR Regulation No. 15 of 2018 on Implementation of Patent by Patent Holders (“MOLHR 15/2018”), which came into effect on 11 July 2018. MOLHR 15/2018 was issued as the implementing regulation of Article 20 of Law No. 13 of 2016 on Patent (“Patent Law”). The regulation requires patent holders to implement the patent, i.e. to either manufacture their patented products or utilize their patented processes in Indonesia in order to support the transfer of technology, investment, and/or job opportunities in Indonesia.

Article 20 of Patent Law remains applicable despite controversy surrounding the provision, especially due to the provision deemed to be burdensome to non-Indonesian patent holders.

There are at least two grounds of objection for this provision. First, the establishment of factory will be economically inefficient because not every patent is capable of being manufactured in Indonesia. Second, the requirement to manufacture the products or utilize the processes in Indonesia arguably contradicts with the non-discrimination principle, as upheld in Article 27 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) which stipulates that patents shall be available and patent rights enjoyable without discrimination over the place of invention, the field of technology and origination of products (local or imported).

As a matter of fact, the provision of Article 20 of Patent Law is not new and was stipulated in the previously replaced Law No. 14 of 2001 on Patent (“Old Patent Law”). The controversy focuses on the removal of ‘exception’ provided by the Old Patent Law, which provides leniency for patents wherein conducting product manufacturing or process utilization is only feasible regionally by filing a request, accompanied with evidences and obtaining prior approval from the Directorate General of Intellectual Property.

In response to the objection, MOLHR argues that the provision of Article 20 of Patent Law is still in accordance with TRIPS by relying on Article 7 of TRIPS, which in essence stipulates that protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology.

MOLHR 15/2018 was enacted in order to provide a reasonable timeframe for patent holders to comply with Article 20 of Patent Law, in which MOLHR allows patent holders to postpone their obligation to either manufacture their patented products or utilize their patented processes in Indonesia.

Pursuant to MOLHR 15/2018, patent holders may file a request to MOLHR to postpone the obligation to manufacture their products or use their processes in Indonesia. If approved by MOLHR, postponement may be granted for a maximum of 5 (five) years with possibility of extension. Based on information we gathered from relevant MOLHR officials, during the postponement period patent holders will still be able to benefit from their exclusive rights, while preparing to comply with Article 20 of Patent Law, among others, by establishing a factory in Indonesia.

However, MOLHR 15/2018 does not provide the requirements and procedures for filing such postponement request in detail. After the request has been reviewed, MOLHR will notify (in writing) the patent holders whether or not the postponement request is granted.

Lastly, it is also worth noting that based on MOLHR 15/2018, the application for postponement must be filed at the latest 3 (three) years from the date the patent was granted.

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