IPR and CompLaw Update: New Law on Patent and the Exemption of the Application of Indonesian Competition Law

New Patent Law: Law No. 13 of 2016 on Patent

Last August, Indonesian Parliament approved a new law: Law No. 13 of 2016 on Patent. The Law entered into force on 26 August 2016 and replaces the previous law on patent, Law No. 14 of 2001. With the intention to respond to the need to provide a more solid legal support to promote innovation, the new law has been enacted with the emphasis on (1) improving the role of state in providing legal protection of intellectual property rights, patent in particular, (2) protecting domestic interests to the extent permitted by international law principles, (3)  encouraging invention, and (4) developing a basis for patent protection according to pragmatic legal realism approach. [General Commentary of the Law par. 5]

Among others, the Law attempts to address the following issues which have not been covered in the old Law:

1. simplification of patent protection process for inventors, e.g. SMEs and researchers;

2.responding to a high number of patent application from national non-profit institutions and individuals;

3. patent protection for genetic resources;

4. government responses to the implementation of the patent;

5. responding to the ratification of the Nagoya Protocol on Access and Benefit Sharing (The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity), e.g. as regards source of origin, the scheme of profit, and sharing the genetic resources;

6. the use of electronic registration for easier and faster registration processes;

7. improving rules concerning distribution of royalties;

8. more detailed provisions on pharmaceutical patents;

9. exclusion of criminal sanctions and civil claim in cases of parallel import and bollard provision; and 

10. nomenclature changes

Also, the Law clarifies the procedure to settle disputes as regards royalty paid to an inventor in cases where the invention is made under an employment agreement and the patent right is rendered to the employer. In cases of dispute concerning the method to determine the amount of royalty, the parties may submit the claim to the Commercial Court (instead of to the District Court, although the case does not involve the patent right per se).

Compulsory licences are recognized under certain circumstances, both in the old and new Law. However, there are some changes in the new Law, for instance that compulsory licences are granted by the Ministry (i.e. the Ministry of Law and Human Rights), instead of by the Directorate of Patent. According to the new Law, an application for a compulsory licence can be submitted under the following ground:1. the patent holder does not perform the obligation to make the product or use the processin Indonesia within a period of 36 months after the patent has been granted; 2. the patent has been implemented by the patent holder or licensee in the form and withsuch a manner detrimental to the interests of the society; or3. patent(s) resulted from the development of another patent can not be implemented without using the respective patent. [Art. 82 of Law No. 13 of 2016]

Licencing Agreements and Exemption of the Application of Indonesian Competition Law

Compulsory licences might play a significant role in cases of patent abuse under the scrutiny of competition law. Although IPR licence agreements are excluded from the application of Indonesian competition law, Law No. 5 of 1999 on the Prohibition of Monopoly Practices and Unfair Business Practices [Art. 50 lit. b], such exemption does not apply in some cases [KPPU Regulation No. 2 of 2009], namely when a licence agreement does not meet the requirement registration and is anti-competitive in nature or has anti-competitive effects. 
KPPU Regulation No. 2 of 1999 provides for guidelines for competition law analysis in cases of refusal to licence and anti-competitive licence agreements. In the first case, the analysis is based on so-called essential facility doctrine, in which the major inquiry is whether the technology for which the license is required is essential for market entrance. This is for instance in the case covered in Art. 82 of Law No. 13 of 2016 above when a patent resulted from the development of another patent can not be implemented without using the required licence and thus, cannot enter the market.

In cases of anti-competitive licence agreements, while the ex-post approach of competition law implies a case by case analysis, KPPU Regulation in providing guidelines for the analysis underlines certain types of licence agreements that are considered as containing exclusive dealing clauses and require further investigation on whether such clauses are anti-competitive or not. Those types of licence clauses are: pool and cross licensing, tying arrangement, resources limitation, limitation in production and distribution, sale price limitation and resale price maintenance, and grant back licencing. Although anti-competitive by effect becomes the major approach to define an infringement of competition law, the Regulation seems to take a stricter approach for grant back licencing, in which the clause is regarded as per se anti-competitive and thus, by merely including such clause, the licence agreement already qualifies as an abuse and consequently prohibited under competition law.