Indonesia has been gradually building a system for better patent licensing. However, progress has been in stops and starts. The previous regulation has now been replaced.
2 weeks ago the Minister of Law and Human Rights has issued Regulation No. 30 of 2019 called Procedures for the Granting of Compulsory Patent Licensing. The Regulation sets out detailed procedures for the granting of compulsory patent licenses.
It replaces both the 2018 regulation mentioned above and regulation on the penalties for non-working or implementing patents in Indonesia. This will affect trademark registration Indonesia, too
The background briefly is that Indonesia has, since its first patent law in 1991 required patents to be worked or implemented in the country. For decades there was no sanction for non-working. The government recently announced that to encourage manufacturing patents must be worked or could be lost.
A complex system to extend the non-working period and grounds was set out. Many patent holders complained that many technologies simply could not be made in Indonesia either at all, or economically, so those patent owners faced losing their patents (possibly a breach of TRIPS). One sanction for the nonworking of a patent was to be compulsory licensing.
This new 2019 regulation creates a slightly different framework. It covers full patents and also simple patents. Three separate grounds for compulsory licensing are provided:
a. Failure to work a patent within 3 years
b. Implementation of a patent is contrary to public interest
c. It is not possible to implement a patent because of the existence of prior more basic patents
The first two grounds can be utilized by the government or third parties. The third allows the government or a patent owned to seek a compulsory license. Applicants for compulsory licenses must be able to demonstrate that they can and will use the patents to be licensed; and they have tried to seek a license already.
The basis of a decision to grant one must be that it is economically feasible and must offer benefits to the general public. Limits to the grant may be provided to avoid harming the public interest. There are special provisions for semiconductors, due to concerns from the smartphone supplier industry. After a grant royalties must be paid to the patent owner.
The differences over the previous system are twofold. One is that there appears to be far more detail about how and why a decision to grant a compulsory license will be made. Secondly, there appears to be a requirement of public benefit in Indonesia. This suggests a fairer procedure over and above the rather arbitrary sounding decision process contemplated previously.
A detailed procedure is also set out; first a formalities review then a substantive examination of the issue by an expert team before the decision is made. What is not at present clear is how the patent holder is to be granted the right to make representations, which appears to be set out in the grounds.
In principle, this looks a more balanced system, but until we see applications and grants it will remain unclear. It is not really obvious which industries will use this, given Indonesia does not have advanced manufacturing in every tech sector.
A further complexity relates to the requirement for patent owners to work their patents. This rule still exists, and patent owners can still apply to delay the working of any patent for up to 5 years by special application to the IP office. It remains critical to file these to defer the risk of compulsory licensing.