The Importance Of Patent Ownership In Employment Contracts In Indonesia: A Case Study.

25 June, 2018

 

Today’s blog post explains the importance of identifying patent ownership in employment contracts. The blog post gives a brief overview of patent protection in Indonesia followed by a case study demonstrating the need to be clear on patent ownership.

 

Patents in Indonesia 

 

A patent is a right granted to the owner of an invention to prevent others from making, using, importing or selling the invention without his permission. A patent may be obtained for a product or a process that gives a new technical solution to a problem or a new method of doing things, the composition of a new product, or a technical improvement on how certain objects work.

 

Indonesia adopts a ‘first-to–file’ patent system, meaning that the first person to file an IP right in the Indonesian jurisdiction will own that right once the application is granted. Two types of patent are recognized in Indonesia – ‘Standard Patents’ (for products and processes) and ‘Simple Patents’ (for products only). The process for obtaining a Simple Patent is supposed to be shorter, however, there is a reduced term of protection in this case, as indicated below. For all applications, applicants need to specify the scope of the protection sought and to explain how to work the invention by means of technical descriptions and drawings.

 

In Indonesia, the inventor of a patent or his/her attorney can file a patent application. If the application is filed by a person other than the inventor, the application must be furnished with a statement with adequate supporting evidence that the applicant is entitled to the invention. If the invention is created by an employee under an employment arrangement, the employer is entitled to file for the invention and not the employee, however, this should also be specified in the employment contract in order to avoid future problems and to solve any rising disputes faster. A below case study reveals what can go wrong if European SMEs do not specify in the employment agreement the ownership of patents developed by employees.

 

Case Study 

 

This case study explains the importance of identifying patent ownership in employment contracts in Indonesia.

 

Background

 

A Belgian entrepreneur set up a local food processing operation called ‘Belsa Food’ in Indonesia. One of their plant managers developed an innovation to the existing raw material cleaning process. The Belgian entrepreneur, believing that Belsa Food could commercialize this process by manufacturing equipment with this innovation, offered a reward sharing scheme and brought the plant manager to an attorney to discuss future contractual arrangements, as the existing employment agreement was silent on ownership of intellectual property in inventions.

 

In the meantime, the plant manager secretly instructed a patent attorney to apply for a patent in his own name. The patent was drafted by a local attorney in Bahasa Indonesia.

 

As soon as the Belgian entrepreneur discovered the patent filing, he asked the plant manager to surrender the patent application to Belsa Food. The plant manager refused.

 

Action Taken

 

Court litigation ensued over rights to the patent application. Twelve months passed, and the plant manager no longer had the funds to file an overseas application within the priority period. The right to file overseas was lost while the dispute dragged on.

 

Outcome

 

The court finally ordered that Belsa Food had the rightful claim to the patent application. The Belgian entrepreneur instructed his own attorney to review the patent application. The attorney quickly realised that the specification of the invention had been badly drafted. The risk now was that a third party could easily design around the patent to get to the same idea behind the innovation. In other words, the specification was drafted too narrowly to effectively protect the innovative concept and the rules for amendment could not help to improve the specification.

 

The Belgian entrepreneur was also informed that Belsa Food had lost the right to apply for patent protection overseas. The grant of the patent locally would also take a long time as examiners do not usually independently examine patents, instead relying on foreign patent grants in order to grant the corresponding local applications.

 

In the meantime, the plant manager found an investor for an improved version of the earlier innovation. His new investor advised him to have the patent specification prepared in English so that they could file it internationally.

 

Belsa Food no longer had the resources to pursue the business opportunity behind the innovation.

 

IP Lessons Learned

 

Specify ownership of IP rights in employment contracts
 

It is important to use a trained and experienced patent attorney – standards can vary significantly, even among those who may have passed local professional examinations

 

Give due consideration to filing overseas when drafting a patent specification
 

Use the PCT to defer the application deadline by another thirty months. This allows you to assess the commercial viability of the invention and the likely market before you spend money to file locally, which may also require significant costs for translation into the local language.