1 September, 2017
Indonesia’s logistics and transportation industry is growing rapidly due to the strong economic development of the country and gradual increase in domestic demand fueled by the rise of the country’s middle class. Opportunities for logistics providers also continue to expand thanks to the strong growth in Indonesia’s e-commerce sector.
However, transportation costs in Indonesia are still significantly higher than in many of its neighboring countries.
This is reasonably due to the geographic challenges that Indonesia faces as a conglomerate of thousands of islands composing the country, and also due to Indonesia’s strict logistics and transportation policies regulating import and export of goods. For example, the requirement that ships with imported cargo are obliged to call at particular ports, which means, for example in the case of agricultural imports, that they all would need to go through Surabaya port before being shipped to the other markets where they are needed1 causing an inevitable congestion of shipments rather than a procedure to streamline the logistics.
On the other hand, as an emerging and fast growing economy, the industry is expected to offer in the near future many lucrative business opportunities to European SMEs specialised in logistics, as also recently outlined by Indonesia’s President including ambitious expenditure plans for building new roads, airports and railways and to develop a modern maritime transport system together with better regulations2.
European logistics and transportation SMEs wishing to enter the Indonesian market need to keep in mind that despite improvements in Indonesia’s IP laws and regulations, counterfeiting and other IP infringements are still commonplace in Indonesia and thus robust IP strategies are needed to grow their business in Indonesia.
Brand Protection – Key to Business Success
Logistics companies’ branding strategies are very important in an industry that is built on the ability to persuade customers that their valuable goods will be shipped smoothly and safely by the chosen logistics company. It could be very damaging to one’s reputation if someone would use a similar or an identical brand to provide substandard services, as it could directly translate into loss of clients’ confidence in the original service provider. It is thus of utmost importance for EU SMEs operating in the logistics and transportation to protect their brand through trade mark registration when planning to do business in Indonesia said Valentina Salmoiraghi, IP Business Advisor of the South-East Asia IPR SME Helpdesk.
SMEs planning to start business activities in Indonesia should register their trade mark in the country well in advance before starting their business there because Indonesia applies the first-to-file’ mark system, meaning that the first person to register a trade mark owns that mark, regardless of the first use. It is especially important to register trade marks in Indonesia because trade mark piracy due to ‘bad-faith’ registration is still a major problem.
Bad-faith registrations exist where a third party (not the legitimate owner of the mark) first registers the mark in Indonesia, thereby preventing the legitimate owner from registering it in the country. It is possible that European SMEs may be able to apply to cancel the unauthorized registration, but the procedure would be lengthy and costly. In some cases, this request may encounter resistance due to corruption within the country.
European SMEs should also keep in mind that according to the Indonesian Trade Mark Law, trade marks can be cancelled due to no-use after 3 years of not being used. This means that SMEs should actively start using their trade marks in Indonesia before that time period comes to an end, to avoid a competitor filing for non-use cancellation. At the same time it also gives European SMEs the opportunity to effectively benefit from non-use cancellation in the instance of bad faith registrations, as the company registering in bad faith also needs to conduct business activities within that time frame.
Trade marks are registered with the Trade Mark Office of Indonesia and it generally takes 2 to 3 years to register a trade mark after the application is submitted.
Don’t Forget to Protect your Internet Domain Name
Most logistics companies rely on their website when managing their day-to-day communication with clients and to attract more customers. It is advisable to register internet domain names in Indonesia because problems like ‘cybersquatting’ and typosquatting still persist there.
Cybersquatting means that a third party registers a domain name that is identical to European company’s product or trade mark name, with the purpose of selling the domain names back to the rightful owner at a premium price.
Typosquatting refers to registering a domain name with misspellings, or typos of famous brands, or company names. The registrant or the ‘domainer’ benefits from the traffic generated when people mistype a URL into a browser. As an example, if an internet user mistypes the URL – e.g. www.euroap.eu instead of www.europa.eu – the user reaches the website of www.euroap.eu, where the domainer can place a number of sponsored links. If the internet user then clicks on one of those exposed links, the registrant of the domain name receives a portion of the advertising revenue paid by the advertiser. Most importantly, typosquatting may lead to consumer confusion or lost web traffic, as internet users may be directed to either fraudulent websites or competitor’s websites continues Valentina Salmoiraghi.
Internet domain names can be registered since 2014 with the Indonesian Internet Domain Name Management Center. Registrations should be done as soon as the company envisages doing business in Indonesia because internet domain name registration also functions under the ‘first-to-file’ system. Indicatively, it costs around EUR 35 per year to register internet domain names in Indonesia.
Protect your Technology or Business Processes with Patents
In the era of innovative applications to businesses, patents can become significantly important in the logistics and transportation industry, as they help to protect technological inventions and thus increase the competitiveness of companies. Logistics companies can protect not only their technological inventions but also their business processes. As recent examples, DHL obtained a patent for its ‘GoGreen’ service which allows customers to be carbon neutral, or Amazon obtaining a patent for anticipatory package shipping, which allows the packages to be shipped before the order has been placed.
The country adopts a ‘first-to-file’ patent system, meaning that the first person to file a patent in the Indonesian jurisdiction will own that right within the country once the application is granted. Two types of patents are recognized in Indonesia –‘Standard Patents’ (for products and processes) and ‘Simple Patents’ (for products only). The process for getting a simple patent is shorter, however, there is a reduced term of protection – as standard patents are protected for 20 years after filing whilst simple patents are only protected for 10 years after filing says the IP Business Advisor.
SMEs should remember that according to the Indonesian Patent Law, applications will need to be submitted in Bahasa Indonesia language and patent specifications need to be translated into the local language. Translation errors are common, with translations often being too literal and narrowing the claims. This is compounded by the lack of procedures in place to correct such errors once a patent is granted. It is recommended that applicants pay special attention to the translation of the independent claims as these tend to be the most important part of the document. Seeking professional advice of local patent attorneys is highly recommended.
Patent applications in Indonesia should be registered with the Directorate General of Intellectual Property. Simple Patents can take about 2 to 3 years to be registered while Standard Patents are more likely to take 3 to 5 years from filing in Indonesia.
Furthermore, logistics companies wishing to make their patent protection more far-reaching may opt to file for a patent through the Patent Cooperation Treaty (PCT) route which allows for patent protection in PCT multiple member states by filling out just one patent application.
Always Enforce your Rights
Entering a new market also means being ready to enforce or defend IP rights in order to ensure that business objectives are met and therefore budget planning for enforcement is key to a successful comprehensive business strategy. When European SMEs identify infringement, they should actively enforce their rights in Indonesia through the various avenues available. While acknowledging that IP enforcement in Indonesia remains challenging due to various factors, including inexperience or lack of technical expertise and resources of IP enforcement authorities, wide-spread corruption, and lack of IP specialised courts, if SMEs manage to build a reputation for ‘being litigious’, then unscrupulous companies will be less likely to infringe their rights in the future as this would reduce their profits gained from the illegal activities and impose costs for litigation, concludes Valentina Salmoiraghi.
Edoardo Caroli, China IPR SME-Helpdesk
