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Jakarta Post

IKEA verdict: Another bad sign for intellectual property rights

  • Aga Nugraha

    The Jakarta Post

Jakarta   /   Fri, March 4, 2016   /  09:32 am

The Supreme Court'€™s recent decision in the IKEA case caused quite a stir when it went public. In the wake of the decision, investors have raised concerns over intellectual property (IP) protection in Indonesia, particularly protection for well-known brands.

The decision also captured media attention, locally and internationally, thanks to IKEA'€™s international ubiquity. The Guardian in its article punned '€œRattan Decision? Ikea Loses Rights to Own Name in Indonesia.'€ Associated Press remarked '€œThere is Samsung of South Korea, Sony of Japan, BMW of Germany, and [now] IKEA of Indonesia.'€

Reuters noted '€œthe court decision could make foreign companies even more cautious to invest in [Indonesia], which is already growing at its weakest pace since the global financial crisis.'€

In contrast, some local news outlets quickly praised the decision as '€œbold'€ and '€œfearless.'€

Following the media frenzy, IKEA'€™s local representative made an official statement basically assuring the customers that Inter IKEA System B.V remained the legal proprietor of the IKEA brand in Indonesia and will continue to carry on business as usual (notwithstanding the decision).

In brief, the Supreme Court affirmed the decision of the lower court, which found that the IKEA trademark in classes 20 and 21 (covering mainly kitchen and house wares) had not been used for three consecutive years and therefore could be removed from the trademark registry. Such things can be notoriously difficult to prove as was seen in the Intel case in 2008.

The local plaintiff managed to convince the judges of the non-use argument based on, among other reasons, a market survey held in several cities, which conveniently left out the Tangerang area, where a conspicuously large IKEA store is located. Of note, it was not a unanimous decision; one Supreme Judge made a dissenting opinion stating that IKEA is a well-known trademark that has a major presence in Indonesia; hence, there is no basis for removal from the trademark registry.

Based on the decision, it appears that any period of three consecutive years of non-use potentially makes a trademark vulnerable to a removal lawsuit, and any subsequent use after that period does not remedy the situation.

While this may help legitimate brand owners arguing their case in a trademark removal lawsuit against squatters, by the same token, this precedent may also open the floodgate for frivolous legal threats and lawsuits against famous brand owners.

If the judges found plaintiff'€™s non-use argument satisfactory, legitimate trademark proprietors could find themselves on the wrong side of the law, and the well-known marks test may be totally irrelevant to begin with in this situation.

Judging from the strong reactions and the case'€™s curious circumstances, the decision is yet another bad signal for the local and international business community and practitioners, which reflects poorly on the state of IP protection in Indonesia, particularly for well-known brands.

That said, the IKEA case is a timely reminder for us to revisit some of the lingering trademark protection-related issues here.

First, a regulatory gap in the current trademark laws significantly diminishes the protection for certain well-known brands, leaving their fate to the discretion of the courts. The Marks Act No. 15 of 2001 clearly protects well-known brands for goods and/or services of the same kind (Art. 6(1)b).

The Act, however, passes on well-known brands protection for dissimilar goods and/or services to a separate government regulation (Art. 6(2)), which has never been issued to date. The resulting legal void had led to some inconsistent court decisions in trademark disputes.

Secondly, Indonesia has a long history of trademark squatting i.e. bad faith registrations of well-known brands by locals for the purpose of selling them back to legitimate owners once they enter the Indonesian market. These '€œtrademark entrepreneurs'€ hold portfolios of foreign brands without any intention to use them in actual commercial activities.

In the early 1990s, the prices for brands buy-back arrangements reportedly ranged from US$10,000 to $100,000 depending on their popularity (Tempo, August 1992). Many foreign brand owners ended up paying the '€œransom'€ to avoid lengthy and costly legal battles, while some others fought back.

As the case law and substantial prior registrations in the trademark registry indicate, trademark squatting remains an issue, especially for famous foreign brands, effectively blocking their chance for a smooth and timely registration.

Finally, the litigation challenge. Indeed, since the breakthrough Tancho case in 1972, there have been some landmark decisions that have set a strong precedent for well-known mark cases.

This has made the argument about whether a disputed brand is famous and whether the local registration was made in bad faith relatively straightforward, particularly for well-known goods and/or services brands of the same kind (e.g. Nike, Giordano, Cannonmate, and Cornetto cases).

Some court decisions concerning bad faith registration of dissimilar goods also upheld the Article 16(3) of TRIPS to fill the regulatory gap(e.g. the Morgan and Nokia cases).

The courts have since routinely applied well-established principles from landmark well-known trademark cases leading to fairly consistent decisions and firm precedents.

Unfortunately, from time to time we can still find controversial and diametrically-opposed decisions over similar cases that deviate from the established precedents.

For instance, in another case, IKEA lost to a local manufacturer of ceramic tiles using the brand '€œIKEMA.'€ The Supreme Court simply pointed to the absence of the government regulation on well-known marks concerning dissimilar goods, and declined to apply Article 16(3) of TRIPS to fill the legal void.

Another recent example concerns the '€œBABY DIOR'€ brand, where Christian Dior lost a trademark cancellation lawsuit against the locally-registered BABY DIOR. The local defendant claimed that their BABY DIOR brand is an acronym for '€œBenar-benar Ada, Bagus, Yahud, Dia Itu Orang Riang (it really exists, good, extraordinary, he is a jovial person), which, read as a whole, sounds like a total gibberish.

Evidently, given the regulatory gap, lingering trademark squatting practices and the occasional unpredictability of Indonesian courts, protecting well-known brands in Indonesia still poses many challenges for owners. Note that well-known trademark protection is equally important for both local (including small and medium enterprises) and foreign enterprises.

High-profile trademark cases involving AQUA, Extra Joss, and KecapNasional are just a few notable examples of how local well-known marks will equally benefit from stronger trademark protection as well as legal certainty and reliable precedents.

Among other issues, the new marks bill needs to cover the protection of well-known marks for dissimilar goods without transferring the matter to an implementing regulation.

The trademark removal provision, particularly the requirement to establish non-use, also needs to be carefully drafted to prevent vagueness and misinterpretation.

Lastly, we certainly hope that a few recent controversial and questionable decisions in trademark cases only represent temporary aberrations and that the courts will continue to uphold the established principles found in firm jurisprudences (yurisprudensitetap) so as to provide legal certainty and stronger trademark protection in Indonesia.

The writer is a lawyer and intellectual property attorney with no involvement in the IKEA case.

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