Increase of Revenue among Small and Medium Entrepreneurs

through Collective Ownership of Trademark

Agung Sujatmiko

Faculty of Law, Universitas Airlangga, Indonesia

Keywords: Collective mark, infringement, lawsuit, small and medium enterprise, revenue.

Abstract: Following the system of constutive protection, the Law Number 20 Year of 2016 stipulates that trademark

protection can only by obtained by registration, by which it is mandatory for a trademark owner to file

application in order to have the trademark registered and thus protected. There are instances where many

small and medium entrepreneurs who do not have their own trademark engage in unlicensed use of other

party’s registered trademark. This research aims to figure out and to analyse the use of collective mark for

small and medium entrepreneurs in the Bags and Luggage Industry (INTAKO) of Tanggulangin, Sidoarjo,

East Java. Deductive method is employed since it is appropriate for the legal issue, by examining basic norms

that regulate collective marks against the empirical facts as found on site. It can be concluded that, the use of

collective trademark may support the revenue of small and medium entrepreneurs, since they are using

trademarks that are safe and free from threats of legal actions, which could waste their time, energy and

money. Trademark infringement lawsuits shall incur significant costs beyond the means of small and medium

entrepreneurs alike. Should they use their own trademark, such cost coud therefore be avoided. Revenue and

profit could also increase since they no longer needed to pay royalties to anyone, as they could legitimately

be using their own legitimate collective trademark instead.

1 INTRODUCTION

According to The Act Number 20 Year of 2016 on

Mark and Geographical Indications, the government

has initiated an integrated brand registration system

on line with several countries in the world by

providing easy access to registration. Mark

registration is an obligation considering the system

adopted is the constitutive system (first to file

principle). If unregistrated, then the rights of the mark

will not protected by the State. In fact, therea are

many of small and medium entrepreneurs (SMEs)

who have not register their mark.

The right of the mark as one of the Intellectual

Property Rights (IPR) has an important function in

the world of commerce, it not only distinguishes

between similar goods and or services but also serves

as a means to win the competition in seizing the

consumer market. In addition, a mark that has become

a well-known mark also serves as a valuable

corporate goodwill and asset.

For that reason mark rights need to be protected.

The concept of legal protection of the trademark

refers to the nature of exclusive rights. The material

rights of a monopoly can be used by others with the

permission of the owner of the mark.

In accordance with The Act Number 20 Year of

2016 on Mark and Geographical Indications, mark

certificates can be obtained through mark registration.

Mark registration is an obligation for an individual /

entrepreneur to have their brand rights which the

rights are protected by the State. If the mark is not

registered, then its mark does not has legal protection,

which may result in legal issues with other parties.

For that reason, SMEs in the field of creative

economy of handicraft bag and suitcase, namely the

Bags and Luggage Industrial Center (INTAKO) in

Tanggulangin, Sidoarjo Regency, East Java,

Indonesia, should have their own mark certificates, in

order to carry out their business safely and legally. If

an individual mark is not available to be registered,

so that a collective mark can be a solution. The

application of collective marks is possible because the

business of the entrepreneurs in Tanggulangin Area,

Sidoarjo, Sidoarjo Regency, East Java, Indonesia, in

general has the same characteristics. It is suitable

with the collective mark substance in The Act No. 20

of 2016 on Mark and Geographical Indications.

Sujatmiko, A.

Increase of Revenue among Small and Medium Entrepreneurs through Collective Ownership of Trademark.

DOI: 10.5220/0010052303910395

In Proceedings of the International Law Conference (iN-LAC 2018) - Law, Technology and the Imperative of Change in the 21st Century, pages 391-395

ISBN: 978-989-758-482-4

391

During this time many of Small and Medium

Enterprises (SMEs) in of Bag and Luggage Industry

at Industrial Bag and Luggage Center (INTAKO)

Tanggulangin-Sidoarjo, Eat Java-Indonesia

(hereinafter referred to as SMEs INTAKO Coop) are

using illegal foreign mark. This situation has the

potential of a lawsuit by the aggrieved mark owner.

Application of collective mark which it is provided

by law can be used as a trade mark solution in

INTAKO-Tanggulangin Area. Collective mark have

several advantages among parties and relatively

easier handling and lower cost due to shared costs.

This research is very important due to based on

existing data the registration or the ownership of mark

certificates is still relatively little. This fact means that

registration of mark required by law has not been well

implemented by small and medium entrepreneurs in

Indonesia, especially SMEs in Tanggulangin,

Sidoarjo, East Java, Indonesia. This is due to various

technical and juridical obstacles. The technical

constraints include the ignorance of SMEs to know

how the procedure of registration of the mark.

Meanwhile the juridical constraints associated with

the lack of legal awareness of the protection of mark

rights law through registration. The purpose of this

research is to support the strategic plan in human

resources development related to the business of Bag

and Luggage Industry at Industrial Bag and Luggage

Center (INTAKO) Tanggulangin-Sidoarjo, Eat Java-

Indonesia. The development of human resources is

intended primarily for SMEs INTAKO Coop. Many

of the entrepreneurs there still dependent to use well-

known mark on their product without permission. It

is illegal to use unauthorized use of famous mark. this

illegal act clearly inhibits the government's

performance program in development of human

resource, especially for the SMEs INTAKO Coop.

The application of collective mark is a solution for

SMEs INTAKO Coop to develop their business in the

future.

This paper will discuss the advantages and

benefits of the application of collective mark in order

to increase revenue and a secure tool for striving for

small and medium entrepreneurs.

2 MATERIAL AND METHODS

The material on the main issues of this paper is an

analysis of the application of collective marks for

entrepreneurs, especially SMEs INTAKO Coop by

using deductive method to identify problems and

facts. The problem are the infringement of SMEs who

unauthorized use foreign mark; and their product

need collective mark to increase the income. The

deductive method is applied by outlining the rule of

law of the mark within the The Act No. 20 of 2016 on

Mark and Geographical Indications which it is

associated with the facts.

3 RESULT AND DISCUSSION

The results of previous studies show many

wellknown mark are found in some places, among

SMEs INTAKO Coop and they use many well-known

mark without their permission. The ego and desire to

gain biggest profit of the entrepreneurs make them

forget and close their eyes that what they are doing is

a violation of the rights of other people's mark.

Strangely, The Local Government has made the

INTAKO-Tanggulangin Area as a target of area

fostering to develop their product by use well known

product without any permission from the owner mark.

On the other hand law enforcement officials are also

permissive, so the violations continue to this day.

That fact indicates that a violation of a well-known

mark is already a routine thing without any solution

(Sujatmiko and Agung, 2016).

In accord with Article 1 point 4 The Act No. 20

of 2016 expressly states that collective marks are

marks used on goods and / or services with similar

characteristics regarding the nature, general

characteristics, and quality of goods or services and

their controls that will be traded by several persons or

legal entities together to distinguish with other similar

goods and / or services. In bags and luggage products

manufactured by SMEs INTAKO Coop-

Tanggulangin,Sidoarjo have opportunity to fulfill the

requirement to get the collective mark. It can be seen

from the characteristics of the goods, but the use of

collective mark has not been applied there.

The right to the mark is the right to intangible

property or also known as incorporeal property. The

rights can have a high value if the mark has a well-

known mark that has been widely known by

consumers (Sujatmiko et.all, 2016). Popularity of a

mark brings the impact that the mark is often

subjected to a breach in the form of being used by

unlawfully charged parties. Unauthorized use of the

mark owner in the exactly the same or almost

identical form. Such use is obviously detrimental to

the owner of the mark, since it can reduce sales

turnover resulting in reduced profits, and it will

mislead the consumer of the mark concerned.

Therefore, mark rights need to be protected so that the

owner does not incur a greater loss in relation to the

iN-LAC 2018 - International Law Conference 2018

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violation. For instance, the protection is in the form

of statutory provision.

Article 1 point 5 in The Act No. 20 of 2016 on

Mark and Geographical Indications, clearly states that

the right to a mark an exclusive right granted by the

State to the owner of the Mark registered in the

General Register of Marks for a certain period of time

by using the Mark itself or granting the other party

permission to use it. Such privileges are essentially

exclusive in nature which can only be exercised by

the rights owner, while others may not use them

without their owner's permission (Fitzgerald and

Fitzgerald, 2004). Therefore, the right needs

protection. The concept that the special mark rights

need to be protected, in line with the understanding of

rights as proposed by Soedikno Mertokusumo that

those rights are legally protected interests, while the

interests are the individual or group demands that are

expected to be fulfilled, (Mertokusumo, 1989). Also,

this is in line with what Achmad Zen Umar Purba

said that as part of Intellectual Property Rights, the

right of the mark is part of property, and as a right, it

is a property or asset (intangible asset), (Purba, 2005).

According to Keith E Mascus, between the

intangible and the tangible entity to a certain point ,

both two rights are the same. However, the prominent

difference is in the aspect of exclusivity. It is the

exclusivity that gives rise to rights and rights is

nothing but compensation for all the efforts that the

intellectual owner has incurred or sacrificed (Purba,

2005).

Since the rights of the marks has a special nature

or character, the right may be preserved against any

person, so that if any other person has a bad faith or

intent to deceive (mala fides) to apply such rights

without the consent of the holder of the right to the

mark, there has been a violation of such special rights.

In this case lies the urgency of legal protection of the

rights to the brand. In general, acts that lead to mark

impersonation befell the famous mark that have been

known by a good reputation by consumers,

(Holloway, 2004).

The above mention happens due to the famous

mark has a good reputation among consumers. There

are three reasons for violation of a well-known mark

(Sulistyobudi, 2003).

a. The offenders will gain material benefits quickly

and surely without bothering to build a brand

reputation;

b. The offenders will not take the risk, if they have to

create their own mark new, because the cost is too

expensive;

c. The difference in profits derived from the sale of

goods with fake mark is much greater when

compared to the profits obtained when selling

original goods with their own mark that is

relatively new and not widely known by

consumers, because counterfeiters do not have to

pay research and development costs, advertising

and promotion and taxes.

These three reasons are the main attraction for

offenders to use other people's mark regardless of the

risks they have to face if the trademark owner

complains to law enforcement officials, on the

grounds that there has been a breach of the mark.

Mark registration is a obligation by every single

owner of the mark because the stelsel adopted in The

Act No. 20 of 2016 on Mark and Geographical

Indications is a constitutive system. In this system,

the obligation to register the mark should not be

distorted, and it is compulsory. If a trademark is not

registered, it will not obtain protection from the State,

meaning that if a mark is used by another party, and

then the other party registers its mark and is declared

accepted, the first owner of a mark does not obtain

legal protection from the State. This is based on the

first to file principle system, which means that the

first registrar will get protection, not the first user.

If a person's trademark is used by another person

without the consent of the owner, the trademark

owner may file a claim of infringement to the

Commercial Court (Pengadilan Niaga) with the

demand that the offending activity be terminated and

a request or claim for damages. In addition to the

brand owner, the licensee may also file a lawsuit. In

addition, the owner of a well-known mark may file a

lawsuit based on a court decision.

On that basis the function of a trademark

registration is to protect the interests of the trademark

owner from acts of a trademark infringement

committed by an irresponsible party. The interests of

the mark owner are highly respected and respected in

the law, as they are related to the economic rights

attached to themark. Economic rights provide income

to the owner, so it must be protected from acts that

lead to violations.

The INTAKO Coop craft products have gained

recognition not only from local communities in

Indonesia but also from the world. Some countries in

Europe also like Italy also imports products made by

INTAKO Coop. A sustainable improvement support

and coaching by the local government has motivated

the handicraftsmen bags, suitcases and the like to

achieve good quality, so that it can penetrate the

international market. Therefore, Industry based on

home industry that needs to be developed in the

future. But behind this succces, many products of

INTAKO Coop do not have their own mark. This is

Increase of Revenue among Small and Medium Entrepreneurs through Collective Ownership of Trademark

393

certainly also detrimental to the craftsmen, because it

can reduce their profits. Products have been sold

without mark, of course these situation are low of

value. For that, the craftsmen need to register and use

the collective mark as their business solution.

In pursuance of Article 46 paragraph (1) Act

Number 20 of 2016, The application for registration

of Trademarks as a collective mark shall only be

accepted if the application is clearly stated that the

mark shall be used as a collective mark. Moreover,

the provisions of paragraph (2) it is stipulated that the

application shall be accompanied by a copy of the

shall at least contain provisions concerning paragraph

(3):

a. The nature, general characteristics, or quality of

goods and / or services to be produced and traded;

b. Supervision over the use of collective marks;

c. Sanction for violation of terms of use of Collective

Marks.

In addition to the empowerment of Micro, Small

and Medium Enterprises, the Government may

development of the said business and / or public

service (paragraph 4).

For collective trademark applications, an

equipment examination is performed similarly to the

regular/ ordinary mark (non-collective mark)

contained in Articles 4 through 7 and 46. This means

that procedures and processes shall be the same as

those of regular/ ordinary mark (not collective

marks). Similarly, the substantive examination

should also be the same.

INTAKO bag entrepreneurs as SMEs craftsmen

after becoming members of the INTAKO union/

coop, they are able to increase their income up to fifty

percent (50%) of income before they become

members of the coop, (Azqiyah, 2016).

Generally they sell their products using foreign

mark without permission. They continuous error and

should be stopped by using a collective mark. Against

the frequent literacy of trademark by the apparatus,

they are still reluctant to use collective mark, arguing

that their products are so pouler among consumers

and the quality of their products is also inferior to the

quality of imported products, (Azqiyah, 206).

In addition to the above reasons, the craftmen

argue that it is very rare the literacy about collective

mark, so that they do not know in detail how to

administer and register a collective mark. Therefore

they are reluctant to use a collective mark. According

to Agus Sardjono, one of the reasons small and

medium entrepreneurs do not want to register a mark

due to a bureaucratic procedure and the mark is not

the main factor consumers to buy their products,

(Sardjono et.all, 2013). In terms of using a collective

mark, their business will be better known to

consumers, because the collective mark will have a

tremendous impact if advertised vigorously through

the mass media.

If they want to use and apply a collective mark,

profits and revenues will increase again, because the

use of collective mark can be efficient and riskless if

sued by others. Court fees can be reduced, as they use

a collective mark that is legal and protected by the

State.

Legal protection provided by the State to small

and medium entrepreneurs is very useful to ensure

legal certainty; prevent the occurrence of violations

and crimes; so that justice is expected to be given to

the parties who are entitled and provide benefits to the

community, (Fathanudien, 2016). This is in line with

the opinion Hayyan ul Haq which states, provide

benefits and happiness for the wider community is the

goal of the establishment of the State listed in the

Constitution of the State, (Haq, 2014).

Therefore, the utilization of collective mark is

highly recommended for SMEs in INTAKO Coop-

Tanggulangin, so that they can work safely and

legally in the future. On the other hand, local

governments are doing literacy and fostering

entrepreneurs to provide technical guidance for

collective mark registration. The technical guidance

is in the form of technical assistance in collective

mark registration.

4 CONCLUSIONS

The Small, Medium Entrepenuers are reluctant to

apply collective ownership of trademarks for several

reasons, namely ignorance of the obligation to

procedures; and the assumption that without using

their own brand of business, their business have

already been profitable. On the other hand, their

reluctance to use a well-known foreign trademark

belonging to another party, is prone to lawsuits in

court that cost a lot. If they use a collective mark, their

income will increase, which derives from benefits and

expenses that are used for the benefit of the court can

be saved as a form of net income. The use of the

Collective Mark will be free from other parties'

claims, so that they can work in a safe and legal

manner.

iN-LAC 2018 - International Law Conference 2018

394

ACKNOWLEDGMENTS

Acknowledgments are conveyed to all parties who

have assisted the implementation of this research,

especially to the leaders of the Faculty of Law and

University of Airlangga for the research funding

provided.

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