Legal Reforms of Trademarks in Order to Increase Investment in

Indonesia

Syafrinaldi

, Rani Fadhila Syafrinaldi

and Heni Susanti

Faculty of Law, Universitas Islam Riau, Jl.Kaharuddin Nasution No.113, Pekanbaru, Indonesia

Faculty of law, Universitas Gadjah Mada, Yogyakarta, Indonesia

Keywords:

Protection of Trademarks, Investment, Economic Development.

Abstract:

Intellectual Property Right is an important aspect for the economic growth of a developing country. One of

the ways to strive the economic system is through investments. It is believed that Foreign Direct Investment

can be a measurement tool for a country’s economic growth, FDI may increase capital formation and create

job opportunity, promote exports such as manufacturing, access of skilled labor to production networks at the

international level and creating some brand names as well as technology transfer and spillover effect. These

advantages will automatically contribute to a country’s economic growth which will help a developing country

to eradicate poverty and achieve peoples’ welfare. However, these beneﬁts could not be achieved if a country

lacks national platforms for intellectual property protection. Country should be able to develop technology

rather than relying merely on natural resources and for this exact reason, an adequate protection of IPR is very

necessary. The absence of adequate protection for such rights could make investment in intellectual works

less attractive thus affecting economic development and the expansion of world trade. This paper introduces

empirical studies of trademarks protection and how it can help economic growth in a developing country,

provides an overview of the topic as well as ﬁndings on the issues.

1 INTRODUCTION

Information and communications revolution began in

the 1800s when the industrial revolution caused mil-

lions of people to change their lifestyle. Headrick ar-

gued that the Information Era has no beginning, as it

is as “old as humankind.” However, he suggests that

“in the course of history there have been periods of

sharp revolutions in the amount of information that

people had access to and in the creation of informa-

tion systems to deal with it” (Headrick, 2000). As

we entered the 21 st century, the information era is

marked by the rapid advance of science, the advent

of online world and digitalization as well as the in-

formation system and technology that transform peo-

ple’s lives. Globalization is a real result of advances in

science and technology. Intellectual Property Rights

(Consideration of Law No. 28 of 2014) is an im-

portant matter in the ﬁelds of science, technology,

art and literature that has an important function in

nation-building and promoting public prosperity that

has been mandated by the constitution namely the

1945 Constitution of the Republic of Indonesia. The

existence and very broad development, especially in

this ﬁeld of knowledge, requires a process or effort to

increase protection and legal certainty for citizens or

owners of intellectual property rights.

One of the things that deserves the attention of the

state is an establishment of legal protection of owner-

ship rights granted by the state to every citizen. The

same type or form of legal protection efforts for IPR

holders must also be provided to IPR which is ac-

knowledge as part of efforts to protect human rights

(see also article 27 (2) of the UN Declaration of Hu-

man Rights). These two things are basically identical

due to the fact that both rights are legal objects and

are things that can be owned individually or in groups

by legal subjects.

The Agreement on the Establishment of the World

Trade Organization (WTO) on April 15, 1994, inten-

siﬁed globalization in the ﬁeld of law that is closely

related to the scope of global trade development

and intellectual property rights and their attachments

namely Trade Aspects Related to the Form of Intellec-

tual Property Rights Agreement (TRIPS Agreement).

WTO is a rule of law in the ﬁeld of trade between

countries at the global level and has a high level of

enthusiasm to eliminate all bad business or trade prac-

Syafrinaldi, ., Syafrinaldi, R. and Susanti, H.

Legal Reforms of Trademarks in Order to Increase Investment in Indonesia.

DOI: 10.5220/0009159203730378

In Proceedings of the Second International Conference on Social, Economy, Education and Humanity (ICoSEEH 2019) - Sustainable Development in Developing Country for Facing Industrial

Revolution 4.0, pages 373-378

ISBN: 978-989-758-464-0

373

tices.

In the development of international trade which

will continue to grow, such as goods and services as

human intellectual products, has a very relevant role

nowadays. An economic value that has been inher-

ent in intellectual property. Therefore it can be said

that with the clarity of elements and standardization

of law in the ﬁeld of protection of intellectual prop-

erty rights, a new legal concept has emerged, namely

the globalization of law. Intellectual Property Rights

consisting of copyright, patent, trademarks, varieties

of plants, trade secret, industrial design and integrated

layout design is a powerful weapon in the economic

development of a nation to become a developed coun-

try (welfare state). One of the WIPO strategic realign-

ment program is ”The challenges we face include ad-

dressing the stress on patent and copyright systems as

a result of rapid technological change, globalization

and increased demand, reducing the knowledge gap

between developed and developing countries, and en-

suring that the IP system continues to serve effectively

its fundamental purpose of encouraging creativity and

innovation in all countries”.

Many international rules and regulations have

been established by the international community with

the aim of providing legal protection in a simpler way.

Madrid Agreement on International Trademark Reg-

istration, 2196 and the Protocol relating to the Madrid

Agreement on International Trademark Registration,

1989 and General Regulations based on the Madrid

Agreement on International Trademark Registration

and Related Protocols of the Agreement, 2008 is an

international legal regulation in the ﬁeld of trade-

marks which provides a way easier to register trade-

marks internationally. Moreover, to support the coun-

try’s economy, the protection of geographical indica-

tions and the use of traditional knowledge must be in-

creased.

2 THE IMPORTANCE OF

INTELLECTUAL PROPERTY

RIGHTS FOR ECONOMIC

DEVELOPMENT

One of the ways to strive the economic develop-

ment is through investments.“Many authors believe

that Foreign Direct Investment could be an engine of

a country’s economic growth, because FDI may en-

hance capital formation and employment generation,

promote manufacturing exports, bring management

know-how, access of skilled labor to international

production networks and established brand names and

technology transfers and spillover effects (SAMAD,

2010). At the most fundamental level, FDI is a

forward-looking decision that binds a multinational

to a long-term operation in a host nation. As such,

any factor that raises the expected proﬁts of such an

operation will raise FDI. In our case, stronger IPRs

can raise the ﬁrm’s perception that it will earn and re-

tain higher returns on its protected knowledge-based

assets” (Ghosh and Yamarik, 2019).

“FDI can help the improvement of environment

and social condition in the host country by relo-

cating ‘cleaner’ technology and guiding to more

socially responsible corporate policies” (Kurtishi-

Kastrati, 2013). Many other potential advantages in-

clude reduces in scarcity of capital, raises labor pro-

ductivity, reduces income disparities, increases com-

petition and reduces foreign exchange gaps. These

advantages will automatically contribute to a coun-

try’s economic growth which will help a develop-

ing country to achieve people’s welfare and alleviate

poverty.

However, these beneﬁts could not be achieved if

a country has a weak national platforms and a weak

intellectual property rights protection. Intellectual

Property Rights is a set of given by a state to the

creator and these set of rights are protected by the

state for a limited period of time from unauthorized

commercial exploitations. These rights include copy-

right, trademarks, geographical indication, patent,

trade-secret, industrial design, as well as plant vari-

ety rights. Superior competition in the current world

economy in the development of the latest technology

related to natural resources and traditional produc-

tion factors and this reason cannot be supported with-

out adequate protection of intellectual property rights.

The absence of adequate forms of legal protection for

these rights (Seyoum, 1996) can make investments in

the creative world.

Intellectual property right is indeed a powerful

tool for economic growth and development of a na-

tion (Syafrinaldi, 2010). Data shows that generally

exports by developing countries in the form of nat-

ural resources became less relevant for the country’s

development. The percentage of deterioration of ex-

port reaches 70% in 1900 and was down by 20% by

the end of the 20th century (see Resources Matter,in

the Message of the Director General of WIPO). The

data tells us that, relying on merely the natural re-

sources of a country in fact cannot bring prosperity

and welfare towards the state. However, by relying on

the intellectual property rights, there have been many

countries that have given us a deﬁnite proof that those

said rights can help transform the country into a de-

veloped country (industrialized country). The intel-

ICoSEEH 2019 - The Second International Conference on Social, Economy, Education, and Humanity

374

lectual property is a constant economic potential that

will continue to undergo a development and progress

through creative and innovative work.

“Various technology development in various

ﬁelds, that is either simple in nature or high tech,

is the result of human invention that is patented and

thus protected by the law, by both international and

national provisions. Legal protection of the intellec-

tual property rights contain economic rights” (Ng-

Loy, 2008) that are high in value as well as moral right

(Davis, 2012).

According to this sense, it can be concluded that

the law plays an important role and determine the eco-

nomic development of a society either local, national

and international. More over, in this globalization era,

the necessity of the law is not only needed by the

public and the justice seekers in a case at the court

only, but also by the business actors, farmers and tech-

nocrats who also rely on the law which purpose is to

provide protection for their own profession.

According to the provisions of Article 15 of the

Trade Agreement concerning aspects of Intellectual

Property Rights (TRIPs): “Any sign, or any combi-

nation of signs, capable of distinguishing the goods

or services of one undertaking from those of other

undertakings, shall be capable of constituting a trade

mark”. Things that can be explained in this sense.

First, trademarks are interpreted in substance: a sign.

It can be denominations, letters, numbers, color com-

binations, or a combination of these elements. Sec-

ond, the trademark is determined by its function, the

mark must be distinctive. Initially trademark law was

designed to meet the objectives of public policy re-

garding consumer protection. This prevents the pub-

lic from being misled about the origin or quality of the

product. Third, the trademark is interpreted in a legal

term: “This is a type of industrial property. Trade-

mark protection gives owners the exclusive right to

use signs to identify goods or services produced or

authorize other parties to use them in return for pay-

ment. Practically, the owner can be a physical or le-

gal person, (the majority of trademarks are owned by

companies)” (C¸ ela, 2015).

Madrid Agreement acknowledge that interna-

tional trademarks registration is done in one of the

trademarks ofﬁce of the member countries or at the

ofﬁces of the WIPO by ﬁlling in the registration form.

With those procedures, trademarks has obtained a

legal protection internationally in member countries

without having to perform the registration in their re-

spective countries. The principle of the ﬁrst to ﬁle

apply to this international trademarks registration due

to the fact that the law only provides protection for

registered trademarks (constitutive principle).

“The international registration referred to by the

Common Efﬂuent Regulations of the Madrid Agree-

ment concerning the International Registration of

Marks and the Protocol Relating to that Agreement

is a trademarks registration made in accordance with

the Madrid Agreement or the protocol or in accor-

dance to both. The protocol should be seen as the

law as a tool of economic development in an effort

to attract foreign investors to Indonesia. Therefore,

the participation of Indonesia to become a member

of the Madrid Agreement and its Protocol must be

really bring beneﬁts for the development of intel-

lectual property rights in Indonesia, especially trade-

marks”(Wipo, 2018) The trademarks act not only pro-

vides protection towards foreign good and services

but also to the goods and services of domestic product

from small, medium and large business. Past experi-

ence of Indonesia that is not so good in the develop-

ment of the law in the ﬁeld of trademarks should not

be happening again. The IP system can support eco-

nomic, social and cultural development if it is used

strategically(Wipo, 2018).

2.1 The Necessity of Bold Legal

Measures from the Government of

President Jokowi

Basically, the concept of IPR covers intellectual prop-

erty rights which are inherent to the owner and are

permanent or exclusive, and the rights obtained by

other parties upon permission from the owner are tem-

porary. “The results of this ability to think are ideas

that are then embodied in the form of creation or in-

vention. While the rights obtained by other parties on

the permission of the owner, as well as the right to re-

produce, the right to use certain products or the right

to produce a certain product”(Muhammad, 1982).

There are many laws and regulations in Indone-

sia concerning intellectual property rights which only

act as passive laws, because in reality these laws have

not been implemented to the utmost. This will affect

the potential economic strength of existing provisions

that cannot be achieved in the community and state.

it can be said that the effectiveness of law and law

enforcement in Indonesia, especially in the ﬁeld of

intellectual property rights is not at its limit.

“It is time for the enactment of Act No. 20 of 2016

concerning trademarks and geographical indications

to be followed up with updates and to be incorporated

(Syafrinaldi, 2010) with a variety of international pro-

visions in the ﬁeld of trademarks, such as the Madrid

Agreement and its Protocol as well as the Singapore

Treaty, 2006. This is the right moment for Indonesia’s

Government under the leadership of President Joko

Legal Reforms of Trademarks in Order to Increase Investment in Indonesia

375

Widodo and Muhammad Jusuf Kalla to use the law

as a tool of economic development and as well as the

ability of the law to attract the investors to invest their

funds in Indonesia through some actions. First, In-

donesia should ratify the Madrid Agreement and its

Protocol. Secondly, implementing the Act No. 20 of

2016 concerning trademarks and geographical indica-

tions to the maximum.”

Trademarks and geographical indication mea-

sures, aspects of geographical indications that ex-

ist in Indonesia must be of particularly serious con-

cern to the country, which in this case is the govern-

ment at both the central and regional governments.

this is because in various regions still have a lot of

wealth and considerable economic potential that can

be done and formed into a creative economy. In

fact the conditions in many areas is almost the same,

only a small percentage of areas in Indonesia that

already brought up the aspects of the commercial

value of geographical indications, for example, “the

Kopi Arabika Toraja, Kopi Arabika Gayo, Kopi Ara-

bika Kintamani Bali, Tembakau Hitam Sumedang,

Tembakau Mole Sumedang, Susu Kuda Sumbawa,

Kangkung Lombok, Madu Sumbawa, Beras Adan

Krayan, Kopi arabika Bajawa Flores, Vanila Kepu-

lauan Alor, Ubi Cilembu Sumedang, Salak Pondoh

Sleman, Kopi Liberika in Meranti, Riau, and so on”.

Geographical Indication is a sign that shows the

region of where the goods natively came from based

on its geographical environmental factor including its

natural factor, human factor, or a combination of both

said factors which give reputation, quality and partic-

ular characteristic to the produced goods and/or prod-

ucts (Article 1 Number 6 of Act No. 20 The year

2016 concerning Trademarks and Geographical Indi-

cations).

Trademarks are generally different from other ge-

ographical indications that are not related to natural

and human factors. in this case the deﬁnition of geo-

graphical indication is the exclusive right granted by

the state to the holders of registered geographical in-

dications, the meaning is that if as long as reputation,

quality and characteristics are the basis of geographi-

cal indications still remain.

(hashita, 2019) India is able to produce more prod-

ucts of geographical indication that could depend on

from the various districts, then rest assured that the

Indonesian economy will be better.”

Filing for geographical indication registration is

an absolute requirement to get the protection of the

law and this is what makes geographical indication

different with the designation of origin that does not

require the registration. “A registered Geographical

Indication enjoys a legal protection, which persists as

Table 1: The export value of Indonesia and some countries

in the ﬁeld of GI.

No State Product Volume

(Tons)

Value

1. Indonesia Coffee 900,000 $1.2

2. Thailand Rice 1.400.000 12,23

Thai

Baht

3. Sri Lanka Ceylon

Tea

- $1.5

4. India Basmati

Rice

5.000.000 $250

far as the features and or the quality on which the pro-

tection has been conferred still exist (Article 56 para-

graph (7) of Trademarks and GI Act).” Which exists

like in Thailand, for coverage of geographical indica-

tions in that country according to B3 which include

such as Rice, Silk, Grapes and Spirits. compared to

the provisions contained in Article 2 paragraph (2) of

Government Regulation No. 51 of 2007 goods can

be in the form of products in agriculture, foodstuffs,

handicraft forms, or other types of goods. Another

interesting example of the geographical indication to

pay close attention to is Ceylon Tea from Sri Lanka

which is the best product of the geographical indica-

tion that has a very high economic value. “The con-

tribution towards economic provided by Ceylon Tea

is directly and indirectly employed by the tea indus-

try”(Hasitha, 2013) :

• 3Rd Largest Foreign Exchange earner.

• Generates an annual income of USD 1.5 Billion.

• Covers entire food import bill of the island.

• Constitute 65 percent of the nation’s Agricultural

Export revenue.

• Contributes 2 percent to the country’s GDP.

• 2 Million People (10 percent of population)

According to data released by the Agency for

the Development of Exports of Agricultural and Pro-

cessed Products, another thing that can be explained

is that the country of India is also one of the countries

in the world that is able and has been able to enjoy

the results and economic beneﬁts of geographical in-

dications, for example is the type of basmati rice. In-

dia stated that the export of basmati rice India reached

the numbers of 370.000, 57 tons from April 2013 until

March 2014 with the value of Rs 2,929,900,000.96 or

worth more than Rp 3 Trillion,- . The number of this

exports rose by 10,000 tons from the previous year.

India provides limitations on the geographical in-

dication, “in relation to goods, means an indication

ICoSEEH 2019 - The Second International Conference on Social, Economy, Education, and Humanity

376

which identiﬁes such goods as agricultural goods, nat-

ural goods or manufactured goods as originating, or

manufactured in the territory of a country, or a re-

gion or locality in that territory, where a given quality,

reputation or other characteristic of such goods is es-

sentially attributable to its geographical origin and in

case where such goods are manufactured goods one

of the activities of either the production or of process-

ing or preparation of the goods concerned takes place

in such territory, region or locality, as the case may

be” (Sreenivasulu, 2013).

Traditional knowledge is one of the ﬁeld of IP

that also receives very little attention from Indone-

sian government. Therefore, traditional knowledge

has not yet been able to be displayed to the surface op-

timally to become national commodities that could be

commercialized. The terminology of the ”traditional

knowledge” is used for ﬁelds which include tradi-

tional knowledge (TK), genetic resources (GRs) and

traditional cultural expressions (TCEs). “Traditional

knowledge (TK) is deﬁned as ”knowledge, know-how,

skills and practices that acres developed, sustained

and passed on from generation to generation within

a community, ﬁlls up forming part of its cultural or

spiritual identity”(Wipo, 2018).

TCEs have strong ties with the social and cultural

identity of the original people of a local, including

in it know-how and skills which it possessed in accor-

dance with the values and trust of that local communi-

ties. The legal protection given is a means of an effort

to promote creativity, enhance cultural diversity and

preserve local cultural heritage. In this context, the

modating the protection in the provisions of article 40

and other related article. This was seen as a progress

in the copyright ﬁeld compared with the Act No. 19 of

2002 concerning Copyrights, although there are still

some provisions that are debatable.

Genetic material can be in the form of natural ma-

terials such as plants, animals, microbial decomposi-

tion or other original materials that have a hereditary

unit function. Genetic resources (GR) if associated

with genetic material that has an actual value. for

example, in the form of some plant material, animal

origin, or microbial decay origin, such as medicinal

plants, agricultural plants, and animal breeds.

Indonesia is still not too late for excelling in the

ﬁeld of traditional knowledge if the current open op-

portunities is not wasted. The commitment of the

government is expected to promote the intellectual

property as a strategic plan to promote the economy

of the nation. IPR management system that it is re-

quired for the golden opportunity can be achieved for

the future of justice and peace.

3 CONCLUSION

“Investment is inﬂuenced by various factors, such as

political, economic, legal and social culture. espe-

cially in the ﬁeld of intellectual property law, the pro-

visions of the legislation in the ﬁeld of intellectual

property must be able to provide guarantees to ev-

ery citizen that the national legal rules of Indonesia

must be in accordance with international provisions.

Enactment of Law No. 20 of 2016 concerning Trade

Marks and Geographical Indications must be immedi-

ately followed by Indonesia’s participation as a par-

ticipant in various international provisions in the ﬁeld

of trademarks, such as the Madrid Agreement and its

Protocols and Singapore. Agreement, 2006.”

There are numerous things that determined mat-

ters relating to investment, those are political, eco-

nomic as well as social. Speciﬁcally, stipulations of

laws and regulations concerning intellectualproperty

law shall provide a certainty that Indonesia’s national

laws are in accordance with the international provi-

sions.

In Joko Widodo and Jusuf Kalla administration

era, there are several actions and efforts needed to be

accomplished in order to carry out and execute the

laws to the utmost and to ensure that these laws would

attract and inﬂuence investors to invest their funds

in Indonesia. First, Indonesia must immediately rat-

ify the Madrid Agreement and its Protocol and adapt

it to the legal character of the nation. Second, the

Government must immediately assign and create pi-

lot projects in the ﬁeld of intellectual property that

the goal is to achieve prosperity for every citizen of

Indonesia

The set of laws and regulations which shall ex-

ist in the ﬁeld of intellectual property rights must be

utilized to the utmost and shall be used as a tool in

the protection and development of the creative econ-

omy in Indonesia. These laws shall be able to guaran-

tee creativity and innovation as well as ensuring that

these innovations are protected by law. It is very nec-

essary that the Government is able to show good faith

as well as a strong and sincere political will that the

provisions of the Act in the ﬁeld of intellectual prop-

erty rights are no longer only existing laws, but rather

feasibly implemented so that in the future Indonesia

will be able to rely on intellectual property as a result

of intellectual creation of human minds that are able

to bring prosperity to the nation and state.

Legal Reforms of Trademarks in Order to Increase Investment in Indonesia

377

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