IP in the Pharmaceutical Sector
From HAKItree
Indonesia’s geography and unique socio-economic conditions present a significant challenge for pharmaceutical companies seeking to do business there. As one of the fastest growing markets in the region Indonesia also presents significant opportunities. Success is possible, with a robust strategy and strict and transparent compliance with Indonesia’s regulatory regime.
Selection, clearance and registration
Regulation
Trademarks are registered with the Trade Mark Office (TMO). However, all drugs intended for distribution in Indonesia must also be approved by and registered with BPOM before they are imported, marketed or sold in Indonesia.
It usually takes between two and three years for a trademark registration certificate to be issued. Once an application is filed, the TMO examines it to check that all formalities have been complied with and that there are no prior conflicting marks. If objections are raised, the TMO will issue an office action and the applicant then has 30 days in which to respond. If the application is accepted by the TMO, it will be published in the Government Gazette. At any time within three months of publication, it may be opposed by third parties on various grounds, including similarity of the mark to prior registered marks.
The issuance of an office action will delay the issuance of a registration certificate by 6-12 months. The opposition of a trademark application can delay registration by 12-18 months.
Once registered, a trade mark is protected in Indonesia for 10 years from the date of filing. The registration can be renewed for subsequent periods of 10 years. Applications for renewal can be filed up to 12 months before expiry of the then current registration period, but not afterwards.
Classification
The TMO applies the International Classification of Goods and Services. However, the TMO does not require the strict classification of goods or services covered by a trademark. For example, it is possible to apply for the class heading or a general category of goods, such as "vaccines" in class 5.
This can cause problems as it is not possible to amend a trademark application once it has been filed, except by deleting words from the goods or services specification, as the case may be. For example, if an applicant is filed for "vaccines for human use" in class 5, the trademark applicant cannot subsequently restrict the goods to "vaccines for human use in the treatment of avian influenza".
Confusion with other marks, INNs
Generally speaking, any trademark can be registered provided that it is distinctive, is not descriptive and is not similar to a prior registered mark. With regard to the World Health Organisation’s (WHO) International Non-Propriety Names (INNs), so long as a proposed trademark is not confusingly similar to an INN, it should be acceptable to registration.
It should be noted that the TMO takes a slightly less strict approach when considering similarity and the distinctiveness of trademarks in class 5.
Non-traditional trademarks
Indonesia does not allow the registration of non-traditional trademarks, such as colour, single shapes, taste or sound. The Trade Mark Law defines a trademark as a sign in the form of a picture, name, word, letters, figures or composition of colours. Colour trademarks are not registrable although it is is at least theoretically possible to register a composition of colours. The Trade Mark Law is under review and it is proposed to extend the classification of trademarks to include 3D marks.
Trademark use requirements
Once registered, a trademark must be used in exact accordance with the mark as registered. If a trademark is not used commercially for a consecutive period of three years from the date of registration, or any consecutive three year period thereafter, the registration can be deleted by a third party making application to the court on the ground of non-use.
There are divergent views in the Indonesian Courts as to what constitutes "use in accordance with registration".
Trademark licences
The Trade Mark Law states that unless a licence agreement has been recorded at the TMO it will have no effect on third parties. However, as of 2008, the regulations for licences have not been implemented and it is not yet possible for licences to be recorded. It is recommended that trademark licences be informally deposited with the TMO to put the licensor and licensee in the best possible position. The use of a mark by a licensee is deemed to be use by the owner of the mark. A licensee, as well as the trade mark owner, can commence infringement proceedings.
Parallel imports
Preventing parallel imports is largely a matter for pharmaceutical companies and their distributors - except in the case of illegal imports (smuggled goods).
Parallel imports are permissible per se under the Trade Mark Law. There is no specific provision in the Trade Mark Law on parallel imports. Under Article 4 of the Law, the registration of a trademark gives “the exclusive right granted by the State to the owner... to himself use said Mark or to grant permission to another party to use it.”
In the case of illegal imports, such goods will usually breach Indonesia’s drug registration and labeling requirements. With the assistance of BPOM, illegal imports can be seized and destroyed.
Anti-counterfeiting and enforcement
Counterfeits
The prevalence and circulation of illegal drugs in Indonesia has reached alarming levels in recent years. It is estimated that 40% of drugs are counterfeit or distributed without a licence.
According to the University of Indonesia’s Institute for Economic and Social Research, in 2005 the total losses suffered in terms of taxes exceeded US$65.4 million in one year. Accordingly, it is a commercial issue as well as a significant health and public safety issue for Indonesia and the region as a whole.
In July 2007, the Police uncovered 16 containers worth of illegal drugs in two warehouses with an estimated 53 million units. At the time, this was the largest illegal medicine seizure in the world. Among the medicine found were for the treatment of coronary disease, cancer to over the counter drugs. In addition, all types of medicine were found including over the counter (OTC), generics and prescription drugs. The Drug Anti Counterfeiting Sub Committee of the International Pharmaceutical Manufacturers Group (IPMG) estimates that 10% of drugs sold in Indonesia. According to the Indonesian Anti-Counterfeiting Society (MIAP) around 60% of counterfeits are imported. The remaining 40% are manufactured locally.
Counterfeit drugs found in the Indonesian market fall into four categories:
- drugs with no active ingredient (API)
- drugs with an inadequate level of API
- drugs with a “different” chemical ingredient
- drugs with sub standard product quality due to significantly inferior production practices.
According to the Indonesian Anti Counterfeiting Society (MIAP), around 60% of counterfeits are imported - predominantly from China. The remaining 40% are produced by local "home industries".
Illegal drugs are predominantly sold on the black market at unauthorized outlets. However, illegal drugs can also be found at authorized outlets.
There are a number of factors that contribute to the high prevalence of illegal drugs in Indonesia:
- low health literacy coupled with low awareness
- inadequate law enforcement and non-deterrent fines
- Indonesia's complicated geography and distribution channels
Access to drugs through the Internet has increased cross–border trade and represents another opportunity for counterfeiting.
Illegal drugs are typically offered at lower prices. Lower prices are usually explained as being possible by virtue of ‘direct sources’, ‘shorter distribution chain’, ‘purchased in large quantity resulting in discount’, or ‘lower profit margin’.
Socio-economic conditions also make pharmaceutical products, especially new molecules, unaffordable to most Indonesian consumers. This lack of access makes low-priced counterfeit products quite attractive.
A significant contributing fact is the lack of compliance to regulations that require prescription medication to only be distributed with a prescription. Studies show that 89% of counterfeit drugs are sold through small unregistered outlets with no prescription.
Enforcement
There have been great improvements in the ability of rights holders to enforce their rights, particularly in copyright enforcement. However, taking action against infringers is still difficult and expensive.
Corruption and the lack of transparency is still a significant problem with the Police and the Attorney General’s Office. Under-funding of the Police means that rights holders are required to assist with the Police’s operational costs. The inability of the Police to provide transparency in terms of reporting operational costs often means that rights holders cannot proceed.
Similarly, corruption within the Attorney General’s Office means that cases are often not prosecuted. The lack of adequate reporting structures precludes officers being held accountable, exacerbating the problem.
Criminal enforcement strategies
If the level or impact of a counterfeit product is low, cease and desist letters can be a simple and cost effective step against counterfeits. It is usually possible to secure a “settlement” pursuant to which the infringer provides a written undertaking and details of supply, customers, etc. Delivery up of infringing goods and compensation is possible, although uncommon at this stage.
If the level of counterfeiting is high and it is known where the counterfeiting is conducted, a raid can be conducted to seize the counterfeited goods. The raid is generally initiated by the registered owner of the trademark by filing a complaint with the Police. The Police have the power to seize and destroy infringing goods and arrest infringers. For the reasons discussed above, trademark owners must work closely with the Police during the raid.
If a trademark owner pursues its complaint after a raid, the Police will complete their investigation, then transfer the case to the public prosecutor. If the public prosecutor finds that the investigation and the evidence are sufficient, a criminal prosecution will be filed at the District Court. If there is a conviction, the infringer will have to pay a fine and/or be sent to prison. However, poor understanding of economic crimes means that penalties are often low. As mentioned above, corruption is a problem in the Indonesian legal system. Prosecutions should be pursued only as part of a broader long-term strategy.
Civil proceedings
If a cease and desist letter fails or a police raid or criminal prosecution are not appropriate, a case can be brought in the civil courts. Available remedies include injunctions, search and seizure orders and damages.
An application for a preliminary injunction must be accompanied by a bank or cash guarantee. If the Court ultimately decides that your case has no merit, the order for the preliminary injunction will be discharged and the guarantee forfeited to the infringer as compensation. Although well known abroad, this remedy was introduced in Indonesia only in 2001, so is still relatively new. Few have yet been granted.
Damages can be claimed, although you need to prove actual loss and/or a method of quantifying that loss.
Drug registration, advertising and labeling
Drug registration
All drugs must be registered with BPOM before they are advertised in Indonesia. A new drug registration is required for the following types of products or product changes:
- a new active ingredient
- a new derivative or combination
- a new dosage form, strength or indication
The following changes to a drug registration must be notified to BPOM:
- license-holder, trade name, manufacturing site or factory name or importer
- inactive ingredients or excipient
- specification, method of analysis
- packaging or labeling
Marketing and labeling
Marketing authorization licenses are valid for five years in Indonesia. Drugs produced for export-only are not required to have labels in Indonesian. However all drugs produced or sold in Indonesia must have Indonesian labeling.
Other issues
Generic substitution
Generic substitution is not in itself regarded as trademark infringement in Indonesia because there isn’t any unlawful reproduction or use of a registered mark. It could be argued that the substitution of a generically equivalent drug amounts to passing off. However, Indonesia’s passing off and consumer protection laws are not well-developed and are rarely used in this context.
Online issues
While Police acknowledge that the the on-line distribution of illegal drugs via the Internet is an issue, distribution of drugs through e-Pharmacies or bulk resellers makes up only a very small part of the Indonesian market. This will however become an important as Internet penetration accelerates.
Trade Dress/Unfair Competition Protection
Indonesia is obligated under the Paris Convention, Article 10(1)bis, and TRIPs to implement national legislation providing for trade dress/unfair competition protection. However, Indonesia does not have any specific trade dress/unfair competition law. Technically, it is possible to file a lawsuit based on unfair competition type of arguments under the Criminal and Civil Codes. However, these general provisions are not tailored to provide adequate or effective intellectual property protection as they are, in practice, almost impossible to harness. Accordingly, Court actions based on unfair competition have been rare, and none have been successfully brought.
Well-Known Marks
Similarly, Indonesia is obligated under the Paris Convention, Article 6(1), and TRIPs to provide effective well-known mark protection. In particular, Article 16(3) of TRIPs prohibits the registration or use of a mark similar to a well-known mark but which is used on goods dissimilar to that upon which the well-known trade mark is registered.
Registration
While the Indonesian Trade Mark Law provides that an application to register a mark may be rejected if the mark is similar in principle or in entirety to a well-known trademark owned by another party for dissimilar goods or services, the relevant provision, Article 6(3) requires that certain conditions, as further provided in a Government Regulation, are met. This Government Regulation remains unimplemented.
Anti-dilution
The Trade Mark Law does not contain any provision to prevent the use of a mark similar to a well-known mark but which is used on goods dissimilar to that upon which the well-known trade mark is applied. This is in violation of Article 16(3) of TRIPs which makes such anti-dilution protection mandatory. There is no apparent intention on the part of the Indonesian Government to deal with this issue.
Inconsistent Application of Legislation and Principles
While great improvements have been made by the Courts in recent years, we still often encounter inconsistent, contradicting and illogical decisions of the Indonesian Courts precluding effective action to remove mis-registered rights from the relevant official registers. This impacts the ability of trademark owners to take action against infringement.
Customs recordal
There is no Customs recordal program in Indonesia, which means that seizures are rare and generally made on the basis of intelligence provided by trademark owners. Under the Customs Law, Customs officials have an ex officio power to determine a consignment if Customs has reason to believe that the goods are counterfeit.
Warrants
Theoretically, a trademark owner can apply to the Court for a warrant ordering the seizure of consigned goods that infringe the rights holder’s intellectual property rights. However, the Government Regulation specifying the procedural requirements is yet to be implemented.
