Redefining Non-Use Cancellation Action in Indonesia

Non-use cancellation is a legal approach to challenge a valid trademark registration. The term “non-use” refers to a state where a registered trademark is not properly used in the course of trade. In determining a condition of non-use, duration is one significant factor. According to Article 19 of the TRIPS Agreement, the minimum period is 3 years. As a member, Indonesia is free to determine the appropriate method of implementing the provisions of the TRIPS Agreement. In Article 74 of Law No. 20/2016 concerning Marks and Geographical Indications, this period is set to 3 years.

There is also a provision, however, that lays out valid reasons for not using a registered trademark. For instance, the owner of a registered trademark may be unable to sell their goods due to import restrictions. In other words, it does not qualify as non-use if the owner is hindered from properly using the trademark. Article 74 (2) of Law No. 20/2016 outlines some of the valid reasons. One of those reasons is when a Government Regulation, which prohibit certain acts directly impacting the trademark use, is issued.

Last year, the Constitutional Court of Indonesia received a petition to declare Article 74 of Law No. 20/2016 as unconstitutional. Finally, on July 30th, 2024, the Constitutional Court judges rendered the decision on the judicial review. First part of the decision concerns the non-use period, which is extended to five consecutive years. The second part amends the provisions of Article 74 (2), recognizing a force majeure as a valid reason as long as it is declared in a Government Regulation.

Petitioner’s View on the Non-Use Cancellation

Concerning the non-use period, Indonesia chose the minimum, which is 3 years. In contrast, the provisions in a number of develop countries set a longer duration, which is 5 years. This is difficult to accept due to the stark difference in the economic development of Indonesia and those countries. For example, Singapore, a country with GDP per capita that is 15 times higher than Indonesia, implement a 5-years non-use period.

A shorter period means a stricter regulation and stricter regulation is not beneficial for trademark owners in doing business. This in turns can be detrimental to the economic growth of the country. Especially, majority of local trademark owners in Indonesia are small to medium-sized businesses. These businesses are often unstable due to very limited capital and resources. Therefore, 3 years do not seem to cater for the ups and downs in the businesses of that scale. On the other hand, companies with huge capital will not have a problem with it. Instead, the non-use cancellation action can be capitalized by these companies to eliminate competitions.

The Government’s Perspective

Unlike copyright or patent, a trademark can be protected for indefinite time. This iso because even though protection is given for 10 years, but it is extendable for the same duration. This is repeatable, as long as the trademark is still being used. Hence, it is the duty of the trademark owners to ensure that they use their trademarks properly in the course of trades. This duty is recognized and implemented in the laws of all countries that are member of World Trade Organization (WTO). Without those provisions, there will be risks of trademarks filed in bad faith. It can be done as a way to block other parties from using it or for monetary gain through trademark squatting.

Implementation of the non-use provisions is not just concerning the duration but also the competent authority. Law No. 20/2016 defines the court as the competent authority to declare a non-use occurrence. In addition to that, it also provides leniency for trademark owners because it does not regulate how to properly use a trademark. There is no mention about minimum area of coverage, minimum duration of use or any other requirements. Licensing is an option if the trademark owners cannot use the trademark by themselves.

When determining the duration, the main reference is always the TRIPS Agreement, which sets the minimum of 3 years. Like Indonesia, countries like United States and China also set the non-use duration to be 3 years. This is disregarding unexpected situations like the COVID-19 pandemic. In Indonesia, there is no Government Regulation which specifically limits trademark use in during the pandemic. In fact, the number of trademark application received by the Indonesian IP office was increased during the COVID-19 pandemic. It is logical to then think that a 3-year period should be enough for trademark owners.

Concerning Proper Use in a Non-Use Cancellation Action

Non-use cancellation action requires the plaintiff to submit relevant evidence. On the other hand, the respondent has the right to submit evidence to prove that the trademark is used. While the regulation does not explicitly mention about a proper use, the court should consider aspects of proper use.

For a trademark, it can be considered a proper use if:

• The trademark is affixed to goods, product packaging, containers, labels, etc., or applied to additional labels, product manuals, price lists, etc., by means of printing, stamping, or weaving;
• The trademark is reflected in transaction documents relating to the sale of goods, including sales contracts, invoices, bills, receipts, quality inspection certificates, customs bills, and the like;
• The trademark is broadcasted in advertisements and promotions through media such as TV, printed media, billboards, mail advertisements, and the like;
• The trademark is showcased in an exhibition.

Furthermore, it can be considered a proper use for a service mark is if:

• The service mark is used directly at the service location, such as brochures, receptions, decorations, staff clothing, posters, menus, price lists, office stationery, letterheads, etc.;
• The service mark is used on documents relating to services, such as invoices, bank documents, service contracts, after-sales maintenance certificates, etc.;
• The service mark is broadcasted in advertisements and promotions through media such as TV, printed media, billboards, mail advertisements, and the like;
• The service mark is showcased in an exhibition.

Judicial Opinion

Non-use cancellation has been a part of Indonesian trademark law for a long time. It is first implemented through Law No. 19/1992 before Indonesia ratified the TRIPS Agreement in 1994. Therefore, provisions of non-use cancellation are perfected when the government enacted Law No. 14/1997. Ever since then there has been little to no modifications to those provisions. It is understandable, because the provisions are in place with an aim to support fair competitions globally. Ultimately, it also serves the purpose of protecting the consumers of the goods/services.

Trademark Protection in Different Legal Systems

Concerning the duration, it is important to remember that there are two principles in a trademark protection: first-to-file and first-to-use. Every country can choose to adopt one or both of the principles. It should also be noted that countries in the world have differing legal systems. Indonesia, for example, follows the civil law legal system while the United States follow the common law legal system.

There is a proclivity that countries following civil law legal system adopt the first-to-file principle. Furthermore, those countries tend to set a shorter duration for a non-use period. However, without overlooking the aforementioned fact, extending the duration from 3 to 5 years should provide greater fairness. On top of that, it can harmonize the provisions of non-use cancellation and invalidation action. Article 77 of Law No. 20/2016 indeed states that the lawsuit for invalidation may only be filed within a period of 5 years from registration.

Restrictions Leading to Non-use

It is true that in some unexpected and unavoidable events trademark owners cannot use their trademarks. Therefore, Article 74 (2) of Law No. 20/2016 is still relevant and cannot be annulled. The reason is because it provides a list of some of these events. It is not necessary to have an exhaustive list of situations because of the provision in Article 74 (2) c can cover anything.

Article 74

(2) The reasons for non-use Mark as referred to section (1) are not valid in case of:
a. import embargo;
b. restriction related to permit for product distribution using relevant Mark or temporary decision from authorized party; or

c. other similar restrictions determined with a Government Regulation.

During a force majeure occurring globally like an economic crisis or a pandemic, businesses are restricted in operations. As such, it fits the criteria of Article 74 (2) c. Law No. 20/2016, however, does not provide proper elucidation for the phrase “other similar restrictions” in Article 74 (2) c. It can then be interpreted very broadly and loosely. Therefore, the phrase has to be revised into “other similar restrictions, including in a condition of a force majeure”.

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Since the Constitutional Court’s decision is definitive and binding, the amendments to the law have been in effect. LSP PARTNERSHIP possesses extensive experience in handling non-use cancellation actions and is well-prepared for upcoming changes. Feel free to contact us so that we can help you in getting the best out of your trademarks.