Compulsory Licensing in Indonesia

The Indonesian compulsory license regime for patents can be divided into licences for
government use and mandatory licences sought by non-government entities.
Government use – Pursuant to the Patent Law, the government issued Implementing
Regulations, Indonesian Government Regulations No 27 of 2004, enabling the government to
obtain compulsory patent licences. Under the Regulations, the Ministry of Justice is charged
with making recommendations to the President to issue a Presidential Decree permitting
government use of patents.
Mandatory licences - No implementing regulations have been issued under the mandatory
licences provisions of the Patent Law. Until they are issued, no one can make an application for
a mandatory licence.

Grounds for granting compulsory licences under the Patent Law

Mandatory licences will be available, once implementing regulations are passed, as follows:
a. On the ground that the patent in question is not being exercised or is not being completely
exercised in Indonesia by the patent holder. This ground is only available 36 months after
the date of the patent.
b. Any time after a patent is granted, on the ground that the patent is being exercised in
Indonesia in a form and manner that adversely affects the interests of the general public.
c. When practising one’s own patent would inevitably result in infringement of another’s patent
(Article 82 of the Patent Law) and the later patent is clearly more advanced than the pre-
existing patent.

Government use

The government may also exercise a patent itself where a patent is important to the defence
and security of the State and the ability to exploit it is urgently needed in the interests of the
general public.
Urgent needs for public interests include matters affecting the health sector such as drugs that
are still protected under patents in Indonesia but which are required to eradicate an epidemic,
and matters affecting the agriculture sector, such as pesticides that are urgently required to
prevent a country-wide harvest failure due to plant diseases.

Procedure for implementing government use

A committee headed by the Directorate-General of Intellectual Property decides on the

compensation payable to the patent holder. Within 14 days of appointment, the committee
must make its recommendation to the Ministry of Justice. Following acceptance of the
committee’s recommendation by the Ministry, the recommendation is sent for endorsement by
the President into a Presidential Decree permitting government use of the patent in question.
The Minister of Justice is required to give notice to the patent holder of an application for
Government Use. Reasons for the issue of a Presidential Decree will be notified to the patent
holder under the Government Use Provisions in the Patent Law. The Presidential Decree must
itself set out the reason for granting the government use.
Presidential Decree 83 of 2004 authorizing Government Use states that Government Use of
Anti-Retroviral drugs is urgently required to fulfill the needs of society in the efforts to address
an HIV/AIDS epidemic.

Production under government use

The Government may appoint a private entity to manufacture the invention as it did pursuant to
Presidential Decree no 83 of 2004 when it appointed Kimia Farma to produce Anti-Retroviral
drugs: Nevirapine and Lamivudine.

Compensation for compulsory licence

Mandatory licence - The licensee under a mandatory licence is required to pay royalty, with the
amount and payment method determined by the Directorate General. The amount of the
royalty is determined in the light of ‘mechanism[s] commonly used in patent licence
agreements as well as know-how or technology transfer agreement[s]’ (Article 78). Failure to
pay royalty under the terms of the mandatory licence is a ground for terminating the mandatory
licence (Article 83).
Government use under a Presidential Decree is subject to payment of a reasonable reward to
the patent holder (Article 101(2)), recommended by a committee chaired by the Directorate
General of Intellectual Property (Regulations for Procedure for Implementation of Patent by
Government - Article 8).
The patent holder does not have an opportunity to participate in the government use process.
It can only file an action in the Commercial Court disputing the amount of royalty after the
Presidential Decree for government use is issued. Such a court challenge does not affect the
government’s use of the patent pursuant to the Presidential Decree.

Conclusion

Government use decrees to date are mainly targeted at HIV drugs. Should the avian flu
situation deteriorate, we may expect to see pressures on the Government to look into
government use of drugs to tackle a new epidemic. Other factors that may come into play are
diplomatic influences, particularly in the light of the recent visit by the US Secretary of State
Mrs Hilary Clinton.

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September 2009