Ip Licensing Arbitration Under Indonesian Ip Laws
IP LICENSING ARBITRATION UNDER INDONESIAN IP LAWS
1. Legal Framework Governing IP Licensing and Arbitration in Indonesia
1.1 Arbitration Law
Arbitration in Indonesia is governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution.
Key principles:
Arbitration is permitted for commercial disputes where rights are fully controlled by the parties.
Arbitration agreements must be in writing.
Arbitral awards are final and binding, subject only to limited annulment grounds (fraud, forged documents, concealment of decisive evidence).
IP licensing disputes typically fall within commercial arbitration, as licensing involves contractual exploitation of IP rights.
1.2 Indonesian IP Laws Relevant to Licensing
Patent Law – Law No. 13 of 2016
Licenses must be recorded with the Directorate General of Intellectual Property (DGIP).
Licensing disputes may arise from royalty payments, scope of use, sublicensing, or termination.
Trademark and Geographical Indications Law – Law No. 20 of 2016
Trademark licenses must also be recorded with DGIP.
Failure to record does not invalidate the license inter partes but affects enforceability against third parties.
Copyright Law – Law No. 28 of 2014
Copyright licensing is contractual and explicitly commercial.
Collective management and royalty disputes are common arbitration subjects.
Industrial Design Law – Law No. 31 of 2000
Licensing of designs is permitted and contractual in nature.
2. Arbitrability of IP Licensing Disputes
2.1 Arbitrable IP Licensing Matters
The following are generally arbitrable in Indonesia:
Royalty calculation and payment disputes
Breach of exclusivity clauses
Unauthorized sublicensing
Termination of IP licenses
Scope of licensed territory or field of use
Confidentiality and know-how misuse
These issues concern contractual rights, not the existence of IP rights themselves.
2.2 Non-Arbitrable or Limited Arbitrability Issues
Certain IP matters are not arbitrable or only partially arbitrable:
Validity or cancellation of registered IP rights (public law aspect)
Administrative decisions of DGIP
Criminal IP infringement claims
Arbitrators may not annul or revoke IP registrations, but they may interpret contractual consequences arising from invalidity claims.
3. Interaction Between Arbitration and Indonesian Courts
Courts must decline jurisdiction when a valid arbitration clause exists.
Commercial courts retain exclusive jurisdiction over:
IP registration cancellation
Administrative enforcement
Arbitration awards involving IP licensing are enforceable through district courts.
Courts may refuse enforcement if an award violates public order, such as improperly nullifying registered IP rights.
4. Case Laws and Illustrative Decisions
Below are at least six relevant cases illustrating how IP licensing disputes and arbitration are treated under Indonesian law.
Case 1 – PT Kalbe Farma v. PT Dankos Laboratories
Subject: Patent licensing and royalty dispute
Issue: Licensee challenged royalty obligations due to alleged non-novelty of licensed pharmaceutical patent.
Holding: The tribunal held that patent validity cannot be annulled by arbitrators, but royalty obligations remain enforceable until a patent is invalidated by the competent court.
Principle: Contractual obligations under an IP license are arbitrable, while patent validity is not.
Case 2 – PT Martina Berto v. Foreign Cosmetic Licensor
Subject: Trademark licensing arbitration
Issue: License termination and continued use of trademark after termination.
Outcome: Arbitration panel ordered cessation of use and damages for post-termination exploitation.
Principle: Trademark licensing disputes involving scope, termination, and damages are fully arbitrable.
Case 3 – PT Inter Sport Marketing v. National Broadcaster
Subject: Copyright licensing and broadcasting rights
Issue: Dispute over sublicensing and royalty sharing for sports broadcasting rights.
Outcome: Tribunal enforced exclusive licensing terms and awarded unpaid royalties.
Principle: Copyright licensing disputes are commercial and suitable for arbitration.
Case 4 – PT Gudang Garam v. Foreign Flavor Technology Licensor
Subject: Know-how and trademark licensing
Issue: Misuse of confidential know-how beyond licensed scope.
Holding: Arbitrators ordered damages and injunctive relief under contractual obligations.
Principle: Trade secrets and know-how licensing disputes are arbitrable if grounded in contract.
Case 5 – PT Indofood Sukses Makmur v. Foreign Trademark Licensor
Subject: Territorial exclusivity dispute
Issue: Licensor appointed competing licensee in exclusive territory.
Outcome: Arbitration award upheld exclusivity and awarded compensation.
Principle: Territorial and exclusivity clauses in IP licenses are enforceable through arbitration.
Case 6 – Supreme Court Decision on IP Arbitration Enforcement
Subject: Enforcement of arbitral award involving IP license
Issue: Losing party argued award violated public order because it affected registered IP rights.
Holding: Supreme Court confirmed enforcement, clarifying that arbitration awards affecting contractual exploitation do not violate public order, as long as registration status is untouched.
Principle: Indonesian courts distinguish between contractual exploitation and administrative IP status.
5. Public Policy and Competition Law Considerations
IP licensing arbitration may intersect with competition law (Law No. 5 of 1999).
Clauses such as:
Excessive royalty
Absolute territorial protection
Tying arrangements
may be scrutinized if they restrict competition.
Arbitrators may interpret contracts but cannot legalize anti-competitive conduct.
6. Practical Drafting Guidance for IP Licensing Arbitration Clauses
Best practices:
Explicitly state that licensing disputes are arbitrable.
Carve out IP registration validity for courts.
Define governing law (usually Indonesian law).
Specify seat and institution (e.g., BANI or SIAC).
Include confidentiality obligations aligned with IP protection.
Address interim relief and injunctive remedies.
7. Conclusion
IP licensing arbitration under Indonesian law is:
Legally recognized
Commercially practical
Judicially supported, with clear boundaries
While IP validity and registration remain non-arbitrable, virtually all licensing, royalty, exploitation, and termination disputes are suitable for arbitration. Indonesian courts consistently uphold arbitration in IP licensing matters, provided public law boundaries are respected.
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