A patent is primarily understood as a form of exclusive rights, however it also comes with certain obligations. Under Indonesia’s patent regime, there is a possibility of compulsory licensing—a legal mechanism that allows third parties, or even the government, to use a patented invention without the consent of the patent holder, under specific circumstances defined by law. It is not a seizure of IP rights as the patent holder retains ownership, but it limits exclusivity in the interest of public policy or economic fairness, which is why it is particularly relevant in the context of non-working patents, public health, and technology access.
For foreign and local patent owners alike, understanding the legal framework around compulsory licensing is essential to protecting your patent IP rights and avoid unwanted issues. Below is key information that all patent holders should be aware of:
Legal Basis
In Indonesia, compulsory licensing is regulated by Law No. 13 of 2016 on Patents, as amended by Law No. 11 of 2020 (Omnibus Law) and most recently by Law No. 65 of 2024.
It also aligns with international law, particularly the TRIPS Agreement under the World Trade Organization, in which Article 31 permits member states to authorize the use of patented inventions without the patent holder’s consent in certain situations, such as public health emergencies or anti-competitive practices. This framework is reinforced by the 2001 Doha Declaration, which affirms the rights of countries to issue compulsory licenses to improve access to medicines and address urgent public health needs.
Under the Indonesian patent regime, the key provisions relating to compulsory licensing are:
Request for Compulsory License
Under Article 82(1) of the Patent Law:
“A compulsory license may be granted for a patent that has not been implemented in Indonesia within 36 months from the date the patent grant.”
Additional grounds under this article include:
- The public interest requires it (e.g. public health, food security, national defence).
- The patent holder refuses to license the patent on reasonable terms.
- The patent is being used in a way that violates anti-monopoly principles.
Grant of License for Public Interest
This allows the government to issue a compulsory license without a request, for reasons of:
- National defence and security
- Severe public health problems
- Import substitution or urgent public needs
Such licenses may be granted without negotiation with the patent holder, though reasonable compensation must still be paid.
Dependent Patents
If a second patent (the “dependent” patent) cannot be exploited without infringing a previous patent, the owner of the dependent patent may apply for a compulsory license to use the earlier invention.
Patent Working Obligation
This article requires all patent holders to implement their inventions in Indonesia. “Implementation” (or “working”) means making, using, selling, importing, or licensing the invention in Indonesia.
Failure to implement within 36 months from the date of grant is the basis for compulsory license applications under Article 82.
Annual Patent Implementation Report
(as amended by Law No. 65 of 2024)
All patent holders must submit an annual report to the Directorate General of Intellectual Property (DGIP) confirming whether and how the patent is being implemented in Indonesia. This report serves as a compliance mechanism and may be used by DGIP to monitor implementation status for compulsory licensing purposes.
⚙️w Compulsory Licensing Works in Practice
Here’s a simplified breakdown of the procedure:
- Application
A third party submits a formal application to DGIP under Article 82, providing evidence that the patent has not been implemented within 36 months or that public interest is at stake.
- Review by DGIP
DGIP evaluates the request and may consult with the patent holder. If public interest is involved, the Minister may issue a license directly (Article 83).
- License Grant
If approved, the applicant receives a license to use the patent under specific terms, including the scope, duration, and royalty payments.
- Royalty Compensation
The patent holder is entitled to reasonable compensation, determined either by mutual agreement or by DGIP if no agreement is reached.
- Monitoring
The licensee must comply with the terms of use. Misuse may lead to revocation of the license.
Conclusion
Compulsory licensing should not be viewed as a method to weaking your IP rights, but to ensure that patent protection aligns with broader public interests. However, for patent owners doing business in Indonesia staying compliant with regulations is essential to minimize risk. At Am Badar & Am Badar, we support patent owners with strategic planning and monitoring avoid exposure to compulsory licensing and other unwanted issues. We also assist in licensing negotiations, drafting, litigation, and any other IP related inquiries that you might need. Contact us at ambadar@ambadar.co.id
