Dealing with trademark counterfeiting in Indonesia and finding an appropriate strategy to fight online counterfeiting.
Indonesia is known to be a difficult jurisdiction to protect intellectual property rights. This article discusses the pragmatic approach to combating trademark counterfeiting in the region and an appropriate strategy to combat online counterfeiting.
What are the penalties for trademark infringement?
In Indonesia, trademark infringement may result in civil liability and criminal penalties, including:
- The counterfeiter having used a mark identical to the registered mark – Imprisonment of up to five years and/or fine (currently up to IDR 2 billion);
- Unauthorized use is not identical but similar – Imprisonment of up to four years and/or fine (currently up to IDR 2 billion).
The trademark owner can also bring a civil action for damages.
What is the preferred mode of legal action against trademark infringement?
The implementation of the intellectual property rights enforcement framework in Indonesia is still far from ideal. It is recommended to start with a cease and desist letter to ensure compliance at first.
Cease and desist letters can be an effective tool because the threats of criminal penalties contained in the letter can provide powerful leverage to brand owners.
What are the considerations for deciding a civil litigation?
A civil action is not always preferred because the interim injunction procedure is impractical and ineffective when the infringer uses a corporate shell to isolate personal liability. On the other hand, criminal complaints may be a more effective method of bringing the infringement to an end.
However, a civil action may still be useful in establishing legal precedent with respect to unconventional marks such as placement marks or three-dimensional marks where the police may be unfamiliar with determining infringement.
Damages awarded should be based on the actual loss suffered. There may be a punitive element in awarding damages (immaterial damages), but this is uncertain. There is also the issue of enforcement of the award because the judgment debtor may have already taken steps to prove the judgment themselves.
In addition, the legal costs are irrecoverable. As such, the amount of investment in civil litigation may not always be commensurate with the outcome. Therefore, an investigation is necessary to ensure that the financial compensation is recoverable.
Civil litigation may also be required for strategic purposes to establish legal precedent to support broader market enforcement.
What are the concerns about invoking criminal sanctions?
Criminal sanctions are triggered by complaints to the police. This leads to a criminal investigation and possible seizures of counterfeit items on the grounds of obtaining evidence for further prosecution.
However, the police investigation can be opaque and not always certain when the investigation can lead to a raid. Police may issue inconsistent requests such as additional requirements for product authentication or chain of authority verification for power of attorney.
The Indonesian Police is a professional organization with fixed deadlines for case management and a duty to keep complainants informed of progress. It is also possible that police resources will be channeled into cases of greater public interest.
The general advantage over civil action is that offenders generally avoid the police. This allows infringers to settle on terms favorable to brand owners. Therefore, filing complaints with the police can provide some leverage if an escalation of cease and desist letters becomes necessary.
What if a criminal complaint becomes necessary?
As explained, a criminal complaint should be the last resort. Where the letter of demand has failed to ensure compliance, it may be necessary to escalate to a complaint to the police. The idea is to continue to exert leverage, but this time the leverage is greater because the police are now involved.
Raid is one of the consequences of a complaint to the police. The most important objective is to use the complaint to the police as leverage during the negotiation. However, the more important objective is to suppress the infringement – a likely reaction when the infringer who might have been stubborn earlier learns that a complaint to the police has been filed. The element of surprise can be important in preparing the case to raid a storage facility.
The seizure, although important, is not necessary to maintain the complaint to the police. Since the act of offense is already proven on the basis of the evidence collected to form the legal basis for the complaint to the police. This evidence can be gathered through mystery shopping or a test purchase. As such, the rights holder is able to maintain the complaint even if no seizure is made. Additional psychological pressure arises when the counterfeiter is summoned by the police for an interview as part of the criminal investigation.
What now remains is a settlement on reasonable terms that the rights holder can offer and leverage the complaint to the police, which may be helpful.
What evidence and documents are required when filing a complaint with the police?
- Power of attorney to the local legal representative to lodge the complaint;
- Purchase of samples of counterfeit items;
- Purchase receipt issued by the counterfeiter;
- Sample of genuine item; and
- A report confirming that the counterfeiter’s sample is a fake.
How should a rights holder deal with the police?
Although Indonesia has made great strides in the fight against corruption, the rights holder must still ensure compliance with the anti-corruption laws of Indonesia and their country of origin – in addition to a cross-border scope such as the US Foreign Corrupt Practices Act and the UK Anti-Bribery Act. As mentioned above, the Indonesian police continue to infuse professionalism into their institution.
Inconsistent practices at certain levels can still lead to delays in the progress of the investigation. It is important to discern when a request is reasonable and when it is not. In the event of unreasonable requests, such as a request for an interview from the CEO of a multinational brand owner, the brand owner should back off and offer alternatives. Although some requests may seem unreasonable, there may be no sinister motive behind the request. However, it is important to formulate a strategy to offer reasonable alternatives to such requests.
If necessary, lobbying from a foreign consulate such as the US Embassy can help move the case forward.
The trademark owner must be willing to reach a settlement with the infringer notwithstanding the police complaint.
The most important right of the rights holder/complainant is that only the complainant has the right to withdraw his complaint. However, the decision to drop any police complaint cannot be taken lightly – there must be a general review by a committee of senior officers before a decision can be made due to lack of evidence. This right to decide when to withdraw a complaint gives the rights holder the power to negotiate with the infringer – a very important card that the rights holder can play to obtain favorable terms.
Due to the uncertainty of criminal prosecution, if the prosecutor loses the case, it may be necessary to return the seized goods to the infringer. As such, the quickest course is to get a settlement instead of letting the matter go to trial.
What is the best strategy to fight against online counterfeiting?
The fastest way is to file withdrawal requests with the platforms.
However, this exercise can feel like an unwinnable arcade game. Since. it is common for the counterfeiter to resurface under another merchant identity.
Automated withdrawal may also not always work as the effect of most of these measures is only temporary. It is almost inevitable that these offenders will resurface with a new identity.
The strategy against online offenses must be targeted. So efforts should be directed at the main offenders with:
- the most infringement listings on any e-commerce platform;
- the greatest number of transactions; and
- longest online presence.
Withdrawals should be targeted against these offenders as they are forced to give up the account they have painstakingly built up over time. Yes, they can come back, but they will have to rebuild a whole new account and restart their background.
To be effective, the action must not be limited to withdrawal requests addressed to e-commerce platforms. Cease and desist letters should also be sent to the people behind these merchant accounts to ensure that they will not resurface under penalty of financial penalty in the signed undertaking.
An investigation is therefore necessary to know the physical location of the offending e-merchants.
Any other thoughts?
Enforcement measures should be taken with the big picture in mind. When the occasion arises, the right holder must insist that the infringer issue a public apology. This helps to “pay it forward” by deterring other offenders in the future. The cost of action not only serves the immediate offense, but also helps deter offense on a broader level.