In 1997, Indonesia modified the compulsory licensing provisions, in its patent laws in response to US trade pressure. Also changed were provisions on parallel imports.
The US Department of Commerce 1998 Country Report on Economic Policy and Trade Practices says this:
-- Patents: Indonesia's 1997 patent law addressed several areas of concern to U.S. companies, including compulsory licensing provisions, a relatively short term of protection, and a provision which allowed importation of 50 pharmaceutical products by non-patent holders.From the 1997 report was this quote:
-- Patents: Indonesia's first patent law came into effect on August 1, 1991. Several areas of concern remain, including compulsory licensing provisions, a relatively short term of protection (14 years), and a provision which allows importation of 50 pharmaceutical products by non-patent holders. When enacted, the new patent law may address many of these concerns.From the 1997 NTE report is this:
PatentsThis is from the 1998 NTE report:
Indonesia's first patent law went into effect on August 1, 1991. Several areas of concern remain, including compulsory licensing provisions, a relatively short term of protection (14 years), and a provision allowing the import of certain patented raw materials. In addition, concerns remain regarding Indonesia's law and regulations on local working requirements and patent cancellation. Finally, the 1989 Indonesia patent law offers no "pipeline" protection. When enacted, the new patent law may address many of these concerns.
Indonesia's first patent law went into effect on August 1, 1991. The new Patent Law amendment, which became law in February 1997, has improved the situation to some extent. For example, the term of protection has been extended to 20 years with a two- year extension period; a patent shall be canceled only in the event the patent holder fails to pay annual fees within a certain time; use of product or process invention before grant of patent shall constitute a patent infringement; and the Article in the prior law that denied the right to prevent importation was deleted to comply with Article 28 of the TRIPS Agreement. Also, Indonesia now provides product patent protection for foods and beverages. In some areas, improvements were made that were not required by the TRIPS Agreement. For example, the definition of the term "patent examiner" was enlarged to include examiners in other industrial property offices. This could facilitate work-sharing in the search and examination process. Also, the exclusion from patentability for plant and animal varieties was deleted.
Unfortunately, some of the problems in the previous law were not corrected and new problems were introduced by the 1997 amendment. Examples include: importation still does not meet the requirement to "work" or exploit the invention domestically as required by the first paragraph of TRIPS Article 27; the right to prevent importation of products made by patented processes is only available if the process is also worked in Indonesia; the content of voluntary patent licenses is more restricted than permitted by TRIPS Article 40; there is no requirement that Government use of patented invention comply with the provisions of TRIPS Article 31; inventions that are contrary to Indonesian laws and regulations are excluded from patentability in violation of Article 4quater of the Paris Convention and TRIPS Article 2; and the standard for excluding inventions contrary to the ordre public is inconsistent with the requirements of paragraph 2 of TRIPS Article 27.
U.S. pharmaceutical industries remain concerned that, although the patent law amendment last year is an improvement, the present patent law does not satisfy the TRIPS requirements; that it includes compulsory licensing provisions, a provision allowing the import of certain patented raw materials; and law and regulations on local working requirements and patent cancellation. The Pharmaceutical Research and Manufacturers of America (PhRMA) also pointed out the incidence of smuggled counterfeit drugs from neighboring countries, the issue of corruption, joint venture requirements, generic drug prescriptions and supply to government institutions and taxation.
Intellectual Property Protection
The same issues remain as in the last report as no action has been taken by the Indonesian Government of President B.J. Habibie during his transition tenure.
The main aim in the year 2000 is to:
- Amend the Patent Law 1989/1997 amendment so as to comply with TRIPS.
- Educate the legal profession and judiciary on Pharmaceutical IPR issues.
- Strengthen the Trademark protection at a legal level.
- Work with the Ministry of Justice, IRP department to help process Patent applications more efficiently.
- Provide effective protection for trade secrets and confidential data, as required by TRIPS Article 39.
In the area of enforcement of existing intellectual property legislation, a few success stories have appeared in 1999 in the area of anti-counterfeit activities. Some local operators have been forced to close down as a result of investigations and police raids. However, the penalties remain inadequate and the actual fate of the perpetrators is unknown. More serious laws and implementation thereof are needed in the future. This can only be expected as the new Indonesian Government begins to tackle the whole issue of the Judiciary and law enforcement.
During 1999 a Code of Pharmaceutical Marketing Practices was issued (April) and approved by both trade associations, GP Farmasi (representing local companies) and IPMG (Research industry). However, only IPMG members have endorsed the code by agreeing in writing to abide by its content. This Code will be offically recognized at the annual meeting of GP Farmasi in March 2000 but it is not expected that all local companies will agree to follow the code. Blatant malpractice in various forms continue to disadvantage the U.S. companies who have to follow strict compliance procedures.
Although it is not actively promoted as much as it was in 1998, generic prescribing remains Government policy, with the potential for substantial adverse impact on PhRMA member firms operating in Indonesia. Generic prices of products produced by Government owned companies have been increased.
Since last year the same key critical barriers exist to U.S. pharmaceutical companies conducting business in Indonesia; however, there are some new developments in Indonesia that are of significant concern to the research-based pharmaceutical industry.
In order of importance, these are:
A. National List of Essential Drugs (NLED)/Price Control Mechanisms.
B. Marketing practices of foreign/domestic industry severely limiting U.S. companies' ability to compete on a level playing field.
C. Strengthening of IPR, especially patent law to GATT and TRIPs agreements.
D. Counterfeiting and smuggling.
E. Other issues: Joint venture requirements; Generic drug prescribing and supply to government institutions; Taxation.
NLED/Price Control Mechanisms
The Indonesian Government has had for many years a basic "List of Essential Drugs." These have been produced "unbranded" by the three Government owned pharmaceutical manufacturers and a selected group of domestic companies licensed to do so. The prices of these products, which are available to Government Hospitals, Health Centers and Clinics, are controlled. Due to the economic crisis, the Ministry of Health has seen the prices of pharmaceuticals in the private sector during 1998 increase by up to 100%. Due to increases in raw material prices, the cost of production of generics have soared. With this scenario in mind, the government is discussing:
- Expanding the list of essential drugs to a full NLED as recommend by WHO.
- Recommending price reductions for certain key products.
- Allowing more companies to compete to produce the NLED.
- Extending subsidized raw material prices for fixed Rupiah/USD rates for purchases of raw materials from overseas.
At this time it is not possible to predict the final outcome but the industry is preparing itself to address these potential changes.
Intellectual Property Protection
The new Indonesian Patent Law amendment became law in February 1997 and while it went some way to improving the situation, the fact remains that the complete Law does not fulfill the TRIPs requirements with GATT.
The main changes are:
While there are some positive changes to the Patent Law as a result of the 1997 amendment, it is generally felt that the wording is suitably ambiguous so to be difficult to fight patent infringement cases.
- Patent term extended to 20 years with 2 year extension period.
- New Article 17 allows for patent holder's right to prohibit import of patented product (provided the product has a process patent and is produced in Indonesia).
- New Article 21 reaffirms Article 17 regarding prohibition of import of patented product provided the product (i.e. NCE) is produced in Indonesia.
- Use of product or process invention before grant of patent shall constitute a patent infringement.
- Amendment of Article 82-92 means that compulsory license mechanism still exists for product patents not used after 3 years or improperly used. The burden of proof is on the person seeking compulsory license to prove capability, that he has the facilities to perform and that he has made efforts to get license from patent holder.
- Article 94 is amended to only cancel a patent in the event the patent holder fails to pay annual fees within a certain time.
Company A applies for product and process patent XYZ in Indonesia but does not manufacture the New Chemical Entity in Indonesia (i.e., formulates). At time of marketing Company B discovers source of NCE raw material (produced by same or different process) and imports raw material and markets product under own brand. Company A takes Company B to court for patent infringement. The case was dismissed as Company A does not manufacture or product NCE in Indonesia and therefore has no right to block importation by local Company B.
As the Indonesian Government is now in a state of flux, the issue of IPR is definitely on the back burner. However it is the intention of the research-based pharmaceutical industry to continue to request modifications and further amendments so that the final version of the Patent Law complies with TRIPS.
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