RECORDAL OF LICENSE AGREEMENT

license, agreement

The definition of License in the Government of the Republic of Indonesia Regulation Number 36 of 2018 concerning Recordal of Intellectual Property License Agreements (“PP 36/2018”) is as referred to in Law Number 30 of 2000 concerning Trade Secrets, Law Number 3l of 2000 concerning Industrial Design, Law Number 32 of 2000 concerning Layout Design of Integrated Circuits, Law Number 28 of 2014 concerning Copyright, Law Number 13 of 2016 concerning Patent, and Law Number 20 of 2016 concerning Marks and Geographical Indications. In broad outline, License is often also interpreted as a form of granting a permit to process and utilize Intellectual Property, which can be granted by the Licensor to the Licensee with the intention that the Licensee can carry out business activities or produce certain products/services by using the licensed Intellectual Property. In this case, a License Agreement is entered into, which can be interpreted as an Agreement between two or more parties where one party as the Owner or Licensor acts to provide a License to the party acting as the Licensee, so that the Licensee can legally produce and market its products/services. 

The recordal of the Intellectual Property License Agreement is regulated in 1 Government Regulation with considerations of efficiency, effectiveness and simplification. 

For the legal protection of the Parties entering into the License Agreement, the Government has regulated License in PP 36/2018. The recordal of the License agreement is carried out on intellectual property objects in the fields of:

a. copyrights and related rights;                 e. layout designs of integrated circuits;

b. patents;                                                       f. trade secrets; and

c. marks;                                                         g. plant varieties.

d. industrial designs;

and the recordal of license agreements in the field of plant varieties is carried out in accordance with the provisions of laws and regulations in the field of plant varieties. 

The Intellectual Property holder has the right to grant a License to other parties to exercise their exclusive rights. The Licensor may not grant a License to the Licensee if the licensed Intellectual Property:

a. has reached the end of the protection period; or

b. has been removed. 

The license agreement must be recorded by the Minister. The License Agreement is made in written form between the Licensor and the Licensee. If the License Agreement is made in a foreign language, it must be translated into Indonesian. 

Matters that need to be considered in drafting the License Agreement, which are also in accordance with the requirements stated in Article 7 paragraph (2) of PP 36/2018, are: 

The License Agreement shall at least contain:

1. Date, month, year and place where the License Agreement is signed;
2. Name and address of the Licensor and Licensee;
3. Object of the License Agreement;
4. Terms of the License, i.e. exclusive or non-exclusive, including sub-licenses;
5. Period of the License Agreement;
6. Area of validity of the License Agreement; and
7. Party that pays the annuity fee for the patent.           

In the event that the Licensor and/or Licensee resides or is permanently domiciled outside the territory of the Republic of Indonesia or is a foreign citizen, the Application for Recordal of the License Agreement must be submitted by a Proxy.

Furthermore, because the Application for Recordal of the License Agreement on Intellectual Property is submitted to the Minister through the Directorate General of Intellectual Property (“DJKI”), requirements are needed to support the application, which include:

1. Copy of the License Agreement;
2. Official Excerpts of the Patent Certificate, Mark Certificate, Industrial Design Certificate, Layout Design of Integrated Circuit Certificate, proof of ownership of Works or Related Rights, or proof of ownership of licensed and valid Trade Secrets;
3. Power of Attorney, if the application is submitted through a Proxy; and
4. Proof of payment of fees.           

In addition to the documents mentioned above, the Applicant must also fill out a Declaration form, which states that the License Agreement registered is an Intellectual Property object that:

1. Is still under protection;
2. Does not harm national economic interests;
3. Does not hinder the development of technology; and
4. Does not conflict with the provisions of laws and regulations, morality, and public order.           

In accordance with the provisions of Article 1 paragraph (3) of the Mark Law which states "The Applicant is the Licensor, Licensee, or Proxy", Licensee may also submit an Application for Recordal of a License Agreement to the Directorate General of Intellectual Property. This is regulated with the aim of making it easier for the Parties to submit an Application for Recordal of a License Agreement. Considering that currently there are more Intellectual Property Owners who are usually Licensors from overseas, the Government of Indonesia makes it easier for interested Parties by declaring that the Licensee is also an Applicant, or in this case, for example, the Licensee is domiciled in Indonesia. 

In addition to the conveniences mentioned above, it is also necessary to pay attention to the provisions of Article 6 of PP 36/2018 which regulates the prohibitions for a License Agreement, namely:

1. Harming the Indonesian economy and Indonesia's national interests;
2. Containing restrictions that hinder the ability of the Indonesian people to transfer, control, and develop technology;
3. Resulting in unfair business competition; and/or
4. Conflicting with the provisions of laws and regulations, religious values, morality, and public order. 

The recordal of the License agreement is valid for the period during which the License agreement is valid. If the period of the Recordal of the License Agreement has expired, the Applicant may reapply. 

The Recordal of the License Agreement may be revoked based on:

a. agreement between the Licensor and the Licensee;

b. court judgment; or

c. other reasons justified under the provisions of the laws and regulations. 

The benefits of the License for the Licensee are that he can use the Intellectual Property (Patents, Marks, Industrial Designs, Layout Designs of Integrated Circuits, Works or Related Rights, or Trade Secrets) of the Licensor safely and legally, so that the Licensee can run his business legally, especially if the Intellectual Property (Patents, Marks, Industrial Designs, Layout Designs of Integrated Circuits, Works or Related Rights, or Trade Secrets) that are used are very well known and have a good reputation in the eyes of consumers, so that they will get many benefits in running their business. Meanwhile for the benefits and profits that are obtained for the Licensor, he will usually get a Royalty whose amount has been agreed upon by both parties (the Licensor and the Licensee). 

Compulsory License in the Indonesian Intellectual Property System is regulated in Law Number 28 of 2014 concerning Copyright ("Copyright Law") and Law Number 13 of 2016 concerning Patents ("Patent Law"). 

In accordance with the provisions of articles 84, 85 and 86 of the Copyright Law, a compulsory license is a license to carry out the translation and/or reproduction of a work in the field of science and literature which is given based on the decision of the Minister on the basis of an application for the purposes of education and/or science and research and development activities. Everyone can apply for a compulsory license to a work in the fields of science and literature for the purposes of education, science, as well as research and development activities to the Minister. With respect to the application for a compulsory license as referred to above, the Minister may:

a.   require the Copyright Holder to carry out its own translation and/or Reproduction of the Work within the territory of the Republic of Indonesia within the specified time;

b.   require the Copyright Holder concerned to give permission to others to carry out the translation and/or Reproduction of the Work in the territory of the Republic of Indonesia within the specified time in the event that the Copyright Holder concerned does not carry out the work himself; or

c.   appoint another party to carry out the translation and/or Reproduction of the Work in the event that the Copyright Holder does not carry out the obligations as referred to in letter b. 

The obligation to carry out the translation shall be implemented after the expiration of a period of 3 (three) years since the Work in the field of science and literature is announced as long as the work has never been translated into Indonesian. The obligation to carry out the Reproduction shall be implemented after the expiration of the period of: 

a.   3 (three) years since the book in the field of mathematics and natural sciences is announced and the book has never been reproduced in the territory of the Republic of Indonesia;

b.   3 (three) years since the book in the field of social sciences field is announced and the book has never been reproduced in the territory of the Republic of Indonesia; and

c.   3 (three) years since the book in the field of art and literature is announced and the book has never been reproduced in the territory of the Republic of Indonesia. 

The translation or reproduction is only used in the territory of the Republic of Indonesia. The implementation of the provisions is accompanied by reasonable compensation. Further provisions regarding the compulsory license shall be regulated by a Government Regulation. 

In accordance with the provisions of articles 81 and 82 of the Patent Law, a compulsory license is non-exclusive. A compulsory license is a license to implement a patent that is granted based on a Decision of the Minister upon an application on the following grounds:

1. Patent Holder has not fulfilled his obligation to make products or use the process in Indonesia as referred to in Article 20 paragraph (1) of the Patent Law within a period of 36 (thirty six) months after the granting of a patent;
2. Patent has been implemented by the patent holder or the licensee in any form and by any manners that harm the public interest; or
3. a patent as a result of development from a patent that has been granted previously cannot be implemented without infringing other protected patents. 

Application for a compulsory license is subject to fees.

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