Franchise
business has grown rapidly in Indonesia over the last two decades. Following
the entering into Indonesia of Kentucky Fried Chicken –the well known American
fast food business– in the late 1970s, many franchise businesses have since the
late 1980s been established and well developed in Indonesia. Local franchise
businesses have since 1990s been inspired for running and developing businesses
accross cities in Indonesia.
The
emerging and spreading of franchise businesses in Indonesia have finally caught
the attention of the Government to formally regulate franchise establishment.
It is only in 1997 that the Government of Indonesia issued a Government Regulation regulating the
setting up of franchise business, with detailed regulation stipulated under a Decree
of Minister of Trade and Industry.
Positive
development of the franchise businesses along with many inputs of law
practicioners and entrepreneurs have contributed to the issuance of the latest Government
Regulation No. 42 in 2007 regulating the setting up of franchise business,
replacing the former government regulation. Thus the detailed regulation was
also replaced, the latest one is the Minister of Trade Regulation No. 31 of
2008 on Undertaking Franchise Business.
It
is under the latest Minister of Trade Regulation No. 31 of 2008 that
intellectual property rights related to the franchised business are required to
have been registered. Registered intellectual property rights are one of the
criteria of franchise system. The former regulations did not put registration as
a requirement. They only required the franchisor to mention in the franchise
agreement the intellectual property rights of the franchised business.
To
run franchise business in Indonesia, any intellectual property rights of the
franchised business must be registered with the Directorate General of
Intellectual Property Rights. As generally people will first recognize the
business through its trademark and/or logo, obviously trademark and logo are
the ultimate symbol of a franchised business. Therefore, registration of
trademark and logo of the business is a must. This is to protect the interests
of both the franchisor and the franchisee against any claim of a third party
for the right to use and to enjoy the benefit of the trademark and logo in
concern. Further, trademark and logo of the franchisor’s company carrying out
the franchised business must also be registered. Whilst the company’s trademark
and logo are commonly different from the trademark and logo of the franchised
business, ignorance in registering the company’s trademark and logo will cause serious
harm to the business.
Other
types of intellectual property rights may also relate to a franchised business
and accordingly must also be registered. If a franchised business involves an
invention or a new technical method, the invention or the new technical method
must be registered as a patent right. An ice cream company producing ice cream
with the shape of small balls using the company’s new technical method for
making the freely movable ice balls must register such new technical method as
a patent right. However if it turns out that the same method has already been
registered by another party, then unless the ice cream company holds license to
use such registered method, it may not use the method to commercially produce
the ice cream balls.
If
a franchised business involves products with a new three dimensional commercial
design, the commercial design must be registered as an industrial design right.
Ice cream produced with the shape of small balls is one of an example of three
dimensional commercial design that can be registered as an industrial design
right. Failure to first register the industrial design of the ice cream balls
three dimensional design, although this ice cream ball company is the first one
commercially producing ice cream balls, could cause another party conducts the
registration for their interest and then threatens the ice cream ball company to
not produce ice cream balls. Should the ice cream ball business has been
franchised, such threat will interfere with or even interrupt the product
supply which, at the end, could affect the franchised business.
The
franchisor shall be the one responsible for the registration. Although the
Minister of Trade Regulation is silent about whose name the intellectual
property rights should be registered under, it is strongly recommended that the
intellectual property rights are registered under the name of the franchisor.
Having any intellectual property rights registered under the name of a party
other than the franchisor will most likely result in a legal dispute which will
eventually harm the continuity of the franchised business.
For
a franchised business entering Indonesia, although the intellectual property
rights have been registered in the home country and, perhaps, in many countries
other than Indonesia, they still have to be registered in Indonesia for
legality to use in Indonesia and for both the franchisor and the franchisee
protection against third party claiming the right to use and enjoy the benefit
of the relevant intellectual property rights.
Said, Sudiro & Partners
Indonesian Attorneys at Law
Sampoerna Strategic Square
South Tower, Level 18
Jl. Jend. Sudirman Kav. 45 - 46
Jakarta 12930 Indonesia
Phone: (62-21) 575.0983
Fax: (62-21) 575.0803
Emails: mail@ssplegal.com
P.O. BOX 8211 JKS.SB Jakarta 12920www.ssplegal.com
