Frequently Asked Questions

Trademark licensing is a widely used business strategy that allows trademark owners to grant third parties the right to use their marks under specific terms. In Indonesia, trademark licensing is regulated under Law No. 20 of 2016 on Trademarks and Geographical Indications (Trademark Law) and its implementing regulations. This article discusses the legal framework, requirements, and key considerations for trademark licensing in Indonesia.

Legal Basis for Trademark Licensing

Under Article 42 of the Indonesian Trademark Law, a registered trademark owner can grant a license to another party to use their mark for all or part of the registered goods and/or services. The license agreement must comply with the following principles:

1. It must be based on a written agreement between the trademark owner (licensor) and the party receiving the license (licensee).
2. The license should not mislead consumers regarding the quality, origin, or reputation of the goods/services.
3. The license agreement must be recorded with the Directorate General of Intellectual Property (DGIP) to have legal effect against third parties.

Trademark License Registration

To ensure legal enforceability, a trademark license agreement must be recorded with the DGIP. The recording process involves:

1. Submitting an application to DGIP, which includes: 
• A copy of the license agreement (or an extract) in Indonesian.
• Proof of trademark registration.
• Power of attorney (if filed through an IP consultant).
2. DGIP review and approval, ensuring compliance with the law.
3. Issuance of the license record, which is then published in the official trademark gazette.

Failure to register a trademark license means that the license cannot be enforced against third parties (e.g., in cases of infringement).

Types of Trademark Licenses

Trademark licenses can be structured in various ways, depending on the business arrangement. The common types include:

1. Exclusive License – Only the licensee can use the trademark within the agreed scope, and even the licensor is restricted from using it.
2. Non-Exclusive License – The licensor retains the right to use the trademark and can grant licenses to multiple parties.
3. Sublicensable License – The licensee has the right to grant sublicenses to third parties, if permitted in the agreement.

Key Considerations in Trademark Licensing

1. Duration and Renewal
• The license term must align with the trademark’s validity period. A registered trademark in Indonesia is valid for 10 years and can be renewed indefinitely.
• The agreement should include renewal and termination conditions.
2. Quality Control Provisions
• The licensor should maintain control over the quality of goods/services associated with the licensed trademark to protect brand reputation.
• The agreement may include audit rights or product inspection clauses.
3. Territorial Scope
• The license can be nationwide or limited to specific regions in Indonesia.
4. Royalties and Payment Terms
• The agreement should specify the royalty structure, payment terms, and tax obligations.
5. Dispute Resolution
• Indonesian law allows parties to choose litigation or alternative dispute resolution (ADR) methods, such as arbitration.

Termination of a Trademark License

A trademark license may be terminated under the following circumstances:

• Expiration of the agreement term without renewal.
• Breach of contract by either party.
• Non-compliance with Indonesian trademark laws, including failure to register the license with DGIP.
• Cancellation or expiration of the trademark registration itself.

Trademark licensing in Indonesia is a valuable tool for businesses seeking to expand brand presence while ensuring legal protection. However, compliance with Indonesian Trademark Law, particularly the requirement to record the license with DGIP, is crucial to enforceability. Careful drafting of the license agreement, including quality control measures and clear dispute resolution mechanisms, will help mitigate risks and ensure a successful licensing arrangement. [RH & PARTNERS/ KH

For more information on trademark licensing in Indonesia, contact Khurnia Hudewi at khudewi@rhp.co.id.

  By: Khurnia Hudewi