JAKARTA — Piracy of intellectual property rights is found all over Southeast Asia. A short visit to the street markets of Jakarta, Kuala Lumpur, Bangkok, Manila or Singapore will convince anybody that counterfeits, fakes and so-called look-alike products are big business. In most countries the problem is recognized and authorities are trying to deal with it.
Indonesia, however, seems to be lagging in the fight against piracy.
Violations of intellectual property rights are rampant in Indonesia. One does not have to go to Jakarta’s trashy marketplaces such as Glodok and Mangga Dua with their illegal copied VCD’s, fake clothing, counterfeit cosmetics and pirated electronics to find proof of this. Even the most luxurious shopping malls are selling pirated products of expensive brands such as leather bags and shoes.
Some producers of counterfeits have become so sophisticated that the consumer is not able to distinguish between the real and copied products. But most consumers knowingly buy the illegal copies because of the price difference. Be it software, watches, televisions, radios or even karaoke machines.
It is difficult for companies to calculate how much is being lost because of piracy. Some consumers cannot be considered as potential purchasers of the original patented product because they would never devote their meager spending power to it. They can only afford the fake because it is cheap.
Others however, might have bought the original were it not for the availability of a very similar fake. In some cases the reputation of the holder of the intellectual property right suffers a blow because a pirate is selling low-quality fakes that cannot be distinguished from the real thing.
Take the business of selling light bulbs for instance. Philips, the Dutch manufacturer, produces an expensive high quality long lasting energy-saving light bulb for markets all over the world. In Southeast Asia it is faced with pirates who produce a low-quality nonenergy-saving light bulb that looks exactly the same for a fraction of the price.
Not only does the light bulb carry the same brand name, but the packaging is also identical. Even the hologram, which is supposed to guarantee authenticity, is there. The counterfeit bulb will break down within a few weeks, and it is most likely that Philips will be blamed because the consumer never realized he bought a fake. So another customer is lost.
Indonesia’s problem is not a lack of legislation. In fact some years ago the laws on intellectual property rights were toughened. It is weak law enforcement that has caused the United States to put Indonesia on the priority watch list for violation of intellectual property rights this year.
The ministry of justice is under heavy pressure from Washington and the U.S. Embassy in Jakarta to fight piracy more effectively. Japan is trying to help Indonesia by providing technical support through the Japan International Cooperation Agency.
Only a few producers dare to take their cases to court in Indonesia as there is no way of telling what the outcome will be in this country, which is known for its widespread corruption. Even in the most blatant cases of piracy, judges are openly being bought to dismiss these cases.
Officials at the directorate general of intellectual property rights of the ministry of justice are grossly underpaid. They are easily bribed, says one well-placed source. Or they spend very little time on the job they were hired for because they run two or three businesses on the side from the very same desk.
Even if a copyright holder wins his case in court, there is very little to be gained by it. In this country it takes more than a court ruling to get the police to shut down an illegal assembly plant.
Therefore, many foreign companies try to bypass the court and deal directly with the police. As long as they pay the right price, the police are willing to raid a pirate. But that way the producers that are trying to counter pirates end up on the wrong side of the law themselves.
With the new OECD code on corporate corruption in foreign countries, many companies don’t dare continue this practice. Others see no other way out than to hire organized crime. The truly desperate ones hire investigators to find the pirate and then hire thugs to destroy the operation, like hiring yakuza in Japan, says one source.
That probably explains why many business representatives become nervous when asked about their strategy of dealing with violation of their intellectual property rights. They are afraid they will disturb the already difficult relationships they have with the authorities. Some, however, jump at the opportunity to share their experiences.
Take the example of National Gobel, an Indonesian subsidiary of the Japanese manufacturer Matsushita. Heru Susantoso, director of the research and development department, said there is widespread piracy of National-brad radios and electric irons. The company has simply lost track of the scale of patent violations.
Now the focus is on the home-use water pump, which is popular in areas where people have no running water. Both the brand and the design are copied. The fake product even includes the same packaging and a copy of the manual and guarantee.
National is preparing to take legal action, but Susantoso admits that law enforcement in Indonesia has weakened over the past five years. The damage to its brand name has prompted National to print cautions on the box. But soon enough, the pirates will copy the caution as well, Susantoso predicts.
Japanese motorcycle manufacturer Honda has recently succeeded in settling a dispute outside of court.
Faced with imports of look-alike motorcycles from China, Honda suffered heavy losses to its market share in 2000. The imports were clearly designed to make the consumer believe he was buying a Honda, and some even carried the name Hongda, says Koremichi Kodama, director of Astra Honda Motor in Jakarta.
Honda could not fight the Chinese imports on design grounds because at the time there was no regulation on that in Indonesia. But the Chinese motorcycle was clearly violating the patent right on a decompression device belonging to Honda in Indonesia. The battle in court proved extremely difficult and uncertain.
Therefore, in the meantime, Honda tried to strike a deal outside the courtroom. Just a few weeks ago the last of the major importers signed an agreement with Honda to stop selling motorcycles with the specific device. But the battle was not be won because of this agreement, says Kodama.
The Chinese imported look-alikes caused a problem which Honda had to face sooner of later anyway. Therefore the Japanese manufacturer decided to design another much lower priced motorcycle that would compete with the Chinese imports directly. This year Honda is steadily recovering market share.
Honda’s experience is noteworthy because the piracy originates from China. For most intellectual property right holders China poses the biggest threat.
The bulk of all pirated products found in Southeast Asia are made in China. It is the major production base for counterfeits, fakes and look-alikes both for the domestic market as for export purposes. Indonesia is just a market with exceptionally poor law enforcement. That needs to be fixed. But ultimately the battle has to be won in China.
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