JAKARTA — Piracy of intellectual property rights can be found all over Southeast Asia. A short visit to the street markets of Jakarta, Kuala Lumpur, Bangkok, Manila or Singapore will convince anyone that counterfeits, fakes and so-called look-alike products are big business.
In most countries the problem has been recognized and authorities are trying to deal with it. Indonesia, however, seems to be lagging in the fight against piracy.
Violation of intellectual property rights is rampant in Indonesia. One doesn’t have to go to Jakarta’s trashy marketplaces Glodok or Mangga Dua, with their illegally copied VCDs, fake clothing, counterfeit cosmetics and imitation electronics, to understand this. Even the most luxurious shopping malls sell fakes of expensive brand-name goods at the same price as the originals.
Some counterfeits have become so sophisticated that the consumer cannot distinguish the real products from the copied ones. But most consumers knowingly buy the illegal ones because of the price difference: Pirated goods often cost less than a tenth of the originals.
“It is difficult for companies to calculate how much is being lost because of piracy,” says Nick Redfearn of Rouse & Co., an international law firm that specializes in tracking down intellectual property right violations. “Some consumers cannot be considered potential purchasers of the original, patented product because they would never devote their little spending power to it. They can only afford the fake because it is cheap,” he explained.
From radios, watches and televisions to software and karaoke machines, counterfeit goods are eating away at corporate sales figures and ruining brand names as well.
“Others . . . might have bought the original were it not for the availability of a very similar-looking fake,” Redfearn said. “The danger is that the reputation of the holder of the intellectual property right suffers a blow because the pirate is selling low-quality fakes that cannot be distinguished from the real thing. That is why companies spend millions of dollars on the protection of their intellectual property rights.”
Take light bulbs for instance. Royal Philips Electronics NV, the Dutch manufacturer, produces a high-quality, long-lasting and energy-efficient bulb sold in markets around the world. “In Southeast Asia, we are faced with pirates who produce a low-quality nonenergy-saving light bulb that looks almost exactly the same, for only a fraction of the price,” says Jan de Visser, general manager of the specialized department for intellectual property rights in Singapore.
Not only does the bulb bear the same brand name, it also has the same packaging, even down to the hologram of authenticity.
“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,” De Visser said.
Indonesia’s problem is not legislation, but rampantly weak law enforcement, said Redfearn.
The Indonesian ministry of justice is under heavy pressure from Washington to fight piracy more effectively. The United States put Indonesia on the priority watch list for copyright violation this year, according to the Web site of the United States Trade Representative.
Japan, on the other hand, is taking a less-confrontational approach.
“We are trying to help Indonesia by providing technical support through the Japan International Cooperation Agency,” explains a spokesperson at the Japanese Embassy in Jakarta.
But few foreign producers take their cases to court in Indonesia because there is no telling what the outcome will be in a country known for its widespread corruption.
“Even in the most blatant cases of piracy, judges are openly being bought to dismiss the case,” said one well-placed source, who spoke on condition of anonymity. “Officials at the directorate general of intellectual property rights of the ministry of justice are grossly underpaid. They are easily bribed.
“And 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,” the source said.
Even if a copyright holder does win in court, like Microsoft did earlier this year, there is usually little gained.
“In this country it takes more than a court ruling to get the police to shut down an illegal assembly plant,” the source said. “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 is willing to raid a pirate. But that way the legitimate producers that are trying to counter pirates end up on the wrong side of the law themselves,” he explains.
In light of the new OECD code on corporate corruption in foreign countries, many companies don’t dare continue this practice.
Others see no way out except by hiring 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.
That probably explains why many business representatives get nervous when asked how they deal with violation of their intellectual property rights, refusing to comment or asking not to be named.
“They fear they will disturb the already difficult relationship with the authorities and judiciary,” explained Redfearn.
Others, however, jump at the chance to share their experiences. One is National Gobel, a local subsidiary of Japanese manufacturing giant Matsushita.
“We have simply lost track of the scale of patent violations,” Heru Susantoso, director of research and development, said about the widespread copying of National’s radios and electric irons.
“Now we focus on our new home-use water pump,” he said. “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. Because of the damage to its brand name, National has started printing a cautionary note on the packaging box. “But soon enough, the pirates will copy the caution as well,” Susantoso predicted.
Honda Motor Co. has recently succeeded in settling a dispute over look-alike motorcycles out of court. Faced with imports of look-alike motorcycles from China, Honda suffered heavy losses in its market share in 2000.
“The imported motorcycles were clearly designed to make the consumer believe he was buying a Honda. Some even carried the name Hongda,” said Koremichi Kodama, director of Astra Honda Motor in Jakarta.
“We could not fight the Chinese imported motorcycles on charges of design-look-alike, 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 in the engine belonging to Honda in Indonesia,” he said.
“The battle in court proved extremely difficult and uncertain. Therefore, in the meantime, we tried to strike a deal outside the courtroom,” Kodama said.
Just a few months ago, the last of the major importers signed an agreement with Honda to stop selling motorcycles with the specific device. It was hardly a victory.
“The battle was not won because of this agreement,” said Kodama. “The Chinese look-alikes caused a problem which we had to face sooner or later anyway. Therefore, we decided to design another, much lower-priced motorcycle that would compete with the Chinese imports directly.” Honda is now steadily recovering some its market share.
Honda’s experience is noteworthy as the piracy harming it is believed to originate in China, Kodama said. De Visser and Redfearn agreed.
“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 and for export purposes,” De Visser noted.
Redfearn said, “Indonesia is just a market with exceptionally poor law enforcement. But ultimately the battle has to be won in China.”
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.