When is the Time to Apply for a Patent License for a Business?

PERTANYAAN

I want to set up a business that seems to have to use patents owned by other companies. Does the patent license process have to be done before establishing the business? Or can it be done at the same time as establishing the business? Then, what language do I need to file a patent in Indonesia?
 

INTISARI JAWABAN

Basically, patent licensing can be done either before establishing a business or at the same time as establishing a business.

You need to note that if the patent license arrangement is carried out before establishing a business, then the one who receives the license is the individual business owner. However, if it is carried out together with the establishment of a business in the form of a legal entity, then the one who receives the license is the legal entity, taking into account the provisions of the LLC Law.

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Kapan Waktunya Mengurus Lisensi Paten untuk Usaha? written by Bernadetha Aurelia Oktavira, S.H., and published on Thursday, 5 October 2023.

This article is an update of the article with the same title, written by Adv. Agus Candra Suratmaja, S.P., S.H. and was first published on Monday, 9 March 2020.

All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Patents

Before answering your question, we first need to know what is patent law in Indonesia? Basically, the regulation of patents in Indonesia refers to the Law 13/2006 a.k.a. Patent Law.  According to Article 1 number 1 Patent Law, the definition of a patent is as follows:

A patent is an exclusive right granted by the state to an inventor for his/her invention in the field of technology for a certain period of time to carry out the invention himself/herself or to give consent to other parties to carry it out.

Based on patent law in Indonesia, patent protection can basically include patents and simple patents.[1] For patent protection to be granted to inventions that are new in nature, it contains inventive steps, and can be applied in industry.[2] Meanwhile, a simple patent is granted for every new invention, the development of an existing product or process, has practical uses and can be applied in industry.[3]

Based on the length of protection, patent protection can be granted for a period of 20 years from the date of acceptance.[4] While a simple patent is granted for a period of 10 years from the date of acceptance.[5] Answering your question regarding what language is required to apply for a patent in Indonesia, referring to Article 24 paragraph (2) Patent Law, an application for patent protection is submitted by the applicant or his attorney to the minister in writing in the Indonesian language by paying a certain fee.

In addition, you want to set up a company that seems to have to use patents owned by other companies. We assume that the patent you are referring to is a patent, not a simple patent. Next, you need to see whether the patent for which you want to request a license is a product patent, a process patent, or both a product patent and a process patent.

The patent holder has the exclusive right to enforce the patent he owns and to prohibit others from enforcing that patent without his consent:[6]

1. in the case of a product-patent, to make, use, sell, import, lease, deliver, or make available for sale or lease or delivery the patented product;
2. in the case of a process-patent, to use the patented production process to make the goods or other acts referred to in letter a, above.

Also read: The Ins and Outs of Patents

Patent License

To be able to use a patent owned by another company, it is necessary to have permission from the patent holder to you or your company. This permission is called a license.

What is a patent license? Basically, a license is a permission granted by a patent holder, either exclusive or non-exclusive, to a licensee based on a written agreement to use a patent that is still protected within a certain period of time and conditions.[7]

An exclusive license agreement is an agreement that is only granted to one licensee and/or in a certain area. Whereas, a non-exclusive license agreement is an agreement that can be granted to several licensees and/or in several regions.[8]

In principle, a license through an agreement is only a grant of the right to enjoy the economic benefits of a patent within a certain period of time and conditions.[9]

Furthermore, Article 4 Government Regulation 36/2018 stated that:

Licensors cannot grant License to Licensees if the licensed intellectual property right:

1. has passed its protection period; or
2. has been removed.

Therefore, it is very important for you to ascertain whether the patent for which you are going to ask for a license is still within the protection period and the patent is not abolished. The license must also be made in writing between the licensor and the licensee. If the license agreement is made in a foreign language, it must be translated into Indonesian.[10]

Furthermore, the license agreement is prohibited from containing provisions that can:[11]

1. injure the Indonesian economy and Indonesian national interests;
2. contain restrictions that hampers the ability of Indonesian people to undertake the transfer, control, and development of technologies;
3. cause unfair business competitions; and/or
4. be contradictory to provisions of laws and regulations, religious values, decencies, and public orders.

The application for registration of a license agreement is then regulated in Article 7 Government Regulation 36/2018 as follows:

1. The Licensing agreement as referred to in Article 5 section (1) must undergo a recordation by the Minister.
2. The Licensing agreement as referred to in section (1) shall at least contain:

 

1. the date, month, year and location of signing of the Licensing agreement;
2. the name and address of Licensor dan Licensee;
3. the object of Licensing agreement;
4. provisions regarding exclusive or non-exclusive License, including sublicense;
5. the term of Licensing agreement;
6. the area where Licensing agreement applies; and
7. the party who undertake to payment of annual costs for patents

Patent License Application

Next, you asked whether patent licensing must be done before establishing a business or can be done at the same time as establishing a business.

The license itself can be granted by the patent holder to an individual or to a legal entity. This is as described in Article 76 section (1) jo. Elucidation to Article 19 section (1) Patent Law.

Therefore, in our opinion, patent licensing can be done before establishing a business or at the same time as establishing a business. If the patent license arrangement is made before establishing a business, then the one who receives the license is you as an individual. However, if it is done simultaneously with the establishment of a business in the form of a legal entity, then the one who receives the license is the legal entity.

However, you need to pay attention to the following provisions of Article 13 section (1) LLC Law below:

Legal acts performed by the prospective founder(s) in the interests of a Company that are yet to be established shall bind the Company after the Company becomes a legal entity, if the first General Meeting of Shareholders of the Company expressly stated that it accepts or takes over all rights and obligations arising from the legal acts performed by the prospective founder(s) or their proxy.

In addition, Article 14 LLC Law also stipulates that:

1. Legal acts performed on behalf of a Company that are yet to secure legal entity status may only be jointly performed by all members of the Board of Directors with all the founders and all members of the Board of Commissioners of the Company, and all of them shall be jointly and severally liable over the
   legal act in question.
2. In the event of a legal act as referred to in section (1) is performed by the founder(s) on behalf of a Company that are yet to secure the legal entity status, then the legal act in question shall become the liability of the founder(s) concerned and shall not bind the Company.
3. The legal act as referred to in section (1) shall, due to law, become the liability of the Company after the Company becomes a legal entity.
4. The legal act as referred to in section (2) only binds and becomes the liability of the Company after the legal act in question has been approved by all shareholders in a General Meeting of Shareholders attended by all shareholders of the Company.
5. The General Meeting of Shareholders as referred to in section (4) is the first General Meeting of Shareholders which must be convened by no later than 60 days after the Company secures its legal entity status

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 40 of 2007 on Limited-Liability Companies;
2. Law Number 13 of 2016 on Patents;
3. Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which has been enacted into law under Law Number 6 of 2023;
4. Regulation of the Government Number 36 of 2018 on the Recordation of Intellectual Property Licensing Agreements.

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[1] Article 2 Law Number 13 of 2016 on Patents (“Patent Law”).

[2] Article 107 number 1 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation (“Perppu Job Creation”) which amended Article 3 section (1) Patent Law.

[3] Article 107 number 1 Perppu Job Creation which amended Article 3 section (2) Patent Law.

[4] Article 22 section (1) Patent Law.

[5] Article 23 section (1) Patent Law.

[6] Article 19 Patent Law.

[7] Article 1 number 11 Patent Law.

[8] Elucidation to Article 76 section (1) Patent Law.

[9] Elucidation to Article 76 section (1) Patent Law.

[10] Article 5 Regulation of the Government Number 36 of 2018 on the Recordation of Intellectual Property Licensing Agreements (“Government Regulation 36/2018”).

[11] Article 6 Government Regulation 36/2018.