Intellectual Property Rights in the Indonesian mining industry.

Intellectual Property Rights in the Indonesian mining industry.  (Vol 94)

Introduction.

The mineral and coal resource sector are a highly competitive business where a company may adopt innovative changes to improve its performance. These changes are often quickly copied throughout the industry. In some cases, the innovative changes can be patented as Intellectual Property (IP), and thereby give an operation advantage to the patenting company. For example, the recent new ultra-low frequency marine seismic system developed by BP. In other cases, a computer software company may secure intellectual property rights over a computing methodology, sparking a new product to out compete their business rivals.

Are Indonesian companies in the resource sector taking full advantage of their Intellectual Property Rights and opportunities?

What are Intellectual Property (IP) Rights.

In essence Intellectual Property is “the property of your mind or propriety knowledge”. The main forms of IP in mining typically includes; –

• Patents (inventions, new product or process).
• Trademarks, (brand names).
• Designs (appearance of products).
• Copyright, (text, plans, drawings, computer programs etc).
• Trade Secrets, (confidential information).

Not all things of the mind are patentable, wherein eligibility often needs to demonstrate the subject’s novelty combined with inventive step, and there is potential economic value to the owner. Fine arts are typically excluded.

The World Intellectual Property Organization (WIPO) defines a patent as “an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem.” Technical information about the invention must be disclosed to the public in a patent application, in order to obtain a patent.

Indonesian Legal bases.

Indonesia’s Intellectual Property rights are based on the 1945 Constitution, being enacted in a number of IP laws, the most recent being Law 13 dated 28 July 2016. These laws are supported by Presidential Instructions (4/2006) and Ministerial of Justice regulations (mostly 1991) and about 14 Implementing Regulations the most recent being No. 51 of 2007.

The Patent Law 13 / 2016 defines patents as “intellectual property granted by the state to an inventor over their invention results in the field of technology which has a strategic role in supporting the development of the nation and promote the general welfare” (Google translate). The Law follows a general international trend of identifying two types of Patens, that of “Patent” (valid for 20 years) and “Simple Patent” (valid for 10 years). Typically, an invention belongs to the originating person, unless so specified in an employment contract wherein the inventor is likened to a contractor with ownership of the invention going to the employer. [Law 13/2017 Article 12]. Patent rights may be transferred (Article 74).

It seems there may be some limitations in Law 13/2016 associated with taking out a patent in Indonesian. Patent holders are obliged to make the product using the process in Indonesia (Article 20), along with transfer of technology. If the patent holder does not make the product in Indonesia within 36 months, then the Minister may implement the Compulsory Licence process to a government party (article 82).

Presidential Decree 74 dated 10 September 2004 is the ratification of the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty of 1996. WIPO has a number of treaties that include patents, trademarks copyright etc. WIPO includes many IP related multilateral treaties, including a 1994 agreement on Trade related Aspects of Intellectual Property Rights (TRIPS). There are also WIPO regional economic treaties and a number of bilateral treaties with IP related matters. According to WIPO statistics, Indonesian filing of patents for 2016 were 1,101 (residents) of which 393 were granted, and 8,538 (non-residents) filed with 3,268 granted, along with a further 53 filings that were conducted abroad of which 47 were granted. The WIPO statistics shows that in 2013 there were 22,564 patents in force in Indonesia.

Overview of the Indonesian IP sector.

The 2017 Dir Jen of Intellectual Property performance report is available on line. This is largely an inward-looking government administrative report. It does tell us that an overall budget of Rp. 164,925 million was spent (94.7% of budget), and some Rp. 463,801 million was earned (copyright, trade secrets, industry design, patents and brands etc) by the department (being 132.5% of target). The report acknowledges that the regulations in support of the intellectual property law need to be improved and the backlog of applications needs to be speeded up.

The report does not seem to tell us how much income was earned by Indonesian holders of intellectual property rights (and associated Indonesian taxes on such earnings), nor how much Indonesian enterprises paid out to foreign IP rights holders.

The Jakarta Post (18 August 2018) article “Providing ease for IP rights applicants” included the following data from the Directorate General of Intellectual Property (DJKI). The total number of registered IP was recorded at 11,034 in 2017, and as of July 2018 the total number of registered IP was reported at 14,103 with trademark ranked first, followed by industrial design. By adopting online system, DJKI earns Rp 450 billion from non-tax payment (PBNP) from the applicants. Some 90% of a registered 9,600 patent owners are foreigners. Out of 1,000 university research based academic papers, about one is eligible for patent. The government has increased its budget for research to Rp. 2.4 trillion in 2018 from Rp. 2.1 trillion in 2017.

Patent Application in Indonesia.

Typical fees to apply for a patent is around Rp 750,000 (or Rp. 1.25 mill with on-line application) with a further Rp 1- 2 million on approval. Engaging local lawyers to assist in the drafting and processing the application may be around Rp 50 million, or more. There is an annual application/ registration fee of around Rp 1 million per year. If this fee is not paid up within about 6 months of its due date, then the patent may be lapsed. The application and approval process typically take up to one year, but can take up to 54 months.

 

Patents in the Indonesian mining & processing sector.

Some assistance was provided in the preparation of this article, by the Patent office in Jakarta. A number of patent applications filed in Indonesia were briefly reviewed, based on the word search sorting in the nature of the invention. The list of inventions was vetted to exclude a number of patents that were not in line with the purpose of the search. For example, the search for “mineral” excluded patens for mineral water, minerals found in plastics etc. This simple review did not undertake further searches may have highlighted other aspects of the Indonesian exploration, mining and processing industries, such as mining software.

From 1998 onwards, there are some 148 approved International coal patent applications with another 10 pending. Many of the applications are from Japan, Korea, China and the USA, with others coming from various European countries, South Africa, Australia etc. Most applications come from large international companies, such as Mitsubishi Heavy Industries of Japan, with a few from research institutes etc. There are 61 approved Indonesian coal patent applications with another 9 pending. About one third of such Indonesian approved applications are from various research centres, such as Badan Pengkajian Penerapan Teknologi Mineral & Coal (BPPT), Lembaga Ilmu Pengetahuan Indonesia (LIPI) etc, while others come from Universities, companies (eg. PT. Pamapersada Nusantara) and private individuals. Most of these patents relate to coal upgrading and coal conversion, with only very few related to coal transport etc.

From around 1985 onwards there are some 120 mineral related patent applications (excluding mineral water, mineral supplements or mineral in plastic production), of which some 17 are yet to be approved. There are 31 applications from Indonesia, with the remaining 89 from outside Indonesia. Most international applications are from large companies, while most Indonesian applications are from government research bodies. There is a wide variety in the nature of the inventions, though many relate to some aspect of mineral processing or the use of minerals in other processes.

From around 1983 onwards there are some 57 mining related patent applications of which 5 are yet to be approved. There are 20 applications from Indonesia, with the remaining 37 from overseas. The two largest contributors are Budianto from Indonesia and Technological Resources Pty Ltd from Australia (a subsidiary of Rio Tinto). There is a wide variety in the nature of inventions, from mine pumps to mine and waste dump systems.

The title searches for coal, mineral and mining shows a trend that about one out of three patents are by Indonesian parties. Indonesian patens are dominated by research institutions, whereas foreign patents are dominated by companies.

The application for patents can be expected to be more frequent in frontier areas of the mining industry. This is shown by the large number of patents in the coal upgrading and coal conversion fields. Other frontier areas where patents are likely to be active include computer software (including geological & ore modelling), surveying and remote sensing, geophysics and geochemistry, along with more sophisticated mining equipment.

Enforcement.

Some countries are strict in applying intellectual property rights, for example tourists entering France may have their imitation branded hand bags confiscated, and street sellers of imitation goods are actively pursued and jailed. It is well known Indonesia is far more relaxed in policing intellectual property rights, with street sellers of pirated music and videos being openly sold everywhere. The Indonesian film industry is crippled by this lax attitude, wherein box office showings of Indonesian films only last for 2 weeks, thereafter the pirated videos take over. The legal issues over the IKEA brand name also showed up weaknesses with the perception of international property rights in Indonesia. At the beginning of the mining software era, Indonesia was infamous for having pirated software and photocopies of instruction manuals. The mining software industry now tends to be self-protecting of its intellectual property rights through development of the “dongle’ security lock and other more advanced security means.

It would seem the Indonesian legal system is a difficult path to follow for someone trying to protect their invention, and so we see often see a form of self-protection applied. For example, – one Ground Penetrating Radar geophysical contractor insists on sending the field data abroad (through the internet), where the processing of sections and reporting is undertaken. The Geophysicist is concerned that his patented software may be pirated through reverse engineering.  Another example can be assumed wherein some Indonesian coal brands are closely guarded (Enviro Coal and Kideko) tend not sell their coal to other Indonesian parties for blending.

The assurances around having patents to seek royalties from others wishing to adopt the same technology can also have difficulties. For example, one Indonesian copper leach project was developed around a patent for bioleaching copper. However, once this project was sold across to a new owner, it seems the status of the patent rights became the subject of a legal dispute. Separately, it would seem from the internet, that Rio Tinto has anticipated such potential disputes by forming Technical Resources Ltd. Pty to hold its various patents in this separate entity. Patents are considered as “intangible assets’ for accounting and valuation purposes.

Patent holder outlook.

A number of approaches were made to various patent holders to get feedback for this article, wherein only a few responses were received. It would seem patents are taken out to 1) protect a technology invention that contributes to their existing business (such as mine software), or2) to seek a royalty from others that may adopt the patented technology (such as pumps for alluvial mining).

Patent Potential.

The coal upgrading and coal conversion industry has seen many attempts to be commercialized. The main near-successful processes are the government’s subsidized South Sumatra coal briquetting industry (now competing with the new household gas program), and the failed “White Industry” coal upgrading plant in East Kalimantan. Ongoing research is being undertaken by the government with its small-scale testing various forms of Rare Earth extraction processes, and undertaking field studies on Coal Bed Methane.

The international patent field includes the trend towards automated and more sophisticated mine machinery (including driverless vehicles underground in Freeport) that provide operational efficiencies and improved safety. “Big Data’ software systems are breaking into the Indonesian mining sector. Exploration and surveying are seeing new technology using drones, and building all sorts of applications to smart handphones. Various international patents are expected to dominate this high technology trend, though Indonesians are free to invent.

Indonesia has a number of research organizations, including universities, along with a vibrant and varied mining sector. It is likely some inventions could be patented and bring their inventors fame and fortune.

Is Indonesia optimizing its patent potential?

Given the apparently high proportion of Indonesian patents in the resource / mining sector, then we might consider Indonesians are taking advantage of their intellectual rights opportunities. However, given that having a patent granted in Indonesia is a slow process, and the apparently weak enforcement of patents, then we may ask; – What is the business case for taking out patents in the Indonesian mining sector?