As of early 2022, the hype of digital assets seems to be exploded. Recent case in Indonesia that a young man has sold his selfies in billions Rupiah on NFT platform called OpenSea, which was traded in ETH cryptocurrency. NFT are now becoming very popular way to sell or purchase digital artwork. Despite unique and innovative, how does Indonesian law protect NFT as a digital asset?

Definition of NFT

Non-Fungible Tokens or NFT is a unit of data stored on a digital ledger (blockchain) that certifies a digital asset to be unique and therefore non-fungible. NFT as a digital asset can represents art objects such as painting, photograph, videos music and even in-game items. Since NFT exist on blockchain, the data is distributed to a ledger that records transactions. Each NFT is unique, cannot be exchanged and dissimilar to one another, hence impossible to be counterfeited. The purchaser of the NFT will typically have a token and transferring such token between parties is possible.

IP Framework

To this date, NFT does not specifically regulated under Indonesian law. Nevertheless, the artwork that is associated with the NFT is protected as copyright. Indonesian Law No. 28 of 2014 on Copyright (“Copyright Law”) determines that Copyright is the exclusive right of the creator that arise automatically based on the principle of declarative after an invention is embodied in a tangible form without prejudice to the restrictions in accordance with the provisions of the legislation. Copyright Law provides no further explanation as to what extent a tangible form is determined. Yet a digital form can be reproduced, copied, modified or published either directly or use device assistance that constitutes a tangible form.

NFT is not copyrighted artwork. Even though NFT contains copyrighted work owned by the creator, the right does not necessarily owned or automatically transferred to the NFT purchaser. Unless, there is an assignment of right from the creator to other party(ies). As the copyright is solely owned by the creator of artwork and/or copyright holder, NFT purchaser is not authorized to reproduce, copy, modify or publish publicly the artwork associated with the NFT for commercial purpose without the permission of the creator or copyright holder. Such conduct is considered as infringement and will render to criminal penalty with imprisonment and fine sanctions. Instead, the purchaser will own a token as proof of NFT ownership, which is transferable. As the digital asset continues to evolve, so must the legal and regulatory development. Albeit Copyright Law is currently silent on NFT protection, we hope that NFT will be further regulated under Copyright Law in terms of intellectual property protection in the near future.

The highly contentious Law No. 11 of 2020 on Job Creation (“Job Creation Law”) has been enacted despite enormous protests nationwide. The objective is to absorb Indonesian workers as widely as possible amid strong competition and the demands of economic globalization. In supporting the job creation, the law must adjust various regulatory aspects related to business simplification, protection and empowerment of micro, small and medium enterprises (MSMEs), improvement of investment ecosystem for accelerating national strategic projects (PSN) as well as the improvement of protection and welfare of workers. The law amends various prevailing law including Law No. 20 of 2016 on Trademark and Geographical Indications (“Trademark Law”). It indicates major changes on the substantive examination period that significantly reduced to only 30 days from 150 days. Further, the Job Creation Law is also omitting Article 25 paragraph (3) yet adding Article 20 point g of Trademark Law.

Functional form is not allowed

The Section VI of Job Creation law indicates the significant changes towards Indonesian Trademark Law. Firstly, Article 108 paragraph (1) amends the Article 20 of Trademark Law, which states:

“A mark cannot be registered if:

a. it contradicts the state’s ideology, laws and regulations, morality, religion, norms of decency, or public order;

b. it constitutes, is related to, or is simply stating the goods and/or services being applied for registration;

c. it contains elements which may mislead the public on the origin, quality, kind, size, type, purpose of use of the goods and/or services being applied for registration or constitutes a name of a protected variety of a plant for similar goods and/or services;

d. it contains information that does not match the quality, benefit, or efficacy of the goods and/or services being produced;

e. it does not have distinguishing features;

f. it is a generic name and/or public symbol; and/or

g. it contains a form that is functional.”

Point g above is the new provision to emphasise the distinctiveness of marks for registration. Considering the lack of distinctiveness of mark applications shall be rejected, thus it allows others to freely use any form that is functional. There is no further explanation as to what functional is under Job Creation Law. However, functional is generally considered as a non-distinctive or lack of distinctiveness mark which visualised on logo, shape, combination of colour or is a description of the function of the product. Distinctiveness is important element affecting the quality of a brand in line with its main function as the identity of goods or services. When a brand only serves as an indication of the form, function, quality or other characteristics of the goods or services, consumers will consider this as a means of obtaining general information about the goods or services.

Faster registration process

Second, Article 23 paragraph (5) of Trademark Law determines the Substantive examination shall be completed within a maximum period of 150 days. While Article 108 paragraph (2) of Job Creation Law clearly reduced the period to only 30 days. The Job Creation Law expedites the process of mark registration, in case there is no opposition or objection against the mark, which is way more effective for the brand owner for their business objectives.

Obligation to retrieve the certificate

Lastly, Article 25 paragraph (3) of Trademark Law is omitted under Job Creation Law, under which the registered Mark is deemed as withdrawn and deleted if the brand owner or its Proxy do not retrieve the certificate within a maximum period of 18 months, as of the issuance date of the certificate. Since mark certificate is now can be retrieved by online system in Directorate General of Intellectual Property (“DGIP”), the mark owner or its Proxy may access the certificate anywhere without having to come to DGIP.

As the economy in Indonesia continues to grow to this very day, the number of new startups in Indonesia are growing rapidly. Most of them are engaging in digital products or services business, while some of them are engaging in conventional business. As we can see, there are 5 startups acknowledged as unicorns in Indonesia since 2019. These companies are  creating and developing numerous brands as the identity of their products. In parallel, the brand protection should not be neglected to protect the emerging business.

The function of digital social media is not merely to share your personal life in internet. It has now become one of the most effective way to advertising and branding your products or services, either for personal or entity business. The content writer of digital social media often put pictures, songs, videos, words and other forms of audio-visual onto their content to create ads on social media. They either create new various forms of audio-visual which generates original works or incorporate existing works without crediting the author. Such contents which include the original or existing works that is used by content writer are intended for commercial purpose.

The original works created by the author are protected under Copyright Law. Based on Law No. 28 year 2014 on Copyright (Copyright Law), Copyright is an exclusive right of the author that arise automatically based on the principle of declarative after an invention is embodied in a tangible form without prejudice to the restrictions in accordance with the provisions of the legislation. Copyright is also comprised of moral rights and economic rights. Further, the protected works under Copyright Law including but not limited to drawing, painting, calligraphy, songs, music, photographic works, image of a person, cinematographic works and video games.

In this context, any works that has been created are copyrighted. Copying and/or unauthorised reproduction of works without the consent of the author is therefore illegal. There is penalty sanction for the breach of Copyright Law asserting any unauthorised reproduction without the consent of the author shall be convicted with 4 years of imprisonment at most and/or fined a maximum of 1 billion Rupiahs.

To avoid an issue, a content writer must be careful and identify further about the source of the works as to whether the original author is providing a license or permit to use their works. Please bear in mind that all works are copyrighted and they should be wise in using existing works. Alternatively, there are websites providing various themed pictures that people can use it with free license with or without attributions – an act of acknowledgement, such as www.freepik.com. Note that public should read again the license terms carefully before using the existing works.

Personal Data Protection
Each personal data treated as individual or entity proprietary and is therefore entitled to have a protection. The business actor (as defined in previous article), must ensure that personal data must be processed in accordance with the purpose of its designation, such as for data submission.

Dispute Resolution
GR 80 allows e-commerce dispute resolution through an Online Dispute Resolution – which subject to the choice of forum and law between the Parties. In light of this, online dispute resolution is basically similar with regular dispute resolution such as mediation, arbitration or escalation to government under relevant ministries or court proceeding.

In terms of dispute between the business actor and consumer, GR 80 allows the consumer who suffers losses or damages from E-commerce business actor to file a claim against the business actor through Consumer Dispute Resolution Body or BPKN. Alternatively, consumer may file a lawsuit through a court civil proceeding based on their domicile.

Sanction
There is no civil or criminal sanctions towards the violation of GR 80. The regulation only stipulates administrative sanctions against business actor for the breach of law as follow:

1. warning letter (divided in 3 terms);
2. being listed in the Priority List of Surveillance;
3. being blacklisted;
4. temporary blocking of e-commerce services; or
5. business license revocation.

After 3 years since the circulation of the draft E-commerce Regulation, the Government of Indonesia has finally enacted Government Regulation No. 80 year 2019 on Commerce through Electronic System or E-commerce (GR 80) in late November. The regulation is implemented as a derivative of Law No. 7 year 2014 on Trade Law and a further regulation of Presidential Regulation No. 74 year 2017 on the National E-commerce Road Map. 

The key area of GR 80 consists of following matters:

1. Relevant parties in E-commerce;
2. Requirements in conducting E-commerce;
3. Implementation of E-commerce;
4. Obligations of E-commerce business actor;
5. Evidence of E-commerce transaction;
6. Electronic advertisement;
7. Electronic offering, acceptance and confirmation;
8. Electronic contract;
9. Personal data protection;
10. Payments in E-commerce;
11. Delivery of goods and services in E-commerce;
12. Exchange goods/services and purchase cancellation in E-commerce;
13. Dispute resolution in E-commerce; and
14. Guidance and surveillance.

In this chapter, some significant provisions that will impact to local and foreign E-commerce business actor will be discussed.
Relevant partiesGR 80 targeting following parties:

1. Merchant (individual or business entity);
2. E-commerce service provider (individual, business entity or state-owned entity that are required to have business permit);
3. Intermediary service provider (individual or business entity that facilitate electronic communications other than telecommunication service provider such as Google, Yahoo and/or hosting service provider and payment gateway provider)

The above parties are also referred to as “E-commerce business actor” or Pelaku Usahathat could be local or foreign business actor.For foreign E-commerce business actor who is actively offering and/or conducting E-commerce business to Indonesian consumers and coming within certain criteria such as transaction amount; transaction value; delivery amount; and/or number of traffic or visitor, will be deemed to have physical presence and conducting permanent business in Indonesia. Accordingly, such E-commerce business actor must appoint a representative in Indonesia. 

Consumer protectionIn terms of consumer protection, GR 80 provides a legal basis that allows any consumer who suffers losses from E-commerce may lodge a complaint against E-commerce business actor to Ministry of Trade. Such business actor complained against is then required to resolve the complaint report, otherwise, they will be listed in the Priority List of Surveillance (a list of business actor with disputes or potentially violating trade policy, but is not yet blacklisted) which can be accessed by public. However, GR 80 does not provide further explanation as to how the business actor shall complete the complaint report or to sort it out.
Domain name and Whistle blower systemBoth local and foreign E-commerce service provider are obliged to use Indonesian high-level domain name (.id) for their respective website.

In align with consumer protection, GR 80 also stipulates that local and foreign E-commerce also Intermediary service provider is liable for legal consequence due to illegal content on their website. Unless there is a prompt action by taking down illegal contents upon request or any findings of such contents.

To avoid such issues or responding to any information on illegal content, it is compulsory for local and foreign E-commerce service provider to provide:

• terms and condition or license agreement to its users in using E-commerce service providers’ services in lawful conduct; and
• complaint form to report illegal contents or any law infringement for public 

Some E-commerce service provider has been providing complaint form, either in electronic or manual form for public access. Through this whistle blowing system, public can report illegal content or unlawful conduct within E-commerce area to purpote law enforcement.
The emerging E-commerce law in Indonesia shows the positive vibes of Indonesian E-commerce market and Government role to take the issue seriously. As the above discussions are not the entire key areas impact local and foreign E-commerce business actor, I will discuss the remaining key areas in next chapter.

The number of counterfeit goods circulated in Indonesia are still huge. Printer ink, apparel, leather goods, and software are the main products that are being counterfeited with more than 30% percentage, according to the data published by MIAP (Indonesia Anti-Counterfeiting Society) through Amcham Indonesia. Then followed by cosmetics, pharmaceutical and lastly, food and beverages products. Broadly speaking, counterfeiters are targeting global well-known brands and unfortunately, counterfeiting activities create impacts on broad scope, which includes:

1. Brand owner loses its brand values, reputation, profits and investment costs;
2. Government loses tax revenue and there are risks of corruption or foul practise;
3. Consumers will have health and safety risks by consuming dangerous pharmaceutical, cosmetics or foods and beverage, and misled by low quality products.

To overcome the counterfeit goods is quite challenging tasks, but it is not impossible. The protection of registered trademarks for brand owner stipulated under Law No. 20 year 2016 on Trademark and Geographical Indication (“Trademark Law”) which allows the brand owner or its proxy to enforce its right and take legal actions. Please bear in mind that the protection only covers registered trademarks, so the brand owners are suggested to file trademark application prior to conducting business in Indonesia.

Counterfeiting is a trademark infringement and it carries both civil and criminal penalties. The criminal offense shall convicted the counterfeiter with 5 years of imprisonment and fined a maximum of IDR 2.000.000.000,- (two billion Rupiahs). The brand owner or its proxy is therefore entitled to lodge a criminal complaint to Authorities such as Police or Civil Service Investigator (PPNS) and/or claim for damages to commercial court for the losses suffered as a result of the infringement.

Trademark infringement is a complaint based criminal, thus law enforcement can only be processed if there is a complaint from the brand owner or its proxy. Once the complaint is lodged, the Authorities will examine the case and conduct investigation to obtain evidences, then assure the infringement is still ongoing prior to commencing raid action. In practise, the post-raid step can lead to two options; either the brand owner and the counterfeiter reach amicable settlement through an agreement, in which the counterfeiter shall subject to demands therein, or escalate the case to Prosecution, if amicable settlement is not succeed. The objectives of law enforcement program are to give deterrent effect to counterfeiters and widespread awareness for other crime perpetrators against counterfeits.

Indonesia has now enacted Protocol relating to the Madrid Agreement concerning the International Registration of Mark, 1989 by issuing President Regulation No. 92 year 2017. This is a legal basis that allows local applicant to file trademark application internationally using Madrid Protocol system. Directorate General of Intellectual Property Rights of Republic of Indonesia (DGIP) have socialized the Madrid Protocol system to public since early 2019.