Shopping center

Indonesia launches mall and mall certification program to crack down on counterfeit sales

The presence of counterfeit products in the Indonesian market is a stubbornly persistent challenge that has plagued the country for many years. The U.S. Trade Representative’s Special 301 Report, which is published annually to assess intellectual property (IP) protection regimes around the world, has placed Indonesia on its “priority watch list” 23 times and 10 times on the “watch list”. The 2021 report included the recommendation that Indonesia develop a specialized intellectual property unit under the Indonesian National Police to focus on investigating domestic criminal syndicates behind counterfeiting and piracy. The special police crime unit already deals with intellectual property issues and has been operating since well before 2021, but that year Indonesia also established its new enforcement task force. Intellectual Property, which aims to improve intra-governmental coordination on enforcement. However, enforcement of intellectual property rights remains difficult in Indonesia.

The police and the Directorate General of Intellectual Property (DGIP) have handled 346 IP enforcement cases in total from 2020 to the start of 2022. If it is positive to see some enforcement activity, it will is a rather small number, given that the Indonesian market and its population are very large and counterfeiting is a widespread and persistent problem.

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The Indonesian Trademark Office is notably trying to address the country’s repeated counterfeiting and piracy issues by introducing a certification system for malls and shopping malls based on their support of intellectual property rights and standards. The certificates are intended to guarantee that the establishment welcomes sellers of authentic products.

Physical markets, such as Pasar Tanah Abang and Mangga Dua, two markets known for counterfeit goods, and online shopping sites are eligible to obtain a certificate. Specifically, this includes department stores, high streets, supermarkets, social media, online marketplaces, and crowdsourcing websites that digitally collect information, ideas, opinions, or the work of a group of people . However, the certification procedure for online marketplaces has not yet been developed, as these present unique challenges for certification authorities.

For brick-and-mortar shopping centers and malls, certification applicants must demonstrate that at least 70% of their tenants are selling genuine products and goods, i.e. those corresponding to the respective brand registered with the DGIP.

The steps to obtain a certificate for a mall or shopping center are described below.

Once the owner of a shopping center or a shopping mall contacts the DGIP to request a certificate, the DGIP proceeds to the inventory of the tenants of the commercial place. The inventory data covers details of tenants and their business, including their relationship to the brand owner and brand registration related to the goods and services sold. Then, the DGIP will distribute questionnaires to customers to find out if the tenants are selling genuine products. However, no specific details on the form of the questionnaire or the required number of respondents have yet been provided. Depending on the results of the questionnaire, the DGIP will identify and verify the transactions of the sellers. This includes verifying the relationship between tenants and trademark owners and the validity of trademark certificates. If the data validation is approved, the DGIP will issue a certificate to the shopping center. In case of refusal, the owner must inform the tenants so that they understand the risk of a possible action against the infringement of the intellectual property.

These identification and verification steps are the main factor why there is not yet a certification process for online marketplaces, as the much higher number of users makes these important steps impractical to complete.

The mall and shopping center certification program also aligns with provisions in the Trademark Act and Copyright Act that specify owner liability, with building management to play a role in the enforcement of intellectual property. The Indonesian Mall Association, however, pointed out that the situation is complex, as there are two types of mall owners, which affects the involvement of the owner. First, “strata title” shopping center ownership agreements allow tenants to hold exclusive rights to their space or “lot,” as well as the right to use the common space. In contrast, leased shopping centers are those in which ownership of the lots remains with the landlord, who only grants temporary rights to use the space. For leased shopping centers, agreements between tenants and landlord include an obligation for tenants to comply with the law. With respect to the sale of counterfeits, the owner may take action – such as an order to close the store until the problem is resolved, or other action requested by the complainant or the authorities – against a tenant who would sell counterfeits. For condominium malls, however, the building owner’s options are more limited, but possible actions could include periodically educating owners about intellectual property infringement or posting notices on premises. so as not to buy counterfeit products.

On the online side, the Indonesian E-Commerce Association noted that its members have been proactive in handling complaints related to intellectual property infringement. Actions they pursue include takedowns, blacklisting, and providing user data to authorities where appropriate. For the time being, these efforts will continue outside of the Trademark Office’s certification program, which will remain on hold for places of sale on the Internet until the DGIP can put in place an effective procedure for verifying e-commerce user data.

The certification program for shopping malls and shopping centers has just been launched and the DGIP has launched an information campaign with various shopping malls in Indonesia. At this stage, brand owners should discuss with their local store owner in Indonesia to initiate coordination with DGIP to obtain a certificate.

Conclusion

The mall and shopping center certification program can help Indonesia move towards being permanently off the priority watch list, especially if the DGIP focuses on physical markets that are most notorious for selling counterfeit products. Educating these markets (as well as online marketplaces) about the certification program should be a priority in any advertising campaign. The certification program has just launched and is not yet mandatory, but requiring such certification before sellers can begin physical or online operations could potentially increase the effectiveness of the program.