LICENSE AGREEMENT AND TRANSFER OF RIGHTS ON TRADE SECRET

    Protection of trade secrets is important for the sustainability of business. Trade secrets in the form of methods of production, processing, sales, or other information in technology and/or business sectors,[1] need to be protected to prevent any party who is illegally obtaining economic benefits from trade secrets which do not belong to them. Thus, the owner of a trade secret needs to ensure the maintainence of confidentiality, especially by not disclosing the substance of a trade secret to any other parties.

    On the other hand, the economic value of trade secrets may also create needs for its owner to: (i) develop the economic value that can be generated; or (ii) transfer the rights of the trade secret to another party. In the case of an owner of a trade secret who needs to develop the economic value of a trade secret, Law Number 30 of 2000 concerning Trade Secrets (“Trade Secret Law“) provides a licensing agreement scheme, and additionally also contains provisions if the owner of trade secret intends to transfer his or her rights.

    License Agreement

    In a licensing agreement, the owner of a trade secret gives permission to another party through an agreement, so that the other party can enjoy the economic benefits of a trade secret for a certain period of time, with certain terms and conditions. As a form of protection, the Trade Secret Law requires that a license agreement be recorded at the Directorate General of Intellectual Property Rights,[2] which contain the administrative information and does not cover the substance of the trade secrets themselves..[3] The record will later be published in the Trade Secret Official Gazette[4] and is intended to provide protection for trade secret owners in the event of a dispute or alleged criminal act with regard to the trade secrets.

    If a Trade Secret license agreement is not recorded, the license agreement will not have legal consequences for any third party.[5] Meanwhile, if the license agreement is recorded, if necessary, the parties may submit an application for an excerpt of the license agreement record,[6] which will be issued within 5 (five) working days from the date of the completed application.[7] The excerpt of the record may be used as one evidence or documents showing the ownership of a party to a trade secret.

    The record of license agreement is regulated in detail in Government Regulation of the Republic of Indonesia Number 36 of 2018 concerning Registration of Intellectual Property License Agreements (“GR 36/2018“), where applications for record of the license agreements need to be submitted in writing,[8] by at least providing documents in the form of:[9]

    1. A copy of the license agreement;
    2. official excerpt of proof of ownership of trade secrets which is still valid;
    3. a power of attorney, if the application is submitted through an attorney;
    4. Receipt of payment of fees.

    Examination of the completeness of documents will be carried out after the application is received. After the documents are declared complete, the application documents will be checked for compliance within 5 (five) working days. A letter will be issued to the applicant,[10] within 2 (two) working days after the document is declared to be complete and in compliance.

    Transfer of Rights

    Meanwhile, if the owner of a trade secret intends to transfer his trade secret, the Trade Secret Law provides a scheme of transferring rights through: (i) inheritance; (ii) grants; (iii) testament; (iv) a written agreement or; (v) other causes justified by statutory regulations (for example a court decision in relation to bankruptcy).[11] As is the case with the license agreement, the administrative information on transfer of rights of trade secret shall be recorded,[12] although the applicant does not have to record its substance.[13]

    In the event that the transfer of rights is not recorded at the Directorate General of Intellectual Property, the transfer of rights has no legal consequence on any third party.[14]

    Closing

    Considering that transfer of rights and license agreements may not have a legal consequence to any third party if the underlying document is not recorded, we conclude that it is very important to record the document of transfer of rights and license agreements. Thus, in the event of a dispute or alleged criminal act, the record may be submitted as


    [1] Article 2 of Trade Secret Law

    [2] Article 8 paragraph (1) Trade Secret Law

    [3] Elucidation of Article 8 paragraph (1) Trade Secret Law

    [4] Article 15 paragraph (3) c GR 36/2018

    [5] Elucidation of Article 8 paragraph (2) Trade Secret Law

    [6] Article 16 paragraph (1) GR 36/2018

    [7] Article 16 paragraph (3) GR 35/2018

    [8] Article 10 paragraph (1) GR 36/2018

    [9] Article 10 paragraph (4) GR 36/2018

    [10] Article 15 paragraph (1) GR 36/2018

    [11] Article 5 paragraph (1) jo. Elucidation of Article 5 paragraph (1) Trade Secret Law

    [12] Article 5 paragraph (3) Trade Secret Law

    [13] Elucidation of Article 5 paragraph (3) Trade Secret Law

    [14] Article 5 paragraph (4) Trade Secret Law