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How Patent Protections Can Bolster Indonesia’s Economy

Indonesia has made significant economic progress over the last several years, propelling itself from one of the “fragile five” economies, as named by Morgan Stanley in 2013, to the 10th largest global economy in terms of purchasing power parity. As the country recovers from impacts of the pandemic and builds its economy, Indonesia aims to further grow its knowledge-based economy and reduce its reliance on natural resources.

The ongoing process of revising the 2016 Patent Act, which is slated for debate in Parliament this year, represents a critical opportunity of Indonesia to orient its policy environment toward the future. A Patent Act that prioritizes innovation could serve as a catalyst to develop the Indonesian healthcare system and leverage the investment Indonesia has made in developing the next generation of entrepreneurs.

A report from the Geneva Network discusses how a strong intellectual property (IP) infrastructure will help Indonesia diversify and grow its knowledge-based economy, and offers the following specific recommendations on how protecting and enforcing patents is important to achieving this growth:

  1. Eliminate Improper Patentability Restrictions

International Standards & Criteria for Patentability: The international criteria for patentability are novelty, an inventive step, and industrial applicability or utility. Indonesia should ensure that all inventions are assessed by these criteria without discrimination or interference from the government.

New Forms & Uses of Existing Medicines: Follow-on innovation is critically important in the biopharmaceutical ecosystem, encompassing new uses for existing medicines, new formulations or dosages, and other refinements of existing technology that improve an existing medicine’s safety or efficacy. Indonesia precludes patents on these important biopharmaceutical innovations by adding an additional criterion for patentability that is inconsistent with international norms. Specifically, Indonesia requires a showing of “increased meaningful benefit” for follow-on innovation, which is inconsistent with the novelty, inventive step, and industrial applicability requirements of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement).

  1. Ensure patents can promote collaboration and technology transfer

Reform 2016 Patent Act: Indonesia’s 2016 Patent Law discourages voluntary  licensing agreements and instead facilitates compulsory licensing on vague grounds. Voluntary licensing mechanisms are crucial to fostering collaboration and attracting international investment. Indonesia should reform its patent laws to promote voluntary cooperation between IP rights holders and local companies.

To develop knowledge-oriented industries such as life sciences or information technology, Indonesia will need to build international partnerships, particularly with the private sector. IP rights are essential to enabling such collaboration, with voluntary patent licensing allowing for safe sharing of information and transfer of technology.

  1. Ensure Patents Have Meaningful Terms

Patent Term Adjustment: Patent Term Adjustment (PTA) essentially provides compensation for the period of protection lost due to undue delays in examining and granting a patent. Indonesia should introduce PTA, which would provide innovators with greater confidence and stability when navigating Indonesia’s patent prosecution regime.

Patent Term Restoration: Many countries utilize a pharmaceutical-specific mechanism which is similar to PTA to “restore some of the patent life lost due to mandatory regulatory review,” which can often take several years to complete. Indonesia should investigate how this could provide an additional incentive for investment from the biopharmaceutical sector, given that the median time to receive marketing authorization for new medicines in Indonesia is approximately 4.4 years.


While Indonesia has made some progress in IP rights in recent years, its patent system still requires improvement if the country is to become a global player in the knowledge economy.

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