New Regulation for IP Royalties in Indonesia

Pursuant to the enactment of Law No. 28 of 2014 on Copyright (Copyright Law), the Ministry of Law and Human Rights (MOLHR) has issued Regulation No. 29 of 2014 on the Guidelines of Application and Issuance of Operational License and Evaluation of Collecting Management Society (Regulation No. 29).

The Copyright Law urges authors, copyright holders, and performers to be members of collecting societies in order to manage and collect royalties from the commercial use of their copyright and neighboring rights from the public, says Daru Lukiantono, a partner at Hadiputranto, Hadinoto & Partners in Jakarta. “The Copyright Law indicates that collecting societies should be nonprofit in nature and obtain operational licenses from the MOLHR by fulfilling certain requirements.” it will affect trademark registration Indonesia too.

In general, Regulation No. 29 further specifies issues on the establishment, issuance of operational licenses, and evaluation of collecting societies, says Wiku Anindito, an associate at the ip law consultant firm.

To obtain operational licenses, collecting societies should (i) be in form of an Indonesian non-profit legal entity; (ii) obtain authorizations from authors, copyright holders or performers to collect, gather and distribute royalties; (iii) represent at least 200 songwriters or 50 members of performers or other copyright holders (e.g. book authors); (iv) have a clear objective and capabilities to collect, gather and distribute royalties.

“Besides satisfying the above requirements, collecting societies should submit their written applications for licenses to the MOLHR by enclosing supporting documents, e.g. Deed of Establishment and Articles of Association, powers of attorney from their members, a list of members and the works that they are managing,” adds Artna Btari, an associate at the firm. “Upon review of the application, within 14 working days of the submission date, the MOLHR will issue the operation license if all requirements are met.”

The Copyright Law requires the establishment of two National Collecting Societies (NCS) with one representing the authors’ interests, and the other representing the interests of the neighboring rights owners (e.g. performers). These two societies should become parent organizations for local collecting societies in the field of song and musical works, Lukiantono says. “Besides collecting and managing royalties for their members, the NCS societies have obligations to establish code of ethics for their members; supervise their members; give recommendations to the MOLHR for sanctions against ethical violations by their members; give recommendations to the MOLHR on the licenses of collecting societies whom they coordinate; establish guidelines, procedures, and system in distributing and calculating royalties; conduct mediation for any copyright and neighboring rights disputes, and provide reports to the MOLHR.”

As the MOLHR will conduct evaluations of every collecting society and NCS at least once a year, every collecting society and NCS should prepare performance and financial reports as audited by a public accountant at least once a year. The audited reports must be submitted to the MOLHR within 14 days after the audit is done, and the result should be announced in national print or electronic media, Anindito says. “The MOLHR can revoke the operational license of a collecting society or an NCS if the form of its legal entity has changed to a profit-oriented entity; it does not distribute the royalties to their members; it can no longer meet the minimum member requirements; it does not carry out coordination with similar collecting society or NCS in setting up the amount of royalty; it does not provide audited reports as required; it does not announce the audited report; it uses more than 20% of its operational funds after its first five years and/or uses more than 30% of its operating funds within its first five years, which fund is gathered from the total of royalties collected annually.” 

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