Utilization of IPR and Funding Problems

Stories about the difficulty of growing a new business based on the use of intellectual property rights (IPR) are not new.

The use of IPRs has been pursued for the last decade to promote the paradigm of human, science and technology-based development but there has been little progress. In fact, concerns about the need to protect small businesses and cooperatives – although with a slightly different concept of protection in accordance with the prevailing conditions of the time – were already around 40 years ago.

The difference is that past initiatives were more general in scope and had yet to move into the use of intellectual property rights. It is understandable, given the fact that the IPR system was just beginning to be established.

Past trails

Entering the new century, as attention on IPRs began increasing, the government issued Law No. 18/2002 on the national system for research, development and the application of science and technology. Researchers were encouraged through an incentive-facilitated approach to develop science and technology and IPRs.

However, the policy mandated in Government Regulation No. 35/2007 concerning the apportion of a business entity’s revenues for the enhancement of engineering capacity, innovation and technology diffusion was not able to catalyze the role of science and technology in life or development activities.

The provided fiscal incentives failed to be the driver either. In search of improvement, the National Innovation Committee, which was formed by the president in 2010, suggested the incentives be realized in a more concrete form under simplified procedures. Still, the expected realization did not follow. With the government probably thinking that the source of the problem lay in the provisional formulation, the policy to optimize of the role of science and technology in development was reformulated in Presidential Regulation No. 38/2018 with a focus on the national research master plan.

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Sidestepping Law No. 18/2002, the presidential regulation was issued by virtue of the President's authority based on Article 4 Paragraph (1) of the Constitution. The storyline might be less important than the leap of ideas. A year later, Law No. 11/2019 concerning the national science and technology system was passed. People might be anxious about how effective this law has been in unfolding and unravelling the politics of national science and technology. Almost three years on, it seems we must still be patient in waiting for the issuance of statutory instruments of the law.

So, how is the execution of the aforementioned new paradigm on the use of intellectual property rights? Indeed, many have become despondent to learn that the new paradigm of "human, science and technology-based development", which was mooted in 2014, has not been properly and clearly elaborated in the years that followed up to now.

It is still to be released – in terms of plot and track – how far the jargon of mental revolution and the idea of liberating education can provide guidance in building the nation’s mentality, character and quality.

Seeing the importance of science and technology for development, the President made the political decision in 2021 to integrate the research portfolios spreading across many government institutions into the National Research and Innovation Agency (BRIN). It will still take time to see how BRIN will make progress in carrying out its function.

Use of IPR

How should the use of IPRs be implemented, as provisionally suggested above? It depends on the intellectual property. There are seven types, copyright (for works of art, culture and literature) or rights related to copyright, trademarks with geographic indication, industrial product design, patents, trade secrets, artwork and technology in integrated circuit layout design and the discovery of new varieties of plants or plant varieties protection (PVP).

They possess economic value and provide benefits. The higher the benefits, the higher the economic value and (usually) the price. Are there any intellectual property rights that have low economic value (or no one is interested in requesting a license to exploit them in economic activities)? There must be.

In all corners of the world, such situations exist. In Indonesia, data at the Intellectual Property Directorate General of the Law and Human Rights Ministry shows hundreds of national patents are "sleeping soundly". They risk being declared “void by law” because the annual maintenance fees have not been settled for the last few years. How does it happen? Most of these patents are legally owned or held by universities or government agencies whose research and inventions were funded by the state budget.

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It is possible that a patent was granted for its qualification of being novel and industrially applicable. However, being economically low in benefits, no one sought a license to use it. In this case, the patent did nothing. It was fruitless. Because the cost of maintaining patents has no portion of the budget, the annual fee that must be paid becomes overdue and causes a burden to the related agency.

How can a patent “fall asleep” if it meets the criteria of being industrially applicable? Technological inventions as patented objects — whether simple, ordinary or extraordinary — weigh on practicality and competitiveness. A patent seeks higher utility over others, in terms of efficiency, effectiveness, convenience, security or safety in utilization and affordability.

Reports say those “sleeping” patents were obtained simply because of their novelty and fulfilment of other formal requirements. It could be because for some academic researchers, obtaining a patent is more about a requirement for additional credit points (KUM), for their lecturing career path. Intellectual property that cannot be used is practically useless. The value is low and has no competitiveness.

IPR as collateral

As intellectual assets and wealth, it is not wrong to use intellectual property rights as collateral for loans. The government's move to pave the way for it through regulation No. 24/2022 is appropriate and logical. Whether or not the lender will accept is another matter.

The valuation of IPRs requires special expertise to asses their utility. Yet this profession has not been (so) developed in Indonesia. Therefore, it is reasonable that the banking industry has recently reacted to question the worthiness of IPRs as collateral. Similar reactions arose when warehouse documents were introduced as worthy as collateral.

Therefore, what’s left now is how to enable it to be effective. If IPRs deserve to be patented so they can competitive economic value, the issue of them being made banking collateral, as stipulated in the government regulation, certainly should not be a problem. The industries that make use of them no longer question their worthiness as collateral. They recognize the benefits of the IPRs they have, or they are licensed to.

It is the quality of the patent that provides the guarantee. Regarding working capital, it can be fulfilled with the resources they have. The challenge for the owners is how they market the products. It would not be an exaggeration for people to assume that the IPRs facilitated by Government Regulation No. 24/2022 are mainly for intellectual property that is more simple in nature, form and utilization.

In social terms, IPRs are intellectual works that are easily encouraged to be used by small and medium businesses (SMEs), or start-up business entities. The use of IPRs, regardless of how simple the technological findings are, should be encouraged as a proliferation of intellectual works. It is good for the inventors and "creators," as well as for businesses who are willing to take advantage of the rights. The small step it may be at the very start will bring a positive and broad impact on national economic life.

Venture capital

However, if that's what we really are after, it is worth remembering the experience we have been through so far. Apart from the existing sociocultural problems, the perennial obstacles to stimulating small businesses in particular, is in the funding.

In the context of intellectual property rights, especially when it comes to technology – no matter how simple the invention is – the problems seem to add up during the course of utilization. It is not merely about funding, but also technical assistance in the process of using intellectual property rights (read: technology) as well as marketing. If the funding obstacles can be resolved with the banking mechanism in general, perhaps the affirmation that intellectual property rights can be used as collateral as mandated in Government Regulation No. 24/2022 could be well implemented soon.

Therefore, if the matter is to rely on regional capacity, it is time for regional administrations to be more encouraged to play roles in business growth such as venture capital formed by a special mission, especially for the use of intellectual property rights (technology).

In the early days, there was no need for such efforts in every province. It was left to whichever was ready with the distinctive potentials to be pushed to grow. Equity capital should not be a problem, especially for micro, small and medium enterprises (MSMEs). Aren't there many regional governments that are said to be investing trillions of rupiahs in funds in Jakarta? Through participation in equity, venture capital businesses can solve the problem of making IPRs collateral.

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By growing venture capital businesses, regional governments can also provide employment opportunities for their people who have vocational skills, both technical and in marketing. The determination to encourage the growth of small businesses, especially in the use of IPRs among small businesses or start-up entities, should not stop short at policymaking.

Furthermore, considering the huge potential and role of such businesses in building a national economy that sides with common people, to encourage its realization also requires the proper attitude and strong determination. In other words, clearly defined orientation and consistency are imperative.

The intellectual property rights, especially those of simple technological findings, carry huge potential in development through economic empowerment for the "lower" community. By so doing, the "human, science and technology-based development" can be realized in a simple but concrete way. Hopefully.

KOMPAS/LUCKY PRANSISKA

Bambang Kesowo

Bambang Kesowo, Intellectual Property Rights (IPR) Observer

This article was translated by Musthofid