Fabiola Rossy and Andrew Diamond, Januar Jahja and Partners

*This article first appeared in Managing IP (February 2021), https://www.managingip.com/article/b1qmdxk7yhrg1n/indonesia-toothpaste-case-reveals-the-perils-of-trademark-use-before-registration

An Indonesian court recently awarded approximately $2.14 million in damages to a Singaporean company that sued Unilever’s Indonesian entity for trademark infringement. Such a high damages award is uncommon in IP infringement cases in Indonesia. The applications for the infringing mark had been filed but still remain under substantive examination by the Indonesian Trademark Office, and yet the Central Jakarta Commercial Court did not find the case to be premature. It is a stark reminder about the risks of using a trademark in Indonesia before it has been registered, as almost all rights are acquired through registration alone.

Background

The defendant’s holding company, Unilever N.V., filed applications in 2019 for the wordmark and the combination mark ‘Pepsodent Strong 12 Jam’ (‘jam’ means ‘hour’ in Bahasa Indonesia) covering toothpaste among other class 03 goods. In the same year, their local affiliate PT. Unilever Indonesia, Tbk. began marketing, distributing, and selling products using the mark ‘Pepsodent Strong 12 Jam’ (see Image 1), while the applications remained pending.

The plaintiff, Hardwood Private Limited, a part of the Indonesian conglomerate known as the Orang Tua Group, had registered the mark ‘Strong’ for toothpaste in class 03 during 2010, followed by numerous variations, namely: ‘Formula Strong’, ‘Strong Protector’, ‘Formula Strong Herbal’, ‘Formula Strong Protection’, and ‘Strong Protection’. Based on these registrations, the plaintiff claimed that they were entitled to exclusive ownership over the word ‘Strong’ and that all marks having identical or substantial similarity with it in class 03. As the defendant had been using the mark ‘Pepsodent Strong 12 Jam’, which wholly contains the plaintiff’s mark ‘Strong’, in trade for class 03 goods, the plaintiff argued that such use was an infringement of their exclusive rights and requested $2.36 million in material damages and $5.37 million in immaterial damages.

Some of the key issues presented to the court were, among others:

1. Whether ‘Strong’ is a descriptive mark that cannot be monopolised by a single party;
2. Whether the mark’s status as a sub-brand to the famous mark ‘Formula’, reduced the risk of consumer confusion, particularly when compared to another famous brand ‘Pepsodent’ included in the defendant’s mark;
3. Whether the lawsuit was premature since the applications for ‘Pepsodent Strong 12 Jam’ remained pending; and
4. The amount of damages to award, if any.

Image 1: The disputed mark

Verdict

In its decision dated November 18 2020, the Commercial Court did not explicitly determine whether the word ‘Strong’ is or is not descriptive for toothpaste. Instead, it focused on the fact that this mark had already been registered in Indonesia, granting its owner exclusive rights over its use in accordance with Indonesian trademark law.

Similarly, the court decided that the fame of the house marks ‘Formula’ and ‘Pepsodent’ was irrelevant to their analysis of similarity, since the registered mark at issue was ‘Strong’ by itself, despite all of the plaintiff’s evidence of commercial use containing both ‘Formula’ and ‘Strong’ together. The court found the defendant’s mark ‘Pepsodent Strong 12 Jam’ to have substantial similarity with the plaintiff’s registered mark ‘Strong’. As a result, the court considered the likelihood of confusion to favour the plaintiff and concluded that the defendant’s actions constituted infringement.

Even though the ‘Pepsodent Strong 12 Jam’ applications were still under substantive examination, the court did not find the lawsuit to be premature. Furthermore, it granted the plaintiff’s request for material damages, which covered the costs of developing the mark ‘Strong’, including promotional costs such as TV advertisements and offline campaigns, as well as the claimed loss of gross margin in 2019. Meanwhile, the court rejected the plaintiff’s request for immaterial damages, which were ostensibly to rebuild the reputation of the brand ‘Strong’ post-infringement.

The civil infringement provisions of the 2016 Indonesian Trademark Law contain neither statutory amounts nor instructions on how damages should be calculated. Thus, the court’s acceptance of material damages only, almost all of which were supported by detailed evidence, and rejection of immaterial damages – which were not supported by detailed evidence – can be considered instructive for calculation of damages in future trademark infringement cases.

Setting aside questions over whether ‘Strong’ should have been found to be descriptive, it must be noted that the Indonesian trademark registry is filled with what most would consider highly descriptive marks, many of which were registered a long time ago. For marks such as ‘Strong’ that have been registered for more than five years, they would no longer be vulnerable to cancellation based on descriptiveness. This case shows the risk that these registrations can pose, as well as the potential downside of using marks before they have been registered, considering that registration would provide a total defence to claims of infringement. The lack of a specific statutory formula or method to calculate damages adds to the risk.

As of February 2021, Unilever’s trademark applications remain pending, and they have already appealed the Commercial Court’s ruling to the Indonesian Supreme Court. Therefore, much remains to be decided and this is likely not the last to be heard about this case.