Not currently enforced
Article 20 of the new Patent law, which repeats earlier similar provisions from the 2001 and 1992 laws, has never been enforced.
It is a controversial provision, intended to drive foreign technology transfer investment and consequential employment to Indonesia. What it says is that a patent granted in Indonesia must be worked (that is the patentee must make products or use the process).
There was previously an exception, essentially for when it was not economically viable to work the patent in a single market, but only at a regional level. So presumably if you had a factory in the region (where exactly was not clear), that would suffice. A formal consent had to be sought from the Ministry of Law to rely on the exception. However there was no clarity on the precise meaning of the whole provision nor implementation of the exception. As a result for the last 25 years, no one ever had to be concerned.
In the new 2016 law a specific sanction was introduced and now non-worked patents can be revoked by the government. This policy change triggered protests from various foreign governments and organisations. The international criticism stems from the fact that not every patent is capable of being worked in Indonesia. Highly complex and often very common products from electronics to biopharmaceuticals might not be capable of or economically viable to be produced in Indonesia. Some products have only a handful of production sites worldwide. And small companies simply cannot afford to make products everywhere.
In response to these protests, a draft Presidential Regulation providing clarity on Article 20 of the Patent Law is being prepared to ameliorate the drastic consequences of non-compliance with Article 20. The draft regulation allows for patent holders to apply for postponement of putting their patent to use where they are incapable of doing so or it is not economically viable. The IP Office is still receiving feedback on the detailed implementation of the draft regulations.
Whilst there has been strong growth in patent applications, Indonesia generally does not attract the volume of high tech patents applications that are filed say in China. Whether the patent law can be used to drive up investment with a stick remains to be seen. Patentees presumably won’t just stop filing in Indonesia simply because they haven’t been able to manufacture locally. Indeed that is not something they may even know at the time of application. Smaller companies and inventors who cannot afford to open factories, will all need to apply for exemptions. The reality then may be that most patent application will need them upon grant. So the effect may just be to put the cost of patenting up.
For now patent holders will need to wait for further news on the regulation. Engagement in the lobbying process would also help.