Commentary: Ku De Ta Is Dead! Long Live Ku De Ta!

BY :PRUDENCE JAHJA & ANDREW DIAMOND

JULY 18, 2015

In February 2013, we contributed an article to the Jakarta Globe regarding an ongoing dispute over ownership of the Ku De Ta brand outside of Indonesia, particularly focusing on litigation in Singapore. At issue was who owned the Singaporean trademarks for the famed Bali beach club and who could therefore profit from lending its name and reputation to the Ku De Ta establishment on the 57th floor of Singapore’s iconic Marina Bay Sands (MBS) SkyPark.

More than two years later, the case appears to have come to a conclusion and promises to have even more relevance now as Indonesia prepares to join the Asean Economic Community at the end of this year. While impossible to predict its full impact, the AEC will clearly present both challenges and opportunities for Indonesian businesses. As demonstrated by the Ku De Ta case, the best lesson is to be prepared for both scenarios.

In its decisions of December 2014 and most recently in May, the Singapore Court of Appeals ruled that the Bali-based partnership of Ku De Ta was the true owner of the brand and thus any trademarks registered by others (in this case, a former partner) were done for the partnership’s benefit. As a result, the Singapore location has changed its name and will no longer be known as Ku De Ta.

The court also directed that the Bali partnership should receive a portion of the profits earned from use of the Ku De Ta trademarks dating from the club’s opening in 2010. As it is thought to be one of the most profitable clubs in the region, this is a tremendous victory for the Bali partnership.

However, this should be ultimately seen as a cautionary tale. Indeed, the first court decision in Singapore went against the Bali partners. And even though they emerged victorious, it took five years of high-stakes litigation for them to be declared the owners of their own brand.

In our earlier article, we wrote that “[d]ue to the increasing insignificance of national borders and surging international trade and travel, well-known local companies can be at risk of losing control of their brands overseas without a proactive protection strategy.” That is even truer now with the planned launching of the AEC at midnight on Dec. 31, 2015.

Designed to fully integrate the region economically, the AEC has the stated goal of “transform[ing] Asean into a region with free movement of goods, services, investment, skilled labor, and freer flow of capital.” Essentially, the idea is to turn the 620 million people and 10 member-states of Asean into one single market.

Much like the overseas success of the Ku De Ta brand in Singapore, there is big potential for businesses in this new Asean market. Collectively, Asean has a young and growing population, and a gross domestic product of $2.5 trillion, a figure that will double by 2020 if current trends continue. This would make Asean the 5th-largest economy in the world. Perhaps due in large part to statistics such as these, a recent Boston Consulting Group survey shows that 67 percent of businesses plan to expand their operations in Asean within the next five years.

The same poll, however, showed that Indonesians are much less optimistic about the AEC than their Asean counterparts — 42 percent of Indonesian respondents viewed Asean integration as some type of threat to their business compared with just 2 percent of Singaporean respondents and 10 percent of Thai respondents, for example.

While it is difficult to pinpoint one specific reason for this pessimism, at a minimum, Indonesia’s business community clearly does not like the idea of Southeast Asia’s biggest and historically protectionist economy being opened up to regional competitors.

Yet the reality is that the AEC is coming and Indonesian businesses need to be prepared. A key lesson from the Ku De Ta case is for companies to proactively register and protect their intellectual property (IP) in relevant countries. This IP can take the form of trademarks (i.e., brands), patents (i.e., new inventions), industrial designs (i.e., visual design of products), and copyright (i.e., original, creative expression), among others. With the exception of copyright in certain situations, all of these IP rights are territorial, which means that registration must be secured separately in each desired country. The formal creation of a single market under the AEC will not change this.

Through the grant of exclusive rights, IP registration allows companies to develop loyal customers and generate goodwill towards their products, thereby protecting advertising and marketing expenditures, as well as opening up new business opportunities through licensing and franchising agreements. It also allows IP owners to take action against copycats or others who are violating the exclusivity of their IP rights. Finally, it can prevent situations such as the one faced by Ku De Ta where the failure to register a brand resulted in a messy and costly dispute.

Perhaps the 58 percent of Indonesian businesses that do feel optimistic about the AEC already understand the value of IP and have taken steps accordingly to protect their rights outside of Indonesia. For those companies who have not, now is the time to take similar action to register and protect brands and inventions before it is too late.

While ultimately a happy ending for the Bali partnership, the Ku De Ta saga is actually a cautionary tale that Indonesian companies would do well to remember as we enter an age not only of increased opportunity but also increased competition.

Prudence Jahja is a senior associate and Andrew Diamond is a foreign IP consultant at Januar Jahja & Partners (JJP), a Jakarta-based law firm specializing in intellectual property law. Januar Jahja & Partners was not involved with any party in the Ku De Ta case.

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