The Effectiveness of Indonesian Unfair Competition Law to Enforce Passing Off Cases 

On a beautiful weekend, you and your family went dinning at a fast food restaurant. All your kids ordered Coca Cola (Coke) as their favorites soft drinks. But instead of Coca Cola the servant replaced your kids’ Coke with Pepsi without any information. Because the taste of both soft drinks is quite similar then your kids had nothing to be complained about. Since your kids (customer) have no complain then can it be said that what the servant (restaurant) has done can be justifiable? What about if this case also happens in many of the other restaurants? Can you imagine the lost of the Coca Cola manufacturing company? Then what the manufacturing company of Coca Cola must do? Should they enter a charge for deceiving or unfair competition to the Court? Are they any legal other base than can be used to enforce the case?

Since the element of fraudulent intent was emphasized over the objective facts of consumer confusion indeed passing off were prohibited in order to protect the consumer from fraud and deceit, preventing unjust enrichment and enforcing honesty and fairness in the market. Passing off was developed, then by the early 20th century, the fraudulent aspects of passing off were gradually de-emphasized and emphasis was placed on the effect of confusingly similar marks on buyer, rather than upon the intent of the infringer.  

Under the English common law, the action for passing off has been developed by the courts for the protection of the goodwill in a business, particularly for goodwill generated by the use in the business of a trademark or the trade dress of a product. Successive decisions have identified, as basic requirements of the law of passing off, a mispresentation made by a trader to protective consumers of his, or ultimate consumers of his goods or services, which is likely to injure the business or goodwill of another trader.1

“Palming off (or passing off) is an attempt to make the purchaser believe that the product of the subsequent entrant is that of his better known competitor. The line between palming off and creating confusion as to source is indistinct; in effect, palming off is simply a more direct and flagrant means of misleading purchasers as to the source of the product”.3 

a person who does something to create a public misled;

and as the consequences of it then the first business suffers some damages.


X’s goods sold with Y’s trademark

Y’s goods resold unbranded (by X).

As an addition, as we have known that recently domain names becomes more and more important and getting closer and closer as to trademarks. In the field of domain names there is a similar thing as to passing off and it is known as “misspelling”. A sample of ‘Electronics Boutique Holdings Corp. v. Zuccarini’ case, where the Plaintiff (Electronics Boutique Holdings Corp.), a national electronic stores with 600 stores spread around in the States and has reserved ‘www.electronicsboutique.com’ and ‘www.ebworld.com’ as his domain names, filed a lawsuit against Defendant (Zuccarini), because the Defendant has registered similar domain names owned by the Plaintiff, those are ‘www.electronicboutique.com’ and ‘www.ebwold.com’.

What about passing off law does Indonesia has it? There are many kinds of the unfair competition and passing off is one of its kind, however passing off is not the unfair competition. Therefore article 382 bis of the Penal Code cannot be said as the passing off law, but we are not saying that then in practice we cannot sue someone for the passing off. Since between passing off and unfair competition is very close then in practice in Indonesia the lawyers or practitioners always use article 382 bis of the Penal Code as their legal basis in claiming for passing off. Moreover the Indonesian Court has a principle where a court cannot refuse any case that is entered by the applicant based on the reason that there is no regulation or law regulated the said case. If the court facing a case like that then the judge who handles the case should create a law or regulation, or even make an interpretation, to justify the said case. Basically we may say that, indeed, Indonesia has an unfair competition law, but we do not have an independent and separate passing off law.

Article 1365 of the Civil Code it is stated that any person who does any illegal action cause a lost or damage to the other person then the said person liable to indemnify the said lost or damage. The problem is that it is hard to collect the damage and the amount of the injunction usually is very small compared with the time and money wasted. It is not a secret that it is not easy to prove the plaintiff’s lost or damages. As we have known there are 2 kinds of the compensation provided by our law those are material and immaterial compensations. In order to induce the judge to grant the material compensation then during the trial the plaintiff has an obligation to prove his/her lost and damage satisfactory. As the lawyers and practitioner we may say that this burden of proof is not an easy job, because there are many problems such as the difficulty in obtaining the complete and comprehensive data i.e. the plaintiff has no information about how long is the infringement happened, how many products that has been sold, how much is the defendant profit, etc. Unfortunately, if we cannot come into a calculation of our client’s lost then our claim for the material compensation will be denied. How’s about the immaterial damage and how much money can be obtained from it? The answer is depends on the Judge who handles the said case. But as a practitioner we may say that usually the number for the immaterial compensation is not so much.

There are many countries those do not have the unfair competition law, and they are also many countries who have unfair competition law but they do not have passing off regulation, like Indonesia. For these countries we believe that they need to take a necessaries actions to prohibit and enforce the unfair competition law and anti-passing off act. As a member of Paris Convention and WTO TRIPs Agreement, Indonesia has an obligation to comply with Paris Convention and WTO TRIPs Agreement terms and regulation and/or decision. On the article 10 bis of the Paris Convention states that:

(2)   Any act of competition contrary honest practices in industrial or commercial matters constitutes an act of unfair competition.

1.  all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities of a competitor;

3.  indications or allegations the use which in the course of trade is liable to misled the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or quantity, of the goods.

Based on these facts, we are in the opinion that, indeed, the legislative needs to amend a new law or regulations that is effective and up to date in this field to fights against unfair competition and ensure the protection against unfair competition law, i.e. by charging the illegal breach of it with a greater or more severe charges then the future infringer has to think twice before they do something illegally in the field of unfair competition. If it is done then our country may eliminates the passing off.

1 ‘Request for Action by the INTA Board of Directors’, INTA, (available online at http//www.inta.org./policy/res_unfaircomp.shtml; accessed on September 9, 2002).

3 J. Thomas McCarthy, “McCarthy on Trademarks and Unfair Competition”,  (Cranbury, New Jersey: CBC, 1993) page 8-26.

5 J. Thomas McCarthy, “McCarthy on Trademarks and Unfair Competition”,  (Cranbury, New Jersey: CBC, 1993) page 25-9.


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