Government Regulation for IP-Based Financing is Finally Enacted

The Indonesian government recently enacted Government Regulation No. 24 of 2022 on the Implementing Regulation of Law No. 24 of 2019 on Creative Economy (“Regulation“). The Regulation confirms and promotes intellectual property (“IP“) assets as security objects that can be used to obtain financing from banks and non-bank financial institutions. The concept of taking security over IP itself is not new. It was first introduced in Law No. 24 of 2019, which stipulated that the government would facilitate an IP financing scheme for creative economy entrepreneurs and allow them to develop a marketing system for their IP-based products.

Regulatory-wise, Law No. 42 of 1999 on Fiducia Security (“Fiducia Law“) stipulates that a fiducia can be encumbered on any movable intangible object that can be owned and transferred, whether registered or unregistered. In addition, Law No. 28 of 2014 on Copyright (“Copyright Law“) and Law No. 13 of 2016 on Patent (“Patent Law“) stipulate explicitly that copyrights and patents can be the object of a fiducia security. In practice, we have seen IP assets, mostly trademarks, being used as security objects to secure a loan or financing transaction. Although theoretically, IP assets can be encumbered with a pledge, as suggested above, we have only seen these IP assets encumbered by way of a fiducia security and registered at the Fiducia Office.

However, the authority responsible for recording and registering the ownership over IP assets is the Directorate General of Intellectual Property (“DGIP“). Unlike land and property assets, in which ownership and security are registered in one registry maintained by the same authority, namely the National Land Agency (Badan Pertanahan Nasional or BPN), the ownership of IP assets is registered with the DGIP, but the holder of a security interest over IP assets is registered with the Fiducia Office.

As analysed in this Update, while the Regulation aims to promote IP (often the sole or primary asset in the creative economy industry) as a valuable and thus acceptable security for a financing/loan transaction, there is still a gap in the practical application.