Since 1999, illegal optical discs containing pirated materials had been sold in a large amount in Indonesia. The phenomenon causes deep concern as it is in contradiction with the principles of fair business competition and jeopardizes Indonesia’s credibility before the international community.

The government considered the lack of regulation and weak enforcement mechanism toward optical discs producers as the main cause of this problem. Negative impacts with regard to the illegal sales of optical discs may cause serious trouble in the near future as it may affect foreign investor’s intention in investing in Indonesia, alleviating state income from tax sector and threaten Indonesia’s export to WTO member countries.

Indonesia has been included in the United States Trade Representative’s (USTR) Priority Watch List (“PWL”) Based on Special 301-US Trade Act 1974 since 1996. The government expects Indonesia to be excluded from the PWL on this year’s Out of Cycle Review (“OCR”) conducted by the USTR in order to develop optical discs industry and to lift the trade volume to USA and Europe. Based on the above considerations, the government deems it necessary to prevent the spread of illegal replication and reproduction of optical discs by regulating the mechanism through a Government Regulation.

Government Regulation Number 29 of 2004 on High Technology Production Infrastructure for Optical Discs (the “Regulation” or “GR 29/2004”) has been recently issued by the State Secretariat to respond the issue. This GR facilitates further implementation of Article 28 of Law No. 19 of 2002 on Copyright (the “Copyright Law”) which addresses the issues associated from unfair competition that arise as a result of the production of illegal optical discs, produced and sold in breach of the prevailing copyright law. Optical Discs under the GR comprise of, among others, CDs (Compact Discs), DVDs (Digital Video Discs), LDs (Laser Discs), CVDs (China Video Discs), MDs (Mini Discs) and other form of optical discs invented in the future. Further specification of these optical discs will be further regulated by a ministerial decree (Article 2).

The GR distinguishes various production infrastructures of optical discs, such as mastering, stampering and laser recording device. Each of this devices must bear international accreditation signified through a stamper code and engraved mould code. Such production codes must be registered to the appropriate government institution administering trade and industry (Article 7).

Every optical discs producer must establish a board sign in its offices, indicating their company name, address, telephone numbers and commercial license number (SIUP) (Article 8).

Importation of empty optical discs including machineries and production equipments of optical discs may only be imported by registered importers having Limited Importer Identification Number (“APIT”). Meanwhile, importation of optical discs containing recorded materials may only be performed by importers having APIT and license from the right holder. Ownership and transfer of machineries and production equipments must be reported to the appropriate ministry. (Article 13).

Optical Discs producers are required to report their activities periodically to the minister with regard to the purchase and utilization of production materials, lease and transfer of machineries, sample of every optical discs produced, amount of products, amount of purchase order from customers and defective products destroyed, also the amount of products delivered to customers to be distributed, exported or stocked (Article 13).  

Every optical disc company has 6 months to ensure that they are in compliance with the provisions of this Regulation.

The administrative sanctions available for breach or refusal of inspection include the cancellation or freezing of business licenses and notification through the mass media of the proved breaches. (mma)