The Clause Your Distribution Agreement Is Missing

A principal appoints an Indonesian distributor. The agreement runs to forty pages. It covers territory, minimum purchase volumes, pricing, termination, and governing law. Under the heading Intellectual Property there is a single paragraph confirming that the principal owns its marks and the distributor acquires no rights in them. Everyone signs.

Three years later the relationship ends badly, and the principal discovers that the mark is registered in Indonesia in the distributor’s name. The distributor filed it in year one, for the stated purpose of clearing customs and registering the product. Nobody objected because nobody was told.

The ownership clause was accurate and useless. It recorded a fact about title abroad. It did nothing about the two things Indonesian law actually turns on: who may file here, and what must be recorded at the Ministry.

The recordal rule most agreements ignore

Indonesian trademark law permits rights to be transferred and licensed, and then attaches a condition that foreign counsel frequently treat as administrative housekeeping.

Article 41 of Law No. 20 of 2016 allows the right to a registered mark to pass by inheritance, bequest, wakaf, gift, agreement, or other legally recognised cause, and requires the transfer to be recorded. Article 41(6) states the consequence of not doing so: a transfer that is not recorded has no legal effect on third parties.

Article 42 does the same for licences. A licence agreement must be applied for recordal with the Minister, and Article 42(5) provides that an unrecorded licence has no legal effect on third parties.

Why this reaches further than it first appears

The recordal point is not only about enforcement. It reaches the use question that decides non-use proceedings.

Where a mark is used in Indonesia by a distributor rather than by the proprietor, the proprietor will want that use attributed to it. The cleanest foundation for that attribution is a licence that exists on the register, matches the goods, and covers the period in question. A licence produced from a drawer after a cancellation claim is filed invites precisely the inference discussed in our note on manufactured use: the document appears when it is needed, and not before.

Recordal is cheap. Reconstructing the licence relationship under cross-examination is not.

The filing trap

The more expensive failure is the registration filed by the distributor in its own name.

Indonesia is a first-to-file jurisdiction. A distributor that files is, on the face of the register, the proprietor. The principal’s remedy is a cancellation action on the ground of bad faith under Article 76 read with Article 21(3), which under Article 77(2) is subject to no limitation period at all. That remedy is real and it works — but it is litigation in the Commercial Court, with cassation available afterwards, against a counterparty that holds the registration and is often still selling.

A clause of four lines in the original agreement avoids all of it.

The clauses that actually do the work

Drafted for Indonesian conditions, not adapted from a template written for somewhere else:

• Prohibition on filing. The distributor shall not apply to register, anywhere, any mark of the principal or any mark confusingly similar to it, in any class, whether alone or with others.
• Assignment of filings made in breach. Any application or registration made in breach is held for the principal and must be assigned on demand at the distributor’s cost — coupled with an irrevocable power of attorney permitting the principal to effect the assignment itself.
• Recordal obligation with a deadline. The licence shall be submitted for recordal with the Minister within a stated number of days of signature, with named responsibility for the filing and for the fee, and delivery of the recordal evidence to the principal.
• Evidence of use, delivered periodically. The distributor shall provide, quarterly, copies of invoices, customs documents, marketplace transaction records and current packaging bearing the mark as registered. This is the clause almost nobody includes, and it is the one that wins the non-use case three years later.
• Form of use. The mark shall be used only in the form as registered, with no alteration of colour, proportion or additional matter without written consent.
• Termination consequences. On termination: immediate cessation of use, withdrawal of any applications, consent to cancellation of any registration, removal of the mark from signage, packaging, domain names and marketplace storefronts, within a stated period.
• Survival. The assignment, power of attorney and evidence obligations survive termination, expiry and dispute.

Where contract law sits in this

These clauses operate inside ordinary Indonesian contract law. Article 1320 of the Civil Code sets the requirements for a valid agreement: consent, capacity, a defined subject matter, and a lawful cause. Article 1338 gives a validly made agreement the force of law between the parties and requires it to be performed in good faith.

That is a sound foundation between the signatories. What it does not do is reach the register. A contractual promise not to file does not by itself undo a filing that has been made, and good faith in performance does not defeat a third party who bought the distributor’s business and relied on what the register said. The contract and the register are two different instruments, and the agreement has to operate on both.

A short audit for agreements already signed

For principals with existing Indonesian distribution arrangements, four questions settle the exposure:

• Search the Indonesian register for the mark and for near variants — in the distributor’s name, and in the names of its directors and affiliates.
• Confirm whether the licence was ever recorded, and obtain the recordal evidence rather than the assurance.
• Ask what use evidence exists for the last five years, and who holds it. If the answer is the distributor, obtain it now, not at the point of dispute.
• Check that the goods actually sold correspond to the classes and specifications registered.

Each of those can be answered in days. Each of them is far harder to answer once the relationship has broken down and the other side has no reason to help.

Primary sources

• Law No. 20 of 2016 on Trademarks and Geographical Indications — Articles 21(3), 41, 42, 43, 74, 76, 77 (accessed 5 October 2026)
• Articles 1320 and 1338 of the Indonesian Civil Code, on the requirements for a valid agreement and performance in good faith (accessed 5 October 2026)
• Constitutional Court Decision No. 144/PUU-XXI/2023, pronounced 30 July 2024
• Minister of Law Regulation No. 5 of 2026 on Trademark Registration, in force 22 February 2026