Introduction

In June 2024, the Ministry of Law and Human Rights (MoLHR) issued Regulation No.15 of 2024 concerning the Management of Royalties for Secondary Use Licences for Copyrighted Books and/or Other Written Works (New Regulation). The New Regulation represents a significant development in Indonesia’s copyright regime, introducing an institutional mechanism that requires those who reproduce and/or distribute books and certain other written works (together, Works) to pay royalties to the relevant author and/or copyright holder (together, Copyright Holder) through a non-profit legal entity called the Collective Management Institution, an institution established solely for such purpose (Copyright CMI).

Aim of the New Regulation and definition of secondary use

The New Regulation is designed to regulate the “secondary use” of Works (which include journal and magazine articles as well as writings and/or drawings in print and electronic media) and the collection/payment of royalties for such use. According to the New Regulation, secondary use is the act of reproducing and/or distributing Works for commercial purposes, or non-commercial purposes, but is detrimental to the reasonable interests of the Copyright Holder of Works.¹

The New Regulation refers to the following main secondary uses: (i) printing; (ii) photocopying; (iii) internet downloading; and (iv) emailing; (v) posting/uploading; (vi) distributing; and (vii) the extraction of data from a website (web scraping). And such secondary uses can be undertaken through various means, including mobile phones, digital-based technology and any other means of reproduction and distribution. ² The New Regulation prohibits the secondary use of “other works” published in magazines, newspapers or periodicals if such secondary use consists of entire articles.³

The inconsistent “10% rule” of secondary use

The New Regulation also states that the secondary use of Works will constitute reproduction and/or distribution (for which royalties are payable) if: (i) the use of Works is “no more than 10%”; or (ii) the secondary use “does not harm the reasonable interests of the Copyright Holder”.⁴ Despite the actual wording of this provision, our view is that the secondary use of no more than 10% of Works should only be subject to the payment of royalties if the secondary use does harm the reasonable interests of the Copyright Holder. We would hope that the MoLHR will clarify the above inconsistency in the future. We would also hope that MoLHR will provide some regulatory guidance on how to determine “10%” of the use of a book or other works, the scope of “distribution”, and how the “reasonable interests of the Copyright Holder are to be determined.

Comparison between the Copyright Law and the New Regulation

The New Regulation makes a paradigm shift from the current copyright regime in Indonesia and raises a number of issues due to inconsistencies with permitted copyright use as stated in Law No.28 of 2014 on Copyright (Copyright Law), including the following topics:

“Commercial use” refers to the use of Works with the aim of the secondary user obtaining economic benefits from various sources or through payment.¹¹ Conversely, “non-commercial use” must not involve the secondary user obtaining any economic benefits from such secondary use.

The Copyright CMI

Central to the relationship between the Copyright CMI and the Copyright Holder is the royalty collection process. The Copyright CMI has the authority to collect royalties for the secondary use of Works from secondary users, but only upon obtaining explicit authorisation from the Copyright Holder. ¹²

To establish a Copyright CMI in the field of Works, a legal entity must acquire an operational licence issued by the MoLHR by fulfilling various requirements outlined in Article 7(1) and (2) of the New Regulation. One of the requirements is for the applicant to obtain “General Licences” (in the form of agreements with the Copyright Holder) to give the Copyright CMI authority to process royalties obtained by the Copyright CMI. ¹³ Once an operational licence has been obtained, a Copyright CMI is authorised to withdraw, collect, and distribute royalties. The New Regulation contemplates that there can be more than one Copyright CMI in the field of Works

Upon the Copyright CMI receiving an operational licence, the Copyright CMI has the ultimate discretion to determine whether a secondary use is commercial or non-commercial, and the amount of royalties for each category. Without any further regulated guidance on the differences between the commercial and non-commercial categories and the amount of royalties that can be charged, whether the Copyright CMI will exercise its discretion fairly, transparently and consistently could become an issue.

In addition, under the New Regulation, the Copyright CMI can use up to 20% of the royalties paid by secondary users to fund its own internal operational activities.14 This is a similar funding model to the Indonesian institution that manages songs and/or music (Music CMI).¹⁵

However, it appears that many song/music creators have long complained about the low level of royalty fees they receive from the Music CMI, which is perceived as not distributing royalties transparently to song and music creators.¹⁶ We suspect that the same problem may arise for the Copyright Holder of Works if the Copyright CMI does not exercise its discretion fairly, transparently and consistently under the New Regulation. To avoid such a situation, we hope that further implementing regulations clarifying provisions of the New Regulation are passed soon.

Conclusions

Through the Copyright CMI, the New Regulation provides a potentially valuable mechanism for a Copyright Holder of Works to be rewarded for their “creations. ” The reward for a Copyright Holder is through the payment of a portion of the royalties collected from secondary users by the Copyright CMI.

The term ‘commercial use’ is crucial as it determines whether secondary users are obliged to pay royalties to the Copyright CMI (or alternatively, to a Copyright Holder). If it can be proven that the use is non-commercial, users are not required to pay royalties if the usage is not detrimental to the reasonable interests of the Copyright Holder. The Copyright CMI plays a significant role in determining whether a secondary use is commercial or non-commercial (by exercising its discretion). Therefore, the Copyright CMI must make careful, transparent assessments, otherwise it risks its credibility and, ultimately, viability. It is therefore important for the Copyright CMI to give each Copyright Holder sufficient information to enable the Copyright Holder to be able to verify the amount of royalties they should receive.

On the downside, the New Regulation is not entirely aligned with the Copyright Law, so it will need to be amended for the sake of consistency and clarity. If the role of the Copyright CMIs works the way it is intended under the New Regulation, with some additional regulatory guidance and transparency, it is hoped that the Copyright Holders will be the genuine beneficiaries of such royalty collections.