Litigation and eligibility: Hungary

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

Q: What options are open to a patent owner seeking to enforce its rights in your jurisdiction?

A patent owner may enforce its rights by filing a civil lawsuit or a request for preliminary injunction. Depending on the circumstances, patent rights may also be enforced in the event of a direct threat of infringement, that is before an infringing product is launched on the Hungarian market; however, court practice is quite strict in this regard. Criminal law penalties as well as customs measures in line with EU Regulation 608/2013 are also available.

Q: Are parties obliged to undertake mediation/ arbitration before bringing a case before the courts? Is this a realistic alternative to litigation?

There is no legal obligation to undertake mediation or arbitration in patent matters.

Q: Are there specialist patent or IP courts in your jurisdiction? If not, what level of expertise can liti-gants expect from the courts?

Patent infringement and second instance of revocation proceedings (following first-instance decisions by the Hungarian Intellectual Property Office (HIPO)) are handled by the Metropolitan Tribunal with exclusive jurisdiction. The tribunal’s specialised panel consists of a legal judge (as chair) and two technical judges. The panel is experienced, makes thorough decisions and is up to date on EU patent law developments. The decisions of the Metropolitan Tribunal may be appealed to the Metropolitan Appeal Court. Other types of patent litigation (eg, licences, inventor remuneration and ownership) are distributed among various courts in the country based on seat of the defendant.

Q: Are validity and infringement dealt with together, or does your country have a bifurcated system?

Hungarian patent litigation is strictly bifurcated so that patent revocation and infringement cases are decided in separate proceedings. While infringement is decided solely by judicial forums, revocation actions must be initiated at the HIPO. Patent infringement proceedings (except preliminary injunction proceedings) are routinely suspended if there is a pending revocation action against the patent in suit.

Q: Who may represent parties engaged in a dispute?

Legal representation is mandatory for all patent disputes before every court. Legal representation can be fulfilled by patent attorneys, attorneys at law or jointly. For foreign companies and individuals, the same form of legal representation is also compulsory in front of the HIPO.

Q: To what extent is pre-trial discovery permitted?

There is no discovery proceeding in Hungary. The court may allow pre-trial retrieval of specifically identified evidence from the other party, although there is no established jurisprudence in this regard.

Q: Is cross-examination of witnesses allowed? If so, what form does this take?

No legal framework exists in Hungary for a cross-examination procedure, witnesses are generally heard by the judge and the parties may also initiate questions. The judge may allow the parties to question the witnesses directly; indeed, this is the usual practice. However, witness testimony is not a common form of evidence in patent infringement proceedings; most evidence comes in the form of documentary evidence and expert opinions.

Q: What use of expert witnesses is permitted?

Experts are often involved in patent litigation. The new Code of Civil Procedure (effective since 2018) distinguishes between private experts and court-appointed experts. The party bearing the burden of proof suggests which type to use. Both court-appointed experts and private experts must be chosen from a list of registered experts. The difference between the two types is that in the case of court-appointed experts, the court formulates the task of the expert; while in the case of using private experts, the party poses the questions alone. If the court appoints an expert, there can be just one expert for the same question, if private experts are used, both sides can propose their own private experts’ opinion. Experts typically submit their opinion in writing; however, they can also be heard by the court at the hearing. It is also common that parties submit the opinion of an independent, external expert who delivers their opinion on the request of one of the parties. These opinions are generally taken into account as the statement of the party itself (ie, it cannot replace a court-appointed expert); however, in special technical fields with a low number of experts, they may gain significance which the court may take into account.

The role of these expert opinions is of specific importance in preliminary injunction proceedings, where – due to the short time frame of the proceeding – the court refuses to involve court appointed experts.

Q: Is the doctrine of equivalents applied by courts in your jurisdiction? If so, what form does this take?

The doctrine of equivalents is included in the Patent Act. Hungarian court practice employs the so-called ‘triple identity’ test – namely, that equivalence is established if, when a given feature is compared to a feature of the patent claim, it serves an essentially identical function in an essentially identical way with an essentially identical result.

Q: Are there problems in enforcing certain types of patent relating to, for example, biotechnology, business methods or software?

Under the Patent Act, business methods and software are not patentable per se. Still, if the business method or software is a part of an invention conforming to all other requirements of patentability (novelty, inventive step and industrial applicability), it is possible to gain patent protection (eg, for computer-implemented inventions).

The same procedural provisions apply for patent litigation in all technical fields. The problems relating to the enforcement of patents in certain complex technological fields (eg, biotechnology) may be due to difficulties in providing proof – especially in preliminary injunction proceedings, where the court requires a high level of evidence of infringement. However, judicial practice developed in regular cases may be of use for elaborating the arguments.

Q: To what extent are courts obliged to consider previous cases that have covered issues similar to those pertaining to a dispute?

Courts are generally not formally obliged to abide by previous decisions, but they usually do so, provided that the facts of the cases are similar. The Metropolitan Tribunal, which has exclusive competence for patent infringement and revocation cases, tends to develop a rather consistent practice. Certain Supreme Court (Curia) decisions relating to fundamental legal questions, however, must be followed by all courts.

Q: To what extent are courts willing to consider the way in which the same or similar cases have been dealt with in other jurisdictions? Are decisions from some jurisdictions more persuasive than those from others?

Although being generally well informed on the leading patent cases in Europe, Hungarian courts are not obliged to follow or consider decisions adopted in other jurisdictions, and this is often emphasised by the courts and the HIPO. The Patent Act provides that in the case of a preliminary injunction proceeding regarding a European patent, the court may take into account whether the European patent at issue was revoked by the European Patent Office (EPO) or nullified in another jurisdiction. However, this is not an obligation. Further, the case law of the EPO is extensively used and duly considered by the courts when parties argue on different aspects of patentability.

Q: What realistic options are available to defendants seeking to delay a case? How might a plaintiff counter these?

For defendants, the usual delaying tactic is the filing of a revocation action, which – due to the strictly bifurcated system – serves as grounds for staying the infringement suit. Preliminary injunctions are not stayed as a consequence of an ongoing revocation case; therefore, plaintiffs should consider using them to avoid delays and protect their market.

If a defendant foresees an infringement action being launched against it, it may request a declaration of non-infringement from the HIPO. In this case, the HIPO decides whether the product or process used by the defendant falls within the scope of protection of a designated patent. While the non-infringement procedure is pending, no infringement action may be brought against the defendant; however, a preliminary injunction request can still be filed.

Q: Under what circumstances, if any, will a court consider granting a preliminary injunction? How of-ten does this happen?

A preliminary injunction may be requested before the main lawsuit, and even ex parte (although as yet there has been no example of deciding a preliminary injunction request ex parte). The patentee or licensee must prove a high probability of infringement and the necessity of the preliminary injunction to protect its rights. A positive presumption of necessity applies if the preliminary injunction is filed within 60 days of gaining knowledge of the infringement (provided that the infringement commenced less than six months before). This presumption may be overturned by the defendant in the context of which the court – based on the instruction of the Patent Act – will take into special consideration negative non-final validity decisions against the patent in suit. Alternatively, the patentee may demonstrate that the preliminary injunction is necessary to prevent instant damages. In both cases, a balance of advantages and disadvantages must be demonstrated, and in this circle the interest of third parties, particularly that of patients in pharmaceutical cases, may be taken into account. In many cases, preliminary injunction is subject to the deposit of a security by the plaintiff. The amount of the bond is established by the court based on the parties’ submissions and it serves as a kind of minimum damage compensation for the defendant. A pending revocation action does not prevent the court from deciding on a preliminary injunction and neither do parallel foreign invalidity decisions when the patent in suit is a national one. Preliminary injunctions are frequently granted, where they are duly substantiated; however, the threshold of evidence is rather high.

Q: How much should a litigant budget for in order to take a case through to a decision at first instance?

Taking a case through to a first-instance decision costs €20,000 to €80,000, depending on factors including the complexity of the patent concerned, the available evidence, the number of hearings, the involvement of experts and translation requirements.

Q: How long should parties expect to wait for a decision to be handed down at first instance?

A first-instance decision on the merits usually takes between 18 months and five years, depending on whether the infringement proceeding is suspended as a consequence of a revocation action. A first-instance decision on preliminary injunction can be reached within four to six weeks from filing.

Q: To what extent are the winning party’s costs recoverable from the losing party?

All court costs are borne entirely by the losing party. In the case of a distinguishable winner/loser ratio, the same ratio is applied for court costs. If the winner/loser ratio is indistinguishable, the parties are often ordered to bear their own costs.

The parties must support their cost claims with invoices. However, if the court considers the costs to be disproportionate to the complexity or value of the case, it may establish a lower amount to be paid.

Q: What remedies are available to a successful plaintiff?

Under the Patent Act, the patentee may seek the following remedies:

  • declaration of infringement;
  • a cease and desist injunction (also available as a preliminary injunction);
  • information on the identity of parties involved in the production and distribution of the infringing goods;
  • satisfaction from the infringer by way of a declaration or other appropriate means;
  • surrender of the profits obtained by the infringement of the patent;
  • seizure, transfer, removal from the market or destruction of the infringing products, as well as of the means and materials exclusively or principally used for infringement (except for destruction, these remedies are also available as a preliminary injunction); and
  • damages.

Q: How are damages awards calculated? Are punitive damages available?

The Patent Act entitles the patentee to two types of pecuniary compensation. The first is a claim to the profits gained through infringement. This is an objective penalty for infringement and does not depend on whether the infringement was wilful.

The second is a claim for compensation of the patentee’s damages in line with the Civil Code. This typically entails compensation of the patentee’s lost profits.

Importantly, the amount of the pecuniary claim must be proven by the plaintiff. Further, when claiming lost profits, the patentee must prove the link between the infringing activity and the decrease of its profit.

Hungarian law does not provide for punitive damages.

Q: Under what circumstances might a court grant a permanent injunction? How often does this hap-pen?

The court may grant a permanent injunction if it is requested in the petition and the infringement of a valid patent is declared. Under Hungarian court practice, injunctions are usually specific to the infringing product or process and an injunction follows the declaration of infringement quasi-automatically; to date, no known cases have challenged this approach.

Q: Does the losing party at first instance have an automatic right of appeal? If not, under what circum-stances might leave to appeal be granted?

Both parties have an automatic right of appeal against both preliminary injunction decisions and the judgment in the main proceedings. In main proceedings, the appeal suspends the enforceability of the judgment, while in preliminary injunction proceedings it does not.

Q: How long does it typically take for the appellate decision to be handed down?

In appeal proceedings, new evidence is generally accepted only if the party could not file it at first instance or the issue that is proven by the evidence has not been raised before (although there are exceptions to this). Thus, appeal procedures are usually faster than first-instance procedures, taking approximately 12 to 18 months. In preliminary injunction proceedings, the appeal decision is usually made within four to six weeks from filing the appeal.

Q: Is it possible to take cases beyond the second instance?

Final decisions on the merits can be submitted for review to the Curia. A request for review can be based only on questions of law. Second-instance preliminary injunction decisions cannot be submitted to the Curia. The deadline for filing such judicial review is 45 days from receipt of the final decision.

Retrial may be requested if the party discovers new evidence or a court decision that was excluded from the original procedure because it was unavailable or there was otherwise a material procedural error (eg, any judge rendering the decision should have been excluded or the case had already been decided elsewhere). The deadline for filing for retrial is six months from the receipt of the final decision or discovery of the new evidence.

Q: To what extent do the courts in your jurisdiction have a reputation for being pro-patentee?

Although the automatic suspension of infringement proceedings in the event of revocation actions is not beneficial for patentees, Hungarian courts are generally considered pro-patentee because in preliminary injunction cases the court generally makes no preliminary assumption regarding the validity of the patent and a preliminary injunction can be ordered while a revocation action is pending.

Q: Have courts in your jurisdiction handled cases relating to standard-essential patents and fair, reason-able and non-discriminatory licensing since the ECJ’s Huawei v ZTE decision? If so, what have they decided?

To the best of our knowledge, no.

Q: If they have not handled such cases, how would you expect them to approach the issue?

We would certainly expect them to follow the approach of the ECJ as much as the facts of the case would allow it.

Q: Has your jurisdiction signed the Agreement on the Unified Patent Court? If so, when do you expect it to be ratified?

Hungary has signed, but not yet ratified, the Agreement on the Unified Patent Court. On 9 July 2018 the Hungarian Constitutional Court – following a motion for constitutional review by the government – ruled that the Agreement on the Unified Patent Court is incompatible with the Hungarian Basic Act. There is currently no information on further development regarding Hungary’s ratification.

Q: Will your country play host to one or more divisions of the Unified Patent Court?

In the event that Hungary ratifies the Agreement on the Unified Patent Court, it is understood that there are plans to have a local division.

Q: Are there any other issues relating to the enforcement system in your country that you would like to raise?

In Hungary, a licensee may also bring an action against infringers, provided that the licensee is registered at the HIPO. Importantly, any party may claim only its own damages (ie, those to which it is entitled under the Civil Code).

Court fees in Hungary are relatively low in patent litigation. The duty fee for a preliminary injunction is usually approximately €35 per patent, with a maximum of €120. The duty fee is the same volume at higher instances. If damages or return of profits is demanded, the duty fee is 6% of the claimed amount, up to Ft1.5 million (approximately €5,000). In an appeal proceeding the duty fee is 8% of the disputed amount, up to Ft2.5 million (€8,300).

Patentees anticipating an infringement of their European patents in Hungary are advised to submit a translation of the patent description to the patent office, even if they did not do so for the purpose of validation (Hungary is a member of the London Agreement), since the defendant may request that it is provided to them during the patent litigation and the infringer’s liability for damages may also be excluded until the point where the translation was not provided by the patentee.

Unlock unlimited access to all IAM content