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Enforcement through the courts

Strategy

What are the most effective ways for a patent owner to enforce its rights in your jurisdiction?

Due to the strict bifurcation of infringement and validity proceedings in Hungary, the most effective way for a patent owner to enforce its rights and protect its market exclusivity is by obtaining a preliminary injunction. A preliminary injunction request may be filed even before the main action. Preliminary injunctions can typically be obtained within six weeks to three months (with another two to four months for appeals), and are enforceable regardless of whether an appeal is filed. Outside the court system, there are no compulsory negotiations between the parties. A rights holder must prove that its infringement claim is likely to be upheld, rather than providing absolute proof; thus, the collection of evidence is somewhat less strict and time consuming.

However, a rights holder should act quickly as a request for a permanent injunction must be filed within six months of the infringement starting, and within 60 days of becoming aware of the infringement. While failure to meet these deadlines does not automatically prevent the rights holder from obtaining a preliminary injunction, it reduces the likelihood of an injunction being granted.

As a prerequisite for granting a preliminary injunction, the courts usually order a bond. Bonds must be paid directly into the bank account of the court via a transfer.

What scope is there for forum selection?

None – the Budapest Metropolitan Court has exclusive competence.

Pre-trial

What are the stages in the litigation process leading up to a full trial?

On 1 January 2018 a new Code of Civil Procedure entered into effect, introducing new and rather strict formal and substantive requirements. These include:

  • detailed information disclosure requirements, such as the parties’ tax number, company registration authority and due proof of entitlement to company representation; and
  • a requirement that all foreign-language evidence (at least in the relevant parts) be translated into Hungarian.

Foreign parties must comply with these requirements or else the court claim will be rejected without meritorious examination by the court. A substantial number of petitions were rejected on formal grounds in the first half of 2018; in such cases, the court claim must be refiled following rectification of the formal errors or shortcomings. The procedure is fully electronic.

The new law also established a new litigation structure, where the procedure is divided into a preparatory and a meritorious phase. Evidence, information or statements of claims, defences or counterclaims must be provided during the preparatory period and no amendments to previous documents (facts) may be subsequently made (with a limited number of exemptions).

The formerly passive status of the defendant has also ceased. While previously the only requirement on the defendant was to appear at the first hearing and formally object to the court claim, under the new law a substantial factually and legally reasoned defence or counterclaim must be filed in the preparatory phase within a strict time limit (which can be extended only with the court’s written permission); otherwise, the court will approve the court claim, which can easily lead to a final judgment.

At the end of the preparatory phase, the court will clarify the main issues and request for any necessary further evidence. With particular regard to the preparatory phase, the new rules are intended to shorten the meritorious hearing and close the first-instance procedure within one-and-a-half years. However, as the Hungarian bifurcated system has not changed, this intention may be realised in patent litigation with limited effect, as the infringement lawsuit is always suspended until a final decision is made in the revocation proceeding. As the first lawsuits under the new code started only in 2018, there is as yet insufficient experience to draw conclusions as to its actual effects on patent litigation practice.

How easy is it for defendants to delay proceedings and how can plaintiffs prevent them from doing so?

Bifurcation provides means for defendants to delay the main infringement action. To delay the proceedings, defendants usually file a revocation or non-infringement action which – due to the bifurcated system and being dealt with by the Hungarian Intellectual Property Office at first instance – serves as a ground for the staying of the infringement lawsuit. Preliminary injunctions are not stayed, so plaintiffs should consider them in order to avoid delays and protect their market.  

If a defendant believes that an infringement action is about to be launched against it, it may request a non-infringement ruling from the Hungarian Intellectual Property Office, whereby the Hungarian Intellectual Property Office decides whether the product or process used by the defendant falls within the scope of protection of the designated patent. While the non-infringement procedure is pending, the main infringement action will be suspended, although a preliminary injunction request can still be filed.

How might a party challenge the validity of a patent through the courts in anticipation of a potential suit for infringement being issued against it?

The validity of a patent may be challenged by filing a revocation action before the Hungarian Intellectual Property Office. The revocation of a patent can be requested by any party (with narrow exceptions) and without time limits.

If a party expects infringement proceedings to be brought against it, it can file for a non-infringement ruling, in which case the suit is stayed until the non-infringement procedure is completed. However, a non-infringement ruling may not be requested after an infringement or preliminary infringement suit has been initiated.

At trial

What level of expertise can a patent owner expect from the courts?

The Budapest Metropolitan Court (which has exclusive competence) decides patent issues in a specialised panel comprising a legal judge as chair and two technical judges. This panel is well experienced, makes thorough decisions and is up to date on European patent law developments.

The Metropolitan Appeal Court also adjudicates patent issues in a three-judge panel, although these judges have no technical qualifications. Consequently, appeals focus more on legal details rather than technical details.

Are cases decided by one judge, a panel of judges or a jury?

A panel of three judges decide cases.

If jury trials do exist, what is the process for deciding whether a case should be put to a jury?

Jury trials do not exist for patent litigation in Hungary. 

What role can and do expert witnesses play in proceedings?

In main infringement proceedings, the party with the burden of proof may call a forensic expert. The new Code of Civil Procedure, effective from 1 January 2018, recognises three kinds of expert (as opposed to the previous code, which recognised only court-appointed forensic experts): private expert, expert appointed in another proceeding and court-appointed expert. The party offering evidence will choose which type to use; offering multiple parallel expert opinions is not allowed. Both the court-appointed experts and private experts must be chosen from a list of registered experts, the only difference being that in the case of court-appointed experts, the court formulates the task of the expert, while with private experts the party alone poses the questions. If the court appoints an expert, there can be only one expert for a single question; if private experts are used, both sides can propose their own private expert opinions. The new rules do not seem to exclude the possibility for any parties to file opinions of their own experts in the form of expert affidavits; however, these are supposed to carry less weight than the opinions of the experts recognised by the Code of Civil Procedure. In any case, as the technical questions are highly specific and there are only a few qualified experts, a party expert opinion may carry greater weight. This has special significance in preliminary injunction proceedings, where the timeframe does not allow the involvement of court-recognised experts and the submission of a clear, concise opinion of a real expert in the given field can be crucial to the case.

Does your jurisdiction apply a doctrine of equivalents and, if so, how?

The doctrine of equivalents is included in Article 24(4) of the Patent Act, in line with the European Patent Convention 2000, in order to determine whether patent protection extends to a product or process. Due account must be taken of any characteristics of the product or process which are equivalent to those specified in the claims. The Hungarian courts employs the so-called ‘triple identity’ test – namely, equivalence is established when, compared to the patent claim, the given feature serves an essentially identical function in an essentially identical way providing an essentially identical result.

Is it possible to obtain preliminary injunctions? If so, under what circumstances?

A preliminary injunction may be requested even before the main suit, and theoretically even ex parte (although this has not occurred in practice). The patentee or licensee must prove that infringement is highly probable and that the preliminary injunction is necessary to protect its rights. A presumption applies to these rights if the preliminary injunction is filed within 60 days from gaining knowledge of the infringement, provided that the latter has commenced less than six months previously.

Alternatively, the patentee may demonstrate that the preliminary injunction is needed to prevent immediate damage. In both cases the balance of advantages and disadvantages must be demonstrated. In many cases, the preliminary injunction is subject to the deposition of a security to be paid by the plaintiff. A pending revocation or non-infringement action does not prevent the court from ruling on a preliminary injunction request.

How are issues around infringement and validity treated in your jurisdiction?

 The Hungarian courts follow a bifurcated system. If the validity of a patent is challenged via a revocation action (or an opposition, in case of European patents) during or before patent infringement proceedings, the infringement proceedings will be suspended until the revocation action has been finally adjudicated. This does not affect preliminary injunctions, as these can be requested and ruled on even if a revocation or opposition action is pending. As long as there is no first-instance invalidity decision against the patent, the courts generally consider the patent’s validity sufficiently proven for the purpose of an injunction.

Will courts consider decisions in cases involving similar issues from other jurisdictions?

The Hungarian courts are not obliged to follow or consider decisions adopted by other jurisdictions, and in many cases this is emphasised by the courts and the Hungarian Intellectual Property Office. A preliminary injunction proceeding for a European patent is the only case where the Patent Act specifies that the court may take into account whether the European patent at issue was revoked by the European Patent Office or nullified in another jurisdiction.

Damages and remedies

Can the successful party obtain costs from the losing party?

The losing party bears all of the court costs. If the winner-loser ratio is different, the same ratio is applied to the court costs. Often, if the winning ratio is indistinguishable, the parties are ordered to bear their own costs. The parties must certify their costs via invoices. However, if the court considers the costs to be disproportionate to the complexity or value of the case, it may mitigate them and establish a lower amount. In practice, the court often sets the costs at a lower level. 

What are the typical remedies granted to a successful plaintiff?

According to Article 35 of the Patent Act, the patentee may seek the following civil remedies:

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

Plaintiffs generally claim all of these remedies, if applicable. In preliminary injunction requests the courts are usually hesitant to grant claims other than injunctive relief due to their irreversible character (eg, the provision of information due to the protection of business secrets because this action is irreversible, even if the patent is ultimately found invalid).

How are damages awards calculated? Are punitive damages available?

The Patent Act differentiates two types of pecuniary compensation:

  • Infringer’s profits gained through infringement – this is an objective penalty for the infringement and does not depend on whether the infringement was wilful. In patent cases the court typically considers the revenues and costs directly linked to the infringing product or process.
  • A claim for compensation of the patentee’s damages in line with the Civil Code – this typically entails compensation for the patentee’s lost profits.

Importantly, the amount of the pecuniary claim must be proven by the plaintiff. Further, if the plaintiff is claiming damages, it must prove the link between the infringing activity and the damages (eg, a decrease of their profit).

There are no punitive damages under Hungarian law.

How common is it for courts to grant permanent injunctions to successful plaintiffs and under what circumstances will they do this?

Under Hungarian court practice a declaration of infringement is followed quasi-automatically by an injunction. To date, no cases have challenged this approach. 

Timescale and costs

How long does it take to obtain a decision at first instance and is it possible to expedite this process?

The Budapest Metropolitan Court takes between 18 months and six years to issue a first-instance decision in a patent infringement suit. Many factors influence this broad timeframe – in particular, whether the defendant uses an invalidity defence, in which case the infringement suit will be stayed until final adjudication of the revocation action. Further factors may influence the length of procedure, including:

  • whether court experts are needed;
  • the parties’ activities (ie, how many times the parties exchange submissions); and
  • the availability of evidence (the courts often allow deadline extensions, particularly if one party is a private person).

The new procedural rules’ main aim is to shorten the procedure; however, we cannot yet see this effect in practice.

Court procedures for patent infringement may not be expedited. However, a preliminary injunction must be adjudicated in an expedited procedure and has a strict deadline. A first-instance decision usually takes between four to six weeks. Patent revocation actions last typically two-and-a-half to five years unless a pending infringement action justifies accelerated proceeding, which reduces proceedings by approximately one year.

How much should a litigant plan to pay to take a case through to a first-instance decision?

The actual costs vary greatly, depending on the circumstances of the case. Generally, rights holders should budget between €20,000 and €100,000 per patent, depending on:

  • the complexity of the patent to be discussed;
  • the available evidence;
  • the number of hearings;
  • the involvement of experts; and
  • any translation requirements.

Appeal

Under what circumstances will the losing party in a first-instance case be granted the right to appeal? How long does an appeal typically take?

Either party can appeal a first-instance infringement decision within 15 days of receipt of the decision. In appeal proceedings, new evidence is generally accepted only if the party could not file it during the first-instance proceeding or the new evidence proves an issue that was not previously raised (although exceptions apply). The appeal procedure generally lasts around one year. The Metropolitan Appeal Court hears appeals in a panel of three judges without technical qualifications. The court may appoint court experts to clarify technical issues, but rarely does so. The second-instance court also holds a hearing.

Options away from court

Are there other dispute resolution options open to parties that believe their patents to be infringed outside the courts?

If direct negotiations fail, the parties may involve mediators to help them to reconcile their respective positions. This may be done before or during trial. Settlements can be concluded out of court or confirmed by a court order. In the latter case, the court order confirms that the settlement has the same effect as any judgment.

Arbitration is possible for the resolution of infringement,  damages or licence fee disputes; however, in practice all patent disputes tend to go to state court in Hungary.   

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