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Hungary and the

By Zsolt Szentpéteri, SBGK Attorneys at Law and Patent Attorneys

Hungary is planning to ratify the Unified the London Agreement (as the only member of Patent Court (UPC) Agreement (16351/12) the Visegrád Group to do so) was unjustified; it and adopt the regime. was further established that joining negatively However, the road to ratification is not so affected the Hungarian economy. straightforward as in a number of other Now, with adoption of the unitary patent European countries. This chapter discusses regime around the corner, more concerns are the challenges and potential pitfalls of being voiced by Hungarian companies and IP ratification for Hungary. professionals.

Lessons from the London Agreement An unequal agreement? Hungary has already ratified the London The unitary patent regime is open to Agreement. Therefore, when validating applicants from all around the world and European published on or after most European patent applications are filed January 1 2011 in Hungary, claims need to by applicants from outside the European be translated into Hungarian only, provided Patent Convention territory. Hungarian that the language of examination before the applicants for unitary patents generally file (EPO) was English. applications in Hungary first, so holding a By ratifying the London Agreement, Hungary unitary patent which also covers Hungary made a significant gesture towards the owners would give them no additional advantage. of European patents, greatly reducing the cost The European patent filing activity of of obtaining exclusive rights in the country. Hungarian applicants is rather low (totalling However, ratification was not to the advantage less than 0.1% of patents filed), meaning that of innovative Hungarian small to medium- Hungary would most probably be unable to sized enterprises, universities and research exploit the advantages of the unitary patent institutes, as these entities usually file in regime. Further, since Hungarian applicants Hungary first, thus making the Hungarian for unitary patents already benefit from all translations of their applications immediately advantages of the regime, ratification in available. The London Agreement caused Hungary is unlikely to increase filing activity severe difficulties for entities seeking to in the country. comply with the law and acquire reliable In the opinion of the Hungarian IP freedom to operate information, since the professional community, adopting the specifications of granted and validated unitary patent regime would result in European patents – which constitute most an unparalleled waiver of Hungary’s patents valid in Hungary – were available in sovereignty. In IP legal disputes, Hungarian foreign languages only. Further, the London natural and legal persons – which are usually Agreement increased the risk of patent defendants, in practice – would typically be infringement penalties for firms that lack obliged to defend themselves neither in their sufficient language skills. own language nor in their home country. Considering the above, Hungarian IP Plans existed to set up a regional division of professionals generally believe that signing the Unified Patent Court (UPC) in Budapest,

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covering and Hungary. However, forecast (due to the great number of European based on recent developments, Croatia may patents that will automatically extend to be unwilling to adopt the unitary patent its territory), filing activity of Hungarian regime and these plans may well fail. Besides, applicants is not expected to increase – despite a regional IP office would cover first-instance the fact that the unitary patent regime provides decisions only; second-instance procedures exclusive rights for a larger territory at a will be conducted in only, relatively more reasonable price. while direct revocation actions (ie, nullity Another issue is the relatively high costs proceedings not initiated as a defence against connected with the system. While the average an infringement claim) can be commenced cost of an infringement proceeding in Hungary only in Paris, or London. is about €20,000 to €30,000, the same costs Hungary’s ratification of the UPC approximately €150,000 in western Europe Agreement would essentially allow the (excluding the costs of additional interim owners of European patents to obtain patent injunctions, revocation and appeal proceedings) protection covering its territory at no cost. – not to mention the extremely high costs in This could result in an influx of patents the , which amount to at least which could easily impede the activities of £350,000. Since the corresponding costs of the domestic companies. UPC system will most probably exceed these, Importantly, although a significant increase a Hungarian party to patent litigation will face in the number of patents valid in Hungary is heavy costs compared to the present situation.

Recommendations Since the Hungarian government made it clear from the beginning that rejection of the unitary patent regime is no longer an option (ie, in light of the existence of the UPC Training Centre in Budapest), and considering the facts outlined above, certain Hungarian IP organisations have presented a number of suggestions to the competent government agencies, at the same time providing the background information necessary to facilitate accession to the unitary patent regime under the most Zsolt Szentpéteri advantageous conditions possible. Managing partner These suggestions are divided into [email protected] essential and recommended conditions for adoption of the regime. The essential Zsolt Szentpéteri is the newly elected managing conditions include: partner of SBGK Patent Attorneys. In 1997 he graduated as a chemical engineer (MSc) from • awaiting the final rules and fees of the the Technical University of Budapest. He is a UPC and unitary patent regime; qualified Hungarian and European patent attorney • obtaining a preliminary decision on and a member of the Hungarian Chamber of setting up a regional division of the UPC Patent Attorneys, the International Association in Budapest; for the Protection of Intellectual Property and the • commencing the appropriate tenders International Federation of Intellectual Property for financial support for Hungarian Attorneys. His practice covers patent prosecution and validation, litigation and technology transfer. companies involved in obtaining IP Mr Szentpéteri has substantial experience rights, IP law enforcement and court in inorganic and organic chemistry, polymer defence; and chemistry, food chemistry and pharmaceutical • providing proper information to chemistry, as well as biotechnology. Hungarian companies regarding the possible significant increase in the number

138 IAM Yearbook 2016 www.IAM-media.com SBGK Attorneys at Law and Patent Attorneys Hungary

Since Hungarian applicants for unitary patents already benefit from all advantages of the regime, ratification in Hungary is unlikely to increase filing activity in the country

of patents valid in Hungary following of the UPC Agreement cannot be expected in adoption of the unitary patent regime. or the either. Implementation of the UPC and unitary In respect of the last condition, the patent regime requires ratification of the UPC IP organisations drew the government’s Agreement by 13 member states, including attention to the fact that at present, , and the United Kingdom. So approximately 5% of the 60,000 to 70,000 far, seven nations have ratified it, including European patents granted annually are France. The most recent approval came from valid in Hungary; considering that the Portugual, which ratified in August 2015. number of valid Hungarian patents stood at The Hungarian government initially approximately 19,000 in 2013, the number aimed for swift ratification. However, of patents valid in the country could well following in-depth analysis and extensive quadruple in the first year following adoption. arguments presented by various professional The recommended conditions include IP organisations, the march towards setting up a regional division of the UPC in ratification seems to have slowed, providing Hungary and postponing adoption of the another chance to optimise the conditions of regime by at least one year in order to gather accession. data on how the system functions and its impact on the economies of participating countries.

Grace period Timing is everything, and a slim hope of winning a ‘grace period’ seems to have arisen in light of the UK referendum on EU membership. If the House of Lords approves the legislation, the referendum is expected to take place before the end of 2017. Of further interest is that, according to certain SBGK Attorneys at Law and Patent Attorneys ad hoc legal advisers to the UK government Andrássy út 113 in connection with the UPC Agreement, Budapest 1063 the treaty – which as it stands is a “political Hungary compromise” and is “not perfect” – is unlikely Tel +36 1 461 10 00 to be ratified before the referendum. Further, Fax +36 1 461 10 99 according to recent reports, speedy ratification Web www.sbgk.hu

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