Hungary to shift away from a hard bifurcation system in patent matters – Significant amendments to the Hungarian Patent Act on the horizon

The amendment touches on three main topics, such as (i) the Bolar-exemption, (ii) softening of the bifurcating system, and (iii) new provisions on preliminary injunctions. The expectation behind the amendment are faster court proceedings and increased clarity when it comes to compensation for damage suffered as a result of unjustified preliminary injunctions.

The Amendment is waiting for formal signing off by the Head of Parliament and expected to be officially published in the Hungarian Official Gazette in the upcoming days.

We were actively taking part involved in shaping the new provisions through various professional associations and we are certain that this will be the biggest change to the Hungarian Patent Act in the last 25 years. Below, we provide an overview of the new provisions and their expected effect on future patent litigation in Hungary.

Changes to the Bolar-exemption [Art 19 (6) Patent Act]

Provisions on the Experimental- and Bolar-exemption were previously not separated in the Patent Act and there had been uncertainties and scarce case law on what the practical scope of the exemptions could be.

The Amendment aims to establish clarity by setting out that the experimental and Bolar exemptions have distinct scope; Bolar-exemption being strictly applicable for medicinal products, stemming from Article 10(6) of Directive 2004/27 amending Directive 2001/83 on the Community code relating to medicinal products for human use. The new provisions clearly set out the scope of the exemption, (i) extending to the placing of the product on the market both within the EEA or a third country; (ii) with listing exempted activities mirroring the infringing activities listed in the Patent Act, yet the list of exempted activities are not exclusive; and (iii) stating that these acts may be undertaken by the MA holder or any other person having economic links with the MA holder for such purposes. The justification to the amendments states, however, that these acts may only be permissible to the extent necessary for authorization.

These changes are expected to gain effect after official publication of the Amendment.

Changes effecting the bifurcation system [inter alia Art 104 (1a)-(1i) Patent Act]

When it comes to enforcement of patent rights, Hungary has been known to be one of few jurisdictions, where the bifurcating system has been standing strong. With the amendment, this is now started to significantly shift allowing invalidity arguments to be considered to a certain extent.

This means in particular that a counterclaim for invalidity can be introduced in the infringement action; in which case the court will act in an expedited way, without delay. The court shall consult a special expert on invalidity questions, that being primarily the Hungarian Intellectual Property Office. The timeline for providing the expert opinion is limited – and strictly enforced – in 30 days.

The most common holdup in patent infringement cases were the frequent and almost automatic suspension of the infringement action as long as separate proceedings for invalidity were heard. The amendment changes this by stating that the infringement suit will only be stayed if the defendant can show that it had started a separate revocation action against the patent at the Hungarian IPO prior to the commencement of the infringement suit, i.e., there will be no stay for 2-3 years]. While if there is a pending opposition at the EPO in the subject of a Hungarian validated European Patent, the infringement suit may only be suspended in particularly justified cases, i.e., not automatically.

These new rules will be applicable for proceedings commenced on 1 January 2022 or afterwards.

Changes to the provisions on preliminary injunctions [inter alia Art 104 (2); (2a); (12a) Patent Act]

To pair the provisions on validity assessment in a patent infringement suit, the rules on assessing a request for a preliminary injunction (PI) will state that the court will need to take the submitted counterclaim for invalidity into consideration as well as the evidence included in the defence against a PI request filed prior to the main action, i.e., a limited possibility for introducing invalidity arguments in PI proceedings will be possible.

There will be specific provisions on the mandatory lifting of an already ordered PI provided that specific circumstances are present. These specific circumstances mean that a PI that has been granted is lifted upon request if the subject matter (i) patent has lapsed; (ii) European patent validated and in force in Hungary has been revoked; or (iii) the patent has been revoked in whole or in part by a decision of the Hungarian IPO or by a judgment of the court of first instance to the extent that the infringement is excluded.

There is another quite significant novum in the amendment, namely that the damage caused by an unjustified PI now will be compensated based on special compensation provisions. The need for such new provisions stems from the decision of the CJEU in Bayer Pharma v Richter Gedeon (C-688/17) and the Directive 2004/48/EC (IPED).

These special compensation rules set out that if the court later – during the infringement suit – finds that the application for a PI was unjustified, the court must, on request, order the applicant of the PI to compensate the respondent for the damages caused by such injunction.

Whether a request for PI was unjustified, the Amendment states that the following circumstances in particular mean that; if (i) the patent is subsequently revoked or the European patent validated and in force in Hungary is revoked, (ii) the preliminary injunction loses its effect by an act or omission of the PI applicant; or (iii) the court finds there has been no infringement of the patent and, on the basis of the evidence available to it, there was no imminent threat thereof.

These new rules will be applicable for proceedings starting from 1 January 2022.

What you should do now

Based on the above, one must note that the bifurcating system is still present as it is still the Hungarian IPO primarily hearing patent invalidity cases. For the court to assume competence over assessing patent invalidity, first a specific counterclaim must be filed in a patent infringement suit, and certain additional circumstances should be met.

Introducing these new provisions specifically on preliminary injunctions must be seen as an additional accomplishment as the legislator was heavily persuaded that this aspect cannot be separated from the amendments on revising the bifurcation-system.

The Hungarian legislator left a rather narrow time-window to get prepared. Some of the new provisions, like the new rules on the Bolar-exemption is expected to enter into force right after the publication of the Amendment. While other, more procedural provisions will apply to preliminary injunction and/or patent infringement proceedings commenced on 1 January 2022 and afterwards.

We expect that these changes will have a significant effect on both the enforcement as well as the defence strategies of industry players.

If you would like to know more about how these changes might affect your present strategies, wish to have a second look at your defensive approach, or consider whether Hungary can now be a preferable jurisdiction for the enforcement of your IP rights, please get in touch with us. We would be happy to assist you in fine-tuning your next steps to best fit these new developments.

For those reading Hungarian, here is the link for the final proposal docket of the amendment.