Dear Mr Nooteboom, Please acknowledge the receipt of this . Yours faithfully, Dr. Miklós Bendzsel, president Hungarian Patent Office

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1 Dear Mr Nooteboom, Please find attached the replies of the Hungarian Patent Office to the Commission's questionnaire on the patent system in Europe. The replies reflect the opinion of our Office, and in no way prejudice or replace the Hungarian government's position on the subject matter. I do hope that our answers will contribute to that important initiative. I look forward to the publishing of the Commission's report thereon, as well as the public hearing to be held in Brussels in early summer Please acknowledge the receipt of this . Yours faithfully, Dr. Miklós Bendzsel, president Hungarian Patent Office 1

2 Budapest, 31/03/06 Replies of the Hungarian Patent Office to the European Commission s Questionnaire on the patent system in Europe The replies below follow the structure of the European Commission s questionnaire without repeating the explanations and questions contained therein. Section 1 Basic principles and features of the patent system 1.1. In general, the Hungarian Patent Office (hereinafter referred to as the HPO ) can certainly agree that those listed in this Section are the basic features required of the patent system. There seems to be no compelling reason for a major overhaul, at European level, of the whole patent system despite the sometimes fierce criticism that it has recently had to undergo in the media and from certain pressure groups, in particular in the context of the debates over the Proposal for a Directive on the patentability of computer-implemented inventions. However, a number of important aspects of the patent system in Europe will no doubt have to be revisited and, perhaps, improved so that the credibility of the patent system can be fully restored within society. Clear substantive rules on patentability are indeed indispensable to a properly functioning patent system. Equally important is the way these rules are interpreted and applied in the practice of patent offices and courts. In this respect, the concerns expressed by various interested circles about the so-called trivial patents and the level of inventiveness required for granting patents should by all means be taken seriously and analysed thoroughly so that public confidence in the patent system can be preserved. Nevertheless, pure demagogy must be separated from justified and wellfounded criticism. No particular change to the applicable rules on patentability is called for as the legal framework under the European Patent Convention (EPC) and its Implementing Regulations as well as national laws seems appropriate. In addition, international agreements, such as the WTO s TRIPS Agreement, would certainly set rather strict limits to any major legislative change in this regard. At European level, the decisive role of the European Patent Office s (EPO s) Boards of Appeal in setting the standards for the conditions of patentability is also to be recognised. Obviously, it is the assessment of inventive step that seems, at present, the most problematic area of the patentability requirements. However, instead of sweeping legislative changes, it is through changing the awareness of patent examiners and strengthening quality assurance mechanisms (both at the EPO and national patent offices) that the assessment of inventive step by the patent offices in Europe can be further improved and made even more consistent. Further consultations and 2

3 discussions on this issue should preferably be extended to the widest possible circle of the various stakeholders and other interested parties, and should not be limited to the hard core of the patent profession. Substantive patent law provisions are not confined to those on what can and cannot be patented. They concern a number of important issues other than patentability itself. All the substantive rules of patent laws do play a key role in balancing the various interests that are at stake within the patent system. Striking a proper balance between the interests of users (actual and potential patentees) and those of the general public requires a careful analysis of the substantive patent law provisions that concern issues other than patentability, too. Therefore, due account should also be taken of provisions relating to the rights conferred by patents, the extent of protection conferred by patents, exceptions and limits to the rights conferred, compulsory licenses and the enforcement of patent rights, to name but a few. In fact, these provisions may turn out even more important than those on patentability in finding the necessary balance of interests. Obviously, transparent, cost effective and accessible processes for obtaining patents are also required of a properly functioning patent system. It is exactly the accessibility (and the efficiency) of the patent system in Europe that is at stake in the so-called strategy debate within the European Patent Organisation. It is only through the establishment of a European patent network [consisting of the EPO and national patent offices (NPOs)] that access to the patent system can be guaranteed on equal terms to all throughout Europe. As it appears, the patent system in Europe can further develop along the lines of basically two different models. It can either become an even more centralised system with an endlessly growing EPO, or it can take the form of a network providing easy, cost effective and timely access to the patent system irrespective of the place of business of the European applicant (user). It has to be underlined that there are neither technical, nor legal barriers to establishing this kind of patent network for promoting innovation in Europe. There are no technical barriers, as search activities of NPOs and the EPO itself are no longer dependent on paper-based collections of documents. Modern information and communications technology could certainly ensure flexible and efficient cooperation between the EPO and NPOs. There are not legal obstacles to developing the European patent network, either. The EPC [namely Article 33(4) EPC] as well as the agreement on PCT concluded between WIPO and the European Patent Organisation do provide appropriate legal bases for introducing the necessary sub-contracting schemes. The need to establish a network is also inherent in the Council s common political approach (7159/03 PI 24, Brussels, 7 March 2003, n o ) on the 3

4 Community patent as it has foreseen that NPOs may carry out search work on behalf of the EPO so that they can maintain a critical mass. This approach has, at EU level, been reaffirmed at a recent meeting of the Competitiveness Council. The Council, in the context of relaunching the Lisbon Strategy, has invited Member States and the Commission to [s]trengthen information and support services on intellectual property, especially for SMEs, support patent authorities increasing their cooperation across borders and pursue work to improve the accessibility and efficiency of Europe s patent system [14155/05 (Presse 287), Press Release, 2694 th Council Meeting, Competitiveness (Internal Market, Industry and Research), Brussels, November 2005]. The Council could not have chosen more unequivocal terms to express its full and unconditional support for the establishment of a European patent network, i.e. a real network where there is co-operation between equal partners working for the common good of all. It has to be stressed that it is not the self-interest of NPOs that is being pursued in the so-called strategy debate within the European Patent Organisation. A reinforced role of NPOs within a European patent network would serve vital European, not just national, interests and objectives. Therefore, the HPO takes the view that access to the patent system can only be properly ensured in Europe with the substantial involvement of a highly developed national IP infrastructure. Consequently, within the European patent system, the emphasis should be shifted from further centralisation to co-operation (as foreseen in the Preamble of the EPC). With the scenario of continuing centralisation of the European patent system, we would be running the risk that the whole patent system might become, in the eye of the general public, and, in particular SMEs, an alien and overly complicated structure reserved for remote supranational institutions and of interest exclusively to large multinational firms. In this regard, new EU Member States such as Hungary are in a particular situation. They have a special interest in improving the competitiveness of their economies by supporting innovation and creativity. To this end, they need to maintain and further improve their national IP infrastructure so that it can better meet the needs of local industry, and so that it should attract more and more R&D investment. It is exactly the skills of their NPOs staff that these Member States try to build on when stepping up their efforts to provide value-added services to the public, in particular SMEs, and to raise the general awareness of the patent system. Therefore, any new model for a network-like co-operation should meet the ultimate objective of the European patent system, namely, it has to foster innovation and improve competitiveness in Europe so that, in accordance with the EU s Lisbon 4

5 strategy, Europe can really become the most competitive knowledge-based economy in the world. To that end, it is important, although to different degrees, for the national offices of the Member States to maintain a critical mass of staff and substantive work. Without this, they would, in the long run, be unable to properly function, which would mean that individual inventors, SMEs and other interested circles would have no simple, cost effective, easy and timely access to the patent system. Predictable, rapid and inexpensive resolution of disputes between right holders and other parties is also an essential prerequisite for establishing a sound and efficient patent system in Europe. However, some caution is needed to avoid a onesided approach in this respect. Resolution of patent law disputes must remain predictable and inexpensive to both parties. Fairness requires that, in addition to the legitimate interests of right holders, those of the potential defendants ( alleged infringers ) should also be taken into consideration. This balanced approach is reflected in Article 41 of the TRIPS Agreement as well as in recital (17) and Article 3 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights. Moreover, it is also to be noted that the predictability of patent law dispute resolution does not only depend on the forum and the procedural rules but also on the substantive provisions underlying the legal dispute. It has always been a consistently held view of the Hungarian authorities that no IP issue can be properly settled without having due regard for other public policy interests such as competition (anti-trust) or healthcare. The negotiations on Hungary s accession to the EU have provided ample evidence for this in relation to SPCs and data exclusivity. Hungary is particularly sensitive to health care implications of industrial property. While the importance of promoting innovation through patents must by all means be recognised, it should also be stressed that there are other legitimate policy objectives pursued by both the European Union and its Member States. Patent rights are neither conferred, nor exercised in a social or political vacuum, therefore, it cannot be a legitimate aim to achieve a level of protection for those rights that would prejudice the vital public interest in social and economic welfare. National governments should be left a certain room for manoeuvre in order to enable them to strike an appropriate balance between the various interests in view of the peculiar circumstances of their society and economy. This has been recognised by Articles 7 and 8 of the TRIPS Agreement. It is also to be recalled that, under the EC Treaty, there are objectives other than the establishment of an internal market that the Community has set out to achieve. Pursuant to Article 3(p) of that Treaty, a contribution to the attainment of a high level of health protection is one of the activities of the Community. Furthermore, Article 152(1) of the EC Treaty provides that a high level of human health protection has to be ensured in the definition and implementation of all 5

6 Community policies and activities. This holds true also for Europe s future patent policy The HPO is of the view that the national IP infrastructures of Member States are a unique asset of Europe. Should they be relied on to a larger extent in stimulating innovation in Europe, they could certainly contribute to enhancing Europe s competitiveness. In this context, reference is made again to the so-called strategy debate within the European Patent Organisation (see point 1.1.) The patent policies of both the Community and its Member States are greatly influenced by the activities of the EPO, as that office is the backbone of the present European patent system and the major patent granting authority in Europe. However, unlike NPOs, which function within, and under the supervision of, national governments, the EPO is not directly and institutionally influenced by broader public interest considerations. In this sense, it performs its tasks in a social and political vacuum, in a politically sterilised environment. While this situation can be regarded as optimal from the viewpoint of the EPO s independence in making individual decisions on granting patents, it does have some drawbacks in terms of the EPO s sensitivity to broader public policy considerations as well as the public perception of the patent system in Europe. This can only be remedied by improving the democratic control over the EPO s activities. To achieve this, the political role of the Administrative Council of the European Patent Organisation should be strengthened. The decision-making process within that Organisation should be developed in a way to achieve full and unconditional respect for two fundamental provisions of the EPC, namely, that the EPO is supervised by the Administrative Council [Article 4(3) EPC], and that the President of the EPO is responsible for its activities to the Administrative Council [Article 10(1) EPC]. At Community level, it is perhaps a conceptual change that would most facilitate a better understanding of broader public policy interests in the patent law context. The interests and needs of the users of the patent system are often, if not routinely, referred to in debates about the future patent system in Europe. Some participants of these debates seem to give a rather restrictive interpretation to the concept user of the patent system. Decision-makers at Community level should distance themselves from this restrictive approach and listen to all those having a potential interest in the functioning of the patent system and not only to those (not necessarily European) large companies having the highest patent filing figures. It has to be recognised that a properly functioning patent system serves not only the interests of the major right holders but also those of the general public, including SMEs and local industries. Therefore, the interests of those who have to respect the exclusive exploitation rights conferred by patents as well as those whishing to benefit from easily accessible up-to-date patent information should also be taken into account. 6

7 It is also to be noted that, even if a well-functioning patent system is important for converting research into innovation and economic success, it will not, in itself, be sufficient to foster innovation in Europe. A number of other factors are equally, or even more, important and must be improved. These factors include in particular: cooperation between research institutes and business enterprises, funding of research at universities, access to venture capital, public infrastructure providing assistance to SMEs and individual inventors, local knowledge of the patent system, systematic use of patent information, easy access to patent expertise. Section 2 The Community patent as a priority for the EU 2.1. The HPO is of the view that the Council s common political approach still constitutes a solid basis for continuing work on the Community patent as a priority for the EU. If the Commission were ready to lay more emphasis on bringing the future Community patent system closer to users and all those it may affect, an alternative to the jurisdictional system of the Community patent as defined by the common political approach could perhaps be considered. This alternative would entail a more substantial role for national courts of Member States. The point of departure for this alternative approach could be that, at present, patent law disputes are heard in national courts of the Member States. These are usually specialised ones having the necessary expertise in settling industrial property disputes. Proceedings are conducted in the official language of the Member State concerned. Because of Article 65 of the European Patent Convention (hereinafter referred to as the EPC ), the full text of the patent is available in that official language even in the case of a European patent. Parties to the proceedings can reasonably be expected to use and understand that language, as e.g. in an infringement suit the defendant is domiciled in the Members State concerned, and the patentee is normally either a local SME, or a larger multinational firm having some sort of local presence in that State. Knowledge of the local circumstances can also best be ensured this way, as e.g. in an infringement suit the facts of the case can be established by a court operating in that State where the harmful event occurred. In comparison, what the Council s common political approach envisages is a fully centralised court system forcing parties of patent law disputes to carry out litigation in a language unknown to them, in a court having its seat outside the Member State where they are domiciled and whose official language they speak, concerning a patent the full text of which was not available to them before (and might not be available even after) the commencement of court proceedings. In this context, attention should be drawn to the jurisdictional arrangements of the Community trade mark and the Community designs systems. The provisions on jurisdiction and procedure in legal actions relating to Community trade marks, as contained in Articles 90 to 104 of Council Regulation (EC) No 40/94 of 20 December 7

8 1993 on the Community trade mark, could serve as a model for those relating to Community patents. It is difficult to see why the jurisdictional arrangements that have been adopted for the existing Community titles of industrial property are not applicable to patents. There seems to be no valid reason to presume that what has been regarded as workable, and is workable, with respect to trade marks and designs, would not work in the case of patents. Although the judicial arrangements for Community trade marks and designs are based on the involvement of national courts of Member States, they also ensure high professional quality and uniformity of jurisprudence. High professional quality is achieved by requiring Member States to limit the number of national courts that can act as Community trade mark courts. Uniformity of jurisprudence is also secured through preliminary rulings of the Court of Justice of the European Communities as well as by other means such as conferences of judges of Community trade mark courts. Should the specific features of patent law cases call for further measures to ensure uniform interpretation, timeliness and professional expertise in settling disputes over Community patents, one could possibly think of entrusting the Court of First Instance (CFI) with the task of giving preliminary rulings in these matters in accordance with the provisions of Article 225(3) of the EC Treaty as amended by the Nice Treaty. Therefore, maintaining the jurisdiction of national patent courts for proceedings concerning infringement and validity of Community patents would not preclude uniform interpretation and application of Community law relating to those patents. The system of preliminary rulings under Article 234 of the EC Treaty on questions referred to the Court of Justice or the CFI by specialised national courts acting as Community patent courts could perhaps alone ensure uniformity in the interpretation of Community patent law. A thorough analysis is needed with respect to the economic and other effects of introducing a jurisdictional system like the one envisaged by the Council s common political approach for Community patent litigation. Detailed and relatively precise estimations or calculations regarding costs and benefits will have to be presented in this respect. Otherwise, it will be hard to explain why a supranational patent court system having, perhaps, decentralised chambers in some, but not all, Member States, and conducting the proceedings under a complicated language regime, would be quicker, cheaper, simpler and more easily accessible than the settlement of patent law disputes at the level of national courts. In addition, each Member State has, in accordance with its international obligations, a legitimate interest in maintaining a judicial system capable of enforcing intellectual property rights in an efficient manner. To achieve this, Member States will continue to need national judges having patent law experience. Therefore, Hungary would welcome a more detailed analysis of the impact the proposed jurisdictional system of the Community patent would have on the 8

9 users and other stakeholders of the patent system and on the functioning of the national industrial property infrastructure. It has to be stressed that all the ideas described above only represent a possible alternative to the jurisdictional system as defined by the common political approach. Hungary can still agree to, and considers itself bound by, the common political approach in every respect. As to the precise legal effect of translations, we maintain the view that should any future Regulation on the Community patent fail to provide for well-defined legal effects of inaccuracies in the translation of the claims, it would render the translation requirements meaningless, which would run counter to the letter and spirit of the Council s common political approach. The onus of proof should always rest with the patentee (and not with the alleged infringer) in the case of a translation that is inaccurate due to the patentee s failure or mistake. Last but not least, in respect of the explanation provided by the Commission under this Section, it is also worth noting that the effect the introduction of the Community patent would have on the costs of patenting in Europe has to be looked at carefully and in a wider context. It remains to be seen whether, and how, the lowering of the costs of patenting in Europe could really contribute to the competitiveness of the European industry. Lowering these costs might also create an incentive for non- European applicants as well to file even more patent applications in Europe. Such an outcome would not necessarily be regarded as a contribution to the competitiveness of European industry. Here, again, the necessary balance will have to be found. Section 3 The European Patent System and in particular the European Patent Litigation Agreement The HPO shares the views expressed by the Commission in this section. We fully agree that those issues identified by the Commission will have to be addressed before EU Member States become parties to the EPLA As to the advantages and disadvantages the draft EPLA would have, let us refer to WPL/11/05 (Munich, ) drawn up by the Secretariat of the Working Party on Litigation on the assessment of the impact of the EPLA on litigation of European patents. This document contains a fair analysis of the impact the EPLA will have on patentees, however, it does not seem to address the position of other potential stakeholders (e.g. alleged infringers). The HPO is not in a position to give its own assessment of the possible advantages and disadvantages the EPLA would have for those who use, and are affected by, patents. The HPO would certainly welcome a more detailed analysis of the impact the EPLA would have on the users and other stakeholders of the patent system as well as on the functioning of national industrial property infrastructures. 9

10 3.2. In our view, the ideal patent litigation scheme in Europe would have to be built on a limited number of competent and specialised national courts co-operating with European instances with a view to ensuring uniform interpretation and application of the relevant patent law provisions. In our reply to question 2.1., we have outlined a possible alternative to the jurisdictional system for Community patents. In the context of the EPLA, this would mean that the scheme set out in Part Va of the draft EPLA (WPL/10/05, Munich, ) could perhaps alone ensure uniformity in the interpretation of European patent law. However, this does not mean that Hungary would not be prepared to consider its accession to a future EPLA, especially if the Community were also to take action in this regard. Section 4 Approximation and mutual recognition of national patents 4.1. Given the very high level of harmonisation reached within the European Patent Organisation, there seems to be no aspect of patent law that could give rise to barriers to free movement or distortion of competition because of differences in law or its application in practice between Member States. The only exception might perhaps be the legal status of employees inventions. Our experience shows that provisions of national patent law on employees inventions do affect investors decisions (e.g. in relation to choosing the seat of their research centres). In this regard, differences in law between Member States can therefore affect the proper functioning of the internal market This question is not applicable to the HPO as a national industrial property office We believe that bringing the main patentability criteria of the EPC into Community law would be neither necessary, nor justified. Admittedly, it would have the very positive effect that national courts could refer questions of interpretation to the European Court of Justice. However, at present, there is no aspect of patent law that could give rise to barriers to free movement or distortion of competition because of differences in law or its application in practice between Member States (see our reply to question 4.1.). Therefore, it would be very difficult, if not impossible, to find justification for adopting any measure aiming at approximation of laws under Article 95 of the EC Treaty. So, the feasibility of option (1) is rather doubtful. In addition, option (1) would entail the risk of commencing a public debate on, and unnecessarily re-opening, a number of settled issues of substantive patent law, which could undermine legal certainty in this field and might make the interested circles understandably concerned about the future European legal environment of innovation and R&D. In addition, when embarking on any exercise with the aim of approximating Member States national patent laws, due account would have to be taken of the ongoing negotiations, under the aegis of WIPO and in the more informal setting of the 10

11 so-called Group B+, on the international (global) harmonisation of substantive patent law provisions. The issue of employees inventions is not specifically covered by the EPC (see Article 60 EPC, which only deals with the applicable law, but contains no substantive provisions on employees inventions), and might be a subject of harmonisation at Community level. However, we cannot see any other issue in respect of which more limited harmonisation [option (2)] would really make sense. The ideas contained in the Commission s Questionnaire on mutual recognition seem to be at a rather nascent phase, so they cannot really be commented on in detail. Nevertheless, they represent an interesting avenue that would certainly be worth exploring further The HPO has no alternative proposals that the Commission might consider in addition to those put forward in this section. x x x Section 5 requires no replies from the HPO. We will inform the Commission of the HPO s contact details in the cover letter. [End of document] 11

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