RESTRICTED
WORLD TRADE IP/C/W/61
6May1997
ORGANIZATION(97-1958)
Original: English Council forTrade-Related Aspects of
Intellectual Property Rights
REVIEW OFLEGISLATION INTHE FIELDS OFPATENTS, LAYOUT-DESIGNS
(TOPOGRAPHIES) OFINTEGRATED CIRCUITS, PROTECTION OF
UNDISCLOSED INFORMATION AND CONTROL OF
ANTI-COMPETITIVE PRACTICES IN
CONTRACTUAL LICENCES
Replies from Hungary toquestions posed bytheEuropean Communities
andtheirMember States, Japan andtheUnited States
Thefollowing communication, dated 30April 1997, hasbeenreceived from thePermanent
Mission ofHungary.
_______________
REPLIES TOTHE QUESTIONS POSED BYTHE EUROPEAN COMMUNITIES AND THEIR
MEMBER STATES
Patents
1. Section 19ofActXXXIII of1995ontheProtection ofInventions byPatents (the"Patents Act")
provides, interalia,thefollowing exceptions toapatent holder 'sexclusive rights: (1)actsperformed
forprivate useoroutside thesphere ofeconomic activities and(2)actsofanexperimental purpose,
connected withthesubject matter ofthepatent, including experiments andresearch matter necessary
forlicensing thedistribution ofpharmaceuticals. Please explain howthese provisions areconsistent
withtherequirements ofTRIPS Article 30.
Under Article 19(1)ofHungarian Patent Law(hereinafter: HPL) patent protection shallafford
theowner ofthepatent (patentee) theexclusive righttoexploit theinvention. Article 30oftheTRIPS
Agreement allows Members toprovide limited exceptions totheexclusive rights conferred byapatent,
provided thatsuchexceptions donotunreasonably conflict withanormal exploitation ofthepatent
anddonotunreasonably prejudice thelegitimate interests ofthepatent owner, taking account ofthe
legitimate interests ofthirdparties.
Theexceptions provided forinSection 19ofHPLarelimited tocertain acts,namely toacts
doneprivately ornotinvolved inaneconomic activity, toactsdoneforexperimental purposes, including
experiments andtestsnecessary fortheregistration ofmedicines andtouseofthepatent inindividual
cases, forpreparing amedicine. Such actsbeing notinvolved inaneconomic activity ordone for
experimental purposes areaccording togenerally accepted international norms notconsidered to
unreasonably conflict withthenormal exploitation ofthepatent. Thecreation oftheseexceptions takes
account ofthelegitimate interests ofthirdparties.IP/C/W/61
Page2
Therefore thesaidprovisions ofHPLdonotunreasonably prejudice thelegitimate interests
ofthepatentee andareconsistent withArticle 30oftheTRIPS Agreement.
Furthermore, inthisrespect theHungarian legislation isfully harmonized alsowiththe
Luxembourg Agreement onCommunity Patents (CPC) which hasbeentaken intoconsideration when
creating thesubstantive provisions ofHPLwithaviewtotheEuropean norms.
2. Section 21ofthePatent Actprovides thatapatent holder isnotentitled topreclude
"pre-utilization" or"continued utilization" ofapatented invention. Please explain howtheseexceptions
toapatent holder 'sexclusive rights areconsistent withTRIPS Article 30.
Arightofprior usewillbelong toanyperson who, ingoodfaith, before thedateofpriority,
intheterritory ofthecountry andwithin theframework ofhiseconomic activities, hadbegun tomake
orusethesubject matter oftheinvention orhadmade serious preparations forthatpurpose
(HPL Article 21(1)).
Aprior usershallbeconsidered asabona fideuseruntilitisproved thattheprior usewas
based ontheinventive activity thatledtothepatented product (HPL Article 21(2)).
Patent protection shallhavenoeffect against aprior userinrelation totheextent ofmaking,
using orpreparation existing atthepriority date(HPL Article 21(3)).
Therightofpriorusemayonlybetransferred together withanentitled economic organization
orwiththatpartoftheeconomic organization inwhich suchmaking, using orpreparation hastaken
place (HPL Article 21(3)).
Arightofcontinued useshallbelong toanyperson who, intheperiod between adeclaration
oflapse ofpatent protection andrestoration thereof, intheterritory ofthecountry andwithin the
framework ofhiseconomic activities, hasstarted tomake orusethesubject matter oftheinvention
orhasmade serious preparations forthatpurpose. Theprovisions (concerning therulesofprior use)
ofparagraph (3)shallapply mutatis mutandis totherightofcontinued use(HPL Article 21(4)).
Theabove rulesofHPLdonotunreasonably conflict withanormal exploitation ofthepatent
anddonotunreasonably prejudice thelegitimate interests ofthepatent owner, because thepatent
protection shallhavenoeffect against aprior useroracontinued useronlyinrelation totheextent
ofmaking, using orpreparation existing atacertain date. Therightofpriororcontinued useistherefore
limited, andissupposed never toachieve acommercial scale. Itisalsolimited asfarasitisnotfreely
transferable.
Nevertheless, theprovisions ofthePatent Lawinquestion takeaccount ofthelegitimate interests
ofprior andcontinued users andcreate afairbalance between theinterests protected bythefirstto
invent system ontheonehandandbythefirsttofilesystem, ontheother hand. Consequently these
provisions areinfullconsistency withArticle 30oftheTRIPS Agreement.
Furthermore, these provisions arealsoincompliance withArticle 38ofCPCaswellaswith
adecision ontheprior usecontained inPartVoftheRules ofImplementation concerning PartVIII
ofthatAgreement (Annex I,Resolution).IP/C/W/61
Page3
3. Under Sections 31to33ofthePatent Act,anapplicant foracompulsory licence must
demonstrate thatthepatent owner wasunwilling toauthorize useofthepatent despite theexistence
of"appropriate conditions". Thelawdoesnotspecify thatthepotential licensee mustofferreasonable
commercial terms andconditions fortheright tousethepatent. Italsodoesnotspecify thata
compulsory licence mustbeexclusive anddoesnotlimitthescope ofsuchalicence tosupplying the
Hungarian market. Given theabsence ofexpress provisions onthesepoints, please explain howSections
31to33ofthePatent Actareconsistent withtherequirements ofTRIPS Article 31.
Theprovision oftheHPL according towhich anapplicant foracompulsory licence hasto
prove before thecourt thattherequirements foracompulsory licence havebeencomplied withand
thatthepatentee wasunwilling togrant alicence under appropriate conditions, hasinourviewthe
same meaning asthewording orArticle 31oftheTRIPS Agreement, where "reasonable commercial
terms" arerequired asoneoftheconditions laiddown forgranting acompulsory licence.
Thenon-exclusive nature ofthecompulsory licence follows fromtheother relevant provisions
oftheHPL. More precisely, since thecompulsory licence isalicence granted bythecourt without
theauthorization ofthepatentee, thecogent ruleofArticle 28(4) oftheHPLisapplicable insucha
case.
According tothesaidArticle arightofexploitation shallbeexclusive onlyifexpressly stipulated
bycontract.
Therightofexploitation isnotbased ona"contract" incaseofacompulsory licence granted
bythecourt. Furthermore, thecourt hastoestablish thescope andduration ofacompulsory licence
taking intoaccount thepurpose ofexploitation authorized byit(Article 33(2)).
Thecompulsory licence granted bytheHungarian court shallextend totheuseofthepatent
tosupply thedomestic market, because under Article 31oftheHPLitisaprecondition foracompulsory
licence thatthedomestic demand isnotsatisfied bythepatentee.
Theprovision ofthePatent Lawisinfullcompliance withtherelevant provision oftheTRIPS
Agreement requiring thatsuchuseshallbeauthorized predominantly forthesupply ofthedomestic
market.
4. Forapplications forprotection which werepending onthedateofapplication oftheAgreement,
howdoyourauthorities comply withTRIPS Article 70.7which allows theamendment oftheapplications
toclaim enhanced protection?
InHungary theLawNo.IIof1969wasamended byLawNo.VIIof1994. Bythisamendment
theprotection ofinventions previously excluded fromprotection bytheLaw-namely theprotection
ofchemical products perse-hasbecome possible. Thesaidamendment alsocontained provisions
onclaiming product protection inpending patent applications anddetailed rules oftheapplicable
procedure. Accordingly, enhanced protection wasavailable before theentry intoforce oftheTRIPS
Agreement.
Integrated circuits
1. Section 7(5)ofActXXXIX of1991 ontheProtection oftheTopographies ofMicro-electronic
Semiconductor Products (the"PTMSP Act") allows forthedisposition ofstockonhandofanunlawfully
reproduced integrated circuit, provided thattherightholder receives the"Customary feeofutilization"
forsuchdisposition afteradequate notice fromtheright holder. Please explain howthisprovisionIP/C/W/61
Page4
complieswithTRIPSArticle37,whichrequiresthatinsuchcircumstancestherightholdershouldreceive
"areasonable royalty suchaswould bepayable under afreely negotiated licence".
Therelevant provision ofHungarian Lawreads asfollows:
"Exploitation shallnotbeconsidered asunlawful ifaperson imports forcommercial
purposes ormarkets semiconductor products incorporating atopography, ofproducts
incorporating thesame, without knowing orhaving reason tobelieve thattheseproducts contain
anunlawfully reproduced topography. From thedatethisperson knows orhasreason toknow
thatthereproduction ofthetopography wasunlawful, hemayputonthemarket onlythestock
onhandorordered, against theusual royalty payable totheowner oftheprotection."
Theabove provision ofthelawisinfullcompliance withtherelevant TRIPS Article 37,where
thepayment ofa"reasonable royalty" isobligatory incaseofsuchuse.Weassume thatthetermusual
royalty, referring toaroyalty usualunder thecurrent market situation, andtheterm"reasonable royalty"
havethesame meaning.
Undisclosed information
1. Chapter IIoftheActLVIIof1996ontheProhibition ofUnfair andRestrictive Market Practices
(the"Unfair Practices Act") protects undisclosed information related totheeconomic activity, provided
thattheperson seeking protection hasa"justifiable interest" inkeeping theinformation secret. Please
explain howthisprovision isconsistent withTRIPS Article 39,which doesnotcondition theprotection
ofundisclosed information ontheexistence ofa"justifiable interest".
Under Article 4(3)aofActNo.LVIIof1996ontheProhibition ofUnfair andRestrictive Market
Practices, forthepurpose ofthatAct"business secrets areallfacts, information, solutions ordata
related totheeconomic activity, inconnection withwhich theentitled person hasajustifiable interest
inkeeping them secret, andintheinterest ofkeeping theabove secret, theentitled person hastaken
therequired measures".
Bythisdefinition alldataqualifying as"business secrets" arerelated totheeconomic activity
oftheperson whopossesses them.
Therefore theyhavea"commercial value"according toArticle 39.2oftheTRIPS Agreement.
Byourinterpretation, where aninformation has"commercial value" theentitled person hasajustifiable
interest keeping itsecret.
Therefore theprovision oftheHungarian Lawisconsistent withArticle 39.2oftheTRIPS
Agreement.
2. Please explain howHungary ensures protection ofundisclosed information submitted tothe
government asacondition ofmarketing approval forpharmaceutical oragricultural chemical products
asrequired byTRIPS Article 39,paragraph 3.
TheHungarian authorities competent forthemarket approval forpharmaceutical oragricultural
chemical products areobliged toprotect theinformation submitted tothemasbusiness secrets towhich
theprovisions oftheLawreferred tounder question 1above apply.IP/C/W/61
Page5
REPLIES TOQUESTIONS POSED BYJAPAN
Patents
1. Inyourcountry, arethefollowing subject matters protectable bypatent: (1)Plants andanimals,
and(2)Plant andanimal varieties?
Under LawontheProtection ofInventions byPatents No.XXXIII of1995(HPL) plants and
animals areprotectable provided thattheymeetthegeneral requirements ofpatentability (seeArticles
1-5ofHPL).
Under Articles 105to114ofHPLplantvarieties andanimal breeds areprotectable, provided
thattheymeetthespecial requirements laiddown bythelaw.
2. Inyourcountry, istheactofoffering forsaleincluded intheexclusive rights ofpatent?
According totheArticle 19(2)(a) ofHPLonthebasis oftheexclusive rightofexploitation,
thepatentee shallbeentitled toprevent anyperson nothaving hisconsent, frommaking, using, putting
onthemarket, offering forsaleaproduct which isthesubject matter oftheinvention.
Theoffering forsaleofaproduct obtained directly byapatented process isalsoprohibited
byArticle 19(2)(c) ofHPL.
3. Inyourcountry, whatkindsofactsarerecognized asexceptions totheexclusive rights conferred
byapatent right?
Article 19(6) ofHPLdeclares thattheexclusive rightofexploitation shallnotextend to:
(a) actsdoneprivately ornotinvolved inaneconomic activity;
(b) actsdone forexperimental purposes relating tothesubject matter oftheinvention,
including experiments andtestsnecessary fortheregistration ofmedicines;
(c) preparation forindividual cases, inapharmacy, ofamedicine inaccordance witha
medical prescription, oractsconcerning themedicine soprepared.
Furthermore, thelawprovides forcertain limitations ofpatent protection, suchastheright
ofprior useandtherightofcontinued useunder Article 21ofHPL. According toanother provision,
subject toreciprocity thepatent protection shallhavenoeffect withrespect tomeans ofcommunication
andtransport which areintransit inthecountry ortoforeign goods which arenotintended tobeput
onthemarket inthecountry (Article 21(5) ofHPL).
4. Inyourcountry, inwhich caseisusewithout theauthorization oftherightholder permitted,
including usebythegovernment orbythird parties authorized bythegovernment?
Theuseofapatented invention without theauthorization ofthepatentee ispermitted:
(a) byvirtue ofarightofprior useorright ofcontinued use,subject totheconditions
laiddown inArticle 21(1-4) ofHPL; or
(b) incaseofacompulsory licence granted according toArticles 31,32,33ofHPL.IP/C/W/61
Page6
5. Inyourcountry, howistheobligation under TRIPS Articles 34.1and34.2regarding theshift
oftheburden ofproof incivilproceedings forpatent infringement related toaprocess patent
implemented?
Intheabsence ofaproof tothecontrary, aproduct shallbedeemed tohavebeenobtained
byapatented process iftheproduct isnewandasubstantial likelihood exists thattheproduct wasmade
bythepatented process andthepatentee hasbeenunable, despite reasonable efforts, todetermine the
process actually used. Asubstantial likelihood thattheproduct wasmade bythepatented process shall
exist, inparticular, when thepatented process istheonlyknown process (Article 19(7) ofHPL). This
provision isincompliance withArticles 34.1and34.2oftheTRIPS Agreement.
REPLIES TOQUESTIONS POSED BYTHE UNITED STATES
Patents
1. Article 27ofHungary 'sLawNo.XXXIII ontheProtection ofInventions byPatents makes null
andvoidanypatent licensing agreement thatrestricts economic competition orhasapurpose
incompatible withthesocial functions ofpatent rights. Please explain howthisSection isinterpreted
inHungary, giving examples ifpossible, andexplain howsuchprovisions comply withtherequirement
ofArticle 30oftheTRIPS Agreement, which specifies thatlimited exceptions totheexclusive rights
conferred byapatent donotunreasonably conflict withanormal exploitation ofthepatent anddo
notunreasonably prejudice thelegitimate interests ofthepatent owner.
Theprovisions ofArticle 27(2) oftheLawprohibit therestriction ofeconomic competition
byagreement ofexploitation. Therefore, itisinfullcompliance withtherelevant provisions ofthe
TRIPSAgreement,accordingtowhichnothinginthatAgreementshallpreventMembersfromspecifying
intheirnational legislation licensing practices orconditions thatmayinparticular cases constitute an
abuse ofintellectual property rights having anadverse effect oncompetition intherelevant market
(Article 40(2)).
Theprohibition ofconcluding exploitation contracts thatrestrict economic competition shall
havenoeffect totheexclusive rights ofthepatentee; inthisregard thisisnotanexception tothe
patentee 'sexclusive rights anditdoesnotunreasonably prejudice thelegitimate interests ofthepatent
owner. Theexclusive rights cannamely beexercised onlyincompliance withtheprovisions ofother
relevant laws, especially withtheLawontheprohibition ofunfair andRestrictive Market Practices.
Under Article 27(2) itisalsoprohibited toconclude anagreement ofexploitation having a
purpose incompatible withthesocial functions oftherights conferred byapatent.
Thisisaspecial provision inthelawbased onthegeneral andbasic principles laiddown by
theCivil Code, already notified totheTRIPS Council.
Section 5oftheCivil Code prohibits abuse ofrights. According toSection 5(2)"Exercise
ofarightshallqualify asabuse ofrights ifitisdirected toanaimincompatible withthesocial purpose
oftheright, especially ifitleads todamage tothenational economy, toharassment ofpersons, injury
oftheirrights andlawful interest, ortotheacquisition ofunjust advantages".
Inthiscontext theprohibition ofabuse ofrights onthebasis ofcontracts ofexploitation will
never mean limitation oftherights ofthepatentee, because thesame basic principle isapplicable to
allcontracts inHungary.IP/C/W/61
Page7
2. Pleaseexplainwhetherapatenteecansatisfytheobligationto"exploit"theinventioninHungary
asusedinArticle 21*ofHungary 'sLawontheProtection ofInventions byPatents through importation
ofthepatented product. Ifnot,please explain howthisprovision complies withtherequirement of
Article 27.1oftheTRIPS Agreement, which precludes discrimination intheenjoyment ofpatent rights
withregardtolocalmanufactureorimportationofthepatentedinvention.(*Weassumethatthequestion
refers toArticle 31.) [N.B. Observation made byHungary.]
Theobligation ofexploitation aslaiddown byArticle 31canbesatisfied byimporting the
patented product, since theexclusive rights conferred byapatent, asdefined inArticle 19(2)(a) and
(c)expressly include theimporting ofproducts.
Article 31doesnotleave anydoubt thatthepatentee canfreely decide howhewillexploit
theinvention, since theimport isapttosatisfy thedomestic demand.
Therefore thesaidprovisions ofHungarian Lawareconsistent withArticle 27.1oftheTRIPS
Agreement.
3. Article 33(4) ofHungary 'sLawontheProtection ofInventions byPatents states thattheholder
ofacompulsory licence hasthesame rights asthepatentee inregard tothemaintenance ofthepatent
andtheexercise oftherights deriving fromprotection. Please explain howthisprovision isapplied
inpractice, providing examples where possible.
There isnolegalpractice ontheapplication ofthisprovision.
4. Please indicate howmany compulsory licences onayearly basishavebeengranted inHungary
since 1January 1993?
Nocompulsory licence hasbeengranted since 1January 1993.
5. Article 37ofHungary 'sLawontheProtection ofInventions byPatents provides foraruling
onlackofinfringementifapersonbelievesthatpatentinfringementproceedingsmaybeinstitutedagainst
him. Itisnotclear fromthelawwhether theruling made bythePatent Office under Article 44(d),
46,47,82and83would bemade afteraproceeding inwhich thepatentee would haveanopportunity
toparticipate. Please describe indetail howthisarticle isimplemented.
Under Article 83ofthePatent LawtheHungarian Patent Office shallinvite thepatentee to
submit comments ontherequest foradecision onlackofinfringement. Following thewritten
preparatory work, itshalldecide atahearing whether therequest shallbeadmitted orrefused.
ThegeneralruleunderArticle47ofthePatentLawontheestablishmentoffactsevenstrengthens
theposition ofthepatentee byprescribing thatthedecisions ofthePatent Office mayonlybebased
onfactsandevidence onwhich theparties concerned havehadanopportunity topresent theircomments.
Thegeneral rulesofadministrative procedures alsorequire thenotification oftheclient ofthe
hearing.