EPLAW PATENT BLOG

HU – Metropolitan Court establishes direct effect of Directive 48/2004/EC to speed up revocation proceedings

Posted: March 26th, 2014

A seemingly ordinary patent revocation proceeding turned into a well of path breaking guidelines from the Metropolitan Court, Budapest, regarding the procedure of the Hungarian Intellectual Property Office (HIPO) and even lead to the declaration of the direct effect of Article 3 of Directive 48/2004/EC (Enforcement Directive).

In the reported patent revocation proceeding, the patentee owned a patent covering a certain packaging material used in the food industry.  Based on this patent the patentee had started infringement proceedings before the Metropolitan Court against a local company a few years ago. In course of the patent infringement lawsuit, the defendant attacked the patent by requesting its revocation from the HIPO against the patent in 2010, roughly a year before the expiration of the right (and after the patentee had already won the infringement lawsuit at first instance). In line with the established judicial practice the infringement lawsuit had been suspended for the duration of the patent revocation proceeding (see post of October 11, 2010).

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The HIPO made its first instance decision regarding the revocation in an expedited proceeding after 3 years in 2013 in which it rejected the revocation request and maintained the patent.

The petitioner of the revocation (who is the same company as the defendant of the infringement lawsuit) appealed to the Metropolitan Court which in its – presently reported – ruling annulled the above mentioned first instance decision of the HIPO and ordered it to conduct a new proceeding abiding the Metropolitan Court’s instructions.

According to the decision, the court found that the HIPO breached essential legal provisions during the first instance revocation proceeding and made a decision which cannot be corrected in the court phase, hence the HIPO was ordered to repeat the entire first instance procedure and make a new decision. The essential procedural mistakes were the following according to the Metropolitan Court.

Ignoring prior art references that were dealt with in the prosecution In the revocation request various prior art documents were referred to in support of the petitioner’s argument of lack of novelty of the invention. However, some of these had already come up during the prosecution of the corresponding patent application and were listed in the patent specification as state of the art.  In view of this fact the HIPO excluded the same prior art references from discussion in the revocation proceeding.

The court disagreed with this conduct and established that the revocation cannot be regarded as the mere repetition of a patent prosecution and the adjudication of the revocation request should be independent from the findings of the examiner in the prosecution. Namely, the revocation request was to be decided by a panel of three examiners (as opposed to the single examiner in the  prosecution) that should weigh the arguments pro and contra validity made by the parties.  Thus, the HIPO mistakenly declared that it had already taken its standpoint regarding certain prior art references that were included in the description of the patent, since the arguments of the petitioner of the present revocation proceeding could not have been available then. Thus the HIPO made an essential mistake when it failed to adjudicate certain prior art references.

a) The HIPO has not served the last writ of the patentee on the petitioner

The HIPO has made its decision without serving the patentee’s last writ on the petitioner.  The court referred to Article 47 (3) of the Patent Act according to which the HIPO may base its decision on such facts and evidence upon which the adverse party was provided the opportunity to react. This provision had been breached by the HIPO when it referred to the content of the said writ in its decision without sending it to the petitioner.   b) Failure to conduct accelerated proceeding

The final and most exciting point of the court’s reasoning showed a critical approach towards the duration of the revocation proceeding.

The court started from citing the chronological milestones of the HIPO’s proceeding: on March 29th, 2010 the patentee asked for expedited proceeding with respect to the ongoing patent infringement proceeding between the parties. The HIPO ruled that the proceeding should continue as expedited on April 15th, 2010. Still, after this ruling, it has served many times the writs of the parties with substantial delay. Furthermore, although the HIPO did not require further writs from the parties after October 2010 and did not hold an oral hearing, it made its decision only on June 19, 2013, i.e. after almost 3 years.

The Metropolitan Court found this delay to be the violation of essential procedural rules of revocation proceeding, particularly of Art. 81/A of the Patent Act.

The court reminded that the mentioned article was enacted in the Patent Act in order to enhance effectiveness of enforcement and speed up patent infringement lawsuits. The court continued emphasizing that Hungary employs a so called bifurcation system, meaning that validity of patents cannot be challenged directly in patent infringement proceedings in form of e.g. a counter-claim, since the first instance adjudication of patent infringement lawsuits and revocation requests belong to different fora (Metropolitan Court and HIPO, respectively). The Metropolitan Court, however, viewed that this separation should not mean that the revocation proceeding is outside the system of patent enforcement, quite on the contrary, it constitutes an essential part of that. Thus, when due to a pending patent infringement lawsuit a patent revocation is adjudicated in an expedited proceeding in line with Art 81/A, the procedural rules of the revocation proceeding shall be interpreted in harmony with the Enforcement Directive.

The court cited Article 3 of the Enforcement Directive which rules – among others – that proceedings falling in the scope of the directive shall not involve unreasonable deadlines and unjustified delays. The court then listed those provisions of the Hungarian law that ensure harmony with this Directive provision in patent infringement lawsuits and preliminary injunction proceedings. The court viewed that the same should be kept in expedited patent revocation proceedings too, as those are equally the part of patent enforcement, only being conducted before the HIPO.

Then the court formulated the problem, that the applicable procedural law is different for expedited patent revocation proceedings than for infringement lawsuits (which belongs under the legal regime of civil litigation) as it is governed by administrative procedural law (with specific provisions in the Patent Act) and this applicable law does not set any time-limits  for such proceedings and certain procedural steps in it. A clear evidence of this was the present proceeding – viewed the court – which had dragged on for three years without the HIPO explicitly violating any procedural rule. Obviously, such delay of revocation proceedings were contrary to the aim of the Enforcement Directive and this in the court’s view is indicative of the imperfect implementation of the Enforcement Directive.

The court then made references to decisions of the European Court of Justice including Van Gend en Loos No. 26/62, Ratti No. 148/78, and Von Colson No. 14/83 dealing with the notions of vertical direct effect and according to which the courts of the member states are also obliged to interpret their national law in the light of the wording and the purpose of the Community directives.

The Metropolitan Court expressed that based on the vertical direct effect of the Enforcement Directive the parties in the accelerated revocation proceedings may demand on the basis of Article 3 of the Directive that the HIPO concludes the proceedings within a reasonable time without this being provided expressis verbis either by the Patent Act or by the Public Administrative Procedures Act.

Also, in the light of the findings of the Von Colson decision the Metropolitan Court interpreted Article 81/A of the Patents Act as a provision ensuring that the revocation proceedings can be terminated within a reasonable time being necessary for the effective enforcement of the law, requiring the HIPO to observe administrative time-limits which are at least as strict as the time-limits prescribed by the Code of Civil Procedure for the present court. The court emphasized that the expedited revocation proceeding is in fact like a counter claim in the infringement lawsuit even though it is regulated by administrative procedural law. Furthermore, in the absence of provisions regarding appropriate time limit in administrative law, the law of civil litigation, that is the Code of Civil Procedure can be regarded as the only model for the schedule of these proceedings.

Thus, the court ruled that in the specific case the HIPO should repeat the first instance proceeding observing time limits set out in the Code of Civil Procedure for Civil lawsuits, e.g. the HIPO shall hold a hearing within four months following the day on which the revocation request was submitted; the HIPO is obliged to send to the parties their submissions and at the same time it is obliged to make all invitations for making a declaration or for supplying deficiencies, and make it possible that the written preparatory work can be completed by the time of the hearing, i.e. within four months. The court added that if the HIPO renders a decision without holding a hearing, it is still obliged to render the decision within the same time-limit, i.e. four months.

The court sums up its motivation emphasizing that although the HIPO has not violated any concrete provisions of the Patent Act in a direct manner, its procedure still failed to comply with the Article 81/A as interpreted in harmony with the Enforcement Directive with regard to the multiple delays in sending the submissions and the considerable and unjustified delay in rendering the decision.

This decision seems to be a remarkable move from the Metropolitan Court and brings us an image of Emperor’s New Clothes, in the sense that it reveals that the patent revocation proceeding is in fact undressed for the fashion of the Enforcement Directive as long as its procedure lacks the essential guarantees envisaged by the Directive. In less metaphorical words, it is a challenging concept that the Metropolitan Court employed the tool of vertical direct effect in a manner that led them to apply the procedural rules of civil litigation in patent revocation proceeding which is otherwise embedded in an entirely different legal regime that is public administrative procedural law. Yet, if this approach was confirmed, it could be the first step in overcoming the main disadvantage of the present strict bifurcation system in Hungary, that is the delay of getting a judgement on patent infringement caused by the duration of the separated patent revocation proceeding. Hence, one should be eager to see if the parties appeal and the Metropolitan Appeal Court will also have a word regarding the same matter.

Reported by: Eszter Szakács

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