As an IP right holder, you have probably encountered the negative effects of IP infringing activities. Moreover, infringements have been rising. According to “The 2021 Trademark Ecosystem Report: Global insights into the optimization of trademark value, protection and technology” by Clarivate CompuMark, trademark infringements continue to rise: 89% of respondents reported trademark infringement, and 50% of respondents indicated that social media platforms are where many infringements occur.

Do you know what legal options you have when it comes to fight against knock-offs in the Hungarian market? Let us navigate through the remedies you can apply.

Legal background

As Hungary is an EU Member State, its legislation is harmonised with the relevant EU Directives on Trademarks, Designs, Trade Secrets and Copyrights as well the legal instruments relating to the civil and customs enforcement of IP rights. Hungary is a member of the Paris Convention for the Protection of Industrial Property and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) with “TRIPS-plus” rules.

In addition, Hungary is one of the only 18 countries that ratified the Medicrime Convention that relates to the counterfeiting of medical products and similar crimes involving threats to public health. Consequently, Hungary enacted in its Criminal Code illicit activities related to counterfeit drugs as standalone crimes effective from 1 January 2016.

It is worth mentioning that there is no IP and/or IP Enforcement Code in Hungary, the IP right holders’ rights, remedies available for infringements and also some civil procedural rights that are applicable only in IP disputes in accordance with the Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (IPRED) are stipulated in the Hungarian IP Acts (namely the Patent Act, the Trademark and GI Act and also the Design Act). Right holders do have privileged rights in the application of preliminary measures and injunctions that are widely available for them in line with the IPRED, nevertheless the short deadlines to decide upon such request for preliminary measures are often not observed due to the courts’ heavy workload.

Stepping up against online infringement

The infiltration of content offering infringing materials or knock-offs has been increasing. Based on our local experience, it is now Facebook and Facebook Marketplace as well as online sales platforms such as www.jofogas.hu where a massive number of usually low quality fake goods are advertised increasingly. In most of the cases, the best solution is to use Facebook’s online Counterfeit Report Form or any other forms or method provided by a given site in question to have the illicit ad removed, even though new listings keep appearing repeatedly on a daily basis.

In other cases, where large quantity of counterfeit goods are suspected to be in the seller’s possession, a well-thought and developed criminal complaint preferably based on evidences collected through prior investigation and test purchase can end up in a criminal case. It is a peculiar Hungarian phenomenon that investigative powers in IP cases are divided: in general, the National Tax- and Customs Authority is responsible for the administrative and criminal investigations of IP crimes or misdemeanours while the investigation of IP crimes related to counterfeit medicines or medical instruments belong to the competency of the  Hungarian Police.

Unfortunately, not every online platform has its own procedure for the easy and effective take down of illicit offers or contents. In this case, the so-called notice and takedown procedure can be revoked for trademark and copyright owners in case of online infringements since 2006.

Specialized agencies against IP infringements

In addition to the measures and rights available for the IP investigative bodies (Customs and Police), the National Institute of Pharmacy and Nutrition (OGYEI) is entitled to order the provisional, 90-days take down of any electronic data relating to falsified drugs. To inform and enable the public to check the trustworthiness of a website before placing an order, OGYEI also blacklists websites that were affected by blocking decisions.

The National Food Chain Safety Office (NEBIH) is another specialized agency that plays an important role in eliminating counterfeit foodstuffs, beverages, dietary supplements or pesticides from the Hungarian market and distribution channels: leads in these fields can be directly reported to NEBIH for investigation and action against the infringement.

Customs enforcement

As Hungary borders non-EU countries such as Ukraine and Serbia, customs plays a significant role in the detection and seizure of fake goods entering the EU. According to the Report on the EU customs enforcement of intellectual property rights – Results at the EU border, 2019, the number of cases detained in Hungary has grown by 43% when compared to figures in 2018, albeit the number of articles detained dropped by 64%. Surprisingly, the significantly lower number of the detained articles amounted to a high estimated value of the detained goods placing Hungary on the 5th place among all EU Member States.

The simplified and the so-called super simplified procedure introduced by IPRED enables IPR holders to promptly and effectively hold up counterfeit goods coming from non-EU territories irrespective whether they are just a pair of shoes or a container of fake cigarette lighters.

It is to be kept in mind that one must have an application for action indicating Hungary as a basis of Customs action in which an operative representative available 24/7 is strongly advised to be indicated. Nothing affects more adversely the eagerness and engagement of enforcement authorities than unavailable right holders and/or late or no answers from representatives.

The weakness of the simplified procedure system lies in the advancing and bearing of the storage and destruction costs: despite the IPRED provides the possibility for IPR holders claiming these costs from the importers, the outcome is uncertain: the procedure is lengthy and requires IPR holders to risk and invest even more money (in the form of advancing the costs of execution) for the recovery of their costs, thus it is rarely the case IPR holders can pocket the amounts paid for in simplified procedures.

This is why right holders often opt for the initiation of criminal or administrative procedure by filing a private motion instead of engaging in the simplified procedure as storage and destruction cost in these cases are either borne by the perpetrator or the state.

It is not much of a help either that the amounts paid for the storage of detained goods set in a Ministerial Decree are relatively high, plus the method of calculation by different customs units is rather inconsistent and not even affected by the IPR holder timely reply.

In spite of the downsides, Customs units are ready to cooperate with IPR holders: the delicate risk analysis system and the cooperation of customs officers are above average at the Hungarian International Airport and other customs clearance locations compared to other customs directorates acting in domestic matters.

IP infringement litigation

IPR holders can file a civil suit for infringement and special (pre-litigation) procedure for ordering provisional measures or preliminary evidence (and for the review of these measures) at the Budapest-Capital Regional Court as IP infringement cases belong to the exclusive jurisdiction of the said court with judges specialized and experienced in IP.

The bifurcation system for industrial property rights are also a “Hungarian specialty”: if the defendant challenges the validity of a trademark, a patent or a design right (on which the infringement claim is based), it is the Hungarian Intellectual Property Office (HIPO) that has jurisdiction on the first instance, and decision is served in a parallel proceeding while the Budapest-Capital Regional Court usually suspends the infringement procedure until the decision on the validity of the IP right.

However, in utility model infringement cases, the Budapest-Capital Regional Court has jurisdiction to decide upon the counterclaim challenging the validity of the IP right in question in certain circumstances. This is the case if the suspension of the infringement case is not justified or the defendant provides the court with the so-called “protectability opinion” of the HIPO. This opinion is a finding and based on novelty search, it contains reasons on whether the utility model appears to meet the requirements of novelty, inventive step and industrial applicability.

In copyright matters, the rule that acknowledges collective rights management bodies as being entitled to apply for all measures, procedures and remedies against infringers is worth highlighting.

The duration of the proceedings will depend on the complexity of the case; on average, it takes two to five years to obtain judgment at first instance and one to three years to obtain judgment at second instance.

Conclusions

While protecting you creative works and innovative solutions with a well-established IP portfolio can be lengthy and costly, especially when it comes to acquiring patent rights, it is nevertheless inevitable in building a successful business and brand.

It is often surprising to see that even well-known and reputable multinational companies struggle with and sometimes even suffocate under the flood of counterfeits. In addition to the loss of profits, damaged reputation and the frustration caused by their impotency to act; they are even exposed to the anger of disgruntled trading partners due to fakes on their competitors’ shelves.

Without IP rights, you efforts become insecure and your business is fragile. While fighting against counterfeiting and piracy has its burdens and difficulties and incurs significant cost, it is still inevitable to draw up and follow an IP enforcement strategy to stay on top of knock-offs.

Hungary may be a small country but with the implementation of a smart IP protection and enforcement strategy in cooperation with an experienced local representative, IPR holders can get all it takes to step up against illicit trade.

 

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