In this chapter we are about to prove that whether you believe it or not, you are doing Research and Development activities, but you might not be aware of it. Besides we will give you information on what are considered to be R and D services within the Hungarian rules and regulations.
Here there are some opening questions for entrepreneurs and managers at enterprises (those who only plan to become entrepreneurs or business managers can as well skip this part)
1.
At your work do you usually carry out development, research or innovation activities?
If your answer is yes, you can skip questions 2-4. But if your answer is no, go to the next questions and answer them.
2.
Is it true that the world and the business environment change rapidly?
We imagine you frowning: why do you have to ask questions when the answer is evident?
3.
Is it true that your business or the enterprise you work for has been operating for years now, or even has been developing?
If your answer is yes, go to question 4. If your answer is that it does not develop, moreover, it ceased to exist, then do not go to question 4 as the fact that you didn’t have any RnD or innovation activities might have contributed to the closure of the business. Even though, it might be worth reading the rest of the document. You might find educative information there.
4.
OK. You have not carried out any RnD or innovation activities. Then can you say how it is possible that your business or the enterprise you manage has been able to survive in a rapidly changing business environment?
Before you give it a thought it might be useful to agree on what we mean by innovation and research and development activities.
There are various, more or less similar interpretations existing for the definition of these. The internationally accepted term definitions as well as most information related to innovation can be found at the webpages of Innosutra and InnolocalSupport.
But now let us concentrate on the official Hungarian definitions. These can be found in the Law on Research and Technological Innovation (Act CXXXIV of 2004) which entered into force on 1 January 2012.
According to the definition of section 4 of the law, technological innovation is all the scientific, technical, managing, economic, and trade activities which aim to improve the efficiency and profitability of a business or aim to achieve beneficial social and environmental effects, all these resulting in new or significantly modified products, services, for the application of new or significantly modified methods, or technologies to enter the market, including those modifications which are considered to be new only in the given sector or at the given organization.
Now, related to question No 4 consider whether you are sure that your company has not carried out either scientific, technical, organizational, economic or trading activities with the aim to give birth to new or significantly modified methods and technologies and their introduction to the market. Please notice that for the technological innovation it is sufficient if the results are proven to be new for your company (organization.)
Of course, you can realize that there are two types of innovation:
a, innovation related to economy. Its aim is to ensure efficiency and profitability of the business activities
b, social innovation. Its aim is to achieve beneficial social and environment changes
Consider what products, services, processes you had some years ago and what of those have you now, furthermore what you plan to have in the future. Consider also, what methods and technologies you used before, what you use now, and what you plan to use in the future.
Have you found any changes?
We are sure that there are only a few whose company is still competitive, and might even grow, but it has not implemented any innovation activities. We hope you are not among those few.
Therefore we are certain that almost all of you have carried out innovation activities. But have you also carried out research and development activities?
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Let us refer to the definitions of point 1of section 4 of the Law on Research and Development and Technological Innovation (Act CXXXIV of 2004). According to the definition research and development includes basic research, applied research and experimental development.
It is very unlikely that your company has carried out basic research (see point 1,a of the law for detailed description). Normally enterprises would not start research activities without the aim to apply its results in practice. Basic research is rather in the scope of universities and academic institutions.
However, surprisingly enough a lot of enterprises carry out applied research. (see point 1,b of the law for detailed description). As many times planned research or critical examination is needed to acquire new knowledge and expertise for the development of new, or significantly modified product, procedure or service.
You might realize that your company also carries out applied research in order to prepare experimental development.
We are almost certain that you have carried out experimental development (see see point 1,c of the law for detailed description). Has your company made plans, blueprints, or other documentations? Or has your company produced a prototype which was never sold? Has your company ever done pilot manufacture or/and testing? Etc. Most producing companies are very unlikely to stay on the market without making prototypes from time to time. Prototypes are normally not for sale but for testing, breaking, etc (like most of the car prototypes).
Qualification of Research and Development projects
Obviously, developments carried out temporarily or as a routine cannot be regarded experimental development, however, it would not be sufficient to survive at the market. Nevertheless, there are surely some of you who would not like to risk their project not being evaluated as a research and development project because of a misreading of the law. These people would like to be on the safe side.
There is a solution to this according to Law 2004. CXXXIV on research and development and technological innovation. The law entitles the Hungarian Intellectual Property Office (previously Hungarian Patent Office) to qualify the projects with the view whether they are regarded to be research and development projects, also to decide whether they can be regarded as own research and development projects. This qualification cannot be later questioned by any Hungarian authorities. But please note that only those projects are entitled to be qualified as research and development projects, which has not started before the submission of the request. So if you would like to make sure, do not hesitate to act.
If required, the Hungarian Intellectual Property Office can identify what percentage your project consists of basic research, applied research and experimental development. If required it can also claim if your project can be qualified as an own RnD project within own related fields.
Joint research and development of enterprises/businesses
We imagine managers of some bigger enterprises frowning. It is all nice-they might say- but not applicable to us. Most of the research and development activities are done by our parent company. We just contribute.
We have good news. Act CXXXIV 2004 on Research and Development and Technological innovation gives space for a research and development contract between for example two companies with the aim of joint research and development. Point 10 of section 4 further describes the details.
Without any doubts the foreign parent enterprise and its branch in Hungary are two companies which cooperate in a certain exploitation of the results of or the actual realization of a certain research and development activity based on a contract. For example the parent enterprise develops the plans and the Hungarian company produces the prototypes or carries out the experimental development. According to the law the Hungarian branch also contributes to the research and development activities, even though its main part might be realized at the parent enterprise abroad.
We hope you are convinced now. If yes, please read on.
