A “pharmerging” country
Ersin Dereligil reviews the current position for patent protection and enforcement in the country and looks to the future.
Despite the recent global financial recessionand the economic problems in neighboring Europe, Turkey’s economy was the second fastest rising economy in the G20 major economies with an increase of 8.5% in 2011, following an increase of
9.2% in 2010. According to the OECD, Turkey is expected to be the fastest growing economy of the OECD members
between 2011 and 2017, with an annual average growth rate of 6.7%. Turkey aims to become one of the top 10 largest economies in the world and to achieve all European Union membership conditions by 2023. Another longterm target is to make Turkey one of the world’s Top 10 economies in health services by attracting foreign investment. Turkey knows that this cannot be achieved without a reliable and consistent IPR regime focusing on patents and the close concerns of global pharma industry. The current patent legislation in Turkey is mostly in line with international standards due to its harmonization efforts towards adopting EU legislation on IPRs, and in accordance with its commitments under the World Trade Organization’s TRIPS Agreement. However, there is still a certain distance to go.
Overview of the pharma market
Turkey pharmaceuticals market is ranked 6th in Europe and 14th in the world in 2011, accounting for US$10.4 billion, according to the Ministry of Economy 2012 Report. Likewise, Turkey is currently the 6th emerging marketafter China, Brazil, Russia, India, and Mexico, among the 17 “pharmerging” countries in global pharmaceutical
investment. Nevertheless, in terms of the number of clinical research centers, Turkey ranks much lower at
34th in the world. Today, there are 53 manufacturing facilities and approximately 300 entities operating in the pharma business, 39 of which are local firms. 14 of the manufacturing facilities and 134 of the entities are owned by multinational
firms. The Turkish pharma market has a remarkable potential for growth due to factors such as the country’s growing and aging population, the improvement in access to health care and medicines, and the increase in average life expectancy. According to projections made by Boston Consulting Group in the sector, the market is expected to reach a size of US$89 billion in 2023.
Incentives for new pharma investments
The new Investment Incentive Package published in June 2012 also includes the pharma industry in strategic investments which provide a number of important incentives for investments over the minimum investment amount of TRL50 million (about EUR38.5 million) in Turkey depending on the type, size and region (i.e., VAT exemptions, support for income tax in addition to corporate tax reductions, VAT refund, customs duty exemptions, support for employer’s social security contributions and land allocations). Other incentives were also defined for regional investments from TRL500,000 to 4 million. This creates a great opportunity for foreign capital to take market share and many foreign funds and multinational
companies have been interested in entering this emerging market. Examples of the recent take-overs: Mustafa Nevzat was acquired by Amgen in 2012 and Cenovapharma, Dr. F. Frik Ilac, Cinay Kimya and Diasis Diagnostic Systems are the other four Turkish companies sold to foreign pharma investors in 2011. According to the IEIS 2012 report, Top 10 Pharmaceutical Company in Turkey, in line with turnover data, are as follows (EUR 1.3 = 1 TRL as of 18.11.2012).
Before Turkey’s membership of the EC Customs Agreement in 1995 patent matters had been handled under the law dating back to 1879. Since then Turkey has been a signatory, or become one, of the major patent related agreements such as Paris Convention on the protection of industrial property, Stockholm Act (1925), Convention establishing WIPO (1976), Convention establishing the World Trade Organization (1995), Patent Cooperation Treaty (1996), Strasbourg Agreement
concerning the international patent classification (1996), Budapest Treaty on the international recognition of the deposit of microorganisms (1998), European Patent Convention (2000) and EPC 2000 (2007).
Patent legislation in Turkey is composed basically of the Patent Decree Law 551 (1995) and Amending Law 4128 (1995). There have been some amendments thereon subsequently by Laws No. 566 (1995) and No. 5194 (2004). Patent protection for pharmaceutical products and processes could only be granted from 1999. Turkey has not yet signed up to the London Agreement and there is no appointed schedule for negotiations to ratify the agreement. A new draft patent law to overcome some of the deficiencies in the present legislation and keep up pace with the EU acquis is ready, but has been waiting approval by the Turkish Parliament for a long time. The leading arrangements expected in the bill cover the new rules for biotechnological inventions, abrogating the non-examined patent system, introducing the post grant opposition procedure for patents, the reinstitution of the rights for unintentional loss of rights, and entitling the opposing third party to request prior art search reports for the utility model applications.
In 2011, patent applications have increased remarkably to 10,241 with a growth rate of 23% (see table). However, this number is still very low in comparison to other IP activity, as Turkey has been ranked “number one” for trademark applications in Europe, ahead of France, Germany and the UK, thanks to ca. 118.000 filings, and “number three” for design applications with 36,500 designs.
Patent applications filed between 2007-2011
As per the pharma concern, 14% of these patent applications in 2011 are related to pharmaceuticals, medicinal chemicals and botanical products. Over the last 5 years (see chart) the average rate of domestic patents to total drug related patents filed in Turkey is only 8.4%. However, it is worth noting the remarkable increase in domestic application numbers, which brings the rate from 3.6% in 2007 up to 12.5% in 2011.
Patent protection & prosecution
Standard patent protection in Turkey lasts for 20 years. Generic launch can only occur once all the patents on the originator brand have expired. These may include both product and process patents. In addition to the patent protection term, Turkey do not allow any other tools for compensating manufacturers for the period between the filing of a patent application for a new medicinal product and authorization to place it on the market. Since Turkey is a member of European Patent Convention with
mostly compatible patent legislation and 96% of foreign applicants prefer this route for patent protection there, only the key points will be highlighted in the following summary. Patentability criteria are world-wide novelty, inventive step and
industrial applicability. The period from filing to registration is about 3-5 years. For utility models, inventive step is not required and inventions on processes and chemicals are excluded. For inventions comprising a method of treatment, only Swiss type-claims are allowed. As an option for conventional patent applications, it is also possible for an applicant to delay the substantial examination stage for 7 years by obtaining non-examined patent protection in Turkey.
Competent contracted authorities for Turkish patent search and examining stages are Austrian, Russian, Danish, Swedish, Turkish Patent (partly) Offices and EPO (search only). At most, three examination reports can be obtained from the elected authority during the prosecution without any oral proceeding, the final one determines if a patent will be granted or not.
Turkey has a very modern and active patent office, namely the Turkish Patent Institute (TPE) which was established in 1994. There are 23 patent examiners and 9 assistant examiners out of 350 personnel working at the Institute. The number of experts will be increased as the number of domestic applications and examination requirements grow.
The TPE does not handle post-grant invalidation proceedings and administrative proceedings cannot be used to enforce patent rights in Turkey.
Due to the complex nature of selecting examination authorities, and conflicting decisions from the same or another authority for the same invention, it should not be surprising that a pharma company may try to challenge the TPE’s final rejection decision based on another authority’s positive granting decision. For instance, consider a patent application with a US priority which was nationalized in Turkey under the Patent Cooperation Treaty and rejected after the third examination report held by the elected Austrian or Russian Patent Office, while the same was granted by the European Patent Office with slight amendments in the claims and/or granted with no amendment in the US and/or in Russia. Consequently, three examination
rules merely allowing applicants for two written responses against the examiner’s negative opinion restricts both parties to come to a conclusion and leads to conflicting decisions. Another difference in the legislation is the grace period of 12
months for any disclosure before the filing date or priority date. That is, if the inventor published or otherwise discloses the invention prior to filing an application, this does not harm the novelty requirement to file a patent application for the same.
Bolar-type exemptions: Turkey recognized explicitly the Bolartype exemption by adding Article 75f, which allows generic drug manufacturers to carry out tests and experiments related to a patented drug in order to obtain marketing authorization even before the expiry of the patent right, on June 22 2004. Moreover, a “restricted” application for marketing authorization of a generic drug appropriately referencing an original drug protected with a granted patent is an allowed act according to the legislation in force, unless the drugs are not put into commercial use.
Compulsory licensing & use requirement: A patentee is obliged to put to use/work the invention under patent protection and file a certified document to the TPE within three years from the date when the patent is granted. Not doing so wouldn’t cause any loss of the patent rights, but there might be a risk of compulsory licensing to another interested party. In order to eliminate this risk, companies should file a legitimate excuse indicating problems in drug regulatory issues or marketing authorization or compliance with standards, if any. Alternatively, an offer for license to be published in the Turkish patent bulletin may be put forward.
No Supplementary Protection Certificate (SPC)
Unlike in Europe and many other countries, the current legislation does not include any provision for a pharmaceutical product to get an SPC to achieve a further term over patent life. Although the time when the SPC will come into use in Turkey is not yet set, it is predicted that the application of SPC-like protection will come into force by 2014. Its introduction is required in order to comply with the relevant EU regulations.
There is a regulation on “data exclusivity”, published in January 2005, which provides a six-year period of market exclusivity only for pharmaceuticals for use in humans to prevent the marketing of generic drugs. However, this period cannot exceed the patent term of 20 years and starts from the authorization date in one of the member countries of the Customs Union. This means, for instance, that it is not possible to obtain for an original drug a protection period of 20+6 years. Likewise, no formulation of data protection and marketing exclusivity duration like “8+2+1 years” after the registration date is applicable in Turkey. Meanwhile, patent protection is not a prerequisite to obtaining data exclusivity.
As a profession, the title of Turkish patent attorney was first introduced in June 1994 and the first qualifying exam was held in 1996. In patent drafting and prosecution stages, good references to patent professionals are important, since any university bachelor degree and passing of the written examination are two basic requirements to become a patent attorney in Turkey, without requiring any technical background and internship. By 2011 year-end, there were 1,128 registered patent attorneys, but only 415 of whom work actively before the Turkish Patent Institute. Patent attorneys cannot conduct patent litigation in courts.
Patent litigation & the court system
Turkey is a civil law country. The first Specialized IP Court was established in 2000 and there are now 22 Civil and Criminal IP courts in Ankara, Istanbul and Izmir; elsewhere, only appointed courts are responsible for hearing patent cases. Civil and criminal proceedings cannot be held at the same court. For criminal proceedings, it is required to file a complaint against the infringer with the public prosecutor. Most judges have been trained within the framework of a joint project between the Ministry of Justice and the European Commission. Although they hear cases on all aspects of patent infringement and thus are experienced in patent judgments, in principle they have no technical expertise. The court usually appoints an independent
expert to examine all legal and technical facts, which are considered at first instance only. Patent litigation can be classified under five basic categories:
1) Civil actions due to infringement of registered rights,
2) Criminal actions,
3) Invalidation actions against registered rights,
4) Actions for stating/determining non-infringement, and
5) Annulment actions against the Turkish Patent Institute’s verdicts.
Among others, civil actions may include requests for determination of infringement, cessation of the acts of infringement, seizure of counterfeited goods and compensation of damages, while criminal actions may include imprisonment, pecuniary punishment, closure of job-sites and prohibition of commerce. For criminal proceedings, a rights holder must file a complaint
against the infringer with the public prosecutor. Although criminal actions were previously a commonly used and effective tool in patent enforcement, this course of action is no longer advisable due to legislative gaps and a major backlog at the criminal courts, both of which are expected to be resolved soon. There are no separate specialist courts for validity and infringement cases in Turkey. Both types of proceedings are generally joined and dealt with simultaneously in the first instance court where the first action is lodged.
Pre-trial discovery: Disclosure of evidence is the first step of patent infringement proceedings. In addition to pre-trial discovery, in the absence of sufficient evidence of infringement it is possible for the plaintiff to initiate a separate lawsuit before the civil court to find and secure evidence of infringing acts. The judge then assigns a panel of experts and assesses the infringing acts without notifying the infringer (ex parte proceedings). The expert report can provide strong evidence of infringement and can be used later for the main civil and criminal proceedings.
Preliminary injunction: A preliminary injunction to stop the infringement and/or to seize the infringing products can be claimed before or alongside the civil proceedings against a wide range of infringing parties – from direct infringers to suppliers, importers, wholesalers and distributors. However, such an injunction is rarely granted, unless very strong evidence of infringement is available. If this is the case, the plaintiff must provide a financial payment or a letter of bank guarantee as security.
Period of proceedings: Although time scales are basically dependent upon the complexity and technical involvement, patent infringementcases may take 3 years and even more in complicated cases, taking into consideration completion of expert reports. In cases where the decision of the first instance court is appealed, the case moves on to the Supreme Court of Appeal, which takes about 1.5 to 2 more years.
Expert reports: Expert reports play a central role in the patent judgment and mostly “a panel of independent experts” is appointed by the court for the examination of all technical and legal facts, the costs of which are paid by the plaintiff. Each panel of appointed experts generally includes a professor, a lawyer and a patent attorney. A printed copy of the case file is submitted to the experts once the petition exchange and submission of evidence stages have been completed. The experts or their reports can be challenged by either party on reasonable grounds, which would then lead to the preparation of a second and generally final report.
Calculation of damages: There are three options for the calculation of damages in Turkey:
the infringer’s profit,
the patentee’s lost profits, and
However, if a patentee has not fulfilled the use requirement, the damages will be calculated according to reasonable royalties.
What to do?
Despite the advanced legislative alignment that has been achieved to date, implementation and enforcement of the acquis still needs to be strengthened. For instance, some of the highly disputed issues that need to be tackled in order to create a efficient and effective patent protection enforcement system in Turkey include:
• The adoption of updated draft laws regulating intellectual and industrial property rights, including deterrent criminal sanctions, is still pending.
• The appeal stage before the Supreme Court is very long.
• The number of trained personnel is still not sufficient, although many judges, prosecutors, court experts, police forces and customs officers have been trained in patent issues.
• There have been strong lobbies and debates over the length of data protection and SPCs so far.
As for the recent positive progress in 2011, the EU and Turkey established an IPR working group to discuss and resolve specific issues in order to overcome the inconveniences of the current Turkish IPR climate. The working group meets at least once a year and has a large and effective level of participation. Likewise, within the framework of an EU Twinning Project between the Turkish Patent Institute and the German Foundation for International Legal Cooperation (IRZ), more than 150 informative activities have been offered in 2011, such as conferences, seminars, and workshops. The aim has been to increase IP knowledge and awareness in Turkey. The Institute has also increased the number of Info & Documents Units (which give out IP information and TPE books) up to 46 throughout Turkey. An orientation committee was also founded, involving 30 Turkish universities and the European Patent Office. Moreover, the Ministry of Justice recently announced a new judicial
reform package that, among many other things, introduces extra measures to lighten the heavy workload of the judiciary and to produce a “revolutionary outcome”. Under this outcome the average length of trials would drop to one year for civil proceedings, and to 18 months to two years for criminal proceedings, including their appeals. The Ministry aims to achieve this within the next two years.
This article first appeared in Turkey;A “pharmerging” country, a supplement to The Patent Lawyer, published by CTC Legal Media. To view the issue in full, please go to www.ctclegalmedia.com