Turkish Supreme Court Decision Regarding Compensation Claims Arising from Pharmaceutical Patent Infringements and Unjust Preliminary Injunctions

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İDisputes between generic and original drug companies in the pharmaceutical sector have recently assumed a new dimension with respect to lawsuits regarding the compensation of damages arising from unjust preliminary injunctions. With the decision of the 11th Civil Chamber of the Turkish Supreme Court dated 06.02.2024 and numbered E. 2022/3681, K. 2024/750, the first decision of precedent nature regarding the compensation of damages suffered by generic drug companies due to an unjust preliminary injunction was also affirmed at the appeal stage.

The decision is of a nature that may yield significant consequences in terms of which matters connected with legislation shall be hypothetically taken into account in the calculation of damages during the marketing authorization, reimbursement, and market entry processes of generic drug manufacturers, as well as the risk assessment of originator companies in preliminary injunction applications.

This article examines the relevant Turkish Supreme Court decision.

Judicial Process

The dispute originated from a preliminary injunction decision preventing the production and sale of the plaintiff generic drug manufacturer's products upon the request of the defendant original drug manufacturer. The preliminary injunction granted on June 28, 2007, which remained in effect for approximately 13 months, was lifted on July 23, 2008. In the subsequent patent infringement lawsuit, the decision determining that the products of the plaintiff generic drug manufacturer did not infringe the defendant's patent became final. Thereupon, the generic drug manufacturer filed a lawsuit for the purpose of compensation for the damages it claimed to have suffered due to the unjust preliminary injunction.

The court of first instance concluded that the plaintiff suffered damages due to the unjust preliminary injunction. Among the alternative calculations included in the expert reports, it relied on the assumption that the plaintiff's product could enter the market 17 days after the preliminary injunction decision and achieve a market share of 16%. In the calculation, the price with a 4% public discount over the retail sale price, the wholesaler sale price, and the manufacturer sale price of the product were also taken into account, and the plaintiff's damages were determined as TRY 1,899,955.10. The court partially accepted the lawsuit regarding this amount, and rejected the claim regarding the excess.

Upon the appeal of the decision by both parties, the 16th Civil Chamber of the Istanbul Regional Court of Justice deemed the calculation of damages by the court of first instance fundamentally accurate. The Regional Court of Justice evaluated that the 17-day market entry period and the 16% market share complied with the data in the file; and that not taking into account the 125-day period put forward by the defendant was also appropriate on the grounds that application for and inclusion in the Social Security Institution ("SSI") reimbursement list was not mandatory. Dismissing the defendant's appeal application entirely, the Chamber partially accepted the plaintiff's application solely regarding interest and ruled that the compensation of TRY 1,899,955.10 be paid together with legal interest starting from July 23, 2008, the date on which the preliminary injunction was lifted.

In the final appeal stage, the Turkish Supreme Court, the 11th Civil Chamber of the Turkish Supreme Court also found the decision of the Regional Court of Justice in compliance with procedure and law. Deciding that the grounds put forward by the parties in their appeal petitions did not warrant reversal, the Chamber affirmed the judgment of the Regional Court of Justice.

Patent Protection and the Bolar Exception

Before addressing the discussions regarding the calculation of damages that arose during the judicial process, it should be noted that, as a rule, original products in the pharmaceutical sector benefit from twenty-year patent protection to obtain exclusivity in the market; however, it is known that this exclusivity period lasts shorter due to the length of clinical trial and marketing authorization processes. Within this framework, the ability of generic manufacturers to enter the market without delay following the expiration of the patent period is of importance both in terms of establishing competition and alleviating the burden on public finance.

The Bolar exception regulated under Article 85/3-c of the Industrial Property Code No. 6769 enables generic companies to carry out marketing authorization activities without waiting for the expiration of the patent term. In accordance with the settled jurisprudence of the Turkish Supreme Court, provided that the product is not actually launched onto the market, preparatory activities aimed at pricing and inclusion in the reimbursement list are recognized as not constituting patent infringement.[1]

Arguments of the Parties Regarding Market Share and Calculations of Damages

One of the noteworthy aspects of the dispute is that, during the determination of damages arising from the unjust preliminary injunction, the parties put forward detailed economic evaluations regarding the hypothetical market entry performance of a generic drug in light of the regulations governing marketing authorization, reimbursement, and market entry processes.

The plaintiff generic drug manufacturer argued that the 16% market share adopted by the court of first instance did not reflect reality. The plaintiff asserted that the 37.45% market share achieved within 13 months by a product belonging to another company that entered the market during the same period constituted the most appropriate precedent for the concrete case. The plaintiff stated that another product of its own, cited as an example by the defendant and specified as having a 16% market share, could not be taken as a precedent because it related to a different disease and therapeutic area. The plaintiff further objected to the use of drugs utilized in the treatment of other diseases or having a different price relationship between the original and generic products in the comparison, asserted that its damages should be calculated as TRY 4,447,094.40 if the 37.45% market share were taken as a basis, and requested that interest be awarded on the claim, stating that the court of first instance had not ruled for interest to accrue on the compensation amount.

The defendant original drug manufacturer, on the other hand, claimed that adjustments regarding both the scope of the market and pricing ought to be made in the calculation of damages. First, it stated that the original drug had two separate indications, namely GIST and CML, whereas the plaintiff's generic product did not possess the GIST indication. Asserting that approximately 25% of the original product's market stemmed from the GIST indication, it argued that this portion should not be taken into account in the calculation of the plaintiff's hypothetical sales. Another major objection of the defendant pertained to discount rates. The defendant also asserted that the experts performing the calculation of damages took the maximum prices obtained from the Ministry of Health as a basis, and that the public institution discount of 28% to be applied to the SSI pursuant to the Health Implementation Communiqué was ignored. For this reason, it was argued that even if the 16% market share assumption accepted by the court were maintained, the 28% SSI discount should be deducted from the unit prices. The defendant further expressed that the price with a 4% public discount taken into consideration by the court of first instance was not applicable to the plaintiff's product.

The parties also diverged on when the plaintiff's product could have entered the market had the preliminary injunction not existed. While the court of first instance and the experts accepted that the product could enter the market within 17 days, the defendant argued that the sales permit and SSI reimbursement processes would take much longer. The defendant stated that the procedures regarding the sales permit and SSI reimbursement application could only be completed approximately 2.5 months after the lifting of the preliminary injunction. Therefore, the defendant original drug manufacturer argued that 125 days should be deducted from the 380-day injunction period and that damages should be calculated over 255 days; it further stated that the semi-annual meeting of the SSI reimbursement commission should also be taken into account. The Regional Court of Justice, on the other hand, rejected this objection based on the evaluation that inclusion in the SSI reimbursement list was not mandatory, and deemed it appropriate to base the calculation on the 17-day period.

The defendant further asserted that the assumption that the plaintiff would directly receive a specific share from the sales of the original drug was not realistic, owing to the high brand value of the original drug, the presence of other generics in the market, and the potential entry of new generics into the market. In this context, it argued that even the 16% market share was high, that certain benchmark products obtained significantly lower market shares in their first year, and that production costs such as raw materials, labor, marketing, sales, and R&D were not adequately taken into consideration in the calculation. In addition, it raised legal objections asserting that the statute of limitations had expired, that no causal link was established, that it possessed no fault, and that contributory negligence existed on the part of the plaintiff. The Regional Court of Justice, however, dismissed these objections upon concluding that an unlawful act, damage, fault, and causal link materialized in the concrete case; that the plaintiff completed the production preparation stage during the injunction; and that no contributory negligence existed on the part of the plaintiff.

Finally, the defendant objected to the court of first instance's evaluation of liability arising from the unjust preliminary injunction under the principle of strict liability; however, this objection was not accepted at the Regional Court of Justice and Turkish Supreme Court stages.

Evaluation Regarding Statute of Limitations

It was asserted by the defendant that the one-year statute of limitations provided for pursuant to Article 399 of the Code of Civil Procedure should begin to run from the date on which the preliminary injunction was lifted. However, this objection was rejected by the courts on the grounds that conclusively demonstrating that the generic company did not commit infringement was dependent on the main lawsuit becoming final; and it was ruled that the statute of limitations shall begin to run from the date on which the main lawsuit becomes final.

Conclusion

The Turkish Supreme Court decision and the process subject to this decision analyzed within the scope of this study reveal that the preliminary injunction mechanism, resorted to by original drug companies to delay the market entry of generics, has become a concrete financial risk factor.

The decision demonstrates that the compensation claimed due to an unjust preliminary injunction, particularly in the pharmaceutical sector, may require the hypothetical reconstruction of the economic state that would have existed had the injunction not been present.

Another noteworthy point in the decision is that the generic company's failure to have yet transitioned to the actual production stage does not constitute a presumption that no damage occurred. Within this framework, it is understood that the completion of the preparation stage is deemed sufficient regarding the claim for lost profits.

On the other hand, technical disputes—such as whether the mandatory 28% discount applied by the Social Security Institution should be deducted in the calculation of damages—are expected to continue to arise in similar disputes.

While the decision is expected to shed light on future disputes regarding many technical issues such as the estimation of market share, the calculation of the damage period, the commencement date of the statute of limitations, and the standing of companies in the preparation stage to claim compensation, an increase in precedent decisions must be awaited for the practice to stabilize, particularly on matters of evaluating the SSI discount and estimating market shares specific to different therapeutic areas.

[1] Decisions of the 11th Civil Chamber of the Court of Cassation numbered E. 2009/11675, K. 2011/11018; E. 2012/6749, K. 2012/13218; E. 2012/18176, K. 2013/13689; E. 2012/6516, K. 2012/13034; E. 2012/103, K. 2013/15232.