(a) (1) Except as provided in paragraph (3), an agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a pharmaceutical product, shall be presumed to have anticompetitive effects and shall be a violation of this section if both of the following apply:

(A) A nonreference drug filer receives anything of value from another company asserting patent infringement, including, but not limited to, an exclusive license or a promise that the brand company will not launch an authorized generic version of its brand drug.

(B) The nonreference drug filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the nonreference drug filer’s product for any period of time.

(2) As used in subparagraph (A) of paragraph (1), “anything of value” does not include a settlement of a patent infringement claim in which the consideration granted by the brand or reference drug filer to the nonreference drug filer as part of the resolution or settlement consists of only one or more of the following:

(A) The right to market the competing product in the United States before the expiration of either:

(i) A patent that is the basis for the patent infringement claim.

(ii) A patent right or other statutory exclusivity that would prevent the marketing of the drug.

(B) A covenant not to sue on a claim that the nonreference drug product infringes a United States patent.

(C) Compensation for saved reasonable future litigation expenses of the reference drug holder but only if both of the following are true:

(i) The total compensation for saved litigation expenses is reflected in budgets that the reference drug holder documented and adopted at least six months before the settlement.

(ii) The compensation does not exceed the lower of the following:

(I) Seven million five hundred thousand dollars ($7,500,000).

(II) Five percent of the revenue that the nonreference drug holder projected or forecasted it would receive in the first three years of sales of its version of the reference drug documented at least 12 months before the settlement. If no projections or forecasts are available, the compensation does not exceed two hundred fifty thousand dollars ($250,000).

(D) An agreement resolving or settling a patent infringement claim that permits a nonreference drug filer to begin selling, offering for sale, or distributing the nonreference drug product if the reference drug holder seeks approval to launch, obtains approval to launch, or launches a different dosage, strength, or form of the reference drug having the same active ingredient before the date set by the agreement for entry of the nonreference drug filer. A different form of the reference drug does not include an authorized generic version of the reference drug.

(E) An agreement by the reference drug holder not to interfere with the nonreference drug filer’s ability to secure and maintain regulatory approval to market the nonreference drug product or an agreement to facilitate the nonreference drug filer’s ability to secure and maintain regulatory approval to market the nonreference drug product.

(F) An agreement resolving a patent infringement claim in which the reference drug holder forgives the potential damages accrued by a nonreference drug holder for an at-risk launch of the nonreference drug product that is the subject of that claim.

(3) Parties to an agreement are not in violation of paragraph (1) if they can demonstrate by a preponderance of the evidence that either of the following are met:

(A) The value received by the nonreference drug filer described in subparagraph (A) of paragraph (1) is a fair and reasonable compensation solely for other goods or services that the nonreference drug filer has promised to provide.

(B) The agreement has directly generated procompetitive benefits and the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement.

(b) In determining whether the parties to the agreement have met their burden under paragraph (3) of subdivision (a), the factfinder shall not presume any of the following:

(1) That entry into the marketplace could not have occurred until the expiration of the relevant patent exclusivity or that the agreement’s provision for entry of the nonreference drug product before the expiration of any patent exclusivity means that the agreement is procompetitive within the meaning of subparagraph (B) of paragraph (3) of subdivision (a).

(2) That any patent is enforceable and infringed by the nonreference drug filer in the absence of a final adjudication binding on the filer of those issues.

(3) That the agreement caused no delay in entry of the nonreference drug filer’s drug product because of the lack of federal Food and Drug Administration (FDA) approval of that or of another nonreference drug product.

(4) That the agreement caused no harm or delay due to the possibility that the nonreference drug filer’s drug product might infringe some patent that has not been asserted against the nonreference drug filer or that is not subject to a final and binding adjudication on that filer as to the patent’s scope, enforceability, and infringement.

(5) This subdivision shall not be construed to preclude a party from introducing evidence regarding paragraphs (1) to (4), inclusive, and shall not be construed to preclude the factfinder from making a determination regarding paragraphs (1) to (4), inclusive, based on the full scope of the evidence.

(c) In determining whether the parties to the agreement have met their burden under paragraph (3) of subdivision (a), the factfinder shall presume that the relevant product market is that market consisting of the brand or reference drug of the company alleging patent infringement and the drug product of the nonreference company accused of infringement and any other biological product that is licensed as biosimilar or is an AB-rated generic to the reference product.

(d) (1) This section does not modify, impair, limit, or supersede the applicability of the antitrust laws of California as defined in the Cartwright Act (Chapter 2 (commencing with Section 16700) of Part 2 of Division 7 of the Business and Professions Code), the Unfair Practices Act (Chapter 4 (commencing with Section 17000) of Part 2 of Division 7 of the Business and Professions Code), or the unfair competition law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code), or the availability of damages or remedies provided therein. This section does not modify, impair, limit, or supersede the right of any drug company applicant to assert claims or counterclaims against any person, under the antitrust laws or other laws relating to unfair competition of the federal antitrust law or state law.

(2) If any provision of this division, an amendment made to this division, or the application of any provision or amendment to any person or circumstance is held to be unconstitutional, the remainder of this division, the amendments made to this division, and the application of the provisions of this division or amendments to any person or circumstance shall not be affected.

(e) (1) (A) Each person that violates or assists in the violation of this section shall forfeit and pay to the State of California a civil penalty sufficient to deter violations of this section, as follows:

(i) If the person who violated this section received any value due to that violation, an amount up to three times the value received by the party that is reasonably attributable to the violation of this section, or twenty million dollars ($20,000,000), whichever is greater.

(ii) If the violator has not received anything of value as described in clause (i), an amount up to three times the value given to other parties to the agreement reasonably attributable to the violation of this section, or twenty million dollars ($20,000,000), whichever is greater.

(iii) For purposes of this subdivision, “reasonably attributable to the violation” shall be determined by California’s share of the market for the brand drug at issue in the agreement.

(B) Any penalty described in subparagraph (A) shall accrue only to the State of California and shall be recovered in a civil action brought by the Attorney General in its own name, or by any of its attorneys designated by it for that purpose, against any party to an agreement that violates this section.

(2) Each party that violates or assists in the violation of this section shall be liable for any damages, penalties, costs, fees, injunctions, or other remedies that may be just and reasonable and available under the Cartwright Act (Chapter 2 (commencing with Section 16700) of Part 2 of Division 7 of the Business and Professions Code), the Unfair Practices Act (Chapter 4 (commencing with Section 17000) of Part 2 of Division 7 of the Business and Professions Code), or the unfair competition law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code), as applicable.

(3) If the State of California is awarded penalties under subparagraph (A) of paragraph (1), it may not recover penalties pursuant to another law identified in paragraph (2). This section shall not be construed to foreclose the State of California’s ability to claim any relief or damages available in paragraph (2), other than those that are penalties.

(4) An action to enforce a cause of action for a violation of this section shall be commenced within four years after the cause of action accrued.

(Added by Stats. 2019, Ch. 531, Sec. 1. (AB 824) Effective January 1, 2020.)