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Quidel Corp. v. Superior Court (Beckman Coulter, Inc.)

California Court of Appeals, Fourth District, First Division

August 29, 2019


          ORIGINAL PROCEEDING in mandate challenging an order of the Superior Court of San Diego County No. 37-2017-00044865-CU-AT-CTL Gregory W. Pollack, Judge. Petition granted.

          Horvitz & Levy, Jeremy B. Rosen, Robert H. Wright, Stanley H. Chen; Charis Lex, Sean P. Gates, Eugene Illovsky, Douglas J. Beteta; Kesselman Brantly Stockinger, Amy T. Brantly and Trevor V. Stockinger, for Petitioner.

          No appearance for Respondent.

          California Appellate Law Group, Anna-Rose Mathieson, Susan Horst; Behmer & Blackford, Timothy S. Blackford; Williams & Connolly, John E. Schmidtlein and Carl R. Metz, for Real Party in Interest.

          HUFFMAN, ACTING P. J.

         Quidel Corporation (Quidel) has petitioned for a writ of mandate and/or prohibition directing the trial court to vacate its order granting summary adjudication. Quidel contends the trial court incorrectly concluded a provision in its contract with Beckman Coulter, Inc. (Beckman) was an invalid restraint on trade in violation of Business and Professions Code, [1] section 16600. Quidel argues the trial court improperly extended the holding from Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 (Edwards) beyond the employment context to a provision in the parties' 2003 BNP Assay Agreement (the Agreement). We are called upon to determine whether the trial court's per se application of section 16600 to section 5.2.3 of the Agreement between Quidel and Beckman was correct. We conclude it was not, and we grant the petition and issue a writ instructing the trial court to vacate the December 7, 2018 order granting summary adjudication on the first cause of action.


         In 1996, Biosite Inc. (Biosite)[2] licensed patent rights and know-how related to a B-type natriuretic peptide (BNP), which can be measured in a person's blood. The semi-exclusive licensing agreement allowed Biosite to develop an immunoassay to determine the level of BNP in a person's blood sample, to help diagnose congestive heart failure. After acquiring the intellectual property rights and know-how, Biosite developed and created a BNP assay for use with its point-of-care analyzer device, and it obtained regulatory approval. BNP assays only work on the analyzer for which they are designed.

         By 2003, Beckman had developed a laboratory analyzer, but it did not have a license for a BNP assay compatible with its analyzer. Around this same time, other companies were also pursuing BNP assays for use with their larger analyzers, which could run multiple, different immunoassays at higher volumes than the point-of-care analyzer Biosite had. One company was also developing an assay to detect NT-proBNP, a closely-related assay that is a potential direct substitute for the BNP assay and is also based on B-protein.

         If Biosite were to correlate a new BNP assay for use with the Beckman lab analyzer to its Federal Drug Administration-approved BNP assay, it could avoid the need to establish the new assay's efficacy through extensive clinical trials. Collaborating would mean Biosite could expand its customer base to those who wanted to use the larger capacity laboratory analyzers and Beckman could include the BNP assay in its menu of immunoassay offerings.

         Biosite and Beckman, each represented by legal counsel, negotiated the Agreement over several months, and they exchanged numerous drafts before executing it on June 24, 2003. Under the terms of the Agreement, Beckman manufactured the BNP assay for Biosite using proprietary materials that Biosite provided, including the antibodies Biosite had developed. In exchange, Biosite purchased its requirements of the BNP assay from Beckman. The Agreement prohibited Biosite from engaging other manufacturers to provide the BNP assay for their competing lab analyzers. The term of the Agreement was negotiated to coincide with the term of a related licensing agreement Biosite had with Scios.

         Section 5.2.1 of the Agreement requires Beckman to offer for sale and to sell the BNP assay exclusively to Biosite. Section 5.2.2 prohibits Biosite from engaging third parties other than Beckman to manufacture for Biosite a diagnostic BNP assay for use. Section 5.2.3 of the Agreement prohibits Beckman from researching or developing an assay that detects the presence or absence of the BNP or NT-proBNP proteins or markers for use in diagnosing cardiac disease until two years before the Agreement's expiration. It does not prohibit the research or development of assays that detect the presence or absence of other proteins or markers, including the biomarkers ST2 or Galectin 3.

         Although Beckman did not dispute that BNP and NT-proBNP assays were seen as and have become potential substitutes for purposes of the motion for summary adjudication, the parties' characterization of the BNP assays and NT-proBNP assays are slightly different. Quidel characterizes the two as closely-related, with the NT-proBNP assay serving as a potential direct substitute for the BNP assay because it detects a peptide that is secreted alongside the BNP. Beckman has alleged the NT-proBNP assay measures a different protein and uses different antibodies and proteins than the BNP assay, suggesting they are distinctly different.


         On November 27, 2017, Beckman sued Quidel for declaratory relief for violation of section 16600 and violation of the Cartwright Act (§ 16720 et seq.). Beckman asked the court to issue a declaratory judgment that section 5.2.3 of the Agreement was void and unenforceable as a violation of Business and Professions Code section 16600 and to issue a permanent injunction preventing the enforcement of section 5.2.3 of the Agreement.

         In August 2018, Beckman filed a motion for partial summary adjudication on the declaratory judgment cause of action. In its papers, Beckman stated it was developing and planning to launch a new laboratory analyzer platform and wanted to develop a competing assay product for the new platform. It argued section 5.2.3 of the Agreement was a non-compete clause that was void under Business and Professions Code section 16600.

         On November 7, 2018, Quidel moved ex parte for a continuance of the motion. In the hearing, Quidel argued additional discovery was necessary to determine if there were material issues of fact in dispute. Beckman contended there was no need for additional discovery to determine the impact of section 16600 on the parties' Agreement. The court denied the ex parte request.

         The trial court ultimately granted Beckman's motion for summary adjudication. It noted none of the statutory exceptions to the restraint on trade outlined in section 16600 apply and explained it was unpersuaded by the legal authority cited by Quidel because it predated Edwards or discussed exclusive dealing contracts in the context of franchise relationships. Relying on Edwards, the trial court concluded section 16600 voids every contract that restrains anyone from" 'engaging in a lawful profession, trade, or business of any kind....' [Citation.]" Accordingly, it concluded section 5.2.3 of the Agreement was void because it "restrains [Beckman] from developing, marketing, or assisting others in the development and marketing of an assay that measures or detects the presence or absence of BNP or NT-proBNP."

         Quidel moved to stay the order pending final appeal or pending resolution of a writ petition seeking a stay and sought an extension of time to file a writ. The court granted the request.

         On January 18, 2019, Quidel filed a petition for writ of mandate and/or prohibition and sought a stay pending a determination of the writ on its merits. Beckman filed a preliminary opposition to the petition, to which Quidel replied. We issued an order to show cause why a peremptory writ should not issue and stayed the order granting Beckman's motion for summary adjudication pending further order. We deemed the ...

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