California Court of Appeals, Fourth District, First Division
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.
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.
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.
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,
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.
1996, Biosite Inc. (Biosite) 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.
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.
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.
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.
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
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.
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.
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
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.
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
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
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