39 Cal. App. 5th 530
Cal. Ct. App. 5th2019Background
- Biosite (now Quidel) licensed BNP assay IP and developed a BNP immunoassay for a point-of-care analyzer; BNP assays are analyzer-specific. Beckman sought to include a BNP assay on its laboratory analyzer.
- In 2003 Biosite and Beckman executed a negotiated BNP Assay Agreement: Beckman would manufacture a BNP assay for Biosite; Biosite would buy its requirements from Beckman; the Agreement contained exclusive-dealing and development restraints.
- Section 5.2.1–5.2.3: Beckman must sell the BNP assay exclusively to Biosite; Biosite may not engage other manufacturers; and Beckman may not research or develop assays for BNP or NT-proBNP until two years before the Agreement’s expiration.
- Beckman sued Quidel (successor to Biosite) seeking declaratory relief that §5.2.3 is void under Business & Professions Code §16600 and an injunction against enforcement; Beckman moved for summary adjudication on the §16600 claim.
- The trial court granted summary adjudication, holding Edwards v. Arthur Andersen LLP extended to render §5.2.3 per se void under §16600; Quidel petitioned for writ review seeking reversal.
- The appellate panel concluded Edwards is limited to employment agreements and held the trial court erred by applying a per se rule; factual inquiry under a reasonableness/market-effect analysis is required for non‑employment exclusive‑dealing restraints.
Issues
| Issue | Plaintiff's Argument (Beckman) | Defendant's Argument (Quidel) | Held |
|---|---|---|---|
| Does Edwards’ per se rule barring noncompetition clauses under §16600 extend beyond employment agreements to corporate exclusive‑dealing R&D restraints? | Edwards applies generally; §16600 voids noncompetes unless within statutory exceptions. | Edwards was limited to employee noncompetes; it should not be extended to corporate exclusive‑dealing agreements. | Edwards is limited to the employment context; its per se rule does not automatically apply outside that context. |
| Is §5.2.3 of the Agreement void per se under §16600? | Yes; it restrains Beckman from developing BNP/NT‑proBNP assays and thus is an unlawful noncompete. | No; the restraint is an in‑term exclusive‑dealing provision that may be reasonable and necessary to protect the parties’ bargain. | Not per se void; whether §5.2.3 violates §16600 requires factual inquiry into its effects and necessity. |
| Are in‑term noncompete/exclusive‑dealing restraints categorically invalid under §16600? | (Implied) Should be invalid consistent with Edwards. | In‑term restraints can be valid; courts have applied a reasonableness/market‑effect test and upheld some in‑term exclusive arrangements. | In‑term restraints are not per se invalid; prior California authority supports a rule‑of‑reason analysis and market‑share/foreclosure inquiry. |
| Was summary adjudication appropriate without further factual development on market effects and necessity? | The law (per Edwards) resolves the issue as a matter of law, so no discovery needed. | Material factual issues exist (market substitutability, purpose, necessity, market foreclosure) that preclude summary adjudication. | Trial court erred: Beckman failed to carry its burden; factual development is required and the motion should be denied. |
Key Cases Cited
- Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (Sup. Ct. 2008) (held employee noncompetition agreements are presumptively invalid under §16600)
- Great Western Distillery Products, Inc. v. John A. Wathen Distillery Co., 10 Cal.2d 442 (Cal. 1937) (exclusive dealing restraints may be upheld if they protect the parties and do not harm public interests)
- Dayton Time Lock Service, Inc. v. Silent Watchman Corp., 52 Cal.App.3d 1 (Cal. Ct. App. 1975) (in‑term exclusive‑dealing/franchise restraints may be valid; post‑term restraints are suspect)
- Kelton v. Stravinski, 138 Cal.App.4th 941 (Cal. Ct. App. 2006) (an in‑term covenant may violate §16600 if it forecloses a substantial share of the market)