Quidel Corporation v. Super. Ct.

Filed 11/6/20; Opinion on transfer from Supreme Court

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

QUIDEL CORPORATION, D075217

Petitioner,

v.
(Super. Ct. No. 37-2017-00044865-
THE SUPERIOR COURT OF SAN CU-AT-CTL)
DIEGO COUNTY,

Respondent;

BECKMAN COULTER, INC.,

Real Party in Interest.

ORIGINAL PROCEEDING in mandate challenging an order of the
Superior Court of San Diego County, 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.
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. In our original,
published opinion, we concluded it was not. We granted the petition and
issued a writ instructing the trial court to vacate the December 7, 2018 order
granting summary adjudication on the first cause of action.
The California Supreme Court granted review of our opinion and
ordered briefing deferred pending its decision in Ixchel Pharma, LLC v.
Biogen, Inc., S256927. On August 3, 2020, the court issued Ixchel
Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130 (Ixchel), which held “a
rule of reason applies to determine the validity of a contractual provision by
which a business is restrained from engaging in a lawful trade or business
with another business.” (Id. at p. 1162.) After the court issued its opinion in

1 Future section references are to the Business and Professions Code
unless otherwise specified.
2
Ixchel, it transferred this matter to this court with directions to vacate our
previous opinion and reconsider the case in light of its opinion in Ixchel.
We have followed the court’s directions and now issue a new opinion in
which we conclude the trial court’s decision was incorrect. We will direct the
trial court to vacate the December 7, 2018 order granting summary
adjudication on the first cause of action.
FACTUAL BACKGROUND

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.

2 As a result of acquisitions, Quidel is the successor in interest to Biosite,
and Quidel is the current counter-party to Beckman under the BNP Assay
Agreement.
3
 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.

4
 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.
PROCEDURAL HISTORY
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

5
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 preliminary
opposition filed by Beckman to be its return to the order to show cause.
Following issuance of our original opinion, Quidel filed a petition for
review with the Supreme Court, which the court granted and deferred
pending consideration of Ixchel. Once the Supreme Court filed its decision in
Ixchel, it transferred this matter back to this court. We invited the parties to

6
submit supplemental letter briefs discussing the impact of Ixchel on the
issues in this case, and in their letters, the parties agreed the matter should
be remanded to the trial court for further proceedings. We now turn to the
merits of the petition.
DISCUSSION
A
Review on Petition for Writ Appropriate
As a preliminary matter, this case is appropriately before us as a
petition for writ of mandate. Although appellate courts “seldom use
extraordinary writs to review interlocutory summary adjudication orders
(grants or denials)” (Int’l Ins. Co. v. Superior Court (1998) 62 Cal.App.4th
784, 788), writ review of such orders is statutorily authorized (Code Civ.
Proc., § 437c, subd. (m)(1)) and may be appropriate when the petitioner raises
a significant legal question of statewide interest (City of Oakland v. Superior
Court (1996) 45 Cal.App.4th 740, 750-751) or when the order disposes of a
large and important portion of the case and intervention by writ will
substantially simplify future proceedings (Fisherman’s Wharf Bay Cruise
Corp. v. Superior Court of San Francisco (2003) 114 Cal.App.4th 309, 319
(Fisherman’s Wharf); Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th
1672, 1679-1680).
In the present case, the petitioner raised a significant legal question of
broad public interest: Does section 16600 invalidate all contractual
noncompete provisions, even outside the employment context, without regard
to the reasonableness of the restraint imposed or whether the terms actually
advance, rather than restrain, competition? (See California Highway
Patrol v. Superior Court (2006) 135 Cal.App.4th 488, 496; see also City of
Oakland v. Superior Court, supra, 45 Cal.App.4th at pp. 750-751.)

7
Additionally, our review helps to substantially advance the underlying case
toward final resolution because the section 16600 claim addresses the
primary area of dispute between the parties. (See Fisherman’s Wharf, supra,
114 Cal.App.4th at p. 319.)
B
Standard of Review
A grant of summary adjudication is appropriate if there are no triable
issues of material fact and the moving party is entitled to judgment as a
matter of law. (Code of Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic
Richfield Co. (2001) 25 Cal.4th 826, 843.) A plaintiff moving for summary
adjudication meets its burden if it proves each element of the cause of action.
(People v. Schlimbach (2011) 193 Cal.App.4th 1132, 1140-1141.) “[I]f a
plaintiff who would bear the burden of proof by a preponderance of evidence
at trial moves for summary judgment, he must present evidence that would
require a reasonable trier of fact to find any underlying material fact more
likely than not—otherwise, he would not be entitled to judgment as a matter
of law, but would have to present his evidence to a trier of fact.” (Aguilar, at
p. 851.) If the plaintiff meets its burden, the defendant must set forth
specific facts showing a triable issue of material facts exist. (Code Civ. Proc.,
§ 437c, subd. (p)(1); Schlimbach, at p. 1141.)
We review a motion for summary adjudication de novo. (Benson v.
Superior Court (2010) 185 Cal.App.4th 1179, 1184-1185.) On appeal, we
independently assess the correctness of the ruling, applying the same legal
standard as the trial court to determine if there are genuine issues of
material fact. (AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018)
28 Cal.App.5th 923, 934 (AMN Healthcare); Fisherman’s Wharf, supra, 114
Cal.App.4th at p. 320.) “In performing our review, we view the evidence in a

8
light favorable to the losing party . . . , liberally construing [the] evidentiary
submission while strictly scrutinizing the moving party’s own showing and
resolving any evidentiary doubts or ambiguities in the losing party’s favor.”
(Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 859.)
C
Section 16600
At the heart of this dispute is the interpretation of section 16600, which
provides, subject to three statutory exceptions, that “every contract by which
anyone is restrained from engaging in a lawful profession, trade, or business
of any kind is to that extent void.” Quidel argues that in the context of an
exclusive dealing business arrangement between two corporate entities, a
court should consider whether an in-term noncompetition provision promotes
competition or restrains it, taking into consideration a multi-factor test that
contemplates the purposes, effects, or reasonableness of the provision’s
restraint. Beckman urges the court to deny the writ on its merits and to
uphold the superior court’s extension of the Supreme Court’s holding in
Edwards: “Noncompetition agreements are invalid under section 16600 in
California, even if narrowly drawn, unless they fall within the applicable

statutory exceptions of sections 16601, 16602, or 166025.”3 (Edwards, supra,
44 Cal.4th at p. 955.)
1. Covenants Not to Compete in the Employment Context
Quidel distinguishes the holding in Edwards in two ways. First, it
argues the holding should not be extended beyond the employment context it
decided. Second, it notes Edwards addressed postterm covenants not to
compete, and Quidel argues in-term covenants should be treated differently.

3 The parties agree none of the exceptions apply here.
9
 In Edwards, the plaintiff signed an agreement with Arthur Andersen
that prohibited him from working for or soliciting any of Arthur Andersen’s
clients for a period of time following his termination of employment.
(Edwards, supra, 44 Cal.4th at p. 942.) When Arthur Andersen was
purchased by HSBC, HSBC offered to employ Edwards, but it required him to
sign a termination of noncompete agreement that, among other things,
indicated he was voluntarily resigning from Arthur Andersen and released
Arthur Andersen from any and all claims. (Id. at p. 943.) In exchange,
Arthur Andersen would release Edwards from the noncompetition
agreement. (Ibid.) Edwards argued the initial noncompetition agreement
was illegal under section 16600, so Arthur Andersen’s offer to release him
from its terms could not serve as consideration for Edwards’s agreement to
release Arthur Andersen from all legal claims. (Edwards, at pp. 944-945.)
The Supreme Court agreed with Edwards. It explained: “[S]ection
16600 evinces a settled legislative policy in favor of open competition and
employee mobility”; it noted people have the right to pursue lawful
employment and to engage in businesses and occupations of their choice.
(Edwards, supra, 44 Cal.4th at p. 946.) Accordingly, it concluded the
noncompete provision was prohibited by section 16600 and void as a matter
of law. (Edwards, at p. 946.) In so doing, it held that noncompete
agreements in employment contracts are per se invalid in California as an
unlawful restraint on trade.
However, “ ‘[i]t is axiomatic that language in a judicial opinion is to be
understood in accordance with the facts and issues before the court. An
opinion is not authority for propositions not considered.’ ” (Kinsman v.
Unocal Corp. (2005) 37 Cal.4th 659, 680, quoting Chevron U.S.A., Inc. v.
Workers’ Comp. Appeals Bd. (1999) 19 Cal.4th 1182, 1195.) The Supreme

10
Court defined the relevant issue as whether “Business and Professions Code
section 16600 prohibit[s] employee noncompetition agreements,” (Edwards,
supra, 44 Cal.4th at pp. 941-942, italics added), and it concluded “section
16600 prohibits employee noncompetition agreements unless the agreement
falls within a statutory exception” (Id., at p. 942., italics added). Thus, the
per se ban on noncompetition clauses outlined in Edwards is limited to
employment agreements. (Ixchel, supra, 9 Cal.5th at p. 1158 [“The question
of whether noncompetition agreements outside the employment context are
per se invalid was not presented in Edwards.”].)
The strict application of section 16600 in the employment context is
supported by the policy: “California courts have consistently declared this
provision an expression of public policy to ensure that every citizen shall
retain the right to pursue any lawful employment and enterprise of their
choice.” (Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22
Cal.App.4th 853, 859; Ixchel, supra, 9 Cal.5th at p. 1158 [explaining the
rationale in Edwards focused on policy considerations].) This is because
“[t]he interests of the employee in his own mobility and betterment are
deemed paramount to the competitive business interests of the employers,
where neither the employee nor his new employer has committed any illegal
act accompanying the employment change.” (Diodes, Inc. v. Franzen (1968)
260 Cal.App.2d 244, 255.)
Beckman contends a panel of this court, in AMN Healthcare, concluded
the rule outlined in Edwards applies “notwithstanding the different factual
context or the existence of prior inconsistent authority.” We disagree. AMN
Healthcare addressed solicitation of individual employees by a competitor.
(AMN Healthcare, supra, 28 Cal.App.5th at pp. 928-931.) The conclusion that
the noncompete and nonsolicitation clause was invalid focused on the

11
interests of the employees in the context of their employment agreements,
and the challenged portion of the employment contract “restrained individual
defendants from practicing . . . their chosen profession—recruiting travel
nurses . . . .” (Id. at p. 936.)
Unlike noncompete clauses that attempt to dilute or eliminate
employee mobility, an interest California courts have found to be a cherished
commercial right (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514), which is
paramount to a business’s competitive interest (Reeves v. Hanlon (2004) 33
Cal.4th 1140, 1151), the clause at issue in the matter before us presents a
different context, challenging a provision in an exclusive dealing agreement
between two sophisticated biotechnology companies. Here, no individual
person’s ability to seek employment is impacted by the challenged portion of
the Agreement. Simply put, this matter falls outside the confines of Edwards
because it does not address an individual’s ability to engage in a profession,
trade, or business.
2. Covenants Not to Compete Outside the Employment Context
Noncompetition clauses have been deemed valid outside the
employment arena. In Great Western Distillery Products, Inc. v. John A.
Wathen Distillery Co. (1937) 10 Cal.2d 442 (Great Western), the parties
entered a requirements contract in which one party would purchase all the
whiskey it required for sale in California from the other, and in exchange the
other party would not sell whiskey in California, other than to an identified
customer. (Id. at pp. 444-446.) The Supreme Court reviewed the cases
interpreting former Civil Code section 1673, the predecessor statute to
Business and Professions Code section 16600, and noted, “[t]he decisions in
this state have recognized and applied the distinction made by authority
elsewhere that if the public welfare be not involved and the restraint upon

12
one party be not greater than protection to the other requires, the contract
will be sustained although it in some degree may be said to restrain trade.”
(Great Western, at pp. 448-449.)
The Supreme Court determined the purpose of the contract in Great
Western was to promote business, and it concluded any incidental or indirect
restrictions did not bring the contract within the statute. (Great Western,
supra, 10 Cal.2d at p. 446.) It explained the contract was “an attempt by the
parties to create a market, within a small designated territory, for the
warehouse receipts of bourbon whiskey of one firm to investors in that type of
security. Such a limited restriction does not appear to affect the public
interests and is obviously designed only to protect the respective parties in
dealing with each other. Furthermore, it does not appear that it was the
intent of the parties to control by monopoly the market price of the securities
or in any manner to interfere with the normal fluctuations resulting from the
law of supply and demand.” (Id. at pp. 449-450.)
Following Great Western, courts applied a test of reasonability,
contemplating whether the arrangement promoted competition. For
example, in Keating v. Preston (1940) 42 Cal.App.2d 110 (Keating), the Court
of Appeal upheld a provision that barred a lessor from leasing space to
competing businesses, commenting the then-modern trend was to evaluate
“contracts between individuals intended to promote rather than to restrict a
particular business, ‘[i]n the light of reason and common sense’ so as to
uphold reasonable limited restrictions.” (Id. at p. 123, quoting Great Western,
supra, 10 Cal.2d at p. 446.) Similarly, in Centeno v. Roseville Community
Hospital (1979) 107 Cal.App.3d 62, the Court of Appeal concluded a hospital’s
exclusive arrangement with a radiology medical group to run the radiology
department at the hospital was valid under section 16600. (Centeno, at

13
pp. 66, 71-72.) In that case, when a partner in the contracted medical group
left that partnership, the hospital refused him access to the radiology
facilities. (Ibid.) He argued the hospital’s contract with the medical group
was a restraint on his trade. (Ibid.) Discussing other cases in which
hospitals maintained a “closed staff,” the court explained the agreements
were examined “in view of the ends sought to be accomplished,” and noted
those decisions indicated “the antitrust laws prohibit only those contracts
which unreasonably restrain competition.” (Id. at pp. 71-72.) In a footnote,
the court also explained: “Only through application of a balancing test are
the California decisions consistent. Exclusive sales or marketing agreements
are not per se against public policy if no significant impairment of free
market activity obtains from the agreement. [Citations.]” (Id. at p. 69, fn. 2.)
While California courts have followed a rule of reason outside the
employment context, they have also concluded, without discussion, that
agreements to develop monopolies are unlawful. (See Ixchel, supra, 9 Cal.5th
at p. 1154 [citing cases invalidating contractual restraints in the business
context that did not expressly apply a reasonableness standard].) For
example, in Vulcan Powder Co. v. Hercules Powder Co. (1892) 96 Cal. 510
(Vulcan Powder), the court concluded the agreement at issue violated former
Civil Code section 1673’s prohibition of restraint on trade. (Vulcan Powder,
at p. 515.) There, four dynamite powder companies agreed to sell their
products at a price fixed by a committee of their representatives, limit the
territories where the companies could sell their product, and pay to the other
companies any profit they earned in excess of the sales over a fixed portion of
the total sales. (Id. at pp. 513-514.) The agreement developed a monopoly
designed to control the price of a commodity, based on a patent held by some
of the parties. (See Standard Oil Co. v. United States (1931) 283 U.S. 163,

14
174-175 [describing relationship as a monopoly]; see also Meyers v. Merillion
(1897) 118 Cal. 352, 355-356 [same].) The court did not need to discuss the
reasonableness of the restraint on trade because the “tendency to create a
monopoly . . . was the objectionable feature of the agreement[] declared
invalid.” (Grogan v. Chaffee (1909) 156 Cal. 611, 614.)
Thus, as long as a noncompetition provision does not negatively affect
the public interests, is designed to protect the parties in their dealings, and
does not attempt to establish a monopoly, it may be reasonable and valid.
(See Great Western, supra, 10 Cal.2d at pp. 449-450; see also Vulcan Powder,
supra, 96 Cal. at p. 516; see also Associated Oil Co. v. Myers (1933) 217 Cal.
297, 304 (Associated Oil).)
3. In-Term Covenants Not to Compete
Quidel separately contends Edwards is distinguishable from the case at
hand because it evaluated a postterm covenant not to compete, while in-term
noncompetition clauses have been held valid. To support its position, Quidel
cites Dayton Time Lock Service, Inc. v. Silent Watchman Corp. (1975) 52
Cal.App.3d 1 (Dayton Time Lock). The agreement there contained a
noncompete provision that prohibited the franchisee from competing with the
franchisor for the duration of the contract and for ten years thereafter. (Id.
at p. 5.) The court held anticompetition limitations in place during the term
of the franchisor-franchisee contract were valid, but the postterm limitations
were not. (Id. at p. 6.) It explained that “[e]xclusive-dealing contracts are not
necessarily invalid,” and that “[a] determination of illegality requires
knowledge and analysis of the line of commerce, the market area, and the
affected share of the relevant market.” (Id. at pp. 6-7.) Because the plaintiff
had not developed material evidence on those issues, the court could not

15
determine as a matter of law that the challenged provision was invalid. (Id.
at p. 7.)
Beckman contends Dayton Time Lock is inapplicable, and it cites
Kelton v. Stravinski (2006) 138 Cal.App.4th 941, 947-948 (Kelton) to support
its contention that in-term covenants not to compete are invalid. In Kelton,
the parties entered a partnership to develop warehouses, but it required the
parties to identify the specific projects that fell within the partnership and
permitted the parties to participate in other warehouse development
activities outside their arrangement. (Id. at p. 944.) They separately
executed a covenant not to compete, one party agreeing to abstain from
operating a warehouse and the other abstaining from designing or building
any warehouses. (Id. at p. 945.) Kelton eventually sued Stravinski claiming
an interest in a variety of projects under the terms of the covenant not to
compete. (Id. at p. 945.) The court concluded the covenant not to compete
contravened the public policy of open competition in violation of
section 16600. (Kelton, at pp. 946-947.)
Although Kelton distinguished its facts from those in Dayton Time Lock
because Dayton Time Lock regarded a franchise agreement instead of an
equal partnership, the Ninth Circuit noted that “Dayton Time Lock and
Kelton make evident that under [section] 16600 an in-term covenant not to
compete in a franchise-like agreement will be void if it ‘foreclose[s]

16
competition in a substantial share’ of business trade or market.”4 (Comedy
Club, Inc. v. Improv West Associates (9th Cir. 2009) 553 F.3d 1277, 1292,
quoting Dayton Time Lock, supra, 52 Cal.App.3d at p. 6.) Thus, in-term
covenants not to compete in exclusive dealing agreements are not per se
invalid.
4. Comparing Section 16600 to the Cartwright Act
Finally, Beckman argues section 16600 cannot require evaluation of the
reasonableness of the terms of a noncompetition provision because such an
approach would make the Cartwright Act, which already requires a similar
evaluation, superfluous. Beckman explains that under a test of
reasonableness, a litigant deciding whether to allege a violation of section
16600 would have the burden of proving the unreasonableness of the
restraint on trade, but would recover only declaratory relief, while a litigant
alleging a violation of the Cartwright Act would carry the same burden, but
success could be rewarded with treble damages in addition to a declaration of
invalidity. Thus, there would be “no reason to ever invoke section 16600 to
challenge an ‘in-term’ business restraint.”
As the Supreme Court recently explained, the Cartwright Act and
section 16600 “share a statutory purpose and doctrinal heritage in common

4 Beckman contends franchise agreements are different from other
exclusive dealing contracts because they are heavily regulated and
necessarily contain exclusivity provisions to protect the franchisor’s
intellectual property due to the franchisee’s substantial association with the
franchisor’s trademark or other mark. (See Kelton, supra, 138 Cal.App.4th at
pp. 947-948.) We decline to draw any conclusion as to the appropriateness of
comparing a franchise agreement to other types of exclusive dealing
arrangements, as the comparison is not necessary to reach our conclusion
here. The Supreme Court recently “decline[d] to construe section 16600 to
call [franchise] arrangements into question simply because they restrain
trade in some way.” (Ixchel, supra, 9 Cal.5th at p. 1161.)
17
law prohibitions on restraints of trade. They should therefore be interpreted
together.” (Ixchel, supra, 9 Cal.5th at p. 1160.) Section 16600 should be read
to incorporate the same rule of reason applied by the Cartwright Act. (Ibid.)
Further, the statutes can apply to different courses of action. While
section 16600 prohibits restraints of “lawful profession, trade, or business of
any kind,” the Cartwright Act also prohibits trusts, a “combination of capital,
skill or acts by two or more persons” for any of a number of enumerated

purposes.5 (§ 16720.) Finally, even though a similar standard applies to
agreements outside the employment context, the post-Edwards application of

5 Section 16720 provides: “A trust is a combination of capital, skill or
acts by two or more persons for any of the following purposes: [¶] (a) [t]o
create or carry out restrictions in trade or commerce[;] [¶] (b) [t]o limit or
reduce the production, or increase the price of merchandise or of any
commodity[;] [¶] (c) [t]o prevent competition in manufacturing, making,
transportation, sale or purchase of merchandise, produce or any commodity[;]
[¶] (d) [t]o fix at any standard or figure, whereby its price to the public or
consumer shall be in any manner controlled or established, any article or
commodity of merchandise, produce or commerce intended for sale, barter,
use or consumption in this State[;] [¶] (e) [t]o make or enter into or execute
or carry out any contracts, obligations or agreements of any kind or
description, by which they do all or any or any combination of any of the
following: [¶] (1) [b]ind themselves not to sell, dispose of or transport any
article or any commodity or any article of trade, use, merchandise, commerce
or consumption below a common standard figure, or fixed value[;] [¶]
(2) [a]gree in any manner to keep the price of such article, commodity or
transportation at a fixed or graduated figure[;] [¶] (3) [e]stablish or settle
the price of any article, commodity or transportation between them or
themselves and others, so as directly or indirectly to preclude a free and
unrestricted competition among themselves, or any purchasers or consumers
in the sale or transportation of any such article or commodity[;] [¶]
(4) [a]gree to pool, combine or directly or indirectly unite any interests that
they may have connected with the sale or transportation of any such article
or commodity, that its price might in any manner be affected.”

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section 16600 as a per se ban on covenants not to compete identifies a
different standard for employment agreements. Applying a similar standard
in some contexts under both laws while providing additional bases for action

means the statutes are not redundant.6
D
Application of Section 16600 to the Agreement
To prevail on its motion for summary adjudication, Beckman must
demonstrate there are no triable issues of material fact that challenge the
reasonability of section 5.2.3 of the Agreement. That is, Beckman must show
there is no dispute that section 5.2.3 (1) tends to restrain trade more than
promote it (Great Western, supra, 10 Cal.2d at p. 446; Ixchel, supra, 9 Cal.5th
at pp. 1160-1161; Martikian v. Hong (1985) 164 Cal.App.3d 1130, 1133;
Keating, supra, 42 Cal.App.2d at p. 123); (2) is not necessary “to protect the
respective parties in dealing with each other” (Great Western, at pp. 449-450;
Associated Oil, supra, 217 Cal. at p. 306; Martikian, at p. 1133); or (3)
forecloses a substantial share of the line of commerce. (Kelton, supra, 138
Cal.App.4th at pp. 947-948.)
There is no dispute that section 5.2.3 of the Agreement limits
Beckman’s ability to develop a competing assay to diagnose cardiac disease.
Section 5.2.3 prohibits Beckman from researching or developing an assay

6 Civil Code section 1673, the predecessor statute to Business and
Professions Code section 16600, was enacted in 1872. (Cianci v. Superior
Court (1985) 40 Cal.3d 903, 922.) The Cartwright Act was enacted in 1907.
(Ibid.) Section 16600 and the Cartwright Act were placed in the Business
and Professions Code as part of a statutory consolidation in 1941. (Cianci,
at p. 922.) Business and Professions Code section 16700, which opens the
chapter containing the Cartwright Act, states: “The provisions of this
chapter are cumulative of each other and of any other provision of law
relating to the same subject in effect May 22, 1907.”
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that detects the presence or absence of the BNP or NT-proBNP proteins or
markers. Quidel maintains that the BNP and NT-proBNP assays are
interchangeable and that Beckman can research and develop the presence or
absence of other biomarkers, like ST2 or Galectin 3, suggesting the restraint
is reasonably narrow. However, whether these limitations tend to restrain
trade more than promote it remains unclear and requires a factual analysis.
Additionally, whether section 5.2.3 of the Agreement is necessary to
protect the parties in their dealings similarly requires a factual analysis, and
the record on this issue is incomplete. Quidel argues that because the NT-
proBNP assay is a direct substitute for the BNP assay, the prohibition on
researching and developing an NT-proBNP assay until two years before the
Agreement’s conclusion is necessary to protect Quidel’s interests in dealing
with Beckman. However, whether prohibiting development of NT-proBNP
assay is necessary to protect parties in their dealings is disputed. Beckman
opted not to present evidence regarding the purpose or effect of the
Agreement, instead contending such facts and evidence were immaterial to
the dispute regarding application of section 16600. Finally, whether the
Agreement forecloses a substantial share of the line of commerce has likewise
not been factually developed.
In the November 7, 2018 hearing, Beckman’s attorneys repeatedly
conceded that the purpose of their motion for summary adjudication was to
avoid engaging in detailed discovery on anti-trust issues, stating that if “full-
blown anti-trust analysis” was required, the motion should be denied.
Because the rule announced in Edwards does not extend beyond the
employment context and a rule of reason applies to determine the validity of
the contractual provision (Ixchel, supra, 9 Cal.5th at p. 1162), we conclude
such factual development is relevant and necessary here.

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 DISPOSITION
The petition for writ of mandate and/or prohibition is granted. Let a
writ issue directing the trial court to vacate its December 7, 2018 order
granting the motion for summary adjudication, and to enter a new order
denying the motion. The stay issued by this court on March 14, 2019, is
vacated.
Petitioner to recover costs.

HUFFMAN, Acting P. J.

WE CONCUR:

IRION, J.

GUERRERO, J.

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