In August 2019, I wrote about a decision by the Fourth District Court of Appeal finding that a non-compete clause in a patent license agreement was not invalid per se pursuant to Section 16600 of the California Business & Professions Code. Quidel v. Superior Court, [ 39 Cal. App. 5th 530 (2019)] Thereafter, the California Supreme Court granted review of Quidel. One year later, I wrote about the California Supreme Court's holding a rule of reasonableness applies to contractual restraints on business operations and commercial dealings. Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130 (2020).
After deciding Ixchel, the Supreme Court transferred Quidel back to the Court of Appeal with directions to vacate its previous opinion and reconsider the case in light of Ixchel. Last Friday, the Court of Appeal issued its new opinion in Quidel. It should come as no surprise that the Court of Appeal concluded that the the per se rule applicable in the employment contract was inapplicable to the license agreement and that rule of reason applies.
The Court of Appeal did not, however, determine whether the contractual provision was reasonable because it was reviewing the trial court's ruling on a motion for summary judgment. This, of course, is bad news for the party arguing for per se invalidity because it had sought to avoid "full blown" discovery on the issue.