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Ixchel Pharma, LLC v. Biogen, Inc.

Supreme Court of California

August 3, 2020, Opinion Filed



LIU, J.—This case presents two questions about the bounds of legitimate business competition under California [**2]  tort and antitrust law. Plaintiff Ixchel Pharma, LLC (Ixchel), a biotechnology company, entered into an agreement with Forward Pharma (Forward) to jointly develop a drug for the treatment of a disorder called Friedreich's ataxia. The drug development went according to plan until Forward decided to withdraw from the agreement, as was allowed by its terms. Pursuant to a settlement with another biotechnology company, defendant Biogen, Inc. (Biogen), Forward had agreed to terminate its contract with Ixchel.

Ixchel sued Biogen in federal court for tortiously interfering with Ixchel's contractual and prospective economic relationship with Forward and claimed that Biogen did so in violation of Business and Professions Code section 16600. On appeal, the United States Court of Appeals for the Ninth Circuit asked us to decide (1) whether Biogen's interference in Ixchel's at-will contract with Forward must be independently wrongful and (2) how Business and Professions Code section 16600 applies to the settlement provision requiring Forward to terminate its agreement with Ixchel.

CA(1)(1) We hold that tortious interference with at-will contracts requires independent wrongfulness and that a rule of reason applies to determine the validity of the settlement provision under Business and Professions Code section 16600.

Because this case [**3]  comes to us from the Ninth Circuit at the motion to dismiss stage, we assume the truth of the facts as alleged in Ixchel's operative [*1138]  complaint. (Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 629 [54 Cal. Rptr. 3d 735, 151 P.3d 1151].) Ixchel is a biotechnology company that develops drugs to treat mitochondrial disease. Since 2012, it has been developing a drug containing the active ingredient dimethyl fumarate (DMF) to treat Friedreich's ataxia, a neurodegenerative disorder affecting one in 50,000 Americans.

Because Ixchel did not have the resources to develop the drug by itself, in 2016 it entered into a collaboration agreement with Forward, a biotechnology company that also develops drugs containing DMF for the treatment of neurological diseases. Under the terms of the collaboration agreement, Ixchel agreed to assign certain patent rights it possessed to Forward. In return, Forward agreed to work with Ixchel to develop a new drug containing DMF to treat Friedreich's ataxia. Forward would investigate the feasibility of conducting clinical trials for the drug and, if feasible, would conduct those trials and pay for them. Ixchel would provide assistance with the clinical trials as necessary. If the clinical trials were successful, Forward agreed to manage and pay for the [**4]  manufacturing and commercialization of the drug with the assistance of Ixchel. Ixchel was entitled to a percentage of royalties on sales of the drug and retained certain rights to engage in its own commercialization of the drug independent of Forward.

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9 Cal. 5th 1130 *; 2020 Cal. LEXIS 4876 **; 2020-2 Trade Cas. (CCH) P81,313

IXCHEL PHARMA, LLC, Plaintiff and Appellant, v. BIOGEN, INC., Defendant and Respondent.

Subsequent History: Reported at Ixchel Pharma, LLC v. Biogen, Inc., 2020 Cal. LEXIS 5387 (Cal., Aug. 3, 2020)

Prior History:  [**1] Ninth Circuit, No. 18-15258. Eastern District of California, No. 2:17-cv-00715-WBS-EFB.

Ixchel Pharma, LLC v. Biogen, Inc., 930 F.3d 1031, 2019 U.S. App. LEXIS 20997 (9th Cir. Cal., July 16, 2019)Ixchel Pharma, LLC v. Biogen, Inc., 2019 Cal. LEXIS 6767 (Cal., Sept. 11, 2019)


contractual, termination, invalid, at-will, restrained, void, profession, noncompetition, competitor, interfered, tortious, antitrust, partnership, inducing, whiskey, Distillery, buyer, collaboration, ingredient, cemented, biotechnology, predecessor, clinical, entities, monopoly, binding, ataxia

Antitrust & Trade Law, Regulated Practices, Price Fixing & Restraints of Trade, Civil Procedure, Settlements, Settlement Agreements, Validity of Agreements, Torts, Contracts, Intentional Interference, Elements, Commercial Interference, Intentional Interference, Business Torts, Prospective Advantage, Prospective Advantage, Labor & Employment Law, Conditions & Terms, Trade Secrets & Unfair Competition, Noncompetition & Nondisclosure Agreements, Employment Relationships, At Will Employment, Governments, Legislation, Interpretation, Courts, Judicial Precedent, Common Law