Update: Apple’s Counterclaim Axed in App Developer’s Antitrust Suit Over Wearable Heart Rate Monitoring Technology

Judge Jeffrey S. White issued an opinion earlier this week dismissing Apple Inc.’s counterclaim against app developer AliveCor Inc., who sued last May. The ruling follows the court’s March decision allowing AliveCor’s antitrust and California Unfair Competition Law (UCL) claims to proceed in large part.

The dispute concerns AliveCor, a Silicon Valley start-up that created both a wristband for the Apple Watch, the KardiaBand, capable of recording an echocardiogram (ECG) and a heart rate monitoring app, SmartRhythm, that advises users if their beat is irregular. As a purported pioneer of wearable health technology, AliveCor claims to be “an innovator in the smartwatch industry that helped change the perception of the Apple Watch from an accessory to a personal health monitoring tool.”

Though AliveCor sought to work with Apple, the latter reportedly viewed the start-up as a competitor. The complaint alleges that Apple took steps to immobilize its business including introducing an new version of the Apple Watch and watch operating system (watchOS) with ECG recording capability and Apple’s own heart rate analysis app. Moreover, the defendant reportedly changed the heart rate algorithm on the Apple Watch and watchOS, rendering SmartRhythm incapable of providing accurate heart rate analysis and greatly undermining AliveCor’s business.

In its March opinion, the court ruled on AliveCor’s monopoly claim. Judge White allowed it to proceed on the theory that Apple monopolizes the “watchOS heart rate analysis app market, a distinct sub-aftermarket of an aftermarket for watchOS apps.” The ruling also accepted AliveCor’s market share contentions as plausible and said that it successfully alleged anticompetitive conduct.

As to the latter, the court explained that because “Apple’s updated heart rate algorithm, which was pushed out to all earlier Apple Watch models, did not improve user experience; the purpose and effect of the update was to prevent third parties from identifying irregular heart rate situations and from offering competing heart rate analysis apps.”

In this week’s opinion, Judge White addressed Apple counterclaim asserting that AliveCor was bound by an app developer agreement and an indemnity clause therein. The court declined Apple’s reading of the indemnity provision, and instead found that it applies to third-party disputes, not intra-party disputes. Judge White interpreted the provision with guidance from California contract law and opined that its language and context confined it to third-party claims.

Following the issuance of the counterclaim decision, the court set the discovery schedule and a trial date for February 2024.

The plaintiff is represented by Quinn Emanuel Urquhart & Sullivan LLP and Apple by Gibson Dunn & Crutcher LLP.