App Developer’s Antitrust Case Against Apple Looking Durable

Court Says Licensing Agreement Does Not Bar App Maker Litigation

A federal judge has rejected Apple Inc.’s interpretation of its app licensing agreement in the antitrust case brought against it by health-app developer AliveCor Inc. The developer alleges Apple has unlawfully maintained its monopoly in the market for heart rate analysis apps, citing the anticompetitive way in which the company updated watchOS, the Apple Watch operating system on which AliveCor’s heart rate analysis app runs.

As Jonathan Rubin wrote for the MoginRubin Blog, the case “challenges the limits” of the “freedom of design” usually enjoyed by companies accused of alleged anticompetitive product design changes. Ordinarily, Rubin wrote, “a design change is not the kind of conduct that runs afoul of the antitrust laws.” But on March 21, U.S. Judge Jeffrey S. White from the Northern District of California denied Apple’s motion to dismiss the antitrust case brought against it by AliveCor (AliveCor, Inc. v. Apple Inc., No. 21-cv-03958-JSW, N.D. Calif.).

Apple counterclaimed that AliveCor was bound by an app developer agreement and an indemnity clause contained in Section 10 of the agreement. On May 16, handing Apple another loss, Judge White rejected Apple’s reading of the indemnity provision, holding that the language applies only to third-party disputes, not intra-party disputes.

Among the precedents cited by Judge White was the recent decision in Epic Games, Inc. v. Apple Inc., 559 F. Supp. 3d 898 (N.D. Cal. 2021). In Epic, Apple asserted a similar counterclaim for indemnification under Section 10 of the license agreement. The Epic court, “guided by the same principles applied here,” Judge White wrote, “rejected Apple’s argument and determined that Section 10 applied only to suits between Apple and third parties.” See Jonathan Rubin’s post regarding Epic.

AliveCor’s case against Apple is set for trial in February 2024.

Edited by Tom Hagy for MoginRubin LLP.

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