Wednesday, February 22, 2023

AliveCor's patent litigation against Apple is on wrong track regardless of President Biden's decision not to veto ITC's hypothetical U.S. import ban--Apple Watch not affected, but antitrust case remains interesting

E-health device maker AliveCor yesterday announced that the company has been informed of the White House not having vetoed a hypothetical U.S. import ban on the Apple Watch. Apple sought a presidential override of the U.S. trade agency's patent infringement ruling on public-interest grounds.

AliveCor is rather unlikely to get leverage over Apple from its patents, but its story makes Apple look bad in other ways as I'll explain further below. At this point, the noise that AliveCor is making about the White House decision looks like it's just an attempt to pressure Apple into some kind of settlement based on the hypothetical possibility of an import ban entering into force further down the road.

The United States International Trade Commission (USITC, or just ITC) has quasi-judicial powers. It can impose what is called a limited exclusion order and amounts to a U.S. import ban on "unfair imports", with the (alleged) unfairness most of the time consisting in (alleged) patent infringements. The Apple Watch is not affected for now, and may never be. The ITC's notice of final determination (PDF) (i.e., summary of final--though appealable--ruling) clearly states the following:

"The enforcement of these orders, including the bond provision, is suspended pending final resolution of the U.S. Patent and Trademark Office, Patent Trial and Appeal Board’s (“PTAB”) Final Written Decisions finding the asserted patent claims unpatentable."

An infringement of an invalid patent is an infringement only in an academic sense, but has no practical implications. There's no liability. And for now, the relevant patent claims are deemed invalid, meaning the United States Patent and Trademark Office (USPTO) itself has concluded that those patents should never have been granted in the first place. The two relevant patents on heart-rate measuring techniques are close related, which is why the prior art references cited by Apple's (thus far successful) validity challenges partly overlap: U.S. Patent No, 10,595,731 on "methods and systems for arrhythmia tracking and scoring" and U.S. Patent No. 10,638,941 on "discordance monitoring".

On December 6, 2022, the same panel of Patent Trial and Appeal Board (PTAB) judges declared either patent invalid (case nos. IPR2021-00971 and IPR2021-00972). There are two prior art references that are key to either decision. One of them is a Patent Cooperation Treaty (PCT) patent application from 2012: WO 2012/140559 A1 on "pulse oximetry measurement triggering ecg measurement" by inventors Ram Shmueli and Nimrod Sandlerman. In the PTAB decisions, that one is briefly referred to as Shmueli. The other is U.S. Patent Application No. 2014/0275840 on a "pathological state detection using dynamically determined body data variability range values" by inventor Ivan Osorio. That one is briefly referred to as Osorio. Most of the PTAB's invalidity holdings are based on combinations of Shmueli and Osorio, potentially with some other prior art.

So what is required before AliveCor will actually gain leverage over Apple?

AliveCor appealed the two PTAB rulings to the Federal Circuit, raising a multitude of questions. While it cannot be ruled out that one or more patent claims might ultimately be deemed valid, the much more likely scenario is that the PTAB is affirmed, either 100% or to an extent that the net effect won't be different from the current situation. And at the same time, Apple can try to get the ITC's infringement decisions overturned.

AliveCor, which even used a Wall Street Journal op-ed to urge President Biden not to veto the ITC ruling, looks a little bit desperate. It may also have a resource problem as the small company is trying to assert its rights against the world's richest corporation, but that David-versus-Goliath situation doesn't make those patents any more valid.

In retrospect, AliveCor should probably have focused on enforcing some European patents in Germany, where obviousness (as opposed to anticipation) arguments often don't dissuade courts from entering an injunction under the country's bifurcation regime (i.e., validity determinations are made in separate proceedings). In the U.S., it is a bit odd that AliveCor first filed lawsuits in the Western District of Texas--a venue that was extremely popular at the time for patent damages claims--in late 2020, and then brought its ITC complaint a few months later. Normally, litigants file ITC complaints and federal companion complaints at the same time.

The history of interactions between AliveCor and Apple is, hoever, interesting. Here are some passages from the ITC complaint:

"35. After AliveCor presented KardiaBand publicly, its founder Dr. Albert was invited to Apple's campus by Dr. Michael O'Reilly, Apple's Vice President of Medical Technology, to present to Apple on KardiaBand. Dr. Albert demonstrated KardiaBand's operation to Apple engineers and Apple's COO, Jeff Williams. Mr. Williams told Dr. Albert that Apple wanted to figure out how to work with AliveCor.

"36. A few months later, Dr. Albert and AliveCor's then-CEO met with Phil Schiller, Apple's SVP of Worldwide Marketing, in order to further demonstrate the KardiaBand product. Unbeknownst to AliveCor, however, Apple was using these meetings to gather information on the operation of KardiaBand. Apple recognized the value in the combination of AliveCor's KardiaBand and SmartRhythm products and wanted to take those ideas as their own and eliminate AliveCor and everyone else as competition.

"37. In fact, after seeing the utility of KardiaBand and SmartRhythm, Apple decided to copy these features and introduce a version of an Apple Watch with its own ECG and AFib analysis and reporting functionality. In late 2018, Apple announced that it was introducing its own ECG app and irregular heart rhythm notification feature as part of an update to the Operating System for the Apple Watch Series 4."

Now, the above sounds like Apple stealing IP--but if AliveCor's patents are invalid, then there was no actual IP, and what Apple did may have been a way of taking advantage of AliveCor's interest in discussing a business relationship, but wasn't illegal.

It's possible that after the initial discussions with AliveCor, Apple performed a check on what IP AliveCor actually owned, and concluded that any issued patents or pending patent applications belonging to AliveCor and relevant to what Apple wanted to do were weak.

But now comes the part that I find more interesting than AliveCor's patent infringement assertions:

"38. After Apple introduced its KardiaBand and SmartRhythm competitor products, it decided to eliminate AliveCor as a competitor. Specifically, with the Apple Watch series 4, Apple updated the watch operating systems from OS4 to OS5. This operating system update included changes to the algorithm the Watch OS used to report heart rates in specific ways that made it impossible for KardiaBand and SmartRhythm (as well as other third party heartrate analysis app providers) [emphasis added] to identify and predict unexpected heartrates and arrhythmias and suggest users record an ECG for confirming potentially [sic] occurrences of AFib.

"39. Ultimately, the changes Apple made to its operating system in OS5 and the introduction of Apple's copycat ECG watches compelled AliveCor to pull the KardiaBand product and SmartRhythm from the market in 2018. [...]"

That, however, is just stated in the complaint to make Apple look bad and not the basis on which AliveCor wanted an ITC exclusion order. AliveCor is, however, pursuing antitrust claims against Apple in the Northern District of California. In an October 2022 post on an antitrust litigation in the same district brought by credit card issuers against Applem I quoted from Judge Jeffrey S. White's March 21, 2022 order that granted in part--but also denied in part--Apple's motion to dismiss AliveCor's original complaint. The most important part was that Judge White held "AliveCor has plausibly alleged an aftermarket for watchOS apps"--i.e., the court may ultimately find that there is a single-brand market under Kodak/Newcal.

Apple filed a motion to dismiss AliveCor's first amended complaint. A hearing that had been postponed to January 27, 2023 was vacated. The court "will issue a written decision on the papers." That case continues to be interesting, but it could be that AliveCor will somehow have to settle because it might otherwise run out of cash. The antitrust case is another potential risk for Apple, but if Epic Games prevails on a single-brand market definition, AliveCor's case is going to be considered a small problem.