Case 4:21-cv-03958-JSW Document 56 Filed 05/16/22 Page 1 of 7
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
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`ALIVECOR, INC.,
`Plaintiff,
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`v.
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`APPLE INC.,
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`Defendant.
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`Case No. 21-cv-03958-JSW
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`ORDER GRANTING MOTION TO
`DISMISS COUNTERCLAIM
`Re: Dkt. No. 47
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`Now before the Court for consideration is the motion to dismiss Defendant Apple Inc.’s
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`(“Apple”) counterclaim for indemnification filed by Plaintiff AliveCor, Inc. (“AliveCor”). The
`Court has considered the parties’ papers, relevant legal authority, and the record in the case, and it
`finds this matter suitable for disposition without oral argument. See N.D. Civ. L.R. 7-1(b). The
`Court VACATES the hearing scheduled for May 20, 2022. For the following reasons, the Court
`GRANTS AliveCor’s motion to dismiss the counterclaim.
`BACKGROUND
`AliveCor initiated this lawsuit against Apple on May 25, 2021, alleging antitrust violations
`and unfair competition claims against Apple. AliveCor alleges that Apple changed the heart rate
`algorithm on the Apple Watch and watchOS, which rendered AliveCor’s heart rate analysis app
`incapable of providing reliable heart rate analysis. AliveCor alleges Apple’s conduct constitutes
`anticompetitive conduct under federal antitrust laws and is unlawful or unfair conduct under
`California’s Unfair Competition Law.
`AliveCor has developed apps for iOS and watchOS. (Counterclaim ¶ 6.) App developers
`who wish to offer their apps on the App Store, like AliveCor, must enter into several agreements
`with Apple prior to doing so. (Id. ¶ 7.) One such agreement is the License Agreement, which
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`grants a developer access to tools and software developed by Apple and governs distribution
`through the App Store for apps that use Apple’s software and services. (Id. ¶¶ 7-8.) Apple alleges
`that AliveCor is and remains a party to the License Agreement. (Id. ¶ 7.)
`The License Agreement contains an indemnification provision which provides:
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`To the extent permitted by applicable law, You [AliveCor] agree to
`indemnify and hold harmless, and upon Apple’s request, defend
`Apple… from any and all claims, losses, liabilities, damages, taxes,
`expenses, and costs, including without limitation, attorneys’ fees and
`court costs (collectively, ‘Losses’), incurred by [Apple] and arising
`from or related to any of the following:…(i) Your breach of any
`certification, covenant, obligation, representation or warranty in this
`Agreement…; (ii) any claims that Your Covered Product or the
`distribution, sale, offer for sale, use or importation of Your Covered
`Product (whether alone or as an essential part of a combination),
`Licensed Application Information, metadata, or Pass Information
`violate or infringe any third party intellectual property or proprietary
`rights; (iii) Your breach of any of Your obligations under the
`EULA…for Your Licensed Application; (iv) Apple’s permitted use,
`promotion or delivery of Your Licensed Application, Licensed
`Application Information, Safari Push Notification, Safari Extension
`(if applicable), Pass, Pass Information, metadata, related trademarks
`and logos, or images and other materials that You provide to Apple
`under this Agreement…; (v) any claims, including but not limited to
`any end-user claims, regarding Your Covered Products, Licensed
`Application Information, Pass Information or related
`logos,
`trademarks, content or images; or (vi) Your use (including Your
`Authorized Developer’s use) of the Apple Software or services, Your
`Licensed Application Information, Pass Information, metadata, Your
`Authorized Test Units, Your Registered Devices, Your Covered
`Products, or Your development and distribution of any of the
`foregoing.
`(Id., Ex. A § 10 (“Section 10).) Section 10 also prohibits the app developer from entering “into
`any settlement or like agreement with a third party that affects Apple’s rights or binds Apple in
`any way…” (Id.)
`Apple alleges that AliveCor’s claims “arise from or relate to, at least in part, [AliveCor’s]
`use of covered Apple Software or Services, its Covered Products, and/or its development of apps
`submitted to and/or published to the App Store.” (Id. ¶ 13; id. ¶¶ 16-17.) As a result, Apple has
`filed a counterclaim alleging that it is entitled to indemnification pursuant to Section 10 of the
`License Agreement including attorney’s fees and court costs incurred in defending this litigation
`and pursuing its counterclaim.
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`AliveCor moves to dismiss Apple’s counterclaim on two bases. First, AliveCor argues a
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`defendant cannot recover attorneys’ fees or costs incurred defending federal antitrust or UCL
`unfair competition claims. Second, AliveCor asserts that under California contract law,
`indemnification provisions are presumptively interpreted as covering only third-party claims.
`ANALYSIS
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`A.
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`Applicable Legal Standard.
`Under Rule 12(b)(6), a party may move to dismiss for failure to state a claim upon which
`relief can be granted. In its pleading, a party must state “enough facts to state a claim to relief that
`is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has
`“facial plausibility” if the party pleads facts that “allow[ ] the court to draw the reasonable
`inference that [another party] is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
`662, 678 (2009).
`In resolving a 12(b)(6) motion, the Court must follow a two-pronged approach. First, the
`Court must accept all well-pleaded factual allegations as true, but “[t]hreadbare recitals of the
`elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal,
`556 U.S. at 678. Nor must the Court “ ‘accept as true a legal conclusion couched as a factual
`allegation.’ ” Id. at 678-80 (quoting Twombly, 550 U.S. at 555). Second, assuming the veracity of
`well-pleaded factual allegations, the Court must “determine whether they plausibly give rise to an
`entitlement to relief.” Id. at 679. This determination is context-specific, requiring the Court to
`draw on its experience and common sense, but there is no plausibility “where the well-pleaded
`facts do not permit the court to infer more than the mere possibility of misconduct.” Id.
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`B.
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`Section 10(vi) Is Limited to Indemnification for Third-Party Claims.
`Apple asserts that it is entitled to fees and costs under Section 10 because AliveCor’s
`claims arise from and are related to, at least in part, AliveCor’s use of covered Apple Software or
`Services, its Covered Products, and/or its development of apps submitted to and/or published to
`the App Store. (Counterclaim ¶ 13; see id. Ex. A § 10(vi).) AliveCor argues that Apple’s
`counterclaim for indemnification must be dismissed because the provision applies only to third-
`party disputes, not intra-party disputes.
`“Generally, indemnity is defined as an obligation of one party to pay or satisfy the loss or
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`damage incurred by another party.” Alki Partners, LP v. DB Fund Servs., LLC, 4 Cal. App. 5th
`574, 600 (2016) (internal citations and quotations omitted). An indemnity agreement is
`interpreted according to the language and contents of the contract, as well as the intention of the
`parties as indicated by the contract, using the same rules that govern the interpretation of other
`contracts. Carr Bus. Enterprises, Inc. v. City of Chowchilla, 166 Cal. App. 4th 14, 20 (2008).
`Courts look to several indicators to distinguish third party indemnification provisions from
`provisions for the award of attorney fees incurred in litigation between the parties to the contract.
`First, the “key indicator is an express reference to indemnification. A clause that contains the
`words ‘indemnify’ and ‘hold harmless’ generally obligates the indemnitor to reimburse the
`indemnitee for any damages the indemnitee becomes obligated to pay third persons—that is, it
`relates to third party claims, not attorney fees incurred in a breach of contract action between the
`parties to the indemnity agreement itself.” Alki Partners, 4 Cal. App. 5th at 600 (citing Carr, 166
`Cal. App. 4th at 20). Here, Section 10 uses the “indemnify and hold harmless” language. This
`language applies to each enumerated subsection including Section 10(vi), which is the subsection
`relevant to Apple’s counterclaim.1 (See Counterclaim ¶¶ 14-17.) This indicates that Section 10
`was intended to cover third-party claims.
`Second, courts examine the context in which the language appears. “Generally, if the
`surrounding provisions describe third party liability, the clause will be construed as a standard
`third-party indemnification provision.” Alki Partners, 4 Cal. App. 5th at 600 (citing Myers Bldg.
`Indus., Ltd v. Interface Tech., Inc., 13 Cal. App. 4th 949, 970 (1993)).
`Review of the other subdivisions of Section 10 further suggests the provision is intended to
`only apply to third-party claims. Several subdivisions refer to claims involving the developer’s
`app and clearly contemplate third parties. See License Agreement § 10(ii) (applying to disputes
`where a developer’s app “violate[s] or infringe[s] any third party intellectual property… rights”;
`id. § 10(v) (applying to claims regarding the developer’s use of “logos, trademarks, content or
`images” and including “any end-user claims”). Similarly, Section 10(iii) refers to the developer’s
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`1 AliveCor disputes the applicability of Section 10(vi) to its claims. It argues this litigation
`focuses on AliveCor’s inability to use Apple Software as opposed to its use of Apple Software.
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`breach of the end-user license agreement (“EULA”), which is an agreement between the developer
`and the end-user, not between the developer and Apple.2 Ex. A § 10(iii); see also id., Schedule 1,
`§ 3.3. Section 10 also prohibits app developers from “enter[ing] into any settlement agreement
`with a third party that affects Apple’s rights or binds Apple in any way,” which also suggests that
`this is a third-party indemnity provision. Id. § 10. Finally, Section 10 contains no express
`references to intra-party disputes or prevailing parties.
`Apple’s argument that the indemnification provision applies to actions between the parties
`is strongest with regard to Section 10(i), which requires indemnification for “breach of any
`certification, covenant, obligation, representation or warranty in this Agreement…” Id. §10(i).
`But even if Section 10(i) could be read to encompass claims between the parties, it does not
`change the Court’s conclusion. Apple’s counterclaim is based on Section 10(vi); Apple does not
`allege that AliveCor breached any certification, covenant, obligation, representation or warranty.
`That Section 10(i) might possibly cover intra-party disputes does not mean that Section 10(vi), the
`applicable provision here, does. Indeed, as discussed above, the express language of the
`indemnification provision and examination of the other subdivisions strongly suggests that Section
`10(vi) covers only third-party claims.
`Apple does not dispute that the terms “indemnify” and “hold harmless” create a
`presumption that an indemnification provision is limited to third-party claims, but it argues that
`the express language of a contract can overcome this presumption. This may be true, but Section
`10 lacks such express language. This distinguishes the present case from those which Apple cites.
`For example, in Dream Theater, Inc. v. Dream Theater, the indemnification provision
`expressly stated that the obligation to indemnify applied “against all losses ‘whether or not arising
`out of third party [c]laims.’” 124 Cal. App. 4th 547, 556 (2004). Similarly, in Zalkind v.
`Ceradyne, Inc., the agreement contained broad language requiring one party to indemnify the
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`2 Apple argues that Section 10(iii) has “no plausible reading” other than to encompass one party’s
`breach of an obligation to the other. (Opp’n at 10.) The EULA is an agreement between the app
`developer and the end-user. Thus, the language of Section 10(iii) seems to contemplate situations
`where the developer breaches its obligations to the end-user under the EULA and the end-user
`sues Apple. Apple provides no explanation how this provision could be read to cover intra-party
`disputes.
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`other for losses “‘whether or not they have arisen from or were incurred in or as a result of any
`demand, claim, action, suit, assessment or other proceedings or any settlement or judgment…’”
`194 Cal. App. 4th 1010, 1028 (2004). In Wilshire-Doheny Assocs. Ltd. v. Shapiro, the court found
`the indemnification provisions applied to disputes between the parties on the contract because
`there was “nothing in the language of any of the three indemnity provisions specifically limiting
`their application to third party lawsuits.” 83 Cal. App. 4th 1380, 1396-97 (2000).
`In contrast, Section 10 does not contain express language expanding its scope beyond
`third-party claims. And unlike the provision in Wilshire-Doheny, Section 10 does contain
`language that limits it to third-party claims, as discussed supra. Moreover, the indemnification
`provisions in Apple’s cited cases were found to cover disputes between the parties for breach of
`contract or enforcement of the indemnification agreements. But, as discussed above, Apple’s
`counterclaim is not for breach of contract. Apple’s cases are distinguishable.
`The recent decision in Epic Games, Inc. v. Apple Inc. further supports the Court’s
`conclusion about Section 10. 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. Id. at 1066.
`The court, guided by the same principles applied here, rejected Apple’s argument and determined
`that Section 10 applied only to suits between Apple and third parties. Id. at 1066-67. The Court
`agrees with the reasoning in Epic.3
`Section 10 contains key indicators suggesting it applies only to claims asserted by third
`parties and is devoid of any unambiguous reference to intra-party disputes. Accordingly, the
`Court GRANTS AliveCor’s motion to dismiss the counterclaim. Because the Court dismisses the
`counterclaim based on the language of the indemnification provision, the Court need not address
`AliveCor’s other arguments related to fee-shifting in antitrust cases.
`//
`//
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`3 The parties in the Epic case have appealed the trial court’s judgment. See Epic Games, Inc. v.
`Apple Inc., Nos. 21-165506, 21-16695 (9th Cir. Mar. 24, 2022). On appeal, Apple has challenged
`the judgment with regard to Section 10. Apple and AliveCor disagree over the scope of Apple’s
`challenge, but the parties’ arguments on that issue did not factor into the Court’s decision here.
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`Case 4:21-cv-03958-JSW Document 56 Filed 05/16/22 Page 7 of 7
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`CONCLUSION
`For the foregoing reasons, the Court GRANTS AliveCor’s motion to dismiss the
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`counterclaim for indemnification. Because the Court finds Section 10(vi) applies to third party
`claims as a matter of law, it concludes amendment would be futile and dismisses the counterclaim
`without leave to amend.
`IT IS SO ORDERED.
`Dated: May 16, 2022
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`______________________________________
`JEFFREY S. WHITE
`United States District Judge
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