[00:00:00] Speaker 04:
May it please the court?

[00:00:02] Speaker 04:
Adam Wolfson on behalf of Appellant AliveCore.

[00:00:04] Speaker 04:
Good morning.

[00:00:05] Speaker 04:
I'd like to reserve five minutes for rebuttal, although if the court would like me to go over that, I'd be happy to.

[00:00:11] Speaker 04:
This is an antitrust case where the evidence shows that Apple marveled at the innovations that AliveCore created using data from the Apple Watch, calling them and those like them a magic trick.

[00:00:22] Speaker 04:
Where Apple realized those innovations were, quote, incredibly valuable, maybe more so than what the hardware costs today.

[00:00:29] Speaker 04:
where Apple employees explained that they wanted to, quote, find creative ways to hold back that data.

[00:00:35] Speaker 04:
And Apple COO agreed.

[00:00:38] Speaker 04:
Where Apple's method of holding back that data was not a necessary consequence of any improvement to the Apple Watch, yet it completely destroyed competition in the relevant aftermarket.

[00:00:48] Speaker 03:
Well, hold on.

[00:00:49] Speaker 03:
The district court found that it was an improvement.

[00:00:52] Speaker 03:
I think Apple mentions that it saved battery, this new process.

[00:00:59] Speaker 03:
HRNN saved battery and that they would have to create this additional reworking in order to exclude the HRPO.

[00:01:10] Speaker 03:
So why isn't that the improvement and why isn't that sufficient for them to be successful?

[00:01:18] Speaker 04:
Thank you, Judge Mendoza.

[00:01:19] Speaker 04:
So first of all, what exactly is the relevant design change at issue in this case?

[00:01:25] Speaker 04:
Is itself a genuine dispute of material fact?

[00:01:28] Speaker 04:
The district court accepted and found that the relevant design change was the introduction of the HRNN algorithm.

[00:01:37] Speaker 04:
However, the evidence in alive course contention is that the relevant design change was gating off of the HRNN.

[00:01:43] Speaker 01:
I don't quite see why that's a fact.

[00:01:45] Speaker 01:
I understand what you're saying and I think maybe we should be focusing on that second one, but why is it a fact?

[00:01:52] Speaker 04:
What exactly is the design change at issue?

[00:01:55] Speaker 01:
What we know from the Alston case... Well, what's at issue is whatever... I mean, if you're challenging the second one, then that's the one that's at issue.

[00:02:02] Speaker 01:
Why is it a fact?

[00:02:04] Speaker 04:
Well, Judge Berzon, I think actually you've seized on a key point here, which is that from the Alston case, from the Supreme Court, from Allied Orthopedic itself, what we have to focus on is the actual alleged restraint.

[00:02:16] Speaker 04:
And what the alleged restraint here is gating off of HRPO,

[00:02:20] Speaker 04:
and eventually the discontinuation of HRPO from the Apple Watch.

[00:02:23] Speaker 04:
So I think you're exactly focused on the right question, which is, what does Alivecore allege is the problem?

[00:02:30] Speaker 04:
And what are the anti-competitive effects?

[00:02:33] Speaker 01:
I gather that in your complaint, you allege that the HRPO introduction was the problem.

[00:02:43] Speaker 01:
But you're clear now that that's not what you're alleging is the problem.

[00:02:47] Speaker 04:
Well, in our complaint, we didn't

[00:02:49] Speaker 04:
We hadn't been able to look into the guts of the code and know what exactly was doing what.

[00:02:55] Speaker 04:
So in the complaint, what was alleged was that the change, this product design change, was not an improvement at the time.

[00:03:03] Speaker 04:
And what we pointed out is that there were significant... But you're not contesting that anymore.

[00:03:08] Speaker 04:
Is that right?

[00:03:09] Speaker 01:
Well, I think... You're not contesting whether the introduction of the new algorithm was an improvement.

[00:03:16] Speaker 04:
Oh, I see.

[00:03:17] Speaker 04:
No, we think that's irrelevant to live course claims.

[00:03:21] Speaker 04:
It's agnostic about whether or not HRNN, the new algorithm, was an improvement.

[00:03:27] Speaker 04:
As we know, the Apple Watch has seven to eight different heart rate algorithms at one time.

[00:03:32] Speaker 04:
HRNN, HRPO ran in parallel.

[00:03:35] Speaker 04:
Apple, for the first minute of every workout mode API session, toggled between them.

[00:03:41] Speaker 04:
Whichever of them had a higher confidence rate, heart rate before that.

[00:03:45] Speaker 04:
And to answer your initial question, Judge Mendoza, the evidence below from Apple wasn't that it needed to take off HRPO in order to introduce HRNN.

[00:03:57] Speaker 04:
It kept it on.

[00:03:58] Speaker 04:
It used it for its own purposes.

[00:04:00] Speaker 04:
It continued to run them in parallel.

[00:04:04] Speaker 00:
Well, it had it running in the background.

[00:04:06] Speaker 00:
It used it for the first minute, but had it running in the background.

[00:04:09] Speaker 00:
But I understood

[00:04:11] Speaker 00:
There never was a version where both algorithms were there and an app developer or a user could choose between them.

[00:04:21] Speaker 00:
To create something where you could choose between them would require more software development, right?

[00:04:29] Speaker 04:
The answer, Judge Friedland, to that is yes.

[00:04:32] Speaker 04:
What the evidence below, though, is from, it's basically uncontested, is that that is a very simple coding switch.

[00:04:39] Speaker 04:
A way to think about this

[00:04:40] Speaker 00:
So I understand your expert said it's a very simple switch, but it is some coding that is required.

[00:04:48] Speaker 00:
Something that doesn't exist in the world would have to be created in the world for that to be an option, right?

[00:04:52] Speaker 04:
Yes, that is correct.

[00:04:54] Speaker 04:
And I believe that that would fall under the definition of a substantially less restrictive alternative.

[00:05:01] Speaker 04:
There is some minor de minimis cost at issue for... So the question is, where does that problem fit in the analysis?

[00:05:09] Speaker 01:
Does it fit... The way you just described it, it still fits at the stage of figuring out

[00:05:16] Speaker 01:
whether the product improvement immunity applies, or does it just apply to the Section 2 analysis?

[00:05:26] Speaker 04:
I think that there's multiple points where this fact, or where this dispute of fact comes in, Judge Berza.

[00:05:32] Speaker 04:
And that is, in the product improvement analysis, the initial analysis, one of the disputes here is whether Apple's gating off of HRPO was associated conduct.

[00:05:45] Speaker 04:
And we know from allied orthopedic that associated conduct is the abuse or leverage of monopoly power alongside a product improvement.

[00:05:53] Speaker 04:
And in allied orthopedic, the reason, it's similar facts to this case where they took algorithms and put them out of reach from a third party.

[00:06:00] Speaker 04:
In that case, the product improvement itself was taking those algorithms and putting them on the monitors at issue in that case and taking them off of the sensors.

[00:06:10] Speaker 04:
Here, what we've pointed out is it wasn't necessary for them to gate off HRPO when they introduced HR.

[00:06:17] Speaker 01:
So your standard for associated conduct is whether it's necessary or whether it's a less restrictive, whether there's a less restrictive alternative, is that what you're saying?

[00:06:27] Speaker 04:
No, not quite.

[00:06:29] Speaker 04:
For the associated conduct, if there is conduct that is not necessary,

[00:06:35] Speaker 04:
for is not a necessary result of a product improvement.

[00:06:39] Speaker 01:
All right.

[00:06:39] Speaker 01:
So that's the standard you're applying, whether it's necessary.

[00:06:42] Speaker 04:
Yes.

[00:06:43] Speaker 04:
Yes.

[00:06:43] Speaker 01:
So can I ask you about?

[00:06:44] Speaker 01:
You said no.

[00:06:46] Speaker 04:
I apologize.

[00:06:46] Speaker 04:
Well, what I didn't want to do is conflate the necessary consequence analysis necessarily with the substantially less restrictive alternative analysis because they might be different, but here they are just very similar.

[00:07:00] Speaker 00:
So on this necessary, so I understand you want the test to be, is it necessary to figure out whether it's part of the improvement or not?

[00:07:09] Speaker 00:
You're saying if it's not necessary to the improvement, then it's not part of the improvement.

[00:07:14] Speaker 00:
As I read allied, it says that that one was necessary, but I don't see anywhere where it says that that is the test.

[00:07:20] Speaker 00:
Like you want that to be the test, but I don't see allied saying that is the whole test.

[00:07:24] Speaker 00:
And so I'd like to explore this because something could be

[00:07:28] Speaker 00:
not necessary but it could be years of development to make it possible and that would be you could do it it would take years of development it's possible so it's not necessary but why should apple i mean this is hypothetical i know you say it's not that it's very small but say it would take a team of thousand engineers a year of work

[00:07:48] Speaker 00:
to have it be the way you want it to be.

[00:07:51] Speaker 00:
So it's not necessary.

[00:07:53] Speaker 00:
It could be done.

[00:07:53] Speaker 00:
It's just very, very, very, very expensive and hard.

[00:07:56] Speaker 00:
Is that still your test?

[00:07:58] Speaker 00:
You're saying that, yes, if it's not necessary, they've got to do that year of many, many, many people working to create what you want.

[00:08:05] Speaker 04:
So I think that would be the hard case that is different than this case.

[00:08:11] Speaker 04:
But if there were no practical way to do this without engaging, as your honor has posited, thousands of engineers, millions of dollars to retain the old technology, I think that would be a situation where the necessary consequence still applies because you have the impracticality

[00:08:33] Speaker 00:
okay but now we're not saying so now we're in a practical instead of necessary so so now it's now it's okay well is it practical i don't think it's contested here that this would require we started with this some engineering effort so it's not zero it's something now you say it's little you're also saying a lot would be impractical now we're in a slippery slope right and so aren't we in some sort of

[00:08:59] Speaker 00:
I don't know, some sort of balancing test to even figure out whether it's part of the improvement or not.

[00:09:05] Speaker 00:
I think you need a test, and you're admitting it can't be necessary.

[00:09:10] Speaker 00:
So what is the test?

[00:09:11] Speaker 04:
Well, I think the necessary consequence test actually makes sense, because if what you do is you provide a new benefit, that's what Allied Orthopedic wants to protect.

[00:09:22] Speaker 04:
It states that the innovation it wants to protect is the provision of new benefits to consumers.

[00:09:28] Speaker 04:
And if you're doing something else to harm competition, that is not necessary.

[00:09:33] Speaker 00:
Right, but what we're trying to figure out is it else.

[00:09:35] Speaker 00:
Because we're trying to figure out, is it actually the same thing?

[00:09:37] Speaker 00:
If it's part of the improvement.

[00:09:40] Speaker 00:
Allied tells us they're immune.

[00:09:43] Speaker 00:
But we want to figure out whether it's part of the improvement.

[00:09:45] Speaker 00:
So you wanted us to say necessary, but you've admitted that can't work because you need something about whether it's practical.

[00:09:51] Speaker 00:
It's got to not be necessary.

[00:09:52] Speaker 00:
It's at least something like practical.

[00:09:54] Speaker 00:
And now practical is a slippery slope of practicality from small cost to big cost.

[00:09:59] Speaker 00:
And we as a court or a jury, who figures that out and what is the standard?

[00:10:03] Speaker 04:
Well, we know from Allied itself that you can look at the intent behind the change.

[00:10:10] Speaker 01:
I'm going back to where I started from.

[00:10:12] Speaker 01:
Allied says, as to what's a very similar question, that Section C, that it's an improvement, but it may have still violated Section 2 of any of its other conducts,

[00:10:27] Speaker 01:
is anti-competitive, and they argued that it was discontinuing the older technology.

[00:10:31] Speaker 01:
So that's exactly parallel to this, right?

[00:10:34] Speaker 04:
Yes.

[00:10:34] Speaker 01:
And they treat that as a Section 2 problem.

[00:10:37] Speaker 01:
And if you treat it as a Section 2 problem, then the whole balancing is built in.

[00:10:42] Speaker 04:
Yes.

[00:10:43] Speaker 01:
So why aren't we just doing that?

[00:10:45] Speaker 04:
We believe that's the correct result.

[00:10:47] Speaker 01:
That's not what you said.

[00:10:48] Speaker 04:
Well, there's three separate reasons that we think the District Court erred.

[00:10:52] Speaker 04:
One is exactly what Your Honor is noting, which is that the discontinuation of old technology in a way that forces consumers to adopt new technology is itself subject to Section 2 scrutiny.

[00:11:05] Speaker 01:
And then, just as a practical matter, we eliminate the whole confusion that you were just talking about, because the balancing is built in

[00:11:14] Speaker 01:
to the test at that point.

[00:11:16] Speaker 01:
I mean, if you back out this notion that there's a refusal to deal.

[00:11:20] Speaker 01:
And then we're doing something that seems to make sense.

[00:11:24] Speaker 01:
We're looking at how much trouble this actually is and how much of an impact on competition it actually has.

[00:11:35] Speaker 01:
And we don't need to use a bunch of words about necessary or least restrictive or

[00:11:42] Speaker 01:
reasonable and so on.

[00:11:44] Speaker 01:
It just seems like a much more sensible approach.

[00:11:47] Speaker 03:
So we wouldn't need a new test, we just rely on allied orthopedic to apply that balancing test.

[00:11:53] Speaker 03:
Is that, that's what I understand your first argument to be.

[00:11:56] Speaker 04:
It is Judge Mendoza and I think here you have still all of the steps that you need to reach.

[00:12:03] Speaker 04:
A monopolist who has a discontinuation of old technology that leaves consumers no choice.

[00:12:09] Speaker 01:
that forces them to use the... Isn't that exactly what Ally did at this point of the analysis?

[00:12:14] Speaker 04:
It did.

[00:12:14] Speaker 04:
And regardless of whether there was a product improvement, the court, in fact, did that.

[00:12:18] Speaker 00:
But, sorry, I mean, maybe that's where we're going to end up.

[00:12:22] Speaker 00:
But that is after they decided that the improvement itself had something alongside it.

[00:12:30] Speaker 00:
And I think we have to figure out if we're talking about something alongside an improvement or the improvement itself.

[00:12:36] Speaker 00:
And that's where this practical or necessary business comes in.

[00:12:39] Speaker 00:
Because part of Allied also, in the improvement itself, was bad for competition.

[00:12:43] Speaker 00:
But they said that doesn't matter because that part is, I mean, that was part of the improvement.

[00:12:48] Speaker 00:
So we have to figure out are we in the first part of Allied or the second part of Allied.

[00:12:51] Speaker 00:
And that's where this practical business was.

[00:12:54] Speaker 00:
I'd like to just go back to that.

[00:12:55] Speaker 00:
Maybe my colleagues won't agree.

[00:12:56] Speaker 00:
But I'd like to know what the test is, because I think you admitted it's not necessary.

[00:13:00] Speaker 00:
It's something about practical.

[00:13:01] Speaker 00:
And I'd love for you to tell me how this works.

[00:13:04] Speaker 00:
How do we figure that out?

[00:13:05] Speaker 00:
Who figures it out?

[00:13:06] Speaker 00:
What does that inquiry look like?

[00:13:08] Speaker 04:
So I still think that the correct test here is necessary consequence, because in the hypothetical that you gave me, Judge Friedland,

[00:13:16] Speaker 04:
When it's not practical from a financial, economic resource basis to employ an alternative design, a necessary consequence of the design that you chose that confers a new benefit to consumers is that the interoperability problem or the restraint that comes with it stems from this new design change.

[00:13:45] Speaker 00:
step that a jury here would have to figure out be, would it have been practical?

[00:13:50] Speaker 00:
I mean, your expert says it would be very easy.

[00:13:53] Speaker 00:
It's a small change.

[00:13:54] Speaker 00:
But maybe Apple will say, no, it's not practical at all.

[00:13:57] Speaker 00:
It would be hard to tell which stream you're looking at.

[00:14:01] Speaker 00:
They're going to get confused.

[00:14:02] Speaker 00:
It's actually a lot of battery memory, all these things, or battery use and processing memory.

[00:14:09] Speaker 00:
That would be the first jury question.

[00:14:11] Speaker 00:
Is this practical or not?

[00:14:12] Speaker 00:
So whether it's even part of the innovation that's the improvement in the first place?

[00:14:17] Speaker 04:
I think the first jury question is, is there a product improvement?

[00:14:21] Speaker 00:
OK, I think that's uncontested, though.

[00:14:23] Speaker 00:
You said that.

[00:14:24] Speaker 00:
So the exercise of benefits are an improvement.

[00:14:27] Speaker 04:
Well, except that it is contested whether there is a product improvement here.

[00:14:31] Speaker 04:
Because Apple would like it to be that the introduction of HRNN is what the jury, the court, and everyone focus on.

[00:14:40] Speaker 04:
a live core believes is the actual, and this gets back to the original question about what is the fact dispute, is that the actual question is was it an improvement to gate off HRPO and eventually to eliminate HRPO entirely.

[00:14:55] Speaker 04:
So that in and of itself

[00:14:56] Speaker 01:
Well, is Apple even claiming that that was an improvement?

[00:14:59] Speaker 01:
I think what they're saying... No, they're not.

[00:15:01] Speaker 01:
They're not.

[00:15:02] Speaker 01:
So why is it a question then?

[00:15:03] Speaker 01:
Well, because if the jury accepts... I see... They're claiming that it is just the way they did it, the way they always have done it, and it would be a problem or a pain to do something else, but they're not saying it itself was an improvement.

[00:15:17] Speaker 04:
They're not claiming that gating off HRPO was an improvement.

[00:15:20] Speaker 04:
They are not claiming that discontinuity... So there's no fact question about you.

[00:15:25] Speaker 04:
But what they are claiming is that introducing HRNN is an improvement that immunizes these claims from antitrust scrutiny.

[00:15:33] Speaker 00:
And they're basically saying the development of the software that was the new exercise, the new heart rate monitoring software that is part of this new phone, if not phone watch, I guess.

[00:15:44] Speaker 00:
new watch is one thing.

[00:15:47] Speaker 00:
And they're saying this is all one thing, and it would be much more complicated due to a different way.

[00:15:52] Speaker 00:
And you're saying it's actually not that complicated due to another way, and therefore, it's two things.

[00:15:58] Speaker 04:
Well, it's that, as we know from Allied, some of the questions of them trying to justify this as an improvement, we have to look behind their explanations.

[00:16:08] Speaker 04:
We have to look at whether they're pretextual.

[00:16:10] Speaker 04:
For example, they claim it's so hard

[00:16:12] Speaker 04:
to create a switch between two data streams where the device is sifting through noise and figuring out signals, all we have to do is look at AM-FM radios.

[00:16:21] Speaker 04:
AM came first.

[00:16:23] Speaker 04:
FM came later.

[00:16:24] Speaker 04:
And it's considered an improvement in terms of audio quality, things like that, but it has its own constraints, which are distribution range and interference, things like that.

[00:16:34] Speaker 04:
How have they done it for decades?

[00:16:37] Speaker 04:
There's a switch.

[00:16:38] Speaker 00:
Right, but you'd like us to believe that switch is very easy and they would like us to believe that switch within the watch, within the battery use, etc.

[00:16:46] Speaker 00:
is very hard.

[00:16:47] Speaker 00:
Or even if it's not very hard, it's something they shouldn't be forced to do that way because they thought of doing it the other way.

[00:16:57] Speaker 00:
And so figuring out who is right there, whether it's easy, whether it's hard, I think that has to be the first test to figure out whether it's part of the same

[00:17:07] Speaker 00:
improvement or not?

[00:17:08] Speaker 04:
Well, so going with Allied's approach to Judge Berzon's point, regardless of whether there's a product improvement, if you have the discontinuation facts, I believe that takes it outside of this question.

[00:17:19] Speaker 04:
However, on this specific question, one of the issues is that if you have any product improvement on a device and you do not examine the specific alleged restraint, the specific justifications, the specific reasons why they say it is necessary

[00:17:36] Speaker 04:
to have caused a restraint, you can have any improvement become sort of the justification.

[00:17:42] Speaker 03:
Or marginal improvement.

[00:17:43] Speaker 03:
Let's say they marginally approve something over 10 years, and is that going to be enough to then, again, gate off, as you argue, you know, the other folks?

[00:17:55] Speaker 04:
Exactly.

[00:17:57] Speaker 04:
And so to give an example from this case, with Watch OS 5, which was the OS update, the operating system update that

[00:18:03] Speaker 04:
eliminate the competition in question, they introduced new watch faces.

[00:18:07] Speaker 04:
You can, on your watch, you can get new watch faces, make it look like a sports watch, like a Rolex, like a Galaxy, things like that.

[00:18:17] Speaker 04:
Was that an improvement?

[00:18:18] Speaker 04:
Probably.

[00:18:19] Speaker 04:
Does that justify gating off HRPO?

[00:18:22] Speaker 04:
No, because there's no connection.

[00:18:24] Speaker 04:
So if there isn't some sort of way to analyze

[00:18:29] Speaker 04:
whether the... Hold on.

[00:18:31] Speaker 03:
Companies do this all the time.

[00:18:32] Speaker 03:
They change the size, for example, of the watch.

[00:18:37] Speaker 03:
They make it smaller or bigger, whatever.

[00:18:41] Speaker 03:
isn't the implication of what you're asking that they would be required to keep it at the same size?

[00:18:45] Speaker 03:
Because there are third party providers that have faces for those watches that have a specific dimension that they create, and now they've changed that.

[00:18:57] Speaker 03:
So they wouldn't be allowed to change that because, according to you, this was to get off and have folks buy Apple faces for those.

[00:19:09] Speaker 04:
I don't think the implication is that this would open the floodgates, if that's the underlying question, Judge Mendoza, because we know that this law has been on the books for decades, decades, and it hasn't.

[00:19:21] Speaker 00:
I can't find any case.

[00:19:24] Speaker 00:
I have to stop you there.

[00:19:25] Speaker 00:
What case tells us, I mean, I've been struggling with this case now for a month trying to figure out how to figure out whether this is part of the improvement or not.

[00:19:34] Speaker 00:
An ally does not tell us, I don't think, it says necessary happened to

[00:19:38] Speaker 00:
That's sufficient, but it's not necessarily necessary.

[00:19:42] Speaker 00:
Can you point to any, you can't say this as if we've lived with this rule forever because we don't have any case that talks about it.

[00:19:48] Speaker 04:
I don't mean to say that it's necessarily a model of clarity.

[00:19:52] Speaker 04:
What I mean is that these types of claims have been brought up for decades and they're not so prevalent despite the extremely rapid pace with which technological advancement has happened over the past two, three decades.

[00:20:06] Speaker 04:
We don't see these types of claims very often because there's so many hurdles that you have to get across before you can get to a viable claim.

[00:20:14] Speaker 04:
You have to have a monopolist.

[00:20:15] Speaker 04:
You have to have, with a design change, you have to have some kind of harm to competition to first lead a plaintiff to bring the case.

[00:20:23] Speaker 04:
In your hypothetical, Judge Mendoza, you might have an increase in a watch size, but that might be a boon.

[00:20:30] Speaker 04:
to third parties because they can create more intricate, better watch faces for the device.

[00:20:36] Speaker 01:
So, I mean, more conceptually, what the product improvement box does is back the analysis out of section two once you decide that it's part of the product improvement, right?

[00:20:53] Speaker 01:
I believe so, yes.

[00:20:54] Speaker 01:
So the choices between doing that or

[00:21:00] Speaker 01:
putting it into section, or cabining how much of the analysis gets backed out that way, and putting this kind of question into a balancing through section two.

[00:21:13] Speaker 01:
It doesn't mean they win, you win, and it probably doesn't mean you win, but it just asks the question a different way.

[00:21:22] Speaker 04:
Well, I'm going to try to be responsive to this based on my understanding of allied orthopedic, which is that

[00:21:29] Speaker 04:
and the cases that predate it, which is that we can't question the anti-competitive effects and pro-competitive benefits of a product improvement because that puts the court in the role of product design.

[00:21:44] Speaker 04:
However, if there are acts that surround or that are not the product improvement itself, that would be the associated conduct.

[00:21:54] Speaker 04:
And therefore, those are actionable.

[00:21:56] Speaker 03:
And what you're saying here is that the gating off is that conduct.

[00:21:59] Speaker 04:
Yes.

[00:22:00] Speaker 04:
Yes.

[00:22:01] Speaker 04:
And that it also falls into this broader bucket that Judge Berzon noted, which is the discontinuation of old technology that leaves consumers with no choice but to adopt the new technology of a monopolist.

[00:22:12] Speaker 04:
And here, we know that this happened because Apple's IRN has 100% market share.

[00:22:17] Speaker 04:
And those most at risk cannot use that today.

[00:22:21] Speaker 04:
because if they have an AFib diagnosis, they cannot use IRM.

[00:22:27] Speaker 00:
So you've said, I think you told Judge Mendoza that it had to be, that the, what you call the associated conduct has to be, I think you said associated with the improvement.

[00:22:39] Speaker 00:
So, and then at one point you said practical.

[00:22:41] Speaker 00:
So I know you don't want to say a test other than necessary, but could you try to tell

[00:22:47] Speaker 00:
What the jury should decide or the judge or who again?

[00:22:51] Speaker 00:
Can you just try to answer this question?

[00:22:53] Speaker 04:
What the test is to figure out whether we're in the the whole thing is the improvement or not So we know that associated conduct is loosely defined as an abuse or leverage of Monopoly power that's not that's not the product improvement itself and

[00:23:13] Speaker 04:
And I think that's an intentionally flexible standard.

[00:23:17] Speaker 04:
In allied orthopedic, as you noted, the reason that the conduct was not considered associated conduct is because it was a necessary consequence.

[00:23:28] Speaker 04:
In terms of a different way to approach that, first of all, Apple has not identified any way to do that.

[00:23:34] Speaker 04:
I'm going to ask them the same question.

[00:23:37] Speaker 04:
built into allied orthopedic is that the justification for this, the negative conduct here, is not protectual.

[00:23:45] Speaker 04:
So it's similar to the non-protectual business justifications aspect of the balancing test.

[00:23:52] Speaker 04:
And on the hard cases, where I understand wanting to avoid a slippery slope, I believe the test would have to have some reflection of an idea that

[00:24:05] Speaker 04:
you could not practically make the alternative design that the plaintiffs are talking about, for whatever reason.

[00:24:14] Speaker 04:
But here, I don't think that this is necessarily the case that requires anything other than following the exact approach.

[00:24:25] Speaker 03:
I'm sorry.

[00:24:25] Speaker 03:
I'm trying to understand your answer.

[00:24:26] Speaker 03:
Is your answer that there has to be some practicality as part of the test?

[00:24:30] Speaker 03:
That's the test.

[00:24:32] Speaker 04:
Well, for associated conduct, the reason that necessary consequence, in my mind, makes sense is because if you're doing something that, for whatever reason, is not necessary for the product improvement, you're not protecting innovation.

[00:24:46] Speaker 04:
So if you pretextually add something in to a broader product improvement and say, well, this was necessary, then just because you have a product improvement, you would get just a free pass, like the Microsoft case.

[00:25:01] Speaker 04:
Microsoft updated its Windows operating system, but as part of operating the system, it deeply integrated the Windows Explorer into the operating system, and it then became a tying claim.

[00:25:17] Speaker 04:
And just because there were improvements to the operating system, Microsoft claimed that this deep integration was necessary and all that.

[00:25:27] Speaker 04:
In the end, the courts examined, well, no, this is forcing OEMs to buy the combination.

[00:25:34] Speaker 04:
It's excluding competition.

[00:25:37] Speaker 00:
This is getting further.

[00:25:39] Speaker 00:
If you still haven't answered this question, so you're saying the practical.

[00:25:44] Speaker 00:
You started going down the Microsoft path about the liability, but back to is it experts are going to

[00:25:52] Speaker 00:
Have reports on the amount of software development and the net size of the teams and that's where it's going to be determined.

[00:25:59] Speaker 00:
Is that what you envision?

[00:26:00] Speaker 04:
I think that would be where you need to where it needs to go.

[00:26:06] Speaker 04:
Is there a legitimate non pretextual reason why the product the claimed product improvement?

[00:26:15] Speaker 04:
Needed to have this exclusionary side effect or site, but needed is how how?

[00:26:21] Speaker 00:
Complicated I mean you said it.

[00:26:23] Speaker 00:
I mean you know a million engineers Typing of computers could do this right?

[00:26:30] Speaker 00:
That's not what you mean though.

[00:26:31] Speaker 00:
You mean some sort of measure of Reasonability or something

[00:26:36] Speaker 01:
Yes, yes where where in allied is the necessary language?

[00:26:41] Speaker 04:
It's in the discussion of Associated conduct if your honor.

[00:26:44] Speaker 01:
Yeah, I looked there.

[00:26:46] Speaker 04:
I'm sure it's there, but I couldn't find it I believe it's page either 1001 or 1002 Yes, it's it's page 1002 your honor.

[00:26:56] Speaker 01:
Okay.

[00:26:56] Speaker 00:
Thank you You started to talk about

[00:27:03] Speaker 00:
intent at one point.

[00:27:05] Speaker 00:
So I think we just got to what this is really going to look like is experts about software development talking about how hard the software development would be.

[00:27:14] Speaker 00:
But at one point, you started to say something about subjective intent.

[00:27:17] Speaker 00:
So I'm wondering if you think it's not just the experts talking about how many programmers it would need or whether you think it's also something else.

[00:27:24] Speaker 04:
Yes.

[00:27:25] Speaker 04:
I think that intent, well, and we know from allied and in other cases cited in our papers,

[00:27:31] Speaker 04:
intent plays into the analysis.

[00:27:33] Speaker 04:
Because if, going back to your honest question, original hypothetical, if you have this, them saying, oh, it would be so hard, so difficult, so everything, and you look into the background and you see, well, actually, like here, they say, oh, we know this is going to break their thing.

[00:27:50] Speaker 04:
Or, you know, where you have admissions that the way that they're doing it is not actually needed or is intended to be anti-competitive, that goes to whether there's actually product improvement

[00:28:01] Speaker 04:
But also, the pretext of this all, you previously said, well, Apple's saying it's so hard to do this.

[00:28:11] Speaker 04:
In fact, they didn't.

[00:28:12] Speaker 04:
In the record, we have expert testimony from Dr. Jafari who said it's simple to create a little toggle.

[00:28:19] Speaker 04:
And Apple doesn't, didn't offer expert evidence that it's hard.

[00:28:23] Speaker 04:
So, or that it's anything other than a de minimis cost.

[00:28:26] Speaker 04:
So, when you're looking at this, you know, when I say,

[00:28:29] Speaker 04:
that I think this case can largely be decided based on what is already an allied orthopedic on the facts.

[00:28:35] Speaker 04:
We succeed where the plaintiffs in allied orthopedic fail based on the analyses that the panel in allied orthopedic... Back to her question then.

[00:28:48] Speaker 03:
Then what you're saying is, so that I understand, if we have to create a test, we're putting you

[00:28:54] Speaker 03:
in the position that we perhaps may be in where we have to develop a test here.

[00:29:00] Speaker 03:
And if that test is there's some practical part of it but there's also subjective that we have to look behind what was the intent of the improvement or of the conduct and the gating off or whatever as you refer to it.

[00:29:15] Speaker 03:
So you believe that there should be a portion of that test to be a subjective intent.

[00:29:21] Speaker 04:
It's not that I think it's necessary, I think that it can inform the analysis, Judge Mendoza, where it's evidence that can contribute to the finding that the actual challenged conduct is associated conduct rather than a product improvement.

[00:29:39] Speaker 00:
So there are lots of cases that say,

[00:29:43] Speaker 00:
subjective intent is kind of misleading in antitrust because people are always going to say we want to beat our competition.

[00:29:49] Speaker 00:
Um, and there's always going to be documents that say we want to beat our competition.

[00:29:52] Speaker 00:
So, uh, I think I hear you saying, at least in this case, we don't actually need to look at the subjective emails or whatever, because all we need is the experts saying it's easy.

[00:30:05] Speaker 04:
In this case I believe that's right however the subject of emails certainly are relevant to the broader case and in fact when we do get to Gating off when you have employees literally saying we need to find creative ways to gate to hold back data and

[00:30:27] Speaker 04:
That certainly informs the analysis of whether this was a necessary consequence.

[00:30:31] Speaker 00:
So the thing, can I just ask about that for a second?

[00:30:33] Speaker 00:
I know we have all these different ways this case goes, but on the intent issue, Apple isn't, they're just selling the watch, right?

[00:30:43] Speaker 00:
They're not making any more money by beating out this AFib detection.

[00:30:50] Speaker 00:
Like, so I don't really understand.

[00:30:54] Speaker 00:
It's like some future possible competition problem that causes this intent.

[00:31:00] Speaker 00:
Can you explain the intent issue given that they're just selling the watch and they're not actually making more money by this competition?

[00:31:06] Speaker 04:
Sure, the profit motive for doing this?

[00:31:08] Speaker 04:
Yeah.

[00:31:09] Speaker 04:
Sure.

[00:31:10] Speaker 04:
Well, so first of all, one of the pieces of evidence that we have here was Apple employees saying,

[00:31:17] Speaker 04:
If we have more competition here, we're likely to sell more watches.

[00:31:22] Speaker 04:
But the value of having more inputs for these algorithms and not having competing algorithms in this space

[00:31:33] Speaker 04:
generates massive, massive value for the company.

[00:31:36] Speaker 04:
Health payers, potentially creating subsidies for the watch, being able to utilize, create more and even better algorithms by having a larger data set, as we know in this day and age of AI and machine learning, more data that comes in.

[00:31:51] Speaker 00:
But if your client had its app, would they not still have the data?

[00:31:56] Speaker 04:
If they had the app, would they not still have the data?

[00:31:58] Speaker 00:
Apple would still have the data, right?

[00:31:59] Speaker 04:
Oh, I see.

[00:32:01] Speaker 04:
No, because then at that point, what's happening is the algorithm data is being reported to AliveCore's algorithms, or to AliveCore's apps.

[00:32:10] Speaker 04:
It's algorithms, I'm sorry, machine learning, smart rhythm, is then using that data to constantly improve itself.

[00:32:19] Speaker 04:
And we actually have Apple employees talking about, if they're able to get out ahead of us,

[00:32:24] Speaker 04:
we might lose this possibility for this incredible new stream where payers are paying people to buy our watch.

[00:32:32] Speaker 00:
So this was... But all of this is like hypothetical future possible ways Apple could make money.

[00:32:36] Speaker 00:
None of them are happening.

[00:32:37] Speaker 00:
Is that right?

[00:32:39] Speaker 04:
I believe that... Well, Apple completely owns this market now.

[00:32:42] Speaker 04:
So it's... I mean, the evidence in the case is that ECG and AFib detection are considered

[00:32:49] Speaker 04:
one of the main reasons to get Apple Watch now.

[00:32:54] Speaker 00:
But wait, but they don't do AFib detection.

[00:32:56] Speaker 00:
That's your whole point.

[00:32:58] Speaker 04:
No, they do have a heart rhythm analysis.

[00:33:00] Speaker 04:
They have intermittent heart rate and heart rhythm analysis.

[00:33:03] Speaker 04:
Their IRN feature will check in about four to six times a day only when you're at rest and only if you don't have an AFib diagnosis.

[00:33:13] Speaker 04:
If you do have an AFib diagnosis, you can't use IRN.

[00:33:16] Speaker 04:
In contrast, AliveCores and the nascent cardiograms

[00:33:19] Speaker 04:
They were continuous monitoring.

[00:33:20] Speaker 04:
They were constantly looking for AFib.

[00:33:24] Speaker 04:
The reason Apple is intermittent is because they sell to a broad range of age demographics.

[00:33:30] Speaker 04:
And so they want to minimize false positives.

[00:33:34] Speaker 04:
A live course with the opposite is it's focused on the most at-risk people and therefore wants to minimize false negatives.

[00:33:41] Speaker 04:
So the continuous monitoring part of this is actually a very big deal.

[00:33:45] Speaker 04:
Apple says in its materials, we do not continuously monitor.

[00:33:49] Speaker 04:
Apple says it's materials.

[00:33:51] Speaker 04:
If you have an AFib diagnosis, do not use IRN.

[00:33:54] Speaker 04:
AliveCorps was the exact opposite.

[00:33:55] Speaker 00:
And so this is what I'm saying.

[00:33:56] Speaker 00:
The idea that health care companies are going to pay them for the continuous monitoring is not happening.

[00:34:03] Speaker 00:
They're not doing it.

[00:34:04] Speaker 00:
They're not getting that money, right?

[00:34:06] Speaker 00:
So it's a future possibility that you think leads to the subjective evidence here?

[00:34:11] Speaker 04:
Well, before this happened, it absolutely was in the documents, them talking about

[00:34:19] Speaker 04:
competition with these other companies.

[00:34:23] Speaker 04:
And I'm just trying to look at some of our evidence, providing where they're able, if and as it gets large enough, it morphs into a service where they said we can't give away these algorithms.

[00:34:36] Speaker 01:
Didn't you say or the record somewhere say that they were actually advertising their new service as a reason to buy the watch?

[00:34:45] Speaker 04:
Uh, yeah.

[00:34:46] Speaker 04:
So the, the, the Apple watch advertises, uh, Apple advertises the Apple watch, uh, heart capabilities and including in particular, uh, the irregular rhythm notification feature as one of the core reasons to buy a watch.

[00:34:59] Speaker 04:
Absolutely.

[00:35:00] Speaker 04:
Yes.

[00:35:01] Speaker 00:
But that's the thing that they say is the improvement.

[00:35:04] Speaker 04:
Uh, the IRN is not what they say.

[00:35:07] Speaker 04:
Sorry.

[00:35:08] Speaker 04:
IRN that the acronyms all kind of bleed into each other.

[00:35:11] Speaker 04:
IRN.

[00:35:12] Speaker 04:
Irregular rhythm notification feature that is the competitor to a live core and cardiogram Hrnn is the algorithm that is that it published its data is published to the workout mode api So they are they're separate things and the iron is the product that they that they advertise but Hrnn is the data source for the iron and

[00:35:36] Speaker 04:
No.

[00:35:37] Speaker 04:
They have a proprietary algorithm that provides the data for IRN.

[00:35:42] Speaker 04:
And then there's another one that's called the Tacogram API that has come up in the case.

[00:35:48] Speaker 04:
But as we pointed out in the papers, if someone wanted to use the Tacogram API to create their own heart rhythm analysis app on the watchOS,

[00:35:58] Speaker 04:
It does not provide continuous monitoring, only four to six times a day.

[00:36:02] Speaker 04:
And you only get an alert after Apple's IRN has already provided an alert.

[00:36:08] Speaker 04:
So all you can do is provide a worse version of what Apple already provides on the watch.

[00:36:13] Speaker 00:
OK, that's really complicated.

[00:36:15] Speaker 00:
But on your theory that this is an essential facility, it seems a little bit problematic to you that Apple seems to have products that you now just went through a whole list of things that are competing but doesn't use the thing you need that you say is essential.

[00:36:31] Speaker 04:
Well, so Apple is the one that controls access to the data that comes off of the PPG sensors on the watch.

[00:36:37] Speaker 04:
It's the one who controls what the outputs are.

[00:36:40] Speaker 04:
On essential facilities, I don't

[00:36:43] Speaker 04:
Well, first of all, we don't think that this should be viewed through the refusal lens.

[00:36:48] Speaker 04:
But if the court were to view it as an essential facility, the essential facility is HRPO or an equivalent type of algorithm that, as Apple's own folks, provided effectively raw data.

[00:37:03] Speaker 04:
The HRNN is the problem because they force people to only use HRNN.

[00:37:09] Speaker 04:
Apple's proprietary algorithm is not available.

[00:37:11] Speaker 04:
The ones that it uses for IRN are not available to third parties.

[00:37:18] Speaker 04:
And then the Tachogram API, what we've explained is- But that's not what you're challenging.

[00:37:24] Speaker 00:
You're not asking for IRN.

[00:37:26] Speaker 04:
No.

[00:37:26] Speaker 04:
No, we're not.

[00:37:27] Speaker 04:
What we're saying is that providing a similar type of heart rate reporting as HRPO was, that was the anti-competitive act of gating that off and then

[00:37:39] Speaker 04:
taking it off eventually entirely.

[00:37:42] Speaker 01:
One last question.

[00:37:43] Speaker 01:
At some point, Apple says, as I recall, that, well, there are actually lots of watches and similar things now, and some of them do have these heart rhythm or could have heart rhythm apps.

[00:38:00] Speaker 01:
Is that in the record, or is that a fact for later in the case, or what?

[00:38:08] Speaker 04:
First of all, it wasn't challenged on summary judgment, not on appeal here.

[00:38:13] Speaker 04:
I think the answer is that what we have here is a relevant aftermarket watch OS heart rhythm analysis app.

[00:38:21] Speaker 01:
Well, yes, but one wonders why that would be if there are other versions and other ways to do the same thing.

[00:38:36] Speaker 04:
Just to, Apple didn't challenge that we have sufficient proof of lock-in power in a relevant aftermarket.

[00:38:44] Speaker 01:
But they do say this other thing.

[00:38:46] Speaker 04:
This other thing, I'm sorry, which other thing?

[00:38:48] Speaker 01:
What I just described, that there are other... That there are Fitbits and other things.

[00:38:53] Speaker 04:
Yeah, and I mean, just to explain part of it, we allege that the foremarket, the first market is actually smartwatches and that Apple has monopoly power in the foremarket.

[00:39:06] Speaker 04:
Even if you look at these others, Apple still has monopoly power in the foremarket.

[00:39:11] Speaker 04:
And it also has monopoly power in the aftermarket.

[00:39:14] Speaker 04:
Fitbits are fitness trackers, typically, not smartwatches.

[00:39:18] Speaker 04:
So they're in a different category.

[00:39:19] Speaker 04:
And therefore, most fitness trackers, effectively all fitness trackers, don't have heart rhythm analysis capabilities.

[00:39:26] Speaker 04:
There are smartwatches that have tried to come up with some similar types.

[00:39:32] Speaker 01:
It's a short answer at this point.

[00:39:33] Speaker 01:
We're not there yet, essentially.

[00:39:35] Speaker 04:
I'm sorry?

[00:39:36] Speaker 01:
It's a short answer at this point.

[00:39:38] Speaker 01:
We're not there yet.

[00:39:39] Speaker 04:
We're not there yet, Your Honor.

[00:39:41] Speaker 00:
But the market question might be determined later, is your point.

[00:39:45] Speaker 00:
Like, we're going to argue later about whether Fitbits should be part of this market or something like that.

[00:39:50] Speaker 04:
It already has been a subject of expert discovery.

[00:39:53] Speaker 04:
We have admissible opinions from both sides.

[00:39:56] Speaker 04:
This would be something that they argue at trial at this point.

[00:40:03] Speaker 00:
OK.

[00:40:03] Speaker 00:
I think we've asked you so many questions, we should let you sit down.

[00:40:06] Speaker 04:
Well, happy to answer them.

[00:40:07] Speaker 04:
Thank you.

[00:40:08] Speaker 00:
We'll still give you five minutes for rebuttal.

[00:40:10] Speaker 00:
Thanks.

[00:40:16] Speaker 00:
You're probably going to be here for a long time, too.

[00:40:19] Speaker 05:
Thank you, Your Honor.

[00:40:19] Speaker 05:
May it please the Court, Thomas Hungar for Apple.

[00:40:22] Speaker 05:
So I think Allied Orthopedics actually does answer at least part of the core set of questions that the Court was asking.

[00:40:32] Speaker 05:
AliveCore's fundamental submission is that Apple had an obligation to, in addition to implementing the product improvement that it

[00:40:41] Speaker 05:
sought to implement and did implement, which AliveCore concedes is a product improvement for the purposes of the workout mode, which is to provide accurate heart rate information for people using the watch for exercise.

[00:40:53] Speaker 05:
That's a conceded improvement.

[00:40:55] Speaker 05:
They say, well, but in addition to making that improvement, which necessarily meant you're going to be providing the more accurate heart rate data from the improved algorithm, which I'm going to call HERN, versus the older, less accurate algorithm, HARPO,

[00:41:10] Speaker 05:
which meant necessarily Apple would be providing the new accurate data to the extent it was available as opposed to the older inaccurate data.

[00:41:18] Speaker 05:
So that's the improvement.

[00:41:21] Speaker 05:
And a live course says, well, but in addition to doing that, you had an obligation to modify your software in a different way.

[00:41:28] Speaker 05:
change your architecture in order to do something that you've never done before, which is provide this additional second track.

[00:41:34] Speaker 01:
So the not changing the software or the way the software operated, i.e.

[00:41:42] Speaker 01:
only giving users and app developers one set of data at a time, that's basically what you're saying?

[00:41:49] Speaker 05:
Yes.

[00:41:50] Speaker 01:
That was true before and that was true after and that's not part of the improvement as such?

[00:41:55] Speaker 05:
It was the existing system.

[00:41:56] Speaker 05:
I mean, correct.

[00:41:57] Speaker 05:
So yes, the improvement operated within the otherwise existing architecture.

[00:42:01] Speaker 01:
So it wasn't that that itself was supposed to be an improvement.

[00:42:06] Speaker 05:
The fact that workout mode always provided only one heart rate.

[00:42:10] Speaker 01:
That was just the way it always was.

[00:42:11] Speaker 05:
That was the way it works.

[00:42:12] Speaker 05:
That in itself was not the improvement.

[00:42:14] Speaker 05:
The improvement was to take that feature.

[00:42:17] Speaker 05:
We provide one heart rate reading.

[00:42:18] Speaker 01:
So why can't they challenge that?

[00:42:22] Speaker 01:
the fact that you only have one set of access, and that's causing us these problems now that you have the improvement under Section 2.

[00:42:31] Speaker 01:
Why are we getting this involved in the product improvement question when it wasn't part of the product improvement?

[00:42:37] Speaker 01:
It was just how you always did things.

[00:42:39] Speaker 05:
Well, but when you, so their claim is that because you did the improvement, right, which necessarily meant we're going to provide the more accurate data instead of the less accurate data,

[00:42:49] Speaker 05:
They say, you've deprived us of the less accurate data, which is valuable to us.

[00:42:53] Speaker 01:
So you have an obligation to change your- Right, and they're challenging that.

[00:42:56] Speaker 01:
And they're bringing a Section 2 case saying you can't do that.

[00:43:00] Speaker 01:
And you say, oh, but we have no obligation to give you something that you don't have.

[00:43:07] Speaker 01:
And you fight it out at that level.

[00:43:09] Speaker 01:
Why are we mixing this up with the product improvement question?

[00:43:12] Speaker 05:
Because part of the product improvement here is to provide the new data.

[00:43:18] Speaker 05:
And unless Apple had an obligation to make it.

[00:43:20] Speaker 01:
But part of the product improvement was not to not provide other data.

[00:43:25] Speaker 01:
That wasn't the product improvement.

[00:43:27] Speaker 05:
Well, it was the product improvement because for two reasons.

[00:43:31] Speaker 05:
Number one, as I said, given the architecture of the device, the only way they could provide the new data is to not provide the old data unless they have an obligation to go further, which they don't.

[00:43:41] Speaker 01:
So it's the architecture of the device which was there before and is there now that they're challenging.

[00:43:49] Speaker 05:
I guess you could say that, but then what they're saying is Apple has an obligation under the law to do something it's never done before because we want it.

[00:43:56] Speaker 05:
And in, and there's no case that says that.

[00:43:59] Speaker 01:
Your answer could be no, and you could give, and we, we do a rule of, well, then we get into discussion of whether there's a, a refusal to deal or not.

[00:44:06] Speaker 01:
But I don't understand why we're just not going to section two at that point directly instead of treating this as part of this immunity for product improvement when it was, what was already there.

[00:44:16] Speaker 05:
Because what a lot, what an allied orthopedic says is that

[00:44:21] Speaker 05:
If it's inherent in the way the system works under the improved process that you create an incompatibility, this is not just, this is all this court's product improvement cases, Allied, Orthopedic, Foremost, and Calcomp.

[00:44:33] Speaker 05:
In each case, there was an improvement that also rendered legacy technology incompatible.

[00:44:39] Speaker 05:
The new technology didn't work with the old technology, just like here.

[00:44:42] Speaker 05:
So there's both a new technology and an incompatibility with the old technology.

[00:44:46] Speaker 05:
And in those cases, the court didn't say, well,

[00:44:49] Speaker 05:
We're now going to decide and let experts fight about how expensive it would have been to modify your new product further.

[00:44:55] Speaker 01:
But Allied actually did do that.

[00:44:56] Speaker 05:
I'm sorry?

[00:44:57] Speaker 01:
But Allied actually did do that.

[00:44:59] Speaker 01:
No, Your Honor, it said the opposite.

[00:45:00] Speaker 01:
I'm sorry?

[00:45:00] Speaker 01:
No, it didn't.

[00:45:01] Speaker 01:
It said that as to

[00:45:03] Speaker 01:
the discontinuation, it can violate Section 2, but it effectively forces consumers to adopt its new technology, but it didn't.

[00:45:12] Speaker 01:
And then it goes on to say that in another paragraph, that plaintiff's argument that Tyco could have made its monitors compatible also fails as a separate argument.

[00:45:22] Speaker 01:
And that has to do with the actual product improvement, i.e., how are these new monitors going to operate?

[00:45:30] Speaker 01:
as to the discontinuation of its old technology, it just talked about Section 2 and said, but it didn't actually happen, so it's not a problem.

[00:45:40] Speaker 05:
Well, so two responses to that.

[00:45:42] Speaker 05:
Number one, I think what we've just been talking about here was the argument that AliveCore makes that Apple had an obligation to modify its product in order to keep providing or to provide this second stream of data, right?

[00:45:57] Speaker 05:
That's their claim.

[00:45:58] Speaker 05:
And what allied orthopedics says is presented with precisely the same argument, they said, right?

[00:46:04] Speaker 05:
As you pointed out, plaintiff argued, Tyco could have made its monitors compatible with the old sensors.

[00:46:10] Speaker 05:
And that argument failed, not because they said, oh, well, that would be too expensive, and the expert evidence says it would cost, you know, $50 million versus $5 million.

[00:46:18] Speaker 05:
They said, our precedents make clear that a monopolist has no duty

[00:46:24] Speaker 05:
to help its competitors survive or expand when introducing an improved product design.

[00:46:29] Speaker 05:
That's exactly this case.

[00:46:30] Speaker 05:
It's on all fours, and that's why their argument fails.

[00:46:33] Speaker 03:
You know, if we take sort of this, you know, 1,000-foot view of what's happening here, and if we really think about what Apple has done, Apple has said, you know, here we have this great product.

[00:46:47] Speaker 03:
Here come you third-party providers.

[00:46:51] Speaker 03:
make improvements, provide additional things and then once they start using that and at least they would argue that once they do something that's profitable,

[00:47:02] Speaker 03:
Apple sees that and then tries to create their own product and then gate off these third parties.

[00:47:13] Speaker 03:
Isn't there something inherently wrong and exactly at the core of what the anti-competitive case law tells us that we're supposed to prevent?

[00:47:23] Speaker 05:
Well, no, Your Honor, for a couple of reasons.

[00:47:24] Speaker 05:
Number one, again, the product improvement doctrine recognizes

[00:47:28] Speaker 05:
that there are going to be circumstances where a product improvement renders competitors' products incompatible.

[00:47:33] Speaker 05:
I mean, that's all the cases that are cited in the briefs that we talk about, and yet the court says that doesn't matter, as long as it actually is a product improvement, which it's conceded that this is.

[00:47:42] Speaker 05:
And again, it's undisputed that what they're saying is not that the product improvement itself didn't entail bringing in the new algorithm as opposed to the old.

[00:47:52] Speaker 05:
It obviously did.

[00:47:53] Speaker 05:
What they're saying is, well, you needed to do something else.

[00:47:57] Speaker 05:
So this is not a case of

[00:47:58] Speaker 05:
other conduct, associated conduct that the defendant engaged in that blocked their ability to compete, it's the case where the actual improvement itself meant that you're going to be providing the new data, therefore not the old data, and that means that they suffer their injury.

[00:48:12] Speaker 05:
So oddly enough, kind of ironically, instead of associated conduct, which would be like Apple did something in addition to the product improvement in order to deny them access to something but for this additional conduct that they would have had access to, they're saying, no, no.

[00:48:27] Speaker 05:
Apple actually had an obligation to engage in additional conduct beyond the improvement itself in order to benefit us, and that's exactly what all these court cases reject.

[00:48:34] Speaker 03:
But what about Jitreelan's set of questions regarding, you know, this might be an improvement, but maybe it's, you know, maybe it's happening sort of marginally, right?

[00:48:45] Speaker 03:
There's some improvement, but

[00:48:48] Speaker 03:
You know, maybe, you know, it's a way to sort of exclude other folks if there's some marginal improvement in this thing.

[00:48:58] Speaker 03:
It's a way to exclude these other groups, so long as there's this marginal improvement.

[00:49:03] Speaker 05:
In allied, that was the claim.

[00:49:05] Speaker 05:
In fact, there was actual evidence of actual anti-competitive intent there, unlike here.

[00:49:10] Speaker 05:
And the court said that didn't matter.

[00:49:11] Speaker 05:
There was a dispute about whether the improvement was really that successful.

[00:49:15] Speaker 05:
The plaintiff argued, oh, it doesn't really accomplish their goals, and they've had second thoughts about how useful it is, and it's not really more accurate.

[00:49:21] Speaker 05:
But the court said it doesn't matter.

[00:49:22] Speaker 05:
As long as there is, quote, some benefit, close quote, that constitutes an improvement, and therefore the improvement is immune from antitrust challenge.

[00:49:30] Speaker 05:
And that's the same here.

[00:49:31] Speaker 05:
Here, it's far stronger, it's far more clear that this new technology is vastly superior.

[00:49:37] Speaker 05:
It's more accurate.

[00:49:38] Speaker 05:
It provides more frequent data so there are fewer gaps and also saves money for Apple because it doesn't have to keep coding for new forms of exercise.

[00:49:47] Speaker 05:
So it's a benefit in many different ways.

[00:49:49] Speaker 00:
So what is your test for whether the improvement captures all of it or whether there's something else?

[00:49:58] Speaker 00:
Can you answer the questions I was asking the other side?

[00:50:01] Speaker 00:
Do you want it to just be they happen at the same time is enough?

[00:50:04] Speaker 00:
Or what is your test?

[00:50:05] Speaker 05:
No, that's not it.

[00:50:07] Speaker 05:
You could use different words.

[00:50:09] Speaker 05:
But if it is part of the improvement itself, if it follows logically from the improvement itself, as opposed to some additional step, it qualifies as the improvement.

[00:50:18] Speaker 00:
OK, let me finish what you were going to say.

[00:50:21] Speaker 05:
Well, I was going to give an example.

[00:50:23] Speaker 05:
In the Novell case from the 10th Circuit that then Judge Gorsuch wrote,

[00:50:30] Speaker 05:
There, Microsoft improved its Windows software.

[00:50:37] Speaker 05:
And as part of that improvement, they said, we're going to stop giving competing app developers access to APIs that would enable them to compete with our APIs using the Windows ecosystem.

[00:50:49] Speaker 05:
And the court did not analyze that as a product improvement case.

[00:50:52] Speaker 05:
Why?

[00:50:52] Speaker 05:
Because the blocking of access to the APIs was not in any way

[00:50:58] Speaker 05:
part of the improvement.

[00:50:59] Speaker 05:
It was just a separate act to block that off.

[00:51:01] Speaker 05:
Similarly, Microsoft and the Microsoft case from the DC Circuit, when they came out with a new version of their software and they incorporated their browser, their internet browser, and they made three steps.

[00:51:15] Speaker 05:
I don't understand the technology, but they did three things designed to block people from switching to competing browsers.

[00:51:20] Speaker 05:
And the court analyzed each of those three things, and they said two of them were not improvements.

[00:51:24] Speaker 05:
They were not necessary.

[00:51:25] Speaker 05:
to this.

[00:51:26] Speaker 05:
They were just purely designed to block competitors.

[00:51:29] Speaker 05:
They didn't provide any benefit.

[00:51:30] Speaker 00:
They weren't part and parcel of the... Okay, okay.

[00:51:32] Speaker 00:
I don't want to go all the way down to what Microsoft was about.

[00:51:34] Speaker 00:
Back to this test.

[00:51:35] Speaker 00:
So you're saying it's really part of the improvement, I guess, is what you're saying, but... Yes.

[00:51:40] Speaker 05:
Or another way, if I could just... One other point would be, if in order to do what they're asking, it would require something beyond the improvement, right?

[00:51:50] Speaker 05:
It's clearly the improvement itself that has disadvantaged them, and they want something more, some additional fix.

[00:51:54] Speaker 00:
But it's all sort of glosses on these.

[00:51:57] Speaker 00:
Okay, you had to program the software for the watch to give HRNN as the new heart monitoring.

[00:52:10] Speaker 00:
Correct.

[00:52:12] Speaker 00:
In the development of that software, you chose to keep the architecture where there was just one thing being reported, but say that

[00:52:22] Speaker 00:
You know, the week before the programmer typed that in, if they had typed in, spent exactly the same amount of time and exactly the same amount of money, they could have spent their week doing it a little differently and had to, the architecture would be different in others too.

[00:52:34] Speaker 00:
It's essentially the switch that they want.

[00:52:36] Speaker 00:
In exactly the same effort and cost, no difference in battery life.

[00:52:41] Speaker 00:
I know you think those things aren't true.

[00:52:43] Speaker 00:
But say there was zero cost to just spending your week differently when you're writing the software and now you've got the switch.

[00:52:50] Speaker 00:
would that be still the same?

[00:52:54] Speaker 00:
Not doing the switch, would that still be part of the same improvement?

[00:52:58] Speaker 05:
So I think the court can and should rule for us regardless of how it would answer that question, because here it's perfectly clear that that's not the case at all, right?

[00:53:06] Speaker 05:
The API, the structure and architecture of the API for workout mode is entirely separate from

[00:53:13] Speaker 05:
the algorithm that produces a certain piece of the data that is sent through the API to app developers.

[00:53:20] Speaker 05:
So just because they're improving one algorithm that provides data that's sent to HealthKit from which the API then sends that data to developers doesn't mean they also have to separately go out and improve the API, which is a different part of the software.

[00:53:33] Speaker 00:
My hypothetical is it would cost zero to provide both instead of just providing one.

[00:53:38] Speaker 00:
I know you think that's not true.

[00:53:40] Speaker 00:
say it would cost zero to change the architecture.

[00:53:44] Speaker 05:
I don't think it's a question of cost, although the fact, it's undisputed here, it would cost Apple something to do what they're asking, which is another reason why it has no obligation to do it.

[00:53:52] Speaker 05:
But even if it were free, the question is, if the improvement itself, as designed by the developer, remember, the whole point of the product improvement doctrine is to avoid chilling innovation by threatening innovators with antitrust liability and treble damages every time they make a product change and some one of, you know, here, there are 15,000 apps that use workout mode API and millions of apps

[00:54:14] Speaker 05:
on the Apple Store.

[00:54:15] Speaker 05:
If every time Apple makes an improvement, it's threatened with liability by any one of the millions of app developers who don't like the particular impact on their legacy technology resulting from that change and can threaten treble damages by getting

[00:54:26] Speaker 05:
Some expert to come in and say oh you could have done a different way that defeats the whole purpose of the product improvement doctrine Which is why we have the doctor.

[00:54:33] Speaker 01:
I suppose that the Watch always had HR in it.

[00:54:42] Speaker 01:
It didn't have the other one and a live court comes in and says, you know, I

[00:54:50] Speaker 01:
Well, no, that wouldn't work.

[00:54:55] Speaker 01:
Suppose it had both of them, but it wasn't ever making the HERPA, whatever you're calling it, public.

[00:55:05] Speaker 01:
It was always in the background.

[00:55:07] Speaker 01:
In other words, it operated the way it operated at the time HRNN was introduced.

[00:55:19] Speaker 01:
A live court comes in and says, you know, if we had access to the HRP, always that was called, you know, we can make this great product.

[00:55:29] Speaker 01:
And so by not letting us have that in the aftermarket, you're monopolizing the market.

[00:55:39] Speaker 01:
and so on.

[00:55:42] Speaker 01:
And that was their claim.

[00:55:43] Speaker 01:
It had nothing to do with any product improvement.

[00:55:48] Speaker 01:
They might well lose, but suppose that's what they were arguing.

[00:55:52] Speaker 05:
So if there were no issue of product improvement, and this is obviously the second point in our brief,

[00:55:58] Speaker 05:
Even if what they say were true, which it clearly isn't, that this is not part and parcel of the product improvement and instead were associated with conduct, it would be... But it's not.

[00:56:06] Speaker 01:
I mean, you've already said it's not.

[00:56:07] Speaker 01:
You already said it's just what was always the case.

[00:56:10] Speaker 05:
With respect, Your Honor, what they're challenging is not the fact that

[00:56:14] Speaker 05:
that the workout mode API has always provided only one source of data.

[00:56:20] Speaker 05:
Their claim is not that that's illegal.

[00:56:22] Speaker 01:
As I'm thinking about it, it seems like that is what they're claiming.

[00:56:25] Speaker 05:
When they say this on their brief at multiple pages, including on page 61, AliveCore, quote, is asking that Apple not be permitted to withdraw an algorithm previously available to third parties.

[00:56:41] Speaker 05:
That's their claim, and that is a refusal to deal claim

[00:56:44] Speaker 05:
if you get past the product improvement document.

[00:56:46] Speaker 01:
All right, well, I'm setting up hypothetical.

[00:56:47] Speaker 01:
Where you didn't withdraw it, you just never had it.

[00:56:49] Speaker 01:
But it was always there and always possible.

[00:56:53] Speaker 01:
You never had it publicly available, but it was always there and always possible.

[00:56:57] Speaker 05:
Again, I don't think that would not be, as you described the hypothetical, if I understand correctly, that would not be a product improvement case, but it would still be a refusal to deal case.

[00:57:05] Speaker 05:
And of course, the law is perfectly clear.

[00:57:08] Speaker 01:
So why isn't that where we are?

[00:57:09] Speaker 01:
Is this a refusal to deal case?

[00:57:11] Speaker 01:
If it's not a refusal to deal case, how does the rule of reason apply, et cetera?

[00:57:15] Speaker 01:
Why are we mixing this up with the product improvement part?

[00:57:18] Speaker 01:
That's what I don't get.

[00:57:21] Speaker 05:
Every product improvement case that this court has decided, or at least the three that we principally talk about, Allied Signal and Foremost and Calcomp, involve product improvements that render the older technology, the competing technology, incompatible.

[00:57:37] Speaker 05:
That's exactly what we have here.

[00:57:39] Speaker 05:
And in those cases, the court each time said the monopolist did not have the obligation to modify its product.

[00:57:44] Speaker 01:
But unlike an Allied.

[00:57:45] Speaker 05:
I'm sorry?

[00:57:46] Speaker 01:
And allied, as I understand it, it was inherently incompatible.

[00:57:50] Speaker 01:
That is, if you move the, I don't quite know what they did, but they moved the sensor from one place to another, and therefore you couldn't use it anymore.

[00:58:01] Speaker 01:
But here, it's not inherently incompatible.

[00:58:05] Speaker 01:
It's incompatible as the result of an earlier decision about how you're going to, and separate decision about how you're going to provide data outside the internal workings of the company, of Apple.

[00:58:20] Speaker 05:
It's inherently incompatible in the existing product.

[00:58:25] Speaker 05:
You'd have to make a product change, just as this court recognized could have done in LA.

[00:58:28] Speaker 01:
But not a product change about the product improvement, a product change about how you reveal

[00:58:33] Speaker 01:
data in general of this category of data?

[00:58:36] Speaker 05:
Well, again, in Allied, the court recognized and the plaintiffs argued that they could have changed the product to keep providing the benefit of the improvement to the people with their technology, but also to make it compatible with others.

[00:58:47] Speaker 01:
Well, I didn't understand that was about changing the product.

[00:58:49] Speaker 01:
That was just give us the old ones.

[00:58:52] Speaker 05:
No, no, no.

[00:58:53] Speaker 05:
Because in Tyco, what happened is that Tyco manufactured a new technology monitor, and then they also

[00:59:00] Speaker 05:
sold sensors that were compatible with that new technology, but they had intentionally designed the monitor to be incompatible with the sensors of all the competing sensor sellers.

[00:59:10] Speaker 05:
And the claim was you had an obligation, Tyco, to make additional changes in your new monitors in order so they could still be used with the competing legacy sensors.

[00:59:19] Speaker 05:
And this court said no, not because it couldn't be done.

[00:59:22] Speaker 05:
And they didn't analyze, you know, would it have been expensive or not or how hard would it have been.

[00:59:26] Speaker 05:
They said you had no obligation to do that.

[00:59:29] Speaker 01:
Because even a monopolist... No, they actually said it was no because it was actually not an anti-competitive.

[00:59:35] Speaker 05:
No, they said no because... That's what one paragraph says.

[00:59:38] Speaker 01:
The next paragraph is about something else.

[00:59:40] Speaker 05:
Well, the paragraph that I'm talking about is the one rejecting the argument that Tyco could have made its monitors compatible with the old sensors, which the court rejected because Tyco had no obligation to help its competitors survive.

[00:59:52] Speaker 05:
That's what I'm talking about.

[00:59:54] Speaker 05:
With respect to the previous paragraph, what the court said was, sure,

[00:59:59] Speaker 05:
You're the only company that sells compatible sensors in the aftermarket.

[01:00:03] Speaker 05:
Nobody else can compete.

[01:00:05] Speaker 05:
But nonetheless, there's no technology forcing, because in the foremarket, there are other competitors.

[01:00:09] Speaker 05:
Other competitors sell different monitors with different technology.

[01:00:13] Speaker 01:
And the same is true here.

[01:00:14] Speaker 05:
Other competitors sell different wearables.

[01:00:16] Speaker 01:
And that was the question I asked at the end of your opponent's argument, because I don't know where that issue is in this case at this point.

[01:00:27] Speaker 05:
It's undisputed that there are other competitors in the wearables market.

[01:00:31] Speaker 05:
And if you look at, and we said this in our brief, that there are various points in the record at pages 2032, 2036, and 2110 of the excerpt of record.

[01:00:42] Speaker 05:
Fitbit, Frontier, iRhythm, other competitors in the wearables market sell their own wearables that have heart rhythm analysis apps or features on them.

[01:00:52] Speaker 05:
So there are other options at the foremarket level, which is what this court said in allied

[01:00:57] Speaker 05:
was sufficient to reject that argument.

[01:00:59] Speaker 01:
But that's a completely different inquiry.

[01:01:01] Speaker 01:
It's a Section 2 inquiry about whether there is actually an effect in competition.

[01:01:07] Speaker 05:
No, I don't think so.

[01:01:08] Speaker 05:
As I understand that argument, it's an associated conduct argument.

[01:01:12] Speaker 05:
The argument is that somehow by forcing people to adopt the technology for their own sensors, that was somehow a violation separate and apart from, not covered by the product improvement doctrine.

[01:01:24] Speaker 05:
And the court said no.

[01:01:25] Speaker 05:
because there are other, you know, people aren't forced to adopt that technology.

[01:01:28] Speaker 05:
And indeed, I would note that the technology forcing argument in this case is far weaker than it was in allied.

[01:01:33] Speaker 05:
Because in this case, and I think my colleague on the other side misspoke in discussing Apple's IRN technology, what they claim is the only feature that's currently in the relevant market.

[01:01:45] Speaker 05:
The IRN uses the tachogram algorithm, not the heart rate algorithm, to detect potential AFib

[01:01:54] Speaker 05:
Because, again, the record is pretty clear on this.

[01:01:58] Speaker 05:
The gold standard for AFib detection is electrocardiogram because you need to measure the interval between the heartbeats.

[01:02:06] Speaker 05:
The heart rate itself doesn't tell you whether somebody's having AFib.

[01:02:09] Speaker 00:
You need to know the intervals between the heartbeats to determine... But you don't contest that you don't provide this service for people who already have an AFib diagnosis?

[01:02:17] Speaker 05:
Correct.

[01:02:18] Speaker 05:
Their product addressed a very tiny subsection of the market.

[01:02:23] Speaker 05:
Our product addresses a much larger section of the market.

[01:02:26] Speaker 05:
It has millions of users.

[01:02:27] Speaker 05:
They claim to have 13,000.

[01:02:28] Speaker 05:
So it's a different segment of the market as they define it.

[01:02:32] Speaker 05:
That's true.

[01:02:32] Speaker 05:
But if I could just make the point that I think I was trying to make, which is in terms of the technology forcing claim, the data that the IRN app that's in the market uses to provide its AFib alerts is the tachogram data.

[01:02:49] Speaker 05:
and Apple makes that information fully available to any app developer that wants it.

[01:02:54] Speaker 05:
And that's at pages 878 of the SER and 36.

[01:02:58] Speaker 03:
Counsel, I guess, along with the questions that Judge Berzon was asking, I guess I'm

[01:03:05] Speaker 03:
I'm coming back to this point, which is, so long as Apple makes a marginal change, that they will then say it's an improvement.

[01:03:13] Speaker 03:
So long as they do that, isn't that just a way to ice out the competition?

[01:03:18] Speaker 03:
That's kind of what I see that they're arguing here.

[01:03:25] Speaker 05:
Well, that is the law.

[01:03:27] Speaker 05:
That is allied.

[01:03:28] Speaker 05:
But I guess part of your question seems to imply that Apple was trying to ice out the competition.

[01:03:34] Speaker 03:
Any marginal improvement?

[01:03:35] Speaker 03:
Any marginal improvement.

[01:03:37] Speaker 03:
Are you saying that Ally says that any marginal improvement is an improvement, and therefore Ally is telling us it's OK?

[01:03:46] Speaker 05:
What Ally says is it has to provide some benefit.

[01:03:48] Speaker 05:
And remember, in Ally, the plaintiff claimed that the

[01:03:51] Speaker 05:
that the alleged improvement really wasn't much of an improvement, but the court said it provided some benefit.

[01:03:55] Speaker 03:
So your answer to my question is yes, any marginal improvement.

[01:03:59] Speaker 03:
Is that what your argument is?

[01:04:01] Speaker 05:
Well, certainly all you need to hold to decide this case is that when it's undisputed, as my opponent has conceded, that the product improvement was in fact an improvement for the market that Apple serves, which is

[01:04:16] Speaker 05:
Again, the point of workout mode is to provide accurate information for people using the Apple Watch during workouts.

[01:04:22] Speaker 05:
It's undisputed that it is an improvement and a significant improvement.

[01:04:24] Speaker 03:
I'm not asking you that.

[01:04:25] Speaker 03:
I asked you a different question.

[01:04:27] Speaker 03:
My question was, so if there is a marginal improvement, what you're saying Allied says that that's sufficient.

[01:04:36] Speaker 05:
Well, again, I think the language in Allied is, quote, some benefit, some benefit for consumers, close quote.

[01:04:42] Speaker 05:
Now, again,

[01:04:44] Speaker 05:
The court to decide this case and affirm the judgment does not need to say that even if it was, you know, trivial and insignificant, that would be sufficient.

[01:04:55] Speaker 05:
This case doesn't present that question.

[01:04:56] Speaker 05:
And it's true.

[01:04:57] Speaker 03:
But who should decide that?

[01:04:58] Speaker 03:
I'm sorry?

[01:04:59] Speaker 03:
Who should decide whether or not it is some improvement?

[01:05:02] Speaker 03:
Should that be a jury?

[01:05:03] Speaker 03:
Should that be the judge?

[01:05:05] Speaker 03:
Who should decide whether or not it is some?

[01:05:07] Speaker 05:
Well, it's like any other question that when the record is undisputed that there is some benefit, as opposing counsel has conceded,

[01:05:14] Speaker 05:
There's no need for a jury trial because there's no genuine issue of material fact.

[01:05:18] Speaker 05:
There could obviously be cases where there would be.

[01:05:20] Speaker 05:
And indeed, in Allied itself, the court said, opposing counsel makes various arguments based on intent, which number one, we think, is if you look at the actual evidence, it doesn't support their characterizations.

[01:05:31] Speaker 05:
But number two, Allied said, that's irrelevant.

[01:05:33] Speaker 05:
Even in Allied, there was actual undisputed evidence of anti-competitive intent.

[01:05:38] Speaker 05:
They made this change in order to block competitors, which is not the case here.

[01:05:41] Speaker 05:
And yet, the court said,

[01:05:42] Speaker 05:
that doesn't matter they said the only kind of intent that would that would matter would be if the intent showed if they had internal documents saying we don't really think this is an improvement we're just going to do this as a way to try and defeat competition because it's not actually providing a benefit for consumers that would obviously undercut the claim of product improvement so can I go back to okay we have that you think a benefit gives you the improvement I want to go back to how we know whether the improvement

[01:06:09] Speaker 00:
Captures the alleged associated conduct or not whether it's separate or not right so Can we go back to the idea about?

[01:06:17] Speaker 00:
Whether you could achieve Helping the competition with zero extra cost to the defendant

[01:06:25] Speaker 00:
I think you were saying it still doesn't matter as long as it's an improvement, it's just total immunity and we consider... Can you tell me what you think the answer is to how we know?

[01:06:36] Speaker 05:
The court obviously does not have to decide that question here.

[01:06:39] Speaker 00:
I think... Well, I think we do.

[01:06:40] Speaker 00:
Tell me what you think the test is.

[01:06:44] Speaker 05:
Well, I think the test is how did the innovator decide to improve the product because judges and juries are not better positioned, the cases say, than innovators to decide how best to improve their product.

[01:06:58] Speaker 05:
And then we look at what the other side claims is what injured them and decide, well, was that part of the way they improved the product or was it separate and apart from that?

[01:07:09] Speaker 00:
And how do we decide whether it's part of or not separate and apart?

[01:07:12] Speaker 00:
What do we look at?

[01:07:13] Speaker 00:
What's the question?

[01:07:14] Speaker 05:
Well, you look at the logical outflow of the improvement itself and what went into making that improvement as opposed to something that just happened at the same time but isn't actually part of the process of whatever that improvement is.

[01:07:29] Speaker 01:
But this is sort of neither because it's the result of something that pre-existed and that they didn't change.

[01:07:38] Speaker 01:
So it's not part of the improvement, and it's not, I forget what your other category was, it's just a background thing that was already there.

[01:07:48] Speaker 05:
I don't think that's right, Your Honor, because they're not complaining.

[01:07:50] Speaker 05:
They were never complaining about the way the API was structured before.

[01:07:55] Speaker 05:
What they're complaining about is the denial.

[01:07:56] Speaker 01:
It wasn't affecting them before, but now it is.

[01:07:58] Speaker 01:
Here's another hypothetical.

[01:08:06] Speaker 01:
that this was not the background structure, that before this new product, they did allow access by consumers and by app developers, either through some toggle way or simultaneously.

[01:08:30] Speaker 01:
to more than one set of this kind of data at a time.

[01:08:33] Speaker 01:
And they changed that when they did the product improvement and blocked it off.

[01:08:40] Speaker 01:
Would that be different?

[01:08:41] Speaker 05:
Oh, yes, completely different.

[01:08:42] Speaker 05:
And I tried to make this point earlier, but I'm not sure I was able to convey it clearly.

[01:08:49] Speaker 05:
That's a key difference.

[01:08:50] Speaker 05:
Because in your hypothetical, there's some improvement.

[01:08:54] Speaker 05:
And there's then additional conduct that's not part of the improvement.

[01:08:58] Speaker 05:
something that is necessary or integral to the improvement itself is separate conduct that has an alleged anti-competitive effect.

[01:09:06] Speaker 05:
Here there is no separate conduct.

[01:09:09] Speaker 05:
All they did is take the old algorithm

[01:09:11] Speaker 05:
come up with a better way to do it and substitute in the new one for the old one, that's the improvement itself.

[01:09:17] Speaker 05:
What they're asking is they're not saying you did something else beyond that.

[01:09:21] Speaker 05:
They're saying we want you to do something else beyond that, namely change your product in order to give something that you never gave before.

[01:09:26] Speaker 01:
That's true.

[01:09:27] Speaker 01:
And I don't know why that's not entirely separate.

[01:09:30] Speaker 01:
And I trust Section 2 analysis that has nothing to do with the product improvement.

[01:09:34] Speaker 05:
Because allied involved that very scenario and said it doesn't work.

[01:09:38] Speaker 05:
But in any event, Your Honor, I know you don't think the product improvement

[01:09:41] Speaker 05:
doctrine applies here, then refusal to deal doctrine.

[01:09:44] Speaker 01:
It's not that I don't think it applies.

[01:09:45] Speaker 01:
I think it's capped off.

[01:09:47] Speaker 01:
And it doesn't have directly to do with what they're challenging now.

[01:09:51] Speaker 05:
Well, I submit that the policy underlying the policy that the product improvement doctrine requires its application in the scenario you're talking about.

[01:10:00] Speaker 05:
Because otherwise, you're going to be forcing developers, I mean, innovators to defend their product improvements against all sorts of claims like this.

[01:10:09] Speaker 05:
But separate and apart from that issue,

[01:10:11] Speaker 05:
leaving product improvement doctrine completely aside, if it's not a product improvement case, it's a refusal to deal case.

[01:10:18] Speaker 05:
Their claim is you're not giving us something in our relationship, our ongoing business relationship, contractual relationship through the app developer and data supplier, you're not giving us something that we want, an input that we want for our product to enable us to compete.

[01:10:32] Speaker 05:
That is a classic, absolutely classic refusal to deal claim and this court's precedence Qualcomm and many other cases

[01:10:39] Speaker 05:
completely foreclosed it.

[01:10:40] Speaker 05:
Indeed, they don't even argue to the contrary in their brief, in their reply brief.

[01:10:44] Speaker 05:
They do not even claim that they can make out a refusal to deal claim.

[01:10:48] Speaker 05:
Their only response is, well, this is an essential facility claim, a doctrine the Supreme Court has never adopted.

[01:10:54] Speaker 05:
This court has never found satisfied that they waved at the motion to dismiss stage and only tried to reinsert into the case after the close of discovery, which they shouldn't be permitted to do.

[01:11:05] Speaker 05:
But in any event, as Your Honor pointed out,

[01:11:07] Speaker 05:
It fails on its face because, as this court said in the Metronet case, for there to be an essential facility, first and foremost, it has to be essential to competition in the relevant market.

[01:11:19] Speaker 05:
And by their definition of the relevant market, the only product in the relevant market is Apple's IRN feature, which does not use Harpo, which they define as the essential facility.

[01:11:30] Speaker 05:
So if the only product in the market doesn't use the alleged essential facility to compete,

[01:11:35] Speaker 05:
by definition, it's not an essential facility because it's not necessary to compete.

[01:11:39] Speaker 05:
And indeed, not only is it not essential, since the IRN feature doesn't use it, the IRN feature does use, as I said before, the tachogram algorithm and Apple provides that information to any app developer that wants it.

[01:11:58] Speaker 00:
It seems like your answer now to the test for whether something is part of the improvement has something to do with whether something additional would need to be created.

[01:12:09] Speaker 00:
You seem to acknowledge that if it's shutting off something that exists, that could count as associated conduct.

[01:12:14] Speaker 00:
So I'm taking it that your answer has something to do with creating something new?

[01:12:20] Speaker 05:
Well, I think certainly if you can do the product improvement without creating the new thing,

[01:12:26] Speaker 05:
and it's clear you would have to create the new thing in order to do the product improvement and give them what they want, then it seems that clearly is not something that should be a basis for liability.

[01:12:35] Speaker 00:
It's here that creating something new is essentially creating the switch.

[01:12:38] Speaker 00:
There's no switch until creating the switch.

[01:12:40] Speaker 00:
You're saying no matter how expensive it would be to create the switch, we just never have to create the switch.

[01:12:45] Speaker 00:
Is that your argument?

[01:12:46] Speaker 05:
Yes, because again, allied and foremost and

[01:12:50] Speaker 05:
Calcomp all say the monopolist does not have to change its product to help its competitors.

[01:12:53] Speaker 00:
And so they say it's undisputed that creating the switch would be de minimis.

[01:12:59] Speaker 00:
Like they say their experts said it would have been really easy.

[01:13:02] Speaker 00:
It would have cost almost nothing or maybe they even say almost nothing or nothing.

[01:13:05] Speaker 00:
No, no, no.

[01:13:06] Speaker 05:
It's undisputed that there would be costs.

[01:13:09] Speaker 05:
both in terms of having to code, recode the architecture, but also in terms of, I mean, keeping new, keeping two algorithms on the phone, I mean, on the watch, indefinitely takes more memory.

[01:13:20] Speaker 00:
Okay, but their expert says it's de minimis cost.

[01:13:23] Speaker 05:
All of those things are.

[01:13:25] Speaker 05:
He said, quote, insignificant, and he was unable to quantify the cost.

[01:13:28] Speaker 00:
Okay, but then they say, sorry, wait, wait, wait, they say,

[01:13:32] Speaker 00:
They said it was insignificant, and they said today, your expert never contested that.

[01:13:38] Speaker 00:
Can you point me to where your expert contested it?

[01:13:41] Speaker 05:
Well, there's ample evidence about the cost.

[01:13:43] Speaker 05:
So I'll give you a few examples.

[01:13:45] Speaker 05:
I mean, there's a lot of evidence.

[01:13:45] Speaker 05:
But I guess my first point would be, since it's undisputed that there would be costs,

[01:13:52] Speaker 05:
that should be the end of the case.

[01:13:54] Speaker 00:
I understand that's your argument, and maybe that's a good argument, that any cost to do anything new is just enough.

[01:13:59] Speaker 00:
It's not pretext, it's enough.

[01:14:01] Speaker 00:
But where is your thing saying it's more than de minimis?

[01:14:04] Speaker 05:
So the disadvantages of doing what they want are multiple.

[01:14:09] Speaker 05:
So first of all, Apple has an interest in providing the most accurate data that it can, obviously.

[01:14:15] Speaker 00:
No, no.

[01:14:16] Speaker 00:
I want to know where your expert says the costs of creating the switch would be more than de minimis in terms of battery life, processing, or engineering time.

[01:14:25] Speaker 00:
Where is something that says it's actually a lot of cost?

[01:14:28] Speaker 05:
Well, again, neither side quantified it.

[01:14:31] Speaker 05:
There's ample evidence from our witnesses that there would be costs.

[01:14:34] Speaker 03:
Where?

[01:14:35] Speaker 05:
Where?

[01:14:36] Speaker 03:
That's the question.

[01:14:37] Speaker 05:
881 to 882 of the supplemental excerpt of record.

[01:14:40] Speaker 05:
At 1924 to 25 of the excerpt of record.

[01:14:44] Speaker 05:
The fact that doing what they want would cause additional battery power and processing power costs.

[01:14:51] Speaker 05:
That's at SER 884, excerpt of record 2054.

[01:14:55] Speaker 01:
But the record is that for at least several years,

[01:15:00] Speaker 01:
The old technology was on them.

[01:15:03] Speaker 05:
Yes.

[01:15:03] Speaker 05:
And again, the process of technological innovation often proceeds step by step.

[01:15:08] Speaker 01:
And when they first developed... Well, OK.

[01:15:11] Speaker 01:
But we're looking at a damages claim for some period of time.

[01:15:14] Speaker 01:
So at least for some period of time, it doesn't appear that the battery life issue was an issue.

[01:15:22] Speaker 05:
Again, because they couldn't fully implement the product improvement until they had fully

[01:15:26] Speaker 05:
perfected the Hearn algorithm, the new algorithm.

[01:15:29] Speaker 05:
They kept the old one around.

[01:15:31] Speaker 01:
So we're only looking from the period from the time they actually took the old technology off the watch.

[01:15:37] Speaker 05:
But there's no basis for liability because, again, they had already improved them.

[01:15:44] Speaker 01:
I'm not talking about the base of liability.

[01:15:45] Speaker 01:
I'm talking about the pertinence of this expert assertion that there's a battery life issue here.

[01:15:54] Speaker 05:
So even during the time when Harpo was still on the machine and being used, if necessary, only during the first 60 seconds, the evidence is that by not continuing to run the whole time and store its output, they were saving memory space, which was significant.

[01:16:11] Speaker 05:
But it's true, obviously.

[01:16:13] Speaker 05:
As long as Harpo was still on the machine, they were still using memory space for that.

[01:16:16] Speaker 05:
That's why the goal was ultimately to get rid of it.

[01:16:18] Speaker 05:
As an Apple witness testified, this is at

[01:16:22] Speaker 05:
38, 35 to 36 of the accepted record.

[01:16:25] Speaker 05:
He said the system is extremely constrained in terms of memory, so we were trying very hard to free up memory in particular to add more features.

[01:16:31] Speaker 05:
Harpo was taking up quite a lot of space.

[01:16:34] Speaker 05:
And that's why they were trying to get rid of it.

[01:16:36] Speaker 05:
So even the ultimate removal of Harpo in itself is a further benefit, and also just part and parcel of the original.

[01:16:42] Speaker 00:
But so back to the cost of... Well, okay, I guess you're saying that it's not just the creation of the switch, it's the other stream of data would have this space.

[01:16:53] Speaker 00:
You're saying that... Taking up space on the watch, you're taking up processing power, you're taking up energy... So you're saying there's qualitative

[01:17:01] Speaker 00:
there are qualitative quotes like that that say it's some processing, it's some battery, and there's some programming cost, but it never gets quantified.

[01:17:09] Speaker 05:
Correct.

[01:17:09] Speaker 05:
And they say, oh, well, who cares?

[01:17:11] Speaker 05:
It's insignificant.

[01:17:11] Speaker 00:
But the point is- Wait, wait, wait.

[01:17:16] Speaker 00:
Can I just ask?

[01:17:18] Speaker 00:
We've got the expert reports we have.

[01:17:19] Speaker 00:
So if we were to say that a jury has to determine, and you might not like this test, but if a jury had to determine whether the cost was more than de minimis,

[01:17:32] Speaker 00:
Are you going to be able to, what would you do if we said that was the test?

[01:17:36] Speaker 00:
Are you going to just lose then?

[01:17:38] Speaker 00:
Or now we're in the section two analysis because you haven't succeeded in showing it's part of the improvement.

[01:17:43] Speaker 00:
Would you ask for more discovery?

[01:17:44] Speaker 00:
What would we do if we have a test that says you have to show it's more than de minimis?

[01:17:49] Speaker 05:
Well, what you would do is you would send every product improvement case to a jury and defeat the entire purpose of the doctrine, which is to incentivize innovation and not force

[01:18:00] Speaker 05:
innovators to try to prove to an antitrust jury that the way they did it was better than the way some expert came up with a better way to do it.

[01:18:08] Speaker 05:
The whole point of this is that antitrust juries are not well equipped to make innovation decisions and decide how innovators should best try to make the best product they can for the market.

[01:18:20] Speaker 05:
And threatening innovators with treble damages liability every single time they make an improvement would be disastrous for the American economy and totally turn antitrust law upside down.

[01:18:29] Speaker 00:
Okay, so that's your argument, very good argument for why we shouldn't say the test is, you have to show it's more than de minimis.

[01:18:34] Speaker 00:
But I guess, just as a practical matter for this case, if we said that was the test, you'd ask to reopen discoveries, your expert would give more of an analysis of that question, and that's the way these cases would proceed also in the future.

[01:18:46] Speaker 05:
I mean, I don't know, I'm not a trial lawyer.

[01:18:48] Speaker 05:
I don't know how that would happen.

[01:18:49] Speaker 05:
That's one possibility.

[01:18:51] Speaker 05:
But, you know, at the end of the day, their expert claims it's insignificant, and their expert's going to, and if that's enough to create a jury issue,

[01:18:58] Speaker 05:
It's very easy to find experts who can say costs are insignificant if they don't even have to quantify what the costs are.

[01:19:03] Speaker 05:
I mean, that insignificant, what does that mean?

[01:19:04] Speaker 05:
That doesn't have any content.

[01:19:06] Speaker 05:
It's just an assertion of a Ipsy Dixit opinion.

[01:19:09] Speaker 05:
If that's enough to get to a jury, every one of these cases goes to a jury.

[01:19:12] Speaker 00:
And that's not what this court... I guess they didn't quantify it either.

[01:19:14] Speaker 00:
They just said it was de minimis.

[01:19:15] Speaker 00:
They didn't say it's this many dollars either.

[01:19:17] Speaker 00:
No one quantified it.

[01:19:18] Speaker 05:
That's correct.

[01:19:20] Speaker 05:
And again, what this court said in allied is not

[01:19:24] Speaker 05:
Oh, well, let's look at how much it would have cost to do what the plaintiffs say you should have done.

[01:19:28] Speaker 05:
They said it doesn't matter because even a monopolist has no obligation to change its product to assist its competitors.

[01:19:35] Speaker 05:
And again, as I was suggesting to Judge Berzon, even if the court is concerned about how the product improvement doctrine should apply in this case, this is a refusal to deal case.

[01:19:46] Speaker 05:
Not every product improvement case is a refusal to deal case.

[01:19:49] Speaker 05:
Many are not, right?

[01:19:50] Speaker 05:
But here, we have an ongoing contractual business relationship between Apple and AliveCore.

[01:19:55] Speaker 05:
They're in the app store.

[01:19:57] Speaker 05:
They're developers.

[01:19:58] Speaker 05:
They have a license agreement, a contractual relationship.

[01:20:01] Speaker 05:
They pay their $99 a year fee to be an app developer.

[01:20:05] Speaker 05:
And they're saying, as part of our ongoing business relationship, you have an obligation to give us more than what you're giving us because we want it.

[01:20:11] Speaker 05:
That is a refusal.

[01:20:12] Speaker 00:
Can I ask what your response is to the intent evidence?

[01:20:16] Speaker 05:
Yes, Your Honor.

[01:20:17] Speaker 05:
So the intent evidence, if you actually look at that evidence,

[01:20:20] Speaker 05:
It doesn't show in any intent to drive a live core or cardiogram out of business.

[01:20:25] Speaker 05:
To the contrary, they are expressing concern that they think- Okay, wait, sorry.

[01:20:30] Speaker 00:
Let me be more specific.

[01:20:32] Speaker 00:
What do we do with the intent evidence that Apple wanted to keep the, I guess, I don't know if market is the right word, but keep the business of doing AFib detection so that it could make money from health insurers in the future, I think would be how you read the email that says that.

[01:20:49] Speaker 05:
Yes.

[01:20:49] Speaker 00:
What do you do with that?

[01:20:50] Speaker 05:
So that email is written by Mr. Cha and he testified in his deposition where he suggested, let's hold back the data and we could make lots of money from our new algorithm once it comes out for the IRN feature.

[01:21:06] Speaker 05:
He said in his deposition, I'm not aware of any algorithm held back as a means to monetize algorithms at Apple.

[01:21:12] Speaker 05:
This is a debate that obviously I was a proponent of.

[01:21:15] Speaker 05:
but I eventually lost.

[01:21:16] Speaker 05:
The consensus was we should make sure all of this data is available to consumers in HealthKit, period.

[01:21:22] Speaker 05:
And Apple's policy, that's at ER 2961 and 2962, Apple's policy, this is at SER 871, Apple has made a policy decision that it provides health data to users for free, it believes the data belongs to the users, so it's not monetizing it, it's providing it free to users, and users are free to allow app developers to use it if they choose.

[01:21:43] Speaker 05:
One, Apple employee or two in email exchanges were speculating years ago they might be able to do this.

[01:21:48] Speaker 05:
Apple has not done it.

[01:21:49] Speaker 05:
It's against its policy to do it.

[01:21:51] Speaker 00:
So I guess your answer is we just ignore it because it's been contradicted.

[01:21:55] Speaker 00:
But say we don't ignore it.

[01:21:56] Speaker 00:
Say that deposition testimony didn't exist.

[01:21:58] Speaker 00:
Do you have any argument about how the legal framework works for thinking about this kind of intent evidence?

[01:22:04] Speaker 00:
I mean, say we just had the email that said we wanted to keep this data for ourselves to sell to health insurers in the future.

[01:22:13] Speaker 00:
Are you saying that would be relevant if it wasn't contradicted?

[01:22:17] Speaker 00:
That should be part of the test at what stage?

[01:22:19] Speaker 05:
Two responses.

[01:22:20] Speaker 05:
Number one, what that evidence is talking about is not Harpo.

[01:22:23] Speaker 05:
It's not talking about Harpo, the algorithm that they're complaining about being withdrawn.

[01:22:27] Speaker 05:
It's talking about the tachogram algorithm, the tachogram algorithm data that Apple freely provides to developers through the tachogram API.

[01:22:35] Speaker 00:
OK, well, let's assume it's not that.

[01:22:37] Speaker 00:
Let's assume you have an email that says,

[01:22:41] Speaker 00:
We are cutting off HRPO data because we want to someday be able to sell this to health insurers.

[01:22:45] Speaker 05:
Right.

[01:22:46] Speaker 05:
What this court said in Allied Orthopedic at page 1001 is, quote, statements of an innovator's intent to harm a competitor through genuine product improvement are insufficient to create a jury question.

[01:22:58] Speaker 05:
So that's the law.

[01:23:00] Speaker 05:
So even if there were such intent here, and there isn't for the reasons that I just stated, but even if there were, it would not create a jury question.

[01:23:10] Speaker 01:
How does that make sense?

[01:23:14] Speaker 01:
I understand there is a sentence there.

[01:23:16] Speaker 01:
But when you talk about it being pro-competitive to have a product improvement, that seems to be contradicted if there is no competition.

[01:23:31] Speaker 01:
If the whole point of doing it is to eliminate competition, why is it pro-competitive?

[01:23:37] Speaker 05:
Well, in Allied,

[01:23:39] Speaker 05:
and also here.

[01:23:40] Speaker 05:
Remember, we're talking about an aftermarket and a foremarket.

[01:23:44] Speaker 05:
Allied was competing with other monitors' sellers in the foremarket.

[01:23:48] Speaker 01:
I understand.

[01:23:48] Speaker 01:
I'm just asking conceptually.

[01:23:50] Speaker 01:
I mean, that sentence doesn't seem to depend on this variegated market.

[01:23:58] Speaker 01:
It just says that whenever you have a product improvement, even if the intent is to foreclose competition, that doesn't matter.

[01:24:05] Speaker 05:
Does that make any sense?

[01:24:08] Speaker 05:
this case is very different from the hypothetical I think we're discussing.

[01:24:11] Speaker 05:
But yes, I think it does make sense because, as was suggested earlier, it's very common in antitrust cases to find statements in emails and internal correspondence about intent to harm competitors.

[01:24:23] Speaker 05:
That's what competition is designed to, that's just kind of inherent in competition.

[01:24:31] Speaker 01:
It's inherent in competition if there is competition.

[01:24:34] Speaker 01:
If you have a market in which there's no competition and you're trying to make sure that there remains no competition, then why isn't the intent to make sure that there is no competition a relevant consideration?

[01:24:47] Speaker 05:
I think the theory of all the cases that have created and expanded upon the product improvement doctrine is that innovation, encouraging innovation,

[01:24:59] Speaker 05:
is one of the goals of the antitrust laws.

[01:25:01] Speaker 05:
And we ought not, therefore, allow the doctrine to disincentivize innovation by making it easy for plaintiffs, typically plaintiffs trying to profit off of legacy technology, as here, to get to an antitrust jury and threaten treble damages every time an innovator innovates by adopting a product improvement.

[01:25:20] Speaker 05:
So the courts have said, if it's actually improvement, if it actually provides some benefit to consumers, we're not going to go down that road.

[01:25:27] Speaker 05:
And that may, in certain circumstances, not this one, but in certain circumstances, that might mean that you are not imposing liability in a way that might deter something that could have some harmful effects.

[01:25:39] Speaker 05:
The doctrine recognizes that even if competitors are harmed, there's no liability.

[01:25:43] Speaker 05:
But the point of the doctrine is to achieve the policy goal of ensuring that the antitrust laws

[01:25:48] Speaker 05:
particularly with treble damages liability, do not over deter valuable, beneficial, pro-competitive conduct like product improvement.

[01:25:56] Speaker 01:
That's my problem.

[01:25:57] Speaker 05:
But innovation is pro-competitive.

[01:25:58] Speaker 01:
It may be beneficial in some abstract way, but in my hypothetical, it's not pro-competitive.

[01:26:03] Speaker 05:
The Supreme Court has said innovation is pro-competitive.

[01:26:07] Speaker 05:
That's one of the goals of the antitrust laws.

[01:26:09] Speaker 00:
So you're saying just giving consumers something new counts as pro-competitive even if it's not increasing

[01:26:16] Speaker 00:
the number of companies providing benefits.

[01:26:20] Speaker 00:
Just providing a better benefit is pro-competitive in the relevant sense is your argument?

[01:26:25] Speaker 00:
I think that's right.

[01:26:28] Speaker 00:
Explain so in your view I think you were kind of getting at this earlier about what was going on with the technology and allied that like there's something There's something that was considered part of the improvement that was also arguably anti-competitive and something else that was considered the associated conduct Can you just walk us through for a second your understanding of the sensors and monitors or is it too confusing to do that?

[01:26:49] Speaker 00:
But are you able to tell us?

[01:26:50] Speaker 00:
What was part of the improvement that was?

[01:26:53] Speaker 00:
Alleged to have been anti-competitive and then what was considered the associated conduct and how they were different Well, I don't think there was anything this goes to the two paragraph thing you were talking to judge Burson You started to say and I just wondered what you're what you were saying Yeah, I mean, I guess I don't have an understanding that there was any associated conduct in I think in Tyco There was no associated conduct.

[01:27:13] Speaker 05:
There were claims of associated conduct and the court said no and

[01:27:15] Speaker 05:
The the the well that's not right because they say the associate conduct argument failed because it was a 45% of the sales were still to the other Well, I mean it may be it may be it may be difficult to I Mean there may be some ambiguities here I have read the court's analysis of forcing which is I think what you're talking about because before it goes to the forcing paragraph the court says

[01:27:44] Speaker 05:
There has to be other conduct, right?

[01:27:47] Speaker 05:
And I suppose this may be what you're saying.

[01:27:50] Speaker 05:
In Tyco, the product improvement was to come out with the new monitor with the new technology and the new sensors that match with the new monitor with the new technology.

[01:28:00] Speaker 05:
And then Tyco also separately discontinued its old product.

[01:28:05] Speaker 05:
So in that sense, that discontinuation, which was not

[01:28:09] Speaker 05:
I mean, they could have kept selling both, right?

[01:28:10] Speaker 05:
There was nothing integral to the new product that meant they couldn't keep selling the old product.

[01:28:15] Speaker 05:
So in that sense, they were analyzing the discontinuation separately, right?

[01:28:18] Speaker 05:
We don't have that here, because remember... No, no, okay.

[01:28:22] Speaker 00:
Okay, great.

[01:28:23] Speaker 00:
So the discontinuation was what they analyzed separately, but there was part of something you were saying was part of the conduct itself, as you understood it, that was alleged to have... Yeah, the incompatibility was part of the product improvement itself, right?

[01:28:36] Speaker 05:
And that's what the court said.

[01:28:38] Speaker 05:
That's not a basis for liability, even though you could have avoided the incompatibility.

[01:28:42] Speaker 05:
That's still not a basis for liability, because that's part of the improvement.

[01:28:46] Speaker 05:
I'm not sure that answers your question.

[01:28:48] Speaker 00:
Yeah, I think we have done our questions.

[01:28:50] Speaker 00:
Thank you.

[01:28:59] Speaker 04:
Thank you.

[01:29:01] Speaker 04:
If there's any questions that you would specifically like me to answer to start, I'd be happy to do so, but I have a couple points that I would love to rebut.

[01:29:10] Speaker 00:
Go ahead.

[01:29:10] Speaker 04:
All right.

[01:29:10] Speaker 04:
Thank you, Judge Friedman.

[01:29:12] Speaker 04:
So on this point of discontinuation at the end of Allied Orthopedic, I believe that Judge Berzon has actually hit on one of the key points, one of the key reasons that this district court should be reversed, which is that we do have evidence of a monopolist discontinuing old technology in a way that gave consumers no choice.

[01:29:29] Speaker 04:
and forced adoption.

[01:29:30] Speaker 04:
We have 100% market share for Apple in this relevant market, which it does not dispute on this record.

[01:29:36] Speaker 01:
Well, the possible difference is that you have this background policy and structure of not providing more than one.

[01:29:48] Speaker 04:
Actually, can I respond to that?

[01:29:49] Speaker 04:
Because that was questioned during my friend's argument.

[01:29:53] Speaker 04:
The record is actually that Apple has a policy of reporting

[01:29:56] Speaker 04:
multiple different heart rate algorithms outputs on the watch simultaneously.

[01:30:01] Speaker 04:
You have seven to eight different heart rate algorithms.

[01:30:04] Speaker 04:
The witness that he referred to was a man named Stephen Wado.

[01:30:08] Speaker 04:
I asked him, do each of these have a different purpose?

[01:30:10] Speaker 04:
And he said, yes.

[01:30:11] Speaker 04:
That includes HRPO and HRNN.

[01:30:13] Speaker 01:
So that would be a fact question, whether it was such a background policy or structure.

[01:30:21] Speaker 01:
But if there were, then this would be something more than simply not discontinuing the prior

[01:30:33] Speaker 01:
algorithm because there would have to be a change in this drug.

[01:30:39] Speaker 01:
In other words, I understand allied, you have these physical things and you either sell them or you don't, right?

[01:30:47] Speaker 01:
Here, you'd have to fiddle around some, maybe just a little bit in order to expose this data.

[01:30:56] Speaker 01:
So the question is, does that matter?

[01:30:58] Speaker 04:
I don't know that it does because the old technology was that they reported HRPO outputs to third parties.

[01:31:06] Speaker 04:
What they stopped was reporting HRPO outputs to third parties.

[01:31:11] Speaker 00:
So the discontinuation of the old technology is... But if they want to do the improvement that I think you haven't disputed as the improvement, add HRNN, the only way to do that without the discontinuing is to create a switch.

[01:31:26] Speaker 04:
Yes, but actually real quick on this point, what the claimed improvement is, isn't introducing HRNN, but how HRNN works.

[01:31:36] Speaker 04:
That's what they claim is the improvement.

[01:31:38] Speaker 00:
throughout this is semantic right I mean basically they're saying exercise mode got better because HR and then I don't fitness and exercise they've been very careful on that because it's affirmatively worse for medical right but it doesn't matter right as long as it's I mean I don't think there's any significance of the way legal significance to what type of improvement is the improvement really

[01:31:58] Speaker 04:
Well, so first of all, one thing that my friend said was that the language in allied orthopedic is about some benefit, is actually some new benefit.

[01:32:07] Speaker 04:
That's the language in allied orthopedic.

[01:32:09] Speaker 00:
But I don't think you dispute that the exercise mode is better.

[01:32:13] Speaker 04:
We do.

[01:32:14] Speaker 00:
Well, it's worse for people with AFib, but better overall.

[01:32:18] Speaker 04:
There's always been two purposes.

[01:32:20] Speaker 04:
This is in the record in our opening brief.

[01:32:22] Speaker 04:
One is exercise and fitness.

[01:32:25] Speaker 04:
One is health monitoring.

[01:32:26] Speaker 04:
In fact, they had a specific category of health monitoring apps.

[01:32:30] Speaker 04:
AliveCore was one of those.

[01:32:32] Speaker 04:
And the question is, is it an improvement when you introduce a new algorithm that they claim it provides benefits for one side while keeping the same algorithm in the same API?

[01:32:45] Speaker 01:
Now you're really throwing me off because I thought your whole structure here is we're not challenging.

[01:32:50] Speaker 04:
What we're not challenging is that we're not claiming that introducing HRNN was anti-competitive.

[01:32:58] Speaker 01:
You're not claiming that it wasn't an improvement.

[01:33:00] Speaker 04:
Well, we believe there are questions about that.

[01:33:02] Speaker 04:
They didn't advertise it.

[01:33:04] Speaker 04:
It was so marginal that people didn't notice it.

[01:33:07] Speaker 01:
But then you're completely changing the case from what I understood that you were trying to structure in your brief, which is,

[01:33:15] Speaker 01:
We're not questioning that.

[01:33:16] Speaker 01:
We're questioning the decision not to have us, allow us access to the deck.

[01:33:22] Speaker 04:
Yes.

[01:33:23] Speaker 04:
That is what we were challenging.

[01:33:24] Speaker 01:
Why are you coming to this other thing?

[01:33:26] Speaker 04:
Because they're making such a big deal out of it, Your Honor.

[01:33:29] Speaker 04:
Because if they're trying, they convinced the lower court to kick this case on summary judgment because the lower court accepted that not only are they correct that the product design change is introducing HRNN, not only

[01:33:43] Speaker 04:
is the, were they correct that you should not focus on gating off HRPO and that not only should you focus on, that you should

[01:33:52] Speaker 04:
not only, you know, that there's evidence of discontinuation, forcing adoption of IRNN, that because they claim there's a product improvement, this case goes away and it's immune from the antitrust law.

[01:34:02] Speaker 01:
So the reason... But your answer is no, it doesn't go away.

[01:34:05] Speaker 01:
I mean, that's a much clearer way to think about it.

[01:34:08] Speaker 01:
If we start getting into arguments about whether it was a product improvement, I think what happens is exactly what happened in the district court.

[01:34:16] Speaker 01:
You get deflected from the real question.

[01:34:18] Speaker 04:
I see my time is up but I agree with you and that's why we structured our brief the way we did because we believe that the district court disregarded all the evidence that shows that this is actionable under allied orthopedics own structure.

[01:34:35] Speaker 00:
And and and but that means that in your theory they are obligated to create the switch.

[01:34:43] Speaker 04:
Yes.

[01:34:43] Speaker 04:
And by the way, on this whole thing about intent, that was in the section on whether you can analyze a product improvement.

[01:34:50] Speaker 04:
The quote is actually, statements of an innovator's intent to harm a competitor through genuine product improvement are insufficient by themselves to create a jury question.

[01:35:01] Speaker 00:
It may just be circular, because it depends whether this is all an improvement or not.

[01:35:04] Speaker 04:
And this is why we had such a long conversation about the necessary consequence, because

[01:35:09] Speaker 04:
If it is de minimis cost to create this switch, is it genuinely true that, to use my friend's statement, that gating off HRPO was, quote, part of introducing HRNN?

[01:35:24] Speaker 03:
And we would need a new test for that.

[01:35:26] Speaker 04:
I'm not sure that, I believe that we can operate under the necessary consequence, but recognizing that you'd want to avoid

[01:35:33] Speaker 04:
sort of slippery slope, you might need to articulate what exactly.

[01:35:36] Speaker 00:
And what is your response to the idea that experts are always going to say it would have been easy, and so every case goes to the jury?

[01:35:43] Speaker 00:
Do you have an answer to that?

[01:35:46] Speaker 04:
Well, it's built into the summary judgment standard, genuine dispute.

[01:35:49] Speaker 04:
Here, the stuff about memory and battery power, I'm the one who took those depositions.

[01:35:54] Speaker 04:
I actually know what those people said.

[01:35:56] Speaker 04:
And they said, no, there's no reason that there's nothing that we were prevented from doing by keeping HRPO.

[01:36:02] Speaker 04:
Battery power was de minimis.

[01:36:04] Speaker 04:
Memory usage, de minimis.

[01:36:06] Speaker 04:
Reporting, if you're going to report in the workout mode, all you had to do was have one report at the same time.

[01:36:11] Speaker 04:
And we know that's what they did.

[01:36:13] Speaker 04:
Apple actually used HRPO after it introduced HRNN for years.

[01:36:19] Speaker 04:
So there necessarily has to be a factual inquiry there, yes.

[01:36:24] Speaker 04:
We do believe so, yes.

[01:36:26] Speaker 00:
And you think you only win if it's de minimis, or you win if it could be more than de minimis under the test?

[01:36:33] Speaker 00:
Is the test that it's only de minimis?

[01:36:36] Speaker 04:
I believe it's an excellent question.

[01:36:42] Speaker 04:
But I think that you could have situations, context specific, where it might be more than de minimis.

[01:36:48] Speaker 04:
We know, for example, Apple has been enjoined to make certain major changes to the way its app store operates, where

[01:36:56] Speaker 04:
That's more than a de minimis cost, but it is meant to avoid anti-competitive effects from its actions under California state law, of course.

[01:37:03] Speaker 04:
But that's a completely different case.

[01:37:05] Speaker 04:
However, what we know, and this is where we get into the substantially less restrictive alternative portion of the balancing test, this court already has precedent that addresses that sort of situation.

[01:37:17] Speaker 04:
And if you get to that point where you are, the plaintiffs have the burden shifted back to them to prove a substantially less restrictive alternative,

[01:37:25] Speaker 04:
there's already ample precedent that addresses that.

[01:37:30] Speaker 00:
Thank you both sides for the helpful arguments.

[01:37:32] Speaker 00:
I think we've exhausted our questions.

[01:37:34] Speaker 00:
This case is submitted.