Friday, August 21, 2020

Apple tells court it "wants Epic on iOS" but Fortnite "hotfix" turned into Epic Games' "hot mess": response to motion for emergency relief

Apple just filed its response to Epic Games' motion for a temporary restraining order (TRO). As no one would have doubted, the iPhone maker opposes the Fortnite and Unreal publisher's motion in the strongest terms (this post continues below the document):

20-08-21 Apple's Respon... by Florian Mueller on Scribd

With respect to Epic's claim of suffering irreparable harm unless the court grants its motion, Apple's opposition brief is consistent with a statement it provided to The Verge a few days ago. The term "status quo" plays a central role here. The purpose of temporary relief is to prevent a party from changing a situation to the moving party's detriment in the absence of an injunction (a TRO is the fastest injunction, even more preliminary than what is called a preliminary injunction). Apple explains to the court that Epic's perspective on the status quo is, in reality, something else: the status quo would be for Epic to simply comply with Apple's App Store terms and policies, and with its developer agreement, while its antitrust complaint challenging those terms is pending. If, however, the court granted Epic's motion, it would allow Epic to get away with a breach of its contractual obligations. The requested TRO would not preserve the status quo. It would force Apple to modify its long-standing App Store terms.

Another key term--in connection with any type of injunction--is "irreparable harm." Epic's motion for a TRO argued that the unavailability of Fortnite on the App Store and, as a further consequence of Epic's non-compliance, the termination of its developer agreement (which would prevent Epic from using Apple's developer tools in the further development not only of Epic's games but also of its Unreal Engine) would constitute irreparable harm. Apple's opposition brief dismisses that theory and distinguishes between irreparable harm on the one hand and "self-inflicted wounds" on the other hand. The Ninth Circuit, which is the appeals court for (among many others) the Northern District of California, stated earlier this year that "self-inflicted wounds are not irreparable injury," quoting earlier decisions in this circuit and in the Seventh Circuit.

Apple's motion stresses that point not only in legalese but also in colloquial terms:

"Apple has offered Epic the opportunity to cure, to go back to the status quo before Epic installed its 'hotfix' that turned into its hot mess, and to be welcomed back into the App Store. All of this can happen without any intervention of the Court or expenditure of judicial resources. And Epic would be free to pursue its primary lawsuit." (emphasis added)

Epic's motion explained what the Fortnite maker means by "hotfix." They submitted a version of Fortnite to Apple's App Store review that seemed to comply with Apple's in-app purchasing rules at the time. However, it already contained program code that made a request to Epic's server in order to find out whether it should offer an alternative payment method in addition to making payments via Apple's in-app purchasing system. A little over a week ago, Epic's server started telling the client (the Fortnite app) to make that additional offer, which is not permitted by Apple's app distribution terms. Epic threw down the gauntlet to Apple:

"Around 2am on August 13, Mr. Sweeney of Epic wrote to Apple stating its intent to breach Epic's agreements: “Epic will no longer adhere to Apple’s payment processing restrictions.'"

The term "hotfix" sounds like Epic just sent some new graphics or similar data down to the client. A "hotfix" is something that doesn't require a formal update, but has an impact on functionality. In this case, the "hotfix" was simply some data--presumably in an XML or JSON format--that told the client to activate some functionality Epic had secretly incorporated into the last approved update. Apple's motion doesn't use the term "Trojan horse," but that's what it is (not in the sense of a computer virus, of course).

The "hot mess" is that Apple had to remove Fortnite from the App Store. The only alternative for Apple would have been to waive a fundamental contractual obligation that iOS app developers have to meet.

Apple's brief quotes some Fortnite gamers (referring to a declaration by Epic's CEO Tim Sweeney):

"Some Epic customers, based on materials attached to Epic's motion, have seen through Epic's subterfuge to understand this is a problem of Epic's making. As one user asked Epic's customer support team after the takedown: 'Did you guys just screw over all your mobile players?' [...] One user predicted Epic would 'remove the illegal (according to Apple) update and be back to normal in no time.'"

That user predicts the same as I also wrote yesterday: I expect the TRO motion to go nowhere, but Fortnite to return to the App Store in the near term.

It's not publicly known how many of Fortnite's 350 million users run the game on iOS, but Apple's motion mentions "[t]ens of millions of iOS Fortnite players."

Unsurprisingly, Apple is not amused by Epic's PR campaign, the latest part of it is a #FreeFortniteCup "with prizes targeting Apple." That tournament will start on Sunday. IGN, a leading games website, wrote that "Epic turns its legal dispute into an in-game event."

All of what I just wrote is unrelated to the merits of Epic's case. For now the question is just whether Epic is likely to persuade the court to enjoin Apple, and I don't see that happening.

Large parts of Apple's response to the motion dispute that anything is anticompetitive about the App Store terms. Apple also disagrees that in-app payments are a separate market from the App Store. But it's too early--just about a week into this litigation--to discuss this in detail. Apple just has to convince the court that this isn't a clear and simple case under settled antitrust law. Apple's lawyers argue that the court would have to "create new law on a scant record" in order to grant Epic's motion.

Judge Yvonne Gonzalez Rogers will preside over the motion hearing (Monday 3 PM Pacific Time; via Zoom).

Finally, just an update to a recent post in which I mentioned three of the Gibson Dunn lawyers representing Apple in this case. The first-named attorney on today's filing signed up shortly after them: Theodore J. "Ted" Boutrous, whom some of you may have seen on TV.

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