[Update] The order (PDF, upploaded by The Verge) came down a few hours later and is consistent with what Judge Gonzalez Rogers said. [/Update]
On Monday afternoon, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California held an Epic Games v. Apple motion hearing. At the outset, the judge outlined her initial inclination, which was to
deny Epic's motion for a temporary restraining order (TRO) against Apple with respect to Fortnite, but to
grant it with respect to Unreal Engine.
That inclination, which may very well--but won't necessarily--become the actual decision (the judge said a written order would come down shortly), is exactly what Epic's lawyers were pursuing as a Plan B when they focused on Unreal Engine in their reply brief.
Judge Gonzalez Rogers reminded attendees of the fact that a TRO needs to be replaced by a preliminary injunction (PI) after 14 days--unless extended by consent--or it simply goes out of effect. Therefore, even if Epic obtained a TRO now, Apple could still try to prevail with respect to Unreal Engine a couple of weeks later--and this goes both ways, so whatever Epic doesn't win immediately, it could still pursue in the next round. The PI hearing has been scheduled for September 28, so the TRO decision will be in effect for about a month. Whatever the court decides on Epic's TRO motion won't be appealable, but a PI decision will be.
Even though this emergency motion had to be briefed over what was basically just a long weekend, the judge was undoubtedly aware of everything that was in the parties' pleadings and the attached declarations and documents. She's familiar with some of the fundamental issues raised by Epic because she's been presiding over two other App Store antitrust cases (Pepper and Cameron) for some time.
That said, a TRO is more preliminary than a preliminary injunction. It appears that the court is very uncomfortable with allowing Apple at this stage to terminate the Epic contract that relates to the Unreal Engine. With respect to Fortnite, however, the case appears clear to the judge. She told Epic's counsel that they "didn't tell Apple you had code in there [for an alternative payment system]" and noted that "this was not an insignificant breach, hence the reason we are here." Counsel for Epic argued that her client merely "ceased complyi with an anticompetitive contract" or, more narrowly, "an anticompetitive provision." That argument, however, didn't seem to get much traction, at least not immediately.
The hurdle Epic faces in this regard is that the court would at this early stage already have to agree that Epic is going to win. It's apparently far too early for that. At least for the time being, Judge Gonzalez Rogers believes the case could go either way. It's "not a slam dunk for Epic or Apple," she noted.
Just like Epic's reply brief didn't even attempt to argue that Epic couldn't simply put back an App Store-compliant version of Fortnite, Epic's counsel wasn't able to explain why a TRO against Apple was absolutely needed. In other words, Epic didn't really give the judge a compelling reason to reconsider her position on Fortnite.
While there wasn't any sign of the judge having second thoughts regarding Unreal Engine either, the related discussion was definitely more interesting. Right now my prediction would be for a TRO to come down with respect to an Epic subsidiary's developer agreement, but it doesn't appear extremely unlikely that Apple might prevail on this one, too, when the court decides on a PI (or when the Ninth Circuit reviews such a PI decision).
The judge expressed concern over Apple having taken an overreaching step by announcing the termination of a developer agreement that "has not been breached." Formally, Epic Games, Inc. (a U.S. corporation) and Epic Games International S.à.r.l. (a Swiss corporation) are separate legal entities. But Gibson Dunn's Richard Doren argued on Apple's behalf that the same individuals manage the accounts, the developer fees are paid with the same credit card for both contracts, and Apple always terminates contracts of affiliate entities when a major breach occurs because otherwise a certain type of non-compliance (here, in the form of offering alternative payment methods) "would spread like a virus."
Mr. Doren also noted that if those two Epic entities were really as separate as Epic argues, there would be "no standing for a restraining order for the benefit of Epic S.à.r.l. as no filings had been made on its behalf (only on the U.S. entity's behalf). Representing Epic, Cravath's Katherine Forrest stresed that they never said the two companies were not affiliated, "just as any corporation may have subsidiaries"--but she insisted that there were "independent contracts" at issue.
All in all, I believe Apple has some interesting points to make with respect to Unreal Engine--and, in practical terms, they argue that Epic can solve the problem by publishing an iOS version of Fortnite that complies with Apple's App Store rules, in which case the developer agreement they need for their work on Unreal Engine will remain in force ("Unreal Engine will be back on track and Fortnite will be back on track," counsel for Apple said). But the court appears inclined to agree that there would be irreparable harm to Epic from such termination.
Assuming that the judge rules the way she was inclined, Epic will presumably claim that Apple had been found to go too far, but that would be an overstatement and oversimplification. There are different priorities at the TRO stage than later on. Judge Gonzalez Rogers said (in the narrow context of market definition, but I think it applies to other aspects of the case as well) that "the battle here will not be won or lost on the TRO and probably not on the [PI]."
It already makes sense to look past the TRO and focus on the PI decision, even though that process wil take another month. Should Epic fail to obtain a PI with respect to Fortnite, it will come under pressure from the Fortnite community to make Fortnite for iOS available again. An appeal of a denial of a PI would probably take too long for Epic's purposes. But would there even be a point in seeking a PI over Fortnite if the TRO decision is based on facts Epic simply can't change--other than continuing to be able to claim that Unreal Engine for iOS is in jeopardy, too?
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