Saturday, September 11, 2021

Federal judge awards Epic Games a mere consolation prize against Apple, which regrettably succeeded with its 'web apps are viable' lie

Yesterday's Epic Games v. Apple ruling by Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California (judgment, permanent injunction, and detailed Rule 52 order) amerely defers the resolution of the real competition issues facing iOS app distribution. It's one of those situations in which either side "gets something" and could claim victory, as Apple apparently does though the stock market initially disagreed (I, personally don't think the decision should have moved the stock at all). This makes it all the more remarkable that Epic doesn't engage in spin but concedes defeat. It's not that Epic achieved nothing; but for the time being, all it got is a consolation prize, and that's why Fortnite won't return to iOS at this stage.

Let me just share a few short observations for now as an exhaustive analysis would take a lot more time:

  • Epic are--for the time being--losers, but Apple are liars in the web apps context. They shamelessly took advantage of the fact that courts need to rely on expert testimony--which I almost mispelled as "testimoney" as expert witnesses say a lot of things when the pay is good--as soon as it comes to technical questions, and the biggest and most impactful lie here was that Apple portrayed HTML 5 web apps as a viable alternative to native apps for game distribution. I know exactly how the HTML 5 version of my Viral Days game feels and performs (it's just terrible); and I know how easy it would be for Apple with its death grip on iOS to always ensure that web apps would fail to meet customer expectations. I can't blame the judge for not knowing this. She's a judge, not a programmer. From my vantage point, based mostly on Epic's proposed findings of fact and conclusions of law, Epic had made the case for the insufficiency of web apps pretty well, though I raised three issues (two of them IP-related) shortly before the trial that I thought Epic should have brought up.

  • Epic v. Apple has been a greater success in terms of revelations (such as Tim Cook's admission that he doesn't receive reports on developer satisfaction) than in terms of remedies. An anti-anti-steering order (meaning that Epic got what AmEx was denied) may help Spotify to some degree, but doesn't solve the fundamental problems.

  • Epic could have succeeded--and on appeal still could succeed--even under the market definition adopted by Judge YGR: digital mobile gaming transaction. In my recollection of the late-May closing argument, that's a market definition Epic's counsel could actually live with. Without the word "mobile" in it, the definition would be too broad and Apple would be in the clear. But the aforementioned web apps lie and other smokescreens regarding alternative ways to distribute games to iOS users worked.

  • Originally, Judge YGR didn't want to make the factual findings herself. She'd much have preferred for a jury to decide because appeals courts afford way more deference to jury verdicts than judicial findings of fact. It was already obvious to me last year that she didn't want this case to be the next FTC v. Qualcomm, where one of her colleagues in the same district found in plaintiff's favor and the appeals court threw out the whole thing. So what Judge YGR has rendered here is a decision that gives either party plenty of ammunition at the appellate stage (e.g., "Apple's slow innovation stems in part from its low investment in the App Store"), though the worst part for Epic is clearly that the judge says the Fortnite maker has "failed to prove [its Sherman Act Section 2] claim for myriad reasons." In some contexts, the ruling leaves open the possibility of certain claims being proven with more or better evidence. Some of the rationale could even be described as displaying a great deal of insecurity along the lines of "maybe I should ... but I'm not sure I can." Anything could still happen before the Ninth Circuit. It could nix Epic's consolation prize based on California Unfair Competition Law but could also reverse key conclusions that enabled Apple's acquittal. Should the appeals court find that Apple has actually violated the antitrust laws (and not merely committed an "incipient" antitrust violation as Judge YGR put it), Epic could theoretically still prevail 100%.

  • What's disappointing is that the judge actually saw--as her world-class examination of Apple CEO Tim Cook on the last day of testimony showed--that Apple doesn't face sufficient competitive constraints with respect to developers, and knows that many developers are unhappy, but that this realization didn't dissuade her from a negative finding on Epic's Section 2 claim.

  • Apple's minimalist concessions have worked so far. The remedy imposed here bears a strong resemblance to how Apple resolved its Japanese antitrust issue relating to "reader" apps. But there's so much going on around the globe that Apple is merely delaying the inevitable because dilatory tactics are profitable. United States Senators from both sides of the aisle have responded to the decision by stating their resolve to take action. Before this case has been decided by a final court of appeal, new legislation may already address some of the issues and allow alternative payment options.

  • The ruling says: "Here, Epic Games has provided requests for its remedy which principally appear to eliminate app review." As I am pursuing my own complaints over Apple's app review, yesterday's decision obviously does nothing to address my primary concern. I still believe that alternative app stores are needed, and that anything less won't do.

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